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 SeptemberJune 30, 20222023
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 OctoberJuly 21, 20222023 the registrant had 212,512,324209,273,826 shares of common stock, $0.10 par value per share, outstanding.
SITE Centers Corp.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED SeptemberJune 30, 20222023
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION | ||
Item 1. | Financial Statements – Unaudited | |
Consolidated Balance Sheets as of | 3 | |
4 | ||
5 | ||
6 | ||
7 | ||
8 | ||
9 | ||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
Item 3. |
| |
Item 4. |
| |
PART II. OTHER INFORMATION | ||
Item 1. |
| |
Item 1A. |
| |
Item 2. |
| |
Item 3. |
| |
Item 4. |
| |
Item 5. |
| |
Item 6. |
| |
|
2
SITE Centers Corp.
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands, except share amounts)
| September 30, 2022 |
|
| December 31, 2021 |
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Assets |
|
|
|
|
|
|
|
| ||||||
Land | $ | 1,095,662 |
|
| $ | 1,011,401 |
| $ | 1,094,240 |
|
| $ | 1,066,852 |
|
Buildings |
| 3,848,821 |
|
|
| 3,624,164 |
|
| 3,770,497 |
|
|
| 3,733,805 |
|
Fixtures and tenant improvements |
| 587,962 |
|
|
| 556,056 |
|
| 600,948 |
|
|
| 576,036 |
|
|
| 5,532,445 |
|
|
| 5,191,621 |
|
| 5,465,685 |
|
|
| 5,376,693 |
|
Less: Accumulated depreciation |
| (1,672,242 | ) |
|
| (1,571,569 | ) |
| (1,724,837 | ) |
|
| (1,652,899 | ) |
|
| 3,860,203 |
|
|
| 3,620,052 |
|
| 3,740,848 |
|
|
| 3,723,794 |
|
Construction in progress and land |
| 59,812 |
|
|
| 47,260 |
|
| 60,231 |
|
|
| 56,466 |
|
Total real estate assets, net |
| 3,920,015 |
|
|
| 3,667,312 |
|
| 3,801,079 |
|
|
| 3,780,260 |
|
Investments in and advances to joint ventures, net |
| 46,001 |
|
|
| 64,626 |
|
| 40,556 |
|
|
| 44,608 |
|
Cash and cash equivalents |
| 20,883 |
|
|
| 41,807 |
|
| 28,041 |
|
|
| 20,254 |
|
Restricted cash |
| 3,119 |
|
|
| 1,445 |
|
| 552 |
|
|
| 960 |
|
Accounts receivable |
| 59,446 |
|
|
| 61,382 |
|
| 61,376 |
|
|
| 63,926 |
|
Other assets, net |
| 147,507 |
|
|
| 130,479 |
|
| 129,397 |
|
|
| 135,009 |
|
| $ | 4,196,971 |
|
| $ | 3,967,051 |
| $ | 4,061,001 |
|
| $ | 4,045,017 |
|
Liabilities and Equity |
|
|
|
|
|
|
|
| ||||||
Unsecured indebtedness: |
|
|
|
|
|
|
|
| ||||||
Senior notes, net | $ | 1,453,384 |
|
| $ | 1,451,768 |
| $ | 1,367,775 |
|
| $ | 1,453,923 |
|
Term loan, net |
| 198,437 |
|
|
| 99,810 |
|
| 198,689 |
|
|
| 198,521 |
|
Revolving credit facilities |
| 80,000 |
|
|
| — |
| |||||||
Revolving credit facility |
| 175,000 |
|
|
| — |
| |||||||
|
| 1,731,821 |
|
|
| 1,551,578 |
|
| 1,741,464 |
|
|
| 1,652,444 |
|
Mortgage indebtedness, net |
| 90,235 |
|
|
| 125,799 |
|
| 53,829 |
|
|
| 54,577 |
|
Total indebtedness |
| 1,822,056 |
|
|
| 1,677,377 |
|
| 1,795,293 |
|
|
| 1,707,021 |
|
Accounts payable and other liabilities |
| 226,952 |
|
|
| 218,779 |
|
| 210,927 |
|
|
| 214,985 |
|
Dividends payable |
| 30,528 |
|
|
| 28,243 |
|
| 30,083 |
|
|
| 30,389 |
|
Total liabilities |
| 2,079,536 |
|
|
| 1,924,399 |
|
| 2,036,303 |
|
|
| 1,952,395 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
| ||||||
SITE Centers Equity |
|
|
|
|
|
|
|
| ||||||
Class A—6.375% cumulative redeemable preferred shares, without par value, $500 liquidation value; |
| 175,000 |
|
|
| 175,000 |
| |||||||
Common shares, with par value, $0.10 stated value; 300,000,000 shares authorized; 214,370,870 and |
| 21,437 |
|
|
| 21,129 |
| |||||||
Class A—6.375% cumulative redeemable preferred shares, without par value, $500 liquidation value; |
| 175,000 |
|
|
| 175,000 |
| |||||||
Common shares, with par value, $0.10 stated value; 300,000,000 shares authorized; 214,372,608 and |
| 21,437 |
|
|
| 21,437 |
| |||||||
Additional paid-in capital |
| 5,974,001 |
|
|
| 5,934,166 |
|
| 5,971,918 |
|
|
| 5,974,216 |
|
Accumulated distributions in excess of net income |
| (4,044,178 | ) |
|
| (4,092,783 | ) |
| (4,085,897 | ) |
|
| (4,046,370 | ) |
Deferred compensation obligation |
| 4,865 |
|
|
| 4,695 |
|
| 4,941 |
|
|
| 5,025 |
|
Accumulated other comprehensive income |
| 9,782 |
|
|
| — |
|
| 10,125 |
|
|
| 9,038 |
|
Less: Common shares in treasury at cost: 2,115,175 and 287,645 shares at September 30, 2022 and |
| (29,266 | ) |
|
| (5,349 | ) | |||||||
Less: Common shares in treasury at cost: 5,376,465 and 3,787,279 shares at June 30, 2023 and |
| (72,826 | ) |
|
| (51,518 | ) | |||||||
Total SITE Centers shareholders' equity |
| 2,111,641 |
|
|
| 2,036,858 |
|
| 2,024,698 |
|
|
| 2,086,828 |
|
Non-controlling interests |
| 5,794 |
|
|
| 5,794 |
|
| — |
|
|
| 5,794 |
|
Total equity |
| 2,117,435 |
|
|
| 2,042,652 |
|
| 2,024,698 |
|
|
| 2,092,622 |
|
| $ | 4,196,971 |
|
| $ | 3,967,051 |
| $ | 4,061,001 |
|
| $ | 4,045,017 |
|
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 June 30, |
| |||||
| 2023 |
|
| 2022 |
| ||
Revenues from operations: |
|
|
|
|
| ||
Rental income | $ | 135,954 |
|
| $ | 136,203 |
|
Fee and other income |
| 2,204 |
|
|
| 4,479 |
|
|
| 138,158 |
|
|
| 140,682 |
|
Rental operation expenses: |
|
|
|
|
| ||
Operating and maintenance |
| 22,476 |
|
|
| 22,278 |
|
Real estate taxes |
| 20,279 |
|
|
| 20,624 |
|
Impairment charges |
| — |
|
|
| 2,536 |
|
General and administrative |
| 14,031 |
|
|
| 11,353 |
|
Depreciation and amortization |
| 58,698 |
|
|
| 51,021 |
|
|
| 115,484 |
|
|
| 107,812 |
|
Other income (expense): |
|
|
|
|
| ||
Interest expense |
| (20,921 | ) |
|
| (18,909 | ) |
Other income (expense), net |
| (634 | ) |
|
| (1,147 | ) |
|
| (21,555 | ) |
|
| (20,056 | ) |
Income before earnings from equity method investments and other items |
| 1,119 |
|
|
| 12,814 |
|
Equity in net income of joint ventures |
| 4,618 |
|
|
| 1,381 |
|
Gain on sale and change in control of interests |
| — |
|
|
| 41,970 |
|
(Loss) gain on disposition of real estate, net |
| (22 | ) |
|
| 4,597 |
|
Income before tax expense |
| 5,715 |
|
|
| 60,762 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (362 | ) |
|
| (353 | ) |
Net income | $ | 5,353 |
|
| $ | 60,409 |
|
Income attributable to non-controlling interests, net |
| — |
|
|
| (19 | ) |
Net income attributable to SITE Centers | $ | 5,353 |
|
| $ | 60,390 |
|
Preferred dividends |
| (2,789 | ) |
|
| (2,789 | ) |
Net income attributable to common shareholders | $ | 2,564 |
|
| $ | 57,601 |
|
|
|
|
|
|
| ||
Per share data: |
|
|
|
|
| ||
Basic | $ | 0.01 |
|
| $ | 0.27 |
|
Diluted | $ | 0.01 |
|
| $ | 0.27 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share amounts)
| Three Months |
| Six Months |
| ||||||||||
| Ended September 30, |
| Ended June 30, |
| ||||||||||
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||
Revenues from operations: |
|
|
|
|
|
|
|
| ||||||
Rental income | $ | 135,123 |
|
| $ | 120,569 |
| $ | 271,826 |
|
| $ | 266,087 |
|
Fee and other income |
| 3,720 |
|
|
| 13,872 |
|
| 5,024 |
|
|
| 8,915 |
|
|
| 138,843 |
|
|
| 134,441 |
|
| 276,850 |
|
|
| 275,002 |
|
Rental operation expenses: |
|
|
|
|
|
|
|
| ||||||
Operating and maintenance |
| 22,314 |
|
|
| 18,562 |
|
| 45,642 |
|
|
| 44,214 |
|
Real estate taxes |
| 20,423 |
|
|
| 19,160 |
|
| 40,332 |
|
|
| 40,807 |
|
Impairment charges |
| — |
|
|
| 2,536 |
| |||||||
General and administrative |
| 10,799 |
|
|
| 11,727 |
|
| 24,676 |
|
|
| 23,604 |
|
Depreciation and amortization |
| 51,179 |
|
|
| 44,669 |
|
| 112,714 |
|
|
| 101,385 |
|
|
| 104,715 |
|
|
| 94,118 |
|
| 223,364 |
|
|
| 212,546 |
|
Other income (expense): |
|
|
|
|
|
|
|
| ||||||
Interest expense |
| (20,139 | ) |
|
| (19,170 | ) |
| (40,844 | ) |
|
| (37,167 | ) |
Other expense, net |
| (501 | ) |
|
| (524 | ) | |||||||
Other income (expense), net |
| (1,321 | ) |
|
| (1,651 | ) | |||||||
|
| (20,640 | ) |
|
| (19,694 | ) |
| (42,165 | ) |
|
| (38,818 | ) |
Income before earnings from equity method investments and other items |
| 13,488 |
|
|
| 20,629 |
|
| 11,321 |
|
|
| 23,638 |
|
Equity in net income of joint ventures |
| 25,918 |
|
|
| 1,824 |
|
| 5,977 |
|
|
| 1,550 |
|
Gain on sale of interests |
| 228 |
|
|
| 35 |
| |||||||
Gain on sale and change in control of interests |
| 3,749 |
|
|
| 45,326 |
| |||||||
Gain on disposition of real estate, net |
| 26,837 |
|
|
| 5,871 |
|
| 183 |
|
|
| 4,455 |
|
Income before tax expense |
| 66,471 |
|
|
| 28,359 |
|
| 21,230 |
|
|
| 74,969 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (258 | ) |
|
| (202 | ) |
| (575 | ) |
|
| (605 | ) |
Net income | $ | 66,213 |
|
| $ | 28,157 |
| $ | 20,655 |
|
| $ | 74,364 |
|
Income attributable to non-controlling interests, net |
| (18 | ) |
|
| (93 | ) |
| (18 | ) |
|
| (37 | ) |
Net income attributable to SITE Centers | $ | 66,195 |
|
| $ | 28,064 |
| $ | 20,637 |
|
| $ | 74,327 |
|
Preferred dividends |
| (2,789 | ) |
|
| (2,789 | ) |
| (5,578 | ) |
|
| (5,578 | ) |
Net income attributable to common shareholders | $ | 63,406 |
|
| $ | 25,275 |
| $ | 15,059 |
|
| $ | 68,749 |
|
|
|
|
|
|
|
|
|
| ||||||
Per share data: |
|
|
|
|
|
|
|
| ||||||
Basic | $ | 0.30 |
|
| $ | 0.12 |
| $ | 0.07 |
|
| $ | 0.32 |
|
Diluted | $ | 0.30 |
|
| $ | 0.12 |
| $ | 0.07 |
|
| $ | 0.32 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share amounts)
| Nine Months |
| |||||
| Ended September 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
Revenues from operations: |
|
|
|
|
| ||
Rental income | $ | 401,210 |
|
| $ | 366,689 |
|
Fee and other income |
| 12,635 |
|
|
| 31,359 |
|
|
| 413,845 |
|
|
| 398,048 |
|
Rental operation expenses: |
|
|
|
|
| ||
Operating and maintenance |
| 66,528 |
|
|
| 58,200 |
|
Real estate taxes |
| 61,230 |
|
|
| 58,359 |
|
Impairment charges |
| 2,536 |
|
|
| 7,270 |
|
General and administrative |
| 34,403 |
|
|
| 41,547 |
|
Depreciation and amortization |
| 152,564 |
|
|
| 137,446 |
|
|
| 317,261 |
|
|
| 302,822 |
|
Other income (expense): |
|
|
|
|
| ||
Interest expense |
| (57,306 | ) |
|
| (57,701 | ) |
Other expense, net |
| (2,152 | ) |
|
| (1,214 | ) |
|
| (59,458 | ) |
|
| (58,915 | ) |
Income before earnings from equity method investments and other items |
| 37,126 |
|
|
| 36,311 |
|
Equity in net income of joint ventures |
| 27,468 |
|
|
| 11,059 |
|
Gain on sale and change in control of interests |
| 45,554 |
|
|
| 13,943 |
|
Gain on disposition of real estate, net |
| 31,292 |
|
|
| 6,069 |
|
Income before tax expense |
| 141,440 |
|
|
| 67,382 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (863 | ) |
|
| (1,057 | ) |
Net income | $ | 140,577 |
|
| $ | 66,325 |
|
Income attributable to non-controlling interests, net |
| (55 | ) |
|
| (384 | ) |
Net income attributable to SITE Centers | $ | 140,522 |
|
| $ | 65,941 |
|
Write-off of preferred share original issuance costs |
| — |
|
|
| (5,156 | ) |
Preferred dividends |
| (8,367 | ) |
|
| (10,867 | ) |
Net income attributable to common shareholders | $ | 132,155 |
|
| $ | 49,918 |
|
|
|
|
|
|
| ||
Per share data: |
|
|
|
|
| ||
Basic | $ | 0.62 |
|
| $ | 0.24 |
|
Diluted | $ | 0.62 |
|
| $ | 0.24 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited; in thousands)
| Three Months |
| Nine Months |
| Three Months |
| Six Months |
| ||||||||||||||||||||||
| Ended September 30, |
| Ended September 30, |
| Ended June 30, |
| Ended June 30, |
| ||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net income | $ | 66,213 |
|
| $ | 28,157 |
|
| $ | 140,577 |
|
| $ | 66,325 |
| $ | 5,353 |
|
| $ | 60,409 |
|
| $ | 20,655 |
|
| $ | 74,364 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Change in fair value of interest-rate contracts |
| 9,782 |
|
|
| — |
|
|
| 9,782 |
|
|
| — |
|
| 4,287 |
|
|
| — |
|
|
| 1,087 |
|
|
| — |
|
Foreign currency translation, net |
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) | |||||||||||||||
Reclassification adjustment for foreign currency |
| — |
|
|
| — |
|
|
| — |
|
|
| 2,683 |
| |||||||||||||||
Total other comprehensive income |
| 9,782 |
|
|
| — |
|
|
| 9,782 |
|
|
| 2,682 |
|
| 4,287 |
|
|
| — |
|
|
| 1,087 |
|
|
| — |
|
Comprehensive income | $ | 75,995 |
|
| $ | 28,157 |
|
| $ | 150,359 |
|
| $ | 69,007 |
| $ | 9,640 |
|
| $ | 60,409 |
|
| $ | 21,742 |
|
| $ | 74,364 |
|
Total comprehensive income attributable to non-controlling interests |
| (18 | ) |
|
| (93 | ) |
|
| (55 | ) |
|
| (384 | ) | |||||||||||||||
Comprehensive income attributable to non-controlling interests |
| — |
|
|
| (19 | ) |
|
| (18 | ) |
|
| (37 | ) | |||||||||||||||
Total comprehensive income attributable to SITE Centers | $ | 75,977 |
|
| $ | 28,064 |
|
| $ | 150,304 |
|
| $ | 68,623 |
| $ | 9,640 |
|
| $ | 60,390 |
|
| $ | 21,724 |
|
| $ | 74,327 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
6
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF EQUITY
(unaudited; in thousands)
| SITE Centers Equity |
|
|
|
|
|
| SITE Centers Equity |
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||
| Preferred Shares |
|
| Common |
|
| Additional |
|
| Accumulated Distributions |
|
| Deferred |
|
| Accumulated Other Comprehensive Income |
|
| Treasury |
|
| Non- |
|
| Total |
| Preferred Shares |
|
| Common |
|
| Additional |
|
| Accumulated Distributions |
|
| Deferred |
|
| Accumulated Other Comprehensive Income |
|
| Treasury |
|
| Non- |
|
| Total |
| ||||||||||||||||||
Balance, December 31, 2021 | $ | 175,000 |
|
| $ | 21,129 |
|
| $ | 5,934,166 |
|
| $ | (4,092,783 | ) |
| $ | 4,695 |
|
| $ | — |
|
| $ | (5,349 | ) |
| $ | 5,794 |
|
| $ | 2,042,652 |
| |||||||||||||||||||||||||||||||||||
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 |
| — |
|
|
| 65 |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 71 |
|
| — |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
Issuance of common shares for |
| — |
|
|
| 243 |
|
|
| 36,614 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
| — |
|
|
| 36,857 |
| |||||||||||||||||||||||||||||||||||||
Repurchase of common |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (26,611 | ) |
|
| — |
|
|
| (26,611 | ) | |||||||||||||||||||||||||||||||||||
Stock-based compensation, net |
| — |
|
|
| — |
|
|
| 2,649 |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| (4,498 | ) |
|
| — |
|
|
| (1,841 | ) |
| — |
|
|
| — |
|
|
| (8,133 | ) |
|
| — |
|
|
| 30 |
|
|
| — |
|
|
| 5,094 |
|
|
| — |
|
|
| (3,009 | ) |
Distributions to non-controlling |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (37 | ) |
|
| (37 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| (18 | ) |
Dividends declared-common shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (55,810 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (55,810 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (27,292 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,292 | ) |
Dividends declared-preferred shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (5,578 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| ��� |
|
|
| (5,578 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
Comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| 74,327 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
|
| 74,364 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,284 |
|
|
| — |
|
|
| (3,200 | ) |
|
| — |
|
|
| 18 |
|
|
| 12,102 |
|
Balance, June 30, 2022 |
| 175,000 |
|
|
| 21,437 |
