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8-K - FORM 8-K 11/13/2017 - KITE REALTY GROUP TRUST | form8k_11132017.htm |
2
November 2017
INVESTOR UPDATE
SHARE PRICE
(AS OF 11/7/17) $19.03
EQUITY MARKET
CAPITALIZATION
(AS OF 11/7/17)
$1.6 BN
ENTERPRISE
VALUE
(AS OF 11/7/17)
$3.3 BN
DIVIDEND YIELD1 6.4%
MOODY’S/S&P
RATINGS Baa3/BBB-
PORTFOLIO SUMMARY
Number of Properties 119
Number of States 20
Total GLA (SF) 23.7mm
Total Retail Operating Portfolio Leased 94.5%
Retail Operating Shop Portfolio Leased 89.7%
Annualized Base Rent (ABR) Per SF, Including 3-R Properties2 $16.32
Average Center Size (SF) ~200,000
PORTFOLIO DEMOGRAPHICS3
Average Household Income 3 Mile: $86,000 5 Mile: $85,200
Population 3 Mile: 67,400 5 Mile: 166,000
COMPANY
SNAPSHOT
Necessity-Driven
Open-Air
Shopping
Centers
20162015201420132012
$1.71
$1.92
$2.02
$1.99
$2.06
~5%
CAGR
FFO PER SHARE, AS ADJUSTED
Note: Unless otherwise indicated, the source of all Company data is publicly available information that has been filed with the Securities and Exchange Commission as of Q3’17.
(1) Source: SNL; Dividend yield calculated as most recent quarterly dividend, annualized and expressed as a percentage of the share price. Future dividends will be declared solely
at the discretion of the Board of Trustees.
(2) 3-R Properties are assets that are in the process of being developed, repositioned, or repurposed, as described in our Quarterly Financial Supplement.
(3) Demographic data source: STI: Popstats based on estimated 2016 data from the U.S. Census Bureau.
3
November 2017
INVESTOR UPDATE
~$36mm in estimated annual free cash flow1
$83mm limited debt maturities through 2020
6% floating rate debt exposure
3.4x debt service coverage
76% of ABR from top 50 MSAs and destination locations
93% of tenants are internet resistant/omni-channel
66% grocery-anchored assets
Focusing on experiential tenants, consisting of
food, fitness, entertainment, and service
Top-tier operating metrics
3.6% historical same-property NOI growth over the last four years
Enhancing assets via the 3-Rs:
Redevelop, Reposition, Repurpose
$8.2mm of additional cash NOI from in-process 3-R and transitional projects
INVESTMENT
GRADE
BALANCE
SHEET
HIGH-QUALITY
PORTFOLIO
OPERATIONS
AND GROWTH
OPPORTUNITIES
BUILDING VALUE AND CRITICAL MASS IN AND AROUND REGIONAL FOOTPRINT
(1) After common dividends, capital expenditures, tenant improvements, and leasing commissions.
CORE
STRATEGY
Gearing Up
Shareholder Value
the Kite Way
4
November 2017
INVESTOR UPDATE
DIVIDEND VS. 2017E FFO1
PRICE VS. 2017E FFO1
KIMAKRFRTDDRROICRPTRPAIWRIKRGREGUEBRXCDR
64%PEER GROUPMEDIAN
59.1%
FRTAKRUEREGROICWRIKIMRPAICDRRPTKRGBRXDDR
12.4xPEER GROUPMEDIAN
9.1x
CONSERVATIVE FFO
PAYOUT RATIO
SUPPORTS POTENTIAL
FUTURE DIVIDEND
INCREASES
DISCOUNTED MULTIPLE
PROVIDES ATTRACTIVE
INVESTMENT
OPPORTUNITY
59.1%
DIVIDEND VS. 2017E FFO1
9.1x
PRICE VS. 2017E FFO1
TOTAL RETURN KRG Provides Attractive Investment Opportunity
(1) 2017E FFO per share refers to consensus estimates for companies as of 11/6/17 per FactSet, which may not reflect the Company’s or the peer companies’ estimates. FFO Payout Ratio calculated as dividends by 2017E FFO, on a per share basis.
