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| 8-K - FORM 8-K 09/12/2016 - KITE REALTY GROUP TRUST | form8k_09122016.htm |
INVESTOR UPDATE
Q2 2016
Chapel Hill (Dallas, TX)
Livingston Center (Livingston, NJ)
© 2016 Kite Realty Group kiterealty.com Investor Update | 2
COMPANY SNAPSHOT
KITE REALTY GROUP TRUST
Note: All data as of 06/30/16 unless otherwise noted.
1.) Source: SNL; Dividend yield calculated as most recent dividend, annualized and expressed as a percent of the security price.
2.) Demographic data for income pulled on a 3-mile radius, and population data based on a 5-mile radius. Source: STI: Popstats.
Note: Cities referenced denote regional office locations.
Number of Properties 121
Number of States 20
Total GLA (SF) 24mm
Total Retail Operating Leased 95.2%
Retail Operating Shop Leased 88.3%
Annualized Base Rent (Per SF) -
Operating Portfolio
$15.27
Average Center Size (SF) ~200,000
Portfolio Demographics (2)
Average Household Income $84,000
Population 167,000
PORTFOLIO SUMMARY
RETAIL PORTFOLIO PRODUCT BREAKDOWN
67% Of Assets Anchored With A Grocery
Grocery
Anchored,
13%
Hybrid
(Power
W/
Grocery),
54%
Power /
Regional
Center,
29%
Other, 4%
© 2016 Kite Realty Group kiterealty.com Investor Update | 3
KITE’S STRATEGY FOCUSES ON THE “CORE” OF THE BUSINESS
C
ULTURE & PASSION
• MANAGEMENT CONSISTENCY
• EFFICIENT OPERATING PLATFORM
O
PERATIONAL EXCELLENCE
• HIGH-QUALITY PORTFOLIO
• TOP-TIER FINANCIAL RESULTS
R
ESILIENT BALANCE SHEET
• WELL-STAGGERED MATURITIES
• FREE CASH FLOW >$50mm
E
XECUTION
• STRONG REDEVELOPMENT,
REPOSITION AND REPURPOSE (“3-
R”) PLATFORM
• PROVEN HISTORY OF EXECUTED
DEALS
Eddy Street Commons (South Bend, IN)
EDDY STREET COMMONS (IN)
CITY CENTER (NY)
© 2016 Kite Realty Group kiterealty.com Investor Update | 4
KITE’S 3-YEAR CORE ROADMAP TO UNLOCK VALUE
FFO, as Adjusted
Per Share
Free Cash Flow
Net Debt / Adjusted
EBITDA
Floating Rate Debt
Shops Leased
Dividend
Per Share
2017 2018YE Goal 2015YE 2016
$1.99
6.98x
12%
87.6%
~$50mm
$1.09
6.0x – 6.25x
< 15%
90%
+12%-16%
+~5% / Year
+15%-20%
Note: The numbers set forth under 2018YE Goal represent aspirational goals only, and do not represent guidance or projections as to the Company’s expected performance. For the Company’s stated guidance with
respect to FFO, as Adjusted, for 2016, we refer to the Company’s quarterly press releases. The Company’s actual performance will be subject to various contingencies, many of which are beyond the Company’s control,
and may well not meet these goals. Dividends are determined solely by the Company’s Board of Trustees.
© 2016 Kite Realty Group kiterealty.com Investor Update | 5
KITE’S CORE MODEL INTERTWINED IN ALL ASPECTS
CORPORATE IDENTITY
& OPERATIONS
HIGH-QUALITY
PORTFOLIO
PORTFOLIO
TRANSFORMATION
INVESTMENT GRADE
BALANCE SHEET
Long-standing,
experienced
management team
Community
involvement
Top-tier operating
metrics
Historical same-
store NOI growth
of ~4.0%
92% Internet
resistant / Omni-
channel
Need-based and
value oriented
retailers
Over 70% ABR
coming from top
50 MSAs
Highly-trafficked
centers; over 67%
of assets include
grocer
Recent portfolio
transformation
History of creating
synergies, driving
growth
Expected net seller
in 2016 of $50-
65mm
Enhancing assets
via the 3-Rs;
Redevelop,
Reposition,
Repurpose
> $50mm in free
cash flow annually
Minimal debt
maturities through
2020
9% floating rate
debt exposure
Target net debt /
adjusted EBITDA of
6.0x-6.25x
KITE’S CORE MODEL IS THE FOUNDATION FOR ACHIEVING SUCCESS IN THE FOLLOWING AREAS:
© 2016 Kite Realty Group kiterealty.com Investor Update | 6
EARNINGS GROWTH FURTHER SUPPORTS INVESTMENT
STATED GOAL: 12-16% FFO GROWTH (2015-2018E) (1)
$1.99
2015 2018E
Goal: +12-16%
20-25%
25-30%
30-35%
15-20%
COMPONENTS OF FFO GROWTH
Minimum Rent
Other 3-R
Shop Lease Up/SSNOI
Under
Construction
Dev./Redev.