|
|
| 5,973,435 |
|
|
| (4,079,844 | ) |
|
| 4,703 |
|
|
| — |
|
|
| (9,847 | ) |
|
| 5,794 |
|
|
| 2,090,678 |
| |||||||||||||||||||||||||||||||||||
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 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares |
| — |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
|
| — |
|
|
| — |
|
|
| 7 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 7 |
|
Expenses for |
| — |
|
|
|
|
| (126 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (126 | ) | |||||||||||||||||||||||||||||||||||||
Stock-based compensation, net |
| — |
|
|
| — |
|
|
| 686 |
|
|
| — |
|
|
| 162 |
|
|
| — |
|
|
| 581 |
|
|
| — |
|
|
| 1,429 |
|
| — |
|
|
| — |
|
|
| 1,763 |
|
|
| — |
|
|
| (114 | ) |
|
| — |
|
|
| 209 |
|
|
| — |
|
|
| 1,858 |
|
Repurchase of common |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20,000 | ) |
|
| — |
|
|
| (20,000 | ) | |||||||||||||||||||||||||||||||||||
Distributions to non-controlling |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| (18 | ) | |||||||||||||||||||||||||||||||||||
Repurchase of OP units |
| — |
|
|
| — |
|
|
| 4,059 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,794 | ) |
|
| (1,735 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-common shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (27,740 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,740 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (27,294 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,294 | ) |
Dividends declared-preferred shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
Comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| 66,195 |
|
|
| — |
|
|
| 9,782 |
|
|
| — |
|
|
| 18 |
|
|
| 75,995 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 5,353 |
|
|
| — |
|
|
| 4,287 |
|
|
| — |
|
|
| — |
|
|
| 9,640 |
|
Balance, September 30, 2022 | $ | 175,000 |
|
| $ | 21,437 |
|
| $ | 5,974,001 |
|
| $ | (4,044,178 | ) |
| $ | 4,865 |
|
| $ | 9,782 |
|
| $ | (29,266 | ) |
| $ | 5,794 |
|
| $ | 2,117,435 |
| |||||||||||||||||||||||||||||||||||
Balance, June 30, 2023 | $ | 175,000 |
|
| $ | 21,437 |
|
| $ | 5,971,918 |
|
| $ | (4,085,897 | ) |
| $ | 4,941 |
|
| $ | 10,125 |
|
| $ | (72,826 | ) |
| $ | — |
|
| $ | 2,024,698 |
|
| SITE Centers Equity |
|
|
|
|
|
| SITE Centers Equity |
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||
| Preferred Shares |
|
| Common |
|
| Additional |
|
| Accumulated Distributions |
|
| Deferred Compensation Obligation |
|
| Accumulated Other Comprehensive (Loss) Income |
|
| Treasury |
|
| Non- |
|
| Total |
| Preferred Shares |
|
| Common |
|
| Additional |
|
| Accumulated Distributions |
|
| Deferred Compensation Obligation |
|
| Treasury |
|
| Non- |
|
| 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 |
| |||||||||||||||||||||||||||||||
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 |
| — |
|
|
| 8 |
|
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 99 |
|
| — |
|
|
| 65 |
|
|
| 4 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 69 |
|
Issuance of common shares for |
| — |
|
|
| 1,696 |
|
|
| 219,711 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,923 |
|
|
| — |
|
|
| 225,330 |
|
| — |
|
|
| 223 |
|
|
| 33,558 |
|
|
| — |
|
|
| — |
|
|
|
|
| — |
|
|
| 33,781 |
| ||
Stock-based compensation, net |
| — |
|
|
| — |
|
|
| 10,425 |
|
|
| — |
|
|
| (995 | ) |
|
| — |
|
|
| 3,085 |
|
|
| — |
|
|
| 12,515 |
| |||||||||||||||||||||||||||||||
Distributions to non-controlling |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (33 | ) |
|
| (33 | ) | |||||||||||||||||||||||||||||||
Redemption of preferred shares |
| (150,000 | ) |
|
|
|
| 5,137 |
|
|
| (5,156 | ) |
|
|
|
|
|
|
|
|
|
| (150,019 | ) | |||||||||||||||||||||||||||||||||||||||||
Dividends declared-common shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (48,795 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (48,795 | ) | |||||||||||||||||||||||||||||||
Dividends declared-preferred shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (7,739 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (7,739 | ) | |||||||||||||||||||||||||||||||
Comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| 37,877 |
|
|
| — |
|
|
| 2,682 |
|
|
| — |
|
|
| 291 |
|
|
| 40,850 |
| |||||||||||||||||||||||||||||||
Balance, June 30, 2021 |
| 175,000 |
|
|
| 21,104 |
|
|
| 5,940,528 |
|
|
| (4,123,347 | ) |
|
| 4,484 |
|
|
| — |
|
|
| (4,311 | ) |
|
| 3,573 |
|
|
| 2,017,031 |
| |||||||||||||||||||||||||||||||
Issuance of common shares |
| — |
|
|
| 6 |
|
|
| 127 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 133 |
| |||||||||||||||||||||||||||||||
Expenses for |
| — |
|
|
| — |
|
|
| (164 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (164 | ) | |||||||||||||||||||||||||||||||
Stock-based compensation, net |
| — |
|
|
| — |
|
|
| 1,975 |
|
|
| — |
|
|
| 106 |
|
|
| — |
|
|
| (504 | ) |
|
| — |
|
|
| 1,577 |
|
| — |
|
|
| — |
|
|
| 996 |
|
|
| — |
|
|
| (24 | ) |
|
| (4,599 | ) |
|
| — |
|
|
| (3,627 | ) |
Distributions to non-controlling |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| (16 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| (18 | ) |
Dividends declared-common shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (25,462 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25,462 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (27,905 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,905 | ) |
Dividends declared-preferred shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
Comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| 28,064 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 93 |
|
|
| 28,157 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,937 |
|
|
| — |
|
|
| — |
|
|
| 18 |
|
|
| 13,955 |
|
Balance, September 30, 2021 | $ | 175,000 |
|
| $ | 21,110 |
|
| $ | 5,942,466 |
|
| $ | (4,123,534 | ) |
| $ | 4,590 |
|
| $ | — |
|
| $ | (4,815 | ) |
| $ | 3,650 |
|
| $ | 2,018,467 |
| |||||||||||||||||||||||||||||||
Balance, March 31, 2022 |
| 175,000 |
|
|
| 21,417 |
|
|
| 5,968,724 |
|
|
| (4,109,540 | ) |
|
| 4,671 |
|
|
| (9,948 | ) |
|
| 5,794 |
|
|
| 2,056,118 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares |
| — |
|
|
| — |
|
|
| 2 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares |
| — |
|
|
| 20 |
|
|
| 3,056 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,076 |
| |||||||||||||||||||||||||||||||||||
Stock-based compensation, net |
| — |
|
|
| — |
|
|
| 1,653 |
|
|
| — |
|
|
| 32 |
|
|
| 101 |
|
|
| — |
|
|
| 1,786 |
| |||||||||||||||||||||||||||||||||||
Distributions to non-controlling |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (19 | ) |
|
| (19 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-common shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (27,905 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,905 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-preferred shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) | |||||||||||||||||||||||||||||||||||
Comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| 60,390 |
|
|
| — |
|
|
| — |
|
|
| 19 |
|
|
| 60,409 |
| |||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | $ | 175,000 |
|
| $ | 21,437 |
|
| $ | 5,973,435 |
|
| $ | (4,079,844 | ) |
| $ | 4,703 |
|
| $ | (9,847 | ) |
| $ | 5,794 |
|
| $ | 2,090,678 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
7
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
| Nine Months |
| Six Months |
| ||||||||||
| Ended September 30, |
| Ended June 30, |
| ||||||||||
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||
Cash flow from operating activities: |
|
|
|
|
|
|
|
| ||||||
Net income | $ | 140,577 |
|
| $ | 66,325 |
| $ | 20,655 |
|
| $ | 74,364 |
|
Adjustments to reconcile net income to net cash flow provided by operating activities: |
|
|
|
|
|
|
|
| ||||||
Depreciation and amortization |
| 152,564 |
|
|
| 137,446 |
|
| 112,714 |
|
|
| 101,385 |
|
Stock-based compensation |
| 5,430 |
|
|
| 11,698 |
|
| 3,635 |
|
|
| 3,628 |
|
Amortization and write-off of debt issuance costs and fair market value of debt adjustments |
| 3,929 |
|
|
| 3,210 |
|
| 2,206 |
|
|
| 2,782 |
|
Equity in net income of joint ventures |
| (27,468 | ) |
|
| (11,059 | ) |
| (5,977 | ) |
|
| (1,550 | ) |
Operating cash distributions from joint ventures |
| 1,111 |
|
|
| 2,840 |
|
| 258 |
|
|
| 1,111 |
|
Gain on sale and change in control of interests |
| (45,554 | ) |
|
| (13,943 | ) |
| (3,749 | ) |
|
| (45,326 | ) |
Gain on disposition of real estate, net |
| (31,292 | ) |
|
| (6,069 | ) |
| (183 | ) |
|
| (4,455 | ) |
Impairment charges |
| 2,536 |
|
|
| 7,270 |
|
| — |
|
|
| 2,536 |
|
Assumption of buildings due to ground lease terminations |
| (2,900 | ) |
|
| — |
| |||||||
Assumption of building due to ground lease termination |
| — |
|
|
| (1,800 | ) | |||||||
Net change in accounts receivable |
| 95 |
|
|
| 18,391 |
|
| 3,250 |
|
|
| 5,110 |
|
Net change in accounts payable and accrued expenses |
| 8,025 |
|
|
| 5,143 |
|
| (1,623 | ) |
|
| (1,659 | ) |
Net change in other operating assets and liabilities |
| (1,567 | ) |
|
| (3,888 | ) |
| (4,389 | ) |
|
| (4,019 | ) |
Total adjustments |
| 64,909 |
|
|
| 151,039 |
|
| 106,142 |
|
|
| 57,743 |
|
Net cash flow provided by operating activities |
| 205,486 |
|
|
| 217,364 |
|
| 126,797 |
|
|
| 132,107 |
|
Cash flow from investing activities: |
|
|
|
|
|
|
|
| ||||||
Real estate acquired, net of liabilities and cash assumed |
| (329,570 | ) |
|
| (62,610 | ) |
| (74,783 | ) |
|
| (297,966 | ) |
Real estate developed and improvements to operating real estate |
| (87,902 | ) |
|
| (55,677 | ) |
| (51,278 | ) |
|
| (57,092 | ) |
Proceeds from disposition of joint venture interests |
| 39,250 |
|
|
| — |
|
| 3,405 |
|
|
| 39,247 |
|
Proceeds from disposition of real estate |
| 55,866 |
|
|
| 29,793 |
|
| — |
|
|
| 21,555 |
|
Equity contributions to joint ventures |
| (143 | ) |
|
| (247 | ) |
| (86 | ) |
|
| (117 | ) |
Repayment of joint venture advance, net |
| 318 |
|
|
| — |
| |||||||
Distributions from unconsolidated joint ventures |
| 39,656 |
|
|
| 23,081 |
|
| 9,468 |
|
|
| 5,422 |
|
Repayment of joint venture advances, net |
| — |
|
|
| 929 |
| |||||||
Net cash flow used for investing activities |
| (282,843 | ) |
|
| (64,731 | ) |
| (112,956 | ) |
|
| (288,951 | ) |
Cash flow from financing activities: |
|
|
|
|
|
|
|
| ||||||
Proceeds from (repayment of) revolving credit facilities, net |
| 80,000 |
|
|
| (135,000 | ) | |||||||
Proceeds from revolving credit facility, net |
| 175,000 |
|
|
| 125,000 |
| |||||||
Proceeds from unsecured term loan |
| 100,000 |
|
|
| — |
|
| — |
|
|
| 100,000 |
|
Payment of debt issuance costs |
| (7,598 | ) |
|
| — |
|
| — |
|
|
| (7,582 | ) |
Repayment of senior notes |
| (87,209 | ) |
|
| — |
| |||||||
Repayment of mortgage debt |
| (35,577 | ) |
|
| (25,613 | ) |
| (625 | ) |
|
| (35,134 | ) |
Proceeds from issuance of common shares, net of offering expenses |
| 36,731 |
|
|
| 225,166 |
|
| — |
|
|
| 36,857 |
|
Redemption of preferred shares |
| — |
|
|
| (150,019 | ) | |||||||
Repurchase of common shares in conjunction with equity award plans and dividend reinvestment plan |
| (5,873 | ) |
|
| (4,878 | ) |
| (4,844 | ) |
|
| (5,469 | ) |
Repurchase of common shares |
| (20,000 | ) |
|
| — |
|
| (26,611 | ) |
|
| — |
|
Distributions to non-controlling interests and redeemable operating partnership units |
| (53 | ) |
|
| (39 | ) | |||||||
Repurchase of operating partnership units |
| (1,735 | ) |
|
| — |
| |||||||
Distributions to redeemable operating partnership units |
| (37 | ) |
|
| (35 | ) | |||||||
Dividends paid |
| (89,523 | ) |
|
| (71,325 | ) |
| (60,401 | ) |
|
| (58,865 | ) |
Net cash flow provided by (used for) financing activities |
| 58,107 |
|
|
| (161,708 | ) | |||||||
Net cash flow (used for) provided by financing activities |
| (6,462 | ) |
|
| 154,772 |
| |||||||
|
|
|
|
|
|
|
|
| ||||||
Effect of foreign exchange rate changes on cash and cash equivalents |
| — |
|
|
| (1 | ) | |||||||
Net decrease in cash, cash equivalents and restricted cash |
| (19,250 | ) |
|
| (9,075 | ) | |||||||
Net increase (decrease) in cash, cash equivalents and restricted cash |
| 7,379 |
|
|
| (2,072 | ) | |||||||
Cash, cash equivalents and restricted cash, beginning of period |
| 43,252 |
|
|
| 74,414 |
|
| 21,214 |
|
|
| 43,252 |
|
Cash, cash equivalents and restricted cash, end of period | $ | 24,002 |
|
| $ | 65,338 |
| $ | 28,593 |
|
| $ | 41,180 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
8
Notes to Condensed Consolidated Financial Statements
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 and ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, 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, 20212022.
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”).entity. 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):
| Nine Months |
| |||||
| Ended September 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
Consolidation of the net assets of previously unconsolidated joint ventures | $ | 42.8 |
|
| $ | — |
|
Investment in joint venture related to net assets acquired |
| 8.5 |
|
|
| — |
|
Dividends declared, but not paid |
| 30.5 |
|
|
| 28.3 |
|
Accounts payable related to construction in progress |
| 12.6 |
|
|
| 10.2 |
|
Assumption of buildings due to ground lease terminations |
| 2.9 |
|
|
| — |
|
Mortgages assumed, shopping center acquisition |
| — |
|
|
| 17.9 |
|
Write-off of preferred share original issuance costs |
| — |
|
|
| 5.1 |
|
Tax receivable - investment sale proceeds |
| — |
|
|
| 4.1 |
|
| Six Months |
| |||||
| Ended June 30, |
| |||||
| 2023 |
|
| 2022 |
| ||
Consolidation of the net assets of previously unconsolidated joint ventures | $ | — |
|
| $ | 42.8 |
|
Net assets acquired from an unconsolidated joint venture | — |
|
|
| 8.5 |
| |
Dividends declared, but not paid |
| 30.1 |
|
|
| 30.7 |
|
Accounts payable related to construction in progress |
| 12.4 |
|
|
| 13.6 |
|
Repurchase of OP units |
| 4.1 |
|
| — |
| |
Assumption of building due to ground lease termination |
| — |
|
|
| 1.8 |
|
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
9
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 September 30, 2022, the majority of these deferral arrangements for tenants that are not accounted for on the cash basis have been repaid.
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.
The Company recorded net uncollectible revenue of $1.9 million for the nine months ended September 30, 2022, primarily due to rental income paid in 2022 related to outstanding amounts owed for prior periods from tenants on the cash basis of accounting and related reserve adjustments.
Fee and Other Income
Fee and Other Income on the consolidated statements of operations includes revenue from contracts with customers, which is primarily from the Company'sCompany’s unconsolidated joint ventures (Note 3)2). Revenue from contracts with Retail Value Inc. was $0.1 million and $9.5 million for the three months ended September 30, 2022 and 2021, respectively, and $0.9 million and $19.4 million for the nine months ended September 30, 2022 and 2021, respectively.
