SITE Centers Corp

Nature of Business and Financial Statement Presentation

Nature of Business

SITE Centers Corp. and its related consolidated real estate subsidiaries (collectively, the “Company” or “SITE Centers”) and unconsolidated joint ventures are primarily engaged in the business of owning, leasing, acquiring, redeveloping, developing and managing shopping centers. Unless otherwise provided, references herein to the Company or SITE Centers include SITE Centers Corp. and its wholly-owned subsidiaries. The Company’s tenant base includes a mixture of national and regional retail chains and local tenants. Consequently, the Company’s credit risk is primarily concentrated in the retail industry.

On October 1, 2024, the Company completed the spin-off of 79 convenience retail properties consisting of approxima tely 2.7 million square feet of gross leasable area (“GLA”), into a separate, publicly-traded company named Curbline Properties Corp. (“Curbline” or “Curbline Properties”). At September 30, 2024, Curbline Properties was a wholly-owned subsidiary of SITE Centers.

Use of Estimates in Preparation of Financial Statements

The preparation of financial statements in conformity with generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses during the year. Actual results could differ from those estimates.

Unaudited Interim Financial Statements

These financial statements have been prepared by the Company in accordance with GAAP for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. However, in the opinion of management, the interim financial statements include all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of the results of the periods presented. The results of operations for the three and nine months ended September 30, 2024 and 2023, are not necessarily indicative of the results that may be expected for the full year. These condensed consolidated financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Principles of Consolidation

The consolidated financial statements include the results of the Company and all entities in which the Company has a controlling interest or has been determined to be the primary beneficiary of a variable interest entity. All significant intercompany balances and transactions have been eliminated in consolidation. Investments in real estate joint ventures in which the Company has the ability to exercise significant influence, but does not have financial or operating control, are accounted for using the equity method of accounting. Accordingly, the Company’s share of the earnings (or loss) of these joint ventures is included in consolidated net income (loss).

Effect of Reverse Stock Split on Presentation

Prior to the commencement of trading on August 19, 2024, in anticipation of the spin-off of Curbline Properties, the Company effected a reverse stock split of its common shares at a ratio of one-for-four. All share and per share data included in these unaudited condensed consolidated financial statements gives retroactive effect to the reverse stock split for all periods presented.

Disposition of Real Estate

For the three and nine months ended September 30, 2024, the Company received gross proceeds of $1,361.6 million and $2,245.1 million, respectively, from the sale of 25 and 40 wholly-owned shopping centers (excluding certain retained convenience parcels) andone parcel at a wholly-owned shopping center resulting in gain on dispositions of $368.1 million and $633.2 million, respectively. For thethree and nine months ended September 30, 2023, the Company received gross proceeds of$118.3 million from the sale offive wholly-owned shopping centers.

Statements of Cash Flows and Supplemental Disclosure of Non-Cash Investing and Financing Information

Non-cash investing and financing activities are summarized as follows (in millions):

Recently Issued Accounting Standards

Segment Reporting. In November 2023, the Financial Accounting Standards Board (“ FASB”) issued Accounting Standards Update (“ASU”) 2023-07 which enhances segment disclosure requirements for entities required to report segment information in accordance with FASB Accounting Standards Codification (“ASC”) 280, Segment Reporting. The amendments in this update are effective for annual reporting periods beginning after December 15, 2023. There are aspects of this ASU that apply to entities with one reportable segment. The Company will review the extent of any disclosures necessary prior to implementation. Other than additional disclosure, the adoption of this ASU is not expected to have a material impact on the Company’s financial position and/or results of operations.

Income Taxes. In December 2023, the FASB issued ASU 2023-09 which enhances income tax disclosure requirements in accordance with FASB ASC 740, Income Taxes. The amendments in this update are effective for annual reporting periods beginning after December 15, 2023. The Company will review the extent of new disclosure necessary prior to implementation. Other than additional disclosure, the adoption of this ASU is not expected to have a material impact on the Company’s financial position and/or result of operations.

