Curbline Properties Corp

Nature of Business and Financial Statement Presentation

Nature of Business

On October 30, 2023, SITE Centers Corp. (“SITE Centers”) announced that it intended to separate its portfolio of convenience properties from the rest of its operations (collectively, the “Curbline Business” or “Curbline Predecessor”), into a separate publicly traded company expected to separate on or around October 1, 2024. To accomplish this separation, in October 2023, SITE Centers formed a Maryland corporation, Curbline Properties Corp. (“Curbline” or the “Company”), to own the Curbline Business.

On October 1, 2024, SITE Centers completed the separation by means of a pro rata special distribution of all outstanding shares of Curbline common stock to the holders of SITE Centers common shares as of September 23, 2024, the record date for the distribution (the “Distribution”). On the date of the Distribution, Curbline’s portfolio was comprised of 79 convenience properties consisting of approximately 2.7 million square feet of gross leasable area (“GLA”) which are geographically diversified principally across the Southeast, Mid-Atlantic, Southwest and Mountain regions along with Texas.

The Company plans to elect to be treated as a real estate investment trust (“REIT”) for U.S. federal income tax purposes, commencing with the taxable year ending December 31, 2024, and intends to maintain its status as a REIT for U.S. federal income tax purposes in future periods. The Company also intends to operate through an umbrella partnership, commonly referred to as an “UPREIT” structure, in which substantially all of the Company’s properties and assets are held through a subsidiary, Curbline Properties LP (the “Operating Partnership”), a Delaware limited partnership. As the sole general partner of the Operating Partnership, the Company has exclusive control of the Operating Partnership’s day-to-day management. The Company is not expected to conduct any material business itself, other than acting as the sole general partner of the Operating Partnership, guaranteeing certain debt of the Operating Partnership and issuing equity from time to time.

The Curbline Business is operated as one segment, which owns, operates and finances convenience properties. The tenant base of the Curbline Business primarily includes national, regional, and local retailers. Consequently, the Curbline Business’ credit risk is concentrated in the retail industry.

Basis of Presentation

The accompanying historical combined financial statements and related notes of the Curbline Business do not represent the balance sheet, statement of operations and cash flows of a legal entity, but rather a combination of entities under common control that have been “carved-out” of SITE Centers’ consolidated financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”). All intercompany transactions and balances have been eliminated in combination. The preparation of these combined financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the combined financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

As of September 30, 2024, the Curbline Predecessor portfolio consistedof 79 convenience properties, including properties that were carved out of existing shopping centers owned by SITE Centers. Curbline Predecessor’s process of allocating the land value to the properties was to conclude, on the acquisition date, the fair value per square foot of convenience land with the residual value allocated to the existing shopping center which was validated with market comparisons. Curbline Predecessor’s process of allocating the building value at the convenience property, as compared to the shopping center, is based on annualized base rent as of the date of acquisition or based on specific identification of costs for ground up developments as of the date placed in service. Curbline Predecessor’s process of allocating mortgage indebtedness and interest expense for these properties was based on the percentage of total assets at acquisition date or refinancing. The mortgages related to the assets were repaid during the years ended December 31, 2022 and 2021.

These combined financial statements reflect the revenues and direct expenses of Curbline Predecessor and include material assets and liabilities of SITE Centers that are specifically attributable to the Curbline Business. Curbline Predecessor equity in these combined financial statements represents the excess of total assets over total liabilities. Curbline Predecessor equity is impacted by contributions from and distributions to SITE Centers, which are the result of treasury activities and net funding provided by or distributed to SITE Centers prior to the Distribution, as well as the allocated costs and expenses described below.

Further, the combined financial statements include an allocation of indirect costs and expenses incurred by SITE Centers related to the Curbline Business, primarily consisting of compensation and other general and administrative costs that have been allocated using the relative percentage of GLA of the Curbline Business and SITE Centers’ management’s knowledge of the Curbline Business. The amounts allocated in the accompanying combined financial statements are not necessarily indicative of the actual amount of such indirect expenses that would have been recorded had Curbline Predecessor been a separate independent entity. Curbline Predecessor believes the assumptions underlying the allocation of indirect expenses are reasonable.

The combined financial statements include $23.6 million and $30.7 million of transactions costs, primarily advisory, legal and professional fees, for the three and nine months ended September 30, 2024, respectively, relating to the spin-off.

Unaudited Interim Financial Statements

These financial statements have been prepared by Curbline Predecessor 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 unaudited combined financial statements should be read in conjunction with the audited combined financial statements and notes thereto included in the information statement included as Exhibit 99.1 to the Company’s Registration Statement on Form 10 filed with the Securities and Exchange Commission on September 3, 2024.

