We came across a bullish thesis on SITE Centers Corp. (SITC) on Pacific Northwest Edge’s Substack by David. In this article, we will summarize the bulls’ thesis on SITC. SITE Centers Corp. (SITC)'s share was trading at $14.95 as of Jan 8th. SITC’s trailing P/E was 1.09 respectively according to Yahoo Finance.
View of a mall entrance, showcasing the retail experiences offered by the company's REIT.
The recent spin-off of CURB from SITC has transformed SITC into a specialized REIT focused on large-scale, town-center-style shopping centers. This strategic realignment positions SITC as a key player in the open-air retail sector, leveraging its portfolio of well-maintained and strategically located properties. SITC’s portfolio embodies the "town center" model, which thrives on a tenant mix of lifestyle businesses requiring a physical presence—such as gyms, restaurants, and entertainment venues—complemented by service-oriented tenants like medical offices and barbershops. This tenant synergy generates foot traffic that benefits traditional retail tenants, reinforcing the resilience of open-air shopping centers in a changing retail landscape. Properties like Paradise Village Gateway in Phoenix and the Pike Outlets near the Aquarium of the Pacific underscore SITC’s commitment to high-quality, community-integrated assets.
Financially, SITC is undergoing a transformative phase. Q3 2024 results highlighted net income of $320.2 million ($6.07 per share), primarily driven by gains on property sales and interest income. However, Operating Funds from Operations (OFFO) declined to $42.8 million ($0.81 per share) due to a reduction in Net Operating Income (NOI) following asset dispositions, offset by increased interest income. These results reflect the company’s active portfolio optimization strategy, including the sale of 25 shopping centers for over $1 billion during the quarter. Despite the short-term decline in NOI, these moves align with SITC's long-term strategy to enhance its portfolio’s quality and focus on properties with superior growth potential.
The spin-off of CURB has sharpened SITC’s focus on larger, lifestyle-driven shopping centers, while CURB pursues opportunities in smaller convenience properties. This separation has created two distinct entities, each with a clear and complementary investment thesis. For SITC, the spin-off reduces operational complexity and mitigates potential dilution of its strategic focus, allowing the company to concentrate on its strengths in tenant diversification and community integration.
SITC’s commitment to lifestyle tenants and property redevelopment is central to its value proposition. The inclusion of resilient tenants such as Whole Foods, Kroger, LA Fitness, and Regal Cinemas strengthens its cash flow stability while mitigating risks from eCommerce competition. This tenant mix supports SITC’s strategy to create vibrant, multi-functional spaces that remain relevant in an evolving retail landscape. While some properties, like The Maxwell in Chicago, may be less standout, the overall portfolio demonstrates a strong alignment with SITC’s town-center model and strategic vision.
From a financial stability perspective, SITC has significantly reduced its debt, leaving total indebtedness at just $300.8 million and committing to redeem all preferred stock. This disciplined approach enhances the company’s financial flexibility, positioning it to navigate potential economic challenges. The management’s prudent strategy, as reflected in recent filings, prioritizes debt reduction over refinancing, a move that underscores SITC’s resilience and operational foresight. This low-leverage structure provides a strong foundation for weathering industry disruptions or broader economic downturns.
While earnings are expected to decline due to asset sales and the spin-off, this is a natural consequence of the company’s restructuring. Management has proactively guided for these adjustments, and the current inflated PE ratio of 1.12, driven by one-time gains, is expected to normalize. A more accurate adjusted PE of approximately 11.5, based on a conservative EPS estimate of 1.3, presents an attractive valuation. Additionally, a likely dividend reduction—possibly by 60%—would still result in a competitive 5.5% yield, offering steady income while preserving room for capital appreciation.
SITC’s redevelopment pipeline further bolsters its growth potential. Its ability to maintain stable cash flows post-spin-off highlights operational resilience, making it a compelling investment alternative amid market volatility. For investors seeking a blend of stability, income, and growth potential, SITC offers a unique opportunity. Its portfolio of lifestyle-oriented properties, near-zero debt, and disciplined management position it as a safe and attractive option in the REIT sector. This combination of strategic focus, financial prudence, and growth-oriented redevelopment creates a robust foundation for long-term value creation and reliable returns.
SITE Centers Corp. (SITC) is not on our list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 24 hedge fund portfolios held SITC at the end of the third quarter which was 20 in the previous quarter. While we acknowledge the risk and potential of SITC as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than SITC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
