SITE Centers Corp. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Spin-off Plans: The spin-off of Curbline Properties is expected to be completed on October 1, 2024, with Curbline capitalized with no debt and $600 million in cash.
• Acquisitions: Acquired five convenience properties in Q2 with total acquisitions of $65 million, and another $27 million in Q3 to date; over $200 million of additional convenience assets are awarded or under contract. Average household incomes for Q2 investments were over $117,000, with a weighted average lease rate over 96% (excluding Meadowmont).
• Leasing Activity: Quarterly leasing volume was up sequentially despite a smaller portfolio, with steady demand from existing and new retailers. Leased rate was down due to asset sales, but leasing activity and economics improved for the Curbline portfolio, with nearly 50% straight line new leasing rent spreads for the trailing 12-month period.
• Same-Store NOI: Curbline's same-store NOI is expected to average greater than 3% over the next three years, and for 2024, is projected to be between 3.5% and 5.5%.

Segment Performance

• Curbline Properties: As of quarter end, included 72 wholly-owned convenience properties (2.4 million square feet) expected to generate approximately $84 million of NOI. The portfolio features capital efficiency, short lease durations leading to high tenant retention and rent growth, with same-store net operating income (NOI) expected to average greater than 3% over the next three years.
• SITE Centers' Portfolio: Substantial disposition activity with over $1.8 billion in closed dispositions since July 2023 at a blended cap rate of 7.1%, and over $1 billion of additional real estate under contract or nonbinding letters of intent (LOIs) at a mid-7s blended cap rate.

Guidance

• Curbline Properties: Total NOI expected to be roughly $84 million in 2024; same-store NOI growth for 2024 is expected to be between 3.5% and 5.5%.
• SITE Centers: Total NOI midpoint of projected range is $201 million, excluding additional dispositions.
• Balance Sheet: Curbline is expected to have no outstanding debt and substantial liquidity at spin-off. SITE Centers intends to retire outstanding unsecured debt using proceeds from the expected mortgage facility closing and cash on hand.

Risks

• Market Volatility: Fluctuations in real estate markets could impact property valuations and transaction activity.
• Economic Downturn: Potential negative impact on tenant credit and occupancy rates.
• Spin-off Execution: Dependence on successful execution of the spin-off and continued buyer interest in SITE Centers' assets.

Question and Answer

Q: Can you remind us what the timing is for those Form 10?

A: David Lukes expects it would come out sometime in September.

Q: What's the cap rate on the Curbline convenience items you're buying?

A: Conor Fennerty says around 6.5% from a GAAP perspective.

Q: What was the cap rate for the assets that you sold in the quarter?

A: Conor Fennerty states it was around 7.1% or 7.05%, with a blended cap rate of 7.1% on the $1.8 billion in dispositions since July 2023.

Q: What is the average weighted lease term for Curbline’s current 72 centers?

A: Conor Fennerty says it's about 5.2 years as of June 30.

Q: How much of the acquisition activity in Q3 is speculative?

A: Conor Fennerty states none of it is speculative, with $200 million plus awarded assets that are confident to close prior to the spin-off date.