Transitional
Dev./ Redev.
COMPLETE EXISTING DEVELOPMENT PROJECT, PARKSIDE PHASE II
FINALIZE TRANSITIONAL REDEVELOPMENT/DEVELOPMENT PROJECTS
LEASE SMALL SHOPS TO 90%
MAINTAIN ~$100MM IN 3-R PIPELINE, TO RETURN 9-11%
Results in
annualized cash
NOI of ~$11mm
Reduced CAM
Leakage
82%
9% 9%
Interest Savings
1.) 2015 FFO for KRG reflects the Company’s defined FFO, as adjusted per share metric.
Note: The numbers described as goals represent aspirational goals only, and do not represent guidance or projections as to the Company’s expected performance. For the Company’s stated guidance with respect to FFO,
as Adjusted, for 2016, we refer to the Company’s quarterly press releases. The Company’s actual performance will be subject to various contingencies, many of which are beyond the Company’s control, and may well
not meet these goals.
© 2016 Kite Realty Group kiterealty.com Investor Update | 7
KRG PROVIDES ATTRACTIVE INVESTMENT OPPORTUNITY
1.) Source: SNL Financial; Total Return (RMS Index) and implied dividend contribution (estimated as RMS less RMZ index) from December 2009 – September 2016.
2.) 2016E FFO per share refers to consensus estimate for companies as of September 2016 per Bloomberg, which may not reflect the Company’s or the applicable peer company’s estimates. FFO Payout Ratio calculated as
dividends divided by 2016E FFO, on a per share basis.
56.1%
BRX KRG DDR REG RPAI AKR WRI EQY KIM FRT ROIC
Peer Group Median 63.7%
DIVIDEND VS. 2016E FFO (2)
RELATIVELY MODEST FFO PAYOUT RATIO SUPPORTS FUTURE
DIVIDEND INCREASES
DISCOUNTED MULTIPLE SUPPORTS VALUATION THESIS
14.4x
BRX KRG DDR RPAI WRI ROIC KIM EQY AKR REG FRT
Peer Group Median 21.4x
PRICE VS. 2016E FFO (2)
40%
60%
Dividend
Contribution
Price
Contribution
COMPONENTS OF TOTAL RETURN (1)
Historically, REITs’ total returns
have had an implied contribution
from dividends of ~40%
CORPORATE IDENTITY & OPERATIONS
© 2016 Kite Realty Group kiterealty.com Investor Update | 9
$1.70
$2.06
2010 2016E
Transformed 86% of portfolio into
higher-quality assets since 2010 (1)
Obtained investment grade rating by
Moody’s and S&P (Baa3 / BBB-)
Executed inaugural private placement
bond deal in 2015
Increased free cash flow from less than
$10mm in 2010 to over $50mm
Achieved dividend per share growth of
19.8% over the last 4 years
COMPANY AND PORTFOLIO TRANSFORMATION SINCE 2010
REVENUE GROWTH AND IMPROVED PORTFOLIO
QUALITY WHILE STRENGTHENING THE BALANCE SHEET
1.) Transformed defined as current operating portfolio GLA that has been sold, recycled, or redeveloped since 2010.
2.) 2010 FFO adjusted for reverse stock split in 2014. 2016E per consensus data per SNL Financial, which may not reflect the Company’s internal estimates.
