Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced
today operating results for the third quarter ended September 30,
2015. Financial statements and exhibits attached to this release
include the details of the results.
“Our robust third quarter performance is a direct result of
our leasing momentum, balance sheet initiatives and continued
operational excellence,” said John Kite, Chief Executive
Officer. “We gained 130 basis points in small shop leasing
and grew same-property net operating income by 3.1%, with over 90%
of our portfolio contributing to the same-property pool.
Upon funding the recently announced $200 million term loan, we
will only have approximately $100 million of securitized debt
maturities through 2020. Our investment grade credit metrics
continue to improve ahead of our scheduled objectives. With
over $50 million in annual free cash flow expected, we are
energized about the future and the shareholder value we will
create.”
Third Quarter And Other Recent
Highlights
- Generated Funds From Operations
(“FFO”), as adjusted, of $43.9 million, or $0.51 per diluted common
share.
- Generated Adjusted Funds From
Operations (“AFFO”) of $39.1 million, or $0.46 per diluted common
share.
- Achieved same-property net operating
income (“NOI”) growth of 3.1% (3.6%, excluding redevelopment
initiatives) year-over-year.
- Increased leased small shop space by
130 basis points to 87.5%.
- Executed a record 107 leases across
796,233 square feet.
- Produced new cash rent spreads of 36.9%
and comparable renewal cash rent spreads of 7.7%.
- Completed the redeployment of the
15-asset disposition proceeds via the previously announced
acquisitions of Livingston Shopping Center (New York-Northern New
Jersey) and Chapel Hill Shopping Center (Fort Worth-Dallas).
- Issued $250 million of senior unsecured
notes via a private placement at a blended fixed rate of 4.41% for
an average maturity of approximately 9.8 years.
- Significantly reduced floating rate
debt exposure to 8% from 19% last quarter.
- In October, closed on a $200 million
7-year unsecured term loan at a rate of LIBOR plus 160 basis
points, which, combined with other financing transactions,
substantially satisfies all near-term securitized maturities.
Third Quarter Financial
Results
FFO, as adjusted, for the three months ended September 30, 2015,
was $43.9 million, or $0.51 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 $43.8 million, or $0.51 per diluted common share, for the same
period in the prior year.
FFO, as defined by NAREIT, was $42.8 million, or $0.50 per
diluted common share, for the Kite Portfolio, compared to $24.7
million, or $0.29 per diluted common share, for the same period in
the prior year. The primary difference between FFO, as defined by
NAREIT, and FFO, as adjusted, in the prior year was due to merger
and acquisition costs.
Portfolio Activity During The Third
Quarter
Development and Redevelopment
The Company’s three development projects, Phase II of Parkside
Town Commons, Phase II of Holly Springs Towne Center, and Tamiami
Crossing, were in aggregate 86.3% pre-leased or committed as of
September 30, 2015. These three projects have a total estimated
cost of approximately $170.0 million, of which approximately $136.4
million, or 80%, had been incurred as of September 30, 2015.
The Company continues to maintain a pipeline of projects with an
expected total cost of approximately $120 million across
redevelopment, reposition and repurpose categories. As of the end
of the third quarter, 12 of the 16 properties included in the
pipeline remain in the operating portfolio. The Company anticipates
commencing active construction on these projects within the next 18
months.
Portfolio Transactions
While being a net seller of over $100 million of non-core
properties since December of 2014, the Company completed its tax
efficient redeployment of disposition proceeds during the third
quarter. The final two acquisitions are outlined below.
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 95.4% 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.
Chapel Hill Shopping Center (Fort Worth-Dallas)
Chapel Hill Shopping Center is an approximately 200,000 square
foot shopping center located in the MSA of Fort Worth-Dallas,
Texas. The center is 97.8% leased and anchored by HEB Grocery’s
premier Central Market, The Container Store and Cost Plus World
Market. The shopping center also includes a strong lineup of other
high-quality retailers such as Ann Taylor, Beauty Brands, New
Balance and Men’s Warehouse. The transaction closed August 21,
2015.
Chapel Hill Shopping Center is located at the intersection of
I-30 and Hulen Street, one of the area’s most highly traveled
crossroads, and benefits from multiple access points and ease of
entry. The densely inhabited area has an estimated population of
275,000 residents within a 5-mile radius.
