Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced
today operating results for the first quarter ended March 31, 2015.
Financial statements and exhibits attached to this release include
the details of these results.
“We kicked off 2015 with another strong quarter of operating
performance, balance sheet management and follow-through
execution,” said John A. Kite, Chairman and CEO. “We
continued to grow FFO and our free cash flow while also reporting
solid same-property NOI growth. The quarter’s results are a
testament to our portfolio’s strength, our operating expertise and
our team’s ability to execute and seamlessly integrate new,
high-growth assets. Our investment grade balance sheet and
upgraded operating systems remained core to our overall
strategy. We are energized and excited about the
future.”
First Quarter Highlights
- Generated FFO, as adjusted, of $42.3
million, or $0.50 per diluted common share, for the first
quarter.
- Adjusted Funds From Operations (“AFFO”)
growth of 13% year-over-year from $0.39 to $0.44 per diluted common
share.
- Same-property net operating income
(“NOI”) growth of 4.4% year-over-year.
- Aggregate cash rent spread of
9.0%.
- Closed final tranche of previously
announced 15-asset disposition for gross proceeds of $167
million.
- Completed development project at Phase
I of Parkside Town Commons in Raleigh, North Carolina, and moved
property to the operating portfolio.
- On April 1, acquired Colleyville Downs,
a 201,000 square foot Whole Foods-anchored shopping center located
in the Dallas MSA.
First Quarter Financial
Results
FFO, as adjusted, for the three months ended March 31, 2015, was
$42.3 million, or $0.50 per diluted common share, for real estate
properties in which the Company’s operating subsidiaries own an
interest (to which we refer to as “Kite Portfolio”), compared to
$17.5 million, or $0.51 per diluted common share, for the same
period in the prior year.
The reduction in FFO per diluted common share was primarily
driven by the 15-asset disposition completed in two tranches,
closing in December 2014 and March 2015.
Reported FFO, as defined by NAREIT, was $42.1 million, or $0.49
per diluted common share, for the Kite Portfolio, compared to $13.0
million, or $0.38 per diluted common share, for the same period in
the prior year.
Net income attributable to common shareholders for the three
months ended March 31, 2015, was $5.1 million compared to a net
income of $2.2 million for the same period in 2014.
Portfolio Activity During The First
Quarter
Development and Redevelopment
The first phase of Parkside Town Commons, which is anchored by
Target and Harris Teeter, was moved into operations in the first
quarter. The remaining development projects include Phase II of
Parkside Town Commons, Phase II of Holly Springs, and Tamiami
Crossing. These three projects were in the aggregate 79% pre-leased
or committed as of March 31, 2015, with a total estimated cost of
approximately $164.5 million, of which approximately $110.7 million
had been incurred as of March 31, 2015.
As of the first quarter, the primary anchors were both open at
the redevelopment project at Gainesville Plaza in Gainesville,
Florida. This project consists of 164,665 square feet, of which
81.6% is open, pre-leased or committed as of March 31, 2015, and is
anchored by Burlington Coat Factory and Ross Dress for Less, which
opened in March.
Dispositions
On September 16, 2014, the Company announced it had entered into
a definitive agreement to sell 15 operating properties. The sale
closed in two tranches, the first in December 2014 and the second
in March 2015. As a result of these sales, the Company exited four
states in which it did not have future growth plans. The second
tranche included 7 non-core assets and resulted in gross proceeds
of approximately $167 million, or net proceeds of $103 million.
Acquisitions
On April 2, 2015, the Company announced it had closed on the
acquisition of Colleyville Downs, a 201,000 square foot shopping
center located in the MSA of Dallas, Texas. The center is 92%
leased and anchored by Petco, Ace Hardware, and a newly constructed
Whole Foods Market that opened in 2014.
Portfolio Operations
As of March 31, 2015, the Company owned interests in 117
operating properties totaling approximately 23.3 million square
feet. The owned GLA in the Company’s retail operating portfolio was
94.9% leased as of March 31, 2015, and the Company’s overall
portfolio was 94.8% leased, excluding ground leases and non-owned
anchors.
