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.
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 $ 0.16 $ 0.21
Less: Dividends on preferred shares (0.09 ) (0.09 ) Add:
Depreciation, amortization and other 1.92 1.92 Less: Gain on sale
of operating property (0.04 ) (0.04 ) Less: Gain on settlement
(0.05 ) (0.05 ) Add: Debt extinguishment and preferred redemption
costs 0.05 0.05
FFO, as adjusted, per diluted common share (1)
$ 1.95 $
2.00
(1) Excludes transaction 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 Thursday, July 30, 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) 510-0712 for domestic callers and
(617) 597-5380 for international callers (passcode 92045905). 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, 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.
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
TrustConsolidated Balance Sheets(Unaudited)
June 30,2015 December
31,2014 Assets: Investment properties, at cost $
3,876,592,422 $ 3,732,747,979 Less: accumulated depreciation
(379,555,777 ) (315,092,881 ) 3,497,036,645 3,417,655,098
Cash and cash equivalents1 70,120,217 43,825,526 Tenant and other
receivables, including accrued straight-line rent of $21,389,804
and $18,629,987, respectively, net of allowance for uncollectible
accounts 44,376,055 48,096,669 Restricted cash and escrow deposits
23,749,963 16,170,973 Deferred costs and intangibles, net
151,928,836 159,977,680 Prepaid and other assets 8,663,844
8,847,088 Assets held for sale — 179,642,501
Total
Assets $ 3,795,875,560 $ 3,874,215,535
Liabilities and Shareholders’ Equity: Mortgage and other
indebtedness2 $ 1,618,614,378 $ 1,554,263,020 Accounts payable and
accrued expenses 79,760,005 75,149,213 Deferred revenue and other
liabilities 142,323,115 136,409,308 Liabilities held for sale —
81,164,271
Total Liabilities 1,840,697,498
1,846,985,812 Commitments and contingencies Limited Partners’
interests in the Operating Partnership and other redeemable
noncontrolling interests 88,113,287 125,082,085
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 June 30, 2015 and
December 31, 2014, respectively 102,500,000 102,500,000 Common
Shares, $.01 par value, 225,000,000 shares authorized, 83,329,324
and 83,490,663 shares issued and outstanding at June 30, 2015 and
December 31, 2014, respectively 833,293 834,907 Additional paid in
capital 2,049,136,498 2,044,424,643 Accumulated other comprehensive
loss (2,809,377 ) (1,174,755 ) Accumulated deficit (283,606,623 )
(247,801,217 )
Total Kite Realty Group Trust Shareholders’
Equity 1,866,053,791 1,898,783,578 Noncontrolling Interests
1,010,984 3,364,060
Total Equity 1,867,064,775
1,902,147,638
Total Liabilities and Shareholders'
Equity $ 3,795,875,560 $ 3,874,215,535
____________________ 1 Includes $43.8 million at June 30,
2015 of funds set aside by the Company to affect a tax deferred
purchase of real estate. 2 Includes debt premium of $25.2 million
at June 30, 2015.