Capital Markets
Since June 30, 2015, the Company completed the previously
announced $250 million senior unsecured private placement offering
at a blended fixed rate of 4.41% across 8-year, 10-year and 12-year
tranches. The notes have an average maturity of approximately 9.8
years which extended the Company’s total weighted average debt
maturity to 5.5 years from 4.8 years last quarter and reduced
floating rate debt to 8% from 19% last quarter.
In October, the Company announced the completion of a $200
million 7-year unsecured term loan bearing an interest rate of
LIBOR plus 160 basis points. Similar to the private placement
notes, the term loan includes a delayed draw feature which is
expected to be utilized to closely match future funding needs. The
Company intends to hedge a portion of or the entire term loan.
In aggregate, these unsecured offerings will be used to repay
all 2016 securitized debt maturities as well as unencumber the
Company’s largest asset, City Center at White Plains in New
York.
Portfolio Operations
As of September 30, 2015, the Company owned interests in 115
operating properties totaling approximately 23 million square feet.
The owned GLA in the Company’s retail operating portfolio was 95.4%
leased as of September 30, 2015, and the Company’s overall
portfolio was 94.8% leased, excluding ground leases and non-owned
anchors.
Same-property NOI, which includes 110 operating properties,
increased 3.1% in the third quarter of 2015 compared to the same
period in the prior year. The leased percentage of these properties
was 95.4% at September 30, 2015, compared to 94.9% at September 30,
2014, and the economic occupancy was 93.6% at September 30, 2015
compared to 93.5% at September 30, 2014.
The Company executed 107 leases totaling 796,233 square feet
during the third quarter of 2015. There were 72 comparable new and
renewal leases executed during the quarter for 584,275 square feet.
Cash rent spreads on new and renewal leases executed in the quarter
were approximately 36.9% and 7.7%, respectively, for a blended cash
rent spread of 13.1%.
2015 Earnings Guidance
The Company is revising its guidance for FFO, as adjusted, for
the year ending December 31, 2015, to $1.98 to $2.00 per diluted
common share. In July, the Company had communicated its
expectations for FFO, as adjusted, to be between $1.95 to $2.00 per
diluted common share.
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 $ 0.17 $ 0.19 Add:
Depreciation, amortization and other 1.93 1.93 Add: Debt
extinguishment and preferred redemption costs 0.04 0.04 Less: Gain
on sale of operating property (0.04 ) (0.04 ) Less: Gain on
settlement (0.05 ) (0.05 ) Less: Dividends on preferred shares
(0.09 ) (0.09 ) Add: Acquisition costs 0.02 0.02
FFO, as adjusted, per diluted common share1 $
1.98 $ 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, October 30, 2015, at 9:30 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) 840-7637 for domestic callers and
(704) 908-0456 for international callers (passcode 15302034). 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 September 30, 2015,
the Company owned interests in a portfolio of 124 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)
September 30,2015 December
31,2014 ($ in thousands) Assets:
Investment properties, at cost $ 3,980,886 $ 3,732,748 Less:
accumulated depreciation (410,328 ) (315,093 ) 3,570,558 3,417,655
Cash and cash equivalents 42,951 43,826 Tenant and other
receivables, including accrued straight-line rent of $23,312 and
$18,630 respectively, net of allowance for uncollectible accounts
47,353 48,097 Restricted cash and escrow deposits 15,713 16,171
Deferred costs and intangibles, net 150,983 159,978 Prepaid and
other assets 10,089 8,847 Assets held for sale — 179,642
Total Assets $ 3,837,647 $ 3,874,216
Liabilities and Shareholders’ Equity: Mortgage and other
indebtedness1 $ 1,679,843 $ 1,554,263 Accounts payable and accrued
expenses 90,148 75,150 Deferred revenue and other liabilities
137,554 136,409 Liabilities held for sale — 81,164
Total Liabilities 1,907,545 1,846,986 Commitments and
contingencies Limited Partners’ interests in the Operating
Partnership and other redeemable noncontrolling interests 86,957
125,082
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 September 30, 2015 and December 31, 2014,
respectively 102,500 102,500 Common Shares, $.01 par value,
225,000,000 shares authorized, 83,323,563 and 83,490,663 shares
issued and outstanding at September 30, 2015 and December 31, 2014,
respectively 833 835 Additional paid in capital 2,050,915 2,044,425
Accumulated other comprehensive loss (6,209 ) (1,175 ) Accumulated
deficit (305,902 ) (247,801 )
Total Kite Realty Group Trust
Shareholders’ Equity 1,842,137 1,898,784 Noncontrolling
Interests 1,008 3,364
Total Equity 1,843,145
1,902,148
Total Liabilities and Shareholders'
Equity $ 3,837,647 $ 3,874,216
____________________ 1 Includes debt premium of $23.9
million at September 30, 2015.