9
At SeptemberJune 30, 20222023 and December 31, 2021,2022, the Company had ownership interests in various unconsolidated joint ventures that had investments in 1913 and 4718 shopping center properties, respectively. Condensed combined financial information of the Company’s unconsolidated joint venture investments is as follows (in thousands):
| September 30, 2022 |
|
| December 31, 2021 |
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Condensed Combined Balance Sheets |
|
|
|
|
|
|
|
| ||||||
Land | $ | 214,310 |
|
| $ | 378,442 |
| $ | 180,588 |
|
| $ | 212,326 |
|
Buildings |
| 651,111 |
|
|
| 1,092,245 |
|
| 556,088 |
|
|
| 643,334 |
|
Fixtures and tenant improvements |
| 69,964 |
|
|
| 123,313 |
|
| 54,418 |
|
|
| 70,636 |
|
|
| 935,385 |
|
|
| 1,594,000 |
|
| 791,094 |
|
|
| 926,296 |
|
Less: Accumulated depreciation |
| (218,942 | ) |
|
| (441,215 | ) |
| (175,989 | ) |
|
| (220,642 | ) |
|
| 716,443 |
|
|
| 1,152,785 |
|
| 615,105 |
|
|
| 705,654 |
|
Construction in progress and land |
| 1,655 |
|
|
| 5,778 |
|
| 127 |
|
|
| 1,965 |
|
Real estate, net |
| 718,098 |
|
|
| 1,158,563 |
|
| 615,232 |
|
|
| 707,619 |
|
Cash and restricted cash |
| 43,951 |
|
|
| 37,535 |
|
| 44,873 |
|
|
| 44,809 |
|
Receivables, net |
| 11,122 |
|
|
| 16,854 |
|
| 9,450 |
|
|
| 11,671 |
|
Other assets, net |
| 38,973 |
|
|
| 49,029 |
|
| 31,501 |
|
|
| 36,272 |
|
| $ | 812,144 |
|
| $ | 1,261,981 |
| $ | 701,056 |
|
| $ | 800,371 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Mortgage debt | $ | 539,897 |
|
| $ | 873,336 |
| $ | 466,500 |
|
| $ | 535,093 |
|
Notes and accrued interest payable to the Company |
| 3,194 |
|
|
| 3,331 |
|
| 2,786 |
|
|
| 2,972 |
|
Other liabilities |
| 41,304 |
|
|
| 51,473 |
|
| 39,099 |
|
|
| 41,588 |
|
|
| 584,395 |
|
|
| 928,140 |
|
| 508,385 |
|
|
| 579,653 |
|
Accumulated equity |
| 227,749 |
|
|
| 333,841 |
|
| 192,671 |
|
|
| 220,718 |
|
| $ | 812,144 |
|
| $ | 1,261,981 |
| $ | 701,056 |
|
| $ | 800,371 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Company's share of accumulated equity | $ | 43,886 |
|
| $ | 59,286 |
| $ | 37,057 |
|
| $ | 42,644 |
|
Basis differentials |
| (760 | ) |
|
| 2,946 |
|
| 829 |
|
|
| (707 | ) |
Deferred development fees, net of portion related to the Company's interest |
| (319 | ) |
|
| (937 | ) |
| (116 | ) |
|
| (301 | ) |
Amounts payable to the Company |
| 3,194 |
|
|
| 3,331 |
|
| 2,786 |
|
|
| 2,972 |
|
Investments in and Advances to Joint Ventures, net | $ | 46,001 |
|
| $ | 64,626 |
| $ | 40,556 |
|
| $ | 44,608 |
|
10
| Three Months |
| Nine Months |
| Three Months |
| Six Months |
| ||||||||||||||||||||||
| Ended September 30, |
| Ended September 30, |
| Ended June 30, |
| Ended June 30, |
| ||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Condensed Combined Statements of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Revenues from operations | $ | 25,855 |
|
| $ | 48,666 |
|
| $ | 105,666 |
|
| $ | 150,623 |
| $ | 24,070 |
|
| $ | 38,162 |
|
| $ | 48,760 |
|
| $ | 79,811 |
|
Expenses from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Operating expenses |
| 6,975 |
|
|
| 12,931 |
|
|
| 28,991 |
|
|
| 41,217 |
|
| 6,118 |
|
|
| 10,493 |
|
|
| 12,682 |
|
|
| 22,016 |
|
Impairment charges |
| 9,010 |
|
|
| — |
|
|
| 17,550 |
|
|
| — |
|
| — |
|
|
| 3,340 |
|
|
| — |
|
|
| 8,540 |
|
Depreciation and amortization |
| 9,450 |
|
|
| 16,605 |
|
|
| 37,123 |
|
|
| 50,309 |
|
| 8,281 |
|
|
| 13,328 |
|
|
| 17,343 |
|
|
| 27,673 |
|
Interest expense |
| 8,241 |
|
|
| 10,980 |
|
|
| 26,560 |
|
|
| 32,898 |
|
| 6,307 |
|
|
| 9,030 |
|
|
| 13,348 |
|
|
| 18,319 |
|
Other expense, net |
| 6,120 |
|
|
| 2,832 |
|
|
| 11,114 |
|
|
| 8,806 |
|
| 2,378 |
|
|
| 2,422 |
|
|
| 4,938 |
|
|
| 4,994 |
|
|
| 39,796 |
|
|
| 43,348 |
|
|
| 121,338 |
|
|
| 133,230 |
|
| 23,084 |
|
|
| 38,613 |
|
|
| 48,311 |
|
|
| 81,542 |
|
(Loss) income before gain on disposition of real estate |
| (13,941 | ) |
|
| 5,318 |
|
|
| (15,672 | ) |
|
| 17,393 |
| |||||||||||||||
Gain (loss) on disposition of real estate, net |
| 119,813 |
|
|
| (455 | ) |
|
| 121,505 |
|
|
| 36,132 |
| |||||||||||||||
Net income attributable to unconsolidated joint ventures | $ | 105,872 |
|
| $ | 4,863 |
|
| $ | 105,833 |
|
| $ | 53,525 |
| |||||||||||||||
Income (loss) before gain on disposition of real estate |
| 986 |
|
|
| (451 | ) |
|
| 449 |
|
|
| (1,731 | ) | |||||||||||||||
Gain on disposition of real estate, net |
| 14,874 |
|
|
| 1,790 |
|
|
| 20,178 |
|
|
| 1,692 |
| |||||||||||||||
Net income (loss) attributable to unconsolidated joint ventures | $ | 15,860 |
|
| $ | 1,339 |
|
| $ | 20,627 |
|
| $ | (39 | ) | |||||||||||||||
Company's share of equity in net income of joint ventures | $ | 21,276 |
|
| $ | 1,760 |
|
| $ | 21,898 |
|
| $ | 9,897 |
| $ | 3,237 |
|
| $ | 592 |
|
| $ | 4,187 |
|
| $ | 622 |
|
Basis differential adjustments(A) |
| 4,642 |
|
|
| 64 |
|
|
| 5,570 |
|
|
| 1,162 |
|
| 1,381 |
|
|
| 789 |
|
|
| 1,790 |
|
|
| 928 |
|
Equity in net income of joint ventures | $ | 25,918 |
|
| $ | 1,824 |
|
| $ | 27,468 |
|
| $ | 11,059 |
| $ | 4,618 |
|
| $ | 1,381 |
|
| $ | 5,977 |
|
| $ | 1,550 |
|
The impact of the COVID-19 pandemic on revenues and receivables for the Company’s joint ventures is more fully described in Note 2.10
Revenues earned by the Company related to all of the Company’s unconsolidated joint ventures are as follows (in millions):
| Three Months |
| Nine Months |
| Three Months |
| Six Months |
| ||||||||||||||||||||||
| Ended September 30, |
| Ended September 30, |
| Ended June 30, |
| Ended June 30, |
| ||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Revenue from contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Asset and property management fees | $ | 1.7 |
|
| $ | 2.8 |
|
| $ | 6.2 |
|
| $ | 8.0 |
| $ | 1.5 |
|
| $ | 2.2 |
|
| $ | 3.0 |
|
| $ | 4.5 |
|
Leasing commissions and development fees |
| 0.6 |
|
|
| 0.6 |
|
|
| 1.6 |
|
|
| 1.5 |
|
| 0.1 |
|
|
| 0.6 |
|
|
| 0.2 |
|
|
| 1.0 |
|
|
| 2.3 |
|
|
| 3.4 |
|
|
| 7.8 |
|
|
| 9.5 |
|
| 1.6 |
|
|
| 2.8 |
|
|
| 3.2 |
|
|
| 5.5 |
|
Other |
| 0.2 |
|
|
| 0.4 |
|
|
| 0.8 |
|
|
| 1.2 |
|
| 0.1 |
|
|
| 0.2 |
|
|
| 0.3 |
|
|
| 0.6 |
|
| $ | 2.5 |
|
| $ | 3.8 |
|
| $ | 8.6 |
|
| $ | 10.7 |
| $ | 1.7 |
|
| $ | 3.0 |
|
| $ | 3.5 |
|
| $ | 6.1 |
|
Disposition of Shopping Centers and Joint Venture Interests
InDuring the third quarter of 2022,six months ended June 30, 2023, the DDRM Joint Venture sold a portfolio of 13five shopping centers for an aggregate sales price of $387.6112.2 million ($77.5 million at the Company's share) with the related mortgage debt of $225.0 million repaid upon closing. In 2022, the DDRM Joint Venture sold two additional shopping centers for an aggregate sales price of $41.0 million ($8.222.4 million at the Company’s share). The Company’s shareproceeds were used to repay mortgage indebtedness of the gain on sale on these transactions was $27.3 million.joint venture, general corporate purposes of the joint venture and distributions to the partners.
Disposition of Joint Venture Interests
In 2021, one of the Company’s unconsolidated joint ventures sold its sole asset, a parcel of undeveloped land. The transaction had contingent proceeds based upon finalization of the tax returns and dissolution of the partnership. In the secondfirst quarter of 2023, the contingencies were resolved and the Company recorded a Gain on Sale and Change in Control of Interests of $3.7 million.
In 2022, the Company acquired its partner’s 80% interest in one asset owned by the DDRM Properties Joint Venture (Casselberry Commons, Casselberry, Florida) and stepped up the previous 20% interest due to change in control, sold its 20% interest in the SAU Joint Venture to its partner, the State of Utah based on a gross asset value of $155.7 million (at 100%). In addition, the Companyand sold its 50% interest in Lennox Town Center to its partner, based on a gross asset value of $77.0 million (at 100%).partner. These transactions resulted inaggregated a Gain on Sale of Interests of $42.2 million.
In the first quarter of 2022, the Company acquired its joint venture partner’s 80% interest in one asset owned by the DDRM Joint Venture (Casselberry Commons, Casselberry, Florida) for $35.6 million, and stepped up the previous 20% interest due to change in control. The transaction resulted in Gain on Change in Control of Interests of $3.345.3 million (Note 4).million.
11
During the ninesix months ended SeptemberJune 30, 2022,2023, the Company acquired the following shopping centers (in millions):
Asset |
| Location |
| Date |
| Purchase |
| |
Artesia Village |
| Scottsdale, Arizona |
| January 2022 |
| $ | 14.5 |
|
Casselberry Commons(A) |
| Casselberry, Florida |
| February 2022 |
|
| 35.6 |
|
Shops at Boca Center |
| Boca Raton, Florida |
| March 2022 |
|
| 90.0 |
|
Shoppes of Crabapple |
| Alpharetta, Georgia |
| April 2022 |
|
| 4.4 |
|
La Fiesta Square |
| Lafayette, California |
| May 2022 |
|
| 60.8 |
|
Lafayette Mercantile |
| Lafayette, California |
| May 2022 |
|
| 43.0 |
|
Shops at Tanglewood |
| Houston, Texas |
| June 2022 |
|
| 22.2 |
|
Boulevard Marketplace |
| Fairfax, Virginia |
| June 2022 |
|
| 10.4 |
|
Fairfax Marketplace |
| Fairfax, Virginia |
| June 2022 |
|
| 16.0 |
|
Fairfax Pointe |
| Fairfax, Virginia |
| June 2022 |
|
| 8.4 |
|
Parkwood Shops |
| Atlanta, Georgia |
| July 2022 |
|
| 8.4 |
|
Chandler Center |
| Chandler, Arizona |
| August 2022 |
|
| 7.0 |
|
Shops at Power and Baseline |
| Mesa, Arizona |
| August 2022 |
|
| 4.6 |
|
Northsight Plaza |
| Scottsdale, Arizona |
| August 2022 |
|
| 5.3 |
|
Broadway Center |
| Tempe, Arizona |
| August 2022 |
|
| 6.1 |
|
Asset |
| Location |
| Date |
| Purchase |
| |
Parker Keystone |
| Denver, Colorado |
| January 2023 |
| $ | 11.0 |
|
Foxtail Center |
| Baltimore, Maryland |
| January 2023 |
|
| 15.1 |
|
Barrett Corners |
| Atlanta, Georgia |
| April 2023 |
|
| 15.6 |
|
Alpha Soda Center |
| Atlanta, Georgia |
| May 2023 |
|
| 9.4 |
|
Briarcroft Center |
| Houston, Texas |
| May 2023 |
|
| 23.5 |
|
The fair value of the acquisitions above was allocated as follows (in thousands):
|
|
|
| Weighted-Average | |
Land | $ | 27,351 |
|
| N/A |
Buildings |
| 40,815 |
|
| (A) |
Tenant improvements |
| 1,774 |
|
| (A) |
In-place leases (including lease origination costs and fair market value of leases) |
| 7,073 |
|
| 6.9 |
|
| 77,013 |
|
|
|
Less: Below-market leases |
| (1,882 | ) |
| 14.0 |
Less: Other liabilities assumed |
| (348 | ) |
| N/A |
Net assets acquired | $ | 74,783 |
|
|
|
|
|
|
| Weighted-Average | |
Land | $ | 92,848 |
|
| N/A |
Buildings |
| 223,221 |
|
| (A) |
Tenant improvements |
| 4,454 |
|
| (A) |
In-place leases (including lease origination costs and fair market value of leases) |
| 29,395 |
|
| 6.4 |
Other assets assumed |
| 505 |
|
| N/A |
|
| 350,423 |
|
|
|
Less: Below-market leases |
| (9,472 | ) |
| 13.8 |
Less: Other liabilities assumed |
| (2,890 | ) |
| N/A |
Net assets acquired | $ | 338,061 |
|
|
|
Consideration: |
|
| |
Cash | $ | 329,570 |
|
Gain on Change in Control of Interest |
| 3,319 |
|
Carrying value of previously held common equity interest |
| 5,172 |
|
Total consideration | $ | 338,061 |
|
The total consideration for these assets was paid in cash. Included in the Company’s consolidated statements of operations for the three and ninesix months ended SeptemberJune 30, 2022,2023, was $6.21.3 million and $11.11.8 million, respectively, in total revenues from the date of acquisition through SeptemberJune 30, 2022,2023, for the properties acquired in 2022.2023.
1211
Other assets and intangibles consist of the following (in thousands):
| September 30, 2022 |
|
| December 31, 2021 |
| June 30, 2023 |
|
| December 31, 2022 |
| ||||
Intangible assets: |
|
|
|
|
|
|
|
| ||||||
In-place leases, net | $ | 69,415 |
|
| $ | 64,464 |
| $ | 57,892 |
|
| $ | 61,918 |
|
Above-market leases, net |
| 7,724 |
|
|
| 7,390 |
|
| 5,263 |
|
|
| 6,206 |
|
Lease origination costs, net |
| 8,753 |
|
|
| 6,636 |
|
| 8,116 |
|
|
| 8,093 |
|
Tenant relationships, net |
| 12,661 |
|
|
| 15,569 |
|
| 10,082 |
|
|
| 11,531 |
|
Total intangible assets, net(A) |
| 98,553 |
|
|
| 94,059 |
|
| 81,353 |
|
|
| 87,748 |
|
Operating lease ROU assets |
| 17,795 |
|
|
| 19,047 |
|
| 17,629 |
|
|
| 18,197 |
|
Other assets: |
|
|
|
|
|
|
|
| ||||||
Prepaid expenses |
| 9,617 |
|
|
| 7,722 |
|
| 10,229 |
|
|
| 6,721 |
|
Swap receivable |
| 8,895 |
|
|
| — |
|
| 9,582 |
|
|
| 8,138 |
|
Other assets |
| 1,358 |
|
|
| 1,708 |
|
| 1,552 |
|
|
| 3,491 |
|
Deposits |
| 3,217 |
|
|
| 3,796 |
|
| 2,627 |
|
|
| 3,188 |
|
Deferred charges, net |
| 8,072 |
|
|
| 4,147 |
|
| 6,425 |
|
|
| 7,526 |
|
Total other assets, net | $ | 147,507 |
|
| $ | 130,479 |
| $ | 129,397 |
|
| $ | 135,009 |
|
|
|
|
|
|
|
|
|
| ||||||
Below-market leases, net (other liabilities) | $ | 63,267 |
|
| $ | 59,690 |
| $ | 57,844 |
|
| $ | 59,825 |
|
As of SeptemberJune 30, 2022,2023, the Company’s Revolving Credit Facility (as defined below) had outstanding borrowings of $80.0175.0 million with a weighted-average interest rate of 3.96.0%. In March 2023, the Company entered into a 5.0% interest rate cap with respect to the variable rate (the Secured Overnight Financing Rate or "SOFR") component applicable to borrowings up to $100 million under the Revolving Credit Facility, of which $75.0 million was designated as an effective hedge. The interest rate cap expires in April 2024.
In June 2022, theThe Company amended and restated its unsecuredmaintains a revolving credit facility with a syndicate of financial institutions and J.P. MorganJPMorgan 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.level and subject to other customary conditions precedent. The Revolving Credit Facility was amended to, among other things, (i) modify the financial covenants and certain other provisions contained therein, (ii) extend the maturity date tois 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), and (iii) change the interest rate benchmark from the London Inter-Bank Offered Rate (“LIBOR”) to the Secured Overnight Financing Rate (“SOFR”).
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-pointspread adjustment plus an applicable margin (0.950.85% at SeptemberJune 30, 2022)2023) or (ii) the alternative base rate plus a spreadan applicable margin (0% at SeptemberJune 30, 2022)2023). The Revolving Credit Facility also provides for an annual facility fee, which was 20 basis points on the entire facility at SeptemberJune 30, 2022.2023. The specified spreadsapplicable 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 SeptemberJune 30, 2022.2023.
In June 2022, in connection with the amendment to the Revolving Credit Facility described above, the Company terminated its separate $20 million unsecured revolving credit facility with PNC Bank, National Association.
As of September 30, 2022, the Company’s Term Loan (as defined below) had outstanding borrowings of $200.0 million, all of which has been converted to a fixed interest rate through the utilization of the Swap (Note 8). The effective fixed rate which includes the applicable margin described below is 3.8%.
In June 2022, the Company amended and restated its $100 million unsecured term loan with a syndicate of financial institutions and Wells Fargo Bank, National Association, as administrative agent (the “Term Loan”) to, among other things, (i) modify the
13
financial covenants and certain other provisions contained therein in a manner consistent with the amendments made to the Revolving Credit Facility, (ii) extend the maturity date to June 2027, (iii) add a $100 million delayed draw feature (that was drawn upon in June 2022) and (iv) change the interest rate benchmark from LIBOR to SOFR. The Term Loan bears interest at variable rates, based on the Company’s long-term senior unsecured debt ratings, equal to (i) the SOFR rate plus a spread (1.05% at September 30, 2022) or (ii) the alternative base rate plus a spread (0.0% at September 30, 2022). The Company may increase the principal amount of the Term Loan in the future to up to $800 million in the aggregate provided that existing or new lenders are identified to provide additional loan commitments. The Term Loan also features a sustainability-linked pricing component whereby the applicable interest rate margin can be adjusted by one to two basis points if the Company meets certain sustainability performance targets. The Company is required to comply with covenants similar to those contained in the Revolving Credit Facility. The Company was in compliance with these financial covenants at September 30, 2022.
The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments:
Measurement of Fair Value
At SeptemberJune 30, 2022,2023, the Company used a pay-fixed interest rate swap to manage some of its exposure to changes in benchmark interest rates (the “Swap”).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,
12
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 an interest rate swap agreement (included in Other Assets) measured at fair value on a recurring basis as of SeptemberJune 30, 2022.2023. 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: |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
September 30, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Financial Instruments |
| $ | — |
|
| $ | 8.9 |
|
| $ | — |
|
| $ | 8.9 |
|
|
|
|
|
| Fair Value Measurements |
|
|
|
| |||||||
Assets (Liabilities): |
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
| ||||
June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Financial Instruments |
| $ | — |
|
| $ | 9.3 |
|
| $ | — |
|
| $ | 9.3 |
|
December 31, 2022 |
|
|
|
|
|
|
|
|
|
|
|
| ||||
Derivative Financial Instruments |
| $ | — |
|
| $ | 8.1 |
|
| $ | — |
|
| $ | 8.1 |
|
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):
| September 30, 2022 |
|
| December 31, 2021 |
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||
| Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
| Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
| ||||||||
Senior Notes | $ | 1,453,384 |
|
| $ | 1,374,206 |
|
| $ | 1,451,768 |
|
| $ | 1,559,973 |
| $ | 1,367,775 |
|
| $ | 1,279,487 |
|
| $ | 1,453,923 |
|
| $ | 1,378,485 |
|
Revolving Credit Facilities and Term Loan |
| 278,437 |
|
|
| 280,000 |
|
|
| 99,810 |
|
|
| 100,000 |
| |||||||||||||||
Revolving Credit Facility and term loan |
| 373,689 |
|
|
| 375,000 |
|
|
| 198,521 |
|
|
| 200,000 |
| |||||||||||||||
Mortgage Indebtedness |
| 90,235 |
|
|
| 87,535 |
|
|
| 125,799 |
|
|
| 127,488 |
|
| 53,829 |
|
|
| 52,228 |
|
|
| 54,577 |
|
|
| 51,936 |
|
| $ | 1,822,056 |
|
| $ | 1,741,741 |
|
| $ | 1,677,377 |
|
| $ | 1,787,461 |
| $ | 1,795,293 |
|
| $ | 1,706,715 |
|
| $ | 1,707,021 |
|
| $ | 1,630,421 |
|
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
14
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 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.
