Attached files
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| 8-K - FORM 8-K 03/02/2018 - KITE REALTY GROUP TRUST | form8k_03022018.htm |
2
March 2018
INVESTOR UPDATE
PORTFOLIO FACTS
Number of Properties 119
Total GLA (SF) 23.9mm
Total Retail Operating
Portfolio Leased 94.8%
Percent Leased Anchors 96.7%
Percent Leased Shops 90.5%
Annualized Base Rent (ABR)
Per SF, Including 3-R
Properties1
$16.32
Average Center Size (SF) ~200,000
Dividend Yield2 8.2%
Moody's / S&P Ratings Baa3 / BBB-
COMPANY
SNAPSHOT
Necessity-Driven
Open-Air
Shopping
Centers
20172016201520142013
$0.96
$1.04
$1.09
$1.23
$1.17
27.6%
GROWTH
DIVIDEND PER SHARE
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 Q4’17.
(1) 3-R Properties are assets that are in the process of being developed, repositioned, or repurposed, as described in our Quarterly Financial Supplement.
(2) 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.
THE KITE WAY
• High-quality portfolio with
diverse tenant base
• Self-funded redevelopment,
repurpose, and reposition
("3-R") program1
• Access to capital markets
with investment grade,
flexible balance sheet
• Well-covered dividend with
attractive yield
• Experienced and committed
senior management team
3
March 2018
INVESTOR UPDATE
$82mm limited debt maturities through 2020
8% floating rate debt exposure
3.5x debt service coverage
Focused on free cash flow growth
76% of ABR derived from top 50 MSAs and destination locations1
93% of tenants are internet resistant / multi-channel
80% of ABR derived from community center / neighborhood center / lifestyle center
Focusing on adding experiential tenants
consisting of food, fitness, entertainment,
and service
$7.5mm of additional cash NOI from in-process 3-R and transitional projects
3.5% historical same-property NOI growth over the last four years
12% annualized return in 2017 on assets enhanced via 3-Rs: Redevelop, Reposition, Repurpose
Top-tier operating efficiency metrics
INVESTMENT
GRADE
BALANCE
SHEET
HIGH-QUALITY
PORTFOLIO
OPERATIONS
AND GROWTH
OPPORTUNITIES
BUILDING VALUE AND CRITICAL MASS IN AND AROUND REGIONAL FOOTPRINT
(1) Destination locations include Naples, FL properties and college towns.
CORE
STRATEGY
Gearing Up
Shareholder Value
the Kite Way
4
March 2018
INVESTOR UPDATE
STRATEGIC
DISPOSITIONS
Capital Recycling Efforts Strengthen Portfolio
Note: Demographic data source: STI: Popstats based on estimated 2017 data on a 5-mile radius from the US Census Bureau.
Dispositions during this period were Publix at St. Cloud, Cove Center, Clay Marketplace, The Shops at Village Walk, and Wheatland Town Crossing.
DISPOSITIONS KRG Q4’17 OPERATING
RETAIL PORTFOLIO
$12.35
$16.32
DISPOSITIONS KRG Q4’17 OPERATING
RETAIL PORTFOLIO
$68,400
$87,800
DISPOSITIONS KRG Q4’17 OPERATING
RETAIL PORTFOLIO
117,900
168,600
IMPROVING ABR IMPROVING HOUSEHOLD INCOME IMPROVING POPULATION DENSITY
~$92 MILLION IN DISPOSITIONS OVER THE LAST FIVE QUARTERS
HIGH-QUALITY
PORTFOLIO
5
March 2018
INVESTOR UPDATE
Note: Demographic data source: STI: Popstats based on estimated 2017 data on a 5-mile radius from the US Census Bureau.
(1) Projected Annual Population Growth 2017-2022.
