10-Q 1 sitc-20240331.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-11690

SITE Centers Corp.

(Exact name of registrant as specified in its charter)

Ohio

34-1723097

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

3300 Enterprise Parkway

Beachwood, OH

44122

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (216) 755-5500

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Shares, Par Value $0.10 Per Share

 

SITC

 

New York Stock Exchange

 

 

 

 

 

Depositary Shares, each representing 1/20 of a share of 6.375% Class A Cumulative Redeemable Preferred Shares without Par Value

 

SITC PRA

 

New York Stock Exchange

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

Accelerated filer

 

 

 

 

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of April 26, 2024 the registrant had 209,543,106 shares of common stock, $0.10 par value per share, outstanding.

 

 


 

SITE Centers Corp.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED March 31, 2024

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

Item 1.

Financial Statements – Unaudited

 

 

Consolidated Balance Sheets as of March 31, 2024 and December 31, 2023

3

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2024 and 2023

4

 

Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2024 and 2023

5

 

Consolidated Statements of Equity for the Three Months Ended March 31, 2024 and 2023

6

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2024 and 2023

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

15

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

31

Item 4.

Controls and Procedures

32

PART II. OTHER INFORMATION

Item 1.

Legal Proceedings

33

Item 1A.

Risk Factors

33

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

33

Item 3.

Defaults Upon Senior Securities

33

Item 4.

Mine Safety Disclosures

33

Item 5.

Other Information

33

Item 6.

Exhibits

34

SIGNATURES

35

 

 

2


 

SITE Centers Corp.

CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands, except share amounts)

 

March 31, 2024

 

 

December 31, 2023

 

Assets

 

 

 

 

 

Land

$

906,727

 

 

$

930,540

 

Buildings

 

3,185,457

 

 

 

3,311,368

 

Fixtures and tenant improvements

 

542,875

 

 

 

537,872

 

 

 

4,635,059

 

 

 

4,779,780

 

Less: Accumulated depreciation

 

(1,575,920

)

 

 

(1,570,377

)

 

 

3,059,139

 

 

 

3,209,403

 

Construction in progress and land

 

54,148

 

 

 

51,379

 

Total real estate assets, net

 

3,113,287

 

 

 

3,260,782

 

Investments in and advances to joint ventures, net

 

38,607

 

 

 

39,372

 

Cash and cash equivalents

 

551,285

 

 

 

551,968

 

Restricted cash

 

5,433

 

 

 

17,063

 

Accounts receivable

 

57,159

 

 

 

65,623

 

Other assets, net

 

126,807

 

 

 

126,543

 

 

$

3,892,578

 

 

$

4,061,351

 

Liabilities and Equity

 

 

 

 

 

Unsecured indebtedness:

 

 

 

 

 

Senior notes, net

$

1,242,191

 

 

$

1,303,243

 

Term loan, net

 

198,940

 

 

 

198,856

 

Revolving credit facility

 

 

 

 

 

 

 

1,441,131

 

 

 

1,502,099

 

Mortgage indebtedness, net

 

124,100

 

 

 

124,176

 

Total indebtedness

 

1,565,231

 

 

 

1,626,275

 

Accounts payable and other liabilities

 

173,242

 

 

 

195,727

 

Dividends payable

 

30,161

 

 

 

63,806

 

Total liabilities

 

1,768,634

 

 

 

1,885,808

 

Commitments and contingencies

 

 

 

 

 

SITE Centers Equity

 

 

 

 

 

Class A—6.375% cumulative redeemable preferred shares, without par value, $500 liquidation value;
   
750,000 shares authorized; 350,000 shares issued and outstanding at March 31, 2024 and
   December 31, 2023

 

175,000

 

 

 

175,000

 

Common shares, with par value, $0.10 stated value; 300,000,000 shares authorized; 214,375,205 and
   
214,373,833 shares issued at March 31, 2024 and December 31, 2023, respectively

 

21,437

 

 

 

21,437

 

Additional paid-in capital

 

5,971,666

 

 

 

5,974,904

 

Accumulated distributions in excess of net income

 

(3,988,449

)

 

 

(3,934,736

)

Deferred compensation obligation

 

5,052

 

 

 

5,167

 

Accumulated other comprehensive income

 

8,723

 

 

 

6,121

 

Less: Common shares in treasury at cost: 5,107,171 and 5,340,654 shares at March 31, 2024 and
   December 31, 2023, respectively

 

(69,485

)

 

 

(72,350

)

Total equity

 

2,123,944

 

 

 

2,175,543

 

 

$

3,892,578

 

 

$

4,061,351

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

 

3


 

 

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share amounts)

 

 

Three Months

 

 

Ended March 31,

 

 

2024

 

 

2023

 

Revenues from operations:

 

 

 

 

 

Rental income

$

119,592

 

 

$

135,872

 

Fee and other income

 

2,499

 

 

 

2,820

 

 

122,091

 

 

 

138,692

 

Rental operation expenses:

 

