SITE Centers Corp.

Good day and welcome to the site center second quarter 2024 operating results conference call. All participants will be in listen only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Stephanie Ruiz de Perez, Vice President of Capital Markets. Please go ahead.

Thank you. Good morning and welcome to SightCenter's second quarter 2024 earnings conference call. Joining me today are Chief Executive Officer David Lukes and Chief Financial Officer Connor Fenerty. In addition to the press release distributed this morning, we have posted our quarterly financial supplement and slide presentation on our website at www.sightcenters.com. which are intended to support our prepared remarks during today's call. Please be aware that certain of our statements today may contain forward-looking statements within the meaning of federal securities laws. These forward-looking statements are subject to risks and uncertainties, and actual results may differ materially from our forward-looking statements. Additional information may be found in our earnings press release and in our filings of the SEC, including our most recent report on Form 10-K and 10-Q. In addition, we'll be discussing non-GAAP financial measures on today's call, including FFO, operating FFO, and same-store net operating income. Descriptions and reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in today's quarterly financial supplement and investor presentation. At this time, it is my pleasure to introduce our Chief Executive Officer, David Lukes.

Good morning. I'd like to start by thanking all of my colleagues at Site Centers for their tremendous efforts over the past few quarters. The dedication, flexibility, and thoughtful execution from the entire organization has been astounding. The results we announced today showcase the significant progress we've made on our strategic goals as we prepare for the planned spinoff of the convenience portfolio from within Site Centers into a new and unique focused growth company called CurbLine Properties. We closed nearly $1 billion of transactions in the quarter. We purchased or retired over $50 million in debt and reported 24% trailing 12-month new leasing spreads for the CurbLine portfolio. Each of these accomplishments mark additional progress on the dual path of growing our CurbLine portfolio through acquisitions and organic NOI growth and maximizing the value of the site center's portfolio through dispositions along with continued leasing and asset management. As we march closer to the spinoff date expected in October, we've spent considerable time with the investment community and have consistently heard two main questions. First, what is the genesis of the Curb Line strategy, and how big of an opportunity does it represent? And second, what will site centers look like at the time of the spinoff, and how do we plan on maximizing value for all stakeholders? So I'll start with those two questions, talk briefly about staffing and Curb Line acquisitions, and then conclude with the second quarter operations before turning it over to Connor to talk in greater detail about results and the outlook for the second half of the year. Starting with CurbLine, we began investing in convenience assets over five years ago as we witnessed the strong financial performance of the small format asset class. Retention was high, credit was strong and diversified, and the CapEx load was extremely low. Importantly, mobile phone geolocation data also emerged during this period as a sophisticated and new tool that we could utilize to identify underwrite and provide hard facts around our investment opportunities the traditional real estate underwriting of boots on the ground market knowledge became supplemented by data analytics that allowed us a window into tenant performance and customer utilization of the small format property sector as we transitioned through the pandemic years two outcomes became notable first the capital efficiency of the business became increasingly important as capital itself became more expensive and valuable. In other words, the significantly higher conversion of top-line rental income down to property cash flow helped offset higher capital costs while also generating compounding cash flow growth. Second, the sector has kept up with inflation remarkably well. Lease duration in general in the curb line portfolio is shorter when compared with properties with a traditional anchor. This is certainly an opportunity as the increase of customers throughout the week with suburban communities due to population growth and flexible work mandates have steadily increased demand for convenience-oriented real estate from tenants seeking to access those customers, resulting in higher tenant retention and higher rent growth. In other words, this is a renewals business where we can capture growing market rents with little landlord capital, as most tenants are renewing leases since there is a shortage of high-quality convenience real estate in suburban communities. To that point, same-store NOI for the curb-line portfolio is expected to average greater than 3% for the next three years when factoring in all of this. These combined attributes, capital efficiency and strong top-line growth, have led numerous investors to ask us about the addressable market for convenience properties. We now have five-plus years of transactions data under our belts and arguably own the highest quality portfolio of convenience assets in the United States. Despite that fact, what we own today represents only one-quarter of 1% of the 950 million square feet of total U.S. inventory, according to ICSC. As of quarter end, the CurbLine portfolio included 72 wholly owned convenience properties, or 