Multiple based on Company share price of $18.60 at market close on 11/6/17.
5
November 2017
INVESTOR UPDATE
3.6%
SPNOI GROWTH AS
REPORTED OVER
LAST 4 YEARS
QUARTERLY AVERAGE SPNOI GROWTH FROM Q3'13-Q3'171
ROIC REG RPAI WRI BRX FRT DDR RPT KIM CDR
4.6%
AKR
3.7%
KRG
3.3%
3.6%
4.1%
3.3% 3.3%
3.1%
3.0%
2.5%
2.3%
2.2%
1.1%
2.9%PEER AVERAGE
KRG SPNOI ADJ. FOR BAD DEBT EXPENSEKRG SPNOI AS REPORTEDKRG SPNOI EXCLUDING 3-R IMPACT
2.6%
(1) Figures exclude redevelopments, when peer information is available, averaged on a quarterly basis from supplemental data for Q3’13-Q3’17. Our computation of NOI and Same Property NOI may not be comparable to the methodology used by other REITs.
Excludes companies that have not been public for the full time period.
OPERATIONAL
EXCELLENCE
Kite’s Consistent, Strong Operational
Performance Is at the Top End of Its Peer Group
November 2017
INVESTOR UPDATE
HIGH-QUALITY
PORTFOLIO
Necessity-Driven and
Experiential-Based
Open-Air
Shopping Centers
7
November 2017
INVESTOR UPDATE
NORTHEAST
11.2%
OF ABR
SOUTHEAST
18.4%
OF ABR
FLORIDA
24.3%
OF ABR
MID-CENTRAL
16.7%
OF ABR
WEST
12.4%
OF ABR
MIDWEST
17.0%
OF ABR
76% OF ABR DERIVED FROM TOP 50 MSAs AND DESTINATION LOCATIONS1
(1) Destination locations (i.e., areas with high-disposable income) include Beechwood Promenade in Athens, GA, Eddy Street Commons in South Bend, IN, Gainesville Plaza in Gainesville, FL, as well as Kings Lake Square, Pine Ridge Crossing, Riverchase Plaza, Shops at Eagle Creek, Tamiami
Crossing, Tarpon Bay Plaza, and Courthouse Shadows, all located in Naples, FL.
GEOGRAPHIC
DIVERSITY Well-Positioned Real Estate Footprint
119
PROPERTIES ACROSS
THE COUNTRY
IN 6 REGIONS
8
November 2017
INVESTOR UPDATE
CITY CENTER MSA: New York City, NY
OWNED
GLA 360,880 SF
ABR
PER SF $26.70
LANDSTOWN COMMONS MSA: Virginia Beach, VA
OWNED
GLA 398,349 SF
ABR
PER SF $19.21
CENTENNIAL CENTER MSA: Las Vegas, NV
OWNED
GLA 334,396 SF
ABR
PER SF $25.05
PORTOFINO SHOPPING CENTER MSA: Houston, TX
OWNED
GLA 386,647 SF
ABR
PER SF $19.68
HIGH-QUALITY
PROPERTIES
Top 12 Centers Comprise 29%
of Total Core Portfolio ABR
TOP 12 CENTERS HAVE AN AVERAGE ABR OF $20.39/SF
9
November 2017
INVESTOR UPDATE
PARKSIDE TOWN COMMONS MSA: Raleigh, NC
OWNED
GLA 347,072 SF
ABR
PER SF $20.20
DELRAY MARKETPLACE MSA: Miami, FL
OWNED
GLA 260,146 SF
ABR
PER SF $26.17
HIGH-QUALITY
PROPERTIES
Top 12 Centers Comprise 29%
of Total Core Portfolio ABR
HOLLY SPRINGS TOWNE CENTER MSA: Raleigh, NC
OWNED
GLA 329,536 SF
ABR
PER SF $17.53
