SITE Centers Reports Third Quarter 2018 Operating Results

BEACHWOOD, Ohio--(BUSINESS WIRE)-- SITE Centers Corp. (NYSE: SITC), formerly known as DDR Corp. today announced operating results for the quarter ended September 30, 2018.

“Our third quarter results represent clear progress on achievement of the multi-year strategic plan we presented at investor day,” commented David R. Lukes, president and chief executive officer. “Same store NOI and FFO per share were above our own expectations, and our quarterly leasing volumes should help us achieve our multi-year leasing goals. We also made significant progress on the capital side of our strategic plan with continued advances of our redevelopment pipeline.”

Results for the Quarter

• Third quarter net loss attributable to common shareholders was $17.3 million, or $0.09 per diluted share, as compared to net loss of $7.4 million, or $0.04 per diluted share, in the year ago-period. The year-over-year increase in net loss is primarily attributable to the dilutive impact of the spin-off transaction and lower gain on sale of real estate partially offset by lower interest expense and debt extinguishment costs.
• Third quarter operating funds from operations attributable to common shareholders (“Operating FFO” or “OFFO”) was $61.0 million, or $0.33 per diluted share, compared to $111.2 million, or $0.60 per diluted share, in the year ago-period. The year-over-year decrease in OFFO is primarily attributable to the dilutive impact of the spin-off transaction partially offset by lower interest expense.
• Changed the presentation of property management related expenses to reflect industry convention for the presentation of such costs. The impact for the third quarter of 2018 and 2017 was $1.7 million and $3.0 million, respectively, which was reclassified from General and administrative expenses to Operating and maintenance expenses. There is no impact to Net income, FFO or OFFO.

Significant Third Quarter Activity

• On July 1, 2018, completed the previously announced spin-off of Retail Value Inc. (“RVI”), an independent company listed on the New York Stock Exchange under the ticker symbol RVI. RVI owned a portfolio of 48 assets that included 36 continental U.S. assets and all 12 of SITE’s previously owned Puerto Rico assets at the time of the spin-off. SITE has retained a preferred stock investment of $190 million in RVI and will continue to manage the RVI assets.
• Sold 11 shopping centers and land parcels for an aggregate sales price of $261.5 million, totaling $42.6 million at SITE’s share, including $21.7 million from the repayment of the Company’s preferred equity investment in its two joint ventures with Blackstone.

Key Quarterly Operating Results

• Reported 2.2% same store net operating income growth on a pro rata basis for the quarter.
• Generated new leasing spreads of 20.6% and renewal leasing spreads of 8.2%, both on a pro rata basis for the quarter, and new leasing spreads of 23.0% and renewal leasing spreads of 6.6%, both on a pro rata basis for the trailing twelve-month period.
• Reported a leased rate of 92.7% at September 30, 2018 on a pro rata basis, compared to 93.4% at September 30, 2017.
• Annualized base rent per occupied square foot on a pro rata basis was $17.47 at September 30, 2018, compared to $17.13 at September 30, 2017.

Guidance

There has been no change in the Company’s Operating FFO per share guidance since the update provided on October 9, 2018. The Company continues to estimate Operating FFO for the fourth quarter of 2018 to be at least $0.30 per diluted share and estimates Operating FFO for 2019 to be from $1.15 to $1.20 per diluted share. Disposition fees from RVI are excluded from Operating FFO guidance. The growth in SSNOI for the year ending December 31, 2018 is still estimated to be at least 1.5% and the growth in SSNOI for the year ending December 31, 2019 is estimated to range between 1% - 2%, both estimates excluding major redevelopment.

Reconciliations of Net Income Attributable to Common Shareholders to FFO and Operating FFO estimates:

		4Q2018E		FY2019E
		Per Share – Diluted		Per Share – Diluted
Net income attributable to common shareholders		$0.03 – $0.07		$0.20 – $0.27
Depreciation and amortization of real estate		0.24 – 0.25		0.86 – 0.89
Equity in net (income) of JVs		(0.01) – (0.03)		(0.04) – (0.05)
JVs' FFO		0.03 – 0.04		0.10 – 0.12
FFO (NAREIT) and Operating FFO		at least $0.30		$1.15 – $1.20

Other key assumptions for 2019 guidance include:

		FY2019E
RVI fee income		$24 - $26 million
Joint Venture fee income		$17 - $21 million
Interest income		$14 - $17 million
General & administrative expenses(1)		$63 million

(1)

Adjusted to reflect the reclassification of approximately $7 million of expense to Operating and maintenance expenses.

