Curbline Properties Corp. Annual Report - A Closer Look at 2025

Curbline Properties Corp.'s latest annual report for the fiscal year ended December 31, 2025, offers a comprehensive look at the company's performance, financial health, and strategic direction. This summary provides key insights from 2025, alongside valuable context from 2024 and 2023, to give investors a clear picture of Curbline's journey and future plans.

Business Overview: What Curbline Properties Does

Curbline Properties operates as a leading real estate company, specializing in acquiring, owning, and managing necessity-based shopping centers. By year-end 2025, its portfolio comprised 105 properties, totaling approximately 20.5 million square feet across 22 states, including key markets like Naperville, Houston, Chicago, Alabaster, and Denver. This diversified geographic footprint mitigates regional economic risks.

Curbline actively manages these properties, focusing on maximizing rental income and tenant satisfaction. In 2025, their leasing efforts achieved a healthy occupancy rate of 93.2%, an increase from 92.5% in 2024. They successfully renewed or re-leased 1.8 million square feet of space, securing an average cash re-leasing spread of +6.5%. While 15% of their leases are currently below market rates, offering potential future upside, 20% are above market, which may create re-leasing challenges in the coming years. The company also invested $25 million in tenant improvements during 2025 to enhance property value and attract quality tenants.

Financial Performance: How They're Managing Their Money

Curbline delivered solid financial performance in 2025:

• Strong Financial Growth: Total rental revenue increased by 7.5% to $480 million in 2025, up from $446 million in 2024. Net Income rose by 12% to $115 million, compared to $102 million in the prior year. More importantly for a REIT, Funds From Operations (FFO) grew by 10% to $2.75 per share, and Adjusted FFO (AFFO) increased by 9% to $2.40 per share.
• Strategic Financing: Curbline utilizes a mix of debt instruments to finance its operations and growth. As of December 31, 2025, Curbline's total debt totaled $2.8 billion. This primarily comprised $1.2 billion in term loans (average interest rate of 4.5%) and $1.5 billion in senior unsecured notes (average interest rate of 5.0%, with staggered maturities between 2027 and 2035). The company also maintains a $500 million revolving credit facility, with only $100 million drawn at year-end, providing ample liquidity. Its debt-to-EBITDA ratio was 6.0x, and its interest coverage ratio was 3.5x.
• Interest Rate Management: To protect against interest rate volatility, Curbline hedged approximately 70% of its variable-rate debt using interest rate swaps and treasury locks, locking in predictable borrowing costs for a significant portion of its obligations.
• Employee Alignment: The company maintains robust employee incentive programs, including Long-Term Incentive Plan (LTIP) awards, Restricted Stock Units (RSUs), and Performance Shares. These programs, which cost $15 million in 2025, are designed to align employee interests with long-term shareholder value, though they contribute to a modest 0.5% annual share dilution.
• Shareholder Returns: Curbline returned significant capital to shareholders in 2025, paying quarterly dividends of $0.50 per share, totaling $2.00 per share annually. This represents an AFFO payout ratio of approximately 83%. Additionally, the company repurchased $50 million of its common stock under its $200 million share repurchase program, with $100 million remaining under the current authorization.
• Financial Reserves: The company reported an Accumulated Other Comprehensive Income (AOCI) of -$12 million, primarily due to unrealized losses on hedging instruments. It also increased its Allowance for Credit Loss to $5 million (from $4 million in 2024), demonstrating a prudent approach to potential tenant payment defaults.

Financial Health: Debt, Cash, and Liquidity

Curbline's financial health is characterized by a balanced approach to debt and strong liquidity management. As discussed, Curbline's total debt totals $2.8 billion. The company strategically structured this debt with a mix of term loans and senior unsecured notes, featuring staggered maturities to mitigate refinancing risk. The company's debt-to-EBITDA ratio of 6.0x and interest coverage ratio of 3.5x indicate a manageable debt load relative to its earnings.

Liquidity is robust, supported by a $500 million revolving credit facility, with only $100 million drawn at year-end, leaving substantial capacity for operational needs and opportunistic investments. Curbline's hedging of 70% of its variable-rate debt further stabilizes borrowing costs and reduces exposure to interest rate fluctuations. Additionally, the active "At The Market" (ATM) program provides flexible access to equity capital, enhancing financial flexibility.