Acquisitions

During thenine months ended September 30, 2024, the Company acquired the following convenience centers and land (in thousands):

(A)

Acquired the fee interest in a land parcel at this center.

(B)

Acquired from the DDRM Properties Joint Venture (Note 3). Meadowmont Village, consisting of 62,116 square feet of GLA was included in the spin-off of Curbline.

The fair value of the acquisitions was allocated as follows (in thousands):

(A)

Depreciated in accordance with the Company’s policy.

Included in the Company’s consolidated statements of operations for the three and nine months ended September 30, 2024, was $3.4 million and $4.5 million, respectively, in total revenues from the date of acquisition through September 30, 2024, for the properties acquired in 2024.

Investments in and Advances to Joint Ventures

At September 30, 2024 and December 31, 2023, the Company had ownership interests in various unconsolidated joint ventures that had investments in 11 and 13 shopping center properties, respectively. The changes to Investments in and Advances to Joint Ventures are as follows (in thousands):

A reconciliation of the consolidated joint venture equity is as follows (in thousands):

Revenues earned by the Company for providing asset management, property management and leasing and development services to all of the Company’s unconsolidated joint ventures were $1.3 million and $4.1 million and $1.6 million and $5.2 million for the three and nine months ended September 30, 2024 and 2023, respectively.

Disposition of Shopping Centers

In May 2024, the Company acquiredone asset previously owned by the DDRM Properties Joint Venture (Meadowmont Village, Chapel Hill, North Carolina) for $44.2 million and stepped up its 20%interest due to a change in control. The transaction resulted in a

Gainon Sale and Change in Control of Interests of $2.7 million. In June 2024, the DDRM Properties Joint Venture soldone asset (Hilltop Plaza, Richmond, California) for $36.5 million. There are no remaining assets in this joint venture.

Other Assets and Intangibles, net

Other assets, liabilities and intangibles consist of the following (in thousands):

(A)

In connection with the sale of two assets in June 2024 to unrelated third parties, intercompany ground leases related to certain portions of land that had initial terms of 90-years and 99-years, respectively, with a fixed, prepaid rent of $1 were assumed by the buyers. Such intercompany ground leases were previously eliminated in consolidation and treated as a sale leaseback when the shopping centers were sold. The leased back land pertains to land underlying convenience assets that were retained by the Company. Upon sale of the shopping centers, the Company recognized below-market ground lease assets of approximately $13.7 million.

(B)

The Company recorded amortization expense related to its intangibles, excluding above- and below-market leases, of $4.4 million and $5.5 million for the three months ended September 30, 2024 and 2023, respectively, and $13.6 million and $17.7 million for the nine months ended September 30, 2024 and 2023, respectively.

(C)

Includes $5.0 million of prepaid loan costs relating to a revolving line of credit and delayed-draw term loan facility for Curbline. The Company is obligated to pay such costs under the Separation and Distribution Agreement (Note 10).

(A)

Fees related to a commitment obtained in October 2023 for a $1.1 billion mortgage facility to be secured by an originally identified group of 40 properties (the “Mortgage Commitment”). The fees paid to date related to the Mortgage Commitment were recorded as a deferred fee as the facility had not closed and therefore no amounts had been drawn. The Company terminated the Mortgage Commitment in August 2024 when it closed a separate $530.0 million mortgage financing on different terms (Note 5). At termination, when it became probable that the Mortgage Commitment would not be drawn upon, the remaining fees were expensed. For the three and nine months ended September 30, 2024, the Company wrote-off $10.9 million and $21.2 million, respectively, of fees relating to the Mortgage Commitment to Debt extinguishment costs on the Company’s Consolidated Statements of Operations.

(B)

Included cash flow hedge and derivative on unsecured notes (Note 6).

