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 September 30, 20212022
OR
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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|
For the transition period from to 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) (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 |
| 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 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 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 October 22, 2021,21, 2022 the registrant had 211,217,691shares212,512,324 shares of common stock, $0.10 par value per share, outstanding.
SITE Centers Corp.
QUARTERLY REPORT ON FORM 10-Q
QUARTER ENDED September 30, 20212022
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION | ||||
Item 1. | Financial Statements – Unaudited |
| ||
| Consolidated Balance Sheets as of September 30, |
| ||
| Consolidated Statements of Operations for the Three Months Ended September 30, |
| ||
| Consolidated Statements of Operations for the Nine Months Ended September 30, |
| ||
|
| |||
|
| |||
| Consolidated Statements of Cash Flows for the Nine Months Ended September 30, |
| ||
|
| |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 17 | ||
Item 3. |
| |||
Item 4. |
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PART II. OTHER INFORMATION | ||||
Item 1. |
| |||
Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
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38 | ||||
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2
SITE Centers Corp.
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands, except share amounts)
| September 30, 2021 |
|
| December 31, 2020 |
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Assets |
|
|
|
|
|
|
|
|
|
|
| |||
Land | $ | 962,872 |
|
| $ | 953,556 |
| $ | 1,095,662 |
|
| $ | 1,011,401 |
|
Buildings |
| 3,533,242 |
|
|
| 3,488,499 |
|
| 3,848,821 |
|
|
| 3,624,164 |
|
Fixtures and tenant improvements |
| 544,374 |
|
|
| 509,866 |
|
| 587,962 |
|
|
| 556,056 |
|
|
| 5,040,488 |
|
|
| 4,951,921 |
|
| 5,532,445 |
|
|
| 5,191,621 |
|
Less: Accumulated depreciation |
| (1,536,248 | ) |
|
| (1,427,057 | ) |
| (1,672,242 | ) |
|
| (1,571,569 | ) |
|
| 3,504,240 |
|
|
| 3,524,864 |
|
| 3,860,203 |
|
|
| 3,620,052 |
|
Construction in progress and land |
| 42,143 |
|
|
| 37,467 |
|
| 59,812 |
|
|
| 47,260 |
|
Total real estate assets, net |
| 3,546,383 |
|
|
| 3,562,331 |
|
| 3,920,015 |
|
|
| 3,667,312 |
|
Investments in and advances to joint ventures, net |
| 72,684 |
|
|
| 77,297 |
|
| 46,001 |
|
|
| 64,626 |
|
Investment in and advances to affiliate |
| 190,121 |
|
|
| 190,035 |
| |||||||
Cash and cash equivalents |
| 61,924 |
|
|
| 69,742 |
|
| 20,883 |
|
|
| 41,807 |
|
Restricted cash |
| 3,414 |
|
|
| 4,672 |
|
| 3,119 |
|
|
| 1,445 |
|
Accounts receivable |
| 59,910 |
|
|
| 73,517 |
|
| 59,446 |
|
|
| 61,382 |
|
Other assets, net |
| 117,857 |
|
|
| 130,690 |
|
| 147,507 |
|
|
| 130,479 |
|
| $ | 4,052,293 |
|
| $ | 4,108,284 |
| $ | 4,196,971 |
|
| $ | 3,967,051 |
|
Liabilities and Equity |
|
|
|
|
|
|
|
|
|
|
| |||
Unsecured indebtedness: |
|
|
|
|
|
|
|
|
|
|
| |||
Senior notes, net | $ | 1,451,229 |
|
| $ | 1,449,613 |
| $ | 1,453,384 |
|
| $ | 1,451,768 |
|
Term loan, net |
| 99,767 |
|
|
| 99,635 |
|
| 198,437 |
|
|
| 99,810 |
|
Revolving credit facilities |
| 0 |
|
|
| 135,000 |
|
| 80,000 |
|
|
| — |
|
|
| 1,550,996 |
|
|
| 1,684,248 |
|
| 1,731,821 |
|
|
| 1,551,578 |
|
Mortgage indebtedness, net |
| 241,561 |
|
|
| 249,260 |
|
| 90,235 |
|
|
| 125,799 |
|
Total indebtedness |
| 1,792,557 |
|
|
| 1,933,508 |
|
| 1,822,056 |
|
|
| 1,677,377 |
|
Accounts payable and other liabilities |
| 213,018 |
|
|
| 215,109 |
|
| 226,952 |
|
|
| 218,779 |
|
Dividends payable |
| 28,251 |
|
|
| 14,844 |
|
| 30,528 |
|
|
| 28,243 |
|
Total liabilities |
| 2,033,826 |
|
|
| 2,163,461 |
|
| 2,079,536 |
|
|
| 1,924,399 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
|
|
|
| |||
SITE Centers Equity |
|
|
|
|
|
|
|
|
|
|
| |||
Class A—6.375% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 350,000 shares issued and outstanding at September 30, 2021 and December 31, 2020 |
| 175,000 |
|
|
| 175,000 |
| |||||||
Class K—6.25% cumulative redeemable preferred shares, without par value, $500 liquidation value; 750,000 shares authorized; 300,000 shares issued and outstanding at December 31, 2020 |
| 0 |
|
|
| 150,000 |
| |||||||
Common shares, with par value, $0.10 stated value; 300,000,000 shares authorized; 211,095,870 and 193,995,499 shares issued at September 30, 2021 and December 31, 2020, respectively |
| 21,110 |
|
|
| 19,400 |
| |||||||
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 |
| |||||||
Additional paid-in capital |
| 5,942,466 |
|
|
| 5,705,164 |
|
| 5,974,001 |
|
|
| 5,934,166 |
|
Accumulated distributions in excess of net income |
| (4,123,534 | ) |
|
| (4,099,534 | ) |
| (4,044,178 | ) |
|
| (4,092,783 | ) |
Deferred compensation obligation |
| 4,590 |
|
|
| 5,479 |
|
| 4,865 |
|
|
| 4,695 |
|
Accumulated other comprehensive loss |
| 0 |
|
|
| (2,682 | ) | |||||||
Less: Common shares in treasury at cost: 254,298 and 898,267 shares at September 30, 2021 and December 31, 2020, respectively |
| (4,815 | ) |
|
| (11,319 | ) | |||||||
Accumulated other comprehensive income |
| 9,782 |
|
|
| — |
| |||||||
Less: Common shares in treasury at cost: 2,115,175 and 287,645 shares at September 30, 2022 and |
| (29,266 | ) |
|
| (5,349 | ) | |||||||
Total SITE Centers shareholders' equity |
| 2,014,817 |
|
|
| 1,941,508 |
|
| 2,111,641 |
|
|
| 2,036,858 |
|
Non-controlling interests |
| 3,650 |
|
|
| 3,315 |
|
| 5,794 |
|
|
| 5,794 |
|
Total equity |
| 2,018,467 |
|
|
| 1,944,823 |
|
| 2,117,435 |
|
|
| 2,042,652 |
|
| $ | 4,052,293 |
|
| $ | 4,108,284 |
| $ | 4,196,971 |
|
| $ | 3,967,051 |
|
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 September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Revenues from operations: |
|
|
|
|
|
|
|
Rental income | $ | 120,569 |
|
| $ | 95,874 |
|
Fee and other income |
| 13,872 |
|
|
| 9,680 |
|
|
| 134,441 |
|
|
| 105,554 |
|
Rental operation expenses: |
|
|
|
|
|
|
|
Operating and maintenance |
| 18,562 |
|
|
| 15,775 |
|
Real estate taxes |
| 19,160 |
|
|
| 16,542 |
|
General and administrative |
| 11,727 |
|
|
| 13,664 |
|
Depreciation and amortization |
| 44,669 |
|
|
| 41,148 |
|
|
| 94,118 |
|
|
| 87,129 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
| (19,170 | ) |
|
| (18,089 | ) |
Other (expense) income, net |
| (524 | ) |
|
| 3,259 |
|
|
| (19,694 | ) |
|
| (14,830 | ) |
Income before earnings from equity method investments and other items |
| 20,629 |
|
|
| 3,595 |
|
Equity in net income of joint ventures |
| 1,824 |
|
|
| 250 |
|
Adjustment of preferred equity interests, net |
| 0 |
|
|
| 3,542 |
|
Gain on sale of joint venture interests |
| 35 |
|
|
| 82 |
|
Gain on disposition of real estate, net |
| 5,871 |
|
|
| 218 |
|
Income before tax expense |
| 28,359 |
|
|
| 7,687 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (202 | ) |
|
| (284 | ) |
Net income | $ | 28,157 |
|
| $ | 7,403 |
|
Income attributable to non-controlling interests, net |
| (93 | ) |
|
| (116 | ) |
Net income attributable to SITE Centers | $ | 28,064 |
|
| $ | 7,287 |
|
Preferred dividends |
| (2,789 | ) |
|
| (5,133 | ) |
Net income attributable to common shareholders | $ | 25,275 |
|
| $ | 2,154 |
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
Basic | $ | 0.12 |
|
| $ | 0.01 |
|
Diluted | $ | 0.12 |
|
| $ | 0.01 |
|
| Three Months |
| |||||
| Ended September 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
Revenues from operations: |
|
|
|
|
| ||
Rental income | $ | 135,123 |
|
| $ | 120,569 |
|
Fee and other income |
| 3,720 |
|
|
| 13,872 |
|
|
| 138,843 |
|
|
| 134,441 |
|
Rental operation expenses: |
|
|
|
|
| ||
Operating and maintenance |
| 22,314 |
|
|
| 18,562 |
|
Real estate taxes |
| 20,423 |
|
|
| 19,160 |
|
General and administrative |
| 10,799 |
|
|
| 11,727 |
|
Depreciation and amortization |
| 51,179 |
|
|
| 44,669 |
|
|
| 104,715 |
|
|
| 94,118 |
|
Other income (expense): |
|
|
|
|
| ||
Interest expense |
| (20,139 | ) |
|
| (19,170 | ) |
Other expense, net |
| (501 | ) |
|
| (524 | ) |
|
| (20,640 | ) |
|
| (19,694 | ) |
Income before earnings from equity method investments and other items |
| 13,488 |
|
|
| 20,629 |
|
Equity in net income of joint ventures |
| 25,918 |
|
|
| 1,824 |
|
Gain on sale of interests |
| 228 |
|
|
| 35 |
|
Gain on disposition of real estate, net |
| 26,837 |
|
|
| 5,871 |
|
Income before tax expense |
| 66,471 |
|
|
| 28,359 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (258 | ) |
|
| (202 | ) |
Net income | $ | 66,213 |
|
| $ | 28,157 |
|
Income attributable to non-controlling interests, net |
| (18 | ) |
|
| (93 | ) |
Net income attributable to SITE Centers | $ | 66,195 |
|
| $ | 28,064 |
|
Preferred dividends |
| (2,789 | ) |
|
| (2,789 | ) |
Net income attributable to common shareholders | $ | 63,406 |
|
| $ | 25,275 |
|
|
|
|
|
|
| ||
Per share data: |
|
|
|
|
| ||
Basic | $ | 0.30 |
|
| $ | 0.12 |
|
Diluted | $ | 0.30 |
|
| $ | 0.12 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
34
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share amounts)
| Nine Months |
| |||||
| Ended September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Revenues from operations: |
|
|
|
|
|
|
|
Rental income | $ | 366,689 |
|
| $ | 306,482 |
|
Fee and other income |
| 31,359 |
|
|
| 35,953 |
|
|
| 398,048 |
|
|
| 342,435 |
|
Rental operation expenses: |
|
|
|
|
|
|
|
Operating and maintenance |
| 58,200 |
|
|
| 50,774 |
|
Real estate taxes |
| 58,359 |
|
|
| 51,547 |
|
Impairment charges |
| 7,270 |
|
|
| 0 |
|
General and administrative |
| 41,547 |
|
|
| 38,542 |
|
Depreciation and amortization |
| 137,446 |
|
|
| 125,014 |
|
|
| 302,822 |
|
|
| 265,877 |
|
Other income (expense): |
|
|
|
|
|
|
|
Interest expense |
| (57,701 | ) |
|
| (58,487 | ) |
Other expense, net |
| (1,214 | ) |
|
| (7,727 | ) |
|
| (58,915 | ) |
|
| (66,214 | ) |
Income before earnings from equity method investments and other items |
| 36,311 |
|
|
| 10,344 |
|
Equity in net income of joint ventures |
| 11,059 |
|
|
| 908 |
|
Reserve of preferred equity interests, net |
| 0 |
|
|
| (19,393 | ) |
Gain on sale of joint venture interests |
| 13,943 |
|
|
| 45,635 |
|
Gain on disposition of real estate, net |
| 6,069 |
|
|
| 993 |
|
Income before tax expense |
| 67,382 |
|
|
| 38,487 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (1,057 | ) |
|
| (859 | ) |
Net income | $ | 66,325 |
|
| $ | 37,628 |
|
Income attributable to non-controlling interests, net |
| (384 | ) |
|
| (621 | ) |
Net income attributable to SITE Centers | $ | 65,941 |
|
| $ | 37,007 |
|
Write-off of preferred share original issuance costs |
| (5,156 | ) |
|
| 0 |
|
Preferred dividends |
| (10,867 | ) |
|
| (15,399 | ) |
Net income attributable to common shareholders | $ | 49,918 |
|
| $ | 21,608 |
|
|
|
|
|
|
|
|
|
Per share data: |
|
|
|
|
|
|
|
Basic | $ | 0.24 |
|
| $ | 0.11 |
|
Diluted | $ | 0.24 |
|
| $ | 0.11 |
|
| 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.