GEOGRAPHIC
DIVERSITY Focus on Portfolio Optimization
LAS VEGAS
AVERAGE
HOUSEHOLD INCOME:
$74,400
PROJECTED
ANNUAL GROWTH1:
7.0%
DALLAS/
FORT WORTH/
HOUSTON
AVERAGE
HOUSEHOLD INCOME:
$97,400
PROJECTED
ANNUAL GROWTH1:
7.6%
NAPLES
AVERAGE
HOUSEHOLD INCOME:
$97,300
PROJECTED
ANNUAL GROWTH1:
10.7%
CHARLOTTE/RALEIGH
AVERAGE
HOUSEHOLD INCOME:
$100,900
PROJECTED
ANNUAL GROWTH1:
13.5%
OKLAHOMA CITY
AVERAGE
HOUSEHOLD INCOME:
$74,200
PROJECTED
ANNUAL GROWTH1:
4.8%
INDIANAPOLIS
AVERAGE
HOUSEHOLD INCOME:
$97,700
PROJECTED
ANNUAL GROWTH1:
6.0%
NEW YORK
AVERAGE
HOUSEHOLD INCOME:
$144,700
PROJECTED
ANNUAL GROWTH1:
1.5%
76% OF ABR FROM TOP 50 MSAs AND DESTINATION LOCATIONS,
INCLUDING ASSETS IN SUPERIORLY POSITIONED MARKETS
HIGH-QUALITY
PORTFOLIO
6
March 2018
INVESTOR UPDATE
TOP MSA
CASE STUDY Dallas / Fort Worth / Houston
PROJECTED ANNUAL POPULATION GROWTH 2017-2022
7.6%• The Dallas MSA has been one of the
nation’s leaders in economic growth over
the past 24 months. The region boasts
18 Fortune 500 companies and has
averaged 1.1% employment growth
annually, compared with 0.2% annualized
growth nationally, according to the US
Bureau of Labor Statistics.
• Dallas and its suburbs have one of the
highest concentrations of corporate
headquarters in the United States. The
Metroplex contains the largest Information
Technology industry base in the state.
These technology firms include: Texas
Instruments, HP Enterprise Services, Dell
Services, AT&T, Alcatel-Lucent, Ericsson,
CA, and Verizon in and around Dallas.
• Fort Worth has received a number of
national accolades relating to economic
opportunity and quality of life. Fort Worth
was recently named Forbes’ No. 3 Best Big
City for Job Seekers, No. 4 Best Market
for Corporate Relocation and Expansion
by Site Selection Magazine, and #1 Best
Downtown in the U.S. by Livability.com.
• Portofino Shopping Center is located in
Shenandoah near The Woodlands, which
was one of the first and most successful
master-planned communities in the
country. Over the last three decades, this
28,000-acre community has become a
thriving center for business, commerce,
and tourism. The development is ranked
as one of the Top 50 Best Selling Master
Planned Communities since 1994.
Note: Demographic data source: STI: Popstats based on estimated 2017 data on a 5-mile radius from the US Census Bureau.
Average Household
Income
$97,400
Percent of ABR
10%
HIGH-QUALITY
PORTFOLIO
7
March 2018
INVESTOR UPDATE
TOP MSA
CASE STUDY Indianapolis / Northern Suburbs
• Hamilton County, the state’s fastest
growing and most affluent metropolitan
area, is frequently recognized for its
exceptional standard of living. The
county has distinguished itself through
its considerable investments in
public infrastructure, outstanding
public schools, and ability to attract
high-growth industries and highly
educated professionals to the area.
• In 2017, Money Magazine ranked Fishers
the #1 Best Place to live in the country,
while Carmel was ranked at #16. The
financial publication cited the area’s low
unemployment and high economic growth
as critical factors in their selection.
• Hamilton County's population has grown
at an annualized rate of more than 2.3%
since 2010, nearly 5x the rate of Indianapolis
and 3x the national average.
• Residents of Hamilton County have the
highest educational levels in the state,
with 56% of all adult residents having
a bachelor’s degree or higher and 78%
of the county’s population employed in
white-collar industries.
Note: Demographic data source: STI: Popstats based on estimated 2017 data on a 5-mile radius from the US Census Bureau.
PROJECTED ANNUAL POPULATION GROWTH 2017-2022
6%
Average Household
Income
$97,700
Percent of ABR
9%
HIGH-QUALITY
PORTFOLIO
8
March 2018
INVESTOR UPDATE
TOP MSA
CASE STUDY Raleigh / Cary / Charlotte
• Raleigh is ranked #4 on the Realtor.com list
of “Next Top Tech Cities” and #3 on USA
Today’s list of “Best Cities for Job Seekers”
in 2017. Both lists analyzed a number of
critical factors, including job market favor-
ability, salaries weighted for cost-of-living,
and other lifestyle factors.