KITE MILESTONES
+~21%
FFO Per Share Growth (2)
9.1x
6.9x
2010 Current
~2x
lower
Net Debt / Adjusted EBITDA
$12.80
$15.27
2010 Current
Annualized Base Rent PSF
+~19%
1.8x
3.7x
2010 Current
~2x
higher
Fixed Charge Coverage
P P
P P
© 2016 Kite Realty Group kiterealty.com Investor Update | 10
KITE CONSISTENTLY MAINTAINS TOP-TIER SSNOI GROWTH
4.9%
4.3%
4.0%
3.7%
3.5%
3.3% 3.3%
3.1%
2.9% 2.8% 2.8%
2.6%
1.9%
ROIC AKR KRG EQY BRX REG WRI DDR RPT FRT RPAI KIM CDR
QUARTERLY AVERAGE SSNOI GROWTH FROM Q2’14-Q2’16 (1)
Peer average
~3.3%
1.) Figures exclude redevelopments, when available, averaged on a quarterly basis from supplemental data for Q2’14-Q2’16.
© 2016 Kite Realty Group kiterealty.com Investor Update | 11
CONTINUED OPERATIONAL EFFICIENCIES WITHIN PORTFOLIO
83.4%
85.9%
89.5% 89.6%
89.0%
87.3%
90.1%
95.4% 95.3% 95.2%
94.8% 94.9%
95.4% 95.2%
Q2'13 Q4'13 Q2'14 Q4'14 Q2'15 Q4'15 Q2'16
% Recovery - Retail Portfolio % Leased - Retail Portfolio
1.) KRG Financial Supplementals 06/30/13 through 06/30/16.
INCREASE IN RETAIL PORTFOLIO RECOVERY RATIO RESULT OF FAVORABLE LEASING ACTIVITY
AND EXPENSE CONTROL (1)
5.1%
CAM recovery is at its strongest
and continues to grow
© 2016 Kite Realty Group kiterealty.com Investor Update | 12
SUSTAINABILITY AND CORPORATE RESPONSIBILITY
COMMITTED TO THE COMMUNITY
ENVIRONMENTALLY-CONSCIOUS EFFORTS
TOTAL KITE ENVIRONMENTAL SAVINGS (1)
• Facilitate opportunities to meet the needs,
improve wellness, and enhance educational
experience for our community
• Currently surpassed 2016 goal of 2,560 hours
of employee volunteer time
• 30 employees on Community Commitment
and Wellness Committees
GOOD FOR THE ENVIRONMENT. GOOD FOR THE BUSINESS.
Mature Trees 173,224
Gallons of Oil 3,872,069
kWh’s of Energy 40,758,626
Cubic Yards Landfill Space 183,900
Gallons of H2O 71,327,594
Total Tons Recycled 10,190
Dump Truck Loads 7,663
SOLAR PANELS, BAYONNE CROSSING (NJ)
1.) Source: Deep Green Waste and Recycling and Keter Environmental statistics. Total environmental savings on a rolling 12-month period as of 07/31/16.
HIGH-QUALITY PORTFOLIO
© 2016 Kite Realty Group kiterealty.com Investor Update | 14
Midwest
17%
Northeast
11%
Mid-
Central
17% West
12%
Southeast
18%
Florida
25%
HIGH-QUALITY, DIVERSE TENANT BASE AND GEOGRAPHY
Top Tenants By ABR # Stores % ABR
1 Publix 18 3.1%
2 TJ Maxx 22 2.5%
3 Petsmart 20 2.3%
4 Bed Bath & Beyond 19 2.2%
5 Ross Dress For Less 18 2.1%
6 Lowe’s 5 1.9%
7 Office Depot / Max 18 1.9%
8 Dick’s Sporting Goods 9 1.7%
9 Ascena 36 1.6%
10 Michaels 14 1.4%
Total 179 20.7%
H
IG
H
-Q
U
AL
IT
Y
T
EN
A
N
T
B
AS
E INVESTMENT GRADE RATED TOP TENANTS
G
EO
G
RAPHICA
LL
Y
DIVE
R
SE
2016 LEASE ACTIVITY EXAMPLES
First In Florida:
Gainesville Plaza (FL)
ABR % BY REGION
HIGH-QUALITY, DIVERSE REVENUE SOURCES IN TERMS OF TENANTS AND GEOGRAPHIES
First Bath & Body Works, White Barn Candle Combo
Store: University Town Center (Norman, OK)
Note: All data as of 06/30/16 unless otherwise noted.
© 2016 Kite Realty Group kiterealty.com Investor Update | 15
ASSET QUALITY SUPPORTED BY MARKET DEMOGRAPHICS
ASSETS ACROSS THE TOP 5 MARKETS SUPERIORLY POSITIONED
Median Household Income
Source: STI: Popstats; information based on a 3-mile radius for the KRG portfolio.