Kite Realty Group
TrustConsolidated Statements of OperationsFor the
Three and Nine Months Ended September 30, 2015 and
2014(Unaudited)
Three Months EndedSeptember 30, Nine
Months EndedSeptember 30, 2015 2014
2015 2014 ($ in thousands, except per share
data) Revenue: Minimum rent $ 66,279 $ 69,033 $ 196,656
$ 131,515 Tenant reimbursements 16,787 17,605 51,891 35,083 Other
property related revenue 4,081 1,938 9,163
5,481
Total revenue 87,147 88,576 257,710 172,079
Expenses: Property operating 11,994 11,850 36,519 26,057
Real estate taxes 10,045 10,632 29,821 20,048 General,
administrative, and other 4,559 3,939 14,131 9,358 Merger and
acquisition costs 1,089 19,088 1,550 26,849 Depreciation and
amortization 42,549 44,383 124,196 81,559
Total expenses 70,236 89,892 206,217
163,871
Operating income 16,911 (1,316 )
51,493 8,208 Interest expense (13,881 ) (15,386 ) (40,995 ) (30,291
) Income tax expense of taxable REIT subsidiary (9 ) (14 ) (134 )
(37 ) Gain on settlement — — 4,520 — Other expense, net (60 ) (13 )
(189 ) (119 )
Income (loss) from continuing operations 2,961
(16,729 ) 14,695 (22,239 )
Discontinued operations: Gain on
sale of operating property — — — 3,199
Income from discontinued operations — — —
3,199
Income (loss) before gain on sale of
operating properties 2,961 (16,729 ) 14,695 (19,040 ) Gain on
sales of operating properties — 2,749 3,363
6,336
Net income (loss) 2,961 (13,980 ) 18,058
(12,704 ) Net income attributable to noncontrolling interest (435 )
(304 ) (1,626 ) (224 ) Dividends on preferred shares (2,114 )
(2,114 ) (6,342 ) (6,342 )
Net income (loss) attributable to
Kite Realty Group Trust common shareholders $ 412 $
(16,398 ) $ 10,090 $ (19,270 )
Income (loss) per
common share - basic and diluted: Continuing operations $ 0.00
$ (0.20 ) $ 0.12 $ (0.45 ) Discontinued operations — —
— 0.06 $ 0.00 $ (0.20 ) $ 0.12 $
(0.39 ) Weighted average common shares outstanding - basic
83,325,074 83,455,900 83,453,660 49,884,469
Weighted average common shares outstanding - diluted
83,433,379 83,718,735 83,566,554 50,145,571
Common Dividends declared per common share $ 0.2725
$ 0.2600 $ 0.8175 $ 0.7600
Amounts attributable to Kite Realty Group Trust common
shareholders: Income (loss) from continuing operations $ 412 $
(16,398 ) $ 10,090 $ (22,366 ) Income from discontinued operations
— — — 3,096
Net income (loss) $
412 $ (16,398 ) $ 10,090 $ (19,270 )
Kite Realty Group TrustFunds
From OperationsFor the Three and Nine Months Ended September
30, 2015 and 2014 (Unaudited)
Three Months EndedSeptember 30, Nine
Months EndedSeptember 30, 2015 2014
2015 2014 ($ in thousands, except share and
per share data) Funds From Operations Consolidated net
income (loss) $ 2,961 $ (13,980 ) $ 18,058 $ (12,704 ) Less:
dividends on preferred shares (2,114 ) (2,114 ) (6,342 ) (6,342 )
Less: net income attributable to noncontrolling interests in
properties (415 ) (679 ) (1,416 ) (757 ) Less: gains on sales of
operating properties — (2,749 ) (3,363 ) (9,534 ) Add: depreciation
and amortization of consolidated entities, net of noncontrolling
interests 42,387 44,208 123,812 81,161
Funds From Operations of the Kite Portfolio 42,819 24,686 130,749
51,824 Less: Limited Partners' interests in Funds From Operations
(967 ) (354 ) (2,698 ) (1,658 ) Funds From Operations attributable
to Kite Realty Group Trust common shareholders1 $ 41,852 $
24,332 $ 128,051 $ 50,166 FFO per share of the
Operating Partnership - basic $ 0.50 $ 0.29 $ 1.53