UNIVERSITY TOWN CENTER MSA: Oklahoma City, OK
OWNED
GLA 348,862 SF
ABR
PER SF $15.13
TOP 12 CENTERS HAVE AN AVERAGE ABR OF $20.39/SF
10
November 2017
INVESTOR UPDATE
DRAPER PEAKS MSA: Salt Lake City, UT
OWNED
GLA 227,494 SF
ABR
PER SF $19.88
HIGH-QUALITY
PROPERTIES
Top 12 Centers Comprise 29%
of Total Core Portfolio ABR
TRADERS POINT MSA: Indianapolis, IN
OWNED
GLA 325,623 SF
ABR
PER SF $16.91
THE LANDING AT TRADITION MSA: Port St. Lucie, FL
OWNED
GLA 360,974 SF
ABR
PER SF $15.73
CENTENNIAL GATEWAY MSA: Las Vegas, NV
OWNED
GLA 193,085 SF
ABR
PER SF $24.18
TOP 12 CENTERS HAVE AN AVERAGE ABR OF $20.39/SF
11
November 2017
INVESTOR UPDATE
Top 10 Tenants by ABR Credit Rating # Stores % ABR
1 The TJX Companies, Inc. A+ 22 2.5%
2 Publix Supermarkets, Inc. A 14 2.5%
3 Petsmart, Inc. B+ 19 2.2%
4 Bed Bath & Beyond, Inc. BBB+ 19 2.2%
5 Ross Stores, Inc. A- 18 2.1%
6 Lowe's Companies, Inc. A- 5 1.8%
7 Office Depot B 15 1.6%
8 Dick's Sporting Goods, Inc. NR 8 1.5%
9 Ascena Retail Group BB- 34 1.5%
10 Nordstrom, Inc. BBB+ 6 1.4%
TOTAL 160 19.3%
TOP INVESTMENT GRADE-RATED TENANTS
2017 LEASE ACTIVITY EXAMPLES
DIVERSE
TENANT BASE
Strong Mix of High-Quality Tenants
Across Our Diversified Portfolio
12
November 2017
INVESTOR UPDATE
Asset Classification Key
Power Center (No Grocer): 3 + anchors over 20K SF
Grocer: No more than 2 anchors over 20K SF in addition to grocer
Power Center (w/Grocer): 3 + anchors over 20K SF in addition to grocer
(1) Grocer includes traditional grocers, specialty grocers, and big box retailers that have a grocer component.
GROCER
28%
NON-GROCER
STRIP
4%
LIFESTYLE
CENTER
3%
COMMERCIAL
3%
UNANCHORED
STRIP
1%
POWER/
COMMUNITY
CENTER
(W/ GROCER)
38%
POWER
CENTER
(NO GROCER)
23%
66% OF ABR
GENERATED FROM
ASSETS ANCHORED
WITH A GROCER1
LIVINGSTON SHOPPING CENTER
COBBLESTONE PLAZA
KINGS LAKE SQUARE
EDDY STREET COMMONS
AT NOTRE DAME
DIVERSE
TENANT BASE
Necessity-Focused
Retail Portfolio
13
November 2017
INVESTOR UPDATE
INTERNET-RESISTANT 53.6%
Services, Entertainment 22.3%
Restaurants 16.1%
Grocer, Specialty Stores 15.2%
MULTI-CHANNEL 39.3%
Soft Goods 14.0%
Home Improvement Goods 11.8%
Discount Retailers 10.3%
Sporting Goods 3.2%
INTERNET RISK 7.1%
Electronic / Books 5.0%
Office Supplies 2.1%
WELL-POSITIONED TO MANAGE EVOLVING CONSUMER
PREFERENCES WITH EXPERIENTIAL TENANTS
TENANT TYPE
COMPOSITION
BY ABR
MULTI-
CHANNEL
39.3%
INTERNET-
RESISTANT
53.6%
INTERNET
RISK
7.1%
Kite’s tenant base is 82% non-apparel 1 and
93% internet-resistant / multi-channel.
