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SITE Centers (SITC) Q4 FFO Beats, Revenues Miss Estimates

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SITE Centers Corp. (SITC - Free Report) posted fourth-quarter 2018 operating funds from operations (OFFO) per share of 31 cents, surpassing the Zacks Consensus Estimate of 30 cents. However, the figure compares unfavorably with the prior-year figure of 56 cents. This year-over-year decline reflects the dilutive impact of the company’s spin-off of RVI, partially offset by lower interest expense. 

Healthy leasing activity, rent and same-store net operating income (NOI) growth primarily drove the company’s impressive performance.

The company generated revenues of $121.5 million in the quarter under review, missing the Zacks Consensus Estimate of $126.4 million. Further, the top-line figure came in lower than the $209.4 million recorded in the comparable period last year.

For full-year 2018, OFFO per share came in at $1.66, surpassing the Zacks Consensus Estimate by a whisker. However, the figure plunged 30% year over year. Revenues for full-year 2018 dipped 25% year over year to $661.7 million. Further, the reported figure missed the Zacks Consensus Estimate of $669.7 million.

Quarter in Detail

Same-store NOI for the total portfolio on a pro-rata basis was 2.1%. In addition, the company, on a pro-rata basis for the total portfolio for the quarter, generated new leasing and renewal leasing spreads of 14% and 5.3%, respectively, in the fourth quarter.

SITE Centers reported a leased rate of 92.7% as of Dec 31, 2018, compared with 93.5% in the previous year, on a pro-rata basis for the total portfolio. Notably, the bankruptcies of Toys “R” Us and Mattress Firm primarily resulted in the year-over-year decline.

Annualized base rent per occupied square-foot for the total portfolio was $17.86 on a pro-rata basis as of Dec 31, 2018, up from $17.20 recorded a year ago.

Notably, SITE Centers sold 15 shopping centers and land parcels, for a total price of $733.3 million, during the reported quarter, thereby, aggregating $530.3 million at the company’s share. Additionally, it acquired three shopping centers for $35.1 million from unconsolidated joint ventures (JV).

In November, SITE Centers formed a JV for a 10-property portfolio, referred to as the Dividend Trust Portfolio (DTP), of which 80% stake was sold to two Chinese institutional investors. The sale proceed was used to repay the company’s outstanding debts.

During the quarter, the company repurchased 3.1 million shares for $36.3 million under its $100-million share buyback program. Subsequent to year end, it repurchased an additional 1.2 million shares for $14.1 million.

SITE Centers exited the Dec-end quarter with $11.08 million in cash compared with $92.61 million as of Dec 31, 2017.

Outlook

For 2019, the company expects OFFO per share of $1.13- $1.18. The Zacks Consensus Estimate for the same is pegged at $1.16.

Net income attributable to shareholders for 2019 is expected to be 24-29 cents per share.

Bottom Line

SITE Centers made strategic efforts to reposition its portfolio and focus on opportunistic investments that will be accretive for long-term growth.

Nonetheless, the company’s leasing activity is being impacted by tenant bankruptcies. In the near term as well, e-retail is anticipated to limit demand for space, and take precedence over the brick-and-mortar retail space.

SITE CENTERS CORP. Price, Consensus and EPS Surprise

SITE Centers carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other REITs

Ventas, Inc. (VTR - Free Report) reported fourth-quarter 2018 normalized FFO of 96 cents, beating the Zacks Consensus Estimate of 95 cents. However, the figure came in lower than the year-ago tally of $1.03.

Host Hotels & Resorts, Inc. (HST - Free Report) recorded fourth-quarter 2018 adjusted FFO of 43 cents per share, which outpaced the Zacks Consensus Estimate of 41 cents. Adjusted FFO per share also increased from the year-ago tally of 42 cents.

Welltower Inc. (WELL - Free Report) posted normalized FFO per share of $1.01 for fourth-quarter 2018, which missed the Zacks Consensus Estimate of $1.03. Moreover, the figure compared unfavorably with the year-ago tally of $1.02.

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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