Indebtedness

The Company’s indebtedness consists of the following (in thousands):

Senior Notes

In August 2024, the Company used cash on hand and proceeds from the Mortgage Facility, discussed below, to repay all of its outstanding senior unsecured indebtedness, including redeeming its senior unsecured notes due in 2025, 2026 and 2027 (the “Senior Notes”) and recorded Debt Extinguishment Costs of $6.7 million which included a make-whole amount of $4.1 million related to the redemption of its Senior Notes due in 2027. The make-whole premium was partially offset by $1.3 million of cash received upon the termination of the swaption which is recorded in Gain on Derivative instruments as discussed in Note 6.

During the first two quarters of 2024, the Company repurchased $88.3 million aggregate principal amount of its outstanding Senior Notes at a discount to par. In connection with these purchases, the Company recorded a net Gain on Debt Retirement of $1.0 million.

Term Loan

In August 2024, the Company repaid in full all outstanding amounts under the Third Amended and Restated Term Loan Agreement, dated as of June 6, 2022 (the “Term Loan Agreement”), by and among the Company, Wells Fargo National Bank, as administrative agent, and the lenders from time to time party thereto. At the time of the repayment, the principal amount outstanding under the Term Loan Agreement was $200.0 million and the Company recorded Debt Extinguishment Costs of $0.9 million. The Company received $6.8 million of cash related to an interest rate swap that was also terminated in connection with the repayment of the Term Loan Agreement (Note 6).

Revolving Credit Facility

On August 15, 2024, the Company repaid in full all outstanding amounts under its unsecured revolving credit facility with a syndicate of financial institutions and JPMorgan Chase Bank, N.A., as administrative agent (the “Revolving Credit Facility”). Simultaneously with such repayment, the Company permanently terminated the lenders’ commitments under the Revolving Credit Facility in accordance with the terms thereof. At the time of termination of the lenders’ commitments, there were no revolving loans outstanding under the Revolving Credit Facility. The Company was required to comply with certain covenants under the Revolving Credit Facility relating to total outstanding indebtedness, secured indebtedness, value of unencumbered real estate assets and fixed charge coverage. The Company was in compliance with these financial covenants through the termination date. In conjunction with the termination, the Company recorded $3.9 million in Debt Extinguishment Costs.

Mortgage Facility

On August 7, 2024, the Company closed and funded a $530.0 million mortgage loan (the “Mortgage Facility”) provided by affiliates of Atlas SP Partners, L.P. and Athene Annuity and Life Company (collectively, the “Lenders”). In connection with the Mortgage Facility’s closing, the Company terminated the Mortgage Commitment.

In connection with the Mortgage Facility’s closing, certain wholly-owned subsidiaries of the Company (collectively, the “Borrowers”) delivered certain promissory notes (collectively, the “Notes”) evidencing their obligation to pay the principal, interest and other amounts under the Mortgage Facility. The Notes are secured by, among other things, mortgages encumbering the Borrowers’ respective properties (a total of 23 properties at closing) (the “Properties”), and related personal property, leases and rents.

The Mortgage Facility will mature on September 6, 2026, subject to two one-year extensions at the Borrowers’ option (subject to satisfaction of certain conditions). The interest rate applicable to the Notes is equal to 30-day term SOFR (subject to a rate index floor of 3.50%) plus a spread of 2.75% per annum. During the continuance of an event of default, the contract rate of interest on the Notes will increase to the lesser of (i)the maximum rate allowed by law or (ii)4% above the interest rate then otherwise applicable.

The Mortgage Facility is structured as an interest only loan throughout the initial two-year term and any exercised extension periods. The principal amount outstanding under the Mortgage Facility may be prepaid in whole or in part by the Borrowers at any time without penalty, provided that prepayments made prior to the first anniversary of the closing date in excess of 35% of the initial principal amount of the Mortgage Facility will be subject to Borrowers’ payment of a spread maintenance premium equal to 2.75% per annum based on the number of days remaining prior to the first anniversary of the closing date. So long as no default then exists and subject to other customary release conditions, the Borrowers may cause the Lenders to release Properties from the Mortgage Facility in connection with their sale by paying 115% of the initial loan amount allocated to such Property (plus the spread maintenance premium, if applicable) provided that after giving effect to such release, the debt yield of the remaining Properties is equal to or greater than (i) the debt yield on the Mortgage Facility’s closing date and (ii) the debt yield in effect immediately prior to such release.

