Curbline Properties Corp. 10-K Analysis & Summary – 2/21/2025

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Curbline Properties Corp.

10-K

Annual report

Filing date:

02/21/2025

TLDR:

Curbline Properties Corp. (CURB) is a newly spun-off REIT focused on convenience shopping centers. It has a strong cash position and acquisition strategy, but faces risks due to its limited operating history and reliance on SITE Centers.

ELI5:

Curbline is a new company that owns shopping centers with stores like grocery stores and pharmacies. They have a lot of cash to buy more shopping centers, but they’re also relying on another company for some services, which could be risky.

Accession #:

0000950170-25-024834

Published on

March 16, 2025

Analyst Summary

Occupancy Rate: 93.9% (December 31, 2024) vs. 94.8% (December 31, 2023) – Slight decrease, attributed to recent acquisitions.
Average Base Rent (ABR) per Occupied Square Foot: $35.62 (December 31, 2024) vs. $35.84 (December 31, 2023) – Slight decrease, attributed to recent acquisitions.
Net Income Attributable to Curbline: $10.3 million (2024) vs. $31.0 million (2023) – Significant decrease, primarily due to transaction costs and higher G&A expenses.
Funds From Operations (FFO) Attributable to Curbline: $52.2 million (2024) vs. $62.6 million (2023) – Decrease, primarily due to transaction costs and higher G&A expenses.
Operating FFO Attributable to Curbline: $83.5 million (2024) vs. $65.5 million (2023) – Increase, driven by property acquisitions and higher interest income.
Cash and Cash Equivalents: $626.4 million (December 31, 2024) – Strong liquidity position.
Debt: $0 (December 31, 2024) – Debt-free balance sheet provides financial flexibility.
Total Assets: $2.03 billion (December 31, 2024) – Significant asset base, primarily real estate.
Cash Flow from Operations: $54.3 million (2024) – Healthy cash generation from core business.
Cash Flow Used for Investing Activities: -$437.4 million (2024) – Primarily driven by property acquisitions.
Cash Flow from Financing Activities: $1.01 billion (2024) – Primarily due to transactions with SITE Centers related to the spin-off.
Gross Profit Margin: 100%.
Operating Profit Margin: 28.07%
Net Profit Margin: 8.49%
Return on Assets (ROA): 0.50%
Return on Equity (ROE): 0.53%
Earnings Per Share (EPS) – Basic: $0.10
Earnings Per Share (EPS) – Diluted: $0.09
Current Ratio: 13.66
Quick Ratio (Acid-Test Ratio): 13.66
Cash Ratio: 12.43
Debt-to-Equity Ratio: 0.047
Debt-to-Assets Ratio: 0.045
Interest Coverage Ratio (Times Interest Earned): 50.27
Asset Turnover: 0.059
Price-to-Earnings Ratio (P/E): 249.35
Price-to-Book Ratio (P/B): 1.32
Price-to-Sales Ratio (P/S): 21.17
Enterprise Value to EBITDA (EV/EBITDA): 44.65
Revenue Growth: 29.06%
Net Income Growth: -66.87%
EPS Growth: -70%

Opportunities and Risks

Limited Operating History: As a newly independent company, Curbline lacks a long track record, making it difficult to predict future performance.
Reliance on SITE Centers: The Shared Services Agreement with SITE Centers creates potential conflicts of interest and dependence on a related party.
REIT Qualification: Failure to qualify as a REIT would have significant tax implications.
Economic Conditions: Changes in consumer trends, inflation, and interest rates could negatively impact tenant demand and profitability.
Cybersecurity: Dependence on SITE Centers’ IT systems exposes Curbline to potential cyber threats.
Fragmented Market: The large, fragmented convenience retail market provides ample acquisition opportunities.
Strong Balance Sheet: The net cash position and access to credit provide financial flexibility for growth.
High-Quality Tenant Base: Focus on national, high-credit tenants reduces credit risk.
Cash Flow Growth Potential: Opportunities to increase rents and maintain high occupancy rates drive cash flow growth.

Curbline Properties Corp. (CURB) 2024 10-K Report Analysis

Executive Summary

This report analyzes Curbline Properties Corp.’s 2024 10-K filing, focusing on its financial performance, risk factors, and future outlook. Curbline, a newly spun-off REIT specializing in convenience shopping centers, presents both opportunities and challenges. The company’s net cash position and acquisition strategy are promising, but its limited operating history and reliance on SITE Centers for certain services pose risks. A cautious approach is warranted, pending further evidence of successful execution of its business plan as an independent entity.

Company Overview

Curbline Properties Corp. (CURB) is a REIT focused on owning, managing, and acquiring convenience shopping centers. It was spun off from SITE Centers Corp. on October 1, 2024. The company’s portfolio consists of 97 properties across the US, with a focus on suburban, high-income areas. Curbline aims to capitalize on the fragmented convenience retail market through strategic acquisitions and active management.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management expresses optimism about the company’s growth prospects, citing its net cash position, acquisition strategy, and the fragmented nature of the convenience retail market. They highlight the company’s focus on high-quality tenants and opportunities for cash flow growth through rent increases and high retention rates. However, the MD&A also acknowledges the risks associated with being a new, independent company and the potential impact of economic conditions on the retail industry.