Kite Realty Group
TrustConsolidated Statements of OperationsFor the
Three and Six Months Ended June 30, 2015 and 2014
(Unaudited)
Three Months EndedJune 30, Six
Months EndedJune 30, 2015 2014
2015 2014 Revenue: Minimum rent $
64,897,478 $ 31,221,687 $ 130,376,865 $ 62,481,723 Tenant
reimbursements 16,488,775 8,315,228 35,103,861 17,478,089 Other
property related revenue 2,349,050 1,306,140
5,083,190 3,543,155
Total revenue 83,735,303
40,843,055 170,563,916 83,502,967
Expenses: Property
operating 11,800,809 6,890,778 24,525,194 14,206,034 Real estate
taxes 9,755,452 4,303,135 19,776,701 9,416,158 General,
administrative, and other 4,565,790 2,313,358 9,571,636 5,419,460
Merger and acquisition costs 301,866 3,280,098 461,363 7,760,487
Depreciation and amortization 41,212,258 19,737,108
81,647,495 37,176,713
Total expenses
67,636,175 36,524,477 135,982,389 73,978,852
Operating income 16,099,128 4,318,578 34,581,527
9,524,115 Interest expense (13,181,140 ) (7,521,991 ) (27,114,127 )
(14,904,836 ) Income tax expense of taxable REIT subsidiary (68,922
) (75,614 ) (124,023 ) (22,468 ) Gain on settlement 4,520,193 —
4,520,193 — Other (expense) income, net (134,277 ) 83,323
(129,765 ) (9,621 )
Income (loss) from continuing operations
7,234,982 (3,195,704 ) 11,733,805 (5,412,810 )
Discontinued
operations: Gain on sale of operating property — —
— 3,198,772
Income from discontinued
operations — — — 3,198,772
Income (loss) before gain on sale of operating properties
7,234,982 (3,195,704 ) 11,733,805 (2,214,038 ) Gain on sales of
operating properties — — 3,362,944 3,489,338
Net income (loss) 7,234,982 (3,195,704 ) 15,096,749
1,275,300 Net (income) loss attributable to noncontrolling interest
(508,304 ) 219,502 (1,191,370 ) 80,590 Dividends on preferred
shares (2,114,063 ) (2,114,063 ) (4,228,125 ) (4,228,125 )
Net
income (loss) attributable to Kite Realty Group Trust common
shareholders $ 4,612,615 $ (5,090,265 ) $ 9,677,254
$ (2,872,235 )
Income (loss) per common share -
basic and diluted: Continuing operations $ 0.06 $ (0.16 ) $
0.12 $ (0.16 ) Discontinued operations — — —
0.08 $ 0.06 $ (0.16 ) $ 0.12 $ (0.08 )
Weighted average common shares outstanding - basic 83,506,078
32,884,467 83,519,013 32,820,538
Weighted average common shares outstanding - diluted 83,803,879
32,884,467 83,818,890 32,820,538
Common Dividends declared per common share $ 0.2725 $
0.2600 $ 0.5450 $ 0.5000
Amounts
attributable to Kite Realty Group Trust common shareholders:
Income (loss) from continuing operations $ 4,612,615 $ (5,090,265 )
$ 9,677,254 $ (5,917,227 ) Income from discontinued operations —
— — 3,044,992
Net income (loss)
$ 4,612,615 $ (5,090,265 ) $ 9,677,254 $ (2,872,235 )
Kite Realty Group TrustFunds
From OperationsFor the Three and Six Months Ended June 30,
2015 and 2014 (Unaudited)
Three Months EndedJune 30, Six
Months EndedJune 30, 2015 2014
2015 2014 Funds From Operations
Consolidated net income (loss) $ 7,234,982 $ (3,195,704 ) $
15,096,749 $ 1,275,300 Less: dividends on preferred shares
(2,114,063 ) (2,114,063 ) (4,228,125 ) (4,228,125 ) Less: net
income attributable to noncontrolling interests in properties
(414,113 ) (49,842 ) (1,001,065 ) (76,475 ) Less: gains on sales of
operating properties — — (3,362,944 ) (6,784,887 ) Add:
depreciation and amortization of consolidated entities, net of
noncontrolling interests 41,131,866 19,511,682
81,424,770 36,950,890 Funds From Operations of the
Kite Portfolio 45,838,672 14,152,073 87,929,385 27,136,703 Less:
Limited Partners' interests in Funds From Operations (924,281 )
(679,739 ) (1,730,879 ) (1,304,591 ) Funds From Operations
attributable to Kite Realty Group Trust common shareholders1 $
