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SITE Centers (SITC) to Optimize Operations With Restructuring

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To align its cost structure and technology platform with present and future expected operations, SITE Centers Corp. (SITC - Free Report) , during the second quarter of 2023, introduced a restructuring plan.

The move is expected to reduce general and administrative, operating and maintenance expenses, and non-real estate depreciation and amortization by roughly $3.7 million on an annualized basis. Additionally, the company anticipates reaping the full benefit of these savings from the beginning of second-quarter 2024.

SITC’s restructuring plan is inclusive of a voluntary retirement offer, which was given to certain eligible employees aged 59.5 years or above with a service period of 10 years or more.

The company is expected to bear $5.3 million of total severance and other charges, including accelerated non-real estate depreciation and amortization in 2023, as part of the process. Of this, it estimates to recognize $3.1 million during the second quarter of 2023, while the remaining amount is likely to be realized in the third and fourth quarters of 2023.

SITC’s current-year net income, applicable to common shareholders and funds from operations (FFO), is likely to be adversely impacted due to the charges and accelerated depreciation and amortization. However, operating FFO (OFFO) will be excluded from the same.

In the first quarter of 2023, SITE Centers reported OFFO per share of 30 cents, beating the Zacks Consensus Estimate by 2 cents. Revenues of $136.8 million in the reported quarter, too, outpaced the Zacks Consensus Estimate of $133.9 million. On a year-over-year basis, OFFO per share and revenues increased 3.4% and 4.4%, respectively, aided by healthy leasing activity and year-over-year growth in base rent per square foot.

In its earnings release, SITC raised its 2023 OFFO per share guidance to $1.11-$1.17 from $1.10-$1.16 estimated earlier. The Zacks Consensus Estimate for the same is currently pegged at $1.14. Also, expectations for growth in same-store net operating income (adjusted for 2022 uncollectible revenue impact) were revised upward from 0-3.5% to 0.5-4%.

Amid a rebounding retail real-estate market, SITE Centers’ portfolio of well-located properties in suburban and high-household-income regions of the United States is benefiting from the continuation of remote working setup and consumers’ shift toward the suburbs. This has led to healthy leasing demand from retailers and service tenants expanding into the key suburban markets, and the trend is likely to carry on, boding well for the company.

Shares of this Zacks Rank #3 (Hold) company have lost 2.9% in the quarter-to-date period compared with the industry’s decline of 3.2%.

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Nonetheless, growing e-commerce adoption, limited consumers’ willingness to spend due to macroeconomic uncertainty and a high interest rate environment raise concerns for the company.

Stocks to Consider

Some better-ranked stocks from the REIT sector are Iron Mountain (IRM - Free Report) , Rexford Industrial Realty (REXR - Free Report) and Stag Industrial (STAG - 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.

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