All rents received from the Properties will be deposited into lockbox accounts in the name of the Borrowers for the benefit of and controlled by the Lenders. So long as no Trigger Period (as defined below) is continuing, Borrowers shall have control over all funds in such lockbox accounts. During a Trigger Period, substantially all amounts in the lockbox accounts will be remitted to a cash management account controlled by the Lenders on a daily basis and will be used by the Lenders to fund monthly debt service, real estate taxes, insurance, required reserves, other amounts owing to the Lenders and other property-level operating costs, with all remaining amounts to be held by the Lenders as additional collateral for the Mortgage Facility. A “Trigger Period” commences (i) upon the occurrence of any event of default under the Mortgage Facility (and ends upon the cure or waiver of the event of default); (ii) when the debt yield falls below 10.5% (and ends when the debt yield exceeds 10.5% for one calendar quarter); or (iii) upon any bankruptcy action with respect to any Borrower or manager of a Property that has not been discharged within 60 days of filing.

Throughout the term of the Mortgage Facility, the Company is required to maintain (i) a net worth of not less than 15% of the then outstanding principal amount of the loan (but in no event less than $100.0 million) and (ii) minimum liquid assets of not less than 5% of the then outstanding principal amount of the loan (but in no event less than $15.0 million).

As of September 30, 2024, the outstanding principal balance of the Mortgage Facility was $206.9 million and 13 properties continued to serve as collateral for the Mortgage Facility. In conjunction with the release of 10 Properties from the Mortgage Facility in connection with the dispositions occurring subsequent to the closing date, the Company recorded debt extinguishment costs of $10.1 million in the three months ended September 30, 2024.

Financial Instruments and Fair Value Measurements

The following methods and assumptions were used by the Company in estimating fair value disclosures of financial instruments.

Cash and Cash Equivalents, Restricted Cash, Accounts Receivable, Accounts Payable and Other Liabilities

The carrying amounts reported in the Company’s consolidated balance sheets for these financial instruments approximated fair value because of their short-term maturities.

Debt

The following methods and assumptions were used by the Company in estimating fair value disclosures of debt. The fair market value of Senior Notes was determined using a pricing model to approximate the trading price of the Company’s public debt. The fair market value for all other debt is estimated using a discounted cash flow technique that incorporates future contractual interest and principal payments and a market interest yield curve with adjustments for duration, optionality and risk profile, including the Company’s non-performance risk and loan to value. The Company’s Senior Notes were and all other debt is classified as Level 2 and Level 3, respectively, in the fair value hierarchy. Considerable judgment is necessary to develop estimated fair values of financial instruments. Accordingly, the estimates presented are not necessarily indicative of the amounts the Company could realize on disposition of the financial instruments.

Carrying values that are different from estimated fair values are summarized as follows (in thousands):

Items Measured on Fair Value on a Recurring Basis

The Company maintained a swap agreement (included in Other Assets) measured at a fair value on a recurring basis of $11.1 million at December 31, 2023. In August 2024, the swap agreement was terminated. The estimated fair value was determined using the market standard methodology of netting the discounted fixed cash payments and the discounted expected variable cash receipts. The variable cash receipts are based on an expectation of interest rates (forward curves) derived from observable market interest rate curves. In addition, credit valuation adjustments, which consider the impact of any credit enhancements to the contract, are incorporated in the fair value to account for potential non-performance risk, including the Company’s own non-performance risk and the respective counterparty’s non-performance risk. The valuation techniques used by the Company to determine such fair value fell within Level 2 of the fair value hierarchy.