45
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(unaudited; in thousands)
| Three Months |
|
| Nine Months |
| Three Months |
| Nine Months |
| |||||||||||||||||||||
| Ended September 30, |
|
| Ended September 30, |
| Ended September 30, |
| Ended September 30, |
| |||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Net income | $ | 28,157 |
|
| $ | 7,403 |
|
| $ | 66,325 |
|
| $ | 37,628 |
| $ | 66,213 |
|
| $ | 28,157 |
|
| $ | 140,577 |
|
| $ | 66,325 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Change in fair value of interest-rate contracts |
| 9,782 |
|
|
| — |
|
|
| 9,782 |
|
|
| — |
| |||||||||||||||
Foreign currency translation, net |
| 0 |
|
|
| (3,916 | ) |
|
| (1 | ) |
|
| (4,409 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (1 | ) |
Reclassification adjustment for foreign currency translation included in net income |
| 0 |
|
|
| 0 |
|
|
| 2,683 |
|
|
| 0 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 2,683 |
|
Change in cash flow hedges reclassed to earnings |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 1,172 |
| |||||||||||||||
Total other comprehensive income (loss) |
| 0 |
|
|
| (3,916 | ) |
|
| 2,682 |
|
|
| (3,237 | ) | |||||||||||||||
Total other comprehensive income |
| 9,782 |
|
|
| — |
|
|
| 9,782 |
|
|
| 2,682 |
| |||||||||||||||
Comprehensive income | $ | 28,157 |
|
| $ | 3,487 |
|
| $ | 69,007 |
|
| $ | 34,391 |
| $ | 75,995 |
|
| $ | 28,157 |
|
| $ | 150,359 |
|
| $ | 69,007 |
|
Total comprehensive income attributable to non-controlling interests |
| (93 | ) |
|
| (116 | ) |
|
| (384 | ) |
|
| (621 | ) |
| (18 | ) |
|
| (93 | ) |
|
| (55 | ) |
|
| (384 | ) |
Total comprehensive income attributable to SITE Centers | $ | 28,064 |
|
| $ | 3,371 |
|
| $ | 68,623 |
|
| $ | 33,770 |
| $ | 75,977 |
|
| $ | 28,064 |
|
| $ | 150,304 |
|
| $ | 68,623 |
|
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 Shares |
|
| Additional Paid-in Capital |
|
| Accumulated Distributions in Excess of Net Income |
|
| Deferred Compensation Obligation |
|
| Accumulated Other Comprehensive (Loss) Income |
|
| Treasury Stock at Cost |
|
| Non- Controlling Interests |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Balance, December 31, 2020 | $ | 325,000 |
|
| $ | 19,400 |
|
| $ | 5,705,164 |
|
| $ | (4,099,534 | ) |
| $ | 5,479 |
|
| $ | (2,682 | ) |
| $ | (11,319 | ) |
| $ | 3,315 |
|
| $ | 1,944,823 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares related to stock plans |
| 0 |
|
|
| 8 |
|
|
| 91 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 99 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares for cash offering |
| 0 |
|
|
| 1,696 |
|
|
| 219,711 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 3,923 |
|
|
| 0 |
|
|
| 225,330 |
| |||||||||||||||||||||||||||||||||||
Stock-based compensation, net |
| 0 |
|
|
| 0 |
|
|
| 10,425 |
|
|
| 0 |
|
|
| (995 | ) |
|
| 0 |
|
|
| 3,085 |
|
|
| 0 |
|
|
| 12,515 |
| |||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (33 | ) |
|
| (33 | ) | |||||||||||||||||||||||||||||||||||
Redemption of preferred shares |
| (150,000 | ) |
|
| 0 |
|
|
| 5,137 |
|
|
| (5,156 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (150,019 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-common shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (48,795 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (48,795 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-preferred shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (7,739 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (7,739 | ) | |||||||||||||||||||||||||||||||||||
Comprehensive income |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 37,877 |
|
|
| 0 |
|
|
| 2,682 |
|
|
| 0 |
|
|
| 291 |
|
|
| 40,850 |
| |||||||||||||||||||||||||||||||||||
Balance, June 30, 2021 |
| 175,000 |
|
|
| 21,104 |
|
|
| 5,940,528 |
|
|
| (4,123,347 | ) |
|
| 4,484 |
|
|
| 0 |
|
|
| (4,311 | ) |
|
| 3,573 |
|
|
| 2,017,031 |
| |||||||||||||||||||||||||||||||||||
| 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 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares related to stock plans |
| 0 |
|
|
| 6 |
|
|
| 127 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 133 |
|
| — |
|
|
| 65 |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 71 |
|
Issuance of common shares for cash offering |
| 0 |
|
|
| 0 |
|
|
| (164 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (164 | ) |
| — |
|
|
| 243 |
|
|
| 36,614 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
|
|
| — |
|
|
| 36,857 |
| ||
Stock-based compensation, net |
| 0 |
|
|
| 0 |
|
|
| 1,975 |
|
|
| 0 |
|
|
| 106 |
|
|
| 0 |
|
|
| (504 | ) |
|
| 0 |
|
|
| 1,577 |
|
| — |
|
|
| — |
|
|
| 2,649 |
|
|
| — |
|
|
| 8 |
|
|
| — |
|
|
| (4,498 | ) |
|
| — |
|
|
| (1,841 | ) |
Distributions to non-controlling interests |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (16 | ) |
|
| (16 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (37 | ) |
|
| (37 | ) |
Dividends declared-common shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (25,462 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (25,462 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (55,810 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (55,810 | ) |
Dividends declared-preferred shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (2,789 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (2,789 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (5,578 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,578 | ) |
Comprehensive income |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 28,064 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 93 |
|
|
| 28,157 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 74,327 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 37 |
|
|
| 74,364 |
|
Balance, September 30, 2021 | $ | 175,000 |
|
| $ | 21,110 |
|
| $ | 5,942,466 |
|
| $ | (4,123,534 | ) |
| $ | 4,590 |
|
| $ | 0 |
|
| $ | (4,815 | ) |
| $ | 3,650 |
|
| $ | 2,018,467 |
| |||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 |
| 175,000 |
|
|
| 21,437 |
|
|
| 5,973,435 |
|
|
| (4,079,844 | ) |
|
| 4,703 |
|
|
| — |
|
|
| (9,847 | ) |
|
| 5,794 |
|
|
| 2,090,678 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares |
| — |
|
|
| — |
|
|
| 6 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 6 |
| |||||||||||||||||||||||||||||||||||
Expenses for |
| — |
|
|
|
|
| (126 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (126 | ) | |||||||||||||||||||||||||||||||||||||
Stock-based compensation, net |
| — |
|
|
| — |
|
|
| 686 |
|
|
| — |
|
|
| 162 |
|
|
| — |
|
|
| 581 |
|
|
| — |
|
|
| 1,429 |
| |||||||||||||||||||||||||||||||||||
Repurchase of common |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (20,000 | ) |
|
| — |
|
|
| (20,000 | ) | |||||||||||||||||||||||||||||||||||
Distributions to non-controlling |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (18 | ) |
|
| (18 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-common shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (27,740 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (27,740 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-preferred shares |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) | |||||||||||||||||||||||||||||||||||
Comprehensive income |
| — |
|
|
| — |
|
|
| — |
|
|
| 66,195 |
|
|
| — |
|
|
| 9,782 |
|
|
| — |
|
|
| 18 |
|
|
| 75,995 |
| |||||||||||||||||||||||||||||||||||
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 |
|
| SITE Centers Equity |
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| SITE Centers Equity |
|
|
|
|
|
| ||||||||||||||||||||||||||||
| Preferred Shares |
|
| Common Shares |
|
| Additional Paid-in Capital |
|
| Accumulated Distributions in Excess of Net Income |
|
| Deferred Compensation Obligation |
|
| Accumulated Other Comprehensive (Loss) Income |
|
| Treasury Stock at Cost |
|
| Non- Controlling Interests |
|
| Total |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Balance, December 31, 2019 | $ | 325,000 |
|
| $ | 19,382 |
|
| $ | 5,700,400 |
|
| $ | (4,066,099 | ) |
| $ | 7,929 |
|
| $ | (491 | ) |
| $ | (7,707 | ) |
| $ | 3,064 |
|
| $ | 1,981,478 |
| |||||||||||||||||||||||||||||||||||
| Preferred Shares |
|
| Common |
|
| Additional |
|
| Accumulated Distributions |
|
| Deferred Compensation Obligation |
|
| Accumulated Other Comprehensive (Loss) Income |
|
| 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 |
| |||||||||||||||||||||||||||||||||||
Issuance of common shares related to stock plans |
| 0 |
|
|
| 18 |
|
|
| (78 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (60 | ) |
| — |
|
|
| 8 |
|
|
| 91 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 99 |
|
Repurchase of common shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (7,500 | ) |
|
| 0 |
|
|
| (7,500 | ) | |||||||||||||||||||||||||||||||||||
Issuance of common shares for |
| — |
|
|
| 1,696 |
|
|
| 219,711 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 3,923 |
|
|
| — |
|
|
| 225,330 |
| |||||||||||||||||||||||||||||||||||
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 |
| 0 |
|
|
| 0 |
|
|
| 4,397 |
|
|
| 0 |
|
|
| (2,495 | ) |
|
| 0 |
|
|
| 2,538 |
|
|
| 0 |
|
|
| 4,440 |
|
| — |
|
|
| — |
|
|
| 1,975 |
|
|
| — |
|
|
| 106 |
|
|
| — |
|
|
| (504 | ) |
|
| — |
|
|
| 1,577 |
|
Distributions to non-controlling interests |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (278 | ) |
|
| (278 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (16 | ) |
|
| (16 | ) |
Dividends declared-common shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (38,914 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (38,914 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (25,462 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (25,462 | ) |
Dividends declared-preferred shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (10,266 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (10,266 | ) |
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (2,789 | ) |
Comprehensive income |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 29,720 |
|
|
| 0 |
|
|
| 679 |
|
|
| 0 |
|
|
| 505 |
|
|
| 30,904 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 28,064 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 93 |
|
|
| 28,157 |
|
Balance, June 30, 2020 |
| 325,000 |
|
|
| 19,400 |
|
|
| 5,704,719 |
|
|
| (4,085,559 | ) |
|
| 5,434 |
|
|
| 188 |
|
|
| (12,669 | ) |
|
| 3,291 |
|
|
| 1,959,804 |
| |||||||||||||||||||||||||||||||||||
Stock-based compensation, net |
| 0 |
|
|
| 0 |
|
|
| 1,506 |
|
|
| 0 |
|
|
| 8 |
|
|
| 0 |
|
|
| 206 |
|
|
| 0 |
|
|
| 1,720 |
| |||||||||||||||||||||||||||||||||||
Distributions to non-controlling interests |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (166 | ) |
|
| (166 | ) | |||||||||||||||||||||||||||||||||||
Dividends declared-preferred shares |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (5,133 | ) |
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| (5,133 | ) | |||||||||||||||||||||||||||||||||||
Comprehensive income (loss) |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 7,287 |
|
|
| 0 |
|
|
| (3,916 | ) |
|
| 0 |
|
|
| 116 |
|
|
| 3,487 |
| |||||||||||||||||||||||||||||||||||
Balance, September 30, 2020 | $ | 325,000 |
|
| $ | 19,400 |
|
| $ | 5,706,225 |
|
| $ | (4,083,405 | ) |
| $ | 5,442 |
|
| $ | (3,728 | ) |
| $ | (12,463 | ) |
| $ | 3,241 |
|
| $ | 1,959,712 |
| |||||||||||||||||||||||||||||||||||
Balance, September 30, 2021 | $ | 175,000 |
|
| $ | 21,110 |
|
| $ | 5,942,466 |
|
| $ | (4,123,534 | ) |
| $ | 4,590 |
|
| $ | — |
|
| $ | (4,815 | ) |
| $ | 3,650 |
|
| $ | 2,018,467 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
67
SITE Centers Corp.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
| Nine Months |
| Nine Months |
| ||||||||||
| Ended September 30, |
| Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
| ||||
Cash flow from operating activities: |
|
|
|
|
|
|
|
|
|
|
| |||
Net income | $ | 66,325 |
|
| $ | 37,628 |
| $ | 140,577 |
|
| $ | 66,325 |
|
Adjustments to reconcile net income to net cash flow provided by operating activities: |
|
|
|
|
|
|
|
|
|
|
| |||
Depreciation and amortization |
| 137,446 |
|
|
| 125,014 |
|
| 152,564 |
|
|
| 137,446 |
|
Stock-based compensation |
| 11,698 |
|
|
| 5,670 |
|
| 5,430 |
|
|
| 11,698 |
|
Amortization and write-off of debt issuance costs and fair market value of debt adjustments |
| 3,210 |
|
|
| 3,581 |
|
| 3,929 |
|
|
| 3,210 |
|
Loss on debt extinguishment |
| 0 |
|
|
| 16,568 |
| |||||||
Equity in net income of joint ventures |
| (11,059 | ) |
|
| (908 | ) |
| (27,468 | ) |
|
| (11,059 | ) |
Reserve of preferred equity interests, net |
| 0 |
|
|
| 19,393 |
| |||||||
Operating cash distributions from joint ventures |
| 2,840 |
|
|
| 2,825 |
|
| 1,111 |
|
|
| 2,840 |
|
Gain on sale of joint venture interests |
| (13,943 | ) |
|
| (45,635 | ) | |||||||
Gain on sale and change in control of interests |
| (45,554 | ) |
|
| (13,943 | ) | |||||||
Gain on disposition of real estate, net |
| (6,069 | ) |
|
| (993 | ) |
| (31,292 | ) |
|
| (6,069 | ) |
Impairment charges |
| 7,270 |
|
|
| 0 |
|
| 2,536 |
|
|
| 7,270 |
|
Assumption of buildings due to ground lease terminations |
| 0 |
|
|
| (3,025 | ) |
| (2,900 | ) |
|
| — |
|
Change in notes receivable accrued interest |
| 0 |
|
|
| (2,891 | ) | |||||||
Net change in accounts receivable |
| 18,391 |
|
|
| (18,500 | ) |
| 95 |
|
|
| 18,391 |
|
Net change in accounts payable and accrued expenses |
| 5,143 |
|
|
| (4,567 | ) |
| 8,025 |
|
|
| 5,143 |
|
Net change in other operating assets and liabilities |
| (3,888 | ) |
|
| (8,226 | ) |
| (1,567 | ) |
|
| (3,888 | ) |
Total adjustments |
| 151,039 |
|
|
| 88,306 |
|
| 64,909 |
|
|
| 151,039 |
|
Net cash flow provided by operating activities |
| 217,364 |
|
|
| 125,934 |
|
| 205,486 |
|
|
| 217,364 |
|
Cash flow from investing activities: |
|
|
|
|
|
|
|
|
|
|
| |||
Real estate acquired, net of liabilities and cash assumed |
| (62,610 | ) |
|
| 0 |
|
| (329,570 | ) |
|
| (62,610 | ) |
Real estate developed and improvements to operating real estate |
| (55,677 | ) |
|
| (50,987 | ) |
| (87,902 | ) |
|
| (55,677 | ) |
Proceeds from disposition of joint venture interests |
| 39,250 |
|
|
| — |
| |||||||
Proceeds from disposition of real estate |
| 29,793 |
|
|
| 1,227 |
|
| 55,866 |
|
|
| 29,793 |
|
Proceeds from sale of joint venture interests |
| 16,067 |
|
|
| 140,441 |
| |||||||
Equity contributions to joint ventures |
| (247 | ) |
|
| (206 | ) |
| (143 | ) |
|
| (247 | ) |
Distributions from joint ventures |
| 7,014 |
|
|
| 4,395 |
| |||||||
Distributions from unconsolidated joint ventures |
| 39,656 |
|
|
| 23,081 |
| |||||||
Repayment of joint venture advances, net |
| 929 |
|
|
| 0 |
|
| — |
|
|
| 929 |
|
Repayment of notes receivable |
| 0 |
|
|
| 7,500 |
| |||||||
Net cash flow (used for) provided by investing activities |
| (64,731 | ) |
|
| 102,370 |
| |||||||
Net cash flow used for investing activities |
| (282,843 | ) |
|
| (64,731 | ) | |||||||
Cash flow from financing activities: |
|
|
|
|
|
|
|
|
|
|
| |||
(Repayment of) proceeds from revolving credit facilities, net |
| (135,000 | ) |
|
| 170,000 |
| |||||||
Repayment of senior notes, including repayment costs |
| 0 |
|
|
| (216,568 | ) | |||||||
Proceeds from (repayment of) revolving credit facilities, net |
| 80,000 |
|
|
| (135,000 | ) | |||||||
Proceeds from unsecured term loan |
| 100,000 |
|
|
| — |
| |||||||
Payment of debt issuance costs |
| (7,598 | ) |
|
| — |
| |||||||
Repayment of mortgage debt |
| (25,613 | ) |
|
| (41,230 | ) |
| (35,577 | ) |
|
| (25,613 | ) |
Proceeds from issuance of common shares, net of offering expenses |
| 225,166 |
|
|
| 0 |
|
| 36,731 |
|
|
| 225,166 |
|
Redemption of preferred shares |
| (150,019 | ) |
|
| 0 |
|
| — |
|
|
| (150,019 | ) |
Repurchase of common shares in conjunction with equity award plans and dividend reinvestment plan |
| (4,878 | ) |
|
| (955 | ) |
| (5,873 | ) |
|
| (4,878 | ) |
Repurchase of common shares |
| 0 |
|
|
| (7,500 | ) |
| (20,000 | ) |
|
| — |
|
Distributions to non-controlling interests and redeemable operating partnership units |
| (39 | ) |
|
| (473 | ) |
| (53 | ) |
|
| (39 | ) |
Dividends paid |
| (71,325 | ) |
|
| (93,215 | ) |
| (89,523 | ) |
|
| (71,325 | ) |
Net cash flow used for financing activities |
| (161,708 | ) |
|
| (189,941 | ) | |||||||
Net cash flow provided by (used for) financing activities |
| 58,107 |
|
|
| (161,708 | ) | |||||||
|
|
|
|
|
|
|
|
|
|
|
| |||
Effect of foreign exchange rate changes on cash and cash equivalents |
| (1 | ) |
|
| 17 |
|
| — |
|
|
| (1 | ) |
Net (decrease) increase in cash, cash equivalents and restricted cash |
| (9,075 | ) |
|
| 38,363 |
| |||||||
Net decrease in cash, cash equivalents and restricted cash |
| (19,250 | ) |
|
| (9,075 | ) | |||||||
Cash, cash equivalents and restricted cash, beginning of period |
| 74,414 |
|
|
| 19,133 |
|
| 43,252 |
|
|
| 74,414 |
|
Cash, cash equivalents and restricted cash, end of period | $ | 65,338 |
|
| $ | 57,513 |
| $ | 24,002 |
|
| $ | 65,338 |
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
78
Notes to Condensed Consolidated Financial Statements
|
|
1.
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, owning,redeveloping, developing redeveloping, leasing and managing shopping centers. Unless otherwise provided, references herein to the Company or SITE Centers include SITE Centers Corp. and its wholly-owned subsidiaries and consolidated joint ventures.subsidiaries. The Company’s tenant base primarily 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. The Company considered impacts to its estimates related to COVID-19, as appropriate, within its unaudited condensed consolidated financial statements, and there may be changes to those estimates in future periods. The Company believes that its accounting estimates are appropriate after giving consideration to the uncertainties surrounding the severity and duration of the COVID-19 pandemic. Actual results could differ from those estimates.
Unaudited Interim Financial Statements
These financial statements have been prepared by the Company in accordance with GAAP for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the periods presented. The results of operations for the three and nine months ended September 30, 20212022 and 2020,2021, are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 20202021.
Principles of Consolidation
The consolidated financial statements include the results of the Company and all entities in which the Company has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity (“VIE”). All significant inter-company balances and transactions have been eliminated in consolidation. Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or loss) of these joint ventures is included in consolidated net income (loss).
Reclassifications
Certain amounts for the three and nine months ended September 30, 2020, have been reclassified in order to conform with the current period’s presentation. The Company reclassified $3.4 million and $10.5 million of interest income for the three and nine months ended September 30, 2020, respectively, primarily related to preferred equity investments that were transferred or redeemed in the fourth quarter of 2020, on its consolidated statements of operations from Interest Income to Other (Expense) Income, net.
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 |
|
| Nine Months |
| |||||
| Ended September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Dividends declared, but not paid | $ | 28.3 |
|
| $ | 5.1 |
|
Mortgages assumed, shopping center acquisition |
| 17.9 |
|
|
| 0 |
|
Write-off of preferred share original issuance costs |
| 5.1 |
|
|
| 0 |
|
Accounts payable related to construction in progress |
| 10.2 |
|
|
| 5.1 |
|
Tax receivable |
| 4.1 |
|
|
| 0 |
|
Assumption of buildings due to ground lease terminations |
| 0 |
|
|
| 3.0 |
|
|
|
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, 2021, $1.7 million remains outstanding under2022, the majority of these deferral arrangements for tenants that are not accounted for on the cash basis. basis have been repaid.
During the three and nine months ended September 30, 2021, the Company recorded net uncollectible revenue that resulted in rental income of $1.1 million and $8.3 million, respectively (the Company’s share of unconsolidated joint ventures was $0.2 million and $1.6 million, respectively), primarily due to rental income paid in 2021 related to outstanding amounts owed for 2020 from tenants on the cash basis of accounting.
