Kite Realty Group Trust · NYSE:KRG
Kite Realty Group Trust — Investor Day (January 2008)
65 slides from Kite Realty Group Trust's investor day presentation, Jan 14, 2008
Slide 1: Analyst and Investor Meeting January 15, 2008
ANALYST AND INVESTOR MEETING JANUARY 15, 2008
Slide 2: Disclaimer
DISCLAIMER This presentation may include certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, our plans, objectives, expectations and intentions and other statements containe
Slide 3: Presentation Summary
PRESENTATION SUMMARY FFO Guidance Reconciliation Speaker Biographies ----------------------Q&A---------------------- Closing Remarks Panel Discussion --------------------BREAK-------------------- Capital Plan/2008 Guidance Market Research Process Development Business Growth Strategy Welcome & Compan
Slide 4: Company Overview: 2008 Primary Objectives
COMPANY OVERVIEW Manage Current Debt Maturities Development Complete Current Development Pipeline Commence construction of Visible Shadow Pipeline Current Pipeline financing secured (80% funded) Capital plan for Visible Shadow Pipeline Realize Operating Efficiencies Balance Sheet Management 2008 PRI
Slide 5: Property Type Allocation
Consumer Behavior Nationwide consumption levels will fluctuate, but a portion of the consumer’s behavior is derived from necessity. Grocery-anchored centers and value-oriented retailers such as Target will continue to create shopping center traffic. PROPERTY TYPE ALLOCATION John Kite, CEO COMPANY OV
Slide 6: Geographic Diversification
(1) Total GLA includes owned GLA, square footage attributable to non-owned outlot structures on land that the Company owns, and non-owned anchor space that currently exists or is under construction. (2) Includes Projected Total GLA for properties on the Current Development, Redevelopment, and Visibl
Slide 7: Strong Tenant Diversity
Information as of September 30, 2007 except as noted (1) Subsequent to September 30, 2007, the Company successfully negotiated a lease termination with Circuit City at Sunland Towne Center in El Paso, TX effective Q1 of 2008. This lease termination is reflected in the table above. (2) As of January
Slide 8: Growth Strategy: Embedded Growth, Current Developments
GROWTH STRATEGY Significant risk behind us: 76% leased or committed Significant upside ahead of us: 33% occupied Growth source for late 2008 and early 2009 Execute small shop leases and build out tenant spaces 24% remaining to be leased: 140,000 square feet of shops Information as of September 30, 2
Slide 9: Growth Strategy: Selective Acquisitions
GROWTH STRATEGY Utilize development infrastructure for value-added opportunities Target under-utilized properties with below market rents on great real estate Partially fund by non-core asset sales A history of executing on off-market opportunities SELECTIVE ACQUISITIONS John Kite, CEO
Slide 10: Same Store Growth via Lease Expirations
GROWTH STRATEGY Nearly 30 percent ($20 million) of annualized base rent expires from 2010 to 2012 From 2010 to 2012, over 500,000 square feet per year will expire (compared to 220,000 per year from 2008 to 2009) 480,000 square feet and $6.2 million of annualized base rent from the state of Florida a
Slide 11: Emphasizing Internal Growth
GROWTH STRATEGY Existing Vacancy Operating retail portfolio is a healthy 94.8 percent leased 240,000 square feet are available to be leased Leasing one quarter of this space at our portfolio average shop rent of $20 per square foot could generate approximately $.03 per share of FFO Operational Effic
Slide 12: Current Development & Redevelopment Pipeline
CURRENT DEVELOPMENT & REDEVELOPMENT PIPELINE Current Development Pipeline is 80% funded Development risks have been mitigated Primary focus on final lease up of small shops Information as of September 30, 2007 CURRENT DEVELOPMENTS Tom McGowan, COO THE DEVELOPMENT BUSINESS