Cash Flow Hedges of Interest Rate Risk

The Company may use swaps and caps as part of its interest rate risk management strategy. The swaps designated as cash flow hedges involved the receipt of variable-rate amounts from a counterparty in exchange for the Company making fixed-rate payments over the life of the agreements without exchange of the underlying notional amount.

Prior to the termination and repayment of amounts outstanding under the Term Loan Agreement (Note 5) on August 15, 2024, the Company had one effective swap with a notional amount of $200.0 million, expiring in June 2027, which converted the variable-rate SOFR component of the interest rate applicable to its term loan to a fixed rate of 2.75%. In August of 2024, in conjunction with the repayment of the Term Loan Agreement (Note 5), the swap was terminated and re-designated to convert the variable-rate SOFR component of the interest rate applicable to $200.0 million of the loan outstanding under the new Mortgage Facility to a fixed rate of 2.75%. At the time or termination, the Company received a cash payment of $6.8 million and the fair value of the derivative remaining in Accumulated Other Comprehensive Income was $6.4 million. This amount will be subsequently reclassified into interest expense in the period that the hedged forecasted transaction is probable of affecting earnings.

All components of the swap were included in the assessment of hedge effectiveness. The Company expects to reflect within the next 12 months, a decrease to interest expense (and a corresponding increase to earnings) of approximately $2.2 million.

Derivative – Unsecured Notes

In 2023, the Company entered into swaption agreements with a notional amount aggregating $450.0 million to partially hedge the impact of changes in benchmark interest rates on potential yield maintenance premiums applicable to the redemption of its Senior Notes due in 2027. The swaptions did not qualify for hedge accounting. As a result, these derivative instruments were recorded in the Company’s consolidated balance sheets at fair market value, with changes in value recorded through earnings as of each balance sheet date until exercise or expiration. In August 2024, the swaption agreements were terminated and the Company received a cash payment of $1.3 million. The Company reported a non-cash loss of $0.3 million and $5.5 million, respectively, related to the valuation adjustments associated with these instruments for the three and nine months ended September 30, 2024, which is recorded in Loss on derivative instruments on the Company’s Consolidated Statement of Operations.

Other Comprehensive Income

The changes in Accumulated Other Comprehensive Income by component are as follows (in thousands):

(A) Includes derivative financial instruments entered into by the Company (Note 6) and by an unconsolidated joint venture.

Earnings Per Share

Prior to the commencement of trading on August 19, 2024, the Company effectuated a one-for-four reverse split of its common shares. The share amounts and earnings per share amounts disclosed below have been adjusted to reflect the one-for-four reverse stock split.

The following table provides a reconciliation of net income and the number of common shares used in the computations of “basic” earnings per share (“EPS”), which utilizes the weighted-average number of common shares outstanding without regard to dilutive potential common shares, and “diluted” EPS, which includes all such shares (in thousands, except per share amounts):

For the three and nine months ended September 30, 2024, Performance Restricted Stock Units (“PRSUs”) issued in March 2024, March 2023 and March 2022 were considered in the computation of diluted EPS. The PRSUs issued in March 2021 were considered in the computation of diluted EPS for both the three and nine months ended September 30, 2023. The PRSUs issued in March 2022 were considered in the computation of diluted EPS for the three months ended September 30, 2023 and were not considered in the computation of diluted EPS for the nine months ended September 30, 2023 because they were antidilutive. PRSUs issued in March 2023 were not considered in the computation of diluted EPS for the three months ended September 30, 2023, because they were antidilutive and were considered in the computation of diluted EPS for the nine months ended September 30, 2023. In March 2024, the Company issued 44,631 common shares in settlement of PRSUs granted in March 2021.

Common Share Dividends

The Company declared cash dividends of $1.04 per common share and $1.56 per common share for the nine-month periods ended September 30, 2024 and 2023, respectively.

