SITE Centers Reports Second Quarter 2020 Operating Results

BEACHWOOD, Ohio–(BUSINESS WIRE)–SITE Centers Corp. (NYSE: SITC) today announced operating results for the quarter ended June 30, 2020.

“Despite unprecedented operating conditions, second quarter results demonstrate the durability of our assets with 100% of our properties operational and over 90% of our tenants currently open for business,” commented David R. Lukes, President and Chief Executive Officer. “Our agreement with Blackstone to unwind our BRE DDR joint ventures further improves our Company’s financial position and outlook with substantial liquidity, no material near-term maturities, and no material capital commitments.”

Results for the Quarter

• Second quarter net loss attributable to common shareholders was $9.7 million, or $0.05 per diluted share, as compared to net income of $8.9 million, or $0.05 per diluted share, in the year-ago period. The year-over-year decrease in net income was primarily attributable to the impact of the COVID-19 pandemic.
• Second quarter operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $39.9 million, or $0.21 per diluted share, compared to $57.0 million, or $0.31 per diluted share, in the year-ago period.

Significant Quarter and Recent Activity

• Entered into agreements with affiliates of Blackstone to terminate the BRE DDR III and BRE DDR IV joint ventures. Additional details are provided in the “BRE DDR Joint Ventures” section of this release.
• The Company’s Board of Directors suspended payment of dividends on its common shares for the third quarter of 2020. The Board of Directors has not made any decisions with respect to its dividend policy beyond the third quarter of 2020 and intends to maintain compliance with REIT taxable income distribution requirements.
• Repaid $360 million of the outstanding balance on the Company’s $970 million unsecured lines of credit. Including $128 million of consolidated cash and availability under lines of credit, total liquidity as of June 30,2020 was $813 million.
• Issued the Company’s sixth Corporate Responsibility and Sustainability Report. The Report was completed in alignment with the Global Reporting Initiative (GRI) and with the Sustainability Accounting Standards Board (SASB) metrics and frameworks and provides updates on the annual results of the Company’s corporate responsibility and sustainability programs. The full Report can be found at https://www.sitecenters.com/2019CRS.

Key Quarterly Operating Results

• Reported a decrease of 19.1% in same store net operating income on a pro rata basis for the second quarter of 2020, excluding redevelopment primarily due to the impact of the COVID-19 pandemic. Including redevelopment, same store net operating income for the second quarter of 2020 decreased by 18.1%.
• Generated new leasing spreads of 23.1% and renewal leasing spreads of 6.6%, both on a pro rata basis, for the quarter and new leasing spreads of 16.9% and renewal leasing spreads of 3.8%, both on a pro rata basis, for the trailing twelve-month period.
• Reported a leased rate of 92.4% at June 30, 2020 on a pro rata basis, compared to 92.9% on a pro rata basis at March 31, 2020 and 93.9% at June 30, 2019. The sequential decline was primarily related to the bankruptcy of 24 Hour Fitness.
• As of June 30, 2020, the signed but not opened spread was 200 basis points representing $11 million of annualized base rent on a pro rata basis scheduled to commence.
• Annualized base rent per occupied square foot on a pro rata basis was $18.51 at June 30, 2020, compared to $17.98 at June 30, 2019.

COVID-19 Update

• Furthered our property level COVID-19 pandemic response to include: property level social media and email marketing campaigns to help communities identify operating tenants, facilitated gift card and purchase promotion program to connect local businesses with members of the communities, instituted heightened cleaning and disinfection protocols, installed social distancing and hygiene signage around our properties to follow CDC guidelines, developed and implemented our Vendor COVID Operating Protocolto promote safe and responsible operations by our vendors, developed and implemented a COVID Operating Protocol for all property operations staff, deployed online purchase pick-up locations across the portfolio, and completed a tenant survey to identify specific tenant needs around curbside and online purchase pick-up.
• As of July 24, 2020, all of the Company’s properties remain open and operational with 92% 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% as of April 5, 2020.
• As of July 24, 2020, the Company’s tenants had paid approximately 64% of second quarter rents and 71% of July rents. The Company has reached deferral arrangements with tenants representing an additional 17% of second quarter rents and 10% of July rents.

