Kite Realty FFO Rises

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Indianapolis-based Kite Realty Group Trust (NYSE: KRG) is reporting second quarter funds from operations of $14.1 million, compared to $10.1 million for the same period a year earlier. The company also says its total portfolio was just over 95 percent leased at the end of the quarter. Early last month, Kite closed on a $2.1 billion merger with Illinois-based Inland Diversified Real Estate Trust. July 31, 2014

News Release

INDIANAPOLIS, Ind. - Kite Realty Group Trust (NYSE: KRG) (the "Company") announced today its operating results for the second quarter ended June 30, 2014. Financial statements and exhibits attached to this release include results for the three and six months ended June 30, 2014 and 2013.

"We continue to execute on our strategic plan as evidenced by another quarter of excellent operating results," said John A. Kite, Chairman and CEO. "Our portfolio fundamentals and operating metrics continue to be among the leaders in the shopping center sector. We achieved 30 percent year-over-year as adjusted FFO per share growth in the quarter, posted strong same property net operating income growth of 4.4 percent and generated cash spreads on lease renewals of 7.7 percent. We also closed on our merger with Inland Diversified earlier this month which strengthens our balance sheet and considerably bolsters our liquidity position to approximately $400 million. We also expect to significantly increase our cash flow from combined operations in the second half of 2014 and beyond."

Second Quarter Financial Results

As adjusted for $3.3 million of merger and acquisition costs, Funds From Operations (FFO), was $17.4 million, or $0.13 per diluted common share, for the second quarter of 2014 which represents a 30 percent per share increase over the second quarter of last year.

Revenue from recurring property operations increased 40 percent in the second quarter of 2014 over the second quarter of 2013.

For the three months ended June 30, 2014, FFO was $14.1 million, or $0.10 per diluted common share for Kite Realty Group, L.P.'s real estate properties in which the Company owns an interest (the "Kite Portfolio"), compared to $10.1 million, or $0.10 per diluted common share, for the same period in the prior year. As adjusted for costs associated with our recently completed merger with Inland Diversified Real Estate Trust ("Inland Diversified"), FFO for the three months ended June 30, 2014 was $17.4 million, or $0.13 per diluted common share for the Kite Portfolio, compared to $10.1 million, or $0.10 per diluted common share, for the same period in the prior year.

For the six months ended June 30, 2014, FFO was $27.1 million, or $0.20 per diluted common share for the Kite Portfolio, compared to $21.5 million, or $0.24 per diluted common share for the same period of the prior year. As adjusted for merger and acquisition costs of $7.8 million, FFO for the six months ended June 30, 2014 was $34.9 million, or $0.25 per diluted common share for the Kite Portfolio, compared to $21.7 million, or $0.24 per diluted common share, in the same period of the prior year.

Net loss attributable to common shareholders for the three months ended June 30, 2014 was $5.1 million compared to a net loss of $8.7 million for the same period in 2013. Net loss attributable to common shareholders during the three months ended June 30, 2014 included merger and acquisition costs of $3.3 million while the three months ended June 30, 2013 included a $5.4 million impairment charge.

Net loss attributable to common shareholders was $2.9 million for the first six months of 2014 compared to an $8.8 million net loss in the same period of the prior year. Net loss in the current year includes gains on sales of operating properties totaling $6.7 million, offset by merger and acquisition costs of $7.8 million. The prior year includes a $5.4 million impairment charge.

Total revenue from property operations for the three months ended June 30, 2014 increased 40 percent over the same period in the prior year and reflects the effects of acquisition of the nine-property portfolio in November of 2013, the delivery of development and redevelopment properties into operations, and the completion of anchor tenant renovations.

Total revenue from property operations for the six months ended June 30, 2014 increased 47 percent over the same period in 2013, mainly due to the acquisition of operating properties and the transition of development properties to operating status.

Portfolio Operations

Same property net operating income increased 4.4 percent in the second quarter of 2014 over the same period in the prior year.

The total portfolio was 95.2 percent leased at the end of the second quarter of 2014.

Executed 45 new and renewal leases for 174,450 square feet during the second quarter of 2014 for an aggregate cash rent spread on comparable leases of 13.9 percent.

As of June 30, 2014, the Company owned interests in 66 operating properties totaling approximately 11.7 million square feet. The owned GLA in the Company's retail operating portfolio was 95.2 percent leased as of June 30, 2014, compared to 95.4 percent leased as of June 30, 2013.

Same property net operating income, which includes 50 operating properties, increased 4.4 percent in the second quarter of 2014 compared to the same period in the prior year. The leased percentage of these properties increased to 96.3 percent at June 30, 2014 from 95.9 percent at June 30, 2013.

The Company executed 45 new and renewal leases during the second quarter of 2014 totaling 174,450 square feet. Cash spreads on new leases executed in the quarter were up 32.0 percent while cash spreads on renewals were up 7.7 percent for a blended spread of 13.9 percent.

As previously announced, several new anchor and national tenants, representing 151,000 square feet of GLA, opened for business during the second quarter of 2014. These tenants include Publix Supermarkets at King’s Lake Square in Naples, Florida; Harris Teeter, Massage Envy, and Sleepy’s at Parkside Town Commons in Raleigh, North Carolina; Total Wine & More at International Speedway Square in Daytona Beach, Florida; Panera Bread at Bolton Plaza in Jacksonville, Florida; and Walgreens at Four Corner Square in Maple Valley, Washington.

Investments in Properties

Substantially completed the redevelopment of Kings Lake Square, a retail shopping center in Naples, Florida, that was 88 percent leased at quarter-end, and transitioned the property into the operating portfolio.

Development

As of June 30, 2014, the Company owned interests in three development projects under construction which include Phase II of Holly Springs Towne Center and Phases I and II of Parkside Town Commons, all near Raleigh, North Carolina. Phase II of Holly Springs Towne Center is anchored by Target, Frank Theatres, Bed Bath & Beyond and DSW while Parkside Town Commons Phase I and II is anchored by Target, Frank Theatres, Harris Teeter, PETCO, Golf Galaxy and Field & Stream. These projects were in aggregate 73.6 percent pre-leased or committed as of June 30, 2014 with a total estimated cost of approximately $158.0 million, of which approximately $95.5 million had been incurred as of June 30, 2014.

Redevelopment

The Company substantially completed the King’s Lake Square redevelopment in Naples, Florida with a new 20-year Publix lease as well as an updated Starbucks and other national and regional tenants. Publix reopened for business on April 24.

The Company owns two additional redevelopment properties under construction that were in the aggregate 83.5 percent pre-leased or committed as of June 30, 2014. Gainesville Plaza in Gainesville, Florida will be anchored by Burlington Coat Factory and Ross Dress for Less and Bolton Plaza in Jacksonville, Florida is anchored by LA Fitness and Academy Sports & Outdoors. We expect Gainesville to open for operations i