Kite Posts Higher FFO

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Indianapolis-based Kite Realty Group Trust (NYSE: KRG) is reporting second quarter funds from operations of $10.1 million, compared to $8 million for the same period a year earlier. The company also says its total portfolio was more than 95 percent leased at the end of the quarter. August 1, 2013

News Release

INDIANAPOLIS, Ind. - Kite Realty Group Trust (NYSE: KRG) (the "Company") announced today its operating results for the three and six months ended June 30, 2013.

Financial Results

Funds from Operations, was $0.10 per diluted common share for the second quarter of 2013.

Revenue from Property Operations increased 28% in the second quarter over the same period of the prior year.

Funds from Operations

For the three months ended June 30, 2013, funds from operations ("FFO") was $10.1 million, or $0.10 per diluted common share for the Kite Portfolio, compared to $7.5 million, or $0.10 per diluted common share in the same period of the prior year. As adjusted for certain one-time items, FFO for the three months ended June 30, 2013 was $10.1 million, or $0.10 per diluted common share for the Kite Portfolio, compared to $8.0 million, or $0.11 per diluted common share, in the same period of the prior year.

For the six months ended June 30, 2013, FFO was $21.5 million, or $0.24 per diluted common share for the Kite Portfolio, compared to $14.1 million, or $0.20 per diluted common share in the same period of the prior year. As adjusted for certain one-time items, FFO for the six months ended June 30, 2013 was $21.7 million, or $0.24 per diluted common share for the Kite Portfolio, compared to $15.9 million, or $0.22 per diluted common share, in the same period of the prior year.

John A. Kite, the Company's Chairman and Chief Executive Officer, said, "We made additional progress on our de-leveraging strategy by issuing equity and promptly deploying that capital into the acquisition of two quality assets in Indianapolis and Nashville. Our portfolio continues to perform very well with same property net operating income increasing 4.4 percent and cash rent spreads of 19.7 percent. We also substantially completed Rangeline Crossing, a quality redevelopment in Carmel, Indiana and transitioned this asset into the operating portfolio at 91.7 percent leased and we plan to complete several more developments before the end of 2013."

Net Income (Loss)

Net loss attributable to common shareholders was $8.7 million for the second quarter of 2013, compared to net loss for the same period in the prior year of $2.7 million. The increase in loss between periods was the result of a previously disclosed $5.4 million non-cash impairment charge taken during the second quarter of 2013 relating to the Company’s Kedron Village property (further discussed below), a $4.0 million increase in depreciation, largely attributable to accelerated depreciation in connection with the Company’s redevelopment activities and the acquisitions of operating properties, and a $1.4 million increase in interest expense primarily due to the ceasing of interest capitalization on the transition to operating status of several development properties. Offsetting these were higher net operating income from property acquisitions and development properties of $4.6 million and higher net operating income of $0.6 million from fully operational properties during both periods.

The Company’s total revenue for the second quarter of 2013 was $31.0 million, a 28 percent increase over the same period in 2012, primarily due to a $3.3 million increase from properties acquired in 2012 and 2013 and a $1.7 million increase from the substantial completion of several development properties.

Net loss attributable to common shareholders was $8.8 million for the first six months of 2013 compared to a $2.7 million net loss in the same period of the prior year. This change consists of the previously disclosed $5.4 million impairment charge taken in the second quarter of 2013, a $6.6 million increase in depreciation, largely attributable to accelerated depreciation in connection with the Company’s redevelopment activities and the acquisitions of operating properties, a $2.2 million increase in interest expense primarily due to the transition to operating status of several development properties, and 2012 gains on sales of operating properties of $5.2 million. These were offset by higher net operating income from property acquisitions and development properties of $10.2 million and higher net operating income from same properties of $1.4 million in 2013, and a 2012 litigation charge of $1.3 million.

The Company’s total revenue for the six months ended June 30, 2013 was $63.1 million, a 29 percent increase over the same period in 2012, mainly due to properties acquired in 2012 and 2013 and the transition of development properties to operating status. In addition, the Company had higher gains on land sales of $4.8 million for the six months ended June 30, 2013 over the same period in 2012.

Portfolio Operations

The Company's total portfolio was 95.4 percent leased at June 30, 2013, an increase of 240 basis points over the same period of the prior year.

Shop leased percentage increased to 84.5 percent from 80.6 percent as of June 30, 2012.

Same Property Net Operating Income for the second quarter of 2013 increased 4.4 percent over the same period of the prior year.

The Company generated aggregate new and renewal leasing spreads of 19.7 percent on spaces vacant less than 12 months.

38 new and renewal leases were executed during the second quarter totaling 106,340 square feet.

As of June 30, 2013, the Company owned interests in 63 retail properties totaling approximately 9.9 square feet. The owned gross leasable area (“GLA”) in the Company’s retail operating portfolio was 95.4 percent leased as of June 30, 2013, compared to 93.0 percent leased as of June 30, 2012. The owned net rentable area of the Company’s commercial properties was 95.2 percent leased as of June 30, 2013.

On a same property basis, the leased percentage of the 49 operating properties increased to 95.1 percent at June 30, 2013 from 92.8 percent at June 30, 2012. Same property net operating income for these properties increased 4.4 percent in the second quarter of 2013 compared to the same period in the prior year.

Investments in Properties

Acquired Cool Springs Market in Nashville, Tennessee, and Castleton Crossing in Indianapolis, Indiana for a total purchase price of $76.6 million.

Substantially completed the redevelopment of Rangeline Crossing and transitioned it to the operating portfolio.

Acquisitions

During the second quarter, the Company acquired Cool Springs Market, a 224,000 square foot center located in Nashville, Tennessee. Cool Springs Market is 95.8 percent leased and is anchored by Dick’s Sporting Goods, Marshall’s, JoAnn Fabrics, Staples, and a non-owned Kroger. The purchase price, exclusive of closing costs, was $37.6 million.

The Company also acquired Castleton Crossing, a 278,000 square foot center located in Indianapolis, Indiana. Castleton Crossing is 100 percent leased and is anchored by TJ Maxx, HomeGoods, Burlington Coat Factory and Shoe Carnival. The purchase price, exclusive of closing costs, was $39.0 million.

Dispositions

As previously disclosed, on July 2, 2013, the lender on the Company’s Kedron Village operating property non-recourse loan initiated foreclosure proceedings and acquired title to the property. The Company performed an evaluation of the property’s fair value as of June 30, 2013. In this evaluation, which was caused by the reduction in the asset’s expected holding period, the undiscounted cash flows of the property were insufficient to recover the book value of the asset and, accordingly, as required by accounting rules, the Company recognized a non-cash impairment charge of $5.4 million during the second quarter