Slide 13: Development & Redevelopment Pipeline
DEVELOPMENT & REDEVELOPMENT PIPELINE Information as of September 30, 2007 55.3% 82.9% 75.7% 79.0% 80.9% 80.3% 100.0% 17.3% 33.4% 70.3% 87.5% 89.2% Percent Committed 3 Staples $3,500 72,271 Naples, FL Shops at Eagle Creek $18,500 757,271 Sub-Total Redevelopments Target (non-owned), Lowe’s $15,000 685
Slide 14: Visible Shadow Pipeline
VISIBLE SHADOW PIPELINE $320 million pipeline (KRG share is $164 million) Progressing towards construction commencement Construction will not commence prior to sufficient tenant commitment Information as of September 30, 2007 FUTURE DEVELOPMENTS Tom McGowan, COO THE DEVELOPMENT BUSINESS
Slide 15: Visible Shadow Pipeline Projects
VISIBLE SHADOW PIPELINE - Information as of September 30, 2007 Power Center $25,600 345,000 Raleigh, NC 100% Broadstone Station (Apex) Power Center $26,200 308,000 Chicago, IL 100% South Elgin Commons Medical Office $8,500 41,000 Carmel, IN 50% Spring Mill Medical II 3 $320,300 $36,000 $90,000 $134,
Slide 16: Visible Shadow Pipeline: Parkside Town Commons
VISIBLE SHADOW PIPELINE Parkside Town Commons THE DEVELOPMENT BUSINESS
Slide 17: Visible Shadow Pipeline: Delray Marketplace
VISIBLE SHADOW PIPELINE Delray Marketplace THE DEVELOPMENT BUSINESS
Slide 18: Shadow Pipeline
SHADOW PIPELINE Assessing viability without spending significant capital Active and constant process to source new deals Analyzing joint venture opportunities with private developers Eddy Street Commons at Notre Dame FUTURE DEVELOPMENTS Tom McGowan, COO THE DEVELOPMENT BUSINESS
Slide 19: Shadow Pipeline Projects: Eddy Street Commons
SHADOW PIPELINE PROJECTS Eddy Street Commons at Notre Dame THE DEVELOPMENT BUSINESS
Slide 20: Eddy Street Commons Program
SHADOW PIPELINE PROJECTS Eddy Street Commons at Notre Dame 90,000 square feet of ground floor retail 75,000 square feet of office space 268 apartments (sell or lease air rights) 255 room full service hotel with 51 condos (JV) 139 room limited service hotel (JV) 240 for sale residential units – phasi
Slide 21: Eddy Street Commons: Zoning and Approvals
SHADOW PIPELINE PROJECTS Eddy Street Commons at Notre Dame Fully zoned and entitled Secured approvals for approximately $35 million TIF Finalizing arrangement with Notre Dame THE DEVELOPMENT BUSINESS
Slide 22: Eddy Street Commons Video
SHADOW PIPELINE PROJECTS Eddy Street Commons at Notre Dame www.eddycommons.com THE DEVELOPMENT BUSINESS Please visit www.eddycommons.com to view the 2:30 minute video
Slide 23: Today's Development Environment
TODAY’S DEVELOPMENT ENVIRONMENT Tom McGowan, COO Demand and Competition Retail demand remains for ‘A’ locations Restrictive credit markets have thinned the herd of skilled developers Land owners and retailers place a premium on teaming with experienced developers Leasing Focus Creative marketing app
Slide 24: Value Creation Embedded in Combined Development Pipeline
THE DEVELOPMENT BUSINESS VALUE CREATION EMBEDDED IN COMBINED DEVELOPMENT PIPELINE (1) Adjusted to account for the Company’s share of projects held in joint ventures. (2) Reflects Parkside Town Commons being developed within the Prudential joint venture with the Company owning 20 percent upon commenc
Slide 25: Development Not Dependent on Growth
Source: Applied Geographic Solutions DEVELOPMENT NOT DEPENDENT ON GROWTH John Fox, Vice President of Market Research MARKET RESEARCH PROCESS Operating Portfolio 3 Mile 5 Mile Development Pipeline 3 Mile 5 Mile 2007 Est. Population 49,691 124,977 2007 Est. Population 44,549 118,951 2012 Est. Populati
Slide 26: Kite Realty Group