 

 

 

 

Operating and maintenance

 

20,544

 

 

 

23,166

 

Real estate taxes

 

16,738

 

 

 

20,053

 

Impairment charges

 

66,600

 

 

 

 

General and administrative

 

11,072

 

 

 

10,645

 

Depreciation and amortization

 

43,150

 

 

 

54,016

 

 

158,104

 

 

 

107,880

 

Other income (expense):

 

 

 

 

 

Interest expense

 

(18,913

)

 

 

(19,923

)

Interest income

 

7,294

 

 

 

 

Gain on debt retirement

 

760

 

 

 

 

Loss on equity derivative instruments

 

(4,096

)

 

 

 

Other income (expense), net

 

(4,063

)

 

 

(687

)

 

(19,018

)

 

 

(20,610

)

(Loss) income before earnings from equity method investments and other items

 

(55,031

)

 

 

10,202

 

Equity in net income of joint ventures

 

17

 

 

 

1,359

 

Gain on sale and change in control of interests, net

 

 

 

 

3,749

 

Gain on disposition of real estate, net

 

31,714

 

 

 

205

 

(Loss) income before tax expense

 

(23,300

)

 

 

15,515

 

Tax expense of taxable REIT subsidiaries and state franchise and income taxes

 

(252

)

 

 

(213

)

Net (loss) income

$

(23,552

)

 

$

15,302

 

Income attributable to non-controlling interests, net

 

 

 

 

(18

)

Net (loss) income attributable to SITE Centers

$

(23,552

)

 

$

15,284

 

Preferred dividends

 

(2,789

)

 

 

(2,789

)

Net (loss) income attributable to common shareholders

$

(26,341

)

 

$

12,495

 

 

 

 

 

 

Per share data:

 

 

 

 

 

Basic

$

(0.13

)

 

$

0.06

 

Diluted

$

(0.13

)

 

$

0.06

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


 

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands)

 

 

 

Three Months

 

 

 

Ended March 31,

 

 

 

2024

 

 

2023

 

Net (loss) income

 

$

(23,552

)

 

$

15,302

 

Other comprehensive income (loss):

 

 

 

 

 

 

Change in cash flow hedges, net of amount reclassed to earnings

 

 

2,602

 

 

 

(3,200

)

Total other comprehensive income (loss)

 

 

2,602

 

 

 

(3,200

)

Comprehensive income (loss)

 

$

(20,950

)

 

$

12,102

 

Total comprehensive income attributable to non-controlling interests

 

 

 

 

 

(18

)

Total comprehensive income (loss) attributable to SITE Centers

 

$

(20,950

)

 

$

12,084

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


 

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF EQUITY

(unaudited; in thousands)

 

 

SITE Centers Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Shares

 

 

Common
Shares

 

 

Additional
Paid-in
Capital

 

 

Accumulated Distributions
in Excess of
Net Income

 

 

Deferred
Compensation
Obligation

 

 

Accumulated Other Comprehensive Income

 

 

Treasury
Stock at
Cost

 

 

Total

 

Balance, December 31, 2023

$

175,000

 

 

$

21,437

 

 

$

5,974,904

 

 

$

(3,934,736

)

 

$

5,167

 

 

$

6,121

 

 

$

(72,350

)

 

$

2,175,543

 

Stock-based compensation, net

 

 

 

 

 

 

 

(3,238

)

 

 

 

 

 

(115

)

 

 

 

 

 

2,865

 

 

 

(488

)

Dividends declared-common shares

 

 

 

 

 

 

 

 

 

 

(27,372

)

 

 

 

 

 

 

 

 

 

 

 

(27,372

)

Dividends declared-preferred shares

 

 

 

 

 

 

 

 

 

 

(2,789

)

 

 

 

 

 

 

 

 

 

 

 

(2,789

)

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

(23,552

)

 

 

 

 

 

2,602

 

 

 

 

 

 

(20,950

)

Balance, March 31, 2024

$

175,000

 

 

$

21,437

 

 

$

5,971,666

 

 

$

(3,988,449

)

 

$

5,052

 

 

$

8,723

 

 

$

(69,485

)

 

$

2,123,944

 

 

 

SITE Centers Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Shares

 

 

Common
Shares

 

 

Additional
Paid-in
Capital

 

 

Accumulated Distributions
in Excess of
Net Income

 

 

Deferred Compensation Obligation

 

 

Accumulated Other Comprehensive (Loss) Income

 

 

Treasury
Stock at
Cost

 

 

Non-
Controlling
Interests

 

 

Total

 

Balance, December 31, 2022

$

175,000

 

 

$

21,437

 

 

$

5,974,216

 

 

$

(4,046,370

)

 

$

5,025

 

 

$

9,038

 

 

$

(51,518

)

 

$

5,794

 

 

$

2,092,622

 

Issuance of common shares
   related to stock plans

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

Repurchase of common shares

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(26,611

)

 

 

 

 

 

(26,611

)

Stock-based compensation, net

 