$54K
$68K
$66K
$61K
$66K
$47K
$49K
$53K
$51K
$47K
Florida Indiana Texas Nevada North Carolina
KRG State Median Household Income State Median Household Income
© 2016 Kite Realty Group kiterealty.com Investor Update| 16
INTERNET RESISTANT 54%
SERVICES, ENTERTAINMENT 19%
GROCERY, SPECIALTY STORES 19%
RESTAURANTS 16%
OMNI-CHANNEL 38%
DISCOUNT RETAILERS 15%
HOME IMPROVEMENT/GOODS 11%
SOFT GOODS 8%
SPORTING GOODS 4%
NON-RESISTANT 8%
ELECTRONICS / BOOKS 5%
OFFICE SUPPLIES 3%
NECESSITY DRIVEN AND INTERNET RESISTANT RETAILER BASE
1.) Data reflects Q2’16 Supplemental.
2.) Source: ICSC Article, June 2016: “In-Store vs. Online: Brick & Mortar is the Dominant Format.”
78% of Consumers Prefer Shopping In-Store
Internet
Resistant,
54%
Omni-
channel,
38%
Non-
Resistant,
8%
TENANT TYPE COMPOSITION
CONSUMER TRENDS (2)
KITE’S PORTFOLIO IS WELL-EQUIPPED TO MANAGE EVOLVING CONSUMER PREFERENCES (1)
In-Store Online
Consumer Purchase / Month 7.5 2.2
Time Spent 54 min. 38 min.
Money Spent / Month $1,710 $247
© 2016 Kite Realty Group kiterealty.com Investor Update| 17
Dallas, TX
Owned
GLA
126,755
ABR per
SF
$24.09
% Leased 92.5%
PORTFOLIO OF HIGH-QUALITY, DIVERSE ASSETS
DELRAY MARKETPLACE CHAPEL HILL
RIVERS EDGE CENTENNIAL CENTER
Delray, FL
Owned
GLA
260,094
ABR per
SF
$25.16
% Leased 96.7%
Indianapolis, IN
Owned
GLA
149,209
ABR per
SF
$20.21
% Leased 100.0%
Las Vegas, NV
Owned
GLA
334,705
ABR per
SF
$22.79
% Leased 93.7%
PORTFOLIO TRANSFORMATION
© 2016 Kite Realty Group kiterealty.com Investor Update | 19
STABILIZED GROUND-UP DEVELOPMENTS
Power center consisting of
premier national retailers
Accelerated development
timing resulted in early store
openings
Future growth expected via
contractual rent terms and
outparcel opportunities
TAMIAMI CROSSING (NAPLES, FL)
HOLLY SPRINGS TOWNE CENTER (RALEIGH, NC)
Two-phased lifestyle
development project
Total of 326K SF (includes
Phase I & Phase II)
Average HHI in primary
trade area exceeds $100K
14,600+ future approved
homes in primary trade area
© 2016 Kite Realty Group kiterealty.com Investor Update | 20
In-process projects of ~$43.5mm
Major Redevelopment:
City Center
Optimizing Existing Vacancies /
Right-sizing:
Bolton Plaza Phase II
Northdale Promenade
Hitchcock Plaza
Shops at Moore
Tarpon Bay Plaza
IN-PROCESS REDEVELOPMENT & 3-R PLATFORM
IN-PROCESS 3-Rs
REDEVELOPMENT PIPELINE: THE 3-Rs
Redevelop: substantial renovations; e.g.
teardowns, remerchandising, exterior / interior
improvements
Repurpose: substantial alterations including
changing the product-type
Reposition: less substantial asset enhancements,
generally $5mm or less
60%
22%
18%
Average 3-R Return: 9-11%
Redevelopment
Reposition
Repurpose
Portofino Phase I (TX)
Outparcel Opportunities:
Portofino Phase I
Castleton Crossing
City Center (NY)
© 2016 Kite Realty Group kiterealty.com Investor Update | 21
PROVEN ABILITY TO CREATE ONGOING SYNERGIES
NO
I MAR
G
IN
69.3%
77.8%
PRE-TRANSACTION Q2'16
72.1%
76.8%
PRE-TRANSACTION Q2'16
RECOVERY
RATI
O
70.1%
82.6%
PRE-TRANSACTION Q2'16
80.5%
92.7%
PRE-TRANSACTION Q2'16
9 Property Portfolio Acquisition
Seller: Private Equity Firm
+850 bps
+1,250 bps
+470 bps
+1,220 bps
Avg.