(1) Apparel tenants comprise 64.9% of soft goods and 83.3% of discount retailers.
DIVERSE
TENANT BASE
Internet-Resistant Retail Base
14
November 2017
INVESTOR UPDATE
RECENT TENANT OPENINGS
~363,000 SF OF ANCHOR SPACE OPENED OVER THE LAST FOUR QUARTERS
FOOD / FITNESS /
ENTERTAINMENT /
SERVICE
DISCOUNT RETAILERS /
SOFT GOODS / SPORTING
GOODS / SPECIALTY
91% OF TOTAL
SQUARE FEET
OPENED
DIVERSE
TENANT BASE
Enhancing Kite’s
Portfolio
with Strong
Retail Tenants
15
November 2017
INVESTOR UPDATE
MINIMAL IMPACT REALIZED IN 2017: ~1% OF ABR1
TENANT
# OF KRG
LOCATIONS AT
1/1/2017
# OF KRG
LOCATIONS AT
9/30/2017
REMAINING ABR
EXPOSURE AT 9/30/17
Gander Mountain 1 0 None
HH Gregg 1 0 None
JCPenney 3 3 0.1%
Kmart / Sears 1 / 2 1 / 2 0.3% / 0.2%
Macy’s 1 1 0.1%
Marsh Supermarkets 1 0 None
Payless 9 8 0.2%
Rue 21 9 2 0.1%
Toys 'R' Us / Babies 'R' Us 6 6 1.1%
No exposure to the following retailers that have filed bankruptcy or have
announced store closings:
Abercrombie & Fitch, American Apparel, Banana Republic, BCBG, bebe, Dillard’s,
Eastern Outfitters, Guess, True Religion, Wet Seal
DIVERSE
TENANT BASE
Minimal Exposure
to Announced
Store Closures
(1) Includes ABR from operating and redevelopment properties from KRG Q3’17 financial supplemental.
November 2017
INVESTOR UPDATE
GROWTH
OPPORTUNITIES
Increasing Value Through
Efficient Operations and
the 3-R Platform
17
November 2017
INVESTOR UPDATE
• Attractive NOI Margin: 74.6%, trailing twelve months
• Efficient G&A / Revenues: 6.1%, trailing twelve months
• Opportunity Areas: Operating expense savings, overage rent,
and ancillary income
• New and renewal cash rent spreads:
- 2016: 18.6% and 7.1% respectively
- 2017: 24.3% and 7.4%, respectively
• Embedded average contractual rent bumps of ~1.5%
• Fixed CAM recovery initiative, ~20% of operating portfolio currently
with goal to increase to ~50%
• $8.2mm of additional cash NOI from $72.5mm-$79.0mm
in-process 3-R and transitional projects
• Five future 3-R opportunities with a total cost of $45-$61mm
• Potential future acquisitions assuming a more favorable
cost of capital
• Anchor lease-up from 96.7% to 98.5%, or ~184,000 SF
• Small shops leased at 89.7% with additional upside to 90%+
OPERATING
PROPERTIES
CONTRACTUAL
RENT STEPS /
FIXED CAM
RECOVERY
3-R INITIATIVE /
DEVELOPMENT /
ACQUISITIONS
OCCUPANCY
GROWTH
INCREASING
VALUE
Embedded
NOI Growth
Opportunities
in Portfolio
18
November 2017
INVESTOR UPDATE
KRG CONSISTENTLY RANKS IN TOP TIER ACROSS PEERS FOR EFFICIENCY
ROIC
75.1%
KRG
74.6%
BRX
74.0%
KIM
72.9%
RPAI
69.2%
FRT
68.6% 68.2%
WRI
NOI MARGIN %
REG
72.2%
DDR
71.4%
RPT
70.9%
FRT
4.1%
WRI
4.4%
ROIC
5.3%
KRG
6.1%
KIM
8.3%
RPT
8.8% 9.1
%
DDR
G&A / REVENUES %
BRX
7.2%
RPAI
7.3%
REG
7.4%
(1) Data reflects trailing four quarters average as of Q3’17. Reflects pro rata income statement figures.