44,914,391 $ 13,472,334 $ 86,198,506 $
25,832,112 FFO per share of the Operating Partnership -
basic $ 0.54 $ 0.41 $ 1.03 $ 0.79 FFO
per share of the Operating Partnership - diluted $ 0.54 $
0.41 $ 1.03 $ 0.79 Funds From
Operations of the Kite Portfolio $ 45,838,672 $ 14,152,073 $
87,929,385 $ 27,136,703 Less: gain on settlement $ (4,520,193 ) $ —
$ (4,520,193 ) $ — Add: merger and acquisition costs 301,866
3,280,098 461,363 7,760,487 Funds From
Operations of the Kite Portfolio, as adjusted $ 41,620,345 $
17,432,171 $ 83,870,555 $ 34,897,190 FFO per
share of the Operating Partnership, as adjusted - basic $ 0.49
$ 0.50 $ 0.98 $ 1.01 FFO per share of
the Operating Partnership, as adjusted - diluted $ 0.49 $
0.50 $ 0.98 $ 1.01 Weighted average
Common Shares outstanding - basic 83,506,078 32,884,467
83,519,013 32,820,538 Weighted average Common
Shares outstanding - diluted 83,803,879 32,936,272
83,818,890 32,870,821 Weighted average Common Shares
and Units outstanding - basic 85,231,284 34,543,898
85,202,110 34,480,602 Weighted average Common Shares
and Units outstanding - diluted 85,529,084 34,595,704
85,501,987 34,530,886 ____________________ 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
attributable to Kite Realty Group Trust common shareholders”
reflects a reduction for the redeemable noncontrolling weighted
average diluted interest in the Operating Partnership.
Kite Realty Group TrustSame
Property Net Operating IncomeFor the Three and Six Months
Ended June 30, 2015 and 2014(Unaudited)
Three Months Ended June 30, Six Months
Ended June 30, 2015 2014
%Change
2015 2014
%Change
Number of properties at period end1 64 64
Leased
percentage at period end 94.9 % 95.4 % 94.9 % 95.4 %
Economic Occupancy percentage at period end2 92.9 %
92.5 % 92.9 % 92.5 % Minimum rent $ 29,586,848 $ 28,880,987
$ 58,608,400 $ 56,847,413 Tenant recoveries 8,204,571 8,205,650
17,052,697 16,887,597 Other income 526,760 548,747
1,380,668 1,548,433 38,318,179 37,635,384 77,041,765
75,283,443 Property operating expenses (5,404,124 )
(5,885,816 ) (13,039,410 ) (13,756,322 ) Real estate taxes
(4,884,128 ) (4,711,216 ) (10,006,607 ) (9,627,666 ) (10,288,252 )
(10,597,032 ) (23,046,017 ) (23,383,988 )
Net operating income -
same properties3 $ 28,029,927 $
27,038,352 3.7 % $ 53,995,748
$ 51,899,455 4.0 %
Reconciliation of Same Property NOI to Most Directly Comparable
GAAP Measure: Net operating income - same properties $ 28,029,927 $
27,038,352 $ 53,995,748 $ 51,899,455 Net operating income -
non-same activity 34,149,115 2,610,790 72,266,273 7,981,320
General, administrative and other (4,565,790 ) (2,313,358 )
(9,571,636 ) (5,419,460 ) Merger and acquisition costs (301,866 )
(3,280,098 ) (461,363 ) (7,760,487 ) Depreciation expense
(41,212,258 ) (19,737,108 ) (81,647,495 ) (37,176,713 ) Interest
expense (13,181,140 ) (7,521,991 ) (27,114,127 ) (14,904,836 ) Gain
on settlement 4,520,193 — 4,520,193 — Other (expense) income, net
(203,199 ) 7,709 (253,788 ) (32,089 ) Discontinued operations — — —
3,198,772 Gains on sales of operating properties — — 3,362,944
3,489,338 Net (income) loss attributable to noncontrolling
interests (508,304 ) 219,502 (1,191,370 ) 80,590 Dividends on
preferred shares (2,114,063 ) (2,114,063 ) (4,228,125 ) (4,228,125
) Net income (loss) attributable to common shareholders $ 4,612,615
$ (5,090,265 ) $ 9,677,254 $ (2,872,235 )
____________________ 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.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20150729006643/en/
Kite Realty Group TrustMaggie Kofkoff, CFA, 317-713-7644Media
& Investor Relationsmkofkoff@kiterealty.com
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