Increase:
+660 bps
Avg.
Increase:
+1,235 bps
KITE’S TRANSACTION TRACK RECORD UNDERSCORES MANAGEMENT’S ABILITY TO DRIVE ONGOING
VALUE THROUGH EFFICIENT OPERATIONS
INVESTMENT GRADE BALANCE SHEET
© 2016 Kite Realty Group kiterealty.com Investor Update | 23
RESILIENT BALANCE SHEET
Moody’s / S&P Ratings: Baa3 / BBB-
Fixed Charge Coverage: 3.7x (1)
Net Debt / Adjusted EBITDA: 6.9x
Secured Debt / Undepreciated Total Assets:
19.3%
Unencumbered Assets / Total Assets: 59.7%
1.) Fixed Charge ratio excludes capitalized interest.
ACTIONS TAKEN SINCE Q2’16
Completed ~$70mm in CMBS debt
payoffs
Completed new five year Term Loan,
used proceeds to pay $200mm of
existing $400mm Term Loan set to
mature in 2020
Restated the Credit Agreement
providing for a $500mm Revolving
Credit Facility
Cobblestone Plaza (FL)
© 2016 Kite Realty Group kiterealty.com Investor Update | 24
2010 Q2'16
~2x
higher
FURTHER ENHANCED FINANCIAL FLEXIBILITY
NET DEBT / ADJUSTED
EBITDA
2010 Q2'16
FLOATING RATE EXPOSURE
21%
9%
-1,200 bps
FIXED CHARGE COVERAGE
x
3.7x
2010 Q2'16
6.9x
~2x
lower
9.1x
Maintain and continue to improve investment grade metrics
Continue to manage debt maturity profile
Maintain floating rate debt exposure of 15% or less
Reduce leverage to 6.0x-6.25x by year-end 2018
BALANCE SHEET INITIATIVES ON TRACK TO MEET 3-YEAR ROADMAP GOALS
1.8x
© 2016 Kite Realty Group kiterealty.com Investor Update | 25
WELL-STAGGERED DEBT MATURITY PROFILE
1. Data is as of Q2’16 with pro forma adjustments. Chart excludes annual principal payments and net premiums on fixed rate debt. Pro forma adjustments include: Term Loan & Revolver Recast –
completed in July, Delray Refinance – completed in July, Pay-offs for Pine Ridge, Riverchase, & Traders Point – completed in July and August.
PRO FORMA SCHEDULE OF DEBT MATURITIES (1)
76
17
64 46
171
216 215
12
72
200
200
200
95
155
2016 2017 2018 2019 2020 2021 2022 2023 2024+
Construction Loan Mortgage Debt Line of Credit Term Loan Private Placement
© 2016 Kite Realty Group kiterealty.com Investor Update | 26
FORWARD-LOOKING STATEMENTS
This presentation, together with other statements and information publicly disseminated by us, 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 as well as uncertainty added to the economic forecast due to oil and energy prices remaining relatively low in 2016; financing
risks, including the availability of and costs associated with sources of liquidity; our ability to refinance, or extend the maturity dates of, our 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
we operate; acquisition, disposition, development and joint venture risks; property ownership and management risks; our ability to maintain our status as a real estate
investment trust (“REIT”) for federal income tax purposes; potential environmental and other liabilities; impairment in the value of real estate property we own; risks
related to the geographical concentration of our properties in Florida, Texas, and Indiana; insurance costs and coverage; risks related to cybersecurity attacks and the loss
of confidential information and other business disruptions; other factors affecting the real estate industry generally; and other risks identified in our Annual Report on
Form 10-K and, from time to time, in other reports we file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate.
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.