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's unconsolidated joint ventures (Note 3). Revenue from contracts with Retail Value Inc. was $0.1 million and other property-related income$9.5 million for the three months ended September 30, 2022 and is recognized2021, respectively, and $0.9 million and $19.4 million for the nine months ended September 30, 2022 and 2021, respectively.
| Three Months |
|
| Nine Months |
| ||||||||||
| Ended September 30, |
|
| Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Revenue from contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset and property management fees | $ | 6,459 |
|
| $ | 7,326 |
|
| $ | 19,636 |
|
| $ | 24,201 |
|
Leasing commissions |
| 624 |
|
|
| 648 |
|
|
| 2,679 |
|
|
| 4,327 |
|
Development fees |
| 258 |
|
|
| 210 |
|
|
| 497 |
|
|
| 1,256 |
|
RVI Disposition fees |
| 5,500 |
|
|
| 856 |
|
|
| 6,092 |
|
|
| 2,622 |
|
RVI Credit facility guaranty fees |
| 60 |
|
|
| 60 |
|
|
| 60 |
|
|
| 60 |
|
Total revenue from contracts with customers |
| 12,901 |
|
|
| 9,100 |
|
|
| 28,964 |
|
|
| 32,466 |
|
Other property income: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other |
| 971 |
|
|
| 580 |
|
|
| 2,395 |
|
|
| 3,487 |
|
Total fee and other income | $ | 13,872 |
|
| $ | 9,680 |
|
| $ | 31,359 |
|
| $ | 35,953 |
|
|
|
At September 30, 20212022 and December 31, 2020,2021, the Company had ownership interests in various unconsolidated joint ventures that had investments in 5519 and 5947 shopping center properties, respectively. Condensed combined financial information of the Company’s unconsolidated joint venture investments is as follows (in thousands):
| September 30, 2021 |
|
| December 31, 2020 |
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Condensed Combined Balance Sheets |
|
|
|
|
|
|
|
|
|
|
| |||
Land | $ | 428,167 |
|
| $ | 441,412 |
| $ | 214,310 |
|
| $ | 378,442 |
|
Buildings |
| 1,212,771 |
|
|
| 1,258,879 |
|
| 651,111 |
|
|
| 1,092,245 |
|
Fixtures and tenant improvements |
| 138,876 |
|
|
| 137,663 |
|
| 69,964 |
|
|
| 123,313 |
|
|
| 1,779,814 |
|
|
| 1,837,954 |
|
| 935,385 |
|
|
| 1,594,000 |
|
Less: Accumulated depreciation |
| (501,506 | ) |
|
| (492,288 | ) |
| (218,942 | ) |
|
| (441,215 | ) |
|
| 1,278,308 |
|
|
| 1,345,666 |
|
| 716,443 |
|
|
| 1,152,785 |
|
Construction in progress and land |
| 8,444 |
|
|
| 58,201 |
|
| 1,655 |
|
|
| 5,778 |
|
Real estate, net |
| 1,286,752 |
|
|
| 1,403,867 |
|
| 718,098 |
|
|
| 1,158,563 |
|
Cash and restricted cash |
| 61,797 |
|
|
| 35,212 |
|
| 43,951 |
|
|
| 37,535 |
|
Receivables, net |
| 19,513 |
|
|
| 25,719 |
|
| 11,122 |
|
|
| 16,854 |
|
Other assets, net |
| 53,415 |
|
|
| 61,381 |
|
| 38,973 |
|
|
| 49,029 |
|
| $ | 1,421,477 |
|
| $ | 1,526,179 |
| $ | 812,144 |
|
| $ | 1,261,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Mortgage debt | $ | 996,968 |
|
| $ | 1,029,579 |
| $ | 539,897 |
|
| $ | 873,336 |
|
Notes and accrued interest payable to the Company |
| 3,789 |
|
|
| 4,375 |
|
| 3,194 |
|
|
| 3,331 |
|
Other liabilities |
| 59,890 |
|
|
| 57,349 |
|
| 41,304 |
|
|
| 51,473 |
|
|
| 1,060,647 |
|
|
| 1,091,303 |
|
| 584,395 |
|
|
| 928,140 |
|
Accumulated equity |
| 360,830 |
|
|
| 434,876 |
|
| 227,749 |
|
|
| 333,841 |
|
| $ | 1,421,477 |
|
| $ | 1,526,179 |
| $ | 812,144 |
|
| $ | 1,261,981 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||
Company's share of accumulated equity | $ | 64,778 |
|
| $ | 72,555 |
| $ | 43,886 |
|
| $ | 59,286 |
|
Basis differentials |
| 5,273 |
|
|
| 1,644 |
|
| (760 | ) |
|
| 2,946 |
|
Deferred development fees, net of portion related to the Company's interest |
| (1,156 | ) |
|
| (1,277 | ) |
| (319 | ) |
|
| (937 | ) |
Amounts payable to the Company |
| 3,789 |
|
|
| 4,375 |
|
| 3,194 |
|
|
| 3,331 |
|
Investments in and Advances to Joint Ventures, net | $ | 72,684 |
|
| $ | 77,297 |
| $ | 46,001 |
|
| $ | 64,626 |
|
10
| Three Months |
|
| Nine Months |
| Three Months |
| Nine Months |
| |||||||||||||||||||||
| Ended September 30, |
|
| Ended September 30, |
| Ended September 30, |
| Ended September 30, |
| |||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Condensed Combined Statements of Operations |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Revenues from operations | $ | 48,666 |
|
| $ | 60,019 |
|
| $ | 150,623 |
|
| $ | 198,906 |
| $ | 25,855 |
|
| $ | 48,666 |
|
| $ | 105,666 |
|
| $ | 150,623 |
|
Expenses from operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Operating expenses |
| 12,931 |
|
|
| 18,613 |
|
|
| 41,217 |
|
|
| 61,661 |
|
| 6,975 |
|
|
| 12,931 |
|
|
| 28,991 |
|
|
| 41,217 |
|
Impairment charges |
| 0 |
|
|
| 0 |
|
|
| 0 |
|
|
| 33,240 |
|
| 9,010 |
|
|
| — |
|
|
| 17,550 |
|
|
| — |
|
Depreciation and amortization |
| 16,605 |
|
|
| 23,901 |
|
|
| 50,309 |
|
|
| 77,580 |
|
| 9,450 |
|
|
| 16,605 |
|
|
| 37,123 |
|
|
| 50,309 |
|
Interest expense |
| 10,980 |
|
|
| 14,700 |
|
|
| 32,898 |
|
|
| 47,555 |
|
| 8,241 |
|
|
| 10,980 |
|
|
| 26,560 |
|
|
| 32,898 |
|
Preferred share expense |
| 0 |
|
|
| 4,626 |
|
|
| 0 |
|
|
| 13,710 |
| |||||||||||||||
Other expense, net |
| 2,832 |
|
|
| 3,246 |
|
|
| 8,806 | �� |
|
| 10,844 |
|
| 6,120 |
|
|
| 2,832 |
|
|
| 11,114 |
|
|
| 8,806 |
|
|
| 43,348 |
|
|
| 65,086 |
|
|
| 133,230 |
|
|
| 244,590 |
|
| 39,796 |
|
|
| 43,348 |
|
|
| 121,338 |
|
|
| 133,230 |
|
Income (loss) before gain on disposition of real estate |
| 5,318 |
|
|
| (5,067 | ) |
|
| 17,393 |
|
|
| (45,684 | ) | |||||||||||||||
(Loss) gain on disposition of real estate, net |
| (455 | ) |
|
| 319 |
|
|
| 36,132 |
|
|
| 9,229 |
| |||||||||||||||
Net income (loss) attributable to unconsolidated joint ventures | $ | 4,863 |
|
| $ | (4,748 | ) |
| $ | 53,525 |
|
| $ | (36,455 | ) | |||||||||||||||
(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 |
| |||||||||||||||
Company's share of equity in net income of joint ventures | $ | 1,760 |
|
| $ | 134 |
|
| $ | 9,897 |
|
| $ | 571 |
| $ | 21,276 |
|
| $ | 1,760 |
|
| $ | 21,898 |
|
| $ | 9,897 |
|
Basis differential adjustments(A) |
| 64 |
|
|
| 116 |
|
|
| 1,162 |
|
|
| 337 |
|
| 4,642 |
|
|
| 64 |
|
|
| 5,570 |
|
|
| 1,162 |
|
Equity in net income of joint ventures | $ | 1,824 |
|
| $ | 250 |
|
| $ | 11,059 |
|
| $ | 908 |
| $ | 25,918 |
|
| $ | 1,824 |
|
| $ | 27,468 |
|
| $ | 11,059 |
|
|
|
10
The impact of the COVID-19 pandemic on revenues and receivables for the Company’s joint ventures is more fully described in Note 2.
Revenues earned by the Company related to all of the Company’s unconsolidated joint ventures and interest income are as follows (in millions):
| Three Months |
|
| Nine Months |
| Three Months |
| Nine Months |
| |||||||||||||||||||||
| Ended September 30, |
|
| Ended September 30, |
| Ended September 30, |
| Ended September 30, |
| |||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Revenue from contracts: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Asset and property management fees | $ | 2.8 |
|
| $ | 3.0 |
|
| $ | 8.0 |
|
| $ | 10.1 |
| $ | 1.7 |
|
| $ | 2.8 |
|
| $ | 6.2 |
|
| $ | 8.0 |
|
Development fees, leasing commissions and other |
| 0.6 |
|
|
| 0.6 |
|
|
| 1.5 |
|
|
| 3.6 |
| |||||||||||||||
Leasing commissions and development fees |
| 0.6 |
|
|
| 0.6 |
|
|
| 1.6 |
|
|
| 1.5 |
| |||||||||||||||
|
| 3.4 |
|
|
| 3.6 |
|
|
| 9.5 |
|
|
| 13.7 |
|
| 2.3 |
|
|
| 3.4 |
|
|
| 7.8 |
|
|
| 9.5 |
|
Other: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||
Interest income(A) |
| 0 |
|
|
| 3.5 |
|
|
| 0 |
|
|
| 10.5 |
| |||||||||||||||
Other |
| 0.4 |
|
|
| 0.5 |
|
|
| 1.2 |
|
|
| 1.7 |
|
| 0.2 |
|
|
| 0.4 |
|
|
| 0.8 |
|
|
| 1.2 |
|
|
| 0.4 |
|
|
| 4.0 |
|
|
| 1.2 |
|
|
| 12.2 |
| $ | 2.5 |
|
| $ | 3.8 |
|
| $ | 8.6 |
|
| $ | 10.7 |
|
| $ | 3.8 |
|
| $ | 7.6 |
|
| $ | 10.7 |
|
| $ | 25.9 |
|
|
|
Disposition of Shopping Centers and Undeveloped LandJoint Venture Interests
In February 2021, onethe third quarter of 2022, the DDRM Joint Venture sold a portfolio of 13 shopping centers for an aggregate sales price 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 2022, the DDRM Joint Venture sold two additional shopping centers for an aggregate sales price of $41.0 million ($8.2 million at the Company’s unconsolidated joint ventures sold its sole asset, which was a parcel of undeveloped land (approximating 70 acres) in Richmond Hill, Ontario. The Company’s share of net proceeds totaled $22.1 million, after accounting for customary closing costs and foreign currency translation. The net proceeds include $6.1 million that are held in escrow of which $4.1 million is expected to be released to the Company pending receipt of certain tax clearance certificates from the Canadian taxing authorities, and the remaining $2.0 million is considered contingent and should be released upon final dissolution of the partnership. The Company recorded an aggregate gain on the transaction of $16.8 million which included its $2.8 million share of the gain reported by the joint venture, as well as $14.0 million related to the promoted interest on the disposition of the investment and write-off of the accumulated foreign currency translation.
From January 1, 2021 to September 30, 2021, 4 shopping centers were sold by unconsolidated joint ventures for $53.4 million.share). The Company’s share of the gain on sale on these transactions was $2.4$27.3 million.
|
|
TheIn the second quarter of 2022, the Company had a preferred investment in Retail Value Inc. (“RVI”) having an aggregate dividend preference of $190.0 million which amount could increase by up to an additional $10 millionsold its 20% interest in the eventSAU Joint Venture to its partner, the aggregate amountState of Utah, based on a gross proceeds from RVI asset sales exceeds a specified threshold (the “RVI Preferred Shares”value of $155.7 million (at 100%). In October 2021,addition, the Company received a distribution of $190.0 million on the RVI Preferred Shares (Note 13). The Company does not expectsold its 50% interest in Lennox Town Center to receive any additional amount from RVI on account of its preferred investmentpartner, based on a gross asset value of $77.0 million (at 100%). These transactions resulted in Gain on Sale of Interests of $42.2 million.
In the projected levelfirst quarter of sale proceeds from RVI’s remaining assets. Revenue from contracts with RVI is included2022, the Company acquired its joint venture partner’s 80% interest in Feeone asset owned by the DDRM Joint Venture (Casselberry Commons, Casselberry, Florida) for $35.6 million, and Other Incomestepped up the previous 20% interest due to change in control. The transaction resulted in Gain on the consolidated statementsChange in Control of operations and was composedInterests of the following (in millions):$3.3 million (Note 4).
11
| Three |
|
| Nine Months |
| ||||||||||
| Ended September 30, |
|
| Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Revenue from contracts with RVI: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset and property management fees | $ | 3.6 |
|
| $ | 4.4 |
|
| $ | 11.5 |
|
| $ | 14.1 |
|
Leasing commissions |
| 0.3 |
|
|
| 0.3 |
|
|
| 1.7 |
|
|
| 2.0 |
|
Disposition fees |
| 5.5 |
|
|
| 0.8 |
|
|
| 6.1 |
|
|
| 2.6 |
|
Credit facility guaranty |
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
|
| 0.1 |
|
Total revenue from contracts with RVI | $ | 9.5 |
|
| $ | 5.6 |
|
| $ | 19.4 |
|
| $ | 18.8 |
|
|
|
During the nine months ended September 30, 2021,2022, 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 Acquired |
| Purchase Price |
|
| Face Value of Mortgage Debt Assumed |
| ||
Shoppes at Addison Place |
| Delray Beach, Florida |
| May 2021 |
| $ | 40.0 |
|
| $ | 17.9 |
|
Emmet Street Station |
| Charlottesville, Virginia |
| May 2021 |
|
| 8.8 |
|
|
| 0 |
|
Hammond Springs |
| Atlanta, Georgia |
| September 2021 |
|
| 31.0 |
|
|
| 0 |
|
The fair value of the acquisitions was allocated as follows (in thousands):
|
|
|
| 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 |
|
|
|
|
|
|
|
| Weighted-Average Amortization Period (in Years) |
Land | $ | 27,203 |
|
| N/A |
Buildings |
| 48,470 |
|
| (A) |
Tenant improvements |
| 1,075 |
|
| (A) |
In-place leases (including lease origination costs and fair market value of leases) |
| 5,829 |
|
| 4.9 |
Other assets assumed |
| 37 |
|
| N/A |
|
| 82,614 |
|
|
|
|
|
|
|
|
|
Less: Mortgage debt assumed at fair value |
| (17,944 | ) |
| N/A |
Less: Below-market leases |
| (2,060 | ) |
| 13.5 |
Net assets acquired | $ | 62,610 |
|
|
|
|
|
The total consideration paid included $62.6 million paid in cash and $17.9 million of assumed mortgage indebtedness. Included in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2021,2022, was $1.1$6.2 million and $1.6$11.1 million, respectively, in total revenues from the date of acquisition through September 30, 2021,2022, for the three properties acquired.acquired in 2022.
12
5. Other Assets and Intangibles, net
|
|
Other assets and intangibles consist of the following (in thousands):
| September 30, 2021 |
|
| December 31, 2020 |
| September 30, 2022 |
|
| December 31, 2021 |
| ||||
Intangible assets: |
|
|
|
|
|
|
|
|
|
|
| |||
In-place leases, net | $ | 49,455 |
|
| $ | 56,756 |
| $ | 69,415 |
|
| $ | 64,464 |
|
Above-market leases, net |
| 7,032 |
|
|
| 8,387 |
|
| 7,724 |
|
|
| 7,390 |
|
Lease origination costs, net |
| 4,838 |
|
|
| 4,974 |
|
| 8,753 |
|
|
| 6,636 |
|
Tenant relationships, net |
| 16,680 |
|
|
| 20,301 |
|
| 12,661 |
|
|
| 15,569 |
|
Total intangible assets, net(A) |
| 78,005 |
|
|
| 90,418 |
|
| 98,553 |
|
|
| 94,059 |
|
Operating lease ROU assets |
| 19,469 |
|
|
| 20,604 |
|
| 17,795 |
|
|
| 19,047 |
|
Other assets: |
|
|
|
|
|
|
|
|
|
|
| |||
Prepaid expenses |
| 9,679 |
|
|
| 7,416 |
|
| 9,617 |
|
|
| 7,722 |
|
Swap receivable |
| 8,895 |
|
|
| — |
| |||||||
Other assets |
| 1,785 |
|
|
| 2,348 |
|
| 1,358 |
|
|
| 1,708 |
|
Deposits |
| 4,275 |
|
|
| 3,767 |
|
| 3,217 |
|
|
| 3,796 |
|
Deferred charges, net |
| 4,644 |
|
|
| 6,137 |
|
| 8,072 |
|
|
| 4,147 |
|
Total other assets, net | $ | 117,857 |
|
| $ | 130,690 |
| $ | 147,507 |
|
| $ | 130,479 |
|
|
|
|
|
|
|
|
|
|
|
|
| |||
Below-market leases, net (other liabilities) | $ | 54,802 |
|
| $ | 57,348 |
| $ | 63,267 |
|
| $ | 59,690 |
|
|
|
12
|
|
The following table discloses certain information regardingAs of September 30, 2022, the Company’s Revolving Credit FacilitiesFacility (as defined below):
|
| Carrying Amount at September 30, 2021 |
|
| Weighted-Average Interest Rate at September 30, 2021 |
| Maturity Date at September 30, 2021 | |
Unsecured Credit Facility |
| $ | 0 |
|
| N/A |
| January 2024 |
PNC Facility |
|
| 0 |
|
| N/A |
| January 2024 |
had outstanding borrowings of $80.0 million with a weighted-average interest rate of 3.9%.