13
As of SeptemberJune 30, 2022,2023, the Company had one effective Swapswap with a notional amount of $200.0 million, expiring in June 2027, which converts the variable-rate SOFR component of the interest rate debtapplicable 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 cash flow hedges is recorded in Accumulated Other Comprehensive Income (“OCI”) and is subsequently reclassified into earnings, into interest expense, in the period that the hedged forecasted transaction affects earnings. All components of the Swapswap 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 $2.84.9 million.
The Company is exposed to credit risk in the event of non-performance by the counterparty to the Swapsswap 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 Swapswap 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,swap, resulting in an acceleration of payment under the Swap.swap.
Common Share DividendDividends
|
| Three Months |
|
| Nine Months |
| ||||||||||
|
| Ended September 30, |
|
| Ended September 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Common share dividends declared per share |
| $ | 0.13 |
|
| $ | 0.12 |
|
| $ | 0.39 |
|
| $ | 0.35 |
|
|
| Three Months |
|
| Six Months |
| ||||||||||
|
| Ended June 30, |
|
| Ended June 30, |
| ||||||||||
|
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Common share dividends declared per share |
| $ | 0.13 |
|
| $ | 0.13 |
|
| $ | 0.26 |
|
| $ | 0.26 |
|
Common Shares Repurchased
In the thirdfirst quarter of 2022,2023, the Company repurchased 1.61.5 million of its common shares in open market transactions at an aggregate cost of $20.0 million, or $12.7413.43 per share.
Common Shares Issued
On March 1, In late December 2022, the Company settledrepurchased 2.20.5 million common shares which were offered and sold on a forward basis in 2021 under itsat an aggregate cost of $2506.6 million continuous equityunder this new program resultingwhich settled in gross proceedsJanuary 2023.
Non-Controlling Interests
In May 2023, the Company repurchased 140,633 Operating Partnership units (“OP Units”) outstanding for cash at an aggregate cost of $35.11.7 million. InThe gain on the second quarter of 2022, the Company sold 201,800 common shares at a weighted-average price of $16.03 per share before issuance costs resultingtransaction was reflected in gross proceeds of $3.2 million.Additional Paid-in-Capital.
The changes in Accumulated Other Comprehensive Income by component are as follows (in thousands):
Balance, December 31, 2021 | $ | — |
|
Comprehensive income from cash flow hedges |
| 9,782 |
|
Balance, September 30, 2022 | $ | 9,782 |
|
Balance, December 31, 2022 | $ | 9,038 |
|
Change in cash flow hedges |
| 3,126 |
|
Amounts reclassified from accumulated other comprehensive income |
| (2,039 | ) |
Balance, June 30, 2023 (A) | $ | 10,125 |
|
(A) Includes derivative financial instruments entered into by the Company on its term loan (Note 6) and by an unconsolidated joint venture.
1514
For the nine months ended September 30, 2022, the Company recorded an impairment charge of $2.5 million as a result of its tenant exercising a $7.0 million fixed price purchase option of their building pursuant to the lease agreement. The charge was based on the difference between the carrying value of the asset and the purchase price.
The following table provides a reconciliation of net 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 |
| Nine Months |
| Three Months |
| Six Months |
| ||||||||||||||||||||||
| Ended September 30, |
| Ended September 30, |
| Ended June 30, |
| Ended June 30, |
| ||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Numerators – Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income | $ | 66,213 |
|
| $ | 28,157 |
|
| $ | 140,577 |
|
| $ | 66,325 |
| $ | 5,353 |
|
| $ | 60,409 |
|
| $ | 20,655 |
|
| $ | 74,364 |
|
Income attributable to non-controlling interests |
| (18 | ) |
|
| (93 | ) |
|
| (55 | ) |
|
| (384 | ) |
| — |
|
|
| (19 | ) |
|
| (18 | ) |
|
| (37 | ) |
Write-off of preferred share original issuance costs |
| — |
|
|
| — |
|
|
| — |
|
|
| (5,156 | ) | |||||||||||||||
Preferred dividends |
| (2,789 | ) |
|
| (2,789 | ) |
|
| (8,367 | ) |
|
| (10,867 | ) |
| (2,789 | ) |
|
| (2,789 | ) |
|
| (5,578 | ) |
|
| (5,578 | ) |
Earnings attributable to unvested shares and OP units |
| (117 | ) |
|
| (150 | ) |
|
| (368 | ) |
|
| (450 | ) |
| (88 | ) |
|
| (125 | ) |
|
| (195 | ) |
|
| (251 | ) |
Net income attributable to common shareholders after | $ | 63,289 |
|
| $ | 25,125 |
|
| $ | 131,787 |
|
| $ | 49,468 |
| $ | 2,476 |
|
| $ | 57,476 |
|
| $ | 14,864 |
|
| $ | 68,498 |
|
Denominators – Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Basic—Average shares outstanding |
| 213,846 |
|
|
| 211,048 |
|
|
| 213,278 |
|
|
| 206,918 |
|
| 209,266 |
|
|
| 213,864 |
|
|
| 209,616 |
|
|
| 212,989 |
|
Assumed conversion of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
PRSUs |
| 341 |
|
|
| 1,114 |
|
|
| 441 |
|
|
| 1,146 |
|
| 181 |
|
|
| 906 |
|
|
| 445 |
|
|
| 1,104 |
|
Forward equity |
| — |
|
|
| 29 |
|
|
| — |
|
|
| 10 |
| |||||||||||||||
OP units |
| 141 |
|
|
| — |
|
|
| 141 |
|
|
| — |
|
| — |
|
|
| 141 |
|
|
| — |
|
|
| 141 |
|
Diluted—Average shares outstanding |
| 214,328 |
|
|
| 212,191 |
|
|
| 213,860 |
|
|
| 208,074 |
|
| 209,447 |
|
|
| 214,911 |
|
|
| 210,061 |
|
|
| 214,234 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Basic | $ | 0.30 |
|
| $ | 0.12 |
|
| $ | 0.62 |
|
| $ | 0.24 |
| $ | 0.01 |
|
| $ | 0.27 |
|
| $ | 0.07 |
|
| $ | 0.32 |
|
Diluted | $ | 0.30 |
|
| $ | 0.12 |
|
| $ | 0.62 |
|
| $ | 0.24 |
| $ | 0.01 |
|
| $ | 0.27 |
|
| $ | 0.07 |
|
| $ | 0.32 |
|
For the three and ninesix months ended SeptemberJune 30, 2022,2023, Performance Restricted Stock Units (“PRSUs”) issued to certain executives in March 2020 were considered in the computation of diluted EPS and the PRSUs issued in March 2022 and March 2021 were not considered in computing diluted EPS because they were antidilutive. For the three and nine months ended September 30, 2021, PRSUs issued to certain executives in March 2021, March 2020 and March 2019 were considered in the computation of diluted EPS. The Company recorded a mark-to-market adjustment of $5.6 million as expense for the nine months ended September 30, 2021, in connection with the PRSUs grantedissued in March 2018. In March 2022 the Company issued 519,255 common shares in settlement of certain PRSUs granted in 2019 and 2020.
The agreements to offer and sell approximately 1.7 million common shares on a forward basis were considered in the computation of diluted EPS for the three and nine months ended SeptemberJune 30, 2021. These shares were settled2023 and not considered in the first quartercomputation of diluted EPS for the six months ended June 30, 2023, because they were antidilutive. The PRSUs issued in March 2023 were not considered in the computation of diluted EPS because they were antidilutive for the three months ended June 30, 2023 and were considered in the computation of diluted EPS for the six months ended June 30, 2023. For the three and six months ended June 30, 2022, (Note 9).PRSUs issued to certain executives in March 2022, 2021 and 2020 were considered in the computation of diluted EPS. In March 2023, the Company issued 559,559 common shares in settlement of PRSUs granted in 2020.
1615
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 related consolidated real estate 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, 2021,2022, 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 SeptemberJune 30, 2022,2023, the Company’s portfolio consisted of 122121 shopping centers (including 1913 shopping centers owned through unconsolidated joint ventures). At SeptemberJune 30, 2022,2023, the Company owned approximately 28.226.2 million square feet of gross leasable area (“GLA”) through all its properties (wholly-owned and joint venture). At September 30, 2022, the aggregate occupancy of the Company’s operating shopping center portfolio was 91.4% versus 90.2% at September 30, 2021, on a pro rata basis, and the average annualized base rent per occupied square foot was $19.11 versus $18.44 at September 30, 2021, on a pro rata basis.
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 |
| Nine Months |
| Three Months |
| Six Months |
| ||||||||||||||||||||||
| Ended September 30, |
| Ended September 30, |
| Ended June 30, |
| Ended June 30, |
| ||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net income attributable to common shareholders | $ | 63,406 |
|
| $ | 25,275 |
|
| $ | 132,155 |
|
| $ | 49,918 |
| $ | 2,564 |
|
| $ | 57,601 |
|
| $ | 15,059 |
|
| $ | 68,749 |
|
FFO attributable to common shareholders | $ | 61,637 |
|
| $ | 66,504 |
|
| $ | 188,729 |
|
| $ | 176,510 |
| $ | 57,519 |
|
| $ | 65,866 |
|
| $ | 119,418 |
|
| $ | 127,092 |
|
Operating FFO attributable to common shareholders | $ | 62,833 |
|
| $ | 61,361 |
|
| $ | 190,845 |
|
| $ | 181,917 |
| $ | 61,295 |
|
| $ | 66,454 |
|
| $ | 124,023 |
|
| $ | 128,011 |
|
Earnings per share – Diluted | $ | 0.30 |
|
| $ | 0.12 |
|
| $ | 0.62 |
|
| $ | 0.24 |
| $ | 0.01 |
|
| $ | 0.27 |
|
| $ | 0.07 |
|
| $ | 0.32 |
|
For the ninesix months ended SeptemberJune 30, 2022,2023, the increasedecrease in net income attributable to common shareholders, as compared to the prior-year period, primarily was primarily attributable to higherthe result of the gain on sale of wholly-owned and joint venture and wholly-owned assets recognized in the second quarter of 2022. Additionally, second quarter 2023 results were impacted by lower joint venture management fees and income, higher operating results driveninterest expense, higher depreciation expense and an employee separation charge, included within general and administrative expenses relating to the restructuring plan initiated in May 2023, partially offset by base rent growth at existing assets,and the net impact of property acquisitions and the write-off of preferred share original issuance costs in 2021, partially offset by lower fee income from joint ventures and Retail Value Inc. (“RVI”).
In March 2020, the World Health Organization categorized COVID-19 as a pandemic, and it continues to spread throughout the United States and other countries across the world. Beginning in mid-March 2020, federal, state and local governments took various actions to limit the spread of COVID-19, including ordering the temporary closure of non-essential businesses (which included many of the Company’s tenants) and imposing significant social distancing guidelines and restrictions on the continued operations of essential businesses and the subsequent reopening of non-essential businesses. The Company continues to monitor the impact of the COVID-19 pandemic on its business and will take additional steps as needed in order to protect the health and safety of its workforce.
The Company’s collection rates continued to improve throughout 2021 reaching at or near pre-pandemic levels by year-end 2021. The Company's tenants, including tenants previously on the cash basis of accounting, are paying their monthly rent in a manner consistent with periods prior to the COVID-19 pandemic and have repaid deferred rents relating to prior periods. Rental income for the nine months ended September 30, 2022 was $1.9 million of prior-period net revenue at SITE Centers’ share, primarily from cash basis tenants and related reserve adjustments.acquisitions.
Company Activity
The growth opportunities within the Company’s core property operations include rental rate increases, continued lease-up of the portfolio, and the adaptation of existing site plans and square footage to generate higher blended rental rates and operating cash flows. Additional growth opportunities include external acquisition investmentsacquisitions and tactical redevelopment. Management intends to use retained cash flow, proceeds from the sale of lower growth assets and proceeds from equity offerings and debt financings to fund capital expenditures relating to new leasing activity, acquisitions, including opportunistic investments, and tactical redevelopment activity. In recent years, the Company’s acquisition activities have largely focused on unanchored, convenience retail properties that offer enhanced prospects for cash flow growth through rent increases and lower capital expenditure requirements.
17
Year-to-date transactionTransactional and investment highlights for the Company through OctoberJuly 21, 2022,2023 include the following:
16
Company Operational Highlights
DuringOperational highlights through June 30, 2023, include the nine months ended September 30, 2022, the Company completed the following operational activities:following:
18
RESULTS OF OPERATIONS
Consolidated shopping center properties owned as of January 1, 2021,2022, are referred to herein as the “Comparable Portfolio Properties.”
Revenues from Operations (in thousands)
| Three Months |
|
|
|
| Three Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Rental income(A) | $ | 135,123 |
|
| $ | 120,569 |
|
| $ | 14,554 |
| $ | 135,954 |
|
| $ | 136,203 |
|
| $ | (249 | ) |
Fee and other income |
| 3,720 |
|
|
| 13,872 |
|
|
| (10,152 | ) |
| 2,204 |
|
|
| 4,479 |
|
|
| (2,275 | ) |
Total revenues | $ | 138,843 |
|
| $ | 134,441 |
|
| $ | 4,402 |
| $ | 138,158 |
|
| $ | 140,682 |
|
| $ | (2,524 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nine Months |
|
|
|
| Six Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Rental income(A) | $ | 401,210 |
|
| $ | 366,689 |
|
| $ | 34,521 |
| $ | 271,826 |
|
| $ | 266,087 |
|
| $ | 5,739 |
|
Fee and other income(B) |
| 12,635 |
|
|
| 31,359 |
|
|
| (18,724 | ) |
| 5,024 |
|
|
| 8,915 |
|
|
| (3,891 | ) |
Total revenues | $ | 413,845 |
|
| $ | 398,048 |
|
| $ | 15,797 |
| $ | 276,850 |
|
| $ | 275,002 |
|
| $ | 1,848 |
|
17
|
| Three Months |
|
|
|
|
| Three Months |
|
|
|
| ||||||||||||
|
| Ended September 30, |
|
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
Contractual Lease Payments |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Base and percentage rental income |
| $ | 99,326 |
|
| $ | 88,403 |
|
| $ | 10,923 |
|
| $ | 100,297 |
|
| $ | 97,933 |
|
| $ | 2,364 |
|
Recoveries from tenants |
|
| 33,214 |
|
|
| 29,441 |
|
|
| 3,773 |
|
|
| 34,501 |
|
|
| 33,763 |
|
|
| 738 |
|
Uncollectible revenue |
|
| (381 | ) |
|
| 1,083 |
|
|
| (1,464 | ) |
|
| (548 | ) |
|
| 1,162 |
|
|
| (1,710 | ) |
Lease termination fees, ancillary and other rental income |
|
| 2,964 |
|
|
| 1,642 |
|
|
| 1,322 |
|
|
| 1,704 |
|
|
| 3,345 |
|
|
| (1,641 | ) |
Total contractual lease payments |
| $ | 135,123 |
|
| $ | 120,569 |
|
| $ | 14,554 |
|
| $ | 135,954 |
|
| $ | 136,203 |
|
| $ | (249 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
|
| Nine Months |
|
|
|
|
| Six Months |
|
|
|
| ||||||||||||
|
| Ended September 30, |
|
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
Contractual Lease Payments |
| 2022 |
|
| 2021 |
|
| $ Change |
|
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Base and percentage rental income(1) |
| $ | 291,483 |
|
| $ | 262,345 |
|
| $ | 29,138 |
|
| $ | 198,751 |
|
| $ | 192,157 |
|
| $ | 6,594 |
|
Recoveries from tenants(2) |
|
| 99,811 |
|
|
| 90,518 |
|
|
| 9,293 |
|
|
| 69,817 |
|
|
| 66,597 |
|
|
| 3,220 |
|
Uncollectible revenue(3) |
|
| 1,889 |
|
|
| 8,268 |
|
|
| (6,379 | ) |
|
| (315 | ) |
|
| 2,270 |
|
|
| (2,585 | ) |
Lease termination fees, ancillary and other rental income |
|
| 8,027 |
|
|
| 5,558 |
|
|
| 2,469 |
|
|
| 3,573 |
|
|
| 5,063 |
|
|
| (1,490 | ) |
Total contractual lease payments |
| $ | 401,210 |
|
| $ | 366,689 |
|
| $ | 34,521 |
|
| $ | 271,826 |
|
| $ | 266,087 |
|
| $ | 5,739 |
|
|
| Increase |
|
| Increase (Decrease) |
| ||
Acquisition of shopping centers |
| $ | 18.3 |
|
| $ | 7.8 |
|
Comparable Portfolio Properties |
|
| 8.8 |
|
|
| 5.8 |
|
Disposition of shopping centers |
|
| (7.1 | ) | ||||
Straight-line rents |
|
| 2.0 |
|
|
| 0.1 |
|
Total |
| $ | 29.1 |
|
| $ | 6.6 |
|
The increase in straight-line rents was primarily due toAt June 30, 2023 and 2022, the removalCompany owned 108 and 99 wholly-owned properties, respectively, with an aggregate occupancy rate of straight-line92.4% and 91.0%, respectively, and average annualized base rent reserves for tenants that were removed from the cash basisper occupied square foot of accounting$19.97 and the impact of straight-line rents recorded on properties recently acquired.$19.06, respectively.
