Overview
Curbline Properties Corp., a Maryland corporation (the “Company” or “Curbline”), is engaged in the business of owning, managing, leasing and acquiring a portfolio of convenience shopping centers. All of Curbline’s properties are located in the United States and are geographically diversified, principally across the Southeast, Mid-Atlantic, Southwest and Mountain regions, along with Texas. At December 31, 2024, the aggregate occupancy of the Company’s portfolio of 97 properties, which aggregated 3.1 million square feet of gross leasable area (“GLA”), was 93.9% occupied and the average annualized base rent (“ABR”) per occupied square foot was $35.62. The primary source of the Company’s income is generated from the rental of the Company’s convenience shopping centers to tenants.
Convenience shopping centers are generally positioned on the curbline of well-trafficked intersections and major vehicular corridors, offering excellent access and visibility, dedicated parking and often include drive-thru units, with approximately half of Curbline properties having at least one drive-thru unit as of December 31, 2024. The properties generally consist of a homogenous row of primarily small-shop units leased to a diversified mixture of national, regional and local service and restaurant tenants that cater to daily convenience trips from the growing suburban population. The property type’s site plan and the depth of leasing prospects that can utilize existing square footage generally reduce operating capital expenditures relative to other retail real estate formats and provide significant tenant diversification. As of December 31, 2024, the median GLA of a property in the Curbline portfolio was approximately 20,000 square feet with 93% of base rent generated by units less than 10,000 square feet.
On October 1, 2024, SITE Centers completed the spin-off of Curbline, pursuant to which SITE Centers contributed 79 convenience shopping centers to the Company as well as transferred to Curbline certain other assets, liabilities and obligations and effected a pro rata special distribution of shares of Curbline common stock to SITE Centers common shareholders (the “Spin-Off”). The Spin-Off was effected pursuant to the Separation and Distribution Agreement (the “Separation and Distribution Agreement”), dated as of October 1, 2024, among the Company, the Operating Partnership (as defined below) and SITE Centers, as further described in the Information Statement. On the Spin Off Date, each holder of SITE Centers common shares as of the record date for the distribution received two shares of Curbline common stock for every one SITE Centers common share held. The Company’s common stock trades on the New York Stock Exchange under the symbol “CURB”.
The Spin-Off is more fully described in the Information Statement. In connection with the Spin-Off, the Company, the Operating Partnership and SITE Centers also entered into a Shared Services Agreement, a Tax Matters Agreement, and Employee Matters Agreement, each as described in further detail in the Information Statement and in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The Spin-Off became effective at 12:01 a.m., Eastern Time, on October 1, 2024.
Curbline was in a net cash position at the time of the Spin-Off, with $800.0 million of cash on hand, no indebtedness, and a $400.0 million unsecured, undrawn line of credit and a $100.0 million delayed draw term loan facility. At December 31, 2024, the Company remained in a net cash position with $626.4 million of cash on hand, no indebtedness and full availability under its credit agreement. Therefore, the Company is expected to have significant access to sources of debt capital in order to fund significant asset growth.
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 in future periods. The Company operates 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, a Delaware limited partnership (the “Operating 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.
Strategy
The Company is the first and only publicly traded company that is focused exclusively on convenience shopping centers, which have historically been owned and managed by private and individual investors in local markets or as part of larger, more diversified real estate portfolios. As of December 31, 2023, there were over 68,000 convenience properties in the United States (950 million square feet of GLA). This highly fragmented but liquid market, along with the Company’s net cash and liquidity position, provides a
substantial addressable opportunity for Curbline to scale and differentiate itself as the first mover public REIT exclusively focused on convenience assets.
Curbline’s acquisition strategy is focused on a number of real estate and financial factors including demographics, property access and visibility, vehicular traffic, tenant credit profile, rent mark-to-market opportunities and prospects for cash flow growth. The Company’s current portfolio is generally located in submarkets with compelling long-term population and employment growth prospects and above-average household incomes of over $115,000 as compared to the national average of median household income of $80,610.
