Kite Realty on a Roll

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INDIANAPOLIS -

Indianapolis-based Kite Realty Group Trust (NYSE: KRG) is reporting second quarter Funds From Operations of $41.6 million, compared to $17.4 million during the same quarter a year earlier. Chief Executive Officer John Kite says the company's liquidity position and financial flexibility are the strongest they've ever been. Kite Realty Group posted similarly improved numbers last quarter.

July 30, 2015 News Release

Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced today operating results for the second quarter ended June 30, 2015. Financial statements and exhibits attached to this release include the details of the results.

“We continue to deliver strong results and execute on our strategic plan as evidenced by our second quarter performance,” said John A. Kite, Chairman and CEO. “We have meticulously redeployed the majority of our net sale proceeds including the purchase of $145.8 million of premier unencumbered assets in our core markets. Our liquidity position and financial flexibility are the strongest in our Company’s history as we remain dedicated to maintaining and improving our investment grade balance sheet. The second quarter is a testament to the team’s hard work and we are excited about our reinvigorated redevelopment pipeline and the portfolio’s long-term growth opportunities.”

Second Quarter And Other Recent Highlights

    Generated Funds From Operations (“FFO”), as adjusted, of $41.6 million, or $0.49 per diluted common share.
    Generated Adjusted Funds From Operations (“AFFO”) of $38.1 million, or $0.44 per diluted common share.
    Achieved same-property net operating income (“NOI”) growth of 3.7% year-over-year.
    Produced renewal cash rent spreads of 8.0%.
    Increased annualized base rent (“ABR”) by over 13% to $15.25 per square foot, compared to the same period last year.
    Simplified the Company’s balance sheet further by purchasing two joint venture partners’ interests at Beacon Hill and Bayport Commons.
    Since March 31, 2015, completed $145.8 million in acquisitions including Colleyville Downs (MSA: Dallas), Belle Isle Station (MSA: Oklahoma City) and Livingston Shopping Center (MSA: New York-Northern New Jersey).
    In July, agreed in principle to issue $250 million of private placement senior unsecured notes at a blended fixed rate of 4.41% across 8-year, 10-year and 12-year tranches for an average maturity of approximately 9.8 years.

Second Quarter Financial Results

FFO, as adjusted, for the three months ended June 30, 2015, was $41.6 million, or $0.49 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 $17.4 million, or $0.50 per diluted common share, for the same period in the prior year.

FFO, as defined by NAREIT, was $45.8 million, or $0.54 per diluted common share, for the Kite Portfolio, compared to $14.2 million, or $0.41 per diluted common share, for the same period in the prior year.

Net income attributable to common shareholders for the three months ended June 30, 2015, was $4.6 million compared to a net loss of $5.1 million for the same period in 2014.

Portfolio Activity During The Second Quarter

Development and Redevelopment

The Company’s three development projects, Phase II of Parkside Town Commons, Phase II of Holly Springs, and Tamiami Crossing, were in aggregate 83.9% pre-leased or committed as of June 30, 2015. These three projects have a total estimated cost of approximately $170.0 million, of which approximately $124.4 million had been incurred as of June 30, 2015.

Since last quarter, tenants occupying nearly 80,000 square feet have opened at Parkside Town Commons Phase II, including Frank Theatres CineBowl & Grille which opened early in July. Vertical construction at Tamiami Crossing will commence in the third quarter as anchors Michaels and Ulta Salon executed leases during the second quarter.

In addition to Gainesville Plaza, for which redevelopment is nearing completion, Cool Springs Market was added to active redevelopment during the second quarter. The project is expected to cost approximately $7.0 million and was 98.9% pre-leased or committed as of June 30, 2015. The project consists of downsizing an existing Staples, expanding square footage, replacing vacant space with a new DSW and Buy Buy Baby as well as other quality-enhancing upgrades.

Acquisitions

Since March 31, 2015, the Company has acquired $145.8 million of real estate assets. Colleyville Downs and Belle Isle Station closed in the second quarter, and Livingston Shopping Center closed in July. The acquisitions of these three unencumbered assets were largely funded using net proceeds from non-core asset sales.