19
The following tables present the statistics for the Company’s assets affecting base and percentage rental income summarized by the following portfolios: pro rata combined shopping center portfolio, wholly-owned shopping center portfolio and joint venture shopping center portfolio:
| Pro Rata Combined |
| |||||
| 2022 |
|
| 2021 |
| ||
Centers owned (at 100%) |
| 122 |
|
|
| 137 |
|
Aggregate occupancy rate |
| 91.4 | % |
|
| 90.2 | % |
Average annualized base rent per occupied square foot | $ | 19.11 |
|
| $ | 18.44 |
|
| Wholly-Owned Shopping Centers |
| |||||
| 2022 |
|
| 2021 |
| ||
Centers owned |
| 103 |
|
|
| 81 |
|
Aggregate occupancy rate |
| 91.6 | % |
|
| 90.6 | % |
Average annualized base rent per occupied square foot | $ | 19.18 |
|
| $ | 18.67 |
|
| Joint Venture Shopping Centers |
| |||||
| 2022 |
|
| 2021 |
| ||
Centers owned |
| 19 |
|
|
| 56 |
|
Aggregate occupancy rate |
| 89.9 | % |
|
| 87.9 | % |
Average annualized base rent per occupied square foot | $ | 16.18 |
|
| $ | 15.25 |
|
Changessales. Decreases in the number of assets under management or the fee structures applicable to such arrangements, will adversely impact the amount of revenue recorded in future periods. The Company’s other joint venture partners may also elect to terminate their joint venture arrangements with the Company in connection with a change in investment strategy or otherwise. See “—Sources and Uses of Capital” included elsewhere herein.
2018
Expenses from Operations (in thousands)
| Three Months |
|
|
|
| Three Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Operating and maintenance | $ | 22,314 |
|
| $ | 18,562 |
|
| $ | 3,752 |
| $ | 22,476 |
|
| $ | 22,278 |
|
| $ | 198 |
|
Real estate taxes |
| 20,423 |
|
|
| 19,160 |
|
|
| 1,263 |
|
| 20,279 |
|
|
| 20,624 |
|
|
| (345 | ) |
Impairment charges |
| — |
|
|
| 2,536 |
|
|
| (2,536 | ) | |||||||||||
General and administrative |
| 10,799 |
|
|
| 11,727 |
|
|
| (928 | ) |
| 14,031 |
|
|
| 11,353 |
|
|
| 2,678 |
|
Depreciation and amortization |
| 51,179 |
|
|
| 44,669 |
|
|
| 6,510 |
|
| 58,698 |
|
|
| 51,021 |
|
|
| 7,677 |
|
| $ | 104,715 |
|
| $ | 94,118 |
|
| $ | 10,597 |
| $ | 115,484 |
|
| $ | 107,812 |
|
| $ | 7,672 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nine Months |
|
|
|
| Six Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Operating and maintenance(A) | $ | 66,528 |
|
| $ | 58,200 |
|
| $ | 8,328 |
| $ | 45,642 |
|
| $ | 44,214 |
|
| $ | 1,428 |
|
Real estate taxes(A) |
| 61,230 |
|
|
| 58,359 |
|
|
| 2,871 |
|
| 40,332 |
|
|
| 40,807 |
|
|
| (475 | ) |
Impairment charges(B) |
| 2,536 |
|
|
| 7,270 |
|
|
| (4,734 | ) | |||||||||||
General and administrative(C) |
| 34,403 |
|
|
| 41,547 |
|
|
| (7,144 | ) | |||||||||||
Impairment charges |
| — |
|
|
| 2,536 |
|
|
| (2,536 | ) | |||||||||||
General and administrative(B) |
| 24,676 |
|
|
| 23,604 |
|
|
| 1,072 |
| |||||||||||
Depreciation and amortization(A) |
| 152,564 |
|
|
| 137,446 |
|
|
| 15,118 |
|
| 112,714 |
|
|
| 101,385 |
|
|
| 11,329 |
|
| $ | 317,261 |
|
| $ | 302,822 |
|
| $ | 14,439 |
| $ | 223,364 |
|
| $ | 212,546 |
|
| $ | 10,818 |
|
|
| Operating |
|
| Real Estate |
|
| Depreciation |
| |||
Acquisition of shopping centers |
| $ | 1.8 |
|
| $ | 1.6 |
|
| $ | 5.3 |
|
Comparable Portfolio Properties |
|
| 1.2 |
|
|
| — |
|
|
| 10.5 |
|
Disposition of shopping centers |
|
| (1.6 | ) |
|
| (2.1 | ) |
|
| (4.5 | ) |
|
| $ | 1.4 |
|
| $ | (0.5 | ) |
| $ | 11.3 |
|
The increase in depreciation for the Comparable Portfolio Properties was primarily the result of the change in useful life of several assets.
|
| Operating |
|
| Real Estate |
|
| Depreciation |
| |||
Acquisition of shopping centers |
| $ | 3.8 |
|
| $ | 3.2 |
|
| $ | 15.4 |
|
Comparable Portfolio Properties |
|
| 4.5 |
|
|
| (0.3 | ) |
|
| (0.3 | ) |
|
| $ | 8.3 |
|
| $ | 2.9 |
|
| $ | 15.1 |
|
Other Income and Expenses (in thousands)
| Three Months |
|
|
|
| Three Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Interest expense | $ | (20,139 | ) |
| $ | (19,170 | ) |
| $ | (969 | ) | $ | (20,921 | ) |
| $ | (18,909 | ) |
| $ | (2,012 | ) |
Other expense, net |
| (501 | ) |
|
| (524 | ) |
|
| 23 |
| |||||||||||
Other income (expense), net |
| (634 | ) |
|
| (1,147 | ) |
|
| 513 |
| |||||||||||
| $ | (20,640 | ) |
| $ | (19,694 | ) |
| $ | (946 | ) | $ | (21,555 | ) |
| $ | (20,056 | ) |
| $ | (1,499 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nine Months |
|
|
|
| Six Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Interest expense(A) | $ | (57,306 | ) |
| $ | (57,701 | ) |
| $ | 395 |
| $ | (40,844 | ) |
| $ | (37,167 | ) |
| $ | (3,677 | ) |
Other expense, net |
| (2,152 | ) |
|
| (1,214 | ) |
|
| (938 | ) | |||||||||||
Other income (expense), net |
| (1,321 | ) |
|
| (1,651 | ) |
|
| 330 |
| |||||||||||
| $ | (59,458 | ) |
| $ | (58,915 | ) |
| $ | (543 | ) | $ | (42,165 | ) |
| $ | (38,818 | ) |
| $ | (3,347 | ) |
2119
|
| Nine Months |
|
| Six Months |
| ||||||||||
|
| Ended September 30, |
|
| Ended June 30, |
| ||||||||||
|
| 2022 |
|
| 2021 |
|
| 2023 |
|
| 2022 |
| ||||
Weighted-average debt outstanding (in billions) |
| $ | 1.8 |
|
| $ | 1.8 |
|
| $ | 1.8 |
|
| $ | 1.8 |
|
Weighted-average interest rate |
|
| 4.0 | % |
|
| 4.0 | % |
|
| 4.4 | % |
|
| 3.9 | % |
The Company’s overall balance sheet strategy is to continue to maintain substantial liquidity, prudent leverage levels and lengthy average debt maturities. The weighted-average interest rate (based on contractual rates and excluding fair market value of adjustments and debt issuance costs) was 4.1%4.3% and 3.9%3.8% at SeptemberJune 30, 2023 and 2022, and 2021, respectively.
At June 30, 2023, the weighted-average maturity (without extensions) was 2.8 years. Interest costs capitalized in conjunction with redevelopment projects were $0.3 million and $0.2 million for the three months ended SeptemberJune 30, 20222023 and 2021,2022, respectively, and $0.8$0.6 million and $0.5 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively.
Other Items (in thousands)
| Three Months |
|
|
|
| Three Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Equity in net income of joint ventures | $ | 25,918 |
|
| $ | 1,824 |
|
| $ | 24,094 |
| $ | 4,618 |
|
| $ | 1,381 |
|
| $ | 3,237 |
|
Gain on sale of interests |
| 228 |
|
|
| 35 |
|
|
| 193 |
| |||||||||||
Gain on disposition of real estate, net |
| 26,837 |
|
|
| 5,871 |
|
|
| 20,966 |
| |||||||||||
Gain on sale and change in control of interests |
| — |
|
|
| 41,970 |
|
|
| (41,970 | ) | |||||||||||
(Loss) gain on disposition of real estate, net |
| (22 | ) |
|
| 4,597 |
|
|
| (4,619 | ) | |||||||||||
Tax expense of taxable REIT subsidiaries and state franchise and |
| (258 | ) |
|
| (202 | ) |
|
| (56 | ) |
| (362 | ) |
|
| (353 | ) |
|
| (9 | ) |
Income attributable to non-controlling interests, net |
| (18 | ) |
|
| (93 | ) |
|
| 75 |
|
| — |
|
|
| (19 | ) |
|
| 19 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nine Months |
|
|
|
| Six Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Equity in net income of joint ventures(A) | $ | 27,468 |
|
| $ | 11,059 |
|
| $ | 16,409 |
| $ | 5,977 |
|
| $ | 1,550 |
|
| $ | 4,427 |
|
Gain on sale and change in control of interests(B) |
| 45,554 |
|
|
| 13,943 |
|
|
| 31,611 |
|
| 3,749 |
|
|
| 45,326 |
|
|
| (41,577 | ) |
Gain on disposition of real estate, net |
| 31,292 |
|
|
| 6,069 |
|
|
| 25,223 |
|
| 183 |
|
|
| 4,455 |
|
|
| (4,272 | ) |
Tax expense of taxable REIT subsidiaries and state franchise and |
| (863 | ) |
|
| (1,057 | ) |
|
| 194 |
|
| (575 | ) |
|
| (605 | ) |
|
| 30 |
|
Income attributable to non-controlling interests, net |
| (55 | ) |
|
| (384 | ) |
|
| 329 |
|
| (18 | ) |
|
| (37 | ) |
|
| 19 |
|
2220
Net Income (in thousands)
| Three Months |
|
|
|
| Three Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Net income attributable to SITE Centers | $ | 66,195 |
|
| $ | 28,064 |
|
| $ | 38,131 |
| $ | 5,353 |
|
| $ | 60,390 |
|
| $ | (55,037 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nine Months |
|
|
|
| Six Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
Net income attributable to SITE Centers | $ | 140,522 |
|
| $ | 65,941 |
|
| $ | 74,581 |
| $ | 20,637 |
|
| $ | 74,327 |
|
| $ | (53,690 | ) |
The increasedecrease in net income attributable to SITE Centers, as compared to the prior-year period, was primarily attributable to higherthe gain on sale of wholly-owned and joint venture and wholly-owned assets recognized in the second quarter of 2022. Additionally, second quarter 2023 results were also impacted by lower joint venture management fees, higher operating results driveninterest expense, higher depreciation expense and an employee separation charge included within general and administrative expenses, offset by base rent growth at existing assets and the net impact of property acquisitions, partially offset by lower fee income from joint ventures and RVI.acquisitions.
NON-GAAP FINANCIAL MEASURES
Funds from Operations and Operating Funds from Operations
Definition and Basis of Presentation
The Company believes that Funds from Operations (“FFO”) and Operating FFO, both non-GAAP financial measures, provide additional and useful means to assess the financial performance of REITs. FFO and Operating FFO are frequently used by the real estate industry, as well as securities analysts, investors and other interested parties, to evaluate the performance of REITs. 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 excludes GAAP historical cost depreciation and amortization of real estate and real estate investments, which assume that the value of real estate assets diminishes ratably over time. Historically, however, real estate values have risen or fallen with market conditions, and many companies use different depreciable lives and methods. Because FFO excludes depreciation and amortization unique to real estate and gains and losses from property dispositions, it can provide a performance measure that, when compared year over year, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs, interest costs and acquisition, disposition and development activities. This provides a perspective of the Company’s financial performance not immediately apparent from net income determined in accordance with GAAP.
FFO is generally defined and calculated by the Company as net income (loss) (computed in accordance with 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 National Association of Real Estate Investment Trusts ("NAREIT").
The Company believes that certain charges, income and gains recorded in its operating results are not comparable or reflective of its core operating performance. 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. As a result, the Company also computes Operating FFO and discusses it with the users of its financial statements, in addition to other measures such as net income (loss) determined in accordance with GAAP and FFO. Operating FFO is generally defined and calculated by the Company as FFO excluding certain charges, income and gains that management believes are not comparable and indicative of the results of the Company’s operating real estate portfolio. Such adjustments include write-off of preferred share original issuance costs, gains/losses on the early extinguishment of debt, certain transaction fee income, transaction costs and other restructuring type costs, including employee separation costs. The disclosure of these adjustments is regularly requested by users of the Company’s financial statements.
The adjustment for these charges, income and gains may not be comparable to how other REITs or real estate companies calculate their results of operations, and the Company’s calculation of Operating FFO differs from NAREIT’s definition of FFO.
21
Additionally, the Company provides no assurances that these charges, income and gains are non-recurring. These charges, income and gains could be reasonably expected to recur in future results of operations.
These measures of performance are used by the Company for several business purposes and by other REITs. The Company uses FFO and/or Operating FFO in part (i) as a disclosure to improve the understanding of the Company’s operating results among the
23
investing public, (ii) as a measure of a real estate asset company’s performance, (iii) to influence acquisition, disposition and capital investment strategies and (iv) to compare the Company’s performance to that of other publicly traded shopping center REITs.
For the reasons described above, management believes that FFO and Operating FFO provide the Company and investors with an important indicator of the Company’s operating performance. They provide recognized measures of performance other than GAAP net income, which may include non-cash items (often significant). Other real estate companies may calculate FFO and Operating FFO in a different manner.
Management recognizes the limitations of FFO and Operating FFO when compared to GAAP’s net income. FFO and Operating FFO do not represent amounts available for dividends, capital replacement or expansion, debt service obligations or other commitments and uncertainties. Management does not use FFO or Operating FFO as an indicator of the Company’s cash obligations and funding requirements for future commitments, acquisitions or development activities. Neither FFO nor Operating FFO represents cash generated from operating activities in accordance with GAAP, and neither is necessarily indicative of cash available to fund cash needs. Neither FFO nor Operating FFO should be considered an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity. FFO and Operating FFO are simply used as additional indicators of the Company’s operating performance. The Company believes that to further understand its performance, FFO and Operating FFO should be compared with the Company’s reported net income (loss) and considered in addition to cash flows determined in accordance with GAAP, as presented in its consolidated financial statements. Reconciliations of these measures to their most directly comparable GAAP measure of net income (loss) have been provided below.
Reconciliation Presentation
FFO and Operating FFO attributable to common shareholders were as follows (in thousands):
| Three Months |
|
|
|
| Three Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
FFO attributable to common shareholders | $ | 61,637 |
|
| $ | 66,504 |
|
| $ | (4,867 | ) | $ | 57,519 |
|
| $ | 65,866 |
|
| $ | (8,347 | ) |
Operating FFO attributable to common shareholders |
| 62,833 |
|
|
| 61,361 |
|
|
| 1,472 |
|
| 61,295 |
|
|
| 66,454 |
|
|
| (5,159 | ) |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||
| Nine Months |
|
|
|
| Six Months |
|
|
|
| ||||||||||||
| Ended September 30, |
|
|
|
| Ended June 30, |
|
|
|
| ||||||||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| 2023 |
|
| 2022 |
|
| $ Change |
| ||||||
FFO attributable to common shareholders | $ | 188,729 |
|
| $ | 176,510 |
|
| $ | 12,219 |
| $ | 119,418 |
|
| $ | 127,092 |
|
| $ | (7,674 | ) |
Operating FFO attributable to common shareholders |
| 190,845 |
|
|
| 181,917 |
|
|
| 8,928 |
|
| 124,023 |
|
|
| 128,011 |
|
|
| (3,988 | ) |
The increasedecrease in FFO for the ninesix months ended SeptemberJune 30, 2022,2023, as compared to the prior-year period, was primarily attributable to lower management fees and income from joint ventures and higher operating results driveninterest and general and administrative expenses, partially offset by base rent growth at existing assets and the net impact of property acquisitions and lower general and administrative expenses due to the mark-to-market adjustment on certain PRSUs settled in 2021, partially offset by lower management fees and the write-off of preferred share original issuance costs in 2021.acquisitions. The change in Operating FFO primarily was due to positive operating results, partially offset by lower fee income.the same drivers impacting FFO but excludes the impact of an employee separation charge included within general and administrative expenses, relating to the restructuring plan initiated in May 2023.