About SITE Centers Corp.

SITE is an owner and manager of open-air shopping centers that provide a highly-compelling shopping experience and merchandise mix for retail partners and consumers. The Company is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol SITC. Additional information about the Company is available at www.sitecenters.com.

Conference Call and Supplemental Information

The Company will hold its quarterly conference call today at 5:00 p.m. Eastern Time. To participate with access to the slide presentation, please visit the Investor Relations portion of SITE's website, ir.sitecenters.com, or for audio only, dial 888-317-6003 (U.S.), 866-284-3684 (Canada) or 412-317-6061 (international) using pass code 1026254 at least ten minutes prior to the scheduled start of the call. A replay of the conference call will also be available at ir.sitecenters.com for one year after the call. A copy of the Company’s Supplemental package is available on the Company’s website.

Non-GAAP Measures

Funds from Operations (“FFO”) is a supplemental non-GAAP financial measure used as a standard in the real estate industry and is a widely accepted measure of real estate investment trust (“REIT”) performance. Management believes that both FFO and Operating FFO provide additional indicators of the financial performance of a REIT. The Company also believes that FFO and Operating FFO more appropriately measure the core operations of the Company and provide benchmarks to its peer group.

FFO is generally defined and calculated by the Company as net income (loss) (computed in accordance with GAAP), adjusted to exclude (i) preferred share dividends, (ii) gains and losses from disposition of depreciable real estate property and related investments, which are presented net of taxes, (iii) impairment charges on depreciable real estate property and related investments and (iv) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles, equity income (loss) from joint ventures and equity income (loss) from non-controlling interests and adding the Company’s proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis. The Company’s calculation of FFO is consistent with the definition of FFO provided by the National Association of Investment Trusts (“NAREIT”). The Company calculates Operating FFO by excluding certain non-operating charges, income and gains. Operating FFO is useful to investors as the Company removes non-comparable charges, income and gains to analyze the results of its operations and assess performance of the core operating real estate portfolio. Other real estate companies may calculate FFO and Operating FFO in a different manner.

In calculating the expected range for or amount of net (loss) income attributable to common shareholders to estimate projected FFO and Operating FFO for future periods, the Company does not include a projection of gain and losses from the disposition of real estate property, potential impairments and reserves of real estate property and related investments, hurricane-related activity, certain transaction costs or certain fee income. Other real estate companies may calculate expected FFO and Operating FFO in a different manner.

The Company also uses net operating income (“NOI”), a non-GAAP financial measure, as a supplemental performance measure. NOI is calculated as property revenues less property-related expenses. The Company believes NOI provides useful information to investors regarding the Company’s financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and, when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis.

The Company presents NOI information herein on a same store basis or “SSNOI.” The Company defines SSNOI as property revenues less property-related expenses, which exclude straight-line rental income and expenses, lease termination income, management fee expense, fair market value of leases and expense recovery adjustments. SSNOI also excludes activity associated with development and major redevelopment and includes assets owned in comparable periods (15 months for quarter comparisons). SSNOI excludes all non-property and corporate level revenue and expenses. Other real estate companies may calculate NOI and SSNOI in a different manner. The Company believes SSNOI provides investors with additional information regarding the operating performances of comparable assets because it excludes certain non-cash and non-comparable items as noted above.

FFO, Operating FFO, NOI and SSNOI do not represent cash generated from operating activities in accordance with GAAP, are not necessarily indicative of cash available to fund cash needs and should not be considered as alternatives to net income computed in accordance with GAAP as indicators of the Company’s operating performance or as alternatives to cash flow as a measure of liquidity. Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in this release and the accompanying financial supplement. Reconciliations of 2018 and 2019 SSNOI projected growth targets to the most directly comparable GAAP financial measure are not provided because the Company is unable to provide such reconciliations without unreasonable effort.

