SITE Centers Expects Sustainable Growth Ahead

Like many other REIT reports for the third quarter, it is blue skies ahead for SITE Centers Corp., where new leasing volume was at its highest in a number of years. So said CEO David Lukes on the firm’s Q3 earnings call. “We exceeded our 2021 investment goals with the closing of Hammond Springs and subsequent to quarter-end, RVI distributed $190 million to SITE Centers.” Those accomplishments, he said, position the company for sustainable growth going forward.

He began the Q3 earnings call by noting that the firm collected 99% of its build rent for the quarter. “Looking back to 2020, we’ve now collected 96% of 2020 base rent, including $21 million of deferral repayments,” he said. “Our tenant assistance program, which effectively ended in 2020, has now collected 98% of the deferred rent due, which is really a testament to the durability of our portfolio cash flow, the credit strength of our tenant base, and the quality of our team and our real estate.”

On the leasing side, the REIT had an” outstanding quarter” with more than 1 million square feet leased, including 237,000 square feet of new leasing, which is its highest in two years, despite having a considerably smaller portfolio, he said. “We signed six anchors this past quarter, bringing our year-to-date anchors to 19. These 19 anchors signed year-to-date have a number of interesting characteristics that are indicative of the operational strength we’re seeing.”

He explained that 15 of the 19 anchors were signed with publicly traded companies, “highlighting the credit quality of our primarily national portfolio.” Second, he said that 30% of the square footage is from new concepts that are sponsored by investment-grade parent companies, and were launched in the last 18 months. “We have 13 more anchors in lease negotiation, which we expect to be completed by the first quarter of next year with similar characteristics to the deal signed to date.”

It is that activity, he says, that should be a material driver of the firm’s growth over the next several years, particularly since new anchors that have property usually drive shop demand in response. “We’ve already seen some of this demand result in positive rental growth and an acceleration in executed shop leases, including over 50 new shop deals in this quarter alone with a number of exciting and well capitalized new concepts.”

He also noted that at a time when buying vacancy is becoming increasingly challenging, given the strength of operating fundamentals, the REIT is heavily focused on finding the right properties in the right submarkets where rent growth is happening and “we have an opportunity to re-tenant existing square footage with stronger credit tenants at higher rents.”