TheIn June 2022, the Company maintains anamended and restated its unsecured revolving credit facility with a syndicate of financial institutions arranged by Wells Fargo Securities, LLC,and J.P. Morgan Chase Bank, N.A., Citizens Bank, N.A., RBC Capital Markets and U.S. Bank National Associationas administrative agent (the “Unsecured“Revolving Credit Facility”). The UnsecuredRevolving Credit Facility provides for borrowings of up to $950$950 million if certain financial covenants are maintained and certain borrowing conditions are satisfied, and an accordion feature for expansion of availability up to $1.45$1.45 billion, provided that new lenders agree to the existing terms of the facility or existing lenders increase their commitment level,level. The Revolving Credit Facility was amended to, among other things, (i) modify the financial covenants and acertain other provisions contained therein, (ii) extend the maturity date of January 2024, withto June 2026 subject to two six-month options to extend the maturity to January 2025June 2027 upon the Company’s request (subject to satisfaction of certain conditions). The Unsecured Credit Facility includes a competitive bid option on periodic, and (iii) change the interest rates for uprate benchmark from the London Inter-Bank Offered Rate (“LIBOR”) to 50% of the facility. The Unsecured Credit Facility also provides for an annual facility fee, which was 20 basis points on the entire facility at September 30, 2021.Secured Overnight Financing Rate (“SOFR”).
The Company maintains a $20 million unsecured revolving credit facility with PNC Bank, National Association (“PNC,” the “PNC Facility” and,together with the Unsecured Credit Facility, the “Revolving Credit Facilities”) which includes substantially the same terms as those contained in the Unsecured Credit Facility. Additionally, the Company provided an unconditional guaranty to PNC with respect to any obligations of RVI outstanding from time to time under a $30 million revolving credit agreement entered into by RVI with PNC. In the third quarter of 2021, the revolving credit agreement between RVI and PNC was terminated, as well as the Company’s guaranty.
The Company’s borrowings under the Revolving Credit FacilitiesFacility bear interest at variable rates at the Company’s election, based on either LIBOR(i) the SOFR rate plus a specified spread (0.90%(0.95% at September 30, 2021)2022) or (ii) the Alternative Base Rate, as defined in the respective facility,alternative base rate plus a specified spread (0%(0% at September 30, 2021)2022). The Revolving Credit Facility also provides for an annual facility fee, which was 20 basis points on the entire facility at September 30, 2022. The specified spreads and facility fee vary depending on the Company’s long-term senior unsecured debt ratingratings from Moody’s Investors Service, Inc., S&P Global Ratings and Fitch Investor Services, Inc. and(or their successors.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 FacilitiesFacility 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 September 30, 2021. 2022.
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.
7. Term Loan 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. 8. Financial Instruments and Fair Value Measurements Measurement of Fair Value At September 30, 2022, the Company used a pay-fixed interest rate swap to manage its exposure to changes in benchmark interest rates (the “Swap”). The estimated fair value was determined using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contract, are incorporated in the fair value to account for potential non-performance risk, including the Company’s own non-performance risk and the respective counterparty’s non-performance risk. The Company determined that the significant inputs used to value its derivative fell within Level 2 of the fair value hierarchy. Items Measured on Fair Value on a Recurring Basis The Company maintains an interest rate swap agreement (included in Other Assets) measured at fair value on a recurring basis as of September 30, 2022. 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):
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, 2021 |
|
| December 31, 2020 |
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||
| Carrying Amount |
|
| Fair Value |
|
| Carrying Amount |
|
| Fair Value |
| Carrying |
|
| Fair |
|
| Carrying |
|
| Fair |
| ||||||||
Senior Notes | $ | 1,451,229 |
|
| $ | 1,579,853 |
|
| $ | 1,449,613 |
|
| $ | 1,549,866 |
| $ | 1,453,384 |
|
| $ | 1,374,206 |
|
| $ | 1,451,768 |
|
| $ | 1,559,973 |
|
Revolving Credit Facilities and term loan |
| 99,767 |
|
|
| 100,000 |
|
|
| 234,635 |
|
|
| 235,000 |
| |||||||||||||||
Revolving Credit Facilities and Term Loan |
| 278,437 |
|
|
| 280,000 |
|
|
| 99,810 |
|
|
| 100,000 |
| |||||||||||||||
Mortgage Indebtedness |
| 241,561 |
|
|
| 243,750 |
|
|
| 249,260 |
|
|
| 250,624 |
|
| 90,235 |
|
|
| 87,535 |
|
|
| 125,799 |
|
|
| 127,488 |
|
| $ | 1,792,557 |
|
| $ | 1,923,603 |
|
| $ | 1,933,508 |
|
| $ | 2,035,490 |
| $ | 1,822,056 |
|
| $ | 1,741,741 |
|
| $ | 1,677,377 |
|
| $ | 1,787,461 |
|
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 as part of its interest rate risk management strategy. The swaps designated as cash flow hedges involve the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.
As of September 30, 2022, the Company had one effective Swap with a notional amount of $200.0 million, expiring in June 2027, which converts SOFR rate debt 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 Swap were included in the assessment of hedge effectiveness. The Company expects to reflect within the next 12 months, a decrease to interest expense (and a corresponding increase to earnings) of approximately $2.8 million.
The Company is exposed to credit risk in the event of non-performance by the counterparty to the Swaps if the derivative position has a positive balance. The Company believes it mitigates its credit risk by entering into swaps with major financial institutions. The Company continually monitors and actively manages interest costs on its variable-rate debt portfolio and may enter into additional interest rate swap positions or other derivative interest rate instruments based on market conditions. The Company has not entered, and does not plan to enter, into any derivative financial instruments for trading or speculative purposes.
Credit Risk-Related Contingent Features
The Company has an agreement with the Swap counterparty that contains a provision whereby if the Company defaults on certain of its indebtedness, the Company could also be declared in default on the Swap, resulting in an acceleration of payment under the Swap.
9. Equity
|
|
Common Share Dividend
|
| Three Months |
|
| Nine Months |
| ||||||||||
|
| Ended September 30, |
|
| Ended September 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Common share dividends declared per share |
| $ | 0.12 |
|
| $ | 0 |
|
| $ | 0.35 |
|
| $ | 0.20 |
|
|
| 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 |
|
Common Shares IssuanceRepurchased
In March 2021,the third quarter of 2022, the Company issued 17.25repurchased 1.6 million of its common shares in open market transactions at an aggregate cost of $20.0 million, or $12.74 per share.
Common Shares Issued
On March 1, 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 netgross proceeds of $225.2$35.1 million.
Common Shares – Continuous Equity Program
In the second quarter of 2021,2022, the Company offered and sold 980,396201,800 common shares on a forward basis under its $250 million continuous equity program at a weighted-average forward price of $15.09$16.03 per share before issuance costs generating expectedresulting in gross proceeds before issuance costs of $14.8$3.2 million. In the third quarter of 2021, the Company offered and sold 720,076 common shares on a forward basis at a weighted-average forward price of $15.89 per share before issuance costs generating expected gross proceeds before issuance costs of $11.4 million. Year to date, the Company has offered and sold 1,700,472 shares on a forward basis at a weighted average price of $15.43 per share before issuance costs generating expected gross proceeds before issuance costs of $26.2 million with no shares settled to date.
The actual proceeds to be received by the Company will vary depending upon the settlement date, the number of shares designated for settlement on that settlement date and the method of settlement. The forward equity sale agreements provide that the forward price will be subsequently adjusted for a floating interest rate factor equal to a specified daily rate plus a spread and scheduled dividends during the term of the applicable agreement.
Preferred Shares
In April 2021, the Company redeemed all $150.0 million aggregate liquidation preference of its Class K Cumulative Redeemable Preferred Shares (the “Class K Preferred Shares”) at a redemption price of $500 per Class K Preferred Share (or $25.00 per depositary share) plus accrued and unpaid dividends of $7.2049 per Class K Preferred Share (or $0.3602 per depositary share). The Company recorded a charge of $5.1 million to net income attributable to common shareholders in the second quarter of 2021, which represents the difference between the redemption price and the carrying amount immediately prior to redemption, which was recorded to additional paid in capital upon original issuance.
Other Comprehensive Income
|
|
The changes in Accumulated Other Comprehensive (Loss) Income related to foreign currency itemsby component are as follows (in thousands):
Balance, December 31, 2021 | $ | — |
|
Comprehensive income from cash flow hedges |
| 9,782 |
|
Balance, September 30, 2022 | $ | 9,782 |
|
15
Balance, December 31, 2020 |
| $ | (2,682 | ) |
Other comprehensive loss before reclassifications |
|
| (1 | ) |
Reclassification adjustment for foreign currency translation(A) |
|
| 2,683 |
|
Net current-period other comprehensive income |
|
| 2,682 |
|
Balance, September 30, 2021 |
| $ | 0 |
|
|
|
|
|
For the nine months ended September 30, 2021,2022, the Company recorded an impairment chargescharge of $7.3$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 assets or investmentsasset and the estimated fair market value. In 2021, the impairmentpurchase price.
14
charges recorded were triggered by a change in the hold period assumptions for an asset considered for sale and sold in the first quarter. For the three and nine months ended September 30, 2020, the Company recorded an adjustment to the reserve of $3.5 million and net charges of $19.4 million, respectively, as a result of an aggregate valuation allowance on its preferred equity interests in the BRE DDR joint ventures that were transferred or redeemed in the fourth quarter of 2020.
Items Measured at Fair Value
The Company is required to assess the fair value of certain impaired consolidated and unconsolidated joint venture investments. The valuation of impaired real estate assets and investments is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset, as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence. In general, the Company considers multiple valuation techniques when measuring fair value of an investment. However, in certain circumstances, a single valuation technique may be appropriate.
For operational real estate assets, the significant valuation assumptions included the capitalization rate used in the income capitalization valuation, as well as the projected property net operating income and expected hold period. For projects under development or not at stabilization, the significant assumptions included the discount rate, the timing and the estimated costs for the construction completion and project stabilization, projected net operating income and the exit capitalization rate. These valuations were calculated based on market conditions and assumptions made by management at the time the valuation adjustments and impairments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.
The following table presents information about the fair value of real estate that was impaired, and therefore, measured on a fair value basis, along with the related impairment charge, for the nine months ended September 30, 2021. The table also indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions):
|
| Fair Value Measurements |
| |||||||||||||||||
|
| Level 1 |
|
| Level 2 |
|
| Level 3 |
|
| Total |
|
| Total Impairment Charges |
| |||||
September 30, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived assets held and used |
| $ | 0 |
|
| $ | 0 |
|
| $ | 10.0 |
|
| $ | 10.0 |
|
| $ | 7.3 |
|
The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value (in millions):
|
| Quantitative Information about Level 3 Fair Value Measurements | ||||||||||
|
| Fair Value at |
|
| Valuation |
|
|
|
|
| Weighted | |
Description |
| September 30, 2021 |
|
| Technique |
| Unobservable Inputs |
| Range |
| Average | |
Impairment of consolidated assets |
| $ | 10.0 |
|
| Indicative Bid(A) |
| Indicative Bid(A) |
| N/A |
| N/A |
|
|
15
|
|
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 |
| Nine Months |
| |||||||||||||||||||||
| Ended September 30, |
|
| Ended September 30, |
| Ended September 30, |
| Ended September 30, |
| |||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Numerators – Basic and Diluted |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income | $ | 28,157 |
|
| $ | 7,403 |
|
| $ | 66,325 |
|
| $ | 37,628 |
| $ | 66,213 |
|
| $ | 28,157 |
|
| $ | 140,577 |
|
| $ | 66,325 |
|
Income attributable to non-controlling interests |
| (93 | ) |
|
| (116 | ) |
|
| (384 | ) |
|
| (621 | ) |
| (18 | ) |
|
| (93 | ) |
|
| (55 | ) |
|
| (384 | ) |
Write-off of preferred share original issuance costs |
| 0 |
|
|
| 0 |
|
|
| (5,156 | ) |
|
| 0 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (5,156 | ) |
Preferred dividends |
| (2,789 | ) |
|
| (5,133 | ) |
|
| (10,867 | ) |
|
| (15,399 | ) |
| (2,789 | ) |
|
| (2,789 | ) |
|
| (8,367 | ) |
|
| (10,867 | ) |
Earnings attributable to unvested shares and OP units |
| (150 | ) |
|
| 0 |
|
|
| (450 | ) |
|
| (149 | ) |
| (117 | ) |
|
| (150 | ) |
|
| (368 | ) |
|
| (450 | ) |
Net income attributable to common shareholders after allocation to participating securities | $ | 25,125 |
|
| $ | 2,154 |
|
| $ | 49,468 |
|
| $ | 21,459 |
| $ | 63,289 |
|
| $ | 25,125 |
|
| $ | 131,787 |
|
| $ | 49,468 |
|
Denominators – Number of Shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic—Average shares outstanding |
| 211,048 |
|
|
| 193,203 |
|
|
| 206,918 |
|
|
| 193,366 |
|
| 213,846 |
|
|
| 211,048 |
|
|
| 213,278 |
|
|
| 206,918 |
|
Assumed conversion of dilutive securities: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
PRSUs |
| 1,114 |
|
|
| 162 |
|
|
| 1,146 |
|
|
| 0 |
|
| 341 |
|
|
| 1,114 |
|
|
| 441 |
|
|
| 1,146 |
|
Forward equity |
| 29 |
|
|
| 0 |
|
|
| 10 |
|
|
| 0 |
|
| — |
|
|
| 29 |
|
|
| — |
|
|
| 10 |
|
OP units |
| 141 |
|
|
| — |
|
|
| 141 |
|
|
| — |
| |||||||||||||||
Diluted—Average shares outstanding |
| 212,191 |
|
|
| 193,365 |
|
|
| 208,074 |
|
|
| 193,366 |
|
| 214,328 |
|
|
| 212,191 |
|
|
| 213,860 |
|
|
| 208,074 |
|
Earnings Per Share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Basic | $ | 0.12 |
|
| $ | 0.01 |
|
| $ | 0.24 |
|
| $ | 0.11 |
| $ | 0.30 |
|
| $ | 0.12 |
|
| $ | 0.62 |
|
| $ | 0.24 |
|
Diluted | $ | 0.12 |
|
| $ | 0.01 |
|
| $ | 0.24 |
|
| $ | 0.11 |
| $ | 0.30 |
|
| $ | 0.12 |
|
| $ | 0.62 |
|
| $ | 0.24 |
|
For the three and nine months ended September 30, 2022, 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, Performance Restricted Stock Units (“PRSUs”)PRSUs issued to certain executives in March 2021, March 2020 and March 2019 were considered in the computation of dilutivediluted EPS. For the three and nine months ended September 30, 2020, PRSUs issued to certain executives in March 2020, March 2019 and March 2017 (not outstanding for the three months ended September 30, 2020) were anti-dilutive and not considered in the computation of EPS, as no share units would have been issued under the plan if the performance period would have ended on September 30, 2020. The PRSUs issued in March 2018 were considered in the computation of EPS for the three months ended September 30, 2020, but were anti-dilutive and not included in the computation of EPS for the nine months ended September 30, 2020. In connection with the PRSUs granted in March 2018, the Company recorded a mark-to-market adjustment of $5.6$5.6 million as expense for the nine months ended September 30, 2021, and recorded $0.3 million as expense and $1.6 million as income forin connection with the three and nine months ended September 30, 2020, respectively.PRSUs granted in March 2018. In March 2021,2022, the Company issued 570,295519,255 common shares in settlement of certain PRSUs granted in 20182019 and 2020.
The agreements to offer and sell approximately 1.7 million common shares on a forward basis for approximately 1.7 million common shareswere considered in the computation of diluted EPS for the three and nine-month periodsnine months ended September 30, 20212021. These shares were settled in the first quarter of 2022 (Note 9). This agreement was not outstanding in 2020.
|
|
On October 6, 2021, the Company received a distribution of $190.0 million on the RVI Preferred Shares, which represents the full amount expected to be paid by RVI on account of the Company’s preferred investment (Note 4).
16
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, 2020,2021, 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, owning,redeveloping, developing redeveloping, leasing and managing shopping centers. As of September 30, 2021,2022, the Company’s portfolio consisted of 137122 shopping centers (including 5619 shopping centers owned through unconsolidated joint ventures). At September 30, 2021,2022, the Company owned approximately 42.828.2 million total square feet of gross leasable area (“GLA”) through all its properties (wholly-owned and joint venture) and managed approximately 4.6 million total square feet of GLA owned by Retail Value Inc. (“RVI”). At September 30, 2021,2022, 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 bothat 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 |
| Nine Months |
| |||||||||||||||||||||
| Ended September 30, |
|
| Ended September 30, |
| Ended September 30, |
| Ended September 30, |
| |||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
Net income attributable to common shareholders | $ | 25,275 |
|
| $ | 2,154 |
|
| $ | 49,918 |
|
| $ | 21,608 |
| $ | 63,406 |
|
| $ | 25,275 |
|
| $ | 132,155 |
|
| $ | 49,918 |
|
FFO attributable to common shareholders | $ | 66,504 |
|
| $ | 42,262 |
|
| $ | 176,510 |
|
| $ | 128,911 |
| $ | 61,637 |
|
| $ | 66,504 |
|
| $ | 188,729 |
|
| $ | 176,510 |
|
Operating FFO attributable to common shareholders | $ | 61,361 |
|
| $ | 43,531 |
|
| $ | 181,917 |
|
| $ | 144,571 |
| $ | 62,833 |
|
| $ | 61,361 |
|
| $ | 190,845 |
|
| $ | 181,917 |
|
Earnings per share – Diluted | $ | 0.12 |
|
| $ | 0.01 |
|
| $ | 0.24 |
|
| $ | 0.11 |
| $ | 0.30 |
|
| $ | 0.12 |
|
| $ | 0.62 |
|
| $ | 0.24 |
|
For the nine months ended September 30, 2021,2022, the increase in net income attributable to common shareholders, as compared to the prior-year period, was primarily attributable to the impact of net revenue relating to prior periods (including deferred rents), which was collected from cash basis tenants in the current period, gains recorded from asset sales, higher disposition fees, lower debt extinguishment costs and the valuation allowance recognized in 2020 related to the Company’s preferred investments in the BRE DDR joint ventures, partially offset by lower gain on sale of wholly-owned and joint venture interests,assets, higher operating results driven by base rent growth at existing assets, the net impact of property acquisitions and the write-off of preferred share original issuance costs andin 2021, partially offset by lower interestfee income resulting from the termination of the Company’s preferred investments in the BRE DDR joint ventures in the fourth quarter of 2020.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. In addition,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 safeguardprotect the health and safety of its employees and their families, the Company closed all of its offices in March 2020 and successfully transitioned to working remotely. The Company reopened its Corporate Headquarters in Cleveland, Ohio and select regional offices on a voluntary basis in October 2020. Employees returned to the office in September 2021, subject to increased flexible work arrangements. To date, the Company’s leasing and administrative operations have not been significantly impacted by the pandemic, as the Company’s significant investments in its IT infrastructure and systems in prior years facilitated the transition to remote and hybrid working environments.workforce.
