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SITE Centers (SITC) Stock Rallies 25.9% QTD: Here's Why
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Shares of SITE Centers (SITC - Free Report) , currently carrying a Zacks Rank #3 (Hold), have gained 25.9% in the quarter-to-date period compared with its industry’s rally of 14.7%.
The Beachwood, OH-based retail real estate investment trust (REIT) has a portfolio of well-located properties in suburban and high-household-income regions of the United States, with maximum concentrations in Florida, Georgia and North Carolina.
It reported third-quarter 2022 operating funds from operations (OFFO) per share of 29 cents, beating the Zacks Consensus Estimate by a penny. The quarterly results reflected healthy leasing activity and a year-over-year improvement in annualized base rent.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
The increase in consumers’ preference for in-person shopping experience following the pandemic downtime has been driving the recovery in the retail real estate industry. Retailers continue to rent out more physical store spaces to meet this growing demand. Consequently, strong anchor demand and shop leasing momentum have been boosting continued occupancy growth.
SITC leased around 4.2 million square feet of gross leasable area for a total of 518 leases in the nine months ended Sep 30, 2022. This included 178 new leases and 340 renewals.
As of Sep 30, 2022, the shopping center portfolio occupancy, on a pro-rata basis, was 91.4%, increasing from 90.2% witnessed at the end of the year-ago quarter.
Moreover, a remote working scenario and consumers’ shifting toward the suburbs have been increasing the demand for this retail REIT’s properties, driving consistent traffic. Also, working from home has led to increased weekday traffic. This positive trend has been aiding SITC to generate decent cashflows.
The company’s aggressive capital-recycling efforts have enabled it to acquire premium U.S. shopping centers. Per the November NAREIT Presentation, from the beginning of 2022 through Nov 15, 2022, SITE Centers disposed of assets worth $719 million ($213 million at the company’s share). This was inclusive of the disposition of 20% interest in the Madison Pool A portfolio, comprising 13 properties for $388 million ($78 million at the company’s share).
In the same time frame, the company acquired assets totaling $346 million. This included the purchase of Shops at Boca Center for $90 million and two assets in Lafayette, CA, for $104 million.
In addition, SITC’s robust balance-sheet position enabled it to capitalize on long-term growth opportunities. It exited third-quarter 2022 with $891 million of liquidity and an average pro-rata net debt to adjusted EBITDA of 5.3X. Also, investment-grade credit ratings of BBB-/Baa3/BBB with a stable outlook from S&P/ Moody's/ Fitch, respectively, render it favorable access to the debt market.
The company’s trailing 12-month return on equity (ROE) is 10.49% compared with the industry’s average of 6.27%, indicating that it is more efficient in using shareholders’ funds than its peers. Also, SITC’s current cash flow growth is projected at 49.30% compared with the 29.69% growth projected for the industry.
SITE Centers is committed to increasing shareholder value through share buybacks. In December 2022, the company’s board of directors authorized a $100-million common stock repurchase program. Such efforts boost investor confidence in the stock.
SITE Centers raised its OFFO per share guidance for 2022. Management expects the same to lie in the range of $1.16-$1.17, up from the prior guidance of $1.13-$1.16. The Zacks Consensus Estimate for the same is currently pegged at $1.17.
Nonetheless, higher e-commerce adoption, stiff competition from industry peers and rising interest rates remain key concerns for the company.
Image: Bigstock
SITE Centers (SITC) Stock Rallies 25.9% QTD: Here's Why
Shares of SITE Centers (SITC - Free Report) , currently carrying a Zacks Rank #3 (Hold), have gained 25.9% in the quarter-to-date period compared with its industry’s rally of 14.7%.
The Beachwood, OH-based retail real estate investment trust (REIT) has a portfolio of well-located properties in suburban and high-household-income regions of the United States, with maximum concentrations in Florida, Georgia and North Carolina.
It reported third-quarter 2022 operating funds from operations (OFFO) per share of 29 cents, beating the Zacks Consensus Estimate by a penny. The quarterly results reflected healthy leasing activity and a year-over-year improvement in annualized base rent.
Image Source: Zacks Investment Research
Let us decipher the factors behind the surge in the stock price.
The increase in consumers’ preference for in-person shopping experience following the pandemic downtime has been driving the recovery in the retail real estate industry. Retailers continue to rent out more physical store spaces to meet this growing demand. Consequently, strong anchor demand and shop leasing momentum have been boosting continued occupancy growth.
SITC leased around 4.2 million square feet of gross leasable area for a total of 518 leases in the nine months ended Sep 30, 2022. This included 178 new leases and 340 renewals.
As of Sep 30, 2022, the shopping center portfolio occupancy, on a pro-rata basis, was 91.4%, increasing from 90.2% witnessed at the end of the year-ago quarter.
Moreover, a remote working scenario and consumers’ shifting toward the suburbs have been increasing the demand for this retail REIT’s properties, driving consistent traffic. Also, working from home has led to increased weekday traffic. This positive trend has been aiding SITC to generate decent cashflows.
The company’s aggressive capital-recycling efforts have enabled it to acquire premium U.S. shopping centers. Per the November NAREIT Presentation, from the beginning of 2022 through Nov 15, 2022, SITE Centers disposed of assets worth $719 million ($213 million at the company’s share). This was inclusive of the disposition of 20% interest in the Madison Pool A portfolio, comprising 13 properties for $388 million ($78 million at the company’s share).
In the same time frame, the company acquired assets totaling $346 million. This included the purchase of Shops at Boca Center for $90 million and two assets in Lafayette, CA, for $104 million.
In addition, SITC’s robust balance-sheet position enabled it to capitalize on long-term growth opportunities. It exited third-quarter 2022 with $891 million of liquidity and an average pro-rata net debt to adjusted EBITDA of 5.3X. Also, investment-grade credit ratings of BBB-/Baa3/BBB with a stable outlook from S&P/ Moody's/ Fitch, respectively, render it favorable access to the debt market.
The company’s trailing 12-month return on equity (ROE) is 10.49% compared with the industry’s average of 6.27%, indicating that it is more efficient in using shareholders’ funds than its peers. Also, SITC’s current cash flow growth is projected at 49.30% compared with the 29.69% growth projected for the industry.
SITE Centers is committed to increasing shareholder value through share buybacks. In December 2022, the company’s board of directors authorized a $100-million common stock repurchase program. Such efforts boost investor confidence in the stock.
SITE Centers raised its OFFO per share guidance for 2022. Management expects the same to lie in the range of $1.16-$1.17, up from the prior guidance of $1.13-$1.16. The Zacks Consensus Estimate for the same is currently pegged at $1.17.
Nonetheless, higher e-commerce adoption, stiff competition from industry peers and rising interest rates remain key concerns for the company.
Stocks to Consider
Some better-ranked stocks from the retail REIT sector are Realty Income (O - Free Report) , STORE Capital and Tanger Factory Outlet Centers (SKT - 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 Realty Income’s current-year FFO per share is currently pegged at $3.96.
The Zacks Consensus Estimate for STORE Capital’s 2022 FFO per share is pegged at $2.29, presently.
The Zacks Consensus Estimate for Tanger Factory Outlet Centers’ ongoing year’s FFO per share presently stands at $1.81.
Note: Anything related to earnings presented in this write-up represent FFO — a widely used metric to gauge the performance of REITs.