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Edited Transcript of SITC earnings conference call or presentation 30-Oct-19 1:00pm GMT

Q3 2019 Site Centers Corp Earnings Call

Beachwood Nov 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Site Centers Corp earnings conference call or presentation Wednesday, October 30, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Brandon Day-Anderson

SITE Centers Corp. - Head of IR, Executive Assistant-Chief Financial Officer

* David R. Lukes

SITE Centers Corp. - President, CEO & Director

* Matthew L. Ostrower

SITE Centers Corp. - Executive VP, CFO & Treasurer

* Michael A. Makinen

SITE Centers Corp. - Executive VP & COO

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Conference Call Participants

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* Daniel Santos

Sandler O'Neill + Partners, L.P., Research Division - VP

* Floris Gerbrand Hendrik van Dijkum

Compass Point Research & Trading, LLC, Research Division - Analyst

* Kathleen McConnell

Citigroup Inc, Research Division - Research Analyst

* Richard Hill

Morgan Stanley, Research Division - Head of U.S. REIT Equity & Commercial Real Estate Debt Research and Head of U.S. CMBS

* Todd Michael Thomas

KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst

* Wesley Keith Golladay

RBC Capital Markets, Research Division - VP & Equity Research Analyst

* Yong Sheng

JPMorgan - Associate, HR Business Partner

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Presentation

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Operator [1]

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Good morning and welcome to the SITE Centers Third Quarter 2019 Operating Results Conference Call. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Brandon Day, Investor Relations. Please go ahead.

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Brandon Day-Anderson, SITE Centers Corp. - Head of IR, Executive Assistant-Chief Financial Officer [2]

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Good morning, and thank you for joining us. On today's call, you will hear from Chief Executive Officer, David Lukes; Chief Operating Officer, Michael Makinen; and Chief Financial Officer, Matthew Ostrower.

Please be aware that certain of our statements may contain forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information about these risks and uncertainties may be found in our earnings press release issued this morning and in the documents that we file with the SEC, including our most recent forms on Form 10-K and 10-Q.

In addition, we will be discussing non-GAAP financial measures on today's call, including FFO, operating FFO and same-store net operating income. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's press release. This release and our quarterly financial supplement are available on our website at www.sitecenters.com.

For those of you on the phone who would like to follow along during today's presentation, please visit the Events section of our Investor Relations page and sign into the earnings call webcast.

At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [3]

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Good morning. Thank you for joining our third quarter earnings call.

I'm extremely pleased with our performance over the last 3 months, which was measurably above our expectations due largely to better-than-expected property NOI and lower G&A. Our ongoing operating momentum is leading us to once again increase our same-store NOI growth and OFFO guidance.

I'd like to first comment on how our quarterly results tie into the 3 major components of our 5-year business plan: leasing, redevelopment and acquisitions, before discussing a couple of key capital transactions, and then I'll hand the call over to Mike to discuss our operations in greater detail. Matt will conclude with some comments on the balance sheet, quarterly results and our guidance increase.

First, same-store NOI growth, the largest component of our business plan was 1.6%, marking the trough we forecasted preceding a number of anchor openings expected in the fourth quarter. The midpoint of our new 2019 guidance range is now ahead of our 5-year average we laid out at Investor Day, helping validate the most important part of our growth.

In terms of future growth, we continue to advance the lease-up of our 60 anchor opportunities identified at Investor Day. Given that there are 48 now leased or in advanced negotiations at a blended 36% leasing spread and that several of the remaining spaces are held for redevelopment, we are nearing the end of our work on these spaces. We also continue to advance our investment program. As a reminder, our 5-year plan calls for $75 million of annual investments funded via capital recycling, a goal we achieved this year through share buybacks and the acquisitions of 3 joint venture assets. As I mentioned last quarter, we have begun working on additional acquisitions, one of which closed in October. Vintage Plaza, in Austin, is a small transaction in terms of dollars, but it's a good case study as to how we're looking at deploying capital.