Financial Statement Analysis

Key Ratios and Trends

Occupancy Rate: 93.9% (December 31, 2024) vs. 94.8% (December 31, 2023) – Slight decrease, attributed to recent acquisitions.
Average Base Rent (ABR) per Occupied Square Foot: $35.62 (December 31, 2024) vs. $35.84 (December 31, 2023) – Slight decrease, attributed to recent acquisitions.
Net Income Attributable to Curbline: $10.3 million (2024) vs. $31.0 million (2023) – Significant decrease, primarily due to transaction costs and higher G&A expenses.
Funds From Operations (FFO) Attributable to Curbline: $52.2 million (2024) vs. $62.6 million (2023) – Decrease, primarily due to transaction costs and higher G&A expenses.
Operating FFO Attributable to Curbline: $83.5 million (2024) vs. $65.5 million (2023) – Increase, driven by property acquisitions and higher interest income.

Analysis: While revenue increased due to acquisitions, profitability metrics (Net Income and FFO) declined due to spin-off related costs and increased G&A. Operating FFO, which excludes these non-recurring items, shows a positive trend, indicating underlying operational strength. The slight decrease in occupancy and ABR warrants monitoring, although management attributes it to acquisitions, suggesting a potential for improvement as these properties are integrated.

Balance Sheet Highlights

Cash and Cash Equivalents: $626.4 million (December 31, 2024) – Strong liquidity position.
Debt: $0 (December 31, 2024) – Debt-free balance sheet provides financial flexibility.
Total Assets: $2.03 billion (December 31, 2024) – Significant asset base, primarily real estate.

Analysis: Curbline’s strong cash position and lack of debt provide a significant advantage for pursuing its acquisition strategy. The substantial real estate asset base reflects the company’s focus on property ownership.

Cash Flow Analysis

Cash Flow from Operations: $54.3 million (2024) – Healthy cash generation from core business.
Cash Flow Used for Investing Activities: -$437.4 million (2024) – Primarily driven by property acquisitions.
Cash Flow from Financing Activities: $1.01 billion (2024) – Primarily due to transactions with SITE Centers related to the spin-off.

Analysis: The cash flow statement reflects the company’s active acquisition strategy and the financial impact of the spin-off from SITE Centers. The positive cash flow from operations supports the sustainability of its business model.

Risk and Opportunity Assessment

Risks

Limited Operating History: As a newly independent company, Curbline lacks a long track record, making it difficult to predict future performance.
Reliance on SITE Centers: The Shared Services Agreement with SITE Centers creates potential conflicts of interest and dependence on a related party.
REIT Qualification: Failure to qualify as a REIT would have significant tax implications.
Economic Conditions: Changes in consumer trends, inflation, and interest rates could negatively impact tenant demand and profitability.
Cybersecurity: Dependence on SITE Centers’ IT systems exposes Curbline to potential cyber threats.

Opportunities

Fragmented Market: The large, fragmented convenience retail market provides ample acquisition opportunities.
Strong Balance Sheet: The net cash position and access to credit provide financial flexibility for growth.
High-Quality Tenant Base: Focus on national, high-credit tenants reduces credit risk.
Cash Flow Growth Potential: Opportunities to increase rents and maintain high occupancy rates drive cash flow growth.

Red Flags and Uncommon Metrics

Transaction Costs: Significant transaction costs related to the spin-off negatively impacted net income and FFO.
General and Administrative Expenses: Increased G&A expenses post-spin-off reflect the costs of operating as an independent company.
Related Party Transactions: The Shared Services Agreement with SITE Centers requires careful monitoring to ensure fair terms and avoid conflicts of interest.

Conclusion and Actionable Insights

Curbline Properties Corp. presents a compelling investment opportunity in the niche convenience retail sector. However, investors should be aware of the risks associated with its limited operating history, reliance on SITE Centers, and the broader economic environment. The company’s strong balance sheet and acquisition strategy are promising, but successful execution is crucial.

Overall Assessment: Hold. Monitor the company’s progress in integrating acquisitions, managing its relationship with SITE Centers, and achieving its growth targets. A more positive outlook would be warranted with sustained improvement in occupancy, ABR, and profitability metrics.

Recommendations:

Monitor Acquisition Integration: Track the performance of acquired properties and their contribution to overall revenue and profitability.
Assess SITE Centers Relationship: Evaluate the terms and effectiveness of the Shared Services Agreement and identify potential conflicts of interest.
Track REIT Compliance: Ensure the company maintains its REIT status and meets distribution requirements.
Evaluate Economic Impact: Monitor the impact of economic conditions on tenant performance and demand for convenience retail space.

