SITE Centers’ (SITC Quick QuoteSITC - Free Report) portfolio of well-located properties in suburban and high-household-income regions of the United States, with maximum concentrations in Florida, Georgia and North Carolina, positions it well for growth.

In recent quarters, the demand for this retail real estate investment trust’s (REIT) properties has benefited from the continuation of remote working setup and consumers’ shift toward the suburbs. This trend is likely to carry on, boding well for the company.

A significant portion of the company’s shopping centers comprises essential retail components such as discounters, specialty grocers and pet supply stores, which add resiliency to its business.

Also, a major chunk of SITC’s tenant roster is national tenants, per its annualized base rent, who have a relatively strong financial position. These factors combined assure stable rental revenues for the company.  

For 2023, we expect rental income to exhibit marginal year-over-year growth, while the same is expected to increase 2.2% in 2024 and 3.5% in 2025.

Moreover, SITE Centers’ aggressive capital-recycling program reflects its prudent capital-management practices and relieves the pressure from its balance sheet. Through this, it has divested its slow-growth assets and redeployed proceeds to acquire premium U.S. shopping centers, thereby enhancing its overall portfolio quality.

In the first quarter of 2023, the company disposed of three joint-venture assets for $40 million ($8 million at the company’s share). It also acquired three convenience properties worth $42 million in the first quarter of 2023 and April 2023.

On the balance sheet front, SITE Centers had $900 million of liquidity as of Mar 31, 2023. It also enjoys investment-grade credit ratings of BBB-/Baa3/BBB with a stable outlook from S&P/ Moody's/ Fitch, respectively, giving it favorable access to the debt market. With enough financial flexibility, SITC is well-poised to capitalize on long-term growth opportunities.

Nonetheless, given the conveniences of online shopping, high e-commerce adoption is concerning for SITE Centers. Also, limited consumers’ willingness to spend due to macroeconomic uncertainty could impair the company’s top-line growth to some extent.

Stiff competition from several real estate companies and developers could weigh on SITC, limiting its ability to raise rental rates, including renewal rates and fill vacancies.

Also, a high interest rate environment could raise the company's borrowing costs, affecting its ability to purchase or develop real estate. Our estimate for 2023 interest expense indicates a rise of 9.2% year over year.

Shares of this Zacks Rank #3 (Hold) company have lost 12.1% in the past three months compared with the industry’s decline of 5.5%.

Image Source: Zacks Investment Research

Stocks to Consider

Some better-ranked stocks from the REIT sector are Iron Mountain (IRM Quick QuoteIRM - Free Report) , Rexford Industrial Realty (REXR Quick QuoteREXR - Free Report) and Stag Industrial (STAG Quick QuoteSTAG - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for Iron Mountain’s 2023 funds from operations (FFO) per share is currently pegged at $3.96, suggesting a year-over year-growth of 4.2%.

The Zacks Consensus Estimate for Rexford Industrial’s current-year FFO per share stands at $2.19 and implies an increase of 11.7% year over year.

The Zacks Consensus Estimate for Stag Industrial’s ongoing year’s FFO per share is pegged at $2.25 presently and indicates a year-over-year rise of 1.8%.  

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.