22
The Company’s reconciliation of net income attributable to common shareholders computed in accordance with GAAP to FFO attributable to common shareholders and Operating FFO attributable to common shareholders is as follows (in thousands). The
24
Company provides no assurances that these charges and gains are non-recurring. These charges and gains could reasonably be expected to recur in future results of operations:
| Three Months |
|
| Nine Months |
| ||||||||||
| Ended September 30, |
|
| Ended September 30, |
| ||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||
Net income attributable to common shareholders | $ | 63,406 |
|
| $ | 25,275 |
|
| $ | 132,155 |
|
| $ | 49,918 |
|
Depreciation and amortization of real estate investments |
| 49,925 |
|
|
| 43,283 |
|
|
| 148,828 |
|
|
| 133,279 |
|
Equity in net income of joint ventures |
| (25,918 | ) |
|
| (1,824 | ) |
|
| (27,468 | ) |
|
| (11,059 | ) |
Joint ventures' FFO(A) |
| 1,271 |
|
|
| 5,659 |
|
|
| 9,469 |
|
|
| 17,065 |
|
Non-controlling interests (OP Units) |
| 18 |
|
|
| 17 |
|
|
| 55 |
|
|
| 49 |
|
Impairment of real estate |
| — |
|
|
| — |
|
|
| 2,536 |
|
|
| 7,270 |
|
Gain on sale and change in control of interests |
| (228 | ) |
|
| (35 | ) |
|
| (45,554 | ) |
|
| (13,943 | ) |
Gain on disposition of real estate, net |
| (26,837 | ) |
|
| (5,871 | ) |
|
| (31,292 | ) |
|
| (6,069 | ) |
FFO attributable to common shareholders |
| 61,637 |
|
|
| 66,504 |
|
|
| 188,729 |
|
|
| 176,510 |
|
RVI disposition fees |
| — |
|
|
| (5,500 | ) |
|
| (385 | ) |
|
| (6,092 | ) |
Mark-to-market adjustment (PRSUs) |
| — |
|
|
| — |
|
|
| — |
|
|
| 5,589 |
|
Debt extinguishment, transactions, net |
| 341 |
|
|
| 356 |
|
|
| 1,643 |
|
|
| 722 |
|
Joint ventures – debt extinguishment and other, net |
| 855 |
|
|
| 1 |
|
|
| 858 |
|
|
| 32 |
|
Write-off of preferred share original issuance costs |
| — |
|
|
| — |
|
|
| — |
|
|
| 5,156 |
|
Non-operating items, net |
| 1,196 |
|
|
| (5,143 | ) |
|
| 2,116 |
|
|
| 5,407 |
|
Operating FFO attributable to common shareholders | $ | 62,833 |
|
| $ | 61,361 |
|
| $ | 190,845 |
|
| $ | 181,917 |
|
| Three Months |
|
| Six Months |
| ||||||||||
| Ended June 30, |
|
| Ended June 30, |
| ||||||||||
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||
Net income attributable to common shareholders | $ | 2,564 |
|
| $ | 57,601 |
|
| $ | 15,059 |
|
| $ | 68,749 |
|
Depreciation and amortization of real estate investments |
| 57,350 |
|
|
| 49,775 |
|
|
| 110,067 |
|
|
| 98,903 |
|
Equity in net income of joint ventures |
| (4,618 | ) |
|
| (1,381 | ) |
|
| (5,977 | ) |
|
| (1,550 | ) |
Joint ventures' FFO(A) |
| 2,201 |
|
|
| 3,883 |
|
|
| 4,183 |
|
|
| 8,198 |
|
Non-controlling interests (OP Units) |
| — |
|
|
| 19 |
|
|
| 18 |
|
|
| 37 |
|
Impairment of real estate |
| — |
|
|
| 2,536 |
|
|
| — |
|
|
| 2,536 |
|
Gain on sale and change in control of interests |
| — |
|
|
| (41,970 | ) |
|
| (3,749 | ) |
|
| (45,326 | ) |
Loss (gain) on disposition of real estate, net |
| 22 |
|
|
| (4,597 | ) |
|
| (183 | ) |
|
| (4,455 | ) |
FFO attributable to common shareholders |
| 57,519 |
|
|
| 65,866 |
|
|
| 119,418 |
|
|
| 127,092 |
|
Separation and other charges |
| 3,099 |
|
|
| — |
|
|
| 3,099 |
|
|
| — |
|
Transaction, debt extinguishment and other (at SITE's share) |
| 677 |
|
|
| 973 |
|
|
| 1,506 |
|
|
| 1,304 |
|
RVI disposition fees |
| — |
|
|
| (385 | ) |
|
| — |
|
|
| (385 | ) |
Non-operating items, net |
| 3,776 |
|
|
| 588 |
|
|
| 4,605 |
|
|
| 919 |
|
Operating FFO attributable to common shareholders | $ | 61,295 |
|
| $ | 66,454 |
|
| $ | 124,023 |
|
| $ | 128,011 |
|
Joint ventures’ FFO and Operating FFO are summarized as follows (in thousands):
| Three Months |
| Nine Months |
| Three Months |
| Six Months |
| ||||||||||||||||||||||
| Ended September 30, |
| Ended September 30, |
| Ended June 30, |
| Ended June 30, |
| ||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
Net income attributable to unconsolidated | $ | 105,872 |
|
| $ | 4,863 |
|
| $ | 105,833 |
|
| $ | 53,525 |
| |||||||||||||||
Net income (loss) attributable to unconsolidated | $ | 15,860 |
|
| $ | 1,339 |
|
| $ | 20,627 |
|
| $ | (39 | ) | |||||||||||||||
Depreciation and amortization of real estate investments |
| 9,450 |
|
|
| 16,605 |
|
|
| 37,123 |
|
|
| 50,309 |
|
| 8,281 |
|
|
| 13,328 |
|
|
| 17,343 |
|
|
| 27,673 |
|
Impairment of real estate |
| 9,010 |
|
|
| — |
|
|
| 17,550 |
|
|
| — |
|
| — |
|
|
| 3,340 |
|
|
| — |
|
|
| 8,540 |
|
(Gain) loss on disposition of real estate, net |
| (119,813 | ) |
|
| 455 |
|
|
| (121,505 | ) |
|
| (36,132 | ) | |||||||||||||||
Gain on disposition of real estate, net |
| (14,874 | ) |
|
| (1,790 | ) |
|
| (20,178 | ) |
|
| (1,692 | ) | |||||||||||||||
FFO | $ | 4,519 |
|
| $ | 21,923 |
|
| $ | 39,001 |
|
| $ | 67,702 |
| $ | 9,267 |
|
| $ | 16,217 |
|
| $ | 17,792 |
|
| $ | 34,482 |
|
FFO at SITE Centers' ownership interests | $ | 1,271 |
|
| $ | 5,659 |
|
| $ | 9,469 |
|
| $ | 17,065 |
| $ | 2,201 |
|
| $ | 3,883 |
|
| $ | 4,183 |
|
| $ | 8,198 |
|
Operating FFO at SITE Centers' ownership interests | $ | 2,126 |
|
| $ | 5,660 |
|
| $ | 10,327 |
|
| $ | 17,097 |
| $ | 2,334 |
|
| $ | 3,885 |
|
| $ | 4,482 |
|
| $ | 8,200 |
|
Net Operating Income and Same Store Net Operating Income
Definition and Basis of Presentation
The Company uses Net Operating Income (“NOI”), which is 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 also presents NOI information on a same store basis, or Same Store Net Operating Income (“SSNOI”). The Company defines SSNOI as property revenues less property-related expenses, which exclude straight-line rental income (including 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 quarter comparisons). In addition, 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. SSNOI is frequently used by the real estate industry, as well as securities analysts, investors and other interested parties, to evaluate the performance of REITs.
2523
SSNOI is not, and is not intended to be, a presentation in accordance with GAAP. SSNOI information has its limitations as it excludes any capital expenditures associated with the re-leasing of tenant space or as needed to operate the assets. SSNOI does not represent amounts available for dividends, capital replacement or expansion, debt service obligations or other commitments and uncertainties. Management does not use SSNOI as an indicator of the Company’s cash obligations and funding requirements for future commitments, acquisitions or development activities. SSNOI does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. SSNOI should not be considered as an alternative to net income (computed in accordance with GAAP) or as an alternative to cash flow as a measure of liquidity. A reconciliation of NOI and SSNOI to their most directly comparable GAAP measure of net income (loss) is provided below.
Reconciliation Presentation
The Company’s reconciliation of net income computed in accordance with GAAP to NOI and SSNOI for the Company at 100% and at its effective ownership interest of the assets is as follows (in thousands):
| For the Nine Months Ended September 30, |
| For the Six Months Ended June 30, |
| ||||||||||||||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
|
| 2023 |
|
| 2022 |
| ||||||||
| At 100% |
|
| At the Company's Interest |
| At 100% |
|
| At the Company's Interest |
| ||||||||||||||||||||
Net income attributable to SITE Centers | $ | 140,522 |
|
| $ | 65,941 |
|
| $ | 140,522 |
|
| $ | 65,941 |
| $ | 20,637 |
|
| $ | 74,327 |
|
| $ | 20,637 |
|
| $ | 74,327 |
|
Fee income |
| (9,471 | ) |
|
| (30,264 | ) |
|
| (9,471 | ) |
|
| (30,264 | ) |
| (3,634 | ) |
|
| (6,818 | ) |
|
| (3,634 | ) |
|
| (6,818 | ) |
Interest expense |
| 57,306 |
|
|
| 57,701 |
|
|
| 57,306 |
|
|
| 57,701 |
|
| 40,844 |
|
|
| 37,167 |
|
|
| 40,844 |
|
|
| 37,167 |
|
Depreciation and amortization |
| 152,564 |
|
|
| 137,446 |
|
|
| 152,564 |
|
|
| 137,446 |
|
| 112,714 |
|
|
| 101,385 |
|
|
| 112,714 |
|
|
| 101,385 |
|
General and administrative |
| 34,403 |
|
|
| 41,547 |
|
|
| 34,403 |
|
|
| 41,547 |
|
| 24,676 |
|
|
| 23,604 |
|
|
| 24,676 |
|
|
| 23,604 |
|
Other expense, net |
| 2,152 |
|
|
| 1,214 |
|
|
| 2,152 |
|
|
| 1,214 |
| |||||||||||||||
Other expense (income), net |
| 1,321 |
|
|
| 1,651 |
|
|
| 1,321 |
|
|
| 1,651 |
| |||||||||||||||
Impairment charges |
| 2,536 |
|
|
| 7,270 |
|
|
| 2,536 |
|
|
| 7,270 |
|
| — |
|
|
| 2,536 |
|
|
| — |
|
|
| 2,536 |
|
Equity in net income of joint ventures |
| (27,468 | ) |
|
| (11,059 | ) |
|
| (27,468 | ) |
|
| (11,059 | ) |
| (5,977 | ) |
|
| (1,550 | ) |
|
| (5,977 | ) |
|
| (1,550 | ) |
Tax expense |
| 863 |
|
|
| 1,057 |
|
|
| 863 |
|
|
| 1,057 |
|
| 575 |
|
|
| 605 |
|
|
| 575 |
|
|
| 605 |
|
Gain on sale and change in control of interests |
| (45,554 | ) |
|
| (13,943 | ) |
|
| (45,554 | ) |
|
| (13,943 | ) |
| (3,749 | ) |
|
| (45,326 | ) |
|
| (3,749 | ) |
|
| (45,326 | ) |
Gain on disposition of real estate, net |
| (31,292 | ) |
|
| (6,069 | ) |
|
| (31,292 | ) |
|
| (6,069 | ) |
| (183 | ) |
|
| (4,455 | ) |
|
| (183 | ) |
|
| (4,455 | ) |
Income from non-controlling interests |
| 55 |
|
|
| 384 |
|
|
| 55 |
|
|
| 384 |
|
| 18 |
|
|
| 37 |
|
|
| 18 |
|
|
| 37 |
|
Consolidated NOI, net of non-controlling interests | $ | 276,616 |
|
| $ | 251,225 |
|
| $ | 276,616 |
|
| $ | 251,225 |
| |||||||||||||||
Consolidated NOI | $ | 187,242 |
|
| $ | 183,163 |
|
| $ | 187,242 |
|
| $ | 183,163 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Net income from unconsolidated joint ventures | $ | 105,833 |
|
| $ | 53,525 |
|
| $ | 21,887 |
|
| $ | 9,943 |
| |||||||||||||||
Net income (loss) from unconsolidated joint ventures | $ | 20,627 |
|
| $ | (39 | ) |
| $ | 4,237 |
|
| $ | 615 |
| |||||||||||||||
Interest expense |
| 26,560 |
|
|
| 32,898 |
|
|
| 5,982 |
|
|
| 8,113 |
|
| 13,348 |
|
|
| 18,319 |
|
|
| 3,028 |
|
|
| 4,151 |
|
Depreciation and amortization |
| 37,123 |
|
|
| 50,309 |
|
|
| 8,304 |
|
|
| 11,480 |
|
| 17,343 |
|
|
| 27,673 |
|
|
| 4,029 |
|
|
| 6,148 |
|
Impairment charges |
| 17,550 |
|
|
| — |
|
|
| 3,510 |
|
|
| — |
|
| — |
|
|
| 8,540 |
|
|
| — |
|
|
| 1,708 |
|
Other expense, net |
| 11,114 |
|
|
| 8,806 |
|
|
| 2,468 |
|
|
| 2,186 |
| |||||||||||||||
Other expense (income), net |
| 4,938 |
|
|
| 4,994 |
|
|
| 1,112 |
|
|
| 1,182 |
| |||||||||||||||
Gain on disposition of real estate, net |
| (121,505 | ) |
|
| (36,132 | ) |
|
| (24,254 | ) |
|
| (4,387 | ) |
| (20,178 | ) |
|
| (1,692 | ) |
|
| (4,037 | ) |
|
| (291 | ) |
Unconsolidated NOI | $ | 76,675 |
|
| $ | 109,406 |
|
| $ | 17,897 |
|
| $ | 27,335 |
| $ | 36,078 |
|
| $ | 57,795 |
|
| $ | 8,369 |
|
| $ | 13,513 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
Total Consolidated + Unconsolidated NOI |
|
|
|
| $ | 294,513 |
|
| $ | 278,560 |
|
|
|
|
| $ | 195,611 |
|
| $ | 196,676 |
| ||||||||
Less: Non-Same Store NOI adjustments |
|
|
|
|
| (19,604 | ) |
|
| (4,637 | ) |
|
|
|
|
| (9,566 | ) |
|
| (15,922 | ) | ||||||||
Total SSNOI including redevelopment |
|
|
|
| $ | 274,909 |
|
| $ | 273,923 |
|
|
|
|
| $ | 186,045 |
|
| $ | 180,754 |
| ||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||
SSNOI % Change including redevelopment |
|
|
|
|
| 0.4 | % |
|
|
|
|
|
|
|
| 2.9 | % |
|
|
|
The SSNOI increase for the ninesix months ended SeptemberJune 30, 2022 included uncollectible revenue of $1.9 million2023, as compared to $8.3 million for the nine months ended September 30, 2021, due to a decrease in the amount of net revenues received from tenantsprior-year period, primarily related to prior periods primarily from cash basis tenants and related reserve adjustments. The decrease in prior period cash receipts was offset by increases in rents and recoveries primarily attributable to sequential increases in occupancy for same-store assets.
LIQUIDITY, CAPITAL RESOURCES AND FINANCING ACTIVITIES
The Company periodically evaluates opportunities to issue and sell additional debt or equity securities, obtain credit facilities from lenders or repurchase or refinance long-term debt as part of its overall strategy to further strengthen its financial position. The Company remains committed to monitoring liquidity and the duration of its indebtedness and to maintaining prudent leverage levels in an effort to manage its overall risk profile.
The Company’s consolidated and unconsolidated debt obligations generally require monthly or semi-annual payments of principal and/or interest over the term of the obligation. While the Company currently believes it has several viable sources to obtain capital and fund its business, including capacity under its Revolving Credit Facility (as defined below), no assurance can be provided
26
that these obligations will be refinanced or repaid as currently anticipated. Any new debt financings may also entail higher rates of interest than the indebtedness being refinanced, which could have an adverse effect on the Company’s operations.
24
The Company has historically accessed capital sources through both the public and private markets. Acquisitions and redevelopments are generally financed through cash provided from operating activities, the Revolving Credit Facility, mortgages assumed, secured debt, unsecured debt, common and preferred equity offerings, joint venture capital and asset sales. Total consolidated debt outstanding was $1.8 billion at SeptemberJune 30, 2022,2023, compared to $1.7 billion at December 31, 2021.2022.
TheAt June 30, 2023, the Company had an unrestricted cash balance of $20.9$28.0 million at September 30, 2022 and an $80.0 million outstanding balance onavailability under its Revolving Credit Facility and accordingly, availability under the Revolving Credit Facility of $870.0$775.0 million (subject to satisfaction of applicable borrowing conditions). The Company has no remaining consolidated debt maturing in 2022. The2023. In 2024, the Company has $87.2$65.6 million aggregate principal amount of senior notes maturing in 2023. At September 30, 2022, the Company had $35.3and $27.6 million aggregate principal amount of consolidated mortgage debt scheduled to maturematuring. The Company’s unconsolidated joint ventures have $112.2 million in 2023, of which $15.7 million was repaid in October 2022. At September 30, 2022, the DDRM Joint Venture has approximately $23.2 million of mortgage debt outstanding at the Company’s share maturing in July 2023, which has a one-year extension option subject to certain conditions.2024. As of SeptemberJune 30, 2022, the Company did not have any indebtedness outstanding having an interest rate determined by reference to LIBOR. As of September 30, 2022,2023, the Company anticipates that it has approximately $25$19 million to be incurred on its pipeline of identified redevelopment projects. The Company declared a common share dividenddividends of $0.39$0.26 per share in the nineaggregate in the six months ended SeptemberJune 30, 2022.2023. The Company believes it has sufficient liquidity to operate its business at this time. In March 2023, the Company entered into a 5.0% interest rate cap with respect to the variable rate (the Secured Overnight Financing Rate or "SOFR") component applicable to borrowings up to $100 million under the Company's Revolving Credit Facility, which interest rate cap will remain in effect through the beginning of April 2024. At June 30, 2023, the Company had $175.0 million drawn on the Revolving Credit Facility. In May 2023, the Company repaid $87.2 million of senior notes due 2023 with amounts drawn under its Revolving Credit Facility.
Revolving Credit Facility and Term Loan
The Company maintains an unsecured revolving credit facilityRevolving Credit Facility with a syndicate of financial institutions and J.P. MorganJPMorgan Chase Bank, N.A., as administrative agent (the “Revolving Credit Facility”) that provides for borrowings of up to $950 million, which limit may be increased to $1.45 billion provided that existing or new lenders agree to provide incremental commitments.commitments and subject to other conditions precedent. The Revolving Credit Facility matures in June 2026 subject to two six-month options to extend the maturity to June 2027 at the Company's option (subject to the 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 credit spread (0.95%adjustment plus an applicable margin (0.85% at SeptemberJune 30, 2022)2023) or (ii) the alternative base rate plus a spreadan applicable margin (0% at SeptemberJune 30, 2022)2023). The Revolving Credit Facility also provides for an annual facility fee, which was 20 basis points on the entire facility at SeptemberJune 30, 2022.2023. The specified spreadsapplicable margins and facility fee vary depending on the Company’s long-term senior unsecured debt ratings from Moody’s, Investors Service, Inc. (“Moody’s”), S&P Global Ratings (“S&P”) and Fitch Investor Services Inc. (“Fitch”) (or their respective successors). The Revolving Credit Facility also features a sustainability-linked pricing component whereby the applicable interest rateinterest-rate margin can be adjusted by one or two basis points if the Company meets certain sustainability performance targets.
The Company also maintains a $200 million unsecured term loan with a syndicate of financial institutions and Wells Fargo Bank, National Association, as administrative agent (the “Term Loan”), that bears interest at variable rates, based on the Company’s long-term senior unsecured debt ratings, equal to (i) the SOFR rate plus a spread (1.05% at September 30, 2022) or (ii) the alternative base rate plus a spread (0.0% at September 30, 2022). The Term Loan matures in June 2027. The Company may increase the principal amount of the Term Loan in the future to up to $800 million in the aggregate provided that existing or new lenders are identified to provide additional loan commitments. The Term Loan also features a sustainability-linked pricing component whereby the applicable interest rate margin can be adjusted by one to two basis points if the Company meets certain sustainability performance targets. The covenants governing the Term Loan are substantially identical to those governing the Revolving Credit Facility.
In late June 2022, the Company utilized the Term Loan’s delayed draw feature to borrow an additional $100.0 million on the Term Loan. As a result, the aggregate principal amount outstanding on the Term Loan was $200.0 million at September 30, 2022. In August 2022, the Company entered into a $200 million Swap to effectively convert the Term Loan to a fixed rate of 3.8% through the loan’s maturity in June 2027.
The Revolving Credit Facility, the Term LoanCompany’s $200.0 million term loan facility and the indentures under which the Company’s senior and subordinated unsecured indebtedness are, or may be, issued contain certain financial and operating covenants including, among other things, leverage ratios and debt service coverage and fixed chargefixed-charge coverage ratios, as well as limitations on the Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company’s assets and engage in certain mergers and acquisitions. These credit facilitiesThe Revolving Credit Facility, the term loan and the indentures also contain customary default provisions including the failure to make timely payments of principal and interest payable thereunder, the failure to comply with the Company’s financial and operating covenants and the failure of the Company or its majority-owned subsidiaries (i.e., entities in which the Company has a greater than 50% interest) to pay, when due, certain indebtedness in excess of certain thresholds beyond applicable grace and cure periods. In the event the Company’s lenders or note holders declare a default, as defined in the applicable agreements governing the debt, the Company may be unable to obtain further funding, and/or an acceleration of any outstanding borrowings may occur. As of SeptemberJune 30, 2022,2023, the Company was in compliance with all of its financial covenants in the agreements governing its debt. Although the Company believes
27
it will continue to operate in compliance with these covenants, if the Company were to violate these covenants, the Company may be subject to higher finance costs and fees or accelerated maturities.