First, we expect the property's vacancy and below-market leases to produce NOI growth well in excess of our portfolio average. Second, the adjacency to Dell's headquarter campus represents a natural anchor drawing thousands of consumers commuting to and from work and allowing the center itself to be more focused on smaller service-oriented shop space. And finally, analysis of the trade area demonstrates that center's actual customers are a mix of Dell and other office employees who are both much more affluent and draws from a much wider trade area than the traditional 3-mile demographic analysis would suggest. We hope to have a few other investments to discuss in the upcoming quarter, all of which will highlight our bottom-up format-diagnostic approach to finding investments that generate compelling returns above our cost of capital.

Finally, we are continuing to make progress on our redevelopment plans, which represent the third component of our 5-year growth strategy. 3 new anchors opened in September at Nassau Park in Princeton, New Jersey, a quarter early, and work continues to work on other 3 active projects. We're also advancing the pre-leasing and entitlement of our pipeline of larger-scale projects in Atlanta, Washington, D.C. and Boston.

Like the sale of Duvall Village in Prince George's County discussed last quarter, we remain focused on realizing value on these projects, whether it means capturing profits early through a sale, mitigating risk through a joint venture or executing projects on our own.

I'd like to now touch on 2 transactions since our last call, both of which materially improves SITE's future growth capacity. First, on October 1, we announced an agreement to unwind the existing $1.1 billion joint venture relationship with TIAA-CREF. This venture began in 2007 and the portfolio had underperformed our core for quite some time now, especially post-spin. The end of the venture improves our growth rate and provides us with $170 million of gross capital to redeploy in assets with much more compelling returns.

The second transaction is the $195 million common equity offering we completed last week in order to repay our outstanding 6.5% Series J preferred stock. This deal was a product of our consistently articulated desire to continue to deleverage without inflicting meaningful earnings dilution. The replacement of the preferred with common accomplishes this goal: lowering our leverage without materially impacting OFFO, AFFO or NAV per share. These 2 transactions add to the list of decisive steps we have taken over the last 2-plus years to position the company for outperformance.

In summary, SITE closed the third quarter extremely well positioned for the future. We have a great team, a focused portfolio poised to benefit from occupancy uplift driven by solid tenant demand, and now an even better balance sheet that provides us enormous flexibility to invest opportunistically. We have made great progress on our 5-year business plan.

And with that, I'll hand the call over to Mike Makinen to discuss our operating results.

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Michael A. Makinen, SITE Centers Corp. - Executive VP & COO [4]

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Thank you, David. I'm very pleased with our reported core operations this quarter, which were ahead of plans due to lower-than-expected tenant bankruptcies, earlier-than-expected anchor rent commencements and higher-than-expected ancillary and other income. We feel great about the momentum in our core operations, both in terms of anchor and shop-leasing volumes.

We opened 13-consolidated anchor tenants in the third quarter, the majority of them earlier than expected. And we plan to open an additional 4 in the fourth quarter. As David mentioned, 48 of the 60 original anchor opportunities we identified at Investor Day have now been leased or are in advanced discussions with commencements expected in the fourth quarter 2020 and 2021, providing a multiyear tailwind.

Shop-leasing activity was especially robust in the quarter. The 51 shop leases we signed marks a 3-year high for this portfolio. And we achieved a new lease rent per square foot of over $30 a foot for the first time in our company's history, especially impressive given the high volumes.

All of this leasing carries strong economics with new and renewal spread as well as net effective rents right in line with our historical averages. It's hard work getting such high volumes and rents, but our job is made easier by today's stronger wholly-owned portfolio and a great operations team. Strong leasing activity and modest bankruptcy in the quarter generated a 30 basis point increase in the pro-rata leased rate to 94.2%. And while our commenced rate increased by 110 basis points to 91.1%, the gap between the 2 numbers, which is the best indicator of low-risk future growth is still a healthy 310 basis points.