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):

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

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

Debt

The carrying amount of debt was $25.8 million at December 31, 2023 and the fair value of mortgage indebtedness was $24.8 million at December 31, 2023. In May 2024, Curbline Predecessor repaid all of its mortgages outstanding at December 31, 2023.

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, Curbline Predecessor acquired the following convenience properties (in thousands):

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

(A)

Depreciated in accordance with Curbline Predecessor’s policy.

Total consideration for the acquisitions was paid in cash. Included in Curbline Predecessor’s combined statements of operations for the three and nine months ended September 30, 2024, was $2.9 million and $3.7 million, respectively, in total revenues from the date of acquisition through September 30, 2024, for the properties acquired in 2024.

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 by SITE Centers 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 Curbline Predecessor. Upon sale of the shopping centers, Curbline Predecessor recognized below-market ground lease assets of approximately $13.7 million.

(B)

Curbline Predecessor recorded amortization expense related to its intangibles, excluding above- and below-market leases, of $2.7 million and $2.0 million for the three months ended September 30, 2024 and 2023, respectively, and $7.0 million and $6.1 million for the nine months ended September 30, 2024 and 2023, respectively. Curbline Predecessor recorded contra revenue for above-market leases of $0.1 million for each of the three months ended September 30, 2024 and 2023 and $0.4 million for each of thenine months ended September 30, 2024 and 2023, which is recorded in rental income on the Combined Statements of Operations.

(C)

Includes $5.0 million of fees paid to date to obtain the Revolving Credit Facility and Term Loan Facility (each as defined below) on October 1, 2024 (Note 5). This amount is included in financing cash flows on the Combined Statements of Cash Flows.

(D)

Curbline Predecessor recorded revenue for below-market leases of $0.8 million and $0.6 million for the three months ended September 30, 2024 and 2023, respectively, and $2.4 million and $1.5 million for thenine months ended September 30, 2024 and 2023, respectively, which is recorded in rental income on the Combined Statements of Operations.

Commitments and Contingencies

Legal Matters

Curbline Predecessor and its subsidiaries are subject to various legal proceedings, which, taken together, are not expected to have a material adverse effect on Curbline Predecessor. Curbline Predecessor is also subject to a variety of legal proceedings or claims for personal injury or property damage arising in the ordinary course of its business, most of which are covered by insurance, although they may be subject to deductibles or retentions. While the resolution of all matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on Curbline Predecessor’s liquidity, financial position or results of operations.

Commitments and Guaranties

Curbline Predecessor routinely enters into contracts for the maintenance of its properties. These contracts typically can be canceled upon 30 to 60 days’ notice without penalty. At September 30, 2024, Curbline Predecessor had purchase order obligations, typically payable within one year, aggregating approximately $0.5 million related to the maintenance of its properties and general and administrative expenses.

Subsequent Events

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

On October 1, 2024, the Company, the Operating Partnership and SITE Centers also entered into a Shared Services Agreement (the “Shared Services Agreement”) for certain business services to be provided by SITE Centers to the Operating Partnership and by the Operating Partnership to SITE Centers. Unless terminated earlier, the term of the Shared Services Agreement will expire on October 1, 2027. The Company, the Operating Partnership and SITE Centers 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, the Operating Partnership and SITE Centers 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.

In connection with the spin-off, on October 1, 2024, the Company and the Operating Partnership entered into a Credit Agreement with a syndicate of lenders and Wells Fargo Bank, National Association, as administrative agent, which provides for (i) an unsecured revolving credit facility in the amount of $400.0 million (the “Revolving Credit Facility”) and (ii) an unsecured, delayed draw term loan facility in the amount of $100.0 million (the “Term Loan Facility” and, together with the Revolving Credit Facility, the “Credit Facilities”). The Revolving Credit Facility also provides a $35.0 million sublimit for letters of credit. The aggregate amount available under the Credit Facilities may be increased to $750.0 million so long as existing or new lenders agree to provide incremental commitments and subject to the satisfaction of certain customary conditions. The Revolving Credit Facility matures in October 2028, subject to two six-month options to extend the maturity to October 2029 subject to the satisfaction of certain conditions. Any loan under the Term Loan Facility will mature in October 2027, subject to two one-year options to extend its maturity to October 2029 subject to the satisfaction of certain conditions. No amounts have been drawn on the Credit Facilities as of November 13, 2024.

On October 24, 2024, the Company entered into a $100.0 million forward interest rate swap agreement to fix the variable-rate SOFR component of the Company's $100.0 million Term Loan Facility to 3.578%, from April 1, 2025 through October 1, 2028. The all-in rate of the Term Loan Facility will be fixed at 4.978% based on the loan’s current applicable spread.

From October 1, 2024 through November 8, 2024, the Company acquired 12 properties for an aggregate purchase price of$81.6 million.