• Raleigh ranks #15 among large metros
for the percentage of adults with a
bachelor’s degree or higher, according
to the U.S. Census Bureau’s American
Community Survey.
• The Raleigh-Cary MSA is the 5th
most educated metropolitan area in the
country based on bachelor and higher
graduation attainment rates. 43.6% of adults
have at least a bachelor’s degree, while the
average nationwide is just 31.3%.
• 60% of households in the city of Cary earn
incomes exceeding $75,000 per year, 20%
higher than the city of Raleigh.
• Charlotte is the nation’s 3rd largest
financial center behind New York and
San Francisco. There are six Fortune 500
companies headquartered in Mecklenburg
County.These companies include: Bank of
America, Lowe’s, and Duke Energy.
• Mecklenburg County, where Charlotte is
located, is the most populated county in
North Carolina. Charlotte’s ability to attract
large international corporations has caused
steady growth in the number of highly-
educated white-collar workers in the county
over recent years. Mecklenburg County has
the second highest rate of both educational
attainment and white-collar employment in
North Carolina.
Note: Demographic data source: STI: Popstats based on estimated 2017 data on a 5-mile radius from the US Census Bureau.
Average Household
Income
$100,900
Percent of ABR
9%
PROJECTED ANNUAL GROWTH 2017-2022
13.5%
HIGH-QUALITY
PORTFOLIO
9
March 2018
INVESTOR UPDATE
(1) STI: Popstats based on 2017 data on a 5-mile radius from the U.S. Census Bureau. Property classification based on definition by the International Council of Shopping Centers (ICSC). In summary:
Neighborhood Center: Convenience-oriented center often anchored by a grocery that comprises 30-50% of GLA. Trade Area: 1-3 miles.
Community Center: Larger center with general merchandise or convenience-oriented offerings. Trade Area: 3-6 miles.
Power Center: Category-dominant anchors, including discount, off-price, and wholesale clubs with minimal small shop tenants. Trade area: 5-10 miles.
COMMUNITY
CENTER PORTFOLIO
NEIGHBORHOOD CENTER/
LIFESTYLE CENTER/
OTHER PORTFOLIO
POWER CENTER
PORTFOLIO
STRATEGIC
ASSET MIX
Well-Balanced Portfolio
PARKSIDE TOWN COMMONS MSA: Raleigh, NC KINGS LAKE SQUARE MSA: Naples, FL PORTOFINO SHOPPING CENTER MSA: Houston, TX
Average 2017
Household Income $90,200
Average 2017
Population 174,300
Average 2017
Household Income $88,600
Average 2017
Population 150,800
Average 2017
Household Income $80,500
Average 2017
Population 173,900
PROPERTY CLASSIFICATION BY ABR1
54%
OF ABR
26%
OF ABR
20%
OF ABR
HIGH-QUALITY
PORTFOLIO
10
March 2018
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- 33 1.4%
10 Nordstrom, Inc. BBB+ 6 1.5%
TOTAL 159 19.3%
TOP INVESTMENT GRADE-RATED TENANTS
2017 LEASE ACTIVITY EXAMPLES
DIVERSE
TENANT BASE
Strong Mix of High-Quality Tenants
Across Our Diversified Portfolio
HIGH-QUALITY
PORTFOLIO
11
March 2018
INVESTOR UPDATE
INTERNET-RESISTANT 54.0%
Services, Entertainment 22.4%
Restaurants 16.5%
Grocer, Specialty Stores 15.1%
MULTI-CHANNEL 39.1%
Soft Goods 13.7%
Home Improvement Goods 11.7%
Discount Retailers 10.5%
Sporting Goods 3.2%
INTERNET RISK 6.9%
Electronic / Books 4.8%
Office Supplies 2.1%
KITE’S TENANT BASE IS 93% INTERNET-RESISTANT / MULTI-CHANNEL
TENANT TYPE
COMPOSITION
BY ABR
MULTI-
CHANNEL
39.1%
INTERNET-
RESISTANT
54.0%
INTERNET
COMPETITION
6.9%
DIVERSE
TENANT BASE
Internet-Resistant Retail Base
Well-Positioned to Manage Evolving Consumer Preferences
HIGH-QUALITY
PORTFOLIO
12
March 2018
INVESTOR UPDATE
• Attractive NOI Margin: 74.4%, trailing twelve months
• Efficient G&A / Revenues: 6.1%, trailing twelve months
• Opportunity Areas: Operating expense savings, overage rent,
and ancillary income
• ABR of leases executed in 2017 is 12.2% higher than the ABR for the
operating retail portfolio including 3-R properties
• Embedded average contractual rent bumps of ~1.5%
• Fixed CAM recovery initiative, ~20% of operating portfolio currently