This spread provides us added confidence in our ability to achieve our 5-year, 2.75%, same-store NOI growth target even with a 1.5% annual NOI reserve for tenant bankruptcies. We are especially focused as well on our shop lease rate, which fell 90 basis points sequentially this quarter to 88% despite the activity I just described. The decline was entirely attributable to the fact that the tenant bankruptcies in the quarter were concentrated in our small shop portfolio with 9 Avenue and 7 Charming Charlie closures since the end of June. We are already in conversations with tenants for each of these locations and feel great about the backfill prospects.

With that, I'll hand the call over to Matt.

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Matthew L. Ostrower, SITE Centers Corp. - Executive VP, CFO & Treasurer [5]

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Thanks, Mike. I'll comment first on our balance sheet then touch on some earnings matters, and I'll close with some thoughts on guidance.

First on the balance sheet. Our position remains strong with pro-rata debt-to-EBITDA in the quarter at 5.8x compared to 6.5x in 3Q '18. Beyond improved leverage, our maturities are also in great shape with a weighted average consolidated term of 5.5 years.

Last week's equity offering will generate further improvement, lowering pro forma net debt plus preferred to EBITDA by almost half a turn. In addition to the deleveraging impact of the recent offering and EBITDA growth, we have 2 other sources of future capital. First is the $160 million remaining preferred investment in our liquidating Blackstone joint venture. We did increase the valuation reserve against the remaining preferred investment by $6 million to $85 million, which compares to the original $76 million reserve we originally established in 2017. However, the increase this quarter was due largely to the loss of an anchor tenant at one of the Blackstone assets rather than a change in market conditions for these shopping centers.

A second additional source of deleveraging is the $217 million of capital we eventually expect to receive through the ultimate liquidation of RVI and the related repayment of our receivable and preferred investment. We received 107 -- we received a $17 million payment from RVI this quarter, representing a receipt of half of the $34 million original receivable. All of these factors, growing EBITDA, the Blackstone preferred and return of capital from RVI means we continue to see 6x debt-to-EBITDA as a long-term leverage maximum.

I'd like to now turn to some earnings-related items. First, while bankruptcies have had a much smaller impact so far in 2019 than we anticipated, something which is helping fuel our guidance increase, we did recognize $169,000 of revenues in the third quarter from Avenue and Charming Charlie stores that have since closed and will, therefore, not recur in the fourth quarter.

There will be significantly less capital and downtime associated with these nonanchored closures, and we are excited about the backfill and mark-to-market opportunities though they will still act as a drag on 2020 growth. We also recognized 484 -- $481,000 of revenue from Dress Barn and Forever 21. And we expect all of these locations to close in the fourth quarter.

I'll turn now to our increased guidance. Given the greater clarity we have at this point in the year as well as significant outperformance in the first 3 quarters, we are increasing our OFFO and same-store NOI growth estimates. Specifically, we have increased our OFFO guidance by $0.01 at the new midpoint despite short-term dilution from our equity offering.

We have also increased the expected same-store NOI growth rate that underpins our OFFO guidance to a new 3% midpoint to reflect better year-to-date operations and expected increases in anchor openings in the fourth quarter. These openings will be partially offset by the $650,000 of total quarterly revenues from bankrupt tenants, which we expect to continue into the first half of 2020.

We also made a number of smaller guidance tweaks for JV fee income, RVI fees and interest income with the change in JV fees related to better-than-expected performance and clarity on the timing of the DDRTC wind down. We provided guidance for 2020 JV fees with the DDRTC announcement and remain comfortable with the $16 million to $20 million range we provided at that time.

In terms of RVI fees, based on asset sales completed to date, RVI fees will be at most $20 million in 2020, assuming no other assets are sold through the -- though the company continues to execute on its business plan to realize value, so I expect the lower full year figure.