Same-property net operating income, which includes 64 operating
properties, increased 4.4% in the first quarter of 2015 compared to
the same period in the prior year. The leased percentage of these
properties was 95.1% at March 31, 2015, compared to 95.3% at March
31, 2014, and the economic occupancy increased to 92.9% in the
first quarter from 91.5% at March 31, 2014.
The Company executed 77 leases totaling 377,470 square feet
during the first quarter of 2015. There were 52 comparable new and
renewal leases executed during the quarter for 275,949 owned square
feet. Cash spreads on new leases executed in the quarter were up
18.4%, while cash spreads on renewals were up 7.1%, for a blended
spread of 9.0%.
2015 Earnings Guidance
The Company is updating its guidance for FFO, as adjusted, for
the year ending December 31, 2015, to be between $1.93 to $2.00 per
diluted common share from $1.90 to $2.00 per diluted common share
and for net income to be within a range of $0.17 to $0.24 per
diluted common share.
While other factors may impact FFO and net income, the Company’s
2015 guidance is being updated based on the following
assumptions:
- An increase of 3.0% to 3.5% in
same-property NOI compared to the prior year from the initial
guidance range of 2.5% to 3.5%;
- An increase in acquisition assumptions
to $125 million from $80 million.
The Company’s 2015 guidance is based on a number of other
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 and anticipated results vary from these
assumptions.
Following is a reconciliation of the range of 2015 estimated net
income per diluted common share to estimated FFO per diluted common
share:
Updated Guidance Range for Full Year 2015
Low
High
Consolidated net income per diluted common share $0.17 $0.24
Less: Dividends on preferred shares
(0.10)
(0.10)
Add: Depreciation, amortization and other 1.89 1.89 Less: Gain on
sale of operating property
(0.03)
(0.03)
FFO, as adjusted, per diluted common share (1)
$1.93 $2.00
(1) Excludes acquisition costs.
Non-GAAP Financial Measures
Given the nature of the Company’s business as a real estate
owner and operator, the Company believes that FFO, FFO, as
adjusted, and AFFO are helpful to investors when measuring
operating performance because they exclude various items included
in net income or loss that do not relate to or are not indicative
of operating performance, such as gains or losses from sales and
impairments of operating properties and depreciation and
amortization, which can make periodic and peer analyses of
operating performance more difficult. We believe this supplemental
information provides a more meaningful measure of our operating
performance. The Company believes presenting FFO, FFO, as adjusted,
and AFFO in this manner allows investors and other interested
parties to form a more meaningful assessment of the Company’s
operating results. Reconciliations of net income to FFO, FFO, as
adjusted, and AFFO are included in the attached table.
Earnings Conference Call
The Company will conduct a conference call to discuss its
financial results on Friday, May 1, 2015, at 11:00 a.m. Eastern
Time. 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 (866) 543-6403 for domestic callers and
(617) 213-8896 for international callers (passcode 68574736). 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 March 31, 2015, the
Company owned interests in a portfolio of 120 operating,
development and redevelopment properties totaling approximately 24
million total square feet across 22 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, 2014, 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.