with goal to increase to ~50%
• ~$7.5mm of additional cash NOI from $71mm - $77mm
in-process 3-R and transitional projects
• Four future 3-R opportunities with a total cost of $40mm - $56mm
• 2018 Big Box Surge Initiative lease-up of vacant anchor boxes
• 1% increase in anchor lease percentage at average ABR
is an additional $1.3mm, or ~102,000 SF
• Small shops leased at 90.5%, with a new goal of 92%
OPERATING
PROPERTIES
CONTRACTUAL
RENT STEPS /
FIXED CAM
RECOVERY
3-R INITIATIVE /
DEVELOPMENT
OCCUPANCY
GROWTH
INCREASING
VALUE
Embedded
NOI Growth
Opportunities
in Portfolio
OPERATIONS
AND GROWTH
OPPORTUNITIES
13
March 2018
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
$24.0mm of 3-R projects
with 12% Return on
Investment (ROI)
$71mm - $77mm of
projects with 8-9% ROI
$40mm - $56mm 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
OPERATIONS
AND GROWTH
OPPORTUNITIES
14
March 2018
INVESTOR UPDATE
3-R COMPLETIONS
Successful
Redevelopment
Examples
ACHIEVED AN OVERALL RETURN ON INVESTMENT OF 12% ON COMPLETED 3-Rs
WITH THE ADDITION OF NEW, HIGH-QUALITY TENANTS
Property Former Tenant(s)/Space(s) Replacement Tenant(s)
Bolton Plaza Vacant Shops
Castleton Crossing
Small Shop Building With:
Centennial Gateway
Market Street Village
Northdale Promenade Underutilized/Vacant Small Shop Space
Portofino Shopping Center -
Phases I/II
Vacant Land/
Outdated Water Features Two new small shop buildings
OPERATIONS
AND GROWTH
OPPORTUNITIES
15
March 2018
INVESTOR UPDATE
(1) Excludes annual principal payments and net premiums on fixed rate.
ONLY
$82mm
THROUGH 2020
SCHEDULE OF DEBT MATURITIES ($ 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
37.9 44.5
80.0 75.0
10.7
300.0
168.2
214.3 214.9
95.0
60.1
200.0 200.0
Only $82mm of debt
maturing through 2020
STRONG
BALANCE
SHEET
Well-Staggered Debt Maturity Profile
INVESTMENT
GRADE
BALANCE
SHEET
16
March 2018
INVESTOR UPDATE
FORWARD-LOOKING STATEMENTS
Certain statements in this document that are not historical fact may constitute 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 economic uncertainty caused by fluctuations in the prices of oil and other energy sources and inflationary trends or out-
look, 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 for federal income tax purposes, poten-
tial environmental and other liabilities, impairment in the value of real estate property we own, the impact of online retail competition and the
perception that such competition 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 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 SEC, specifically the section titled “Risk Factors” in the Company’s and the Operating Partnership’s Annual
Report on Form 10-K for the fiscal year ended December 31, 2017, which discuss these and other factors that could adversely affect the Compa-
ny’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.
DISCLAIMER
17
March 2018
INVESTOR UPDATE
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 acceler-
ated amortization of debt issuance costs, transaction costs, a severance charge and a debt extinguishment loss 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 indica-
tor 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.
NON-GAAP FINANCIAL MEASURES
18
March 2018
INVESTOR UPDATE
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.
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 indicators of our financial per-
formance. 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 December 31, 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. A reconciliation of net income
(computed in accordance with GAAP) to Same Property NOI is included elsewhere in this Financial Supplement.
NON-GAAP FINANCIAL MEASURES
19
March 2018
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 30 and 31 of the latest 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
888 577 5600
kiterealty.com
30 S MERIDIAN STREET
SUITE 1100
INDIANAPOLIS, IN 46204