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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, 2022

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 22, 2022 the registrant had 213,826,224 shares of common stock, $0.10 par value per share, outstanding.

 

 

 


 

SITE Centers Corp.

QUARTERLY REPORT ON FORM 10-Q

QUARTER ENDED March 31, 2022

 

TABLE OF CONTENTS

 

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements – Unaudited

 

 

Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021

2

 

Consolidated Statements of Operations for the Three Months Ended March 31, 2022 and 2021

3

 

Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2022 and 2021

4

 

Consolidated Statements of Equity for the Three Months Ended March 31, 2022 and 2021

5

 

Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2022 and 2021

6

 

Notes to Condensed Consolidated Financial Statements

7

Item 2.

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

14

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

30

Item 4.

Controls and Procedures

31

 

 

 

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

32

Item 3.

Defaults Upon Senior Securities

32

Item 4.

Mine Safety Disclosures

32

Item 5.

Other Information

32

Item 6.

Exhibits

33

 

 

 

SIGNATURES

34

 

 

1


 

SITE Centers Corp.

CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands, except share amounts)

 

 

March 31, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

 

Land

$

1,051,198

 

 

$

1,011,401

 

Buildings

 

3,718,886

 

 

 

3,624,164

 

Fixtures and tenant improvements

 

563,879

 

 

 

556,056

 

 

 

5,333,963

 

 

 

5,191,621

 

Less: Accumulated depreciation

 

(1,611,259

)

 

 

(1,571,569

)

 

 

3,722,704

 

 

 

3,620,052

 

Construction in progress and land

 

56,629

 

 

 

47,260

 

Total real estate assets, net

 

3,779,333

 

 

 

3,667,312

 

Investments in and advances to joint ventures, net

 

57,047

 

 

 

64,626

 

Cash and cash equivalents

 

17,188

 

 

 

41,807

 

Restricted cash

 

2,026

 

 

 

1,445

 

Accounts receivable

 

52,480

 

 

 

61,382

 

Other assets, net

 

143,407

 

 

 

130,479

 

 

$

4,051,481

 

 

$

3,967,051

 

Liabilities and Equity

 

 

 

 

 

 

 

Unsecured indebtedness:

 

 

 

 

 

 

 

Senior notes, net

$

1,452,307

 

 

$

1,451,768

 

Term loan, net

 

99,854

 

 

 

99,810

 

Revolving credit facilities

 

115,000

 

 

 

 

 

 

1,667,161

 

 

 

1,551,578

 

 

 

 

 

 

 

 

 

Mortgage indebtedness, net

 

91,168

 

 

 

125,799

 

Total indebtedness

 

1,758,329

 

 

 

1,677,377

 

Accounts payable and other liabilities

 

206,340

 

 

 

218,779

 

Dividends payable

 

30,694

 

 

 

28,243

 

Total liabilities

 

1,995,363

 

 

 

1,924,399

 

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, 2022 and

   December 31, 2021

 

175,000

 

 

 

175,000

 

Common shares, with par value, $0.10 stated value; 300,000,000 shares authorized; 214,168,194 and

   211,286,874 shares issued at March 31, 2022 and December 31, 2021, respectively

 

21,417

 

 

 

21,129

 

Additional paid-in capital

 

5,968,724

 

 

 

5,934,166

 

Accumulated distributions in excess of net income

 

(4,109,540

)

 

 

(4,092,783

)

Deferred compensation obligation

 

4,671

 

 

 

4,695

 

Less: Common shares in treasury at cost: 579,005 and 287,645 shares at March 31, 2022 and

   December 31, 2021, respectively

 

(9,948

)

 

 

(5,349

)

Total SITE Centers shareholders' equity

 

2,050,324

 

 

 

2,036,858

 

Non-controlling interests

 

5,794

 

 

 

5,794

 

Total equity

 

2,056,118

 

 

 

2,042,652

 

 

$

4,051,481

 

 

$

3,967,051

 

 

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

 

 


2


 

SITE Centers Corp.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share amounts)

 

Three Months

 

 

Ended March 31,

 

 

2022

 

 