$ 1.01 FFO per share of the Operating Partnership -
diluted $ 0.50 $ 0.29 $ 1.53 $ 1.00
Funds From Operations of the Kite Portfolio $ 42,819 $
24,686 $ 130,749 $ 51,824 Less: gain on settlement $ — $ — $ (4,520
) $ — Add: merger and acquisition costs 1,089 19,088
1,550 26,849 Funds From Operations of the Kite
Portfolio, as adjusted $ 43,908 $ 43,774 $ 127,779
$ 78,673 FFO per share of the Operating Partnership,
as adjusted - basic $ 0.52 $ 0.51 $ 1.50 $
1.53 FFO per share of the Operating Partnership, as adjusted
- diluted $ 0.51 $ 0.51 $ 1.50 $ 1.52
Weighted average Common Shares outstanding - basic
83,325,074 83,455,900 83,453,660 49,884,469
Weighted average Common Shares outstanding - diluted
83,433,379 83,718,735 83,566,554 50,145,571
Weighted average Common Shares and Units outstanding - basic
85,238,537 85,114,237 85,214,390 51,543,952
Weighted average Common Shares and Units outstanding -
diluted 85,346,842 85,377,073 85,327,283
51,805,054 ____________________ 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 Nine Months
Ended September 30, 2015 and 2014(Unaudited)
Three Months Ended September 30, Nine
Months Ended September 30, 2015 2014
%Change
2015 2014
%Change
($ in thousands) ($ in thousands) Number of
properties at period end1
110
110 110 110
Leased percentage at period end 95.4 %
94.9 % 95.4 % 94.9 %
Economic Occupancy percentage at period
end2 93.6 % 93.5 % 93.6 % 93.5 % Minimum rent $
58,606 $ 57,681 $ 117,214 $ 114,528 Tenant recoveries 15,908 15,826
32,961 32,713 Other income, including specialty leasing and overage
rental income 1,009 726 2,390 2,275
75,523 74,233 152,565 149,516 Property operating expenses
(9,079 ) (9,532 ) (22,118 ) (23,288 ) Real estate taxes (9,432 )
(9,380 ) (19,439 ) (19,007 ) (18,511 ) (18,912 ) (41,557 ) (42,295
)
Net operating income - same properties3 $
57,012 $ 55,321 3.1 % $
111,008 $ 107,221 3.5 %
Reconciliation of Same Property NOI to Most Directly Comparable
GAAP Measure: Net operating income - same properties $ 57,012 $
55,321 $ 111,008 $ 107,221 Net operating income - non-same
activity4 8,096 10,773 80,362 18,753 General, administrative and
other (4,559 ) (3,939 ) (14,131 ) (9,358 ) Merger and acquisition
costs (1,089 ) (19,088 ) (1,550 ) (26,849 ) Depreciation expense
(42,549 ) (44,383 ) (124,196 ) (81,559 ) Interest expense (13,881 )
(15,386 ) (40,995 ) (30,291 ) Gain on settlement — — 4,520 — Other
expense, net (69 ) (27 ) (323 ) (156 ) Discontinued operations — —
— 3,199 Gains on sales of operating properties — 2,749 3,363 6,336
Net income attributable to noncontrolling interests (435 ) (304 )
(1,626 ) (224 ) Dividends on preferred shares (2,114 ) (2,114 )
(6,342 ) (6,342 ) Net income (loss) attributable to common
shareholders $ 412 $ (16,398 ) $ 10,090 $ (19,270 )
____________________ 1 Same property 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 net operating income excludes net gains from
outlot sales, straight-line rent revenue, bad debt expense and
recoveries, lease termination fees, amortization of lease
intangibles and significant prior year expense recoveries and
adjustments, if any. 4 Includes non-cash accounting items across
the portfolio as well as net operating income from properties not
included in the same store pool.
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/20151029006061/en/
Kite Realty Group TrustMaggie Kofkoff, CFA, 317-713-7644Media
& Investor Relationsmkofkoff@kiterealty.com
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