BRE DDR Joint Ventures

• On July 14, 2020, the Company entered into agreements with affiliates of Blackstone to terminate the BRE DDR III and BRE DDR IV joint ventures. Pursuant to these agreements:
  • At the closing of the BRE DDR III transaction, the Company will transfer its common and preferred equity interests in BRE DDR III to an affiliate of Blackstone in exchange for (i) BRE DDR III’s interests in White Oak Village and Midtowne Park, (ii) 50% of the unrestricted cash then held by BRE DDR III (BRE DDR III’s unrestricted cash balance was $13.6 million as of June 30, 2020), and (iii) $1.9 million in cash. At closing, the White Oak Village and Midtowne Park properties will continue to be subject to existing mortgage loans which had an aggregate outstanding principal balance of $50.0 million as of June 30, 2020.
  • At the closing of the BRE DDR IV transaction, an affiliate of Blackstone will transfer its common equity interest in BRE DDR IV to the Company for consideration of $1.00 and the Company’s preferred investment in the BRE DDR IV joint venture will be redeemed, thereby leaving the Company as the sole owner of (i) the seven properties currently owned by BRE DDR IV, including Echelon Village Plaza and Larkins Corner, in which the Company did not previously have a material economic interest, and (ii) BRE DDR IV’s restricted and unrestricted cash ($11.2 million in the aggregate as of June 30, 2020). At closing, these seven properties will be subject to existing mortgage loans which had an aggregate outstanding principal balance of $147.0 million as of June 30, 2020.

The closings of the two transactions are not conditioned on one another and each transaction is expected to close as soon as all applicable conditions have been satisfied including receipt of lender consents.

DDR BRE Acquisition Properties

About SITE Centers Corp.

SITE Centers is an owner and manager of open-air shopping centers that provide a highly-compelling shopping experience and merchandise mix for retail partners and consumers. The Company is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol SITC. Additional information about the Company is available at https://www.sitecenters.com. To be included in the Company’s e-mail distributions for press releases and other investor news, please click here.

Conference Call and Supplemental Information

The Company will hold its quarterly conference call today at 8:00 a.m. Eastern Time. To participate with access to the slide presentation, please visit the Investor Relations portion of SITE’s website, ir.sitecenters.com, or for audio only, dial 888-317-6003 (U.S.), 866-284-3684 (Canada) or 412-317-6061 (international) using pass code 2698100 at least ten minutes prior to the scheduled start of the call. The call will also be webcast and available in a listen-only mode on SITE Centers’ web site at ir.sitecenters.com. If you are unable to participate during the live call, a replay of the conference call will also be available at ir.sitecenters.com for further review. You may also access the telephone replay by dialing 877-344-7529 (U.S.), 855-669-9658 (Canada) or 412-317-0088 (international) using passcode 10146103 through August 28, 2020. A copy of the Company’s Supplemental package is available on the Company’s website.

Non-GAAP Measures

Funds from Operations (“FFO”) is a supplemental non-GAAP financial measure used as a standard in the real estate industry and is a widely accepted measure of real estate investment trust (“REIT”) performance. Management believes that both FFO and Operating FFO provide additional indicators of the financial performance of a REIT. 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 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 interests, (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 calculates Operating FFO as FFO excluding certain non-operating charges, income and gains. 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. Other real estate companies may calculate FFO and Operating FFO in a different manner.

The Company also uses net operating income (“NOI”), 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 presents NOI information herein on a same store basis or “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. 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.

FFO, Operating FFO, NOI and SSNOI do not represent cash generated from operating activities in accordance with GAAP, are not necessarily indicative of cash available to fund cash needs and should not be considered as alternatives to net income computed in accordance with GAAP, as indicators of the Company’s operating performance or as alternatives to cash flow as a measure of liquidity. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures have been provided herein.

Safe Harbor

SITE Centers Corp. considers portions of the information in this press release 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 expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, the impact of the outbreak of COVID-19 on the Company’s ability to manage its properties and finance its operations and on tenants’ ability to operate their businesses, generate sales and meet their financial obligations, including the obligation to pay rent; the Company’s ability to pay dividends; local conditions such as the supply of, and demand for, retail real estate space in the area; the impact of e-commerce; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant and the impact of any such event on rental income from other tenants and our properties; redevelopment and construction activities may not achieve a desired return on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract; our ability to secure equity or debt financing on commercially acceptable terms or at all; impairment charges; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements and the Company’s ability to satisfy conditions to the completion of these arrangements; valuation and risks relating to our joint venture and preferred equity investments; the termination of any joint venture arrangements or arrangements to manage real property and the ability to satisfy conditions of such terminations; property damage, expenses related thereto and other business and economic consequences (including the potential loss of rental revenues) resulting from extreme weather conditions or natural disasters in locations where we own properties, and the ability to estimate accurately the amounts thereof; sufficiency and timing of any insurance recovery payments related to damages from extreme weather conditions or natural disasters; any change in strategy and our ability to maintain REIT status; and the finalization of the financial statements for the period ended June 30, 2020. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company’s most recent reports on Form 10-K and Form 10-Q. The impacts of the COVID-19 pandemic may also exacerbate the risks described therein, any of which could have a material effect on the Company. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

Contacts

Conor Fennerty, EVP and Chief Financial Officer

216-755-5500

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