2021

 

Revenues from operations:

 

 

 

 

 

 

 

Rental income

$

129,884

 

 

$

119,890

 

Fee and other income

 

4,436

 

 

 

8,249

 

 

 

134,320

 

 

 

128,139

 

Rental operation expenses:

 

 

 

 

 

 

 

Operating and maintenance

 

21,936

 

 

 

20,216

 

Real estate taxes

 

20,183

 

 

 

19,664

 

Impairment charges

 

 

 

 

7,270

 

General and administrative

 

12,251

 

 

 

17,395

 

Depreciation and amortization

 

50,364

 

 

 

45,560

 

 

 

104,734

 

 

 

110,105

 

Other income (expense):

 

 

 

 

 

 

 

Interest expense

 

(18,258

)

 

 

(19,395

)

Other expense, net

 

(504

)

 

 

(366

)

 

 

(18,762

)

 

 

(19,761

)

Income (loss) before earnings from equity method investments and other items

 

10,824

 

 

 

(1,727

)

Equity in net income of joint ventures

 

169

 

 

 

4,385

 

Gain on change in control of interests

 

3,356

 

 

 

13,908

 

Loss on disposition of real estate, net

 

(142

)

 

 

(20

)

Income before tax expense

 

14,207

 

 

 

16,546

 

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

 

(252

)

 

 

(365

)

Net income

$

13,955

 

 

$

16,181

 

Income attributable to non-controlling interests, net

 

(18

)

 

 

(173

)

Net income attributable to SITE Centers

$

13,937

 

 

$

16,008

 

Preferred dividends

 

(2,789

)

 

 

(5,133

)

Net income attributable to common shareholders

$

11,148

 

 

$

10,875

 

 

 

 

 

 

 

 

 

Per share data:

 

 

 

 

 

 

 

Basic

$

0.05

 

 

$

0.05

 

Diluted

$

0.05

 

 

$

0.05

 

 

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

3


SITE Centers Corp.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(unaudited; in thousands)

 

 

Three Months

 

 

Ended March 31,

 

 

2022

 

 

2021

 

Net income

$

13,955

 

 

$

16,181

 

Other comprehensive income:

 

 

 

 

 

 

 

Foreign currency translation, net

 

 

 

 

(1

)

Reclassification adjustment for foreign currency

   translation included in net income

 

 

 

 

2,683

 

Total other comprehensive income

 

 

 

 

2,682

 

Comprehensive income

$

13,955

 

 

$

18,863

 

Total comprehensive income attributable to non-controlling interests

 

(18

)

 

 

(173

)

Total comprehensive income attributable to SITE Centers

$

13,937

 

 

$

18,690

 

 

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

 

4


 

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

 

 

Treasury

Stock at

Cost

 

 

Non-

Controlling

Interests

 

 

Total

 

Balance, December 31, 2021

$

175,000

 

 

$

21,129

 

 

$

5,934,166

 

 

$

(4,092,783

)

 

$

4,695

 

 

$

(5,349

)

 

$

5,794

 

 

$

2,042,652

 

Issuance of common shares related

   to stock plans

 

 

 

 

65

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

69

 

Issuance of common shares for

   cash offering

 

 

 

 

223

 

 

 

33,558

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

33,781

 

Stock-based compensation, net

 

 

 

 

 

 

 

996

 

 

 

 

 

 

(24

)

 

 

(4,599

)

 

 

 

 

 

(3,627

)

Distributions to non-controlling

   interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18

)

 

 

(18

)

Dividends declared-common shares

 

 

 

 

 

 

 

 

 

 

(27,905

)

 

 

 

 

 

 

 

 

 

 

 

(27,905

)

Dividends declared-preferred shares

 

 

 

 

 

 

 

 

 

 

(2,789

)

 

 

 

 

 

 

 

 

 

 

 

(2,789

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

13,937

 

 

 

 

 

 

 

 

 

18

 

 

 

13,955

 

Balance, March 31, 2022

$

175,000

 

 

$

21,417

 

 

$

5,968,724

 

 

$

(4,109,540

)

 

$

4,671

 

