SITE Centers (SITC) Q1 FFO Beats, Revenues Miss Estimates

SITE Centers Corp. (NYSE:SITC) posted first-quarter 2019 operating funds from operations (OFFO) per share of 32 cents, surpassing the Zacks Consensus Estimate of 29 cents.

Results reflect growth in same-store net operating income (NOI). The company, on a pro-rata basis, generated new and renewal leasing spreads of 23.2% and 7.9%, respectively, in the first quarter.

However, the operating FFO per share figure compares unfavorably with the prior-year tally of 53 cents. This year-over-year decline reflects the dilutive impact of the company’s spin-off of RVI, partially offset by lower interest expense.

The company generated revenues of $113.7 million in the quarter, missing the Zacks Consensus Estimate of $117.9 million. Further, the top-line figure came in lower than the $207 million recorded in the comparable period last year. This downside primarily resulted from lower rental income owing to a decrease in minimum rents and percentage rents.

Quarter in Detail

Same-store NOI growth for the total portfolio on a pro-rata basis was 1.3% in the first quarter. SITE Centers reported a leased rate of 93% as of Mar 31, 2019, compared with 93.6% in the prior-year period, on a pro-rata basis. Notably, the bankruptcies of Toys “R” Us and Mattress Firm primarily resulted in the year-over-year decline.

Annualized base rent per occupied square-foot for the total portfolio was $17.92 on a pro-rata basis as of Mar 31, 2019, up from $17.16 recorded a year ago.

SITE Centers sold five shopping centers for $185.6 million during the reported quarter. Further, the company entered into an agreement with Column Financial, Inc, an affiliate of Credit Suisse (SIX:CSGN), regarding a portfolio of 83 properties anchored by Shopko. The company’s management of the assets is anticipated to generate a one-time $1-million fee, of which $0.5 million was recorded in the March-end quarter.

Also, the company received a $1.8 million fee related to the refinancing of RVI’s loan facility, which was excluded from OFFO.

Finally, SITE Centers exited the Jan-Mar quarter with $9.61 million in cash compared with $11.08 million as of Dec 31, 2018.

Outlook

The company revised the operating FFO per share outlook to $1.14- $1.19 from the initially provided estimate of $1.13-$1.14. The Zacks Consensus Estimate for the same is pegged at $1.16. Furthermore, the guidance for same-store net operating income has been revised to 1.25% to 2% compared to the prior projection of 1% to 2%.

Bottom Line

SITE Centers is feeling the heat of the prevalent choppy retail real estate environment. In fact, the company witnessed significant decline in minimum rents and percentage rents as compared to the prior-year quarter.

Nonetheless, SITE Centers made strategic efforts to reposition its portfolio. Additionally, focus on opportunistic investments will be accretive for its long-term growth.

SITE Centers carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Vornado Realty Trust (NYSE:VNO) , UDR Inc. (NYSE:UDR) and Outfront Media (NYSE:OUT) .

Vornado Realty Trust will release its quarterly figures on Apr 29, UDR on Apr 30 and Outfront Media is scheduled to release the same on May 7.

Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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