Kite Realty Group Trust Reports Second Quarter Results

INDIANAPOLIS--(BUSINESS WIRE)-- Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced operating results for the second quarter ended June 30, 2016. The attached financial statements, exhibits and reconciliations of non-GAAP measures provide the details of these results.

Second Quarter Highlights

• Net loss attributable to common shareholders was $1.9 million, or $0.02 per diluted common share, including $2.8 million ($0.03 per diluted common share) of transaction costs.
• Funds From Operations (“FFO”), as adjusted, increased 6% compared to the same period in the prior year and was $0.52 per diluted common share, or $44.2 million.
• Small shop occupancy was 88.3%, an increase of 210 basis points compared to the same period in the prior year.
• Same-property NOI, which includes 102 retail operating properties, increased 2.6% for the comparable operating portfolio and 3.6% excluding the impact of the Company’s Redevelopment, Repurpose and Reposition ("3-R") initiative, both percentages compared to the same period in the prior year.
• Ground-up development projects were substantially completed at Tamiami Crossing (Naples, FL) and Holly Springs Towne Center (Phase II) (Raleigh/MSA, NC), and these properties were transitioned into the operating portfolio.
• The Company commenced construction on three additional 3-R projects, for a total of eight projects in process. These eight projects have an estimated incremental return averaging approximately 9% to 11%, and aggregate costs for all of these projects are expected to range between $40.5 million and $47.0 million.
• Guidance for 2016 FFO, as adjusted, increased to a range of $2.04 to $2.08 per diluted common share from a range of $2.02 to $2.08 per diluted common share.

“We are pleased with our second quarter performance,” said John A. Kite, Chairman and CEO. “We substantially completed two development projects, Holly Springs Towne Center in Raleigh, North Carolina, and Tamiami Crossing in Naples, Florida. We continued to expand our 3-R initiative, starting construction on three additional projects during the quarter. Our leasing efforts remained focused and aggressive as reflected in our continued improvement in small shop leasing. Finally, our proactive balance sheet approach further strengthened our financial flexibility and liquidity position.”

Second Quarter Financial & Portfolio Results

Net loss attributable to common shareholders for the three months ended June 30, 2016, was $1.9 million compared to a net income of $4.6 million for the same period in 2015. The decrease is primarily attributable to a $4.5 million settlement gain in the second quarter of 2015 and terminated transaction costs of $2.8 million in the second quarter of 2016.

FFO, as adjusted, for the three months ended June 30, 2016, was $44.2 million, or $0.52 per diluted common share, for real estate properties in which the Company’s operating subsidiaries own an interest (to which we refer as the “Kite Portfolio”), compared to $41.6 million, or $0.49 per diluted common share, for the same period in the prior year.

Reported FFO, as defined by NAREIT, was $41.4 million, or $0.48 per diluted common share, for the Kite Portfolio, compared to $45.8 million, or $0.54 per diluted common share, for the same period in the prior year. The decrease is primarily attributable to the non-recurring settlement gain and terminated transaction costs described above.

As of June 30, 2016, the Company owned interests in 121 operating properties totaling approximately 24 million square feet. The owned gross leasable area in the Company’s retail operating portfolio was 95.2% leased as of June 30, 2016.

Same-property NOI, which includes 102 retail operating properties, increased 2.6% for the comparable operating portfolio and 3.6% excluding the impact of the Company’s 3-R initiative, both percentages compared to the same period in the prior year.

The Company executed leases on 98 individual spaces during the second quarter of 2016 totaling 423,346 square feet, including 71 comparable new and renewal leases for 363,419 owned square feet. The Company generated positive cash spreads of 19.5% on new comparable leases executed during the quarter and 6.7% on renewals, for a blended spread of 9.4%.

Balance Sheet

The Company funded the remaining $100 million on its existing 7-year term loan facility during the quarter, using the proceeds to repay the balance on its revolving line of credit. Previously in the quarter, the Company had repaid $20 million of property level debt related to Mullins Crossing using the line of credit. Subsequent to quarter end, property level debt of $26 million related to Pine Ridge and Riverchase was repaid using the line of credit.

In July, the Company refinanced $700 million in unsecured bank facilities, including the extensions of $200 million of its $400 million term loan for an additional five years to mature in 2021 and its $500 million revolving credit facility to mature in 2020. The revolving credit facility may be extended beyond 2020, for two additional periods of six months each, at the Operating Partnership's option, subject to certain conditions. The revised terms of the unsecured financings improve the borrowing base calculation, lower the Company’s interest rate and extend the term to maturity.