As of October 15, 2021, all of the Company’s properties remain open and operational with 100% of tenants, at the Company’s share and based on average base rents, open for business. This compares to an open rate low of 45% in April 2020. The COVID-19 pandemic had a significant impact on the Company’s collection of rents from April 2020 through the end of 2020. The Company’s collection rates have shown significant improvement in the first nine months ofcontinued to improve throughout 2021 relative to 2020 levels. A substantial majority ofreaching 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 are repayinghave repaid deferred rents relating to prior periods. Included inRental income for the third quarter 2021 results and nine-months 2021 results were $1.6nine months ended September 30, 2022 was $1.9 million and $12.4 million, respectively, of 2020prior-period net revenue at SITE Centers’ share, primarily from cash basis tenants. The majority of the deferral arrangements relating to 2020 revenue were repaid by the end of the third quarter of 2021,tenants and therefore, the impact of 2020 rent collections is expected to decline in future periods. At September 30, 2021, the Company had outstanding contractual accounts receivable of $1.7 million and its pro rata share of outstanding contractual accounts receivable of unconsolidated joint ventures was $0.1 million for tenants that are not accounted for on the cash basisrelated reserve adjustments..
17
As of October 15, 2021, the Company’s quarterly rent payment rates for assets owned as of September 30, 2021, determined on a pro rata basis, for each quarterly reporting period since March 2020, and updated for subsequent cash receipts (including the repayment of deferred rents), are reflected as follows:
| Second Quarter 2020 |
| Third Quarter 2020 |
| Fourth Quarter 2020 |
| First Quarter 2021 | Second Quarter 2021 | Third Quarter 2021 |
As of October 15, 2021 | 91% |
| 96% |
| 97% |
| 98% | 99% | 99% |
As of July 21, 2021 | 89% |
| 93% |
| 97% |
| 97% | 98% | N/A |
As of April 16, 2021 | 84% |
| 89% |
| 95% |
| 96% | N/A | N/A |
As of February 12, 2021 | 79% |
| 88% |
| 94% |
| N/A | N/A | N/A |
As of October 23, 2020 | 70% |
| 84% |
| N/A |
| N/A | N/A | N/A |
As of July 24, 2020 | 64% |
| N/A |
| N/A |
| N/A | N/A | N/A |
The Company calculates the aggregate percentage of rents paid with respect to a given period by comparing the amount of tenant payments received as of the date presented to the amount billed to tenants during the period. The billed amount includes abated rents, rents subject to deferral arrangements and rents owing from bankrupt tenants that were in possession of the space and billed. For the purposes of reporting the percentage of aggregate base rents collected for a given period, when rents subject to deferral arrangements are later paid, those payments are allocated to the period in which the rent was originally owed.
Although rent collection levels continued to improve in the third quarter of 2021, collection levels have not fully returned to pre-COVID levels during the first nine months of 2021, and future rent collections may be negatively impacted by any surges in COVID‑19 contagion, the discovery of new COVID-19 variants which are more infectious or resistant to COVID-19 vaccines, decreases in the effectiveness of COVID-19 vaccines, and any implementation of additional restrictions on tenant businesses as a result thereof. For a further discussion of the impact of the COVID-19 pandemic on the Company’s business, see “Liquidity, Capital Resources and Financing Activities” and “Economic Conditions” included in this section and Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
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 investments and tactical redevelopment. Management intends to use retained cash flow, proceeds from the sale of lower growth assets the repayment of other investments and proceeds from equity offerings and debt financings to fund capital expenditures relating to new leasing activity, opportunistic investingacquisitions and tactical redevelopment activity.
Transaction17
Year-to-date transaction and investment highlights for the Company through October 22, 2021,21, 2022, include the following:
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18
Company Operational Highlights
During the nine months ended September 30, 2021,2022, the Company completed the following operational activities:
• Leased approximately 4.2 million square feet of GLA, including 178 new leases and 340 renewals for a total of 518 leases. At December 31, 2021, the Company had 339 leases expiring in 2022, with an average base rent per square foot of $20.31, on a pro rata basis. The Company has addressed substantially all of its remaining 2022 lease expirations; • For the comparable leases executed in the nine months ended September 30, 2022, the Company generated positive leasing spreads on a pro rata basis of 20.0% for new leases and 6.0% for renewals. Leasing spreads are a key metric in real estate, representing the percentage increase of rental rates on new and renewal leases over rental rates on existing leases, though leasing spreads exclude consideration of the amount of capital expended in connection with new leasing activity. The Company’s leasing spread calculation includes only those deals that were executed within one year of the date the prior tenant vacated, in addition to other factors that limit comparability and as a result, is a useful benchmark to compare the average annualized base rent of expiring leases with the comparable executed market rental rates; • The Company’s total portfolio average annualized base rent per square foot increased to $19.11 at September 30, 2022, on a pro rata basis, as compared to $18.33 at December 31, 2021 and $18.44 at September 30, 2021, primarily due to the impact of acquisitions and new leases that commenced in the first nine months of 2022; • The aggregate occupancy of the Company’s operating shopping center portfolio was 91.4% at September 30, 2022, on a pro rata basis, as compared to 90.0% at December 31, 2021 and 90.2% at September 30, 2021 and • For new leases executed during the nine months ended September 30, 2022, the Company expended a weighted-average cost of tenant improvements and lease commissions estimated at $7.31 per rentable square foot, on a pro rata basis, over 18 the lease term, as compared to $8.56 per rentable square foot in 2021. The Company generally does not expend a significant amount of capital on lease renewals.
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2021 RESULTS OF OPERATIONS
Consolidated shopping center properties owned as of January 1, 2020, but excluding properties under development or redevelopment and those sold by the Company,2021, are referred to herein as the “Comparable Portfolio Properties.”
Revenues from Operations (in thousands)
| Three Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Rental income(A) | $ | 135,123 |
|
| $ | 120,569 |
|
| $ | 14,554 |
|
Fee and other income |
| 3,720 |
|
|
| 13,872 |
|
|
| (10,152 | ) |
Total revenues | $ | 138,843 |
|
| $ | 134,441 |
|
| $ | 4,402 |
|
|
|
|
|
|
|
|
|
| |||
| Nine Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Rental income(A) | $ | 401,210 |
|
| $ | 366,689 |
|
| $ | 34,521 |
|
Fee and other income(B) |
| 12,635 |
|
|
| 31,359 |
|
|
| (18,724 | ) |
Total revenues | $ | 413,845 |
|
| $ | 398,048 |
|
| $ | 15,797 |
|
| Three Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Rental income(A) | $ | 120,569 |
|
| $ | 95,874 |
|
| $ | 24,695 |
|
Fee and other income |
| 13,872 |
|
|
| 9,680 |
|
|
| 4,192 |
|
Total revenues | $ | 134,441 |
|
| $ | 105,554 |
|
| $ | 28,887 |
|
|
| Three Months |
|
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| ||||||
|
| Ended September 30, |
|
|
|
| ||||||
Contractual Lease Payments |
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Base and percentage rental income |
| $ | 99,326 |
|
| $ | 88,403 |
|
| $ | 10,923 |
|
Recoveries from tenants |
|
| 33,214 |
|
|
| 29,441 |
|
|
| 3,773 |
|
Uncollectible revenue |
|
| (381 | ) |
|
| 1,083 |
|
|
| (1,464 | ) |
Lease termination fees, ancillary and other rental income |
|
| 2,964 |
|
|
| 1,642 |
|
|
| 1,322 |
|
Total contractual lease payments |
| $ | 135,123 |
|
| $ | 120,569 |
|
| $ | 14,554 |
|
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|
| |||
|
| Nine Months |
|
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| ||||||
|
| Ended September 30, |
|
|
|
| ||||||
Contractual Lease Payments |
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Base and percentage rental income(1) |
| $ | 291,483 |
|
| $ | 262,345 |
|
| $ | 29,138 |
|
Recoveries from tenants(2) |
|
| 99,811 |
|
|
| 90,518 |
|
|
| 9,293 |
|
Uncollectible revenue(3) |
|
| 1,889 |
|
|
| 8,268 |
|
|
| (6,379 | ) |
Lease termination fees, ancillary and other rental income |
|
| 8,027 |
|
|
| 5,558 |
|
|
| 2,469 |
|
Total contractual lease payments |
| $ | 401,210 |
|
| $ | 366,689 |
|
| $ | 34,521 |
|
| Nine Months |
|
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| |||||
| Ended September 30, |
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| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Rental income(A) | $ | 366,689 |
|
| $ | 306,482 |
|
| $ | 60,207 |
|
Fee and other income(B) |
| 31,359 |
|
|
| 35,953 |
|
|
| (4,594 | ) |
Total revenues | $ | 398,048 |
|
| $ | 342,435 |
|
| $ | 55,613 |
|
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| Three Months |
|
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| |||||
|
| Ended September 30, |
|
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| |||||
Contractual Lease Payments |
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Base and percentage rental income |
| $ | 88,403 |
|
| $ | 82,959 |
|
| $ | 5,444 |
|
Recoveries from tenants |
|
| 29,441 |
|
|
| 25,833 |
|
|
| 3,608 |
|
Uncollectible revenue |
|
| 1,083 |
|
|
| (14,188 | ) |
|
| 15,271 |
|
Lease termination fees, ancillary and other rental income |
|
| 1,642 |
|
|
| 1,270 |
|
|
| 372 |
|
Total contractual lease payments |
| $ | 120,569 |
|
| $ | 95,874 |
|
| $ | 24,695 |
|
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| Nine Months |
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| Ended September 30, |
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| |||||
Contractual Lease Payments |
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Base and percentage rental income(1) |
| $ | 262,345 |
|
| $ | 246,505 |
|
| $ | 15,840 |
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Recoveries from tenants(2) |
|
| 90,518 |
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| 80,371 |
|
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| 10,147 |
|
Uncollectible revenue(3) |
|
| 8,268 |
|
|
| (27,918 | ) |
|
| 36,186 |
|
Lease termination fees, ancillary and other rental income |
|
| 5,558 |
|
|
| 7,524 |
|
|
| (1,966 | ) |
Total contractual lease payments |
| $ | 366,689 |
|
| $ | 306,482 |
|
| $ | 60,207 |
|
| The changes |
|
| Increase (Decrease) |
| |
Comparable Portfolio Properties |
| $ | (5.0 | ) |
Acquisition of shopping centers |
|
| 19.1 |
|
Redevelopment properties |
|
| 1.0 |
|
Straight-line rents |
|
| 0.7 |
|
Total |
| $ | 15.8 |
|
Decrease in base and percentage rental income for the Comparable Portfolio Properties isnine months ended September 30, 2022, were due to the timingfollowing (in millions):
|
| Increase |
| |
Acquisition of shopping centers |
| $ | 18.3 |
|
Comparable Portfolio Properties |
|
| 8.8 |
|
Straight-line rents |
|
| 2.0 |
|
Total |
| $ | 29.1 |
|
The increase in straight-line rents was primarily due to the removal of both tenant bankruptcies, store closuresstraight-line rent reserves for tenants that were removed from the COVID-19 pandemiccash basis of accounting and rent commencements in 2021the impact of the vacated space.straight-line rents recorded on properties recently acquired.
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 |
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| $ | 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 |
|
| Pro Rata Combined Shopping Center Portfolio September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Centers owned (at 100%) |
| 137 |
|
|
| 147 |
|
Aggregate occupancy rate |
| 90.2 | % |
|
| 89.7 | % |
Average annualized base rent per occupied square foot | $ | 18.44 |
|
| $ | 18.53 |
|
| Wholly-Owned Shopping Centers September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Centers owned |
| 81 |
|
|
| 69 |
|
Aggregate occupancy rate |
| 90.6 | % |
|
| 89.7 | % |
Average annualized base rent per occupied square foot | $ | 18.67 |
|
| $ | 18.89 |
|
| Joint Venture Shopping Centers September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Centers owned |
| 56 |
|
|
| 78 |
|
Aggregate occupancy rate |
| 87.9 | % |
|
| 88.4 | % |
Average annualized base rent per occupied square foot | $ | 15.25 |
|
| $ | 15.14 |
|
AtRecoveries from tenants were approximately 78.1% and 77.7% of operating expenses and real estate taxes for the nine months ended September 30, 2022 and 2021, respectively.
Changes 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 the average annualized base rent per occupied square foot was $18.61 and $18.79, respectively.Uses of Capital” included elsewhere herein.
20
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Expenses from Operations (in thousands)
| Three Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Operating and maintenance | $ | 22,314 |
|
| $ | 18,562 |
|
| $ | 3,752 |
|
Real estate taxes |
| 20,423 |
|
|
| 19,160 |
|
|
| 1,263 |
|
General and administrative |
| 10,799 |
|
|
| 11,727 |
|
|
| (928 | ) |
Depreciation and amortization |
| 51,179 |
|
|
| 44,669 |
|
|
| 6,510 |
|
| $ | 104,715 |
|
| $ | 94,118 |
|
| $ | 10,597 |
|
|
|
|
|
|
|
|
|
| |||
| Nine Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Operating and maintenance(A) | $ | 66,528 |
|
| $ | 58,200 |
|
| $ | 8,328 |
|
Real estate taxes(A) |
| 61,230 |
|
|
| 58,359 |
|
|
| 2,871 |
|
Impairment charges(B) |
| 2,536 |
|
|
| 7,270 |
|
|
| (4,734 | ) |
General and administrative(C) |
| 34,403 |
|
|
| 41,547 |
|
|
| (7,144 | ) |
Depreciation and amortization(A) |
| 152,564 |
|
|
| 137,446 |
|
|
| 15,118 |
|
| $ | 317,261 |
|
| $ | 302,822 |
|
| $ | 14,439 |
|
| Three Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Operating and maintenance | $ | 18,562 |
|
| $ | 15,775 |
|
| $ | 2,787 |
|
Real estate taxes |
| 19,160 |
|
|
| 16,542 |
|
|
| 2,618 |
|
General and administrative |
| 11,727 |
|
|
| 13,664 |
|
|
| (1,937 | ) |
Depreciation and amortization |
| 44,669 |
|
|
| 41,148 |
|
|
| 3,521 |
|
| $ | 94,118 |
|
| $ | 87,129 |
|
| $ | 6,989 |
|
| Nine Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Operating and maintenance(A) | $ | 58,200 |
|
| $ | 50,774 |
|
| $ | 7,426 |
|
Real estate taxes(A) |
| 58,359 |
|
|
| 51,547 |
|
|
| 6,812 |
|
Impairment charges(B) |
| 7,270 |
|
|
| — |
|
|
| 7,270 |
|
General and administrative(C) |
| 41,547 |
|
|
| 38,542 |
|
|
| 3,005 |
|
Depreciation and amortization(A) |
| 137,446 |
|
|
| 125,014 |
|
|
| 12,432 |
|
| $ | 302,822 |
|
| $ | 265,877 |
|
| $ | 36,945 |
|
| The changes |
|
| Operating and Maintenance |
|
| Real Estate Taxes |
|
| Depreciation and Amortization |
| |||
Comparable Portfolio Properties |
| $ | 2.7 |
|
| $ | 1.8 |
|
| $ | (4.9 | ) |
Acquisition of shopping centers |
|
| 4.5 |
|
|
| 5.8 |
|
|
| 14.2 |
|
Redevelopment properties |
|
| 0.2 |
|
|
| (0.8 | ) |
|
| 3.1 |
|
|
| $ | 7.4 |
|
| $ | 6.8 |
|
| $ | 12.4 |
|
Change in depreciation and amortization for the Comparable Portfolio Properties is primarily anine months ended September 30, 2022, were due to the following (in millions):
|
| 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 |
|
21
2021 of $5.6 million for certain PRSUs which were granted in 2018 and settled in 2021, general and administrative expenses were 5.6% of total revenues for the nine months ended September 30, 2021. The Company continues to expense certain internal leasing salaries, legal salaries and related expenses associated with leasing and re-leasing of existing space.
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Other Income and Expenses (in thousands)
| Three Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Interest expense | $ | (20,139 | ) |
| $ | (19,170 | ) |
| $ | (969 | ) |
Other expense, net |
| (501 | ) |
|
| (524 | ) |
|
| 23 |
|
| $ | (20,640 | ) |
| $ | (19,694 | ) |
| $ | (946 | ) |
|
|
|
|
|
|
|
|
| |||
| Nine Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Interest expense(A) | $ | (57,306 | ) |
| $ | (57,701 | ) |
| $ | 395 |
|
Other expense, net |
| (2,152 | ) |
|
| (1,214 | ) |
|
| (938 | ) |
| $ | (59,458 | ) |
| $ | (58,915 | ) |
| $ | (543 | ) |
21
| Three Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Interest expense | $ | (19,170 | ) |
| $ | (18,089 | ) |
| $ | (1,081 | ) |
Other (expense) income, net |
| (524 | ) |
|
| 3,259 |
|
|
| (3,783 | ) |
| $ | (19,694 | ) |
| $ | (14,830 | ) |
| $ | (4,864 | ) |
| Nine Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Interest expense(A) | $ | (57,701 | ) |
| $ | (58,487 | ) |
| $ | 786 |
|
Other expense, net(B) |
| (1,214 | ) |
|
| (7,727 | ) |
|
| 6,513 |
|
| $ | (58,915 | ) |
| $ | (66,214 | ) |
| $ | 7,299 |
|
|
|
|
| Nine Months |
| |||||
|
| Ended September 30, |
| |||||
|
| 2021 |
|
| 2020 |
| ||
Weighted-average debt outstanding (in billions) |
| $ | 1.8 |
|
| $ | 2.0 |
|
Weighted-average interest rate |
|
| 4.0 | % |
|
| 3.8 | % |
The Company’s overall balance sheet strategy is to continue to maintain substantial liquidity, prudent leverage levels and low leverage.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 3.9%4.1% and 3.7%3.9% at September 30, 2022 and 2021, and 2020, respectively.