 

 

 

 

 

 

(8,133

)

 

 

 

 

 

30

 

 

 

 

 

 

5,094

 

 

 

 

 

 

(3,009

)

Distributions to non-controlling
   interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

(18

)

Dividends declared-common shares

 

 

 

 

 

 

 

 

 

 

(27,292

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,292

)

Dividends declared-preferred shares

 

 

 

 

 

 

 

 

 

 

(2,789

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,789

)

Comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

15,284

 

 

 

 

 

 

(3,200

)

 

 

 

 

 

18

 

 

 

12,102

 

Balance, March 31, 2023

$

175,000

 

 

$

21,437

 

 

$

5,966,089

 

 

$

(4,061,167

)

 

$

5,055

 

 

$

5,838

 

 

$

(73,035

)

 

$

5,794

 

 

$

2,045,011

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)

 

Three Months

 

 

Ended March 31,

 

 

2024

 

 

2023

 

Cash flow from operating activities:

 

 

 

 

 

Net (loss) income

$

(23,552

)

 

$

15,302

 

Adjustments to reconcile net (loss) income to net cash flow provided by operating activities:

 

 

 

 

 

Depreciation and amortization

 

43,150

 

 

 

54,016

 

Stock-based compensation

 

2,031

 

 

 

1,760

 

Amortization and write-off of debt issuance costs and fair market value of debt adjustments

 

1,819

 

 

 

1,111

 

Gain on debt retirement

 

(760

)

 

 

 

Other income—unrealized loss on derivatives

 

4,096

 

 

 

 

Equity in net income of joint ventures

 

(17

)

 

 

(1,359

)

Gain on sale and change in control of interests

 

 

 

 

(3,749

)

Gain on disposition of real estate, net

 

(31,714

)

 

 

(205

)

Impairment charges

 

66,600

 

 

 

 

Assumption of building due to ground lease termination

 

(1,952

)

 

 

 

Net change in accounts receivable

 

7,790

 

 

 

4,819

 

Net change in accounts payable and accrued expenses

 

(15,643

)

 

 

(16,205

)

Net change in other operating assets and liabilities

 

(11,896

)

 

 

(13,323

)

Total adjustments

 

63,504

 

 

 

26,865

 

Net cash flow provided by operating activities

 

39,952

 

 

 

42,167

 

Cash flow from investing activities:

 

 

 

 

 

Real estate acquired, net of liabilities and cash assumed

 

(18,065

)

 

 

(26,503

)

Real estate developed and improvements to operating real estate

 

(19,813

)

 

 

(27,990

)

Proceeds from sale of joint venture interests

 

 

 

 

3,405

 

Proceeds from disposition of real estate

 

115,329

 

 

 

 

Equity contributions to joint ventures

 

(44

)

 

 

(56

)

Repayment of joint venture advance

 

730

 

 

 

318

 

Net cash flow provided by (used for) investing activities

 

78,137

 

 

 

(50,826

)

Cash flow from financing activities:

 

 

 

 

 

Proceeds from revolving credit facility, net

 

 

 

 

75,000

 

Payment of loan commitment fees

 

(3,183

)

 

 

 

Repayment of senior notes

 

(60,758

)

 

 

 

Repayment of mortgage debt

 

(134

)

 

 

(314

)

Repurchase of common shares in conjunction with equity award plans and dividend reinvestment plan

 

(2,594

)

 

 

(4,800

)

Repurchase of common shares

 

 

 

 

(26,611

)

Distributions to redeemable operating partnership units

 

 

 

 

(18

)

Dividends paid

 

(63,733

)

 

 

(30,353

)

Net cash flow (used for) provided by financing activities

 

(130,402

)

 

 

12,904

 

 

 

 

 

 

 

Net (decrease) increase in cash, cash equivalents and restricted cash

 

(12,313

)

 

 

4,245

 

Cash, cash equivalents and restricted cash, beginning of period

 

569,031

 

 

 

21,214

 

Cash, cash equivalents and restricted cash, end of period

$

556,718

 

 

$

25,459

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

7


 

Notes to Condensed Consolidated Financial Statements

1.
Nature of Business and Financial Statement Presentation

Nature of Business

SITE Centers Corp. and its related consolidated real estate subsidiaries (collectively, the “Company” or “SITE Centers”) and unconsolidated joint ventures are primarily engaged in the business of owning, leasing, acquiring, redeveloping, developing and managing shopping centers. Unless otherwise provided, references herein to the Company or SITE Centers include SITE Centers Corp. and its wholly-owned subsidiaries. The Company’s tenant base includes a mixture of national and regional retail chains and local tenants. Consequently, the Company’s credit risk is primarily concentrated in the retail industry.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

Unaudited Interim Financial Statements

These financial statements have been prepared by the Company in accordance with GAAP for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the periods presented. The results of operations for the three months ended March 31, 2024 and 2023, are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Principles of Consolidation

The consolidated financial statements include the results of the Company and all entities in which the Company has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or loss) of these joint ventures is included in consolidated net income (loss).