 

$

(9,948

)

 

$

5,794

 

 

$

2,056,118

 

 

 

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, 2020

$

325,000

 

 

$

19,400

 

 

$

5,705,164

 

 

$

(4,099,534

)

 

$

5,479

 

 

$

(2,682

)

 

$

(11,319

)

 

$

3,315

 

 

$

1,944,823

 

Issuance of common shares related

   to stock plans

 

 

 

 

6

 

 

 

31

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

37

 

Issuance of common shares for

   cash offering

 

 

 

 

1,696

 

 

 

219,910

 

 

 

 

 

 

 

 

 

 

 

 

3,923

 

 

 

 

 

 

225,529

 

Stock-based compensation, net

 

 

 

 

 

 

 

8,580

 

 

 

 

 

 

(968

)

 

 

 

 

 

3,009

 

 

 

 

 

 

10,621

 

Distributions to non-controlling

   interests

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(16

)

 

 

(16

)

Dividends declared-common shares

 

 

 

 

 

 

 

 

 

 

(23,303

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,303

)

Dividends declared-preferred shares

 

 

 

 

 

 

 

 

 

 

(4,950

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,950

)

Comprehensive income

 

 

 

 

 

 

 

 

 

 

16,008

 

 

 

 

 

 

2,682

 

 

 

 

 

 

173

 

 

 

18,863

 

Balance, March 31, 2021

$

325,000

 

 

$

21,102

 

 

$

5,933,685

 

 

$

(4,111,779

)

 

$

4,511

 

 

$

 

 

$

(4,387

)

 

$

3,472

 

 

$

2,171,604

 

 

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

5


SITE Centers Corp.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)

 

Three Months

 

 

Ended March 31,

 

 

2022

 

 

2021

 

Cash flow from operating activities:

 

 

 

 

 

 

 

Net income

$

13,955

 

 

$

16,181

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

50,364

 

 

 

45,560

 

Stock-based compensation

 

1,823

 

 

 

7,694

 

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

 

1,145

 

 

 

1,015

 

Equity in net income of joint ventures

 

(169

)

 

 

(4,385

)

Operating cash distributions from joint ventures

 

883

 

 

 

794

 

Gain on change in control of interests

 

(3,356

)

 

 

(13,908

)

Loss on disposition of real estate, net

 

142

 

 

 

20

 

Impairment charges

 

 

 

 

7,270

 

Net change in accounts receivable

 

6,815

 

 

 

13,641

 

Net change in accounts payable and accrued expenses

 

(14,257

)

 

 

(13,048

)

Net change in other operating assets and liabilities

 

(7,324

)

 

 

(4,724

)

Total adjustments

 

36,066

 

 

 

39,929

 

Net cash flow provided by operating activities

 

50,021

 

 

 

56,110

 

Cash flow from investing activities:

 

 

 

 

 

 

 

Real estate acquired, net of liabilities and cash assumed

 

(133,463

)

 

 

 

Real estate developed and improvements to operating real estate

 

(24,725

)

 

 

(18,131

)

Proceeds from disposition of real estate

 

156

 

 

 

11,279

 

Equity contributions to joint ventures

 

(55

)

 

 

(92

)

Distributions from unconsolidated joint ventures

 

3,583

 

 

 

17,483

 

Net cash flow (used for) provided by investing activities

 

(154,504

)

 

 

10,539

 

Cash flow from financing activities:

 

 

 

 

 

 

 

Proceeds from (repayment of) revolving credit facilities, net

 

115,000

 

 

 

(135,000

)

Repayment of mortgage debt

 

(34,696

)

 

 

(18,563

)

Proceeds from issuance of common shares, net of offering expenses

 

33,781

 

 

 

225,529

 

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

 

(5,415

)

 

 

(4,476

)

Distributions to non-controlling interests and redeemable operating partnership units

 

(17

)

 

 

(7

)

Dividends paid

 

(28,208

)

 

 

(14,844

)

Net cash flow provided by financing activities

 

80,445

 

 

 

52,639

 

 

 

 

 

 

 

 

 