2.4 million square feet of real estate, expected to generate about $84 million of NOI. These assets share common characteristics, including excellent visibility, access, and we believe compelling economics highlighted by limited CapEx needs. We continue to expect the spinoff to be completed on October 1st of this year, with CURB capitalized with no debt and $600 million of cash. Given a substantial disposition activity to date and consistent with our commentary from last quarter, we now no longer expect CURB to retain a preferred investment in site centers, which is a good segue since proceeds from the sale of site centers' portfolio of anchored properties has been used to facilitate an unmatched balance sheet for CURBLINE. As a result, I'll spend a moment on the expected strategy for site centers after the spin. As of last Friday, we have closed $951 million of wholly owned property sales year to date with total closed dispositions since July 1st, 2023 of just over $1.8 billion at a blended cap rate of 7.1%. As of Friday, the company has over $1 billion of additional real estate currently either under contract, in contract negotiation, or with executed non-binding LOIs at a blended cap rate in the mid-sevens. Although we expect some of these transactions to close pre-spin, others will close in the fourth quarter, and some may fall out. As a result, we are not in a position today to quantify the site center's portfolio at the time of the spinoff and expect to update disclosure on the portfolio itself as we near the spin date. What we can say is that site centers post-spin will contain a diversified portfolio, including assets in major markets with strong tenant sales, and we remain flexible and open to a variety of outcomes and the eventual path to creating value for our stakeholders. In terms of potential buyers and activity, the pool of interest remains deep and it remains an active and liquid market for our portfolio of open-air shopping centers. Leasing momentum remains strong, market rents are growing, and replacement costs remain elevated, factors we believe they're supporting strong buyer interest. In addition to considering further asset sales, we will continue to focus on leasing and asset management and listen to the signals from the public and private market with respect to valuation and expect to act on those signals as appropriate. Shifting to post-spend staffing, both curb line and site centers will have their own leasing and property management teams along with dedicated accounting and legal leadership. Other departments and staff will remain within site centers and be utilized by both companies under a shared service agreement, including the accounting, legal, and IT departments, among others. The purpose of this agreement is to facilitate an orderly transition of our current resources and allow each company to pursue its business plan with as little G&A friction as possible. It's an elegant way to maintain historical portfolio knowledge keep the talent on our team intact, and allow flexibility to execute each business plan. More detail and clarity on the shared service agreement will be provided in the Form 10. Moving to acquisitions, we acquired five convenience properties in the second quarter with total acquisitions at share of $65 million, including our partner's interest in Meadowmont Village in Chapel Hill, North Carolina. The convenience portion of this property is expected to be included in the curb spinoff We closed another $27 million of acquisitions in the third quarter to date and have over $200 million of additional convenience assets awarded or under contract, subject to our completion of diligence. Average household incomes for the second quarter investments were over $117,000, with a weighted average lease rate of over 96%, excluding metamount, highlighting our focus on acquiring properties where renewals and lease bumps drive growth without significant capex. As I noted, going forward, we remain encouraged by the unique opportunities in the convenience subsector, including the size of the opportunity itself and have plenty of room to grow. And combined with a balance sheet that is expected to have no outstanding debt and substantial liquidity, CurbLine Properties has the opportunity to generate compelling and elevated relative growth and returns for stakeholders. Ending with operations, Overall quarterly leasing volume was up sequentially again, despite a materially smaller portfolio and less availability. Leasing demand continues to be steady from both existing retailers and service tenants expanding into key suburban markets, along with new concepts competing for the same space. Despite the strength of execution from our leasing team, our lease rate was down 100 basis points sequentially, in large part due to the sale of assets with an average lease rate of almost 97%. In terms of leasing spreads, we added new disclosure in the supplement this quarter, breaking out activity for CurbLine. Leasing activity, velocity, and economics continue to improve as we grow this portfolio, highlighted by almost 50% straight-line new leasing rent spreads for the trailing 12-month period. Recent new and renewal deals include a number of first-to-portfolio and recurring national tenants, including CAVA, Panda Express, Wells Fargo, the UPS Store, LensCrafters, and Comcast. Before turning the call over to Connor, I want to thank, again, everyone at Site Centers for their work these past few quarters. There is no shortage of individuals and teams across the company who have worked tirelessly to position both Site and CurbLine for success, and I'm extremely grateful for all of their contributions. And with that, I'll turn it over to Connor.