DISCLAIMER
© 2016 Kite Realty Group kiterealty.com Investor Update | 27
NON-GAAP FINANCIAL MEASURES
Funds from Operations
Funds from Operations (FFO) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of
operating performance. We calculate FFO in accordance with the best practices described in the April 2002 National Policy Bulletin of the National
Association of Real Estate Investment Trusts (NAREIT), which we refer to as the White Paper. The White Paper defines FFO as net income
(determined in accordance with generally accepted accounting principles (GAAP)), excluding gains (or losses) from sales and impairments of
depreciated property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
Considering the nature of our business as a real estate owner and operator, we believe that FFO is helpful to investors in measuring our operational
performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance, such as
gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating
performance more difficult. For informational purposes, we have also provided FFO adjusted for a severance charge in 2016, transaction costs in 2016
and 2015 and a gain on settlement in 2015. We believe this supplemental information provides a meaningful measure of our operating performance.
We believe our presentation of FFO, as adjusted, provides investors with another financial measure that may facilitate comparison of operating
performance between periods and among our peer companies. FFO should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indicator of our financial performance, is not an alternative to cash flow from operating activities (determined in
accordance with GAAP) as a measure of our liquidity, and is not indicative of funds available to satisfy our cash needs, including our ability to make
distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the
current NAREIT definition or that interpret the current NAREIT definition differently than we do. A reconciliation of net earnings (computed in
accordance with GAAP) to FFO is included elsewhere in this Financial Supplement.
Adjusted Funds from Operations
Adjusted Funds From Operations (“AFFO”) is a non-GAAP financial measure of operating performance used by many companies in the REIT
industry. AFFO should not be considered an alternative to net earnings, as an indication of the company's performance or to cash flow as a measure of
liquidity or ability to make distributions. Management considers AFFO a useful supplemental measure of the company’s performance. The company’s
computation of AFFO may differ from the methodology for calculating AFFO used by other REITs, and therefore, may not be comparable to such
other REITs. A reconciliation of net earnings (computed in accordance with GAAP) to AFFO is included elsewhere in this Financial Supplement.
Net Operating Income
Net operating income (NOI) is provided here as a supplemental measure of operating performance. NOI is defined as property revenues less property
operating expenses, excluding depreciation and amortization, interest expense, impairment, and other items. We believe this presentation of NOI is
helpful to investors as a measure of our operational performance because it is widely used in the real estate industry to measure the performance of
real estate assets without regard to various items, included in net income, that do not relate to or are not indicative of operating performance, such as
depreciation and amortization, which can vary depending upon accounting methods and book value of assets. We also believe NOI helps our investors
to meaningfully compare the results of our operating performance from period to period by removing the impact of our capital structure (primarily
interest expense on our outstanding indebtedness) and depreciation of the basis in our assets from our operating results. NOI should not, however, be
considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance. The Company’s
computation of NOI may differ from the methodology for calculating NOI used by other REITs, and therefore, may not be comparable to
such other REITs.
Free Cash Flow
Free Cash Flow reflected on an annual basis defined as Funds From Operations (FFO) as adjusted less capital expenditures, tenant improvements, plus non-cash items,
and after dividends paid.
© 2016 Kite Realty Group kiterealty.com Investor Update | 28
NON-GAAP FINANCIAL MEASURES
Earnings Before Interest Expense, Income Tax Expense, Depreciation and Amortization (EBITDA)
We define EBITDA, a non-GAAP financial measure, as net income before depreciation and amortization, interest expense and income tax expense of
taxable REIT subsidiary. For informational purposes, we have also provided Adjusted EBITDA, which we define as EBITDA less (i) EBITDA from
unconsolidated entities, (ii) severance charge, (iii) transaction costs, (iv) other income and expense and (v) noncontrolling interest EBITDA.
Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. EBITDA, Adjusted EBITDA and Annualized
Adjusted EBITDA, as calculated by us, are not comparable to EBITDA reported by other REITs that do not define EBITDA exactly as we do.
EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated from operating activities in accordance with GAAP,
and should not be considered alternatives to net income as an indicator of performance or as alternatives to cash flows from operating activities as an
indicator of liquidity.
Considering the nature of our business as a real estate owner and operator, we believe that EBITDA and Adjusted EBITDA are helpful to investors in
measuring our operational performance because they exclude various items included in net income that do not relate to or are not indicative of our
operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and
peer analyses of operating performance more difficult. For informational purposes, we have also provided Annualized Adjusted EBITDA, adjusted as
described above. We believe this supplemental information provides a meaningful measure of our operating performance. We believe presenting
EBITDA in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.