Colleyville Downs (Dallas)

As announced on April 2, 2015, the Company closed on the acquisition of Colleyville Downs, a 201,000 square foot shopping center located in the MSA of Dallas, Texas. The center is anchored by Petco and a newly constructed Whole Foods Market that opened in 2014.

Colleyville Downs is on the southeast corner of Highway 26 and Glade Road. The shopping center is well-positioned in a densely populated, desirable market with an estimated population of 80,000 and an average household income of $128,000, both within a 3-mile radius.

Belle Isle Station (Oklahoma City)

Belle Isle Station is an approximately 400,000 square foot shopping center located in a premier fashion corridor, adjacent to the best-performing shopping mall in Oklahoma City. The center is 98.5% leased and anchored by best-in-class retailers Nordstrom Rack, Ross Dress for Less, Ulta Salon, Babies “R” Us, Shoe Carnival, Old Navy and Wal-Mart. The transaction closed on May 14, 2015.

Belle Isle Station is exceptionally located just 1.5 miles south of Nichols Hills, one of the highest-income areas in Oklahoma City, with an average household income of approximately $235,000 and average home prices in excess of $1.3 million. The densely populated market area has an estimated population of 200,000 within a 5-mile radius.

Livingston Shopping Center (New York-Northern New Jersey)

Livingston Shopping Center is a 140,000 square foot power center located in a prime retail corridor of Livingston, New Jersey. Located in close proximity to one of the top-10-sales-grossing malls in the country, the center is 95% leased and anchored by Nordstrom Rack, DSW, TJ Maxx, Buy Buy Baby, Cost Plus and Ulta Salon. The transaction closed July 24, 2015.

The Town of Livingston is located in affluent Essex County near New York City and the Newark, New Jersey airport in an area with a median home value over $535,000 in 2014. The power center benefits from strong demographics, with an estimated population over 150,000 and average household incomes of more than $170,000 within a 5-mile radius.

Capital Markets

During the second quarter, the Company exercised the accordion option on its Unsecured Term Loan Facility which increased the amount outstanding from $230 million to $400 million.

In July, the Company agreed in principle to issue $250 million of private placement senior unsecured notes at a blended fixed rate of 4.41% across 8-year, 10-year and 12-year tranches for an average maturity of approximately 9.8 years. The Company expects the notes to be issued on or about September 10, 2015, subject to the negotiation and execution of loan documents and customary closing conditions. There can be no assurances that any of these conditions will be satisfied or that the placement will occur on the terms described herein, or at all.

The Company intends to use the proceeds from the transactions to repay existing indebtedness, unencumber additional assets, reduce floating rate exposure and extend the average maturity of the Company’s debt.

Portfolio Operations

As of June 30, 2015, the Company owned interests in 119 operating properties totaling approximately 24 million square feet. The owned GLA in the Company’s retail operating portfolio was 94.9% leased as of June 30, 2015, and the Company’s overall portfolio was 94.8% leased, excluding ground leases and non-owned anchors.

Same-property NOI, which includes 64 operating properties, increased 3.7% in the second quarter of 2015 compared to the same period in the prior year. The leased percentage of these properties was 94.9% at June 30, 2015, compared to 95.4% at June 30, 2014, and the economic occupancy increased to 92.9% in the second quarter compared to 92.5% at June 30, 2014.

The Company executed 77 leases totaling 419,537 square feet during the second quarter of 2015. There were 57 comparable new and renewal leases executed during the quarter for 335,395 square feet. Cash spreads on new and renewal leases executed in the quarter increased approximately 8.0%.

2015 Earnings Guidance

The Company is revising its guidance for FFO, as adjusted, for the year ending December 31, 2015, to $1.95 to $2.00 per diluted common share. In April the Company had communicated its expectations for FFO, as adjusted, to be between $1.93 to $2.00 per diluted common share.

The Company is also revising its acquisition guidance to $185 million for the year, up from $125 million as previously communicated.

The Company’s 2015 guidance is based on a number of factors, many of which are outside the Company’s control and all of which are subject to change. The Company may change its guidance during the year if actual or anticipated results vary from these assumptions.

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, 2015, the Company owned interests in a portfolio of 122 operating, development and redevelopment properties totaling approximately 25 million total square feet across 22 states. For more information, please visit the Company’s website at www.kiterealty.com.

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