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SITE Centers' (SITC) Q3 OFFO Meets, Revenues Lag Estimates

Zacks Equity Research

SITE Centers Corp.’s SITC third-quarter 2019 operating funds from operations (OFFO) per share of 30 cents came in line with the Zacks Consensus Estimate. However, the figure compares unfavorably with the prior-year quarter’s reported tally of 33 cents. This year-over-year decline is mainly due to the formation of the DTP joint venture.

Results were adversely impacted by fall in rental income and other property revenues. However, decent leasing spreads, both for new leases and renewals, provided some support.

The company generated revenues of $109.7 million in the quarter, missing the Zacks Consensus Estimate of $111.6 million. Also, the top-line figure came in lower than the $129 million recorded in the comparable period last year.

Quarter in Detail

Same-store net operating income (NOI) growth on a pro-rata basis was 1.6% for the quarter. SITE Centers reported a leased rate of 94.2% as of Sep 30, 2019, up 150 basis points from the prior-year quarter’s end, on a pro-rata basis.

Annualized base rent per occupied square foot was $18.04 on a pro-rata basis as of Sep 30, 2019, up 3.3% from $17.47 as of Sep 30, 2018. The company, on a pro-rata basis, generated new and renewal leasing spreads of 13.9% and 4.6%, respectively, in the third quarter.

SITE Centers sold two shopping centers for $39.2 million ($37.9 million at the company’s share) during the reported quarter. This included $1.3 million from the repayment of SITC Centers’ preferred equity investment in two joint ventures with Blackstone.

Finally, SITE Centers exited the September-end quarter with $23.7 million in cash compared with approximately $11.1 million as of Dec 31, 2018.

Outlook

The company updated its operating FFO per share outlook to $1.20-$1.22 from the prior estimate of $1.18-$1.22. The Zacks Consensus Estimate for the same is currently pinned at $1.21.

Furthermore, the guidance for same-store NOI has been revised to 2.75-3.25% compared with the previous projection of 2.25-3.25%.

Conclusion

Healthy leasing momentum is likely to support SITE Centers’ financials, in the upcoming period. Moreover, the company remains on track with its five-year growth plan. Additionally, emphasis on redevelopment opportunities will likely result in rent and occupancy growth at its properties. It is also focused on revamping its portfolio through asset sales and reinvesting the proceeds in accretive acquisitions. Nevertheless, shrinking footfall at malls amid shift of consumers toward online channels, store closures and bankruptcy of retailers will likely keep affecting the retail real estate sector and dent the company’s growth in the near term.

SITE CENTERS CORP. Price, Consensus and EPS Surprise

 

SITE CENTERS CORP. Price, Consensus and EPS Surprise

 

SITE CENTERS CORP. price-consensus-eps-surprise-chart | SITE CENTERS CORP. Quote

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

Performance of Other REITs

Taubman Centers Inc. TCO reported third-quarter 2019 funds from operations (FFO) per share of 88 cents, missing the Zacks Consensus Estimate of 89 cents. The figure also compared unfavorably with the year-ago quarter’s reported tally of $1.05.  

Kimco Realty Corp.’s KIM third-quarter 2019 FFO as adjusted, excluding the impact of transactional income and charges, came in at 37 cents per share, surpassing the Zacks Consensus Estimate by a whisker. The reported tally came in a penny higher than the year-ago quarter’s FFO as adjusted of 36 cents per share.

PS Business Parks, Inc. PSB posted third-quarter 2019 FFO of $1.71 per share, which narrowly missed the Zacks Consensus Estimate of $1.73. However, the figure came in 4.3% higher than the prior-year quarter’s $1.64.   

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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