Redevelopment and Development

The Company’s 3-R initiative, which includes a total of 23 different projects in various stages, continued to progress during the second quarter. The Company commenced construction at Hitchcock Plaza (Aiken, SC), Shops at Moore (Oklahoma City, OK) and Tarpon Bay Plaza (Naples, FL), during the second quarter. Combined with projects already in process, the Company now has eight 3-R projects under construction, with an average targeted incremental return of approximately 9% to 11% and aggregate estimated costs of $40.5 million to $47 million. Additional 3-R opportunities have been identified at fifteen properties and have an average targeted incremental return of approximately 9% to 11% and total estimated costs of approximately $90 million to $110 million.

Two development properties, Holly Springs Towne Center (Phase II) (Raleigh, NC) and Tamiami Crossing (Naples, FL) were substantially completed during the second quarter and transitioned into the operating portfolio. Tamiami Crossing is fully occupied by Ulta, Marshalls, Michaels, PetSmart, Ross, and Stein Mart. The Company’s remaining development project, the second phase of Parkside Town Commons (Raleigh, NC), was 89.2% pre-leased or committed.

Updated Guidance

The Company is updating its guidance for 2016 FFO, as adjusted, to $2.04 to $2.08 from $2.02 to $2.08 per diluted common share. This guidance excludes certain non-recurring items such as transaction costs, debt extinguishment gains/losses and certain other income or charges. Please refer to the full list of guidance assumptions on page 36 of the Quarterly Financial Supplemental.

Earnings Conference Call

The Company will conduct a conference call to discuss its financial results on Friday, July 29, 2016, at 10:00 a.m. EDT. A live webcast of the conference call will be available online on the Company’s corporate website at www.kiterealty.com. The dial-in numbers are (844) 309-0605 for domestic callers and (574) 990-9933 for international callers (passcode 14937527). In addition, a webcast replay link will be available on the corporate website.

About Kite Realty Group Trust

Kite Realty Group Trust is a full-service, vertically integrated real estate investment trust engaged in the ownership, operation, management, leasing, acquisition, construction, redevelopment and development of neighborhood and community shopping centers in selected markets in the United States. As of June 30, 2016, the Company owned interests in a portfolio of 121 operating, development and redevelopment properties totaling approximately 24 million total square feet across 20 states. For more information, please visit the Company’s website at www.kiterealty.com.

Safe Harbor

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, performance, transactions or achievements, financial or otherwise, may differ materially from the results, performance, transactions or achievements, financial or otherwise, expressed or implied by the forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not limited to: national and local economic, business, real estate and other market conditions, particularly in light of low growth in the U.S. economy, financing risks, including the availability of and costs associated with sources of liquidity, the Company’s ability to refinance, or extend the maturity dates of, its indebtedness, the level and volatility of interest rates, the financial stability of tenants, including their ability to pay rent and the risk of tenant bankruptcies, the competitive environment in which the Company operates, acquisition, disposition, development, joint venture, property ownership and management risks, the Company’s ability to maintain its status as a real estate investment trust for federal income tax purposes, potential environmental and other liabilities, impairment in the value of real estate property the Company owns, risks related to the geographical concentration of our properties in Florida, Indiana and Texas, the dilutive effects of future offerings of issuing additional securities, and other factors affecting the real estate industry generally. The Company refers you to the documents filed by the Company from time to time with the Securities and Exchange Commission, specifically the section titled “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which discuss these and other factors that could adversely affect the Company’s results. The Company undertakes no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Funds from Operations (FFO) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance. We calculate FFO in accordance with the best practices described in the April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (NAREIT), which we refer to as the White Paper. The White Paper defines FFO as net income (determined in accordance with generally accepted accounting principles (GAAP)), excluding gains (or losses) from sales and impairments of depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

Considering the nature of our business as a real estate owner and operator, we believe that FFO is helpful to investors in measuring our operational performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we have also provided FFO adjusted for a severance charge in 2016, transaction costs in 2016 and 2015 and a gain on settlement in 2015. We believe this supplemental information provides a meaningful measure of our operating performance. We believe our presentation of FFO, as adjusted, provides investors with another financial measure that may facilitate comparison of operating performance between periods and among our peer companies. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance, is not an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and is not indicative of funds available to satisfy our cash needs, including our ability to make distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.

The Company believes that Net Operating Income ("NOI") is helpful to investors as a measure of its operating performance because it excludes various items included in net income that do not relate to or are not indicative of its operating performance, such as depreciation and amortization, interest expense, and impairment, if any. The Company believes that Same Property NOI is helpful to investors as a measure of its operating performance because it includes only the NOI of properties that have been owned for the full period presented, which eliminates disparities in net income due to the redevelopment, acquisition or disposition of properties during the particular period presented and thus provides a more consistent metric for the comparison of the Company's properties. NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indicators of the Company's financial performance. The Company’s computation of Same Property NOI may differ from the methodology for calculating Same Property NOI used by other REITs, and therefore, may not be comparable to such other REITs.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160728006328/en/

Kite Realty Group Trust
Maggie Daniels, CFA, 317-713-7644
Investor Relations and Strategy
[email protected]

Source: Kite Realty Group Trust

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