INCREASING
VALUE
Top-Tier Operating
Efficiency Metrics
19
November 2017
INVESTOR UPDATE
(1) KRG Supplementals Q4’10 through Q3’17.
Q3'172016201520142013201220112010
92.2%
93.3%
94.2%
95.3%
94.8%
95.4% 95.4%
94.5%
2.
5
%
GR
O
WT
H
SINCE
2010 Q3'172016201520142013201220112010
$12.80
$13.26
$12.95
$13.18
$15.15 $15.22
$15.78
$16.32
27
.5
%
GR
O
WT
H
SINCE
2010
Q3'172016201520142013201220112010
78.1%
79.5%
82.5%
85.5% 85.7
%
87.6%
88.9% 89.7
%
14.
9
%
GR
O
WT
H
SINCE
2010 Q3'172016201520142013201220112010
85.7%
87.3%
82.5%
85.9%
89.6%
87.3%
89.2%
89.9%
4.
9
%
GR
O
WT
H
SINCE
2010
RETAIL PORTFOLIO LEASE % ABR PER SQUARE FOOT
SMALL SHOP LEASE % RETAIL RECOVERY RATIO
INCREASING
VALUE
Proven Ability to Create
Positive Operating Results1
20
November 2017
INVESTOR UPDATE REDEVELOP REPURPOSE REPOSITION
Substantial renovations,
including teardowns,
remerchandising,
and exterior/interior
improvements
Significant property
alterations, including
product-type changes
Less substantial asset
enhancements, generally
$5mm or less
investment
COMPLETED IN-PROCESS IDENTIFIEDOPPORTUNITIES
$22.9mm of 3-R projects
with 13% Return on
Investment (ROI)
$72.5mm - $79.0mm of
projects with 8-9% ROI
$45.0mm - $61.0mm of
projects with 9-11% ROI
SOURCE OF CAPITAL
Free cash flow + non-core, low-growth property sales
KITE’S 3-R PLATFORM HAS GENERATED ATTRACTIVE
RISK-ADJUSTED RETURNS AND IMPROVED CASH FLOW AND ASSET
QUALITY RESULTING IN INCREASED SHAREHOLDER VALUE
RAMPART COMMONS MSA: Las Vegas, NV FISHERS STATION MSA: Indianapolis, IN
3-R OVERVIEW
Redevelopment
Execution and
Opportunity
November 2017
INVESTOR UPDATE
INVESTMENT GRADE
BALANCE SHEET
Well-Positioned
for the Future
22
November 2017
INVESTOR UPDATE
(1) KRG Supplementals Q4’11 through Q3’17.
Q3'17201620152014201320122011
9.7x
8.6x
7.4x
6.5x
7.0x 7.0x
6.9x
2.8x
LOWERED
Q3'17201620152014201320122011
1.6x 1.6x
2.0x
3.2x
3.4x
3.3x
3.4x
1.8x
INCREASED
Q3'17201620152014201320122011
42%
28%
30%
23%
12%
7%
6%
3,600
bps
DECREASED
NET DEBT / EBITDA DEBT SERVICE COVERAGE FLOATING RATE DEBT EXPOSURE
STRONG
BALANCE SHEET
Significantly Improved Metrics1
23
November 2017
INVESTOR UPDATE
5.7
YEARS
WEIGHTED AVERAGE
DEBT MATURITY
WEIGHTED AVERAGE DEBT MATURITIES AND WEIGHTED AVERAGE INTEREST RATE1
DDR ROICBRX RPAI KIMRPTWRI REGKRG
WEIGHTED AVERAGE DEBT MATURITY (YEARS)
WEIGHTED AVERAGE INTEREST RATE (%)
4.0%
5.7 YEARS
(1) Peer data sourced from publicly available Q3’17 information. Only inclusive of peers who provided both weighted average debt maturity and weighted average interest rates.
