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Rent Will Be Paid, And Site Centers Will Come Back

May 04, 2020 10:07 AM ETSITE Centers Corp. (SITC)18 Comments


  • SITC collected only 50% of April rent.
  • Its balance sheet is much more resilient than first glance, especially when considering the GAAP rules surrounding the covenants.
  • SITC is very cheap at 5 times 2019 FFO - Wall Street is not appreciating the strength of its balance sheet or the resilience of its portfolio.
  • Looking for a helping hand in the market? Members of Best Of Breed get exclusive ideas and guidance to navigate any climate. Get started today »

Site Centers (NYSE:SITC) was one of the first shopping center REITs to report earnings since COVID-19 hit and, like peers, at times had to respond to analyst questions regarding future outlook with “I don’t know.” SITC collected 50% of April rent, but noted that certain well-capitalized tenants are choosing not to pay rent. SITC has suspended its quarterly dividend, which at first glance may be a sign of distress, but the company maintains strong liquidity with minimal near-term debt maturities and plenty of breathing room in its covenants. While it may be a while before SITC is able to return to “business as usual,” I believe that its strong balance sheet and quality portfolio should enable it to emerge from this mess mostly intact and deserving of a dramatically higher share price. I reiterate my buy rating.

COVID-19: What’s Open And Who’s Paying Rent?

SITC executed on a strong first quarter with SS NOI growth at 3.7% excluding redevelopments. I don’t think anyone cares about pre-coronavirus numbers, so let’s get right to business.

SITC noted that 49% of tenants are open (based on ABR), with 56% of tenants deemed essential. SITC breaks out the sectors which are open below:

(2020 Q1 Presentation)

On the conference call, SITC stated that “generally the tenants that are open are paying rent. Tenants that are closed are not paying rents.”

SITC has received 50% of April rent. 12% of the unpaid rent was from local non-credit tenants. SITC has offered 98 deferred rent payment plans primarily to local shops, totaling 1.9% of second quarter rent, with the expectation to receive the rent after 3-6 months. Local shops make up 7% of total rent.

SITC did note that there are some tenants who clearly can pay rent, but aren’t. For example, on the conference call they mentioned “a grocery

25 Stocks I Like More Than SITC

SITC is only rated a buy - the Best of Breed portfolio features over 25 stocks rated strong buy or even conviction buy.

Some investors start by looking at valuation with a stock screener, and from these cheap companies try to find any that they can justify buying. I instead start with an assessment of quality, and only from the highest quality companies do I begin to search for value. My goal is to not only beat the market but to also do so with a high success rate.

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This article was written by

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Julian Lin is a top ranked financial analyst. Julian Lin runs Best Of Breed Growth Stocks, a research service uncovering high conviction ideas in the winners of tomorrow. 

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Analyst’s Disclosure: I am/we are long SITC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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