Finally, we typically don't discuss quarterly changes in OFFO, but I wanted to call out 2 specific items that will impact our fourth quarter. First, the equity offering closed last Thursday, but the preferred redemption won't take place until the end of November. As such, we will be sitting on the proceeds for over a month, which will be short-term dilutive. Second, our G&A expense assumption for the year is unchanged, reflecting our expectation that this line item, which nets out mark-to-market of the PRSU's will increase in the fourth quarter and be higher than any other quarter this year.

With that, I will hand the call back to David for some closing comments.

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [6]

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Thank you, Matt. In conclusion, the last 9 months provide increasing evidence of this organization's ability to pivot to growth. We are now demonstrably ahead of schedule in executing on the operational, redevelopment and opportunistic investing goals that underlie our plan to produce compelling growth over the next 5 years.

And with that, we'll be happy to take questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Todd Thomas with KeyBanc Capital Markets.

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Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [2]

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David, you touched on investments a bit, which was part of the rationale behind the common equity offering. I was just wondering if you could provide a little more detail on investments, talk about what you're seeing and what the appetite's like moving forward?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [3]

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Sure. I'd be happy to, Todd. I mean first of all, I guess I would mention that the equity offering was really earmarked to replace the preferred equity stack. But it does obviously give us a bit more flexibility. We continue to recycle assets and have been in the market looking for properties. I hate to give too much insight other than the fact that we're heavily focused on convenience-oriented properties. I think we've got a very good window now into what's available in the market. And we're heavily focused on return. I think we recognize that our cost of capital has a hurdle to it. And I think that we're able to find properties that can meet that hurdle.

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Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [4]

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Okay. Can you talk about what that hurdle is, a little bit more? And then in terms of the types of properties, so you mentioned the small shops and the convenience, which you highlighted for the property in Austin. Would new investments, I guess, have a greater skew towards small shops than the current portfolio today?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [5]

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Well, for this particular quarter, with one asset purchased that happened to be entirely shops. I can see that's a reasonable question. The reality is for us to make investments in retail real estate and make money that has double-digit IRRs, we need to format-agnostic. I don't think that there is a tailwind for the industry that is guiding us into a certain property type or even certain submarkets. We're really looking for return. And the older the asset classes get, the more there's mark-to-market opportunities or kind of a tenant roster changes that we think can drive value. And that's why we're less focused on format, and we're more concerned about rent roll.

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Todd Michael Thomas, KeyBanc Capital Markets Inc., Research Division - MD and Senior Equity Research Analyst [6]

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Okay. And just one question for Matt. As we see the anchor leasing kick in here over the next few quarters, a lot of that was for vacant space. The same-store expense recovery rate was just over 86% in the quarter. How much more NOI margin expansion should we expect over the next several quarters here as expense recoveries pick up?

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Matthew L. Ostrower, SITE Centers Corp. - Executive VP, CFO & Treasurer [7]

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I don't have a specific forecast for that. I mean we do get -- anchors, in particular, you do see a real improvement in terms of leakage of operating expenses. So I would see -- I would expect some margin improvement. I don't think it's going to be monumental.

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Operator [8]

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Our next question comes from Christy McElroy with Citi.

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Kathleen McConnell, Citigroup Inc, Research Division - Research Analyst [9]

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This is Katy McConnell on for Christy. Can you talk about what drove the earlier-than-expected timing of the anchor openings this quarter? And maybe talk about how much of an impact that had on the improvement in same-store guidance versus the lighter-than-expected tenant fallout?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [10]

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Sure, Katy. I can give you a preamble by saying that our 5-year business plan was heavily front loaded by anchor leasing. A year ago, at Investor Day, we talked about 60 anchor opportunities. I think Mike did a great job of assembling, not only a great team of leasing experts that really can handle the box leasing but on the legal and construction side, which is really the majority of the work once the dealmaking happens with a handshake. And we're quite a bit ahead of our schedule that we laid out a year ago. And it was entirely due to a much faster-permitting process, a focused effort on the construction and legal teams to get the spaces opened. And frankly, the retailers, themselves, were very aggressive in wanting to get opened in '19. And so we ended up with a bunch of retailers opening a couple of months earlier than anticipated.