For more information on the foregoing non-GAAP financial measures and reconciliations of net income to FFO, FFO, as adjusted, AFFO, NOI, same
property NOI, EBITDA and Adjusted EBITDA for the quarter ended June 30, 2016, please see the Company’s Quarterly Financial Supplement for the
quarter ended June 30, 2016, which is available on the Company’s website at http://ir.kiterealty.com/QuarterlyResults. For reconciliations of net
income to FFO, FFO, as adjusted, AFFO, NOI, same property NOI, EBITDA and Adjusted EBITDA for the year ended December 31, 2015, please see the
Company’s Annual Report on Form 10-K for the year ended December 31, 2015, which was filed with the Securities and Exchange Commission and is
available on the Company’s website at http://ir.kiterealty.com/Docs.
Same Property Net Operating Income
The Company believes that Net Operating Income ("NOI") 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. The Company’s computation of
Same Property NOI may differ from the methodology for calculating Same Property NOI used by other REITs, and therefore, may not be comparable to such other REITs.
When evaluating the properties that are included in the same property pool, we have established specific criteria for determining the inclusion of properties acquired or
those recently under development. An acquired property is included in the same property pool twelve months after the acquisition date. A development property is
included in the same property pool twelve months after construction is substantially complete, which is typically between six and twelve months after the first date a
tenant is open for business. A redevelopment property is included in the same property pool twelve months after the construction of the redevelopment property is
substantially complete. A redevelopment property is first excluded from the same property pool when the execution of a redevelopment plan is likely and we begin
recapturing space from tenants. For the three months ended June 30, 2016, we excluded 11 redevelopment properties from the same property pool that met these
criteria and were owned in all periods compared.
© 2016 Kite Realty Group kiterealty.com Investor Update | 29
APPENDIX – RECONCILIATION OF FFO TO NET INCOME (LOSS)
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.
($ in thousands, except per share data)
Funds From Operations
Consolidated net (loss) income $ (1,496 ) $ 7,235 $ 477 $ 15,096
Less: cash dividends on preferred shares ) )
Less: net income attributable to noncontrolling interests in properties ) ) ) )
Less: gains on sales of operating properties ) ) )
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
Funds From Operations of the Kite Portfolio1
Less: Limited Partners' interests in Funds From Operations ) ) ) )
Funds From Operations attributable to Kite Realty Group Trust common shareholders $ 40,585 $ 44,915 $ 83,170 $ 86,198
FFO per share of the Operating Partnership - basic $ 0.49 $ 0.54 $ 1 $ 1.03
FFO per share of the Operating Partnership - diluted $ 0.48 $ 0.54 $ 0.99 $ 1.03
Funds From Operations of the Kite Portfolio1 $ 41,394 $ 45,839 $ 84,960 $ 87,929
Less: gain on settlement ) )
Add: transaction costs
Add: severance charge
Funds From Operations of the Kite Portfolio, as adjusted $ 44,165 $ 41,621 $ 88,231 $ 83,870
FFO per share of the Operating Partnership, as adjusted - basic $ 0.52 $ 0.49 $ 1.03 $ 0.98
FFO per share of the Operating Partnership, as adjusted - diluted $ 0.52 $ 0.49 $ 1.03 $ 0.98
Weighted average Common Shares outstanding - basic
Weighted average Common Shares outstanding - diluted
Weighted average Common Shares and Units outstanding - basic
Weighted average Common Shares and Units outstanding - diluted
Funds From Operations per share
Consolidated net (loss) income $ (0.02 ) $ 0.08 $ 0.01 $ 0.18
Less: cash dividends on preferred shares ) )
Less: net income attributable to noncontrolling interests in properties ) ) )
Less: gains on sales of operating properties )
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
Funds From Operations of the Kite Portfolio per share1 $ 0.48 $ 0.54 $ 1.00 $ 1.03
Funds From Operations of the Kite Portfolio per share1 $ 0.48 $ 0.54 $ 1.00 $ 1.03
Less: gain on settlement ) )
Add: transaction costs
Add: severance charge
Funds From Operations of the Kite Portfolio per share, as adjusted $ 0.52 $ 0.49 $ 1.03 $ 0.98
0.04 — 0.03 —
— — — —
— (0.05 — (0.05
— — — (0.04
0.51 0.48 1.00 0.95
— (0.02 — (0.05
(0.01 — (0.01 (0.01
85,420,633 85,529,084 85,394,353 85,501,987
83,475,474 83,803,879 83,460,521 83,818,890
85,320,923 85,231,284 85,295,968 85,202,110
83,375,765 83,506,078 83,362,136 83,519,013
2,771 302 2,771 461
— — 500 —
— (4,520 — (4,520
$ 41,394 $ 45,839 $ 84,960 $ 87,929
(809 (924 (1,790 (1,731
(194 — (194 (3,363
43,545 41,132 85,599 81,425
— (2,114 — (4,228
(461 (414 (922 (1,001
June 30,
2016 2015 2016 2015
Three Months Ended
June 30,
Six Months Ended
© 2016 Kite Realty Group kiterealty.com Investor Update | 30
APPENDIX – RECONCILIATION OF SAME PROPERTY NOI TO NET
INCOME
1.) Same property analysis excludes operating properties in redevelopment as well as office properties (Thirty South Meridian and Eddy Street Commons).