Safe Harbor

SITE Centers Corp. considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, local conditions such as supply of space or a reduction in demand for real estate in the area; competition from other available space; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant and the impact of any such event on rental income from other tenants and our properties; redevelopment and construction activities may not achieve a desired return on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract; our ability to secure equity or debt financing on commercially acceptable terms or at all; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements or our failure to satisfy conditions to the completion of these arrangements; the termination of any joint venture arrangements or arrangements to manage real property; property damage, expenses related thereto and other business and economic consequences (including the potential loss of rental revenues) resulting from extreme weather conditions in locations where we own properties, and the ability to estimate accurately the amounts thereof; sufficiency and timing of any insurance recovery payments related to damages from extreme weather conditions; any change in strategy; the success of our deleveraging strategy; our ability to maintain REIT status; and the finalization of the financial statements for the period ended September 30, 2018. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company's most recent reports on Form 10-K and Form 10-Q. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

SITE Centers Corp.
Income Statement: Consolidated Interests
		$ in thousands, except per share
				3Q18		3Q17		9M18		9M17
		Revenues (1):
		Minimum rents (2)		$92,159		$153,925		$380,724		$485,777
		Percentage rent		600		1,016		3,861		4,538
		Recoveries		31,951		51,368		133,863		164,477
		Other property revenues (3)		2,483		13,824		14,923		23,723
		Business interruption income		1,784		0		6,884		0
				128,977		220,133		540,255		678,515
		Expenses (4):
		Operating and maintenance		18,386		31,926		85,473		103,845
		Real estate taxes		21,211		30,618		83,712		98,691
				39,597		62,544		169,185		202,536
		Net operating income		89,380		157,589		371,070		475,979
		Other income (expense):
		Fee income (5)		15,118		7,291		30,424		25,517
		Interest income		5,055		6,807		15,412		22,365
		Interest expense		(26,962)		(46,296)		(115,915)		(147,031)
		Depreciation and amortization		(49,629)		(85,210)		(196,515)		(266,370)
		General and administrative (6)		(15,232)		(13,449)		(45,353)		(60,499)
		Other income (expense), net (7)		(1,454)		(64,340)		(99,316)		(65,298)
		Impairment charges		(19,890)		(10,284)		(68,394)		(60,353)
		Hurricane property and impairment loss (8)		157		(6,089)		(817)		(6,089)
		Loss before earnings from JVs and other		(3,457)		(53,981)		(109,404)		(81,779)
		Equity in net (loss) income of JVs		(2,920)		4,811		9,687		2,429
		(Reserve) adjustment of preferred equity interests		(2,201)		15,377		(4,537)		(60,623)
		Valuation allowance of prepaid tax asset		0		(8,777)		0		(8,777)
		Tax expense		(238)		(490)		(611)		(1,186)
		Gain on disposition of real estate, net		124		44,291		39,643		127,017
		Net (loss) income		(8,692)		1,231		(65,222)		(22,919)
		Non-controlling interests		(239)		(248)		(1,191)		(728)
		Net (loss) income SITE		(8,931)		983		(66,413)		(23,647)
		Preferred dividends		(8,382)		(8,383)		(25,148)		(20,376)
		Net loss Common Shareholders		($17,313)		($7,400)		($91,561)		($44,023)
		Weighted average shares – Basic & Diluted – EPS (9)		184,655		183,843		184,616		183,519
		Earnings per common share – Basic & Diluted (9)		($0.09)		($0.04)		($0.50)		($0.24)
		Revenue items:
(1)		Lost revenue related to hurricane		$0		($2,558)		($6,570)		($2,558)
(2)		Ground lease revenue		5,305		10,625		24,875		32,314
(3)		Lease termination fees		99		9,380		3,316		10,188
(4)		Operating expenses:
		Bad debt expense		(132)		(1,335)		(31)		(2,591)
(5)		Fee Income:
		JV and other fees		6,265		7,291		21,571		25,517
		RVI fees		7,231		0		7,231		0
		RVI disposition fees		1,622		0		1,622		0
(6)		General and administrative expenses:
		Separation charges		0		0		(4,641)		(16,552)
		Internal leasing expenses		(1,182)		(1,190)		(3,760)		(4,040)
		Construction administrative costs (capitalized)		1,120		1,681		3,682		5,899
(7)		Other income (expense), net
		Transaction and other expense, net		(1,421)		1,506		(40,883)		1,144
		Debt extinguishment costs, net		(33)		(65,846)		(58,433)		(66,442)
				(1,454)		(64,340)		(99,316)		(65,298)
(8)		Hurricane property and impairment loss
		Impairment charge (property damage deductible)		0		(5,100)		0		(5,100)
		Clean up costs and other expenses		157		(989)		(817)		(989)
				157		(6,089)		(817)		(6,089)
(9)		Prior periods presented have been adjusted to reflect the Company's one-for-two reverse stock split.