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Matthew L. Ostrower, SITE Centers Corp. - Executive VP, CFO & Treasurer [11]

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On your variance question, I would say the less-than-expected tenant fallout tends to outweigh most things. We had a pretty -- as we've discussed from the very beginning of the year all the way through now we've had pretty conservative assumptions about tenant fallout. So 150-plus basis points in your numbers, kind of being able to eliminate that gradually throughout the year or most of that throughout the year obviously has an outsized impact.

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Kathleen McConnell, Citigroup Inc, Research Division - Research Analyst [12]

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Okay. Great. And then can you also just touch on how re-leasing spreads have trended on the box progress you've made today? And how does this compare to what you'd expect with the remaining space, based on the level and quality of backfill demand you're seeing today?

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Michael A. Makinen, SITE Centers Corp. - Executive VP & COO [13]

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This is Mike. I think in general, we have been very pleased with the leasing spreads that we have seen on the anchor backfills. And we were expecting those to be pretty impressive simply because of the mark-to-market that we anticipated. And we anticipate to see positive leasing spreads on the anchors as we go forward as well.

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Operator [14]

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Our next question comes from Daniel Santos with Sandler O'Neill.

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Daniel Santos, Sandler O'Neill + Partners, L.P., Research Division - VP [15]

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The first one is, I was wondering if you could give us just a little bit more color on how you're thinking about the capital markets and raising equity in the future?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [16]

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Sure, Daniel. We are a pretty price-sensitive group. I think that we recognize that shareholders should look to us to be good stewards of their capital. And I think over the last course of this year, we have kind of proven that to be the case. Remember, we bought back stock at a price of $11.73 back in January, and we issued last week at $15.28. So I think for us the price sensitivity is an important feature. But if we take action going forward, it really has to be for a specific purpose. And in this case, the purpose of taking out the preferreds with really no dilution to the common shareholders was a great feature for us.

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Daniel Santos, Sandler O'Neill + Partners, L.P., Research Division - VP [17]

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Okay. Should we expect to see more buybacks in the future?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [18]

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Well, like I said, we are price-sensitive. I would find it strange to discuss buybacks a week after we issued. But in the future, I think we're always going to be looking at the price of the stock. And we're going to be looking at uses of capital that we think are important. So unless the price and the use are tied together, I wouldn't expect us to be announcing anything.

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Daniel Santos, Sandler O'Neill + Partners, L.P., Research Division - VP [19]

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Okay. And just one last question. Some of your peers have noted some increased liquidity for shopping centers. Are you seeing similar trends for power centers?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [20]

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Well, we haven't sold any properties that would fit that category out of SITE Centers.

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Operator [21]

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Our next question comes from Wes Golladay with RBC Capital Markets.

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Wesley Keith Golladay, RBC Capital Markets, Research Division - VP & Equity Research Analyst [22]

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Can you comment on how the local shop tenants are doing, more so the franchisors?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [23]

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I'm sorry, Wesley. One more time. It was hard to hear you.

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Wesley Keith Golladay, RBC Capital Markets, Research Division - VP & Equity Research Analyst [24]

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Oh, sorry. Can you comment on how the local shop tenants are doing more like the sandwich shops and more of the franchisors?

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Michael A. Makinen, SITE Centers Corp. - Executive VP & COO [25]

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This is Mike. I think in general, the answer is, they're doing very well. And a lot of it just really stems from the additional traffic we are being experiencing from an anchor lease-up. The anchor tenants are really driving heavy traffic, and that translates well to the shop tenants doing well. And we have seen that really help drive our increased shop leasing as well.