Consolidated Indebtedness – as of SeptemberJune 30, 20222023
As discussed above, the Company is committed to maintaining prudent leverage levels and may utilize proceeds from equity offerings or the sale of properties or other investments or equity offerings to repay additional debt. These sources of funds could be affected by various risks and uncertainties. No assurance can be provided that the Company’s debt obligations will be refinanced or repaid as currently anticipated. See Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
The Company continually evaluates its debt maturities and, based on management’s assessment, believes it has viable financing and refinancing alternatives. The Company has sought to manage its debt maturities, through executing a strategy to extend debt duration, increase liquidity, maintain prudent leverage levels and improve the Company’s credit profile with a focus of lowering the Company'sCompany’s balance sheet risk and cost of capital.
25
Unconsolidated Joint Ventures’ Mortgage Indebtedness – as of SeptemberJune 30, 20222023
The Company’s unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $0.5 billion and $1.0 billion at September 30, 2022 and 2021, respectively. Such mortgages are generally non-recourse to the Company and its partners; however, certain mortgages may have recourse to the Company and its partners in certain limited situations, such as misappropriation of funds, impermissible transfer, environmental contamination and material misrepresentation. The outstanding indebtedness of the Company’s unconsolidated joint ventures at SeptemberJune 30, 2022,2023, which matures in the subsequent 13-month period (i.e., through October 2023)July 31, 2024), is $115.8 million ($23.2 million at the Company’s share). All of this amount is attributableas follows (in millions):
| Outstanding |
|
| At SITE Centers' Share |
| ||
Dividend Trust Portfolio(A) | $ | 364.3 |
|
| $ | 72.9 |
|
DDRM Joint Venture(B) |
| 40.9 |
|
|
| 8.2 |
|
Total debt maturities through July 31, 2024 | $ | 405.2 |
|
| $ | 81.1 |
|
No assurance can be provided that these obligations will be refinanced or repaid as currently anticipated. Similar to SITE Centers, the Company’s joint ventures experienced a reduction in rent collections, beginning in the second quarter of 2020, as a result of the impact of the COVID-19 pandemic. Any future deterioration in rent collectionproperty-level revenues may cause one or more of these joint ventures to be unable to refinance maturing obligations or satisfy applicable covenants, financial tests or debt service requirements or loan maturity extension conditions in the future, thereby allowing the mortgage lender to assume control of property cash flows, limit distributions of cash to joint venture members, declare a default, increase the interest rate or accelerate the loan’s maturity. In addition, rising interest rates may adversely impact the ability of the Company'sCompany’s joint ventures to sell assets at attractive prices in order to repay indebtedness.
Cash Flow Activity
The Company’s cash flow activities are summarized as follows (in thousands):
| Nine Months |
| Six Months |
| ||||||||||
| Ended September 30, |
| Ended June 30, |
| ||||||||||
| 2022 |
|
| 2021 |
| 2023 |
|
| 2022 |
| ||||
Cash flow provided by operating activities | $ | 205,486 |
|
| $ | 217,364 |
| $ | 126,797 |
|
| $ | 132,107 |
|
Cash flow used for investing activities |
| (282,843 | ) |
|
| (64,731 | ) |
| (112,956 | ) |
|
| (288,951 | ) |
Cash flow provided by (used for) financing activities |
| 58,107 |
|
|
| (161,708 | ) | |||||||
Cash flow (used for) provided by financing activities |
| (6,462 | ) |
|
| 154,772 |
|
Changes in cash flow for the ninesix months ended SeptemberJune 30, 2022,2023, compared to the prior comparable period, are as follows:
Operating Activities: Cash provided by operating activities decreased $11.9$5.3 million primarily due to change in cash flow from higher interest rates, higher general and administrative expenses attributable to a May 2023 restructuring plan and changes in working capital.
Investing Activities: Cash used for investing activities decreased $176.0 million primarily due to the following:
Investing Activities: Cash used for investing activities increased $218.1 million primarily due to the following:
28
Financing Activities: Cash provided by financing activities increased $219.8decreased $161.2 million primarily due to the following:
Dividend Distribution
The Company declared common and preferred cash dividends of $91.9$60.2 million and $84.8$61.4 million for the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, respectively. The Company intends to distribute at least 100% of ordinary taxable income in the form of common and preferred dividends with respect to the year ending December 31, 20222023 in order to maintain compliance with REIT requirements and in order to not incur federal income taxes (excluding federal income taxes applicable to its taxable REIT subsidiary activities).
The Company declared a quarterly cash dividend of $0.13 per common share for each of the first threeand second quarters of 2022.2023. The Board of Directors of the Company intends to monitor the Company’s dividend policy in order to maintain sufficient liquidity for operatingoperations and in order to maximize the Company’s free cash flow while still adhering to REIT payout requirements.
26
SITE Centers’ Equity
In MarchDecember 2022, the Company settled 2.2 million common shares, which were offered and sold on a forward basis in 2021 under its $250 million continuous equity program, resulting in gross proceeds of $35.1 million. In the second quarter of 2022, the Company sold 201,800 common shares at a weighted-average price of $16.03 per share before issuance costs generating gross proceeds of $3.2 million. At October 21, 2022, the Company had approximately $211.7 million available for the future offering of common shares under this program.
In the third quarter of 2022, the Company repurchased 1.6 million of its common shares in open market transactions at an aggregate cost of $20.0 million, or $12.74 per share. In November 2018, the Company’s Board of Directors authorized a common share repurchase program. Under the terms of the program, the Company may purchaseis authorized to repurchase up to a maximum value of $100 million of its common shares. Through October 21, 2022,In the first quarter of 2023, the Company had repurchased 6.71.5 million of its common shares under this program in open market transactions at an aggregate cost of approximately $77.9$20.0 million, or $11.66$13.43 per share. Through June 30, 2023, the Company had repurchased under this program 2.0 million of its common shares in open market transactions at an aggregate cost of $26.6 million.
SOURCES AND USES OF CAPITAL
Strategic Transaction Activity
The Company remains committed to maintaining sufficient liquidity, managing debt duration and maintaining prudent leverage levels in an effort to manage its overall risk profile. Equity offerings, debt financings, asset sales and cash flow from operations continue to represent a potential source of proceeds to be used to achieve these objectives.
Equity TransactionsAcquisitions
Through June 30, 2023, the Company acquired Parker Keystone (Denver, Colorado) for $11.0 million, Alpha Soda Center (Atlanta, Georgia) for $9.4 million, Barrett Corners (Atlanta, Georgia) for $15.6 million, Foxtail Center (Baltimore, Maryland) for $15.1 million and Briarcroft Center (Houston, Texas) for $23.5 million.
Dispositions
In the third quarter of 2022, the Company repurchased 1.6 million of its common shares in open market transactions at an aggregate cost of $20.0 million, or $12.74 per share.
In March 2022, the Company settled 2.2 million common shares which were offered and sold on a forward basis in 2021 under its $250 million continuous equity program, resulting in gross proceeds of $35.1 million. In the second quarter of 2022, the Company sold 201,800 common shares, generating gross proceeds of $3.2 million.
Acquisitions
During the ninesix months ended SeptemberJune 30, 2022, the Company acquired 14 assets for an aggregate purchase price of $301.1 million: Chandler Center (Chandler, Arizona); Shops at Power and Baseline (Mesa, Arizona); Northsight Plaza (Scottsdale, Arizona); Broadway Center (Tempe, Arizona); Artesia Village (Scottsdale, Arizona); La Fiesta Square and Lafayette Mercantile (Lafayette, California); Shops at Boca Center (Boca Raton, Florida); Shoppes of Crabapple (Alpharetta, Georgia); Parkwood Shops (Atlanta, Georgia); Shops at Tanglewood (Houston, Texas) and Boulevard Marketplace, Fairfax Marketplace and Fairfax Pointe (Fairfax, Virginia).
The Company also acquired its joint venture partner’s 80% equity interest in Casselberry Commons (Casselberry, Florida) owned2023, unconsolidated shopping centers sold by the DDRM Joint Venture for $35.6 million ($44.5 million at 100%). This transaction resulted in a Gain on Change in Control of Interests of $3.3 million.
29
Dispositions
In the nine months ended September 30, 2022, the Company sold two wholly-owned shopping centers and one parcel at a wholly-owned shopping center in addition to two unconsolidated shopping centers generatinggenerated proceeds totaling $98.4$112.2 million of which the Company’s share was $65.6$22.4 million. In addition, in the third quarter of 2022,The proceeds from the DDRM Joint Venture sold 13 shopping centerssales were primarily used to repay mortgage indebtedness of the joint venture, for an aggregate sales pricedistribution to the partners and for general corporate purposes of $387.6 million ($77.5 million at the Company's share) with the related mortgage debt of $225.0 million repaid upon closing.
In the second quarter of 2022, the Company sold its 20% interest in the SAU Joint Venture to its partner, the State of Utah, based on a gross asset value of $155.7 million (at 100%). In addition, the Company sold its 50% interest in Lennox Town Center to its partner based on a gross asset value of $77.0 million (at 100%). These transactions resulted in a Gain on Sale of Interests of $42.2 million.joint venture.
Changes in investment strategies for assets may impact the Company’s hold-period assumptions for those properties. The disposition of certain assets could result in a loss or impairment recorded in future periods. The Company evaluates all potential sale opportunities taking into account the long-term growth prospects of the assets, the use of proceeds and the impact to the Company’s balance sheet, in addition to the impact on operating results.
Equity Transactions
In the first quarter of 2023, the Company repurchased 1.5 million of its common shares in open market transactions at an aggregate cost of $20.0 million, or $13.43 per share with the remaining proceeds from the sale of wholly-owned properties in the fourth quarter of 2022 and proceeds from the sale of joint venture properties.
The Company repurchased 140,633 OP units in a privately negotiated transaction at an aggregate cost of $1.7 million, or $12.34 per unit. Following the repurchase, the Company has no outstanding OP units.
Redevelopment OpportunitiesPipeline
One key component of the Company’s long-term strategic plan will be the evaluation of additional tactical redevelopment potential within the portfolio, particularly as it relates to the efficient use of the underlying real estate.estate, which includes to expand, improve and re-tenant various properties. The Company will generally expects to commence construction on redevelopment projects only after substantial tenant leasing has occurred. At SeptemberJune 30, 2022, the Company anticipates that it has approximately $25 million to be incurred on its pipeline of identified redevelopment projects.
Redevelopment Projects
As part of its strategy to expand, improve and re-tenant various properties, at September 30, 2022,2023, the Company had approximately $60 million in construction in progress in various active consolidated redevelopmentredevelopments and other projects and anticipates that it has approximately $19 million yet to be incurred
27
on a net basis. The Company’s majorits pipeline of identified redevelopment projects are typically substantially complete within two years of the construction commencement date. Redevelopment projects placed into service in 2022 were completed at a cost of approximately $322 per square foot.projects. At SeptemberJune 30, 2022,2023, the Company’s large-scale shopping center expansionexpansions, outparcel developments, construction of first-generation space and repurposing projects, were as follows (in thousands):
Location |
| Estimated |
| Estimated |
|
| Cost Incurred at |
|
| Estimated |
| Estimated |
|
| Cost Incurred at |
| ||||
West Bay Plaza - Phase II (Cleveland, Ohio) |
| 4Q23 |
| $ | 9,102 |
|
| $ | 6,455 |
|
| 4Q23 |
| $ | 7,941 |
|
| $ | 6,988 |
|
Carolina Pavilion (Charlotte, North Carolina) |
| 4Q23 |
|
| 2,721 |
|
|
| 2,366 |
| ||||||||||
Shoppers World (Boston, Massachusetts) |
| 3Q23 |
|
| 5,700 |
|
|
| 5,200 |
| ||||||||||
Nassau Park Pavilion (Trenton, New Jersey) |
| 1Q24 |
|
| 7,635 |
|
|
| 5,470 |
| ||||||||||
University Hills (Denver, Colorado) |
| 3Q24 |
|
| 6,718 |
|
|
| 5,047 |
| ||||||||||
Shoppers World (Boston, Massachusetts) |
| 2Q24 |
|
| 2,414 |
|
|
| 513 |
| ||||||||||
Tanasbourne Town Center (Portland, Oregon) |
| 4Q25 |
|
| 13,769 |
|
|
| 2,622 |
| ||||||||||
Perimeter Pointe (Atlanta, Georgia) |
| TBD |
| TBD |
|
|
| 1,326 |
|
| TBD |
|
| — |
|
|
| 1,417 |
| |
Total |
| $ | 9,102 |
|
| $ | 7,781 |
|
| $ | 46,898 |
|
| $ | 29,623 |
|
At September 30, 2022, the Company’s tactical redevelopment projects, including outparcels, first generation space and small-scale shopping center expansions and other capital improvements, were as follows (in thousands):
Location |
| Estimated |
| Estimated |
|
| Cost Incurred at |
| ||
Tanasbourne Town Center (Portland, Oregon) |
| 4Q24 |
| $ | 11,540 |
|
| $ | 1,655 |
|
Nassau Park Pavilion (Trenton, New Jersey) |
| 4Q23 |
|
| 7,635 |
|
|
| 2,426 |
|
University Hills (Denver, Colorado) |
| 4Q23 |
|
| 5,972 |
|
|
| 3,228 |
|
Shoppers World (Boston, Massachusetts) |
| 4Q23 |
|
| 4,967 |
|
|
| 2,631 |
|
Hamilton Marketplace (Trenton, New Jersey) |
| 2Q23 |
|
| 3,843 |
|
|
| 3,589 |
|
Carolina Pavilion (Charlotte, North Carolina) |
| 4Q23 |
|
| 2,339 |
|
|
| 1,861 |
|
Other Tactical Projects |
| N/A |
|
| 1,884 |
|
|
| 14 |
|
Total |
|
|
| $ | 38,180 |
|
| $ | 15,404 |
|
CAPITALIZATION
At SeptemberJune 30, 2022,2023, the Company’s capitalization consisted of $1.8 billion of debt, $175.0 million of preferred shares and $2.3$2.8 billion of market equity (market equity is defined(calculated as the common shares and OP Units outstanding multiplied by $10.71,$13.22, the closing price of the Company’s common shares on the New York Stock Exchange on Septemberat June 30, 2022)2023). The closing priceAt June 30, 2023, after giving effect to the swap of the Company’s common shares onvariable-rate component of the New York Stock Exchange was $15.44 at September 30, 2021. At September 30, 2022 and 2021,
30
term loan's interest rate to a fixed rate, the Company’s total debt consisted of $1.7 billion and $1.6 billion respectively, of fixed-rate debt and $0.1 billion and $0.2 billion, respectively, of variable-rate debt. At September 30, 2022, the fixed-rate debt includes $200.0$175.0 million of variable-rate debt that had been effectively swapped to a fixedvariable rate through the use of interest rate derivative contracts.debt.
Management’s strategy is to maintain access to the capital resources necessary to manage the Company’s balance sheet and to repay upcoming maturities. Accordingly, the Company may seek to obtain funds through additional debt or equity financings and/or joint venture capital in a manner consistent with its intention to operate with a conservativeprudent debt capitalization policy and to reduce the Company’s cost of capital by maintaining an investment grade rating with Moody’s, S&P and Fitch. A security rating is not a recommendation to buy, sell or hold securities, as it may be subject to revision or withdrawal at any time by the rating organization. Each rating should be evaluated independently of any other rating. The Company may not be able to obtain financing on favorable terms, or at all, which may negatively affect future ratings.
The Company’s credit facilitiesRevolving Credit Facility, term loan and the indentures under which the Company’s senior and subordinated unsecured indebtedness are,is, or may be, issued contain certain financial and operating covenants, including, among other things, debt service coverage and fixed charge coverage ratios, as well as limitations on the Company’s ability to incur secured and unsecured indebtedness, sell all or substantially all of the Company’s assets, engage in certain mergers and acquisitions and make distribution to its shareholders. Although the Company intends to operate in compliance with these covenants, if the Company were to violate these covenants, the Company may be subject to higher finance costs and fees or accelerated maturities. In addition, certain ofthe Revolving Credit Facility, term loan and the Company’s credit facilities and indentures permit the acceleration of maturity in the event certain other debt of the Company is in default or has been accelerated. Foreclosure on mortgaged properties or an inability to refinance existing indebtedness would have a negative impact on the Company’s financial condition and results of operations.
CONTRACTUAL OBLIGATIONS AND OTHER COMMITMENTS
TheAs of June 30, 2023, the Company has no remaining consolidated debt maturing in 2022. As of October 21, 2022,2023. In 2024, the Company has $87.2$65.6 million aggregate principal amount of senior notes, and $19.6$27.6 million of consolidated secured mortgage debt maturing in 2023.and $112.2 million of unconsolidated joint venture mortgage debt at the Company’s share maturing. The Company expects to fund future maturities from utilization of its Revolving Credit Facility, proceeds from asset sales and other investments, cash flow from operations and/or additional debt or equity financings. No assurance can be provided that these obligations will be repaid as currently anticipated or refinanced.
Other Guaranties
In conjunction with the redevelopment of shopping centers, the Company had entered into commitments with general contractors aggregating approximately $30.1$20.6 million for its consolidated properties at SeptemberJune 30, 2022.2023, which includes the assets in the redevelopment pipeline. These obligations, composed principally of construction contracts, are generally due within 12 to 24 months, as the related construction costs are incurred, and are expected to be financed through operating cash flow, asset sales or borrowings under the Revolving Credit Facility. These contracts typically can be changed or terminated without penalty.
The Company routinely enters into contracts for the maintenance of its properties. These contracts typically can be canceled upon 30 to 60 days’ notice without penalty. At SeptemberJune 30, 2022,2023, the Company had purchase order obligations, typically payable within one year, aggregating approximately $7.7$7.0 million related to the maintenance of its properties and general and administrative expenses.
28
ECONOMIC CONDITIONS
TheDespite current economic uncertainty, the Company continues to believe there isexperience retailer demand for quality real estate locations within well-positioned shopping centers and continues to see demand from a broad range of tenants for its space, despite growing uncertainty and increasing e‑commerce distribution. The Company has experienced strong momentum in new lease discussions and renewal negotiations with tenants.centers. The Company executed new leases and renewals aggregating approximately 3.51.6 million square feet of space for the nine months ended September 30, 2022, on a pro rata basis. Although there may be some additional disruption among existing tenants due to inflationary pressures, supply chain impacts, labor shortages and capital markets volatility,basis for the six months ended June 30, 2023. The Company believes that recentthese strong leasing volumesresults and tenant demand are attributable to the locationconcentration of the Company’s portfolio in suburban, high household income communities, pandemic-induced work-from-home trends, limited new construction and to its national tenants’ strong financial positions and increasing emphasis and reliance onuse of physical store locations to improve the spreadspeed and efficiency of purchases agnostic of channel.merchandise distribution.