Interest costs capitalized in conjunction with redevelopment projects were $0.3 million and $0.2 million for each of the three months ended September 30, 2022 and 2021, respectively, and 2020$0.8 million and $0.5 million and $0.8 million for the nine months ended September 30, 2022 and 2021, and 2020, respectively. The decrease in
Other Items (in thousands)
| Three Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Equity in net income of joint ventures | $ | 25,918 |
|
| $ | 1,824 |
|
| $ | 24,094 |
|
Gain on sale of interests |
| 228 |
|
|
| 35 |
|
|
| 193 |
|
Gain on disposition of real estate, net |
| 26,837 |
|
|
| 5,871 |
|
|
| 20,966 |
|
Tax expense of taxable REIT subsidiaries and state franchise and |
| (258 | ) |
|
| (202 | ) |
|
| (56 | ) |
Income attributable to non-controlling interests, net |
| (18 | ) |
|
| (93 | ) |
|
| 75 |
|
|
|
|
|
|
|
|
|
| |||
| Nine Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Equity in net income of joint ventures(A) | $ | 27,468 |
|
| $ | 11,059 |
|
| $ | 16,409 |
|
Gain on sale and change in control of interests(B) |
| 45,554 |
|
|
| 13,943 |
|
|
| 31,611 |
|
Gain on disposition of real estate, net(C) |
| 31,292 |
|
|
| 6,069 |
|
|
| 25,223 |
|
Tax expense of taxable REIT subsidiaries and state franchise and |
| (863 | ) |
|
| (1,057 | ) |
|
| 194 |
|
Income attributable to non-controlling interests, net |
| (55 | ) |
|
| (384 | ) |
|
| 329 |
|
(B) In 2022, the Company recorded a $3.3 million gain from the acquisition of its joint venture partner's 80% equity interest in an asset (Casselberry Commons) owned by the DDRM Joint Venture, a $16.8 million gain from the sale of its 20% interest in the SAU Joint Venture to its partner and a $25.4 million gain from the sale of its 50% interest in Lennox Town Center to its partner. The 2021 gain relates to the sale of the Company’s interest in undeveloped land in Richmond Hill, Ontario. (C) Reflects the sale of assets in 2022 and 2021. 22
|
|
Other Items (in thousands)
| Three Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Equity in net income of joint ventures | $ | 1,824 |
|
| $ | 250 |
|
| $ | 1,574 |
|
Adjustment of preferred equity interests, net |
| — |
|
|
| 3,542 |
|
|
| (3,542 | ) |
Gain on sale of joint venture interests |
| 35 |
|
|
| 82 |
|
|
| (47 | ) |
Gain on disposition of real estate, net |
| 5,871 |
|
|
| 218 |
|
|
| 5,653 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (202 | ) |
|
| (284 | ) |
|
| 82 |
|
Income attributable to non-controlling interests, net |
| (93 | ) |
|
| (116 | ) |
|
| 23 |
|
| Nine Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Equity in net income of joint ventures(A) | $ | 11,059 |
|
| $ | 908 |
|
| $ | 10,151 |
|
Reserve of preferred equity interests, net(B) |
| — |
|
|
| (19,393 | ) |
|
| 19,393 |
|
Gain on sale of joint venture interests(C) |
| 13,943 |
|
|
| 45,635 |
|
|
| (31,692 | ) |
Gain on disposition of real estate, net |
| 6,069 |
|
|
| 993 |
|
|
| 5,076 |
|
Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
| (1,057 | ) |
|
| (859 | ) |
|
| (198 | ) |
Income attributable to non-controlling interests, net |
| (384 | ) |
|
| (621 | ) |
|
| 237 |
|
|
|
|
|
|
|
Net Income (in thousands)
| Three Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Net income attributable to SITE Centers | $ | 28,064 |
|
| $ | 7,287 |
|
| $ | 20,777 |
|
| Three Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Net income attributable to SITE Centers | $ | 66,195 |
|
| $ | 28,064 |
|
| $ | 38,131 |
|
|
|
|
|
|
|
|
|
| |||
| Nine Months |
|
|
|
| ||||||
| Ended September 30, |
|
|
|
| ||||||
| 2022 |
|
| 2021 |
|
| $ Change |
| |||
Net income attributable to SITE Centers | $ | 140,522 |
|
| $ | 65,941 |
|
| $ | 74,581 |
|
| Nine Months |
|
|
|
|
| |||||
| Ended September 30, |
|
|
|
|
| |||||
| 2021 |
|
| 2020 |
|
| $ Change |
| |||
Net income attributable to SITE Centers | $ | 65,941 |
|
| $ | 37,007 |
|
| $ | 28,934 |
|
The increase in net income attributable to SITE Centers, as compared to the prior-year period, was primarily attributable to higher gain on sale of wholly-owned and joint venture assets, higher operating results driven by base rent growth at existing assets and the net impact of net revenue relating to prior periods (including deferred rents) which was collected from cash basis tenants in the current period, gains recorded from asset sales, higher disposition fees, lower debt extinguishment costs and the valuation allowance
23
recognized in 2020 related to the Company’s preferred investments in the BRE DDR joint ventures,property acquisitions, partially offset by lower gain on sale of joint venture interests and lower interestfee income resulting from the termination of the Company’s preferred investment in the BRE DDR joint ventures in the fourth quarter of 2020.and RVI.
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, including reserve adjustments of preferred equity interest, (iv) gains and losses from changes in control and (v) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles, equity income (loss) from joint ventures and equity income (loss) from non-controlling interests and adding the Company’s proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis. The Company’s calculation of FFO is consistent with the definition of FFO provided by NAREIT.
The Company 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. 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. 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
24
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 September 30, |
|
|
|
| |||||||||||
| 2021 |
|
| 2020 |
|
| $ Change |
| 2022 |
|
| 2021 |
|
| $ Change |
| ||||||
FFO attributable to common shareholders | $ | 66,504 |
|
| $ | 42,262 |
|
| $ | 24,242 |
| $ | 61,637 |
|
| $ | 66,504 |
|
| $ | (4,867 | ) |
Operating FFO attributable to common shareholders |
| 61,361 |
|
|
| 43,531 |
|
|
| 17,830 |
|
| 62,833 |
|
|
| 61,361 |
|
|
| 1,472 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||
| Nine Months |
|
|
|
|
| Nine Months |
|
|
|
| |||||||||||
| Ended September 30, |
|
|
|
|
| Ended September 30, |
|
|
|
| |||||||||||
| 2021 |
|
| 2020 |
|
| $ Change |
| 2022 |
|
| 2021 |
|
| $ Change |
| ||||||
FFO attributable to common shareholders | $ | 176,510 |
|
| $ | 128,911 |
|
| $ | 47,599 |
| $ | 188,729 |
|
| $ | 176,510 |
|
| $ | 12,219 |
|
Operating FFO attributable to common shareholders |
| 181,917 |
|
|
| 144,571 |
|
|
| 37,346 |
|
| 190,845 |
|
|
| 181,917 |
|
|
| 8,928 |
|
The increase in FFO for the nine months ended September 30, 2021,2022, as compared to the prior-year period, was primarily was attributable to higher operating results driven by base rent growth at existing assets and the net impact of net revenue relating to prior periods (including deferred rents) collected from cash basis tenants in the current periodproperty acquisitions and lower debt extinguishment costsgeneral 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 lower fee income and lower interest income and the higher mark-to-market expense on the PRSUs.in 2021. The change in Operating FFO primarily was due to the impact of net revenue relating to prior periods (including deferred rents) collected from cash basis tenants in the current period,positive operating results, partially offset by lower fee income and lower interest income.
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 |
|
| Nine Months |
| ||||||||||
| Ended September 30, |
|
| Ended September 30, |
| ||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net income attributable to common shareholders | $ | 25,275 |
|
| $ | 2,154 |
|
| $ | 49,918 |
|
| $ | 21,608 |
|
Depreciation and amortization of real estate investments |
| 43,283 |
|
|
| 39,812 |
|
|
| 133,279 |
|
|
| 120,889 |
|
Equity in net income of joint ventures |
| (1,824 | ) |
|
| (250 | ) |
|
| (11,059 | ) |
|
| (908 | ) |
Joint ventures' FFO(A) |
| 5,659 |
|
|
| 4,388 |
|
|
| 17,065 |
|
|
| 14,529 |
|
Non-controlling interests (OP Units) |
| 17 |
|
|
| — |
|
|
| 49 |
|
|
| 28 |
|
Impairment of real estate |
| — |
|
|
| — |
|
|
| 7,270 |
|
|
| — |
|
(Adjustment) reserve of preferred equity interests |
| — |
|
|
| (3,542 | ) |
|
| — |
|
|
| 19,393 |
|
Gain on sale of joint venture interests |
| (35 | ) |
|
| (82 | ) |
|
| (13,943 | ) |
|
| (45,635 | ) |
Gain on disposition of real estate, net |
| (5,871 | ) |
|
| (218 | ) |
|
| (6,069 | ) |
|
| (993 | ) |
FFO attributable to common shareholders |
| 66,504 |
|
|
| 42,262 |
|
|
| 176,510 |
|
|
| 128,911 |
|
RVI disposition fees |
| (5,500 | ) |
|
| (856 | ) |
|
| (6,092 | ) |
|
| (2,622 | ) |
Mark-to-market adjustment (PRSUs) |
| — |
|
|
| 289 |
|
|
| 5,589 |
|
|
| (1,617 | ) |
Executive separation charge |
| — |
|
|
| 1,650 |
|
|
| — |
|
|
| 1,650 |
|
Debt extinguishment and other, net |
| 356 |
|
|
| 186 |
|
|
| 722 |
|
|
| 18,207 |
|
Joint ventures – debt extinguishment and other, net |
| 1 |
|
|
| — |
|
|
| 32 |
|
|
| 42 |
|
Write-off of preferred share original issuance costs |
| — |
|
|
| — |
|
|
| 5,156 |
|
|
| — |
|
Non-operating items, net |
| (5,143 | ) |
|
| 1,269 |
|
|
| 5,407 |
|
|
| 15,660 |
|
Operating FFO attributable to common shareholders | $ | 61,361 |
|
| $ | 43,531 |
|
| $ | 181,917 |
|
| $ | 144,571 |
|
|
|
Joint ventures’ FFO and Operating FFO are summarized as follows (in thousands):
| Three Months |
|
| Nine Months |
| |||||||||||||||||||||||||
| Ended September 30, |
|
| Ended September 30, |
| Three Months |
| Nine Months |
| |||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| Ended September 30, |
| Ended September 30, |
| |||||||||||||||
Net income (loss) attributable to unconsolidated joint ventures | $ | 4,863 |
|
| $ | (4,748 | ) |
| $ | 53,525 |
|
| $ | (36,455 | ) | |||||||||||||||
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| |||||||||||||||||||
Net income attributable to unconsolidated | $ | 105,872 |
|
| $ | 4,863 |
|
| $ | 105,833 |
|
| $ | 53,525 |
| |||||||||||||||
Depreciation and amortization of real estate investments |
| 16,605 |
|
|
| 23,901 |
|
|
| 50,309 |
|
|
| 77,580 |
|
| 9,450 |
|
|
| 16,605 |
|
|
| 37,123 |
|
|
| 50,309 |
|
Impairment of real estate |
| — |
|
|
| — |
|
|
| — |
|
|
| 33,240 |
|
| 9,010 |
|
|
| — |
|
|
| 17,550 |
|
|
| — |
|
Loss (gain) on disposition of real estate, net |
| 455 |
|
|
| (319 | ) |
|
| (36,132 | ) |
|
| (9,229 | ) | |||||||||||||||
(Gain) loss on disposition of real estate, net |
| (119,813 | ) |
|
| 455 |
|
|
| (121,505 | ) |
|
| (36,132 | ) | |||||||||||||||
FFO | $ | 21,923 |
|
| $ | 18,834 |
|
| $ | 67,702 |
|
| $ | 65,136 |
| $ | 4,519 |
|
| $ | 21,923 |
|
| $ | 39,001 |
|
| $ | 67,702 |
|
FFO at SITE Centers' ownership interests | $ | 5,659 |
|
| $ | 4,388 |
|
| $ | 17,065 |
|
| $ | 14,529 |
| $ | 1,271 |
|
| $ | 5,659 |
|
| $ | 9,469 |
|
| $ | 17,065 |
|
Operating FFO at SITE Centers' ownership interests | $ | 5,660 |
|
| $ | 4,388 |
|
| $ | 17,097 |
|
| $ | 14,571 |
| $ | 2,126 |
|
| $ | 5,660 |
|
| $ | 10,327 |
|
| $ | 17,097 |
|
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 is presented both including and excluding activity associated with development and major redevelopment. 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.
25
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.
26
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 Nine Months Ended September 30, |
| ||||||||||||||||||||||||||
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 |
|
| 2021 |
|
| 2022 |
|
| 2021 |
| ||||||||
| At 100% |
|
| At the Company's Interest |
| At 100% |
|
| At the Company's Interest |
| ||||||||||||||||||||
Net income attributable to SITE Centers | $ | 65,941 |
|
| $ | 37,007 |
|
| $ | 65,941 |
|
| $ | 37,007 |
| $ | 140,522 |
|
| $ | 65,941 |
|
| $ | 140,522 |
|
| $ | 65,941 |
|
Fee income |
| (30,264 | ) |
|
| (34,149 | ) |
|
| (30,264 | ) |
|
| (34,149 | ) |
| (9,471 | ) |
|
| (30,264 | ) |
|
| (9,471 | ) |
|
| (30,264 | ) |
Interest expense |
| 57,701 |
|
|
| 58,487 |
|
|
| 57,701 |
|
|
| 58,487 |
|
| 57,306 |
|
|
| 57,701 |
|
|
| 57,306 |
|
|
| 57,701 |
|
Depreciation and amortization |
| 137,446 |
|
|
| 125,014 |
|
|
| 137,446 |
|
|
| 125,014 |
|
| 152,564 |
|
|
| 137,446 |
|
|
| 152,564 |
|
|
| 137,446 |
|
General and administrative |
| 41,547 |
|
|
| 38,542 |
|
|
| 41,547 |
|
|
| 38,542 |
|
| 34,403 |
|
|
| 41,547 |
|
|
| 34,403 |
|
|
| 41,547 |
|
Other expense, net |
| 1,214 |
|
|
| 7,727 |
|
|
| 1,214 |
|
|
| 7,727 |
|
| 2,152 |
|
|
| 1,214 |
|
|
| 2,152 |
|
|
| 1,214 |
|
Impairment charges |
| 7,270 |
|
|
| — |
|
|
| 7,270 |
|
|
| — |
|
| 2,536 |
|
|
| 7,270 |
|
|
| 2,536 |
|
|
| 7,270 |
|
Equity in net income of joint ventures |
| (11,059 | ) |
|
| (908 | ) |
|
| (11,059 | ) |
|
| (908 | ) |
| (27,468 | ) |
|
| (11,059 | ) |
|
| (27,468 | ) |
|
| (11,059 | ) |
Reserve of preferred equity interests |
| — |
|
|
| 19,393 |
|
|
| — |
|
|
| 19,393 |
| |||||||||||||||
Tax expense |
| 1,057 |
|
|
| 859 |
|
|
| 1,057 |
|
|
| 859 |
|
| 863 |
|
|
| 1,057 |
|
|
| 863 |
|
|
| 1,057 |
|
Gain on sale of joint venture interests |
| (13,943 | ) |
|
| (45,635 | ) |
|
| (13,943 | ) |
|
| (45,635 | ) | |||||||||||||||
Gain on sale and change in control of interests |
| (45,554 | ) |
|
| (13,943 | ) |
|
| (45,554 | ) |
|
| (13,943 | ) | |||||||||||||||
Gain on disposition of real estate, net |
| (6,069 | ) |
|
| (993 | ) |
|
| (6,069 | ) |
|
| (993 | ) |
| (31,292 | ) |
|
| (6,069 | ) |
|
| (31,292 | ) |
|
| (6,069 | ) |
Income from non-controlling interests |
| 384 |
|
|
| 621 |
|
|
| 384 |
|
|
| 621 |
|
| 55 |
|
|
| 384 |
|
|
| 55 |
|
|
| 384 |
|
Consolidated NOI | $ | 251,225 |
|
| $ | 205,965 |
|
| $ | 251,225 |
|
| $ | 205,965 |
| |||||||||||||||
SITE Centers' consolidated joint venture |
| — |
|
|
| — |
|
|
| (958 | ) |
|
| (1,200 | ) | |||||||||||||||
Consolidated NOI, net of non-controlling interests | $ | 251,225 |
|
| $ | 205,965 |
|
| $ | 250,267 |
|
| $ | 204,765 |
| $ | 276,616 |
|
| $ | 251,225 |
|
| $ | 276,616 |
|
| $ | 251,225 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Net income (loss) from unconsolidated joint ventures | $ | 53,525 |
|
| $ | (36,455 | ) |
| $ | 9,943 |
|
| $ | 366 |
| |||||||||||||||
Net income from unconsolidated joint ventures | $ | 105,833 |
|
| $ | 53,525 |
|
| $ | 21,887 |
|
| $ | 9,943 |
| |||||||||||||||
Interest expense |
| 32,898 |
|
|
| 47,555 |
|
|
| 8,113 |
|
|
| 9,251 |
|
| 26,560 |
|
|
| 32,898 |
|
|
| 5,982 |
|
|
| 8,113 |
|
Depreciation and amortization |
| 50,309 |
|
|
| 77,580 |
|
|
| 11,480 |
|
|
| 13,665 |
|
| 37,123 |
|
|
| 50,309 |
|
|
| 8,304 |
|
|
| 11,480 |
|
Impairment charges |
| — |
|
|
| 33,240 |
|
|
| — |
|
|
| 1,890 |
|
| 17,550 |
|
|
| — |
|
|
| 3,510 |
|
|
| — |
|
Preferred share expense |
| — |
|
|
| 13,710 |
|
|
| — |
|
|
| 685 |
| |||||||||||||||
Other expense, net |
| 8,806 |
|
|
| 10,844 |
|
|
| 2,186 |
|
|
| 2,250 |
|
| 11,114 |
|
|
| 8,806 |
|
|
| 2,468 |
|
|
| 2,186 |
|
Gain on disposition of real estate, net |
| (36,132 | ) |
|
| (9,229 | ) |
|
| (4,387 | ) |
|
| (1,778 | ) |
| (121,505 | ) |
|
| (36,132 | ) |
|
| (24,254 | ) |
|
| (4,387 | ) |
Unconsolidated NOI | $ | 109,406 |
|
| $ | 137,245 |
|
| $ | 27,335 |
|
| $ | 26,329 |
| $ | 76,675 |
|
| $ | 109,406 |
|
| $ | 17,897 |
|
| $ | 27,335 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
Total Consolidated + Unconsolidated NOI |
|
|
|
|
|
|
|
| $ | 277,602 |
|
| $ | 231,094 |
|
|
|
|
| $ | 294,513 |
|
| $ | 278,560 |
| ||||
Less: Non-Same Store NOI adjustments |
|
|
|
|
|
|
|
|
| 490 |
|
|
| 9,705 |
|
|
|
|
|
| (19,604 | ) |
|
| (4,637 | ) | ||||
Total SSNOI including redevelopment |
|
|
|
|
|
|
|
| $ | 278,092 |
|
| $ | 240,799 |
|
|
|
|
| $ | 274,909 |
|
| $ | 273,923 |
| ||||
Less: Redevelopment Same Store NOI adjustments |
|
|
|
|
|
|
|
|
| (11,071 | ) |
|
| (7,478 | ) | |||||||||||||||
Total SSNOI excluding redevelopment |
|
|
|
|
|
|
|
| $ | 267,021 |
|
| $ | 233,321 |
| |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||
SSNOI % Change including redevelopment |
|
|
|
|
|
|
|
|
| 15.5 | % |
|
|
|
|
|
|
|
|
| 0.4 | % |
|
|
| |||||
SSNOI % Change excluding redevelopment |
|
|
|
|
|
|
|
|
| 14.4 | % |
|
|
|
|
The increase in SSNOI atfor the Company’s effective ownership interestnine months ended September 30, 2022 included uncollectible revenue of $1.9 million as compared to $8.3 million for the nine months ended September 30, 2021, as compareddue to 2020, a decrease in the amount of net revenues received from tenants related to prior periods primarily was attributable to rental income paid in 2021 byfrom cash basis tenants whichand related reserve adjustments. The decrease in prior period cash receipts was offset by increases in rents and recoveries primarily attributable to amounts (including deferred rent) originally owedsequential increases in 2020.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 lowprudent 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 credit facilities described below,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.