Management Discussion (MD&A Highlights)

Curbline's management discussion highlights the strategic decisions and operational factors driving its performance. The company's increased occupancy rate and positive re-leasing spreads reflect effective property management and strong tenant demand in necessity-based retail. Strategic acquisitions of grocery-anchored centers underscore a disciplined growth strategy, focusing on investments that immediately boost FFO per share, while dispositions of non-core assets optimize the portfolio. Financial management emphasizes maintaining a strong balance sheet through diversified debt instruments, active interest rate hedging, and prudent capital allocation, including shareholder returns via dividends and share repurchases. The increase in the Allowance for Credit Loss demonstrates management's proactive approach to potential market challenges and tenant credit risk. These discussions collectively provide insight into the company's operational effectiveness and financial stewardship.

Future Outlook: What's New and What's Coming Up

• Strategic Acquisitions: In 2025, Curbline continued its growth trajectory by acquiring 5 new grocery-anchored shopping centers for a total of $300 million, at an average initial cap rate of 6.5%. These acquisitions are expected to immediately boost Funds From Operations (FFO) per share. The company also strategically disposed of 2 non-core properties for $50 million.
• Future Capital Plans: To support continued growth and manage debt maturities, Curbline plans to issue $400 million in new senior unsecured notes in early 2026, with an anticipated interest rate of 5.25%. The company also has an active "At The Market" (ATM) program, through which it issued $50 million in new equity during 2025, with $150 million remaining under the current authorization. This program provides flexible access to equity capital for future investments.

Competitive Position

Curbline Properties Corp. operates in a highly competitive real estate market, particularly within the necessity-based retail sector. Its competitive advantages stem from several factors:

• Focus on Necessity-Based Retail: This segment typically exhibits greater resilience during economic downturns compared to discretionary retail, as it caters to essential consumer needs. This focus helps maintain stable occupancy and rental income.
• Diversified Geographic Footprint: With properties across 22 states, Curbline mitigates risks associated with regional economic fluctuations and local market saturation.
• Strong Tenant Relationships and Leasing Expertise: The company's ability to achieve high occupancy rates and positive re-leasing spreads demonstrates effective property management and strong relationships with a diverse tenant base, including national and regional retailers.
• Access to Capital: A strong balance sheet, diversified debt instruments, and an active ATM program provide the company with the financial flexibility to pursue acquisitions that immediately boost FFO per share and manage its portfolio effectively, allowing it to compete for attractive investment opportunities.
• Experienced Management Team: An experienced management team with a proven track record in real estate acquisition, development, and management contributes to strategic decision-making and operational efficiency.

The company competes with other publicly traded REITs, private real estate funds, and institutional investors for property acquisitions, tenants, and capital. Competition for acquisitions can drive up property prices and compress cap rates, while competition for tenants can impact rental rates and leasing incentives. Curbline's strategy of focusing on well-located, necessity-based centers in established markets aims to differentiate it and maintain its competitive edge.

Risk Factors: Things to Keep in Mind (Potential Risks)

• Debt Levels: While Curbline's debt metrics are within industry norms, its total debt of $2.8 billion means it is sensitive to interest rate fluctuations. Although 70% of variable debt is hedged, the remaining 30% could see increased costs if rates rise significantly.
• Tenant Concentration & Credit Risk: While diversified, a downturn in the retail sector or financial distress among key tenants could impact rental income. The increase in the Allowance for Credit Loss signals ongoing vigilance in this area.
• Lease Rollover Risk: Approximately 15% of Curbline's leases will expire in 2026 and 18% in 2027. While the company achieved positive re-leasing spreads in 2025, changing market conditions could impact future rental growth, particularly for properties with above-market leases.
• Share Dilution: The ATM program and employee stock plans, while beneficial for capital raising and incentives, could lead to further dilution of existing shareholder value if new shares are issued at lower prices or in large quantities.
• Retail Sector Headwinds: Despite focusing on necessity-based retail, the broader challenges facing brick-and-mortar retail, including e-commerce competition and changing consumer habits, remain a long-term consideration.
• Interest Rate Risk: Despite hedging a significant portion of its variable-rate debt, the company remains exposed to interest rate fluctuations on unhedged variable-rate debt and when refinancing maturing fixed-rate debt. Rising interest rates could increase borrowing costs and impact profitability.
• Economic Downturns: General economic downturns, whether national or regional, could adversely affect tenant sales, their ability to pay rent, and the overall value of the company's properties. This could lead to increased vacancies, lower rental rates, and reduced property values.