Statements of Cash Flows and Supplemental Disclosure of Non-Cash Investing and Financing Information

Non-cash investing and financing activities are summarized as follows (in millions):

 

Three Months

 

 

Ended March 31,

 

 

2024

 

 

2023

 

Dividends declared, but not paid

$

30.2

 

 

$

30.1

 

Accounts payable related to construction in progress

 

8.1

 

 

 

10.3

 

Assumption of building due to ground lease termination

 

2.0

 

 

 

 

 

2.
Acquisitions

During the three months ended March 31, 2024, the Company acquired the following convenience centers (in thousands):

Asset

 

Location

 

Date
Acquired

 

Gross Purchase
Price

 

 

Grove at Harper's Preserve

 

Conroe, Texas

 

February 2024

 

$

10,650

 

 

Shops at Gilbert Crossroads

 

Gilbert, Arizona

 

March 2024

 

 

8,460

 

 

 

 

 

 

 

 

$

19,110

 

 

 

8


 

The fair value of the acquisitions was allocated as follows (in thousands):

 

 

 

 

Weighted-Average
Amortization Period
(in Years)

Land

$

4,523

 

 

N/A

Buildings

 

11,760

 

 

(A)

Tenant improvements

 

573

 

 

(A)

In-place leases (including lease origination costs and fair market value of leases)

 

1,816

 

 

9.4

 

 

18,672

 

 

 

Less: Below-market leases

 

(381

)

 

16.1

Less: Other liabilities assumed

 

(226

)

 

N/A

   Net assets acquired

$

18,065

 

 

 

 

(A)
Depreciated in accordance with the Company’s policy.

The total consideration for the assets was paid in cash. Included in the Company’s consolidated statements of operations for the three months ended March 31, 2024, was $0.1 million in total revenues from the date of acquisition through March 31, 2024, for the properties acquired in 2024.

3.
Investments in and Advances to Joint Ventures

At March 31, 2024 and December 31, 2023, the Company had ownership interests in various unconsolidated joint ventures that had investments in 13 shopping center properties. The changes to Investments in and Advances to Joint Ventures are as follows (in thousands):

Balance, December 31, 2023

$

39,372

 

Equity in net loss

 

(153

)

Amortization of basis differentials

 

170

 

Repayment of advances

 

(730

)

Capitalized costs

 

44

 

Change in fair value of derivative

 

(96

)

Balance, March 31, 2024

$

38,607

 

A reconciliation of the consolidated joint venture equity is as follows (in thousands):

 

March 31, 2024

 

 

December 31, 2023

 

Company's share of accumulated equity

$

35,365

 

 

$

35,782

 

Basis differentials

 

1,367

 

 

 

1,099

 

Deferred development fees, net of portion related to the Company's interest

 

(132

)

 

 

(136

)

Amounts payable to the Company

 

2,007

 

 

 

2,627

 

Investments in and Advances to Joint Ventures, net

$

38,607

 

 

$

39,372

 

Revenues earned by the Company for providing asset management, property management and leasing and development services to all of the Company’s unconsolidated joint ventures were $1.4 million and $1.8 million for the three months ended March 31, 2024 and 2023, respectively.

9


 

4.
Other Assets and Intangibles, net

Other assets and intangibles consist of the following (in thousands):

 

March 31, 2024

 

 

December 31, 2023

 

Intangible assets, net:

 

 

 

 

 

In-place leases

$

44,583

 

 

$

50,282

 

Above-market leases

 

2,998

 

 

 

3,593

 

Lease origination costs

 

7,959

 

 

 

8,249

 

Tenant relationships

 

6,368

 

 

 

6,866

 

Total intangible assets(A)

 

61,908

 

 

 

68,990

 

Operating lease ROU assets

 

17,107

 

 

 

17,373

 

Other assets:

 

 

 

 

 

Loan commitment fees(B)

 

16,011

 

 

 

13,485

 

Prepaid expenses

 

12,941

 

 

 

5,104

 

Swap receivables(C)

 

9,722

 

 

 

11,115

 

Other assets

 

1,584

 

 

 

2,294

 

Deposits

 

2,760

 

 

 

2,857

 

Deferred charges, net

 

4,774

 

 

 

5,325

 

Total other assets, net

$

126,807

 

 

$

126,543

 

 

 

 

 

 

 

Below-market leases, net (other liabilities)

$

43,241

 

 

$

46,096

 