Ph KITE REALTY GROUP SIRATEGICPRIGRITIES; y REGION MARKET SCREENING SITE / IDENTIFICATION METRO MARKET, EMPLOYMENT CENTERS UNIVERSITY TOWNS, Rich EaPLOYNEAT GROWTH AIGHPOPULATION GROWTH) STABLERDUSINGHARKES, 3 Analyst and Investor Meeting - January 15, 2008 - Naples, Florida
Slide 27: Active & Future Subdivisions
951 & 41 Area ACTIVE & FUTURE SUBDIVISTIONS Source: Hanley Wood
Slide 28: Naples Area: Target Locations
NAPLES AREA: TARGET LOCATIONS
Slide 29: Market Research Process
Source: Applied Geographic Solutions MARKET RESEARCH PROCESS
Slide 30: Capital Plan
CAPITAL PLAN COMPANY LEVEL STRATEGY Dan Sink, CFO Capital Plan Projections Current Development Pipeline – Total Cost of $167 million with $133 million funded 80% Funded as of 9/30/07 Construction loan proceeds in place to fund remaining $34 million of cost Visible Shadow Pipeline – KRG’s share of $1
Slide 31: Capital Plan: Refinancing Debt
CAPITAL PLAN COMPANY LEVEL STRATEGY Dan Sink, CFO Aggressively Refinancing Debt – CONFIDENT about Execution 2008 Maturities: $118 million $109.4 million construction/land loans $8.6 million other variable and mini-perm loans Executed or negotiating refinancing of debt $37 million refinanced for 12 t
Slide 32: Operating Metrics
OPERATING METRICS For the Three Months Ended September 30, 2007 2.7x 2.8x Fixed Charge Coverage 2 6.5% 5.0% G&A /Total Revenue 95.1% 94.6% Portfolio % Leased 65% 64% FFO Payout % 71.4% 73.6% NOI / Revenue Selected Peer Group Average 1 KRG (1) Peer Group consists of KIM, DDR, AKR, REG and RPT. (2) De
Slide 33: 2008 Guidance
2008 GUIDANCE COMPANY LEVEL STRATEGY Dan Sink, CFO 2008 Outlook – Earnings Guidance 1 KRG has provided 2008 FFO guidance with a range of $1.28 to $1.33 per share Major Assumptions Includes the removal of two properties from operations due to their planned redevelopment (approximately $.02 reduction)
Slide 34: Capital Plan: Market Overview and Hedging
CAPITAL PLAN Goal: Take advantage of low interest rates in a volatile market while maintaining flexibility COMPANY LEVEL STRATEGY George McMannis, Senior Vice President of Finance & Capital Markets Market Overview Permanent Loan Market – CMBS, Insurance Companies Construction Loan Market Joint Ventu
Slide 35: Capital Plan: Floating to Fixed Rate Debt
CAPITAL PLAN COMPANY LEVEL STRATEGY George McMannis, Senior Vice President of Finance & Capital Markets As of 9/30/07 As of 12/31/07 Ratio of floating to fixed rate debt
Slide 36: Meeting Break
MEETING BREAK Webcast will continue shortly…
Slide 37: Naples Market Overview
PANEL DISCUSSION NAPLES: SOLID MARKET, NOT DISTRESSED Market Overview Residential: Not Falling Off a Cliff Retail Landscape New deals, new retailers Rental Rates Absorption Vacancy Market Trends NAPLES MARKET OVERVIEW David Stevens, Investment Properties Corporation
Slide 38: Learning Target Markets
Goal: Know the market like a lifetime local Where are the major nodes of retail and who anchors those nodes? How are these nodes distributed throughout the geography? Where are the existing residential pockets? Create the KRG demographic profile to fit the market What major retailers are not represe
Slide 39: Predevelopment: Zoning and Site Design Guidelines
Zoning/Site Design Guidelines Annexation/Rezoning/Comprehensive Plan Neighborhood Meetings Overlay Districts/Design Guidelines Politics Value Creation Traffic Entitlements/Access Department of Transportation and local transportation requirements Transportation Concurrency Management Environmental Is
Slide 40: Estero Town Commons
Estero Town Commons PANEL DISCUSSION
Slide 41: Tarpon Springs Plaza
Tarpon Springs Plaza PANEL DISCUSSION
Slide 42: Tamiami Crossing
951 & 41 (Tamiami Crossing) PANEL DISCUSSION
Slide 43: Why Does KRG Have In-House Construction Capabilities?