SITE Centers Corp.
Reconciliation: Net (Loss) Income to FFO and Operating FFO
and Other Financial Information
		$ in thousands, except per share
				3Q18		3Q17		9M18		9M17
		Net loss attributable to Common Shareholders		($17,313)		($7,400)		($91,561)		($44,023)
		Depreciation and amortization of real estate		48,242		81,064		191,997		258,137
		Equity in net loss (income) of JVs		2,920		(4,811)		(9,687)		(2,429)
		JVs' FFO		7,060		8,268		20,871		21,062
		Non-controlling interests		28		76		587		227
		Impairment of depreciable real estate (1)		19,890		13,620		68,394		54,603
		Gain on disposition of depreciable real estate, net		(124)		(44,477)		(38,809)		(125,900)
		FFO attributable to Common Shareholders		$60,703		$46,340		$141,792		$161,677
		RVI disposition fees		(1,622)		0		(1,622)		0
		Reserve (adjustment) of preferred equity interests		2,201		(15,377)		4,537		60,623
		Hurricane property (income) loss, net (2)		(1,941)		3,616		504		3,616
		Impairment charges – non-depreciable assets		0		1,764		0		10,850
		Separation charges		0		0		4,641		16,552
		Debt extinguishment, transaction, other, net		1,475		65,835		99,337		66,782
		Joint ventures - debt extinguishment, transaction, other		187		95		890		778
		Valuation allowance of Puerto Rico prepaid tax asset		0		8,777		0		8,777
		Loss (gain) on disposition of non-depreciable real estate, net		0		186		(834)		(1,117)
		Total non-operating items, net		300		64,896		107,453		166,861
		Operating FFO attributable to Common Shareholders		$61,003		$111,236		$249,245		$328,538
		Weighted average shares & units – Basic: FFO & OFFO (3)		184,803		184,080		184,775		183,772
		Assumed conversion of dilutive securities (3)		9		18		8		28
		Weighted average shares & units – Diluted: FFO & OFFO (3)		184,812		184,098		184,783		183,800
		FFO per share – Basic & Diluted (3)		$0.33		$0.25		$0.77		$0.88
		Operating FFO per share – Basic & Diluted (3)		$0.33		$0.60		$1.35		$1.79
		Common stock dividends declared, per share (3)		$0.20		$0.38		$0.96		$1.14
		Capital expenditures (SITE share):
		Development and redevelopment costs		11,543		13,005		45,060		32,525
		Maintenance capital expenditures		4,176		5,841		7,746		9,865
		Tenant allowances and landlord work		5,219		12,897		25,097		42,079
		Leasing commissions		861		877		2,701		2,600
(1)		Impairment charges:
		Hurricane impairment charge (property damage deductible)		0		5,100		0		5,100
		Impairment charge on RVI portfolio held for sale (pre-spin)		14,110		0		14,110		0
		Impairment charge on shopping centers marketed for sale		5,780		8,520		54,284		49,503
				19,890		13,620		68,394		54,603
(2)		Hurricane property (income) loss, net (SITE Share):
		Lost tenant revenue		0		2,571		6,570		2,571
		Business interruption income		(1,784)		0		(6,884)		0
		Clean up costs and other expenses, net		(157)		1,045		818		1,045
				(1,941)		3,616		504		3,616
(3)		Prior periods presented have been adjusted to reflect the Company's one-for-two reverse stock split.

SITE Centers Corp.
Certain Non-Cash Items (SITE share)
	$ in thousands
		3Q18		3Q17		9M18		9M17
	Straight-line rent, net	$206		($864)		$109		($207)
	Amortization of (above)/below-market rent, net	1,112		2,369		1,638		10,603
	Straight-line ground rent (expense) income	(37)		(53)		(113)		162
	Debt fair value and loan cost amortization	(1,133)		(1,096)		(6,407)		(3,221)
	Capitalized interest expense	268		529		936		1,405
	Stock compensation expense	(1,437)		(1,561)		(4,521)		(5,053)
	Non-real estate depreciation expense	(1,341)		(4,101)		(4,389)		(8,043)
	Non-cash interest income	0		0		0		1,283