(A)
The Company recorded amortization expense related to its intangibles, excluding above- and below-market leases, of $4.7 million and $6.2 million for the three months ended March 31, 2024 and 2023, respectively.
(B)
Fees related to a commitment obtained in October 2023 for a lender to provide a $1.1 billion mortgage facility to be secured by an originally identified group of 40 properties (the “Mortgage Facility”). The fees paid to date related to the Mortgage Facility are recorded as a deferred fee as the facility has not closed and therefore no amounts have been drawn. The Company may proceed to close and draw all or a portion of the Mortgage Facility on any date prior to October 25, 2024, subject to the satisfaction of various closing conditions. Once amounts are drawn on the Mortgage Facility, the fees, including a funding fee to be paid at closing, will be classified as a contra asset to the borrowings and amortized over the life of the Mortgage Facility. If it becomes probable that the debt, or a portion of the debt, will not be drawn upon, the fees paid to date, or a portion of the fees paid to date, will be expensed. For the three months ended March 31, 2024, the Company wrote-off $0.7 million of fees to Other Income (Expense), net, on the Company’s Consolidated Statements of Operations because the maximum amount available to be borrowed under the Mortgage Facility decreased to $1.0 billion due to the release of two properties that were originally identified to serve as collateral for the Mortgage Facility.
(C)
Includes cash flow hedge and derivative on unsecured notes (Note 6).
5.
Revolving Credit Facility

As of March 31, 2024, the Company’s Revolving Credit Facility (as defined below) had no outstanding borrowings.

 

The Company maintains a revolving credit facility with a syndicate of financial institutions and JPMorgan Chase Bank, N.A., as administrative agent (the “Revolving Credit Facility”). The Revolving Credit Facility provides for borrowings of up to $950 million if certain borrowing conditions are satisfied, and an accordion feature for expansion of availability up to $1.45 billion, provided that new lenders agree to the existing terms of the facility or existing lenders increase their commitment level and subject to other customary conditions precedent. The Revolving Credit Facility maturity date is June 2026 subject to two six-month options to extend the maturity to June 2027 upon the Company’s request (subject to satisfaction of certain conditions).

The Company’s borrowings under the Revolving Credit Facility bear interest at variable rates at the Company’s election, based on either (i) the SOFR rate plus a 10 basis-point spread adjustment plus an applicable margin (0.85% at March 31, 2024) or (ii) the alternative base rate plus an applicable margin (0.0% at March 31, 2024). The Revolving Credit Facility also provides for an annual facility fee, which was 20 basis points on the entire facility at March 31, 2024. The applicable margins and facility fee vary depending on the Company’s long-term senior unsecured debt ratings from Moody’s Investors Service, Inc., S&P Global Ratings and Fitch Investor Services Inc. (or their respective successors). The Revolving Credit Facility also features a sustainability-linked pricing component whereby the applicable interest rate margin can be adjusted by one or two basis points if the Company meets certain sustainability performance targets. The Company is required to comply with certain covenants under the Revolving Credit Facility relating to total outstanding indebtedness, secured indebtedness, value of unencumbered real estate assets and fixed charge coverage. The Company was in compliance with these financial covenants at March 31, 2024.

10


 

6.
Financial Instruments and Fair Value Measurements

The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments.

Measurement of Fair Value

At March 31, 2024, the Company used a pay-fixed interest rate swap to manage some of its exposure to changes in benchmark-interest rates. The estimated fair value was determined using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contract, are incorporated in the fair value to account for potential non-performance risk, including the Company’s own non-performance risk and the respective counterparty’s non-performance risk. The Company determined that the significant inputs used to value its derivative fell within Level 2 of the fair value hierarchy.

Items Measured on Fair Value on a Recurring Basis

The Company maintains swap agreements (included in Other Assets) measured at fair value on a recurring basis as of March 31, 2024. The following table presents information about the Company’s financial assets and liabilities and indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions):

 

 

 

 

 

Fair Value Measurements

 

 

 

 

Assets (Liabilities):

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Financial Instruments

 

$

 

 

$

9.7

 

 

$

 

 

$

9.7

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Derivative Financial Instruments

 

$

 

 

$

11.1

 

 

$

 

 

$

11.1

 

Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Other Liabilities

The carrying amounts reported in the Company’s consolidated balance sheets for these financial instruments approximated fair value because of their short-term maturities.

Debt

The following methods and assumptions were used by the Company in estimating fair value disclosures of debt. The fair market value of senior notes is determined using a pricing model to approximate the trading price of the Company’s public debt. The fair market value for all other debt is estimated using a discounted cash flow technique that incorporates future contractual interest and principal payments and a market interest yield curve with adjustments for duration, optionality and risk profile, including the Company’s non-performance risk and loan to value. The Company’s senior notes and all other debt are classified as Level 2 and Level 3, respectively, in the fair value hierarchy. Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments.