Why does KRG have in-house construction capabilities? Streamlines the process from conception to design to completion Eliminates the middle man Build wholesale, value retail Market & Cost Trending In 2007, construction costs increased 2.6% 1 nationally compared to 10.6% 2 in 2006 and 9.5% 2 in 2005
Slide 44: Construction Materials Cost Index
-7.0 -1.0 434.02 Lumber $/MBF +1.7 +0.3 40.45 Steel $/CWT +6.3 0.0 101.18 Cement $/Ton -1.1 -0.2 2676.78 Materials % Change Year % Change Month DEC. 2007 Index Value 20-CITY: 1913 = 100 THE CONSTRUCTION BUSINESS Todd Oswald, Vice President of Construction Pricing is expected to normalize nationally
Slide 45: Pre-Construction
Pre-Construction Project Manager and Superintendent to review and critique project drawings and specifications prior to initial bidding Recent completion of three projects in Florida has further enhanced our relationships with key counties in Southwest Florida. Estimating Indexing and volatile items
Slide 46: Construction Core Values
THE CONSTRUCTION BUSINESS Todd Oswald, Vice President of Construction PANEL DISCUSSION SAFETY COST MGMT QUALITY SCHEDULE CONSTRUCTION CORE VALUES
Slide 47: KITE
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Slide 48: Leasing Environment
Insulated Operating Portfolio Well located properties with an average age of approximately 7 years Limited exposure with only 41 retail leases expected to expire in 2008 Nearly 50% of these leases have been renewed or are in negotiations Strong ratio of National/Regional to Local tenants Secure Curr
Slide 49: Florida Landscape: Still Strong
Florida Landscape: Still Strong KRG core retailers like Target, Dick’s Sporting Goods, Kohl’s, Staples, Petsmart, and Best Buy have made Florida part of the store growth strategy Florida’s 18 million residents have created strong sales for retailers despite the slowing housing market Florida ICSC Au
Slide 50: Factors To Drive Leasing Strategy
Factors To Drive Leasing Strategy Flight to Quality: ‘A’ locations in ‘A’ markets Strong retailer relationships Experienced and motivated leasing team Constant communication between departments – predevelopment, development, construction, legal PANEL DISCUSSION LEASING ENVIRONMENT Gregg Poetz, Senio
Slide 51: Same Store NOI Growth
Same Store NOI Growth Historical Growth: 1.5% - 2.0% range Lease Expiration Schedule/Asset Ages - limits upside in near-term Push renewal rates - 2007 spreads in Naples (16.4%) Optimize CAM and RETAX recoveries - lease language Pursue Ancillary Income Opportunities Focus strategically at property le
Slide 52: Operational Efficiencies
Operational Efficiencies MRI Tenant Web Portal Strengthening Property Management - People and Processes Strategic Vendor Partnerships PANEL DISCUSSION ASSET MANAGEMENT INITIATIVES Dan Meador, Senior Vice President of Asset Management
Slide 53: Ancillary Income
Ancillary Income ATM - Potential strategic partnerships with 2 major banks Outdoor Media - development properties Cart/Kiosk Program - development properties Tenant Web Portal Expense items = Revenue opportunities PANEL DISCUSSION ASSET MANAGEMENT INITIATIVES Dan Meador, Senior Vice President of Ass
Slide 54: OPEX and CAPEX Optimization
OPEX and CAPEX Optimization Aggregation Strategies - $400,000 savings in Indy portfolio, approaching $800,000 portfolio wide Property Rating Strategies - service levels commensurate with asset quality Aggressive real estate tax appeal strategies Timing of CAPEX relative to lease rollover - maximize