Curbline Properties Corp. Financial Analysis (Year Ended December 31, 2024)

1. Financial Ratio and Metric Analysis

Profitability

Gross Profit Margin: Rental income is considered gross profit, so the gross profit margin is 100%.
Operating Profit Margin:
- Calculation: (Total Revenues – Rental Operation Expenses) / Total Revenues = ($120,881 – $86,953) / $120,881 = 28.07%
Net Profit Margin:
- Calculation: Net Income Attributable to Curbline / Total Revenues = $10,262 / $120,881 = 8.49%
Return on Assets (ROA):
- Calculation: Net Income Attributable to Curbline / Total Assets = $10,262 / $2,033,098 = 0.50%
Return on Equity (ROE):
- Calculation: Net Income Attributable to Curbline / Total Equity = $10,262 / $1,942,557 = 0.53%
Earnings Per Share (EPS) – Basic: $0.10
Earnings Per Share (EPS) – Diluted: $0.09

Liquidity

Current Ratio:
- Calculation: Current Assets / Current Liabilities. Current assets are Cash and cash equivalents + Accounts receivable, net + Amounts receivable from SITE Centers + Other assets = $626,409 + $15,887 + $33,762 + $12,153 = $688,211. Current Liabilities are Accounts payable and other liabilities + Dividends payable = $23,718 + $26,674 = $50,392. Current Ratio = $688,211 / $50,392 = 13.66
Quick Ratio (Acid-Test Ratio):
- Calculation: (Current Assets – Inventory) / Current Liabilities. Assuming no inventory, Quick Ratio = Current Ratio = 13.66
Cash Ratio:
- Calculation: Cash and Cash Equivalents / Current Liabilities = $626,409 / $50,392 = 12.43

Solvency/Leverage

Debt-to-Equity Ratio:
- Calculation: Total Liabilities / Total Equity = $90,541 / $1,942,557 = 0.047
Debt-to-Assets Ratio:
- Calculation: Total Liabilities / Total Assets = $90,541 / $2,033,098 = 0.045
Interest Coverage Ratio (Times Interest Earned):
- Calculation: EBITDA / Interest Expense. EBITDA = Net Income + Interest Expense – Interest Income + Depreciation and Amortization + Tax Expense + Non-controlling interests = $10,273 + $901 – $7,810 + $41,911 + $4 + $11 = $45,290. Interest Coverage Ratio = $45,290 / $901 = 50.27

Activity/Efficiency

Asset Turnover:
- Calculation: Total Revenues / Total Assets = $120,881 / $2,033,098 = 0.059

Valuation

Price-to-Earnings Ratio (P/E):
- Calculation: Market Cap / Net Income Attributable to Curbline. Market Cap = Shares Outstanding * Stock Price = 105,043,781 * $24.36 = $2,558,868,819. P/E Ratio = $2,558,868,819 / $10,262,000 = 249.35
Price-to-Book Ratio (P/B):
- Calculation: Market Cap / Total Equity = $2,558,868,819 / $1,942,557,000 = 1.32
Price-to-Sales Ratio (P/S):
- Calculation: Market Cap / Total Revenues = $2,558,868,819 / $120,881,000 = 21.17
Enterprise Value to EBITDA (EV/EBITDA):
- Calculation: (Market Cap + Total Liabilities – Cash) / EBITDA = ($2,558,868,819 + $90,541,000 – $626,409,000) / $45,290,000 = 44.65

Growth Rates

Revenue Growth:
- Calculation: (2024 Total Revenues – 2023 Total Revenues) / 2023 Total Revenues = ($120,881 – $93,660) / $93,660 = 29.06%
Net Income Growth:
- Calculation: (2024 Net Income – 2023 Net Income) / 2023 Net Income = ($10,273 – $31,013) / $31,013 = -66.87%
EPS Growth:
- Calculation: (2024 Diluted EPS – 2023 Diluted EPS) / 2023 Diluted EPS = ($0.09 – $0.30) / $0.30 = -70%

Other Relevant Metrics

FFO (Funds From Operations) and Operating FFO: These are non-GAAP measures commonly used in the REIT industry. FFO is calculated by adding depreciation and amortization to net income and subtracting gains on sales of property. Operating FFO further adjusts FFO for certain items such as transaction costs and debt extinguishment costs. These metrics are used to assess the operating performance of REITs.
Same-Property NOI (Net Operating Income): This metric measures the NOI generated by properties that were owned for the entirety of both reporting periods, providing a more accurate comparison of operating performance.

2. Commentary

Curbline Properties Corp. shows strong revenue growth of 29.06% from 2023 to 2024, driven by acquisitions and comparable portfolio properties. However, net income and EPS experienced significant declines of -66.87% and -70% respectively, indicating potential challenges in cost management or increased expenses. The company maintains a very strong liquidity position with high current, quick, and cash ratios, and a low leverage. The high P/E ratio of 249.35 suggests that the stock may be overvalued relative to its earnings.