The Company focuses on leasing space to a diversified group of primarily national, high credit quality tenants operating across a wide range of primarily service and restaurant businesses, including quick-service restaurants, healthcare and wellness, financial services, beverage retail, telecommunications, beauty and hair salons, and fitness, among others.
Convenience properties offer the opportunity to generate above-average, occupancy-neutral cash flow growth (compared to cash flow growth levels for other retail real estate assets) through rental income increases from either fixed annual rental increases or renewal option increases embedded in tenant leases, elevated retention rates limiting lost rent resulting from vacancy, and positive mark-to-market of leases at renewal. In addition, tenant lease agreements at convenience properties typically have shorter lease terms and fewer tenant renewal options with approximately 54% of the ABR under Curbline’s leases expiring within the next five years without any tenant renewal option assumptions. The duration of convenience tenant leases provides Curbline with more frequent opportunities to increase rents to market levels and to mitigate the risk and impact of inflation. Convenience properties’ standardized site plans, high tenant retention rates, higher annualized base rents per square foot and the depth of leasing prospects that can utilize existing square footage also generally result in lower operating capital expenditure levels as a percentage of annualized base rents over time relative to other retail real estate formats including grocery, lifestyle and regional power center properties.
The overall investment, operating and financing policies of the Company, which govern a variety of activities, such as capital allocations, dividends and status as a REIT, are determined by management and the Company’s Board of Directors (the “Board of Directors” or the “Curbline Board”). The Board of Directors may amend or revise the Company’s policies from time to time without a vote of the Company’s stockholders.
Recent Developments
From January 1, 2025 through February 21, 2025, the Company acquired two convenience shopping centers for an aggregate purchase price of $7.7 million.
Tenants and Competition
The positioning of the Company’s convenience shopping centers, their location in affluent sub-markets, and their standardized unit sizes attract a diversified group of primarily national, high credit quality tenants operating across a wide range of primarily service and restaurant businesses. As of December 31, 2024, national tenants accounted for over 71% of the portfolio’s total ABR, public company tenants comprised over 32% of the portfolio’s total ABR and only one tenant represented more than 2% of the portfolio’s total ABR. The Company believes its diversification of primarily national tenants along with the depth of leasing prospects for its homogenous store unit sizes mitigates credit risk and will allow it to maintain elevated leased rates across the portfolio. As of December 31, 2024, the portfolio’s largest tenants included Starbucks (2.4% of ABR), Darden (1.5% of ABR), JPMorgan Chase (1.3% of ABR), Verizon (1.2% of ABR) and Total Wine & More (1.2% of ABR) and the portfolio’s top ten tenants comprised less than 13% of total ABR.
Numerous real estate companies and developers, private and public, compete with the Company in leasing space in convenience shopping centers to tenants. The Company competes with other real estate companies and developers in terms of rental rates, property location, availability of space, management services and property condition.
For more information on the Company’s tenants, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” under the caption “Company Fundamentals.”
Qualification as a Real Estate Investment Trust
As of December 31, 2024, the Company believes it met the qualification requirements of a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended (the “Code”) and plans to elect to be taxed as a REIT with the filing of its federal income tax return for 2024. As a result, the Company, with the exception of its taxable REIT subsidiaries (“TRSs”), will not be subject to federal income tax to the extent it meets certain requirements of the Code.
Human Capital Management
As of December 31, 2024, the Company’s workforce was composed of 37 full-time employees. Of the Company’s employees, 32% of employees were assigned to work in New York, NY, and 27% of employees were assigned to work in Beachwood, OH, with the rest working in regional offices or remotely. Many of the Company’s employees have a long tenure with the Company or with SITE Centers, with approximately 62% of the Company’s employees having been with the Company or SITE Centers for over 5 years and 35% for over 10 years.