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Wesley Keith Golladay, RBC Capital Markets, Research Division - VP & Equity Research Analyst [26]

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Okay. And then looking at your, I guess, 5-year plan, if we were to do a refresh today, what would be the biggest change based on you are able to access the capital markets, you unwound a JV? I guess my assumption would be the $75 million investment would probably be a little conservative at the moment. Is that a fair statement?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [27]

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I mean I would say that the biggest change from our Investor Day a year ago is simply the pace. We've just been able to execute a lot faster than we anticipated. Remember that that plan was front-end loaded by NOI growth that then feeds into FFO growth. And at this point, we're ahead of schedule on the NOI growth section.

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Matthew L. Ostrower, SITE Centers Corp. - Executive VP, CFO & Treasurer [28]

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I would also say that you saw us sell Duvall Village this quarter. We announced it last quarter. I would say on the margin when you look at our kind of internal capital planning you're seeing some movement from spending money on redevelopment into -- instead using that -- harvesting capital and then recycling that capital into acquisition.

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Operator [29]

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Our next question comes from Yong Sheng with JPMorgan.

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Yong Sheng, JPMorgan - Associate, HR Business Partner [30]

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I guess in your Investor Day last year, you touched on potentially funding your redevelopment pipeline through the sale of next year's development rights. Is that still expected to occur?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [31]

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We have a number of projects that are undergoing municipal entitlements. Remember, that's the -- kind of first the leg of the stool that you need to prepare a project just to get the permitting for it. Several of those projects have moved along pretty quickly, namely Fairfax outside of D.C. and then a project up in Boston and one down at Atlanta.

How we execute on those, whether we put capital that work in a joint venture, whether we sell the air rights or whether we do a project on our own, it really hasn't been decided. I think we'll make the decision the closer we get to having a project that's shovel ready.

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Operator [32]

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Our next question comes from Richard Hill with Morgan Stanley.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity & Commercial Real Estate Debt Research and Head of U.S. CMBS [33]

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I just jumped on a little bit late, given another earnings call. But I'm sorry, this has been repeated. But one of the things that struck me was slower-than-anticipated bankruptcies. So I am wondering if that's transitory, and something has fundamentally changed in the strip market, or if you're still cautious. Because I hark back to what -- your Analyst Day a year ago, and you were pretty cautious. So I'm just wondering if things have been pushed out? Or there has been a fundamental change over the past 12 months that makes you more bullish on the store closure environment over the medium-to-long-term?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [34]

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Rich, that is a great question. I think we've wrestled with that subject for the entirety of this year. There is a dilemma, and one is that we have curated a portfolio through a spin-off down to less than 70 wholly-owned assets. And the land location of those 70 wholly-owned assets have made them really desirable from tenants. So if you think about 60 vacancies we announced last year, we've leased or getting close to concluding the leases about 48 of them.

The demand is really strong. And when you combine that with the fact that the bankruptcies and liquidations of the retailer world simply haven't happened to the extent that we would have thought a year ago. You're right. We have to consider whether it's going to simply roll forward into '20 or whether the new normal has fewer bankruptcies.

My personal opinion is that retail is still in transition. There are disruptive forces going on in a lot of tenants throughout this sector. And the best defense you can have is really strong property. What we would hope is that even as retailers are repositioning their store fleets, they are doubling down on their best locations. And those are the ones that we think we own.

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Matthew L. Ostrower, SITE Centers Corp. - Executive VP, CFO & Treasurer [35]

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The only thing I would add is just from a budgeting standpoint, if you sort of think about 2020, when we kind of can have this debate about whether we're seeing a wholesale improvement in fundamentals, you should expect that we will remain conservative in terms of how we guide and how we do our budgets.

Some tenants are really question marks. They're trying really hard to turn their businesses around. And we've seen businesses do that before and turn themselves around. But then there are some that we think really are especially more of a question of when not if. And so you can assume that we'll build a fair amount of that into our forecast. So conservatism will definitely be -- given these uncertainties, conservatism will be the theme for our budgeting and guidance process.

