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Should You Retain SITE Centers (SITC) Stock in Your Portfolio?
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SITE Centers Corp’s (SITC - Free Report) well-located portfolio of retail real estate assets concentrated mostly 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 elevated interest rates add to its woes.
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.
On Jun 13, 2024, SITE Centers completed the sale of a six-property portfolio for $495 million prior to closing pro-rations, allocations and credits. In the second quarter of 2024, as of Jun 3, 2024, the company disposed of two properties for $50.2 million. It has $650 million of additional assets under contract, expected to close by the end of the second quarter of 2024, subject to standard closing conditions.
Notably, in the first quarter of 2024, SITE Centers disposed of 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 three months, shares of this Zacks Rank #3 (Hold) company have gained 2.8% against the industry’s decline of 0.1%.
Image Source: Zacks Investment Research
However, 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. For 2024, we project an 18.4% year-over-year decrease in total revenues.
A high interest rate environment is a concern for SITE Centers. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. 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 two months to $2.05.
The Zacks Consensus Estimate for O’s current year FFO per share has moved marginally northward in the past month to $4.21.
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.
Image: Shutterstock
Should You Retain SITE Centers (SITC) Stock in Your Portfolio?
SITE Centers Corp’s (SITC - Free Report) well-located portfolio of retail real estate assets concentrated mostly 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 elevated interest rates add to its woes.
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.
On Jun 13, 2024, SITE Centers completed the sale of a six-property portfolio for $495 million prior to closing pro-rations, allocations and credits. In the second quarter of 2024, as of Jun 3, 2024, the company disposed of two properties for $50.2 million. It has $650 million of additional assets under contract, expected to close by the end of the second quarter of 2024, subject to standard closing conditions.
Notably, in the first quarter of 2024, SITE Centers disposed of 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 three months, shares of this Zacks Rank #3 (Hold) company have gained 2.8% against the industry’s decline of 0.1%.
Image Source: Zacks Investment Research
However, 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. For 2024, we project an 18.4% year-over-year decrease in total revenues.
A high interest rate environment is a concern for SITE Centers. Elevated rates imply high borrowing costs for the company, affecting its ability to purchase or develop real estate. 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 Realty Income (O - 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 two months to $2.05.
The Zacks Consensus Estimate for O’s current year FFO per share has moved marginally northward in the past month to $4.21.
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.