Slide 55: Closing Remarks: Committed Management
CLOSING REMARKS Senior management owns approximately 22 percent of the Company and has acquired over 400,000 shares and 800,000 units since the IPO at cost of approximately $21M 0.2% 8 years EVP & CFO Dan Sink 22.1% 7.1% 16 years President & CEO John Kite 4.1% 12 years Sr. EVP & COO Tom McGowan 10.7
Slide 56: Capital Allocation Committee
Capital Allocation Committee Capital Allocation Committee (CAC) is comprised of the CEO, COO, and CFO Approval is required prior to contract execution for any land acquisition, operating property acquisition, or disposition Department heads and representatives from Predevelopment, Development, Leasi
Slide 57: The Cornerstone: Anchor Tenant Pre-Leasing
The Cornerstone: Anchor Tenant Pre-Leasing Speculative builders need not apply Retailer demand must exist, it cannot be projected Over 75 percent of the Current Development Pipeline was pre-leased or committed as of September 30, 2007 100 percent of the anchor tenant space in the Current Development
Slide 58: A Solid Foundation
A SOLID FOUNDATION Healthy pay-out ratio Strong fixed charge coverage Capital available for development pipeline ‘A’ locations High occupancy Below market rents CLOSING REMARKS 2008 AND BEYOND John Kite, CEO A CLEAR STRATEGY 2008 – 2012 Growth Initiatives Shadow Pipeline Internal Growth Financial St
Slide 59: Question and Answer Session
Question and Answer Session
Slide 60: Appendix
APPENDIX Presenter Biographies FFO Guidance Reconciliation
Slide 61: Presenter Biographies
PRESENTER BIOGRAPHIES Mark Jenkins, Senior Vice President of Development Mark heads all retail development for the Company across the United States. His daily responsibilities include deal sourcing, land procurement, entitlement negotiations, and anchor tenant negotiations. Before joining Kite Realt
Slide 62: Presenter Biographies
PRESENTER BIOGRAPHIES Doug Pedersen, Vice President of Predevelopment Services Doug is responsible for site planning, due diligence, design management, and securing entitlements to develop land and acquire property. He maintains an expertise as Project Manager on certain developments while directing
Slide 63: Presenter Biographies
PRESENTER BIOGRAPHIES Dan Meador, Senior Vice President of Asset Management and Redevelopment Dan directs all asset management and redevelopment activities for Kite Realty Group. He oversees property management and lease administration for the current 55 property operating portfolio, and he provides
Slide 64: FFO Guidance Reconciliation
FFO GUIDANCE RECONCILIATION RECONCILIATION OF GUIDANCE FOR THE TWELVE MONTHS ENDING DECEMBER 31, 2008 High End Low End $1.33 $1.28 Estimated diluted FFO 1 per share 0.01 0.01 Depreciation and amortization of unconsolidated entities 0.77 0.77 Depreciation and amortization of consolidated entities 0.1
Slide 65: Corporate Profile
CORPORATE PROFILE Kite Realty Group Trust is a full-service, vertically integrated real estate investment trust engaged primarily in the ownership, operation, management, leasing, acquisition, construction, expansion, and development of high quality neighborhood and community shopping centers in sel
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