27
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 Facilities (as defined below),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 September 30, 2021,2022, compared to $1.9$1.7 billion at December 31, 2020. 2021.
The Company had an unrestricted cash balance of $61.9$20.9 million at September 30, 2021, no2022 and an $80.0 million outstanding balance on its Revolving Credit Facilities,Facility, and accordingly, availability under the Revolving Credit FacilitiesFacility of $970.0$870.0 million (subject to satisfaction of applicable borrowing conditions). The Company has $140.5no remaining debt maturing in 2022. The Company has $87.2 million aggregate principal amount of senior notes maturing in 2023. At September 30, 2022, the Company had $35.3 million aggregate principal amount of consolidated mortgage debt at its share, maturing priorscheduled to the end of 2022mature in 2023, of which $87.6$15.7 million was repaid in October 2021, and no unsecured debt maturities prior to 2023. The Company’s unconsolidated joint ventures have $34.02022. At September 30, 2022, the DDRM Joint Venture has approximately $23.2 million of mortgage debt outstanding at the Company’s share maturing in the remainder of 2021, and $92.5 million of mortgage debt at the Company’s share maturing in 2022.July 2023, which has a one-year extension option subject to certain conditions. As of September 30, 2021,2022, the Company did not have any indebtedness outstanding having an interest rate determined by reference to LIBOR. As of September 30, 2022, the Company anticipates that it has approximately $26$25 million to fundbe incurred on its pipeline of identified redevelopment projects. The Company declared dividendsa common share dividend of $0.35$0.39 per share in the nine months ended September 30, 2021.2022. The Company believes it has sufficient liquidity to operate its business at this time.
Revolving Credit FacilitiesFacility and Term Loan
The Company maintains an unsecured revolving credit facility with a syndicate of financial institutions arranged by Wells Fargo Securities, LLC,and J.P. Morgan Chase Bank, N.A., Citizens Bank, N.A., RBC Capital Markets and U.S. Bank National Associationas administrative agent (the “Unsecured“Revolving Credit Facility.”Facility”) The Unsecured Credit Facilitythat provides for borrowings of up to $950 million, (whichwhich limit may be increased to $1.45 billion provided that theexisting or new lenders agree to existing terms of the facility or existing lenders increase theirprovide incremental commitments) and a maturity date of January 2024, withcommitments. The Revolving Credit Facility matures in June 2026 subject to two six-month options to extend the maturity to January 2025 uponJune 2027 at the Company’s requestCompany's option (subject to the satisfaction of certain conditions). The Company also maintains an unsecured revolving credit facility with PNC Bank, National Association, which provides for borrowings of up to $20 million (the “PNC Facility,” and together with the Unsecured Credit Facility, the “Revolving Credit Facilities”), and has terms substantially the same as those contained in the Unsecured Credit Facility. The Company’s borrowings under the Revolving Credit FacilitiesFacility bear interest at variable rates at the Company’s election, based on either LIBOR(i) the SOFR rate plus a specified spread (0.90%(0.95% at September 30, 2021),2022) or (ii) the Alternate Base Rate, as defined in the respective facility,alternative base rate plus a specified spread (0% at September 30, 2021)2022). The CompanyRevolving Credit Facility also paysprovides for an annual facility fee, ofwhich was 20 basis points on the aggregate commitments applicable to each Revolving Credit Facility.entire facility at September 30, 2022. The specified spreads and commitment feesfacility 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”) and(or their successors.
respective successors). The Revolving Credit FacilitiesFacility 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 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 Loan 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 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 certain acquisitions. These credit facilities and 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 September 30, 2021,2022, the Company was in compliance with all of its financial covenants in the agreements governing its debt. Although the Company intendsbelieves
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. The Company is closely monitoring the impact of the COVID-19 pandemic on its business and the Company believes it will continue to operate in compliance with these covenants.
Consolidated Indebtedness – as of September 30, 20212022
As discussed above, the Company is committed to maintaining lowprudent leverage levels and may utilize proceeds from equity offerings or the sale of properties or other investments 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, 2020.2021.
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 lowprudent leverage and improve the Company’s credit profile with a focus of lowering the Company's balance sheet risk and cost of capital.
28
Unconsolidated Joint Ventures’ Mortgage Indebtedness – as of September 30, 20212022
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 September 30, 2021,2022, which matures in the subsequent 13-month period (i.e., through October 31, 2022)2023), is as follows (in millions):
| Outstanding at September 30, 2021 |
|
| At SITE Centers' Share |
| ||
DDR Domestic Retail Fund I(A) | $ | 462.5 |
|
| $ | 92.5 |
|
RVIP IIIB(A) |
| 61.3 |
|
|
| 15.8 |
|
Sun Center Limited(B) |
| 18.7 |
|
|
| 14.9 |
|
DDR SAU Retail Fund LLC(C) |
| 16.6 |
|
|
| 3.3 |
|
Total debt maturities through October 2022 | $ | 559.1 |
|
| $ | 126.5 |
|
|
|
|
|
|
|
Subject$115.8 million ($23.2 million at the Company’s share). All of this amount is attributable to the uncertain impact ofDDRM Joint Venture and the COVID-19 pandemic on capital and transactions markets, it is expected thatCompany expects the joint ventures will generally fund these obligationsventure to repay the indebtedness with proceeds from refinancing opportunities, including extension optionsasset sales or possible asset sales. to exercise the option to extend the loan's maturity date by one year.
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. Though rent collection at the Company’s joint ventures have improved during 2021, anyAny future deterioration in rent collection 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'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 |
| |||||
| Ended September 30, |
| |||||
| 2021 |
|
| 2020 |
| ||
Cash flow provided by operating activities | $ | 217,364 |
|
| $ | 125,934 |
|
Cash flow (used for) provided by investing activities |
| (64,731 | ) |
|
| 102,370 |
|
Cash flow used for financing activities |
| (161,708 | ) |
|
| (189,941 | ) |
| Nine Months |
| |||||
| Ended September 30, |
| |||||
| 2022 |
|
| 2021 |
| ||
Cash flow provided by operating activities | $ | 205,486 |
|
| $ | 217,364 |
|
Cash flow used for investing activities |
| (282,843 | ) |
|
| (64,731 | ) |
Cash flow provided by (used for) financing activities |
| 58,107 |
|
|
| (161,708 | ) |
Changes in cash flow for the nine months ended September 30, 2021,2022, compared to the prior comparable period, are as follows:
Operating Activities: Cash provided by operating activities increased $91.4decreased $11.9 million primarily due to the following:
• Decrease in cash collected from tenants in 2022 related to prior periods primarily from cash basis tenants; • Decrease in fees earned from joint ventures and managed properties and • Increase in income from acquired properties.
|
|
|
|
|
|
Investing Activities: Cash (used for) provided byused for investing activities decreased $167.1increased $218.1 million primarily due to the following:
• Increase in real estate assets acquired, developed and improved of $299.2 million; • Increase in proceeds from disposition of real estate and disposition of joint venture interests of $65.3 million and • Increase in distributions from unconsolidated joint ventures net of advance payments of $15.6 million. 28
|
|
|
|
Financing Activities: Cash used forprovided by financing activities decreased $28.2increased $219.8 million primarily due to the following:
|
|
|
|
|
|
|
|
RVI Preferred Shares
In 2018, RVI issued to the Company 1,000 shares of its series A preferred stock (the “RVI Preferred Shares”), which are noncumulative and have no mandatory dividend rate or maturity date. The RVI Preferred Shares rank, with respect to dividend rights and rights upon liquidation, dissolution or winding upredemptions of RVI, senior in preference and priority to RVI’s common shares and any other
29
class or series of RVI capital stock. Subject to the requirement that RVI distribute to its common shareholders the minimum amount required to be distributed with respect to any taxable year in order for RVI to maintain its status as a REIT and to avoid U.S. federal income taxes, the RVI Preferred Shares are entitled to a dividend preference for all dividends declared on RVI’s capital stock at any time up to a “preference amount” equal to $190.0 million in the aggregate, which amount could increase by up to an additional $10 million if the aggregate gross proceeds of RVI asset sales subsequent to July 1, 2018, exceeds approximately $2.0 billion. On October 6, 2021, the Company received a distribution of $190.0 million on the RVI Preferred Shares. Aggregate gross proceeds of RVI’s asset sales subsequent to July 1, 2018 through October 1, 2021 were $1.8 billion. RVI owns three remaining shopping centers as of October 1, 2021. The Company does not expect to receive any additional amounts with respect to the RVI Preferred Shares based on the level of sale proceeds expected from RVI’s remaining assets.Dividend Distribution
Dividend Distribution
The Company declared common and preferred cash dividends of $84.8$91.9 million and $54.3$84.8 million for the nine months ended September 30, 20212022 and 2020,2021, 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, 20212022 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 $0.11 per common share for the first quarter of 2021 and $0.12$0.13 per common share for each of the second and thirdfirst three quarters of 2021.2022. The Board of Directors of the Company intends to monitor the Company’s dividend policy in order to maintain sufficient liquidity for operating and in order to maximize the Company’s free cash flow while still adhering to REIT payout requirements.
SITE Centers’ Equity
In the second and the third quarters of 2021,March 2022, the Company settled 2.2 million common shares, which were offered and sold 980,396 and 720,076 of its common shares, respectively, on a forward basis in 2021 under its $250 million continuous equity program, at a weighted average priceresulting in gross proceeds of $15.09 per share and $15.89 per share, respectively. Year to date,$35.1 million. In the second quarter of 2022, the Company has offered and sold 1,700,472201,800 common shares at a weighted averageweighted-average price of $15.43$16.03 per share before issuance costs generating expected gross proceeds before issuance costs of $26.2 million, with no shares settled to date. The second quarter transactions may be settled at any time before the July 1,$3.2 million. At October 21, 2022, settlement date and the third quarter transactions may be settled at any time before the September 9, 2022 settlement date. As of October 22, 2021, the Company had approximately $223.8$211.7 million available for the future issuanceoffering of common shares under thatthis program.
In March 2021,the third quarter of 2022, the Company issued 17.25repurchased 1.6 million of its common shares resulting in net proceedsopen market transactions at an aggregate cost of $225.2 million.
In April 2021, the Company redeemed all $150.0$20.0 million, aggregate liquidation preference of its Class K Preferred Shares at a redemption price of $500or $12.74 per Class K Preferred Share (or $25.00 per depositary share) plus accrued and unpaid dividends of $7.2049 per Class K Preferred Share (or $0.3602 per depositary share). The Company recorded a non-cash charge of $5.1 million to net income attributable to common shareholders in the second quarter of 2021, which represents the difference between the redemption price and the carrying amount immediately prior to redemption, which was recorded to additional paid in capital upon original issuance.
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 purchase up to a maximum value of $100 million of its common shares. Through October 22, 2021,21, 2022, the Company had repurchased 5.16.7 million of its common shares under this program in open market transactions at an aggregate cost of approximately $57.9$77.9 million, or $11.33$11.66 per share. As of October 22, 2021, the Company had not repurchased any shares under the program during 2021.
SOURCES AND USES OF CAPITAL
Strategic Transaction Activity
The Company remains committed to maintaining sufficient liquidity, managing debt duration and maintaining lowprudent leverage levels in an effort to manage its overall risk profile. Equity offerings, debt financings, asset sales and proceedscash flow from the repayment of other investmentsoperations continue to represent a potential source of proceeds to be used to achieve these objectives.
Equity Transactions
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 2021,2022, the Company issued 17.25settled 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 netgross proceeds of $225.2 million which were used, in part, in April 2021 to redeem all$35.1 million. In the second quarter of its Class K Preferred Shares having an aggregate liquidation preference2022, the Company sold 201,800 common shares, generating gross proceeds of $150.0$3.2 million.
30
Acquisitions
During the nine months ended September 30, 2021,2022, the Company purchased three shopping centers (Delray Beach, Florida, Charlottesville, Virginia and Atlanta, Georgia)acquired 14 assets for an aggregate purchase price of $79.8 million, which includes $17.9 million$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 assumed mortgage indebtedness. Crabapple (Alpharetta, Georgia); Parkwood Shops (Atlanta, Georgia); Shops at Tanglewood (Houston, Texas) and Boulevard Marketplace, Fairfax Marketplace and Fairfax Pointe (Fairfax, Virginia).
The Company remains committed to taking advantagealso acquired its joint venture partner’s 80% equity interest in Casselberry Commons (Casselberry, Florida) owned 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 its financial position and elevated cash resources, including as a resultInterests of its recent receipt of a $190.0 million distribution on the RVI Preferred Shares, to prudently grow its portfolio of assets in wealthy suburban communities.$3.3 million.
Proceeds from Transactional Activity29
Dispositions
DuringIn the nine months ended September 30, 2021,2022, the Company sold fourtwo wholly-owned shopping centers and one parcel at a wholly-owned shopping center in addition to two unconsolidated shopping centers aggregating 0.6 million square feet, five wholly-owned land parcels and the Hobby Lobby pad of a shopping center. These sales collectively generatedgenerating proceeds totaling $84.6$98.4 million, of which the Company’s proportionate share was $65.6 million. In addition, in the third quarter of 2022, the proceeds was $41.9 million. The Company’s pro rata shareDDRM Joint Venture sold 13 shopping centers for an aggregate sales price of proceeds is before giving effect to$387.6 million ($77.5 million at the repaymentCompany's share) with the related mortgage debt of indebtedness and transaction costs. $225.0 million repaid upon closing.
In February 2021, onethe second quarter of 2022, the Company’s unconsolidated joint venturesCompany sold its sole20% interest in the SAU Joint Venture to its partner, the State of Utah, based on a gross asset which was a parcelvalue of undeveloped land (approximating 70 acres) in Richmond Hill, Ontario. The Company’s share of net proceeds totaled $22.1$155.7 million after accounting for customary closing costs and foreign currency translation. The net proceeds include $6.1 million that are held in escrow of which $4.1 million is expected to be released to(at 100%). In addition, the Company pending receiptsold its 50% interest in Lennox Town Center to its partner based on a gross asset value of certain tax clearance certificates from the Canadian taxing authorities, and the remaining $2.0$77.0 million is considered contingent and should be released upon final dissolution(at 100%). These transactions resulted in a Gain on Sale of the partnership. The Company recorded an aggregate gain on the transactionInterests of $16.8 million which included its $2.8 million share of the gain reported by the joint venture, as well as $14.0 million related to the Company’s promoted interest on the disposition of the investment and write-off of the accumulated foreign currency translation. Subsequent to the transaction, the Company has no other investments outside the United States.$42.2 million.
On October 6, 2021, the Company received a distribution of $190.0 million on the RVI Preferred Shares, which represents the full amount expected to be paid by RVI on account of the Company’s preferred investment.