The Company benefits from a diversified tenant base, with only one tenant whose annualized rental revenue equals or exceeds 3% of the Company’s annualized consolidated revenues plus the Company’s proportionate share of unconsolidated joint venture revenues (TJX Companies at 5.8%). Other significant national tenants generally have relatively strong financial positions, have outperformed other retail categories over time and the Company believes remain well-capitalized. Historically these national tenants have provided a stable revenue base, and the Company believes that they will continue to provide a stable revenue base going forward, given the long-term nature of these leases. The majority of the tenants in the Company’s shopping centers provide day-to-day
31
consumer necessities with a focus on value and convenience, versus discretionary items, which the Company believes will enable many of its tenants to outperform under a variety of economic conditions. The Company recognizes the risks posed by current economic conditions but believes that the position of its portfolio and the general diversity and credit quality of its tenant base should enable it to successfully navigate through a potentially challenging economic environment. The Company has relatively little reliance on overage or percentage rents generated by tenant sales performance.
The Company believes that its shopping center portfolio is well positioned, as evidenced by its recent leasing activity, historical property income growth and consistent growth in average annualized base rent per occupied square foot. Historical occupancy has generally ranged from 89% to 96% since94% over the Company’s initial public offering in 1993.last 10 years. At SeptemberJune 30, 20222023 and December 31, 2021,2022, the shopping center portfolio occupancy, on a pro rata basis, was 91.4%92.3% and 90.0%92.4%, respectively, and the total portfolio average annualized base rent per occupied square foot, on a pro rata basis, was $19.11$19.89 and $18.33,$19.52, respectively. The Company’s portfolio washas been impacted by tenant bankruptcies, and closures in 2020, primarily due to the impact ofincluding bankruptcy stemming from the COVID-19 pandemic, and the Company expects to expend significant amounts of capital in coming periods in connection with recentlyleases executed leases to backfill these and other closures. Although the per square foot cost of leasing capital expenditures has been predominantly consistent with the Company’s historical trends, the high volume of the Company’s recent leasing activity will cause aggregate leasing capital expenditure levels to remainbe elevated. The weighted-average cost of tenant improvements and lease commissions estimated to be incurred over the expected lease term for new leases executed during the ninesix months ended SeptemberJune 30, 20222023 and 2021,2022, on a pro rata basis, was $7.31$5.90 and $8.56$7.15 per rentable square foot, respectively. The Company generally does not expend a significant amount of capital on lease renewals.
Beginning in March 2020,Although disruptions to the Company’s business stemming from the COVID-19 pandemic have subsided, inflation, higher interest rates, reduced consumer spending, labor shortages and the volatility of global capital markets pose risks to the U.S. economy and the Company’s tenants. In addition to these macroeconomic challenges, the retail sector was significantly impactedhas been affected 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 their operations or close their businesses for a period of time. The Company worked with tenants to maximize the collection of unpaid 2020 rents by offering rent deferment on a case-by-case basis often in exchange for concessions in the form of tenant extensions of lease terms, the relaxation of leasing restrictions and co-tenancy provisions and, in some cases, alterations of control areas allowing for future redevelopment of the shopping center. The Company’s collection rates showed significant improvements in 2021 and the Company’s tenants, including cash basis tenants, are paying their monthly rent in a manner consistent with the period prior to the COVID-19 pandemic and have repaid deferred rents relating to prior periods. As of September 30, 2022, the majority of rent deferral arrangements for tenants that are not accounted for on the cash basis have been repaid. Any new surges in contagion or new COVID‑19 variants could adversely impact the Company's ability to lease space and collect rents. Certain tenant categories remain especially vulnerable to the impact ofchanging consumer behaviors following the COVID-19 pandemic, including movie theaters, fitness centersthe competitive nature of the retail business and local restaurants. Forthe competition for the share of the consumer wallet. The Company routinely monitors the credit profiles of its tenants and analyzes the possible impact of any potential tenant credit issues on the financial statements of the Company and its unconsolidated joint ventures. In some cases, changing conditions have resulted in weaker retailers and retail categories losing market share and declaring bankruptcy and/or closing stores. However, other retailers, specifically those in the value and convenience category, continue to express interest in launching new concepts and expanding their store fleets within the suburban, high household income communities in which the Company’s properties are located. As a result, the Company believes that its prospects to backfill any spaces vacated by bankrupt or non-renewing tenants are generally good, though such re-tenanting efforts would likely require additional risks relatingcapital expenditures and the opportunities to lease any vacant theater spaces may be more limited. However, there can be no assurance that vacancy resulting from increasingly uncertain economic conditions will not adversely affect the COVID-19 pandemic, seeCompany’s operating results (see Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022).
Although disruptions in rent collections stemming from the COVID-19 pandemic have subsided, inflation, labor shortages, supply chain disruptions and global capital markets volatility continue to pose risks to the U.S. economy, the Company’s tenants and business. Inflationary pressures andInflation, rising interest rates, the availability of commercial real estate financing have also impacted, in certain cases, real estate owners’ ability to acquire and sell assets and raise equity and debt financing. Although the Company has relatively small amounts of consolidated indebtedness maturing in 2024 (none remaining in 2023), debt capital markets liquidity could result in reductions in consumer spending and retailer profitability which couldadversely impact the Company’s ability to grow rentsrefinance future maturities and tenant demand for new and existing store locations. Regardlessthe interest rates applicable thereto. To the extent that the interest rate environment does not moderate prior to the time of accelerating inflation levels, base rent under most ofthese refinancings, the Company’s long-term anchor leases will remain constant (subject to tenants’ exercise of renewal options at pre-negotiated rent increases) until the expiration of their lease terms. While many of these leases require tenants to pay their share of shopping center operating expenses (including common area maintenance, real estate tax and insurance expenses), the Company’s ability to collect the passed-throughinterest expense increases to tenants is dependent on their ability to absorb and pay these increases. Inflation may also impact other aspects of the Company’s operating costs, including employee retention costs, the cost to complete redevelopments and build-outs of recently leased vacancies and interest rate costs relating to variable rate loans and refinancing of fixed-rate indebtedness. Increasing interest rates or capital availability constraints may alsolevels would be adversely impact the transaction market, asset values and the Company's ability to buy or sell properties. While the Company has not been significantly impacted by any of these items to date, no assurances can be provided that these inflationary pressures will not have a material adverse effect on the Company’s business in the future.affected.
FORWARD-LOOKING STATEMENTS
MD&A should be read in conjunction with the Company’s consolidated financial statements and the notes thereto appearing elsewhere in this report. Historical results and percentage relationships set forth in the Company’s consolidated financial statements, including trends that might appear, should not be taken as indicative of future operations. The Company considers portions of this
29
information 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 expectations for future periods. Forward-looking statements include, without limitation, statements related to acquisitions (including any related pro forma financial information) and other business development activities, future capital expenditures, financing sources and availability and the effects of environmental and other regulations. Although the Company believes that the expectations reflected in these forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose,
32
any statements contained herein that are not statements of historical fact should be deemed to be forward-looking statements. Without limiting the foregoing, the words “will,” “believes,” “anticipates,” “plans,” “expects,” “seeks,” “estimates” and similar expressions are intended to identify forward-looking statements. Readers should exercise caution in interpreting and relying on forward-looking statements because such statements involve known and unknown risks, uncertainties and other factors that are, in some cases, beyond the Company’s control and that could cause actual results to differ materially from those expressed or implied in the forward-looking statements and that could materially affect the Company’s actual results, performance or achievements. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements see Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.2022.
Factors that could cause actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include, but are not limited to, the following:
30
33
31
34
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company’s primary market risk exposure is interest rate risk. TheAt June 30, 2023, the Company’s debt, excluding unconsolidated joint venture debt and adjusted to reflect the swap of the variable rate (SOFR) component of interest rate applicable to the Company’s $200.0 million of variable-rate debt that SOFR was swappedterm loan to a fixed rate of 2.75% at September 30, 2022, is summarized as follows:
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||
| Amount |
|
| Weighted- |
|
| Weighted- |
|
| Percentage |
|
| Amount |
|
| Weighted- |
|
| Weighted- |
|
| Percentage |
| ||||||||
Fixed-Rate Debt | $ | 1,742.1 |
|
|
| 3.3 |
|
|
| 4.1 | % |
|
| 95.6 | % |
| $ | 1,577.6 |
|
|
| 3.8 |
|
|
| 4.1 | % |
|
| 94.1 | % |
Variable-Rate Debt | $ | 80.0 |
|
|
| 3.7 |
|
|
| 3.9 | % |
|
| 4.4 | % |
| $ | 99.8 |
|
|
| 1.1 |
|
|
| 1.1 | % |
|
| 5.9 | % |
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||
| Amount |
|
| Weighted- |
|
| Weighted- |
|
| Percentage |
|
| Amount |
|
| Weighted- |
|
| Weighted- |
|
| Percentage |
| ||||||||
Fixed-Rate Debt | $ | 1,620.3 |
|
|
| 2.7 |
|
|
| 4.2 | % |
|
| 90.3 | % |
| $ | 1,707.0 |
|
|
| 3.1 |
|
|
| 4.1 | % |
|
| 100.0 | % |
Variable-Rate Debt | $ | 175.0 |
|
|
| 2.9 |
|
|
| 6.0 | % |
|
| 9.7 | % |
| $ | — |
|
|
| — |
|
|
| — |
|
|
| 0.0 | % |
The Company’s unconsolidated joint ventures’ indebtedness at its carrying value is summarized as follows:
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||
| Joint |
|
| Company's |
|
| Weighted- |
|
| Weighted- |
|
| Joint |
|
| Company's |
|
| Weighted- |
|
| Weighted- |
| ||||||||
Fixed-Rate Debt | $ | 363.4 |
|
| $ | 72.7 |
|
|
| 1.5 |
|
|
| 4.8 | % |
| $ | 673.9 |
|
| $ | 146.2 |
|
|
| 2.4 |
|
|
| 4.2 | % |
Variable-Rate Debt | $ | 176.5 |
|
| $ | 38.9 |
|
|
| 1.3 |
|
|
| 5.1 | % |
| $ | 199.4 |
|
| $ | 43.5 |
|
|
| 1.4 |
|
|
| 2.2 | % |
| June 30, 2023 |
|
| December 31, 2022 |
| ||||||||||||||||||||||||||
| Joint |
|
| Company's |
|
| Weighted- |
|
| Weighted- |
|
| Joint |
|
| Company's |
|
| Weighted- |
|
| Weighted- |
| ||||||||
Fixed-Rate Debt | $ | 363.8 |
|
| $ | 72.8 |
|
|
| 0.8 |
|
|
| 4.8 | % |
| $ | 363.5 |
|
| $ | 72.7 |
|
|
| 1.3 |
|
|
| 4.8 | % |
Variable-Rate Debt | $ | 102.7 |
|
| $ | 39.0 |
|
|
| 1.3 |
|
|
| 4.5 | % |
| $ | 171.6 |
|
| $ | 53.0 |
|
|
| 1.1 |
|
|
| 5.4 | % |
The Company intends to use retained cash flow, proceeds from asset sales, equity and debt financing and variable-rate indebtedness available under its Revolving Credit Facility to repay indebtedness and fund capital expenditures at the Company’s shopping centers. Thus, to the extent the Company incurs additional variable-rate indebtedness or needs to refinance existing fixed-rate indebtedness in a rising interest rate environment, its exposure to increases in interest rates in an inflationary period could increase. The Company does not believe, however, that increases in interest expense will significantly impact the Company’s distributable cash flow given the Company’s outstanding debt maturity profile.
The interest rate risk on a portion of the Company’s variable-rate debt has been mitigated through the use of an interest rate swap agreement with major financial institutions. At SeptemberJune 30, 2022,2023, the variable (SOFR) component of the interest rate onapplicable to the Company’s $200.0 million of the Company’s consolidated variable-rate debtterm loan facility was swapped to a fixed rate. The Company is exposed to credit risk in the event of nonperformance by the counterparties to the swaps. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions.
32
The carrying value of the Company’s fixed-rate debt is adjusted to include the $200.0 million of variable-rate debt that was swapped to a fixed rate at SeptemberJune 30, 2022. The fair value of the Company's fixed-rate debt is adjusted to include (i) the swap reflected in the carrying value and (ii) the Company’s proportionate share of the joint ventures' fixed-rate debt.2023. An estimate of the effect of a 100 basis-point increase at SeptemberJune 30, 20222023 and December 31, 2021,2022, is summarized as follows (in millions):
| September 30, 2022 |
|
|
| December 31, 2021 |
| June 30, 2023 |
|
|
| December 31, 2022 |
|
| ||||||||||||||||||||||||||||||||||||
| Carrying |
|
| Fair |
|
| 100 Basis-Point |
|
|
| Carrying |
|
| Fair |
|
| 100 Basis-Point |
| Carrying |
|
| Fair |
|
| 100 Basis-Point |
|
|
| Carrying |
|
| Fair |
|
| 100 Basis-Point |
|
| ||||||||||||
Company's fixed-rate debt | $ | 1,742.1 |
|
| $ | 1,652.7 |
| (A) | $ | 1,604.8 |
| (B) |
| $ | 1,577.6 |
|
| $ | 1,687.5 |
|
| $ | 1,630.3 |
| $ | 1,620.3 |
|
| $ | 1,522.4 |
| (A) | $ | 1,485.1 |
| (B) |
| $ | 1,707.0 |
|
| $ | 1,622.2 |
| (A) | $ | 1,577.7 |
| (B) |
Company's proportionate share of | $ | 72.7 |
|
| $ | 70.8 |
|
| $ | 69.8 |
|
| $ | 146.2 |
|
| $ | 149.7 |
|
| $ | 146.8 |
| $ | 72.8 |
|
| $ | 72.9 |
|
| $ | 72.9 |
|
| $ | 72.7 |
|
| $ | 70.5 |
|
| $ | 69.6 |
|
|
The sensitivity to changes in interest rates of the Company’s fixed-rate debt was determined using a valuation model based upon factors that measure the net present value of such obligations that arise from the hypothetical estimate as discussed above. A 100 basis-point increase in short-term market interest rates on variable-rate debt at SeptemberJune 30, 2022,2023, would result in an increase in interest expense of approximately $0.6$0.4 million for the Company and $0.1 million representingrelating to the Company’s proportionate share of
35
the joint ventures’ interest expense relating to variable-ratevariable rate debt outstanding for the ninesix months ended SeptemberJune 30, 2022.2023. This exposure to interest rate risk was mitigated by the implementation of a 5.0% interest rate cap with respect to the variable (SOFR) component applicable to borrowings up to $100 million under the Company's Revolving Credit Facility through the beginning of April 2024. The estimated increase in interest expense for the year does not give effect to possible changes in the daily balance of the Company’s or joint ventures’ outstanding variable-rate debt. All of the variable-rate debt outstanding at the unconsolidated joint ventures is subject to hedging agreements.
The Company and its joint ventures intend to continually monitor and actively manage interest costs on their variable-rate debt portfolio and may enter into swap positions based on market fluctuations. In addition, the Company believes it has the ability to obtain funds through additional equity and/or debt offerings and joint venture capital. Accordingly, the cost of obtaining such protection agreements versus the Company’s access to capital markets will continue to be evaluated. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes. As of SeptemberJune 30, 2022,2023, the Company had no other material exposure to market risk.
Item 4. CONTROLS AND PROCEDURES
The Company’s management, with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), conducted an evaluation, pursuant to Securities Exchange Act of 1934 Rules 13a-15(b) and 15d-15(b), of the effectiveness of our disclosure controls and procedures. Based on their evaluation as required, the CEO and CFO have concluded that the Company’s disclosure controls and procedures (as defined in Securities Exchange Act Rules 13a-15(e) and 15d-15(e)) were effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and were effective as of the end of such period to ensure that information required to be disclosed by the Company in reports that it files or submits under the Securities Exchange Act is accumulated and communicated to the Company’s management, including its CEO and CFO, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.
During the three months ended SeptemberJune 30, 2022,2023, there were no changes in the Company’s internal control over financial reporting that materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.
3633
PART II
OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on the Company. The Company is also subject to a variety of legal actions for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company’s liquidity, financial position or results of operations.
Item 1A. RISK FACTORS
None.
Item 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
ISSUER PURCHASES OF EQUITY SECURITIES
| (a) |
|
| (b) |
|
| (c) |
|
| (d) |
| ||||
| Total |
|
| Average |
|
| Total Number |
|
| Maximum Number |
| ||||
July 1–31, 2022 |
| 1,872 |
| (1) | $ | 13.47 |
|
|
| — |
|
| $ | — |
|
August 1–31, 2022 |
| 20 |
| (1) |
| 14.61 |
|
|
| — |
|
|
| — |
|
September 1–30, 2022 |
| 1,598,226 |
| (2) |
| 12.75 |
|
|
| 1,569,602 |
| (3) |
| — |
|
Total |
| 1,600,118 |
|
| $ | 12.76 |
|
|
| 1,569,602 |
|
| $ | 22.1 |
|
| (a) |
|
| (b) |
|
| (c) |
|
| (d) |
| ||||
| Total |
|
| Average |
|
| Total Number |
|
| Maximum Number |
| ||||
April 1–30, 2023 |
| 1,040 |
|
| $ | 11.98 |
|
|
| — |
|
| $ | — |
|
May 1–31, 2023 |
| 2,650 |
|
|
| 11.77 |
|
|
| — |
|
|
| — |
|
June 1–30, 2023 |
| 524 |
|
|
| 11.92 |
|
|
| — |
|
|
| — |
|
Total |
| 4,214 |
|
| $ | 11.84 |
|
|
| — |
|
| $ | 73.4 |
|
Item 3. DEFAULTS UPON SENIOR SECURITIES
None.
Item 4. MINE SAFETY DISCLOSURES
Not applicable.
Item 5. OTHER INFORMATION
None.
3734
Item 6. EXHIBITS
31.1 | ||
31.2 | ||
32.1 | ||
32.2 | ||
101.INS | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document1 | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document1 | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document1 | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document1 | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document1 | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document1 | |
104 | The cover page from the Company’s Quarterly Report on Form 10-Q for the quarter ended |
Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of SeptemberJune 30, 20222023 and December 31, 2021,2022, (ii) Consolidated Statements of Operations for the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 2021,2022, (iii) Consolidated Statements of Comprehensive Income for the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 2021,2022, (iv) Consolidated Statements of Equity for the Three and NineSix Months Ended SeptemberJune 30, 20222023 and 2021,2022, (v) Consolidated Statements of Cash Flows for the NineSix Months Ended SeptemberJune 30, 20222023 and 20212022 and (vi) Notes to Condensed Consolidated Financial Statements.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SITE CENTERS CORP. | ||||||
By: | /s/ Christa A. Vesy | |||||
Name: | Christa A. Vesy | |||||
Title: | Executive Vice President ( | |||||
Date: |
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