SITE Centers Corp.
Balance Sheet: Consolidated Interests
		$ in thousands
				At Period End
				3Q18		4Q17
		Assets:
		Land		$970,008		$1,738,792
		Buildings		3,634,232		5,733,451
		Fixtures and tenant improvements		508,270		693,280
				5,112,510		8,165,523
		Depreciation		(1,284,446)		(1,953,479)
				3,828,064		6,212,044
		Construction in progress and land		58,717		82,480
		Real estate, net		3,886,781		6,294,524
		Investments in and advances to JVs		83,792		106,037
		Investment in and advances to affiliate (1)		226,469		0
		Receivable – preferred equity interests, net		204,078		277,776
		Cash		11,446		92,611
		Restricted cash		1,827		2,113
		Notes receivable, net		19,670		19,675
		Receivables, net (2)		74,253		108,695
		Property insurance receivable		0		58,583
		Intangible assets, net		88,752		182,407
		Other assets, net		23,024		27,652
		Total Assets		4,620,092		7,170,073
		Liabilities and Equity:
		Revolving credit facilities		105,000		0
		Unsecured debt		1,896,458		2,810,100
		Unsecured term loan		198,540		398,130
		Secured debt		185,004		641,082
				2,385,002		3,849,312
		Dividends payable		45,406		78,549
		Other liabilities (3)		214,693		344,774
		Total Liabilities		2,645,101		4,272,635
		Preferred shares		525,000		525,000
		Common shares		18,467		18,426
		Paid-in capital		5,542,949		5,531,249
		Distributions in excess of net income		(4,115,736)		(3,183,134)
		Deferred compensation		8,474		8,777
		Other comprehensive income		(1,093)		(1,106)
		Common shares in treasury at cost		(8,054)		(8,280)
		Non-controlling interests		4,984		6,506
		Total Equity		1,974,991		2,897,438
		Total Liabilities and Equity		$4,620,092		$7,170,073
(1)		Preferred investment in RVI		$190,000		$0
		Receivable from RVI		36,469		0
				226,469		0
(2)		Straight-line rents receivable, net		35,575		59,439
(3)		Below-market leases, net		61,358		127,513

SITE Centers Corp.
Reconciliation of Net Income (Loss) Attributable to SITE to Same Store NOI (1)
$ in thousands
						At SITE Share
						(Non-GAAP)
		3Q18		3Q17		3Q18		3Q17
GAAP Reconciliation:
Net (loss) income attributable to SITE		($8,931)		$983		($8,931)		$983
Fee income		(15,118)		(7,291)		(15,118)		(7,291)
Interest income		(5,055)		(6,807)		(5,055)		(6,807)
Interest expense		26,962		46,296		26,962		46,296
Depreciation and amortization		49,629		85,210		49,629		85,210
General and administrative		15,232		13,449		15,232		13,449
Other expense, net		1,454		64,340		1,454		64,340
Impairment charges		19,890		10,284		19,890		10,284
Hurricane property and impairment loss		(157)		6,089		(157)		6,089
Equity in net loss (income) of joint ventures		2,920		(4,811)		2,920		(4,811)
Reserve (adjustment) of preferred equity interests		2,201		(15,377)		2,201		(15,377)
Valuation allowance of prepaid tax asset		0		8,777		0		8,777
Tax expense		238		490		238		490
Gain on disposition of real estate		(124)		(44,291)		(124)		(44,291)
Income from non-controlling interests		239		248		239		248
Consolidated NOI		89,380		157,589		89,380		157,589
SITE's consolidated JV		0		0		(404)		(381)
Consolidated NOI, net of non-controlling interests		89,380		157,589		88,976		157,208
Net (loss) income from unconsolidated joint ventures		(50,859)		36,080		(7,735)		3,733
Interest expense		23,126		24,276		3,689		3,675
Depreciation and amortization		34,332		45,291		4,766		5,518
Impairment charges		87,880		2,160		13,182		432
Preferred share expense		6,249		8,307		313		416
Other expense, net		5,460		6,577		962		892
Gain on disposition of real estate, net		(32,548)		(31,740)		(3,313)		(1,572)
Unconsolidated NOI		73,640		90,951		11,864		13,094
Total Consolidated + Unconsolidated NOI		163,020		248,540		100,840		170,302
Less: Non-Same Store NOI adjustments		(13,987)		(101,258)		(8,435)		(79,913)
Total SSNOI		$149,033		$147,282		$92,405		$90,389
SSNOI % Change		1.2%				2.2%

(1)

Excludes major redevelopment activity; see Investments section for additional detail. See calculation definition in the Non-GAAP Measures section.

View source version on businesswire.com: https://www.businesswire.com/news/home/20181024005798/en/

SITE Centers Corp.
Matthew Ostrower, CFO, 216-755-5500

Source: SITE Centers Corp.

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