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.
Redevelopment Opportunities
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. The Company will generally commence construction on various redevelopmentsredevelopment projects only after substantial tenant leasing has occurred. At September 30, 2021,2022, the Company anticipates that it has approximately $26$25 million to fundbe 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, 2021,2022, the Company had $42approximately $60 million in construction in progress in various active consolidated redevelopment and other projects.projects on a net basis. The Company’s major 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. At September 30, 2021,2022, the Company’s large-scale shopping center expansion and repurposing projects were as follows (in thousands):
Location |
| Estimated Stabilized Quarter |
| Estimated Gross Cost |
|
| Cost Incurred at September 30, 2021 |
|
| Estimated |
| Estimated |
|
| Cost Incurred at |
| ||||
West Bay Plaza - Phase II (Cleveland, Ohio) |
| 2Q23 |
| $ | 9,102 |
|
| $ | 2,972 |
|
| 4Q23 |
| $ | 9,102 |
|
| $ | 6,455 |
|
Woodfield Village Green (Chicago, Illinois) |
| TBD |
|
| — |
|
|
| 663 |
| ||||||||||
Perimeter Pointe (Atlanta, Georgia) |
| TBD |
|
| — |
|
|
| 1,252 |
|
| TBD |
| TBD |
|
|
| 1,326 |
| |
Total |
|
|
| $ | 9,102 |
|
| $ | 4,887 |
|
| $ | 9,102 |
|
| $ | 7,781 |
|
At September 30, 2021,2022, 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 Stabilized Quarter |
| Estimated Gross Cost |
|
| Cost Incurred at September 30, 2021 |
|
| 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 |
| $ | 6,672 |
|
| $ | 164 |
|
| 4Q23 |
|
| 4,967 |
|
|
| 2,631 |
|
University Hills (Denver, Colorado) |
| 4Q23 |
|
| 4,589 |
|
|
| 519 |
| ||||||||||
Hamilton Marketplace (Trenton, New Jersey) |
| 4Q22 |
|
| 3,843 |
|
|
| 2,769 |
|
| 2Q23 |
|
| 3,843 |
|
|
| 3,589 |
|
Carolina Pavilion (Charlotte, North Carolina) |
| 4Q23 |
|
| 2,339 |
|
|
| 167 |
|
| 4Q23 |
|
| 2,339 |
|
|
| 1,861 |
|
West Bay Plaza (Cleveland, Ohio) |
| 1Q22 |
|
| 335 |
|
|
| 100 |
| ||||||||||
Other Tactical Projects |
| N/A |
|
| 13,549 |
|
|
| 12,971 |
|
| N/A |
|
| 1,884 |
|
|
| 14 |
|
Total |
|
|
| $ | 31,327 |
|
| $ | 16,690 |
|
| $ | 38,180 |
|
| $ | 15,404 |
|
No major redevelopment assets have been completed to date in 2021. For tactical redevelopment and larger retenanting projects completed in 2021, the assets placed in service were completed at a cost of approximately $116 per square foot.
OFF-BALANCE SHEET ARRANGEMENTSCAPITALIZATION
The Company has a number of off-balance sheet joint ventures with varying economic structures. Through these interests, the Company has investments in operating properties. Such arrangements are generally with institutional investors.
The Company’s unconsolidated joint ventures had aggregate outstanding indebtedness to third parties of $1.0 billion and $1.4 billion at September 30, 2021 and 2020, respectively (see Item 3. Quantitative and Qualitative Disclosures About Market Risk). 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 misrepresentations.
CAPITALIZATION
At September 30, 2021,2022, the Company’s capitalization consisted of $1.8 billion of debt, $175.0 million of preferred shares and $3.3$2.3 billion of market equity (market equity is defined as common shares and OP Units outstanding multiplied by $15.44,$10.71, the closing price of the Company’s common shares on the New York Stock Exchange on September 30, 2021), resulting in a debt to total market capitalization ratio of 0.34 to 1.0, as compared to the ratio of 0.51 to 1.0 at September 30, 2020.2022). The closing price of the Company’s common shares on the New York Stock Exchange was $7.20$15.44 at September 30, 2020.2021. At September 30, 20212022 and 2020, 2021,
30
the Company’s total debt consisted of $1.7 billion and $1.6 billion, and $1.5 billionrespectively, of fixed-rate debt respectively,and $0.1 billion and $0.2 billion, and $0.3 billionrespectively, of variable-rate debt. At September 30, 2022, the fixed-rate debt includes $200.0 million of variable-rate debt respectively. that had been effectively swapped to a fixed rate through the use of interest rate derivative contracts.
ItManagement’s strategy is management’s strategy to havemaintain 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 conservative 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 facilities 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, 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 certain 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 of 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
The Company has no remaining consolidated debt maturing until Januaryin 2022. As of October 21, 2022, the Company has $87.2 million aggregate principal amount of senior notes and $19.6 million of consolidated secured mortgage debt maturing in 2023. The Company expects to fund future maturities from utilization of its Revolving Credit Facilities,Facility, proceeds from asset sales and other investments, cash flow from operations and/or
32
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 $19.7$30.1 million for its consolidated properties at September 30, 2021.2022. 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 Facilities.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 September 30, 2021,2022, the Company had purchase order obligations, typically payable within one year, aggregating approximately $6.4$7.7 million related to the maintenance of its properties and general and administrative expenses.
ECONOMIC CONDITIONS
Despite an increase inThe Company continues to believe there is retailer bankruptcies in 2020, thedemand 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 in the second half of 2020, which continued through the first nine months of 2021. Ultimately, thetenants. The Company executed new leases and renewals aggregating approximately 2.63.5 million square feet of space for the nine months ended September 30, 2021,2022, on a pro rata basis, which exceeded first nine months 2020 leasing levels.basis. Although there may be some additional disruption among existing tenants due to the continuing impact of the COVID-19 pandemic,inflationary pressures, supply chain impacts, labor shortages and capital markets volatility, the Company believes that recent strong leasing volumes are attributable to the location of the Company’s portfolio in suburban, high household income communities (which have been impacted less by the pandemic on a relative basis) and to its national tenants’ strong financial positions and increasing emphasis and reliance on physical store locations to improve the spread and efficiency of fulfillmentpurchases agnostic of online purchases.channel.
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 5.9%5.8%). Other significant national tenants include Dick’s Sporting Goods, Ulta, Bed Bath & Beyond, Best Buy, Nordstrom Rack, Five Below, Ross Stores, Kroger, Whole Foods and Home Depot, all of whichgenerally 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% since the Company’s initial public offering in 1993. At September 30, 20212022 and December 31, 2020,2021, the shopping center portfolio occupancy, on a pro rata basis, was 90.2%91.4% and 89.0%90.0%, respectively, and the total portfolio average annualized base rent per occupied square foot, on a pro rata basis, was $18.44$19.11 and $18.50,$18.33, respectively. The Company’s portfolio has beenwas impacted by tenant bankruptcies and lease expirations in recent years (which increased in number and paceclosures in 2020, followingprimarily due to the onsetimpact of the COVID-19 pandemic)pandemic, and the Company expects to expend significant amounts of capital in coming periods in connection with recently executed anchor leases and in order to re-lease remaining anchor vacancies.backfill these 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 anchor leasing activity will cause aggregate leasing capital expenditure levels to remain elevated. The weighted-average cost of tenant improvements and lease commissions estimated to be incurred over the expected lease term for new and renewal leases executed during the nine months ended September 30, 20212022 and 2020,2021, on a pro rata basis, was $2.71$7.31 and $2.01$8.56 per rentable square foot, respectively. The Company generally does not expend a significant amount of capital on lease renewals.
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 their operations or close their businesses for a period of time. AsThe Company worked with tenants to maximize the collection of October 15, 2021, 100%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 Company’s tenants (at the Company’s share and based on average base rents) were open for business, up from an open rate low of 45% in early April 2020. The COVID-19 pandemic had no impact on the Company’s collection of rents for the first quarter of 2020, but it had a significant impact
33
on collection of rents from April 2020 through the end of 2020. shopping center. The Company’s collection rates have shownshowed significant improvements in 2021 and a substantial majority of 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 repayinghave repaid deferred rents relating to prior periods. As of October 15, 2021, the Company’s quarterly rent payment rates, for assets owned at September 30, 2021, determined on a pro rata basis, for each quarterly reporting period since March 2020, and updated for subsequent cash receipts (including2022, the repaymentmajority of deferred rents), are reflected as follows:
|
| Second Quarter 2020 |
|
| Third Quarter 2020 |
|
| Fourth Quarter 2020 |
|
| First Quarter 2021 |
|
| Second Quarter 2021 |
|
| Third Quarter 2021 |
|
As of October 15, 2021 |
| 91% |
|
| 96% |
|
| 97% |
|
| 98% |
|
| 99% |
|
| 99% |
|
For purposes of reporting the percentage of aggregate base rents collected for a given period, when rents subject to deferral arrangements are later paid, those payments are allocated to the period in which the rent was originally owed. The Company calculates the aggregate percentage of rents paid by comparing the amount of tenant payments received as of the date presented to the amount billed to tenants during the period, which billed amount includes abated rents, rents subject to deferral arrangements and rents owing from bankrupt tenants that were in possession of the space and billed.
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, 2021, $1.7 million remains outstanding under these deferral arrangements for tenants that are not accounted for on the cash basis. As of October 15, 2021, agreed upon rent deferral arrangements with tenants that remain unpaid represented 1% of 2020 rents. Agreed upon rental deferral arrangements for the first three quarters of 2021 are immaterial.
The Company is unable to forecast the duration of the disruption to tenant and Company operations caused by the COVID-19 pandemic or the ultimate level of collections of rents and other unpaid amounts owed by tenants that were deferred or unpaid during 2020. However, the level and pace of collections of such deferred rents and other unresolved amounts exceeded management’s expectations during the first nine months of 2021, especially with respect to collections from tenants previously placed on the cash basis of accounting. Ifhave been repaid. Any new surges in contagion were to occur, or if new COVID-19COVID‑19 variants were to be discovered which are more resistant to vaccines, or if there are decreases in the effectiveness of such vaccines, the Company’s recent success in the collection of deferred rents and unresolved amounts could be adversely impacted and such developments could lead to new restrictions on tenant operations, nonpayment of contractual and previously deferred rents, additional tenant requests for rent relief and additional tenant closures and bankruptcies, all of which could adversely impact the Company’s results of operations in the future.Company's ability to lease space and collect rents. Certain tenant categories remain especially vulnerable to the impactsimpact of the COVID-19 pandemic, including movie theaters, fitness centers and local restaurants. For additional risks relating to the COVID-19 pandemic, see Item 1A. Risk Factors in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. 2021.
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 and rising interest rates could result in reductions in consumer spending and retailer profitability which could impact the Company’s ability to grow rents and tenant demand for new and existing store locations. Regardless of accelerating inflation levels, base rent under most of 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-through 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 also 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.
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 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, 2020. The impact of the COVID-19 pandemic may also exacerbate the risks discussed therein and herein, any of which could have a material effect on the Company.2021.
34
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:
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3634
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
|
The Company’s primary market risk exposure is interest rate risk. The Company’s debt, excluding unconsolidated joint venture debt and adjusted to reflect the $200.0 million of variable-rate debt that SOFR was swapped to a fixed rate of 2.75% at September 30, 2022 is summarized as follows:
| September 30, 2021 |
|
| December 31, 2020 |
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Amount (Millions) |
|
| Weighted- Average Maturity (Years) |
|
| Weighted- Average Interest Rate |
|
| Percentage of Total |
|
| Amount (Millions) |
|
| Weighted- Average Maturity (Years) |
|
| Weighted- Average Interest Rate |
|
| Percentage of Total |
| Amount |
|
| Weighted- |
|
| Weighted- |
|
| Percentage |
|
| Amount |
|
| Weighted- |
|
| Weighted- |
|
| Percentage |
| ||||||||||||||||
Fixed-Rate Debt | $ | 1,605.1 |
|
|
| 4.0 |
|
|
| 4.1 | % |
|
| 89.5 | % |
| $ | 1,602.4 |
|
|
| 4.7 |
|
|
| 4.1 | % |
|
| 82.9 | % | $ | 1,742.1 |
|
|
| 3.3 |
|
|
| 4.1 | % |
|
| 95.6 | % |
| $ | 1,577.6 |
|
|
| 3.8 |
|
|
| 4.1 | % |
|
| 94.1 | % |
Variable-Rate Debt | $ | 187.5 |
|
|
| 0.8 |
|
|
| 1.7 | % |
|
| 10.5 | % |
| $ | 331.1 |
|
|
| 1.9 |
|
|
| 1.5 | % |
|
| 17.1 | % | $ | 80.0 |
|
|
| 3.7 |
|
|
| 3.9 | % |
|
| 4.4 | % |
| $ | 99.8 |
|
|
| 1.1 |
|
|
| 1.1 | % |
|
| 5.9 | % |
The Company’s unconsolidated joint ventures’ indebtedness at its carrying value is summarized as follows:
| September 30, 2021 |
|
| December 31, 2020 |
| September 30, 2022 |
|
| December 31, 2021 |
| ||||||||||||||||||||||||||||||||||||||||||||||||||||
| Joint Venture Debt (Millions) |
|
| Company's Proportionate Share (Millions) |
|
| Weighted- Average Maturity (Years) |
|
| Weighted- Average Interest Rate |
|
| Joint Venture Debt (Millions) |
|
| Company's Proportionate Share (Millions) |
|
| Weighted- Average Maturity (Years) |
|
| Weighted- Average Interest Rate |
| Joint |
|
| Company's |
|
| Weighted- |
|
| Weighted- |
|
| Joint |
|
| Company's |
|
| Weighted- |
|
| Weighted- |
| ||||||||||||||||
Fixed-Rate Debt | $ | 754.1 |
|
| $ | 176.9 |
|
|
| 2.2 |
|
|
| 4.4 | % |
| $ | 757.5 |
|
| $ | 178.2 |
|
|
| 2.9 |
|
|
| 4.4 | % | $ | 363.4 |
|
| $ | 72.7 |
|
|
| 1.5 |
|
|
| 4.8 | % |
| $ | 673.9 |
|
| $ | 146.2 |
|
|
| 2.4 |
|
|
| 4.2 | % |
Variable-Rate Debt | $ | 242.9 |
|
| $ | 48.6 |
|
|
| 0.8 |
|
|
| 2.5 | % |
| $ | 272.1 |
|
| $ | 54.4 |
|
|
| 0.5 |
|
|
| 2.5 | % | $ | 176.5 |
|
| $ | 38.9 |
|
|
| 1.3 |
|
|
| 5.1 | % |
| $ | 199.4 |
|
| $ | 43.5 |
|
|
| 1.4 |
|
|
| 2.2 | % |
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 FacilitiesFacility 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 as a result of inflation will significantly impact the Company’s distributable cash flow. 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 September 30, 2022, the interest rate on $200.0 million of the Company’s consolidated variable-rate debt 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.
The carrying value and the fair value of the Company’s fixed-rate debt areis adjusted to include the $200.0 million of variable-rate debt that was swapped to a fixed rate at September 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 ventureventures' fixed-rate debt. An estimate of the effect of a 100 basis-point increase at September 30, 20212022 and December 31, 2020,2021, is summarized as follows (in millions):
| September 30, 2022 |
|
|
| December 31, 2021 |
| ||||||||||||||||||
| 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 |
|
Company's proportionate share of | $ | 72.7 |
|
| $ | 70.8 |
|
| $ | 69.8 |
|
|
| $ | 146.2 |
|
| $ | 149.7 |
|
| $ | 146.8 |
|
| September 30, 2021 |
|
|
| December 31, 2020 |
| ||||||||||||||||||
| Carrying Value |
|
| Fair Value |
|
| 100 Basis-Point Increase in Market Interest Rate |
|
|
| Carrying Value |
|
| Fair Value |
|
| 100 Basis-Point Increase in Market Interest Rate |
| ||||||
Company's fixed-rate debt | $ | 1,605.1 |
|
| $ | 1,736.0 |
|
| $ | 1,660.5 |
|
|
| $ | 1,602.4 |
|
| $ | 1,704.0 |
|
| $ | 1,634.3 |
|
Company's proportionate share of joint venture fixed-rate debt | $ | 176.9 |
|
| $ | 181.5 |
|
| $ | 178.3 |
|
|
| $ | 178.2 |
|
| $ | 181.6 |
|
| $ | 177.2 |
|
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 September 30, 2021,2022, would result in an increase in interest expense of approximately $1.4$0.6 million for the Company and $0.4$0.1 million representing the Company’s proportionate share of
35
the joint ventures’ interest expense relating to variable-rate debt outstanding for the nine months ended September 30, 2021.2022. 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.
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 September 30, 2021,2022, the Company had no other material exposure to market risk.
37
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 September 30, 2021,2022, 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.
3836
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. |
|
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 Number of Shares Purchased(1) |
|
| Average Price Paid per Share |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
July 1–31, 2021 |
| 129 |
|
| $ | 15.06 |
|
|
| — |
|
| $ | — |
|
August 1–31, 2021 |
| 20 |
|
|
| 15.86 |
|
|
| — |
|
|
| — |
|
September 1–30, 2021 |
| 25,350 |
|
|
| 15.28 |
|
|
| — |
|
|
| — |
|
Total |
| 25,499 |
|
| $ | 15.28 |
|
|
| — |
|
| $ | 42.1 |
|
|
|
Item 3. DEFAULTS UPON SENIOR SECURITIES None. |
|
None.
Item 4. MINE SAFETY DISCLOSURES
|
|
Not applicable.
Item 5. OTHER INFORMATION |
|
None.
39None.
37
Item 6. EXHIBITS
1. Submitted electronically herewith.
Attached as Exhibit 101 to this report are the following formatted in iXBRL (Inline Extensible Business Reporting Language): (i) Consolidated Balance Sheets as of September 30, 38 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.
39
|