The Company’s primary human capital management objective is to attract, develop, engage and retain the highest quality talent. To support this objective, the Company offers competitive pay and benefit programs, with a broad focus on wellness and flexible work arrangements designed to allow employees to meet personal and family needs. The Company currently utilizes a hybrid work schedule that provides employees the opportunity to work remotely on a limited basis while continuing to cultivate in-office relationships and learning, which are key elements to the Company’s culture. The Company also takes steps to measure and improve upon its level of employee engagement and to create a diverse and inclusive workplace. The Company’s employees are expected to exhibit honest, ethical and respectful conduct in the workplace. The Company annually requires its employees to complete training modules on sexual harassment and discrimination and to acknowledge and certify their compliance with the Company’s Code of Business Conduct and Ethics. Senior members of its accounting, finance and capital markets and asset management departments are also required to acknowledge and agree to the Company’s Code of Ethics for Senior Financial Officers on an annual basis.
Information About the Company’s Executive Officers
The section below provides information regarding the Company’s executive officers as of February 14, 2025:
David R. Lukes, age 55, has served as President and Chief Executive Officer of Curbline since November 2023 and has been a member of Curbline’s Board of Directors since July 2024. Mr. Lukes has served as president and chief executive officer of SITE Centers and has been a member of SITE Centers’ board of directors since March 2017. Prior to joining SITE Centers, Mr. Lukes served as chief executive officer of Equity One, Inc., an owner, developer and operator of shopping centers, from 2014 until 2017. Mr. Lukes previously served as president and chief executive officer of Sears Holding Corporation affiliate Seritage Realty Trust, a real estate company, from 2012 to 2014 and as president and chief executive officer of Olshan Properties, a privately-owned real estate firm specializing in commercial real estate, from 2010 to 2012. From 2002 to 2010, Mr. Lukes served in various senior management positions at Kimco Realty Corporation, including serving as its chief operating officer from 2008 to 2010. Mr. Lukes has also served as the president, chief executive officer and a director of Retail Value Inc. (“RVI”), since April 2018 and as an independent director of Citycon Oyj, an owner and manager of shopping centers in the Nordic region listed on the Nasdaq Helsinki stock exchange, since 2017. Mr. Lukes also serves as a member of the advisory board of governors of the National Association of Real Estate Investment Trusts (“NAREIT”). Mr. Lukes holds a Bachelor of Environmental Design from Miami University, a Master of Architecture from the University of Pennsylvania and a Master of Science in Real Estate Development from Columbia University.
Conor M. Fennerty, age 39, has served as Executive Vice President, Chief Financial Officer and Treasurer of Curbline since November 2023. Mr. Fennerty previously served as executive vice president, chief financial officer and treasurer of SITE Centers from November 2019 until the Spin-Off Date. From 2017 to 2019, Mr. Fennerty served as SITE Centers’ senior vice president of capital markets. Mr. Fennerty also previously served as executive vice president of RVI from 2020, and as a director of RVI from 2022, in each case until the Spin-Off Date. Prior to joining SITE Centers, Mr. Fennerty served as a vice president and senior analyst at BlackRock, Inc., a global funds manager, from 2014 to 2017, an analyst at Cohen & Steers Capital Management, a specialist asset manager focused on real assets, from 2012 to 2014, and prior to that, a member of the global investment research division of Goldman Sachs from 2010 to 2012. Mr. Fennerty earned a Bachelor of Science in Business Administration with a major in finance from Georgetown University.
John M. Cattonar, age 43, has served as Executive Vice President and Chief Investment Officer of Curbline since November 2023. Mr. Cattonar has served as executive vice president and chief investment officer of SITE Centers since May 2021 and was appointed to the board of directors of SITE Centers in September 2024. Previously, Mr. Cattonar served as senior vice president of investments of SITE Centers from 2017 to 2021. Prior to joining Curbline, Mr. Cattonar served as vice president of asset management for Equity One from 2015 to 2017 and at Sears Holding Corporation affiliate Seritage Realty Trust from 2012 to 2015. Mr. Cattonar earned a Master of Science in Real Estate Development from Columbia University and holds a Bachelor of Arts in Economics from the University of North Carolina at Chapel Hill.