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Richard Hill, Morgan Stanley, Research Division - Head of U.S. REIT Equity & Commercial Real Estate Debt Research and Head of U.S. CMBS [36]

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Yes. Sure. And that's helpful. And the reason I focus on it is -- look, from an investor standpoint, there has been a pretty significant differentiator between strips and your cousin, the mall sector. Are you seeing a different demand from tenants from maybe more convenience-located strip centers than maybe you saw previously? And as -- that maybe some of the change that, at least the markets are pricing in over the past 12 months?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [37]

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I think, Rich, the change has simply been an increase in aggregate demand across a lot of different product types. If you look at the last quarter's earnings call, we listed the number of tenants that have leased those 48 boxes, and it's pretty staggering. And there is a very wide range of tenant demand, including services, clubs and traditional retail. So I don't really see a fundamental shift in the type of demand. But we certainly have had much more demand than we anticipated last year.

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Operator [38]

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Our next question comes from Floris van Dijkum from Compass Point.

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Floris Gerbrand Hendrik van Dijkum, Compass Point Research & Trading, LLC, Research Division - Analyst [39]

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Just a follow-up on the cost of capital discussion. Obviously, you issued equity at a slight discount to NAV but have paid down the preferreds with that. Is it right to assume that you are thinking about your cost of capital as being at/or below your cost of preferreds that you're paying that down?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [40]

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I think, Floris, what we said is that there is a very specific use of capital. And at that price, we were willing to transfer the capital stack from preferred to common at that specific moment, at that specific price.

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Matthew L. Ostrower, SITE Centers Corp. - Executive VP, CFO & Treasurer [41]

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And the only thing I would add is, NAV is a movable feast, right? At the moment, I think that our band of -- for example -- just looking at consensus numbers, our band goes from like $11 all the way up to $18, right? And that's not because the analysts aren't doing their job; that's because there's a lot of uncertainty about what asset values really are. So there is potentially a false precision involved in the NAV exercise. Even if we take the consensus NAV as a given, whatever small amount of dilution -- we think it was less than 1% versus consensus NAV -- there is a value-add through improving our capital structure that we thing far outweighs whatever minimal amount of NAV dilution there might have been based on a consensus number, which we're not necessary blessing. But there is -- at this point in the cycle, in particular, we think, there's real value to be added by being smart and deleveraging in a way that has very low cost associated with it.

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Floris Gerbrand Hendrik van Dijkum, Compass Point Research & Trading, LLC, Research Division - Analyst [42]

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Fair enough. Fair enough. The other question I have is maybe if you can give us some comments on where you view right now your mark-to-market in your portfolio? You guys have done a very good job in terms of leasing. And I'm just curious how much more can you squeeze out of the portfolio?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [43]

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Yes. Floris, it's a great question. I think you know that we have not published a mark-to-market. We really haven't commented on it. And frankly, it moves significantly when you're leasing a lot of anchor space. But I will remind you that when we did the spin-off of RVI, one of the primary reasons was to curate for mark-to-market. And when you combine a high mark-to-market with great underlying land that means that over time you should capture rent growth in addition to redevelopment opportunities.

And in some cases, bankruptcies of tenants allow you to unlock the land value that you couldn't previously or otherwise do. So mark-to-market it is a really important feature of this portfolio, but we really haven't been specific with marking a specific dollar number.

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Floris Gerbrand Hendrik van Dijkum, Compass Point Research & Trading, LLC, Research Division - Analyst [44]

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Can you guys comment on the mark-to-market opportunity for your Dress Barn and at Charming Charlie exposure?

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [45]

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We have not commented specifically on the exposure for those. I would simply say that they are a positive mark.

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Operator [46]

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This concludes our question-and-answer session. I would like to turn the conference back over to David Lukes for any closing remarks.

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David R. Lukes, SITE Centers Corp. - President, CEO & Director [47]

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Thank you all very much for taking the time to join. And we will speak with you next quarter.

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Operator [48]

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The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.