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Should You Retain SITE Centers (SITC) in Your Portfolio Now?
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SITE Centers Corp’s (SITC - Free Report) well-located portfolio of retail real estate assets concentrated in the suburban and high household income regions positions it well for growth. Its focus on the aggressive capital-recycling program also augurs well. However, rising e-commerce adoption and a high interest rate environment pose concerns for it.
What’s Aiding it?
SITE Centers’ properties are located in affluent markets where the average household income is around $111,000. This enables it to enjoy solid trade area demographics, boosting demand for its properties. Further, the continuation of the hybrid working environment has driven demand for its properties in the suburbs.
The company has a solid tenant roster comprising reputed names in the industry. These tenants hold a relatively strong financial position and have performed well over time. Moreover, its national tenants represent 89% of the Signed Not Opened pipeline. This assures stable rental revenues for the company over the long term.
This retail real estate investment trust’s (REIT) aggressive capital-recycling program highlights its prudent capital-management practices and helps preserve balance sheet strength. Through this, SITC has divested its slow-growth assets and redeployed proceeds to acquire premium U.S. shopping centers, thereby enhancing its overall portfolio quality and cash-flow growth.
Notably, in the first quarter of 2024, SITE Centers disposed three wholly-owned shopping centers for $119.4 million. It also acquired two convenience shopping centers for $19.1 million.
On the balance sheet front, SITE Centers had $557 million of cash and restricted cash and $950 million of availability on lines of credit as of Mar 31, 2024. It has no consolidated debt maturities through year-end 2024. Hence, with ample financial flexibility and manageable near-term debt maturities, SITC seems well-positioned to capitalize on long-term growth opportunities.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 9.6% compared with the industry’s upside of 6.4%.
Image Source: Zacks Investment Research
What’s Hurting it?
Given the convenience of online shopping, higher e-commerce adoption is concerning for SITE Centers. Online retailing will likely remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores. Moreover, potential tenant bankruptcies for some of SITE Centers’ tenants could adversely impact the company’s top line in the upcoming period.
Further, given the prevailing high interest rates, SITC may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side. Its total share of consolidated debt as of Mar 31, 2024, was $1.57 billion. The dividend payout may also seem less attractive than the yields on fixed-income and money market accounts due to high interest rates.
In conclusion, given the above-mentioned factors, it seems wise to retain SITC in your portfolio right now.
The Zacks Consensus Estimate for KRG’s 2024 FFO per share has moved marginally upward over the past month to $2.04.
The Zacks Consensus Estimate for AKR’s current year FFO per share has moved marginally northward in the past month to $1.28.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.
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Should You Retain SITE Centers (SITC) in Your Portfolio Now?
SITE Centers Corp’s (SITC - Free Report) well-located portfolio of retail real estate assets concentrated in the suburban and high household income regions positions it well for growth. Its focus on the aggressive capital-recycling program also augurs well. However, rising e-commerce adoption and a high interest rate environment pose concerns for it.
What’s Aiding it?
SITE Centers’ properties are located in affluent markets where the average household income is around $111,000. This enables it to enjoy solid trade area demographics, boosting demand for its properties. Further, the continuation of the hybrid working environment has driven demand for its properties in the suburbs.
The company has a solid tenant roster comprising reputed names in the industry. These tenants hold a relatively strong financial position and have performed well over time. Moreover, its national tenants represent 89% of the Signed Not Opened pipeline. This assures stable rental revenues for the company over the long term.
This retail real estate investment trust’s (REIT) aggressive capital-recycling program highlights its prudent capital-management practices and helps preserve balance sheet strength. Through this, SITC has divested its slow-growth assets and redeployed proceeds to acquire premium U.S. shopping centers, thereby enhancing its overall portfolio quality and cash-flow growth.
Notably, in the first quarter of 2024, SITE Centers disposed three wholly-owned shopping centers for $119.4 million. It also acquired two convenience shopping centers for $19.1 million.
On the balance sheet front, SITE Centers had $557 million of cash and restricted cash and $950 million of availability on lines of credit as of Mar 31, 2024. It has no consolidated debt maturities through year-end 2024. Hence, with ample financial flexibility and manageable near-term debt maturities, SITC seems well-positioned to capitalize on long-term growth opportunities.
Over the past six months, shares of this Zacks Rank #3 (Hold) company have gained 9.6% compared with the industry’s upside of 6.4%.
Image Source: Zacks Investment Research
What’s Hurting it?
Given the convenience of online shopping, higher e-commerce adoption is concerning for SITE Centers. Online retailing will likely remain a popular choice among customers, thus adversely impacting the market share for brick-and-mortar stores. Moreover, potential tenant bankruptcies for some of SITE Centers’ tenants could adversely impact the company’s top line in the upcoming period.
Further, given the prevailing high interest rates, SITC may find it difficult to purchase or develop real estate with borrowed funds as the costs are likely to be on the higher side. Its total share of consolidated debt as of Mar 31, 2024, was $1.57 billion. The dividend payout may also seem less attractive than the yields on fixed-income and money market accounts due to high interest rates.
In conclusion, given the above-mentioned factors, it seems wise to retain SITC in your portfolio right now.
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Kite Realty Group Trust (KRG - Free Report) and Acadia Realty Trust (AKR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for KRG’s 2024 FFO per share has moved marginally upward over the past month to $2.04.
The Zacks Consensus Estimate for AKR’s current year FFO per share has moved marginally northward in the past month to $1.28.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.