4.0%
WEIGHTED AVERAGE
INTEREST RATE
STRONG
BALANCE SHEET
Efficient Debt Structure Relative to Peers
24
November 2017
INVESTOR UPDATE
(1) Excludes annual principal payments and net premiums on fixed rate.
ONLY
$83mm
THROUGH 2020
SCHEDULE OF DEBT MATURITIES ($ IN MILLIONS)1
2017 2018 2019 2020 2021 2022 2023 20252024 2027+2026
MORTGAGE DEBT LINE OF CREDIT TERM LOAN PRIVATE PLACEMENT SENIOR UNSECURED NOTES
38 45
80 75
11
300
169
215 215
95
41
200
200
Only $83mm of debt
maturing through 2020
STRONG
BALANCE SHEET
Well-staggered Debt Maturity Profile
25
November 2017
INVESTOR UPDATE
FORWARD-LOOKING STATEMENTS
This supplemental information package, together with other statements and information publicly disseminated by us, contains certain for-
ward-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 achieve-
ments, 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 economic uncertainty caused by fluctuations in the prices of oil and other energy sources;
• 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 the Company operates;
• acquisition, disposition, development and joint venture risks;
• property ownership and management risks;
• our ability to maintain our 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;
• the impact of online retail and the perception that such retail has on the value of shopping center assets;
• risks related to the geographical concentration of our properties in Florida, Indiana and Texas;
• insurance costs and coverage;
• risks associated with 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 reports the Company files with the Securities and Exchange Commission (“the SEC”) or in other documents that
it publicly disseminates, including, in particular, the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year
ended December 31, 2016, and in our quarterly reports on Form 10-Q.
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
26
November 2017
INVESTOR UPDATE
FREE CASH FLOW
Free Cash Flow is reflected on an annual basis and is defined as Funds From Operations (FFO) as adjusted, less capital expenditures, capitalized
internal costs, tenant improvements, plus non-cash items, and after dividends paid.
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. The Company calculates FFO, a non-GAAP financial measure, in accordance with the best practices described in the
April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts ("NAREIT"). The NAREIT white paper defines FFO
as net income (determined in accordance with GAAP), excluding gains (or losses) from sales and impairments of depreciated property, plus de-
preciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
Considering the nature of our business as a real estate owner and operator, the Company believes 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 operat-
ing 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, the Company has also provided FFO adjusted for accelerat-
ed amortization of debt issuance costs, transaction costs and a severance charge in 2016. The Company believes this supplemental information
provides a meaningful measure of our operating performance. The Company believes 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 indica-
tive 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 income (computed in accordance with GAAP) to FFO is included elsewhere in this Finan-
cial 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 modifies FFO, as adjusted for certain cash and non-cash transactions not included in FFO, as adjusted. AFFO should not be con-
sidered an alternative to net income as an indication of the company's performance or as an alternative 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 income (computed in accordance with GAAP) to AFFO is included elsewhere in this Financial Supplement.
NET OPERATING INCOME AND SAME PROPERTY NET OPERATING INCOME
The Company uses property net operating income (“NOI”), a non-GAAP financial measure, to evaluate the performance of our properties.
The Company defines NOI as income from our real estate, including lease termination fees received from tenants, less our property operating
expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and certain corporate level expenses.
The Company believes that NOI is helpful to investors as a measure of our operating 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 depreciation and amortization, interest expense, and
impairment, if any.
NON-GAAP FINANCIAL MEASURES
27
November 2017
INVESTOR UPDATE
NET OPERATING INCOME AND SAME PROPERTY NET OPERATING INCOME (CONT.)