Kite Realty Group Trust Consolidated
Balance Sheets (Unaudited) March 31,
December 31, 2015 2014 Assets:
Investment properties, at cost $ 3,753,405,895 $ 3,732,747,979
Less: accumulated depreciation (347,763,694 ) (315,092,881 )
3,405,642,201 3,417,655,098 Cash and cash equivalents1
126,743,610 43,825,526 Tenant and other receivables, including
accrued straight-line rent of $19,871,143 and $18,629,987,
respectively, net of allowance for uncollectible accounts
42,420,970 48,096,669 Restricted cash and escrow deposits
17,598,342 16,170,973 Deferred costs and intangibles, net
154,075,705 159,977,680 Prepaid and other assets 11,843,056
8,847,088 Assets held for sale — 179,642,501
Total
Assets $ 3,758,323,884 $ 3,874,215,535
Liabilities and Shareholders’ Equity: Mortgage and other
indebtedness2 $ 1,569,420,326 $ 1,554,263,020 Accounts payable and
accrued expenses 82,956,921 75,149,213 Deferred revenue and other
liabilities 134,211,750 136,409,308 Liabilities held for sale —
81,164,271
Total Liabilities 1,786,588,997
1,846,985,812 Commitments and contingencies Limited Partners’
interests in the Operating Partnership and other redeemable
noncontrolling interests 91,146,685 125,082,085
Shareholders’
Equity: Kite Realty Group Trust Shareholders’ Equity:
Preferred Shares, $.01 par value, 40,000,000 shares authorized,
4,100,000 shares issued and outstanding at March 31, 2015 and
December 31, 2014, respectively 102,500,000 102,500,000 Common
Shares, $.01 par value, 450,000,000 shares authorized, 83,579,854
and 83,490,663 shares issued and outstanding at March 31, 2015 and
December 31, 2014, respectively 835,799 834,907 Additional paid in
capital 2,043,740,457 2,044,424,643 Accumulated other comprehensive
loss (4,339,357 ) (1,174,755 ) Accumulated deficit (265,511,996 )
(247,801,217 )
Total Kite Realty Group Trust Shareholders’
Equity 1,877,224,903 1,898,783,578 Noncontrolling Interests
3,363,299 3,364,060
Total Equity 1,880,588,202
1,902,147,638
Total Liabilities and Shareholders'
Equity $ 3,758,323,884 $ 3,874,215,535
____________________ 1 Includes $94.7 million
at March 31, 2015 of funds set aside by the Company to affect a tax
deferred purchase of real estate. 2 Includes debt premium of $26.8
million at March 31, 2015.
Kite Realty Group
Trust Consolidated Statements of Operations For the
Three Months Ended March 31, 2015 and 2014
(Unaudited)
Three Months Ended
March 31, 2015 2014 Revenue:
Minimum rent $ 65,479,387 $ 31,260,036 Tenant reimbursements
18,615,086 9,162,860 Other property related revenue 2,734,139
2,237,015
Total revenue 86,828,612 42,659,911
Expenses: Property operating 12,724,292 7,315,255 Real
estate taxes 10,021,249 5,113,023 General, administrative, and
other 5,005,846 3,106,102 Merger and acquisition costs 159,497
4,480,389 Depreciation and amortization 40,435,238
17,439,606
Total expenses 68,346,122
37,454,375
Operating income 18,482,490 5,205,536
Interest expense (13,932,987 ) (7,382,845 ) Income tax (expense)
benefit of taxable REIT subsidiary (55,101 ) 53,146 Other income
(expense), net 4,514 (92,944 )
Income/(loss) from
continuing operations 4,498,916 (2,217,107 )
Discontinued
operations: Gain on sale of operating property
—
3,198,772
Income from discontinued operations
—
3,198,772
Income before gain on sale of operating
properties 4,498,916 981,665 Gain on sales of operating
properties 3,362,944 3,489,338
Net income
7,861,860 4,471,003
Less: Net income attributable to
noncontrolling interest (683,066 ) (138,912 )
Less:
Dividends on preferred shares (2,114,063 ) (2,114,063 )
Net
income attributable to Kite Realty Group Trust common
shareholders $ 5,064,731 $ 2,218,028
Income (loss) per common share - basic and diluted:
Continuing operations $ 0.06 $ (0.03 ) Discontinued operations —
0.10
$ 0.06 $ 0.07
Weighted average
common shares outstanding - basic 83,532,092 32,755,898
Weighted average common shares outstanding - diluted
83,625,352 32,755,898
Common Dividends declared
per common share $ 0.2725 $ 0.2600
Amounts attributable to Kite Realty Group Trust common
shareholders: Income (loss) from continuing operations $
5,064,731 $ (826,614 )
Income from discontinued operations —
3,044,642