Carrying values that are different from estimated fair values are summarized as follows (in thousands):

 

March 31, 2024

 

 

December 31, 2023

 

 

Carrying
Amount

 

 

Fair
Value

 

 

Carrying
Amount

 

 

Fair
Value

 

Senior Notes

$

1,242,191

 

 

$

1,227,547

 

 

$

1,303,243

 

 

$

1,278,186

 

Revolving Credit Facility and term loan

 

198,940

 

 

 

200,000

 

 

 

198,856

 

 

 

200,000

 

Mortgage Indebtedness

 

124,100

 

 

 

127,189

 

 

 

124,176

 

 

 

127,749

 

 

$

1,565,231

 

 

$

1,554,736

 

 

$

1,626,275

 

 

$

1,605,935

 

Risk Management Objective of Using Derivatives

The Company is exposed to certain risks arising from both its business operations and economic conditions. The Company principally manages its exposures to a wide variety of business and operational risks through management of its core business activities. The Company manages economic risks, including interest rate, liquidity and credit risk, primarily by managing the amount, sources and duration of its debt funding and, from time to time, through the use of derivative financial instruments. Specifically, the Company enters into derivative financial instruments to manage exposures that arise from business activities that result in the receipt or payment of future known and uncertain cash amounts, the values of which are determined by interest rates. The Company’s

11


 

derivative financial instruments are used to manage differences in the amount, timing and duration of the Company’s known or expected cash receipts and its known or expected cash payments principally related to the Company’s borrowings.

Cash Flow Hedges of Interest Rate Risk

The Company’s objectives in using interest rate derivatives are to manage its exposure to interest rate movements. To accomplish this objective, the Company generally uses swaps and caps as part of its interest rate risk management strategy. The swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

As of March 31, 2024, the Company had one effective swap with a notional amount of $200.0 million, expiring in June 2027, which converts the variable-rate SOFR component of the interest rate applicable to its term loan to a fixed rate of 2.75%.

The effective portion of changes in the fair value of derivatives designated, and that qualify, as a cash flow hedge is recorded in Accumulated Other Comprehensive Income and is subsequently reclassified into earnings, into interest expense, in the period that the hedged forecasted transaction affects earnings. All components of the swap were included in the assessment of hedge effectiveness. The Company expects to reflect within the next 12 months, a decrease to interest expense (and a corresponding increase to earnings) of approximately $4.3 million.

The Company is exposed to credit risk in the event of non-performance by the counterparty to the swap if the derivative position has a positive balance. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.

Credit Risk-Related Contingent Features

The Company has an agreement with the swap counterparty that contains a provision whereby if the Company defaults on certain of its indebtedness, the Company could also be declared in default on the swap, resulting in an acceleration of payment under the swap.

Derivative – Unsecured Notes

In 2023, the Company entered into swaption agreements with a notional amount aggregating $450.0 million to partially hedge the impact of change in benchmark interest rates on potential yield maintenance premiums applicable to its unsecured notes due in 2027. The swaptions did not qualify for hedge accounting. As a result, these derivative instruments are recorded in the Company’s consolidated balance sheets at fair market value, with changes in value recorded through earnings as of each balance sheet date until exercise or expiration, in October 2024. Accordingly, the Company reported non-cash loss of $4.1 million related to the valuation adjustments associated with these instruments for the three months ended March 31, 2024.

7.
Senior Notes

During the quarter ended March 31, 2024, the Company purchased $61.6 million aggregate principal amount of its outstanding senior unsecured notes due in 2025 and 2026 at a discount to par resulting in a net gain of $0.8 million.

8.
Other Comprehensive Income

The changes in Accumulated Other Comprehensive Income by component are as follows (in thousands):

Balance, December 31, 2023

$

6,121

 

Change in cash flow hedges

 

3,895

 

Amounts reclassified from accumulated other comprehensive income
   to interest expense

 

(1,293

)

Balance, March 31, 2024 (A)

$

8,723

 

(A)
Includes derivative financial instruments entered into by the Company on its term loan and by an unconsolidated joint venture.

 

12


 

9.
Earnings Per Share

The following table provides a reconciliation of net (loss) income and the number of common shares used in the computations of “basic” earnings per share (“EPS”), which utilizes the weighted-average number of common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares (in thousands, except per share amounts).

 

Three Months

 

 

 

Ended March 31,

 

 

 

2024

 

 

2023

 

 

Numerators  Basic and Diluted

 

 

 

 

 

 

Net (loss) income

$

(23,552

)

 

$

15,302

 

 

Income attributable to non-controlling interests

 

 

 

 

(18

)

 

Preferred dividends

 

(2,789

)

 

 

(2,789

)

 

Earnings attributable to unvested shares and OP Units

 

(131

)

 

 

(107

)

 

Net (loss) income attributable to common shareholders after
   allocation to participating securities

$

(26,472

)

 

$

12,388

 

 

Denominators  Number of Shares

 

 

 

 

 

 

BasicAverage shares outstanding

 

209,419

 

 

 

209,971

 

 

Assumed conversion of dilutive securities—PRSUs

 

 

 

 

436

 

 

DilutedAverage shares outstanding

 

209,419

 

 

 

210,407

 

 

(Loss) Earnings Per Share:

 

 

 

 

 

 

Basic

$

(0.13

)

 

$

0.06

 

 

Diluted

$

(0.13

)

 

$

0.06

 

 

For the three months ended March 31, 2024, Performance Restricted Stock Units (“PRSUs”) issued to certain executives in March 2024, March 2023 and March 2022 were antidilutive in the computation of diluted EPS due to the net loss. For the three months ended March 31, 2023, PRSUs issued to certain executives in March 2021 were considered in the computation of diluted EPS, and PRSUs issued in March 2023 and 2022 were not considered in the computation of diluted EPS, because they were antidilutive. In March 2024, the Company issued 178,527 common shares in settlement of PRSUs granted in 2021.

