SITE Centers’ SITC well-located portfolio concentrated in suburban and high household income regions, focus on tenants with necessity-based businesses and an aggressive capital-recycling program are likely to aid its near-term performance.
SITE Centers’ 88% of the tenants being national based on annualized base rent (ABR), ensures a stable flow of rental revenues over the long term. Also, the company’s top 64 public tenants represent 52% of the base rent.
Further, the majority of SITC’s tenants at its shopping centers are essential to retail businesses that serve the day-to-day consumer needs. Of the 92 wholly-owned shopping centers, 68% were either anchored by a grocer or a high-quality discounter. This helps the company to generate steady revenues during uncertain times.
To enhance its portfolio, SITE Centers has adopted an aggressive capital-recycling program through which it disposes of slow-growth assets and redeploys the proceeds to acquire premium U.S. shopping centers. During first-quarter 2022, it acquired one shopping center in Arizona for $14.5 million and two in Florida for $125.6 million. Moreover, in April, it acquired Shoppes of Crabapple (Alpharetta, GA) for $4.4 million. In the same month, SITC completed the previously announced disposition of its 20% interest in the SAU Joint Venture to its partner, the State of Utah, for $155.7 million. Such match-funding initiatives reflect the company’s prudent capital-management practices.
Further, SITE Centers has ample liquidity and focuses on further strengthening its balance-sheet position. As of Mar 31, 2022, it had $872 million of liquidity, with $17.2 million consolidated cash in hand and $855 million of availability on the company’s lines of credit. In June, it refinanced its $950 million unsecured revolving credit facility and extended the maturity for the same. It also enjoys a large pool of unencumbered assets and investment-grade credit ratings that provides it easy access to the secured and unsecured debt markets and helps maintain availability on the line.
Analysts seem bullish on this Zacks Rank #3 (Hold) stock. The estimate revisions trend for 2022 funds from operations (FFO) per share indicates a favorable outlook for the company, as the same has moved marginally northward over the past two months to $1.14.
However, over recent years, the adoption of e-commerce by consumers has lowered the demand for the retail real estate space resulting in retailers opting for store closures. Further, the social-distancing measures forced the reluctant ones, who once favored in-store purchases, to choose online retailing to avoid physical contact. With widespread vaccination drives and relaxations being implemented, the mall traffic is witnessing a rebound. However, the recovery may be sluggish as concerns regarding the emergence of new variants of coronavirus linger.
SITE Centers also faces stiff competition from several real estate companies and developers, limiting its ability to raise rental rates, including renewal rates and filling vacancies.
Also, a hike in interest rate will raise borrowing costs for SITC and could affect its ability to purchase or develop real estate. Its total consolidated debt as of Mar 31, 2022, was approximately $1.8 billion. The dividend payout might become less attractive than the yields on fixed income and money market accounts.
Shares of SITC have depreciated 19.4% in the past three months compared with the industry’s decline of 14.5%.
Image Source: Zacks Investment Research
Stocks to Consider
Some better-ranked stocks in the REIT sector are Kite Realty Group Trust KRG, EPR Properties EPR and American Assets Trust AAT, each carrying a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Kite Realty Group Trust’ 2022 FFO per share has moved 2.8% upward in the past two months to $1.80.
The Zacks Consensus Estimate for EPR Properties’ 2022 FFO per share has moved approximately 1% upward in the past week to $4.63.
The Zacks Consensus Estimate for American Assets Trust’s ongoing year’s FFO per share has been raised 1.8% over the past two months to $2.20.
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.
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
American Assets Trust, Inc. (AAT) : Free Stock Analysis Report
Kite Realty Group Trust (KRG) : Free Stock Analysis Report
EPR Properties (EPR) : Free Stock Analysis Report
SITE CENTERS CORP. (SITC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research