Kite Realty Group Trust · NYSE:KRG
Kite Realty Group Trust — Q3 2020 Earnings Presentation
39 slides from Kite Realty Group Trust's earnings presentation, Oct 28, 2020
Slide 1: Third Quarter 2020
THIRD QUARTER 2020 COBBLESTONE PLAZA – MIAMI MSA 888 577 5600 kiterealty.com
Slide 2: High-quality portfolio with diverse tenant base
Number of Operating • High-quality portfolio with diverse tenant base 82 Retail Properties • Southern US (aka “Warmer & Cheaper”) Total Retail GLA (SF) 16.1M focus to take advantage of current and projected demographic trends Operating Portfolio 93.3% Percent Leased • Strong balance sheet with a sub
Slide 3: Q3 2020 highlights
Q3 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. Q3 2020 Same Property NOI was 6.9% lower year-over-year driven by the negative impacts of COVID-19. At quarter end, cash on hand was
Slide 4: COVID-19 Update: Strong Real Estate Is the Ship That Survives the Storm
KITE COVID-19 UPDATE: Strong Real Estate IS the Ship That Survives the Storm KRG 888 577 5600 kiterealty.com LISTED] NYSE
Slide 5: Location and asset quality matter
• 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 vs closed by tenant category
% Portfolio Open % Portfolio Closed % Portfolio Open % Portfolio Closed Total 51% Total 97% Grocery / Drug 100% Grocery / Drug 100% Pet Stores 99% Pet Stores 100% Hardware / Auto 98% Hardware / Auto 100% Other Essential 96% Other Essential 100% Banks 86% 14% Banks 96% Quick Service Restaurants 80% 2
Slide 7: Q3 cash rent collections
Cash Rent Collections, 92% Still In Pursuit, 1% Bad Debt, 5% Affirmatively Deferred Rent, 2% © 2020 Kite Realty Group Third Quarter 2020 Investor Presentation | 7
Slide 8: Rent received by tenant category
% Rent Received % Rent Outstanding Total 92% Grocery / Drug 100% Hardware / Auto 100% Other Essential 98% Pet Stores 99% Banks 100% Full Service Restaurants 87% 13% Quick Service Restaurants 89% 11% Medical 98% Office / Communication 99% Professional Service 97% Other Non-Essential 90% 10% Soft Good
Slide 9: Portfolio statistics and demographics
Number of Retail Operating Properties 23 105 82 Average GLA (square feet) 140k 144k 140k ABR PSF $14.64 $16.84 $18.00 +7% Population1 61,700 65,600 76,000 +16% Est. Annual Population Growth1 (’19-’24) 1.0% 1.4% 1.7% +21% Average HH Income1 $71,800 $88,700 $97,100 +9% Households1 21,900 25,500 29,300
Slide 10: Portfolio evolution since IPO
2004 – IPO 2015 – Merger Today # of Operating 30 110 82 Retail Properties # of States 9 20 16 # of Markets 16 52 33 South and West ABR 57% 76% 77% Top Region (% of ABR) South 52% South 63% South 62% Top State (% of ABR) FL 27% FL 28% FL 27% Top MSA (% of ABR) Indianapolis 23% Indianapolis 9% Las Veg
Slide 11: Balance sheet strength and capital flows
$, millions • Balance Sheet Strength Est. Capital Flows Through 2022 – $129M of cash on hand $600 – $50M drawn on KRG’s revolving Cash On credit facility $500 Hand $129 – $578M of available liquidity – NDE = 6.9x1 with no outstanding $400 Net Liquidity preferred shares $382 • Limited Capital Needs $
Slide 12: Implied NOI erosion and cap rate at current stock price
• 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 $11.40: – Assuming zero NOI erosion from 20191, 5.0% $21.88 $20.54 $19.30 $18.15 $17.08 implied cap rate = ~9.4% 7.5% $20.96 $19.66 $18.45 $17.33
Slide 13: Moving Forward
KITE MOVING FORWARD: Experienced Team + Strong Real Estate + Leading Balance Sheet = Potential for Opportunities 888 577 S600 kiterealty.com KRG JuisteD| NYSE
Slide 14: KRG is on solid footing and able to move forward
While we are not out of the woods yet, KRG is on solid footing and able to move forward • Project Focus resulted in a more optimal portfolio and a strong balance sheet, allowing KRG to weather the COVID storm and now focus on the future – Sold the most troubled centers, not only keeping the best cen
Slide 15: Tenant bankruptcies and big box backfill
• KRG entered 2020 in a very strong occupancy position with a KRG record level of shop space occupancy and sector leading 92.5% and only 6 vacant anchors • COVID-19 has created large retailer disruption leading to the bankruptcy and/or dislocation of tenants • 16 different KRG tenants declared bankr
Slide 16: Bankruptcy dislocation addressed
65% + of dislocated ABR related to bankruptcies has already been addressed / in process 1 New York Sports Club Q3 1.1% 111,566 3 0 3 2 Stein Mart Q3 0.8% 238,800 7 0 0 5% 3 It’s Sugar Q3 0.1% 3,459 2 0 1 To Be Backfilled, 1.7% 4 Ruby Tuesday Q3 0.1% 4,730 1 0 1 5 Ascena Q2 0.7% 64,261 13 0 8 4% 6 Ta