Common Share Dividends

The Company declared a quarterly cash dividend of $0.13 per common share for both the first quarter of 2024 and the first quarter of 2023.

10.
Impairment Charges

 

For the three months ended March 31, 2024, the Company recorded impairment charges of $66.6 million, based on the difference between the carrying value of the assets and the estimated fair market value. The impairment charges recorded were triggered by a change in the hold period assumptions.

 

Items Measured at Fair Value

The Company is required to assess the fair value of certain impaired consolidated investments. The valuation of impaired real estate assets is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset, as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence. In general, the Company considers multiple valuation techniques when measuring fair value of an investment. However, in certain circumstances, a single valuation technique may be appropriate.

These valuations are calculated based on market conditions and assumptions made by management at the time the valuation adjustments and impairments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.

 

13


 

The following table presents information about the fair value of real estate that was impaired, and therefore, measured on a fair value basis, along with the related impairment charge, for the three months ended March 31, 2024. The table also indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions):

 

 

 

Fair Value Measurements

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

 

Total
Impairment
Charges

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-lived assets held and used

 

$

 

 

$

 

 

$

138.2

 

 

$

138.2

 

 

$

66.6

 

 

The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value (in millions, except per square foot):

 

 

 

Quantitative Information about Level 3 Fair Value Measurements

 

 

 

Fair Value at

 

 

Valuation

 

 

 

 

 

Description

 

March 31, 2024

 

 

Technique

 

Unobservable Inputs

 

Range

 

Impairment of consolidated assets

 

$

22.2

 

 

Indicative Bid

 

Indicative Bid(A)

 

N/A

 

 

 

 

116.0

 

 

Income Capitalization Approach

 

Market Capitalization Rate

 

7.0%—7.7%

 

 

 

 

 

 

 

 

Cost per square foot

 

$

44

 

(A) Fair value measurements based upon an indicative bid and developed by third-party sources (including offers and comparable sales values), subject to the Company’s corroboration for reasonableness. The Company does not have access to certain unobservable inputs used by these third parties to determine these estimated fair values.

11.
Subsequent Events

From April 1, 2024 through April 26, 2024, the Company acquired the fee interest in a parcel at a wholly-owned property in Tampa, Florida for $1.0 million and sold two shopping centers for an aggregate price of $50.2 million.

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OPERATIONS

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) provides readers with a perspective from management on the financial condition, results of operations and liquidity of SITE Centers Corp. and its consolidated subsidiaries (collectively, the “Company” or “SITE Centers”) and other factors that may affect the Company’s future results. The Company believes it is important to read the MD&A in conjunction with its Annual Report on Form 10-K for the year ended December 31, 2023, as well as other publicly available information.

EXECUTIVE SUMMARY

The Company is a self-administered and self-managed Real Estate Investment Trust (“REIT”) in the business of owning, leasing, acquiring, redeveloping, developing and managing shopping centers. As of March 31, 2024, the Company’s portfolio consisted of 114 shopping centers (including 13 shopping centers owned through unconsolidated joint ventures). At March 31, 2024, the Company owned approximately 21.9 million square feet of gross leasable area (“GLA”) through all its properties (wholly-owned and joint venture).

The following provides an overview of the Company’s key financial metrics (see Non-GAAP Financial Measures described later in this section) (in thousands, except per share amounts):

 

Three Months

 

 

Ended March 31,

 

 

2024

 

 

2023

 

Net (loss) income attributable to common shareholders

$

(26,341

)

 

$

12,495

 

FFO attributable to common shareholders

$

51,931

 

 

$

61,899

 

Operating FFO attributable to common shareholders

$

59,801

 

 

$

62,728

 

(Loss) earnings per share  Diluted

$

(0.13

)

 

$

0.06

 

For the three months ended March 31, 2024, the decrease in net income attributable to common shareholders, as compared to the prior-year period, primarily was the result of the impact of net property dispositions and impairment charges partially offset by the gain on disposition of real estate recognized in 2024 and an increase in interest income.

Plan to Separate Convenience Retail Portfolio

In October 2023, the Company announced a plan to spin off its convenience assets into a separate, publicly traded REIT to be named Curbline Properties Corp. (“Curbline”) in recognition of the distinct characteristics and opportunities within the Company’s unanchored and grocery and power center portfolios. Convenience properties are positioned on the curbline of well-trafficked intersections, offering enhanced access and visibility relative to other retail property types. The properties generally consist of a homogeneous row of primarily small-shop units along with dedicated parking leased to a diversified mixture of national and local service and restaurant tenants that cater to daily convenience trips from the growing suburban population. The property type’s site plan and depth of leasing prospects generally reduce operating capital expenditures and provide significant tenant diversification.

