Kite Realty Group Trust · NYSE:KRG
Kite Realty Group Trust — Q2 2020 Earnings Presentation
48 slides from Kite Realty Group Trust's earnings presentation, Aug 7, 2020
Slide 1: Investor Update Second Quarter 2020
ee ae INVESTOR UPDATE JND QUARTER 2020 8885775600 kiterealty.com EH NYSE.
Slide 2: Number of Operating Retail Properties and Key Statistics
Number of Operating • High-quality portfolio with diverse tenant base 82 Retail Properties • Southern US (aka “Warmer & Cheaper”) Total Retail GLA (SF) 11.6mm focus to take advantage of current and projected demographic trends Operating Portfolio 94.0% Percent Leased • Strong balance sheet with a su
Slide 3: Q2 2020 Highlights
Q2 2020 FFO per share was $0.30. FFO per share was negatively impacted primarily due to bad debt and interest expense on the outstanding balance on the line of credit. SPNOI for Q2 2020 was 9.8% lower year-over-year driven by the negative impacts of COVID-19. At quarter end, cash on hand was approxi
Slide 4: COVID-19 Impact: Strong Real Estate
r | KEITE COVID-19 IMPACT: Strong Real Estate IS the Ship That Survives the Storm 888 577 5600 kiterealty.com
Slide 5: Historically the market determined better real estate through higher ABR
• Historically the market determined “better” real estate through higher ABR, Super ZIPs and higher TAP scores • These metrics don’t tell the whole story though, as evidenced by: – Research over the past decade shows rent growth in gateway markets is only marginally higher than other markets1 – Port
Slide 6: % Portfolio Open by Tenant Category
% Portfolio Open % Portfolio Closed % Portfolio Open % Portfolio Closed Total 51% 49% Total 94% Grocery / Drug 100% Grocery / Drug 100% Hardware / Auto 100% Hardware / Auto 100% Other Essential 100% Other Essential 100% Pet Stores 99% Pet Stores 100% Banks 86% 14% Banks 96% Quick Service Restaurants
Slide 7: Cash Rent Collections, 80%
Cash Rent Collections, 80% Still In Pursuit, 2% Bad Debt, 7% Deferred Rent - Local Tenant, 1% Deferred Rent - National Security Deposits, Tenant, 8% 2% © 2020 Kite Realty Group Second Quarter 2020 Investor Presentation | 7
Slide 8: % Rent Received by Tenant Category
% Rent Received % Rent Outstanding Total 80% 20% Grocery / Drug 100% Hardware / Auto 99% Other Essential 94% Pet Stores 90% Banks 100% Full Service Restaurants 74% 26% Quick Service Restaurants 76% 24% Medical 92% Office / Communication 98% Professional Service 97% Other Non-Essential 81% 19% Soft G
Slide 9: Portfolio Metrics Comparison
Number of Properties 23 105 82 Average GLA (square feet) 140k 144k 141k ABR PSF $14.64 $16.84 $18.08 +7% Population1 61,700 65,600 75,900 +16% Est. 5-Year Population Growth1 (’19-’24) 1.0% 1.4% 1.7% +21% Average HH Income1 $71,800 $88,700 $98,000 +10% Households1 21,900 25,500 29,300 +15% % of Colle
Slide 10: 2004 IPO, 2015 Merger, Today
2004 – IPO 2015 – Merger Today # of Operating Retail Properties 30 110 82 # of States 9 20 16 # of Markets 16 52 33 Top Region (% of ABR) South 52% South 63% South 61% Top State (% of ABR) FL 27% FL 28% FL 27% Top MSA (% of ABR) Indianapolis 23% Indianapolis 9% Las Vegas 11% South and West ABR 57% 7
Slide 11: Balance Sheet Strength and Limited Capital Needs
• Balance Sheet Strength – $230M of cash on hand Net Debt to EBITDA 7.1x – $200M drawn on KRG’s $600M revolving credit facility Key Credit Facility Covenant Ratios • Paid down an additional $100M after quarter end Secured Debt to Total Asset Ratio < 45% 11% – $584M of available liquidity – NDE = 7.1
Slide 12: Market Assuming Drastic Permanent NOI Erosion and Cap Rate Expansion
• Market is currently assuming there is drastic and permanent NOI erosion AND cap rate expansion 6.25% 6.50% 6.75% 7.00% 7.25% • Based on a stock price of $10.00: – Assuming zero NOI erosion from 20191, 5.0% $21.63 $20.29 $19.05 $17.90 $16.83 implied cap rate = ~9.9% 7.5% $20.71 $19.41 $18.20 $17.08
Slide 13: COVID-19 Update: Strong Team to Weather the Storm
r | KEITE COVID-19 UPDATE: Strong Team to Weather the Storm KRG 888 577 5600 kiterealty.com LISTED. NYSE.