Slide 17: BOPIS and curbside pickup growth
Same-day services grew Curbside pickup at ~3,450 270% outpacing locations and same-day overall digital growth1 delivery from ~2,730 stores1 Comp sales were up Greater than 60% of online 35.1% in 2Q1 orders picked up in store1 Have physical pickup in Greater than 75% of online locations that reaches
Slide 18: Essential tenants drive daily trips
• 44% of ABR is deemed essential • 41% of ABR service-oriented tenants offer necessary daily trips post- COVID • 15% of ABR from primarily full service restaurants creates additional traffic • Essential shadow anchors Target and Bank of America drive daily trips Sufficient access points to the shopp
Slide 19: Open-air centers benefit retailers
• 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 • 13 of 14 had increased sales methods • One relocati
Slide 20: Multi-family JV on under-utilized 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 contributing the land, thereby providing KRG a JV interest with minimal capital spend. Cost $38.4M KRG Ownership % 12% KRG Capital Requ
Slide 21: Eddy Street development with Notre Dame
• Partnered with the University of Notre Dame to Cost $7.5M complete the Eddy Street development master plan by KRG Ownership % 100% creating a book-end to the project anchored by a specialty grocer. KRG Capital Required $7.5M Est. Project Cash Yield 8.5% - 9.5% • The project will contain a 13k squa
Slide 22: Market Thesis
KITE MARKET THESIS: “| skate to where the puck is going to be, not where it has been.” - Wayne Gretzky KRG 888 577 5600 kiterealty.com LISTED] NYSE
Slide 23: Migration shift to Southern and Western US
• The 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, Illinoi
Slide 24: 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 25: Florida income gains from migration
Source: Wirepoints, “Florida gained $95 billion in gross income over 8 years because of domestic migration” © 2020 Kite Realty Group Third Quarter 2020 Investor Presentation | 25
Slide 26: Source: Synergos Technologies |
Source: Synergos Technologies © 2020 Kite Realty Group Third Quarter 2020 Investor Presentation | 26
Slide 27: KRG Difference: Strong Real Estate
KITE KRG DIFFERENCE: Strong Real Estate KRG 888 577 5600 kiterealty.com LISTED] NYSE
Slide 28: Grocery-anchored centers and strong demographics
• 74% 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 76,000 • Average asset size is 140k square feet - Average Household Income: $97,100 - Est. Ann. 5-year Population Growth: 1.7% Larger center with g
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© 2020 Kite Realty Group Third Quarter 2020 Investor Presentation | 29
Slide 30: ABR by tenant category
Professional Service, 1% Office / Communication, 6% Other Non-Essential, 2% Grocery / Theatres, 2% Pet Stores, 4% Drug, 12% Sporting Goods, 3% Fitness, 4% Medical, 3% Hardware / Auto, 2% Banks, 2% Personal Other Essential, 1% Service, 9% Quick Service Restaurants, Discount 10% Retailers, 14% Soft Go
Slide 31: 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 % of ABR Local Tenants: Local brands As of 9/30/2020 © 2020 Kite Realty Group Third Quarter 2020 Investor Presentation | 31
Slide 32: Top 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 1.9% 6 Dick’s Sporting Goods, Inc. NR 7 1.7% 7 Nordstrom Rack BB+ 6 1.7% 8 Michaels Stores, Inc. B 12 1.5% 9 National Amusements B-
Slide 33: ESG platform and COVID-19 response
• KRG has a strong ESG platform and is taking necessary steps to show investors – Created an ESG Task Force – Publicly disclosed KRG’s ESG policy – Published an ESG brochure highlighting key stats and initiatives for each category – Filed inaugural GRESB report • COVID-19 ESG Response and 2020 Initi
Slide 34: 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 35: 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 36: EBITDA
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
Slide 37: Same Property Net Operating Income
Kite Realty Group Trust Same Property Net Operating Income For the Three and Nine Months Ended September 30, 2020 and 2019 (Unaudited) ($ in thousands) Three Months Ended September 30, Nine Months Ended September 30, % % 2020 2019 Change 2020 2019 Change Number of properties for the quarter1 82 82 L
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© 2020 Kite Realty Group Third Quarter 2020 Investor Presentation | 38
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