In addition, in October 2023, the Company obtained a financing commitment for a $1.1 billion mortgage facility (the “Mortgage Facility”) which is expected to close prior to the consummation of the spin-off with loan and additional asset sale proceeds expected to be used to repay all of the Company’s outstanding unsecured indebtedness, including all outstanding public notes. In the first quarter of 2024, the Company released two properties that had previously been identified to serve as collateral for the facility, thereby reducing the committed amount to $1.0 billion as of March 31, 2024. For the three months ended March 31, 2024, the Company wrote-off $0.7 million of fees to Other Income (Expense), net, on the Company’s Consolidated Statements of Operations because the maximum amount to be borrowed decreased as it related to assets that were identified in the commitment to serve as collateral for the Mortgage Facility but were subsequently released.

As of March 31, 2024, the Company had a portfolio of 67 wholly-owned convenience assets that are expected to be included in the Curbline portfolio, including properties separated or in the process of being separated from existing Company properties. The median property size within the Curbline portfolio as of March 31, 2024, was approximately 21,000 square feet with 92% of base rent generated by units less than 10,000 square feet. The Company intends to acquire additional convenience properties prior to the spin-off that will be included in the Curbline portfolio, funded through additional Company dispositions, retained cash flow and cash on hand. Following the separation of Curbline, the Company intends to realize value through operations and, depending on market

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conditions, the sale of additional assets. The timing of certain sales may be impacted by interim leasing, tactical redevelopment activities and other asset management initiatives intended to maximize value.

Curbline is expected to be in a net cash position at the time of its separation from the Company with cash on hand, a preferred investment in the Company, and an unsecured, undrawn line of credit. Curbline is not expected to have any debt outstanding at the time of its separation from the Company and therefore Curbline is expected to have significant capacity to utilize sources of debt capital in order to fund asset growth.

The Company currently expects to complete the separation of Curbline on or around October 1, 2024.

Company Activity

Growth opportunities within the Company’s portfolio include rental rate increases, continued lease up of the portfolio, rent commencement with respect to recently executed leases and the adaptation of existing site plans and square footage to generate higher blended rental rates and operating cash flows.

Transactional and investment highlights for the Company through April 26, 2024, include the following:

Acquired two convenience centers and a fee interest in a land parcel for an aggregate purchase price of $20.2 million, including Grove at Harper’s Preserve (Houston, Texas) for $10.7 million, Shops at Gilbert Crossroads (Phoenix, Arizona) for $8.5 million and the fee interest in a parcel of land in Tampa, Florida for $1.0 million;
Sold five wholly-owned shopping centers for an aggregate sales price of $169.6 million;
Repurchased $61.6 million aggregate principal amount of outstanding senior unsecured notes due in 2025 and 2026 for total consideration including expenses of $60.8 million and recorded a gain on retirement of debt of $0.8 million.

Operational Accomplishments

The Company believes strong leasing economics are attributable to the concentration of the Company’s portfolio in suburban, high household income communities and to national tenants’ strong financial positions and increasing emphasis and reliance on physical store locations.

Operational highlights for the Company through March 31, 2024, include the following:

Leased approximately 0.8 million square feet of GLA, including 15 new leases and 84 renewals for a total of 99 leases. As of March 31, 2024, the remaining 2024 lease expirations aggregated approximately 0.8 million square feet of GLA (representing approximately 53% of total annualized base rent of 2024 expiring as of December 31, 2023) as compared to 1.5 million square feet of GLA as of December 31, 2023;
For the comparable leases executed in the three months ended March 31, 2024, the Company generated cash lease spreads on a pro rata basis of 11.5% for new leases and 8.0% for renewals. Leasing spreads are a key metric in real estate, representing the percentage increase of rental rates on new and renewal leases over rental rates on existing leases, though leasing spreads exclude consideration of the amount of capital expended in connection with new leasing activity. The Company’s cash lease spreads calculation includes only those deals that were executed within one year of the date the prior tenant vacated, in addition to other factors that limit comparability, and as a result, is a useful benchmark to compare the average annualized base rent of expiring leases with the comparable executed market rental rates;
Total portfolio average annualized base rent per square foot increased to $20.69 at March 31, 2024, as compared to $20.35 at December 31, 2023 and $19.65 at March 31, 2023, all on a pro rata basis;
The aggregate occupancy of the Company’s operating shopping center portfolio was 91.6% at March 31, 2024, as compared to 92.0% at December 31, 2023 and 92.8% at March 31, 2023, all on a pro rata basis and
For new leases executed in the three months ended March 31, 2024, the Company expended a weighted-average cost of tenant improvements and lease commissions estimated at $4.93 per rentable square foot, on a pro rata basis, over the lease term, as compared to $4.90 per rentable square foot for the full year of 2023. The Company generally does not expend a significant amount of