The Company also uses same property NOI ("Same Property NOI"), a non-GAAP financial measure, to evaluate the performance of our proper-
ties. Same Property NOI excludes properties that have not been owned for the full period presented. It also 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 period
expense recoveries and adjustments, if any. The Company believes that Same Property NOI is helpful to investors as a measure of our 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 acquisition or disposition of properties during the particular period presented and thus provides a more consistent metric
for the comparison of our properties. The year to date results represent the sum of the individual quarters, as reported.
NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indica-
tors of our financial performance. Our computation of NOI and Same Property NOI may differ from the methodology 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, the Company has established specific criteria for determining the in-
clusion of properties acquired or those recently under development. An acquired property is included in the same property pool when there is a
full quarter of operations in both years subsequent to the acquisition date. Development and redevelopment properties are included in the same
property pool four full quarters after the properties have been transferred to the operating portfolio. A redevelopment property is first excluded
from the same property pool when the execution of a redevelopment plan is likely and the Company begins recapturing space from tenants. For
the quarter ended September 30, 2017, the Company excluded eight redevelopment properties and the recently completed Northdale Promenade
redevelopment from the same property pool that met these criteria and were owned in both comparable periods.
EARNINGS BEFORE INTEREST EXPENSE, INCOME TAX EXPENSE, DEPRECIATION AND AMORTIZATION (EBITDA)
The Company defines 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, the Company has also provided Adjusted EBITDA, which the Company de-
fines as EBITDA less (i) EBITDA from unconsolidated entities, (ii) gains on sales of operating properties or impairment charges, (iii) other income
and expense, (iv) noncontrolling interest EBITDA and (v) other non-recurring activity or items impacting comparability from period to period.
Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. Net Debt to Adjusted EBITDA is the Company's
share of net debt divided by Annualized Adjusted EBITDA. EBITDA, Adjusted EBITDA, Annualized Adjusted EBITDA and Net Debt to Adjusted
EBITDA, as calculated by us, are not comparable to EBITDA and EBITDA-related measures reported by other REITs that do not define EBITDA
and EBITDA-related measures 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, the Company believes that EBITDA, Adjusted EBITDA and the ratio
of Net Debt to 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 prop-
erty and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational
purposes, the Company has also provided Annualized Adjusted EBITDA, adjusted as described above. The Company believes this supplemental
information provides a meaningful measure of our operating performance. The Company believes presenting EBITDA and the related measures
in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.
NON-GAAP FINANCIAL MEASURES
28
November 2017
INVESTOR UPDATE
APPENDIX – CONSOLIDATED
STATEMENTS OF OPERATIONS
29
November 2017
INVESTOR UPDATE
(1) “ FFO of the Operating Partnership” measures 100% of the operating performance of the Operating Partnership’s real estate properties. “FFO attributable to Kite Realty Group Trust common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest
in the Operating Partnership.
APPENDIX – RECONCILIATION
OF FFO TO NET INCOME
30
November 2017
INVESTOR UPDATE
(1) Same Property NOI excludes eight properties in redevelopment, the recently completed Northdale Promenade 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 and expiration during the period.
(3) Same Property NOI 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 period expense recoveries and adjustments, if any.
(4) See pages 27 and 28 of Q3 2017 supplemental for further detail of the properties included in the 3-R initiative.
(5) Includes non-cash activity across the portfolio as well as net operating income from properties not included in the same property pool.
APPENDIX – RECONCILIATION OF
SAME PROPERTY NOI TO NET INCOME
31
November 2017
INVESTOR UPDATE
(1) Represents Adjusted EBITDA for the three months ended September 30, 2017 (as shown in the table above) multiplied by four.
(2) Partner share of consolidated joint venture debt is calculated based upon the partner’s pro-rata ownership of the joint venture, multiplied by the related secured debt balance. In all cases, this debt is the responsibility of the consolidated joint venture.
APPENDIX – RECONCILIATION OF
EBITDA/ADJUSTED EBITDA TO NET INCOME
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