Slide 14: COVID-19 Response Priorities
• Protect employee safety, security, mental health, and productivity – Instituted work from home for all non-essential employees – Activated business continuity plan – Offering employees ample resources to enable effective employee engagement • Keep centers open and operating to provide for consumer
Slide 15: The New Normal
• The best scientific minds in the world are racing to find a cure/vaccine and one of our core values is optimism • We are all getting used to the “new normal” environment in which we live • Retailers, restaurants, gyms, etc. are working to adapt to the new normal in order to not just survive, but t
Slide 16: Supporting Tenants: Sanitizer, Signage and Pick-up Parking
• Delivered hand sanitizers and cleaning supplies to small shop tenants • Produced signs and banners to highlight re-opened tenants • Installed clusters of designated pick-up parking spaces at centers throughout the portfolio – Assist our tenants as they adjust to the evolving needs of their busines
Slide 17: Community Support Initiatives
• Delivered food to local hospitals, purchased from KRG small business tenants • Donated to the Indiana Restaurant & Lodging Association to assist furloughed workers • Supported a KRG restaurant tenant in its effort to deliver meals to elderly and at-risk citizens • Provided KRG employees a stipend
Slide 18: Short-term dislocation in rents versus permanent dislocation
• Short-term dislocation in rents is much more benign than permanent dislocation For example: – A small shop tenant with $22psf of total rent annually – Replacing this tenant could cost ~$30psf in tenant allowance – This tenant allowance would equate to 16 months of current rent (excluding down time
Slide 19: Small Shop Tenant Support and Lending Program
Small shop tenants are the backbone of the US economy and we are working to help them in this time of need • In constant communication with our small shop tenants • Provided tenants with summaries, weblinks, and lender contacts to assist with their SBA applications in conjunction with the CARES Act
Slide 20: Retail Real Estate: Evolution has accelerated to Revolution
r | KEITE RETAIL REAL ESTATE: Evolution has accelerated to Revolution 888 577 5600 kiterealty.com
Slide 21: COVID-19 accelerated the demise of certain retailers
• COVID-19 has accelerated the demise of certain retailers with pre-existing issues – Recent retailer closures are not surprising as they are from retailers struggling pre-COVID – Allows the best real estate to replace struggling tenants • Top retailers are still experiencing strong sales – Many hav
Slide 22: Retailers' Online Fulfillment Through Stores
~25% of nordstromrack.com units are fulfilled from Rack stores.1 Online sales increased 141% Fulfilled and delivered online Curbside accounted for using stores to fulfill 80% of orders from 2,500 stores1 40% of total e-commerce orders1 sales which were up 250% during Q1 Looking to accelerate BOPIS q
Slide 23: Store Value
• Point of Sale: – Physical stores represent the most cost-effective point of sale, and the best Store Value opportunity to leverage impulse buying. – Brick-and-mortar total spending increased 4.2% on Black Friday compared to 20181 • Brand Awareness: Point of Sale – 83% increase in brand awareness w
Slide 24: Digitally native brands opening stores
• Digitally native brands are set to open 850 stores in the next five years – “Clicks to bricks” retailer expansions demonstrate the value that new brands place on having physical locations – Shoppers make around 60% of purchases at the stores of digitally native retailers today, despite these compa
Slide 25: Shift in retailer usage of real estate
• Retail real estate is seeing a shift in retailer usage – Retailers are using their stores for more than just a point of sale – Physical locations are becoming distribution points for not only online orders, but also buy online: pick up in store (“BOPIS”) ~ return to store (“BORIS”) ~ fulfill from
Slide 26: Essential ABR and BOPIS-ready center
• 44% of ABR is deemed essential • 41% of ABR service-oriented tenants offer necessary daily trips post- COVID • 15% of ABR from restaurants creates additional traffic • Essential shadow anchors Target and Bank of America drive daily trips Sufficient access points to the shopping center to ensure qu
Slide 27: Open-air assets are thriving
• Open-air assets are thriving in their convenient and affordable nature for retailers • 14 relocations to open-air centers • Conveniently located and easily accessible parking • All 14 had lower costs fields that satisfy BOPIS / curbside pick up methods • 13 of 14 had increased sales • One relocati