Effect of foreign exchange rate changes on cash and cash equivalents

 

 

 

 

(1

)

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

 

(24,038

)

 

 

119,288

 

Cash, cash equivalents and restricted cash, beginning of period

 

43,252

 

 

 

74,414

 

Cash, cash equivalents and restricted cash, end of period

$

19,214

 

 

$

193,701

 

 

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

6


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 acquiring, owning, developing, redeveloping, leasing 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 primarily includes national and regional retail chains and local tenants.  Consequently, the Company’s credit risk is 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.  The Company considered impacts to its estimates related to COVID-19, as appropriate, within its unaudited condensed consolidated financial statements, and there may be changes to those estimates in future periods. The Company believes that its accounting estimates are appropriate after giving consideration to the uncertainties surrounding the severity and duration of the COVID-19 pandemic. 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, 2022 and 2021, 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, 2021.

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 (“VIE”).  All significant inter-company 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,

 

 

2022

 

 

2021

 

Consolidation of the net assets of previously unconsolidated joint ventures

$

42.8

 

 

$

 

Joint venture investments related to consolidation of net assets

 

8.5

 

 

 

 

Dividends declared, but not paid

 

30.7

 

 

 

28.3

 

Accounts payable related to construction in progress

 

10.5

 

 

 

5.7

 

Tax receivable - investment sale proceeds

 

 

 

 

4.1

 

 

2.

Revenue Recognition

Impact of the COVID-19 Pandemic on Revenue and Receivables

Beginning in March 2020, the retail sector was significantly impacted by the COVID-19 pandemic.  Though the impact of the COVID-19 pandemic on tenant operations varied by tenant category, local conditions and applicable government mandates, a significant number of the Company’s tenants experienced a reduction in sales and foot traffic, and many tenants were forced to limit

7


their operations or close their businesses for a period of time, primarily in 2020.  The COVID-19 pandemic also had a significant impact on the Company’s collection of rents from April 2020 through the end of 2020.  The Company engaged in discussions with most of its larger tenants that failed to satisfy all or a portion of their rent obligations and agreed to terms on rent-deferral arrangements (and, in a small number of cases, rent abatements) and other lease modifications with a significant number of such tenants.  As of March 31, 2022, the majority of these deferral arrangements for tenants that are not accounted for on the cash basis have been repaid.    

During the three months ended March 31, 2022, the Company recorded net uncollectible revenue that resulted in rental income of $1.1 million, primarily due to rental income paid in 2022 related to outstanding amounts owed from tenants on the cash basis of accounting that were contractually due in 2020.  

For those tenants where the Company is unable to assert that collection of amounts due over the lease term is probable, regardless if the Company has entered into a deferral agreement to extend the payment terms, the Company has categorized these tenants on the cash basis of accounting.  As a result, all existing accounts receivable relating to these tenants have been reserved in full, including straight-line rental income, and no rental income is recognized from such tenants once they have been placed on the cash basis of accounting until payments are received.  The Company will remove the cash basis designation and resume recording rental income from such tenants on a straight-line basis at such time it believes collection from the tenants is probable based upon a demonstrated payment history, improved liquidity, the addition of credit-worthy guarantors or a recapitalization event.

Fee and Other Income

Fee and Other Income on the consolidated statements of operations includes revenue from contracts with customers, revenue from contracts with Retail Value Inc. (“RVI”) and other property-related income and is recognized in the period earned as follows (in thousands):

 

Three Months

 

 

Ended March 31,

 

 

2022

 

 

2021

 

Revenue from contracts with customers:

 

 

 

 

 

 

 

Asset and property management fees

$

2,309

 

 

$

2,601

 

Leasing commissions

 

270

 

 

 

239

 

Development fees

 

136

 

 

 

113

 

Total revenue from contracts with customers

 

2,715

 

 

 

2,953

 

Other property income

 

1,523

 

 

 

544

 

 

 

4,238

 

 

 

3,497

 

Revenue from contracts with RVI:

 

 

 

 

 

 

 

Asset and property management fees

 

191

 

 

 

3,974

 

Leasing commissions

 

7

 

 

 

778