Impairment Charges

For the nine months ended September 30, 2024, the Company recorded impairment charges aggregating $66.6 million, based on the difference between the carrying value of the assets and the estimated fair market value. The impairment charges recorded were triggered by a change in the hold period assumptions.

Items Measured at Fair Value

The Company is required to assess the fair value of certain impaired consolidated investments. The valuation of impaired real estate assets is determined using widely accepted valuation techniques including discounted cash flow analysis on the expected cash flows of each asset, as well as the income capitalization approach considering prevailing market capitalization rates, analysis of recent comparable sales transactions, actual sales negotiations and bona fide purchase offers received from third parties and/or consideration of the amount that currently would be required to replace the asset, as adjusted for obsolescence. In general, the Company considers multiple valuation techniques when measuring fair value of an investment. However, in certain circumstances, a single valuation technique may be appropriate.

These valuations are calculated based on market conditions and assumptions made by management at the time the valuation adjustments and impairments were recorded, which may differ materially from actual results if market conditions or the underlying assumptions change.

The following table presents information about the fair value of real estate that was impaired, and therefore, measured on a fair value basis, along with the related impairment charge for the nine months ended September 30, 2024. The table also indicates the fair value hierarchy of the valuation techniques used by the Company to determine such fair value (in millions):

The following table presents quantitative information about the significant unobservable inputs used by the Company to determine the fair value (in millions, except per square foot):

(A) Fair value measurements based upon an indicative bid and developed by third-party sources (including offers and comparable sales values), subject to the Company’s corroboration for reasonableness. The Company does not have access to certain unobservable inputs used by these third parties to determine these estimated fair values.

Subsequent Events

Curbline Spin Off

On October 1, 2024, the Company completed the spin-off of Curbline Properties. At the time of the spin-off, Curbline owned 79 convenience retail properties, consisting of approximately 2.7 million square feet of GLA of convenience retail real estate. In connection with the spin-off, on October 1, 2024, the Company, Curbline and Curbline Properties LP (the “Operating Partnership”) entered into a Separation and Distribution Agreement (the “Separation and Distribution Agreement”), pursuant to which, among other things, the Company transferred its portfolio of convenience retail properties, $800.0 million of unrestricted cash and certain other assets, liabilities and obligations to Curbline and effected a pro rata special distribution of all of the outstanding shares of Curbline common stock to common shareholders of the Company as of September 23, 2024, the record date. On the spin-off date, holders of the Company’s common shares received two shares of common stock of Curbline for every one common share of the Company held on the record date.

On October 1, 2024, the Company, Curbline and the Operating Partnership also entered into a Shared Services Agreement (the “Shared Services Agreement”) for certain business services to be provided by the Company to the Operating Partnership and by the Operating Partnership to the Company. Unless terminated earlier, the term of the Shared Services Agreement will expire on October 1, 2027. The Company, Curbline and the Operating Partnership also entered into a tax matters agreement, which governs the rights, responsibilities and obligations of the parties following the spin-off with respect to various tax matters and provides for the allocation of tax-related assets, liabilities and obligations. In addition, the Company, Curbline and the Operating Partnership entered into an employee matters agreement, which governs the respective rights, responsibilities and obligations of the parties following the spin-off with respect to transitioning employees, equity plans and retirement plans, health and welfare benefits, and other employment, compensation and benefit-related matters.

Class A Preferred Stock Redemption

The Company provided notice of its intent to redeem all of its outstanding 6.375% Class A Cumulative Redeemable Preferred Shares and the associated depositary shares on October 24, 2024, with payment of the redemption price plus accrued and unpaid dividends of to be made on or after November 26, 2024. The Company expects to record a non-cash charge of approximately $6.1 million to net income attributable to common shareholders in the fourth quarter of 2024, which represents the difference between the redemption price and the carrying amount immediately prior to redemption, which was recorded to additional paid in capital upon original issuance.