Slide 28: KRG Difference: Strong Real Estate
r | KEITE KRG DIFFERENCE: Strong Real Estate 888 577 5600 kiterealty.com
Slide 29: Grocery-anchored, South and West centers with strong demographics
• 72% of retail ABR is from centers with a grocer component • Strong 3-mile demographics: • 77% of ABR is from South and West United States - Population 75,900 • Average asset size is 141k square feet - Average Household Income: $98,000 - Est. 5-year Population Growth: 1.7% Larger center with genera
Slide 30: Second Quarter 2020 Investor Presentation | 30
© 2020 Kite Realty Group Second Quarter 2020 Investor Presentation | 30
Slide 31: % of ABR by tenant category
Professional Service, 2% Office / Communication, 6% Other Non-Essential, 2% Grocery / Theatres, 2% Pet Stores, 4% Drug, 12% Sporting Goods, 3% Medical, 3% Fitness, 4% Hardware / Auto, 2% Banks, 2% Personal Other Essential, 1% Service, 7% Quick Service Discount Restaurants, Retailers, 14% 10% Soft Go
Slide 32: National, Regional and Local Tenants
National: 75% Regional: 22% Local: 3% National: 52% Regional: 9% Local: 39% National Tenants: Nationwide presence Regional Tenants: Regional brands Local Tenants: Local brands © 2020 Kite Realty Group Second Quarter 2020 Investor Presentation | 32
Slide 33: Occupancy, ABR PSF and Leased Rates
Same-Property Occupancy Rate ABR PSF 96% $19.00 $18.08 95% $17.00 94% 93% $15.00 92.1% 92% $13.00 91% 90% $11.00 2013 2014 2015 2016 2017 2018 2019 Q2 2013 2014 2015 2016 2017 2018 2019 Q2 2020 2020 Same-Property Leased Rate Small Shop Leased Rate 97% 93% 96% 91% 89.5% 95% 89% 94.0% 94% 87% 93% 85%
Slide 34: Second Quarter 2020 Investor Presentation | 34
© 2020 Kite Realty Group Second Quarter 2020 Investor Presentation | 34
Slide 35: Top 10 Tenants
1 Publix Supermarkets, Inc. NR 11 2.5% 2 The TJX Companies, Inc. A 16 2.2% 3 PetSmart, Inc. B- 14 1.9% 4 Bed Bath & Beyond, Inc. B+ 16 1.9% 5 Ross Stores, Inc. BBB+ 13 1.8% 6 Dick’s Sporting Goods, Inc. NR 7 1.7% 7 Nordstrom Rack BBB- 6 1.6% 8 Michaels Stores, Inc. B 12 1.5% 9 National Amusements B-
Slide 36: Multi-family JV on parking field
• 267 multi-family units on an under- utilized parking field through a JV with a 3rd party developer. • KRG’s contribution to the venture was primarily fulfilled by providing the land, thereby providing KRG a JV interest with minimal capital spend. Cost $38.4M KRG Ownership % 12% KRG Capital Require
Slide 37: ESG platform and 2020 initiatives
• KRG has a strong ESG platform and is taking necessary steps to show investors – Filing inaugural GRESB report – Publicly disclosing KRG’s ESG policy – Created an ESG Task Force – Published an ESG brochure highlighting key stats and initiatives for each category • COVID-19 ESG Response and 2020 Ini
Slide 38: Market Thesis
r | KEITE MARKET THESIS: “1 skate to where the puck is going to be, not where it has been.” - Wayne Gretzky 888 577 5600 kiterealty.com
Slide 39: Migration shift to the Southern and Western US
• US is currently experiencing a migration shift to the Southern / Western US for a variety of reasons (cost of living, lifestyle, taxes, etc.) • No state income taxes in Florida, Texas, Nevada, and Tennessee is influencing migration from high income tax states like New York, California, Illinois, C
Slide 40: Discretionary income in warmer and cheaper cities
• Residents in historically expensive states in the northeast and on the west coast are feeling an outsized impact of the SALT deduction limitation • Significant discretionary income delta in “warmer and cheaper” cities New York, NY Miami, FL Las Vegas, NV Dallas, TX Income $250,000 $250,000 $250,00
Slide 41: Companies relocating to the South — headlines
“Charles Schwab to “70 financial firms flee “Amazon plans move 1,000 jobs out NYC for Palm Beach Austin expansion that of San Francisco” County Florida in 3 years” will add 800 jobs” Associated Press Palm Beach BDB CNBC “1,800 companies “Mitsubishi Motors “JPMorgan Weighs left California in a Reloca
Slide 42: Second Quarter 2020 Investor Presentation | 42
Source: Synergos Technologies © 2020 Kite Realty Group Second Quarter 2020 Investor Presentation | 42
Slide 43: Forward-Looking Statements
Forward-Looking Statements This supplemental information package, 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
Slide 44: Net Operating Income and Same Property NOI
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 tena
Slide 45: EBITDA definitions
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 defines as EBITDA less
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© 2020 Kite Realty Group Second Quarter 2020 Investor Presentation | 46
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