2.) Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent. Calculated as a weighted average based on the timing of cash rent commencement during the period.
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 property pool.
5.) See pages 26 and 27 of the Company’s Q2 2016 supplemental for further detail of the properties included in the 3-R initiative.
($ in thousands)
% Change % Change
Number of properties for the quarter1
Leased percentage % % % %
Economic Occupancy percentage2 % % % %
M inimum rent $ 54,827 $ 53,982 $ 109,178 $ 107,327
Tenant recoveries
Other income
Property operating expenses ) ) ) )
Real estate taxes ) ) ) )
) ) ) )
Net operating income - same properties3 $ 52,460 $ 51,146 2.60% $ 104,684 $ 101,648 3.00%
Net operating income - same properties excluding
the impact o f the 3-R initiative5
3.60%
Reconciliation of Same Property NOI to M ost
Directly Comparable GAAP M easure:
Net operating income - same properties $ 52,460 $ 51,146 $ 104,684 $ 101,648
Net operating income - non-same activity4
Other expense, net ) ) ) )
General, administrative and other ) ) ) )
Transaction costs ) ) ) )
Depreciation expense ) ) ) )
Interest expense ) ) ) )
Gain on settlement
Gains on sales of operating properties
Net income attributable to noncontrolling interests ) ) ) )
Dividends on preferred shares ) )
Net (loss) income attributable to common
shareholders
$ (1,895 ) $ 4,613 $ (494 ) $ 9,677
(399 (508 (971 (1,191
— (2,114 — (4,228
— 4,520 — 4,520
194 — 194 3,363
(43,841 (41,212 (86,082 (81,648
(15,500 (13,181 (30,825 (27,114
(4,856 (4,566 (10,147 (9,572
(2,771 (302 (2,771 (461
13,266 11,033 26,266 24,614
(448 (203 (842 (254
(17,162 (17,619 (34,949 (36,355
(8,245 (9,006 (16,763 (18,821
(8,917 (8,613 (18,186 (17,534
69,622 68,765 139,633 138,003
14,557 14,488 29,892 30,107
238 295 563 569
94 93.8 94 93.8
95.3 95.4 95.3 95.4
2016 2015 2016 2015
102 102
Three M onths Ended June 30, Six M onths Ended June 30,
© 2016 Kite Realty Group kiterealty.com Investor Update | 31
APPENDIX – RECONCILIATION OF EBITDA / ADJUSTED EBITDA
TO NET INCOME (LOSS)
1.) Represents Adjusted EBITDA for the three months ended June 30, 2016 (as shown in the table above) multiplied by four.
Three Months Ended 2016
June 30, 2016
Consolidated net loss $ (1,496)
Adjustments to net loss:
Depreciation and amortization 43,841
Interest expense 15,500
Income tax expense of taxable REIT subsidiary 338
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 58,183
Adjustments to EBITDA:
Unconsolidated EBITDA 34
Transaction costs 2,771
Gain on sale of operating property (194)
Other expense, net 110
Noncontrolling interest (461)
Adjusted EBITDA $ 60,443
Annualized Adjusted EBITDA(1) $241,773
Company share of net debt:
Mortgage and other indebtedness $ 1,740,487
Less: Partner share of consolidated joint venture debt (13,745)
Less: Cash, Cash Equivalents, and Restricted Cash (49,402)
Less: Net debt premiums and issuance costs, net (5,973)
Company Share of Net Debt $ 1,671,367
Net Debt to EBITDA 6.9x