Net Income $ 5,064,731 $
2,218,028
Kite Realty Group Trust
Funds From Operations For the Three Months Ended March
31, 2015 and 2014 (Unaudited) Three Months
Ended March 31, 2015 2014 Funds
From Operations Consolidated net income $ 7,861,860 $ 4,471,003
Less: dividends on preferred shares (2,114,063 ) (2,114,063 ) Less:
net income attributable to noncontrolling interests in properties
(586,952 ) (26,633 ) Less: gains on sales of operating properties
(3,362,944 ) (6,688,110 ) Add: depreciation and amortization of
consolidated entities, net of noncontrolling interests 40,292,904
17,342,631 Funds From Operations of the Operating
Partnership 42,090,805 12,984,828 Less Limited Partners' interests
in Funds From Operations (806,598 ) (624,852 ) Funds From
Operations allocable to the Company1 $ 41,284,207 $
12,359,976 FFO per share of the Operating Partnership -
basic $ 0.49 $ 0.38 FFO per share of the Operating
Partnership - diluted $ 0.49 $ 0.38 Funds From
Operations of the Operating Partnership $ 42,090,805 $ 12,984,828
Add: Merger and acquisition costs 159,497 4,480,389
Funds From Operations of the Kite Portfolio, as adjusted $
42,250,302 $ 17,465,217 FFO per share of the
Operating Partnership, as adjusted - basic $ 0.50 $ 0.51
FFO per share of the Operating Partnership, as adjusted -
diluted $ 0.50 $ 0.51 Weighted average Common
Shares outstanding - basic 83,532,092 32,755,898
Weighted average Common Shares outstanding - diluted 83,625,352
32,806,581 Weighted average Common Shares and Units
outstanding - basic 85,172,613 34,416,602 Weighted
average Common Shares and Units outstanding - diluted 85,265,873
34,467,286 ____________________ 1
“Funds From Operations of the Kite Portfolio measures 100% of the
operating performance of the Operating Partnership’s real estate
properties and construction and service subsidiaries in which the
Company owns an interest. “Funds From Operations allocable to the
Company” reflects a reduction for the redeemable noncontrolling
weighted average diluted interest in the Operating Partnership. 2
Excludes merger and acquisition costs.
Kite Realty Group
Trust Same Property Net Operating Income For the
Three Months Ended March 31, 2015 and 2014 (Unaudited)
Three Months Ended March 31, 2015
2014 % Change Number of properties at period
end1 64 64
Leased percentage at period end 95.1 %
95.3 %
Economic Occupancy percentage at period end2
92.9 % 91.5 % Minimum rent $ 29,021,553 $ 27,966,426 Tenant
recoveries 8,848,126 8,681,946 Other income 853,908 999,686
38,723,587 37,648,058 Property operating expenses
(7,635,289 ) (7,870,742 ) Real estate taxes (5,122,479 ) (4,916,450
) (12,757,768 ) (12,787,192 )
Net operating income - same
properties (64 properties)3 $ 25,965,819
$ 24,860,866 4.4 %
Reconciliation to Most Directly Comparable GAAP Measure: Net
operating income - same properties $ 25,965,819 $ 24,860,866 Net
operating income - non-same activity 38,117,252 5,370,767 Other
expense, net (50,587 ) (39,798 ) General, administrative and other
(5,005,846 ) (3,106,102 ) Merger and acquisition costs (159,497 )
(4,480,389 ) Depreciation expense (40,435,238 ) (17,439,606 )
Interest expense (13,932,987 ) (7,382,845 ) Discontinued operations
— 3,198,772 Gains on sales of operating properties 3,362,944
3,489,338 Net income attributable to noncontrolling interests
(683,066 ) (138,912 ) Dividends on preferred shares (2,114,063 )
(2,114,063 ) Net income attributable to common shareholders $
5,064,731 $ 2,218,028 ____________________ 1
Same property NOI analysis excludes operating properties in
redevelopment. 2 Excludes leases that are signed but for which
tenants have not commenced payment of cash rent. 3 Same property
NOI excludes net gains from outlot sales, straight-line rent
revenue, bad debt expense and related recoveries, lease termination
fees, amortization of lease intangibles and significant prior year
expense recoveries and adjustments, if any.
The Company believes that Net Operating Income 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.
Kite Realty Group TrustMedia & Investor RelationsMaggie
Kofkoff, CFA, 317-713-7644mkofkoff@kiterealty.com
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