Kite Realty Group Trust · NYSE:KRG
Kite Realty Group Trust — Investor Presentation (March 2019)
34 slides from Kite Realty Group Trust's investor presentation, Mar 4, 2019
Slide 1: Presentation or Section Name
Presentation or Section Name | 1
Slide 2: Kite Realty Group Snapshot
KITE REALTY GROUP SNAPSHOT KRG QUICK FACTS Why KRG? Number of Retail Properties 108 • High-quality portfolio with diverse tenant Total GLA (SF) 21.4mm base Operating Portfolio 1 94.6% • Covered dividend with attractive 8% yield Percent Leased Annualized Base • Opportunity to exploit current public $
Slide 3: Geographic Footprint
GEOGRAPHIC FOOTPRINT Note: Demographic data source: STI: Popstats based on estimated 2018 data on a 5-mile radius from KRG market assets, per the US Census Bureau, weighted by ABR Population Growth 2018 – 2023 © 2019 Kite Realty Group Fourth Quarter 2018 Investor Presentation | 3
Slide 4: Strategic Asset Mix
STRATEGIC ASSET MIX PROPERTY CLASSIFICATION BY ABR1 COMMUNITY NEIGHBORHOOD CENTER/ POWER CENTER 57% LIFESTYLE CENTER/OTHER 24% 19% CENTER PORTFOLIO of ABR PORTFOLIO of ABR PORTFOLIO of ABR Average Q4 2018 $92,068 Average Q4 2018 $89,600 Average Q4 2018 $83,959 Household Income Household Income House
Slide 5: Portfolio of Strong, High-Credit Tenants
PORTFOLIO OF STRONG, HIGH-CREDIT TENANTS Credit # of % of Top 10 Tenants by ABR Recent Lease Activity Rating1 Stores2 ABR2 1 The TJX Companies A+ 22 2.6% 2 Publix Supermarkets, Inc. NR 14 2.5% 3 Bed Bath & Beyond, Inc. BB+ 19 2.3% 4 PetSmart, Inc CCC 17 2.0% 5 Ross Stores, Inc. A- 16 1.9% 6 Lowe’s C
Slide 6: Minimal Impact from Announced 2019 Store Closings
MINIMAL IMPACT FROM ANNOUNCED 2019 STORE CLOSINGS Gross Leasable Area Annual Base Rent 1.8% 1.7% 98.2% 98.3% Remaining Portfolio Closing Retailer Impact Note: Data includes announced store closures from Payless, Beauty Brands and Kmart © 2019 Kite Realty Group Fourth Quarter 2018 Investor Presentati
Slide 7: KRG 2018 Review
KRG 2018 Review Presentation or Section Name | 7
Slide 8: 2018 Highlights
2018 HIGHLIGHTS FFO 2018 FFO / Share was $2.00, in-line with KRG’s guidance and analyst consensus at the beginning of 2018 SPNOI for 2018 was 1.4% higher year-over-year, which was at the high end of KRG’s guidance, and driven by SPNOI an increase in minimum rent (169 bps), partially offset by a decr
Slide 9: Portfolio Statistics
PORTFOLIO STATISTICS ABR and Shop Space Occupancy Continue to Grow as Overall Occupancy Remains Steady Total Occupancy Rate ABR PSF Record Level 96% $18.00 $16.84 95% $17.00 94% $16.00 93% 92.7% $15.00 92% $14.00 91% $13.00 90% $12.00 2013 2014 2015 2016 2017 Q1 '18Q2 '18Q3 '18Q4 '18 2013 2014 2015
Slide 10: 3-R & Development Activity
3-R & DEVELOPMENT ACTIVITY Completed construction on 7 major projects costing ~$80mm and yielding 8.5% Stabilized / Location (MSA) Type of Project Completed Burnt Store Marketplace Punta Gorda Redevelopment Q1 2018 Rampart Commons City Center New York City Redevelopment Q2 2018 Portofino Shopping Ce
Slide 11: Tenant Composition Continues to Evolve
TENANT COMPOSITION CONTINUES TO EVOLVE Providing shoppers with retail offerings they desire 2018 ABR TENANT MIX 2018 ABR SIGNED TENANT MIX Sporting Grocer, Specialty Office Supplies, 1.9% Home Improvement Electronics & Books, 0.5% Goods, 3.3% Stores, 2.5% Electronics & Goods, 3.5% Books, 4.8% Office
Slide 12: KRG Unique Investment Opportunity
KRG Unique Investment Opportunity Presentation or Section Name | 12
Slide 13: Peer Group Evaluation
PEER GROUP EVALUATION Many of the strip center REITs are valued based on their leverage levels and property quality Data as of February 25, 2019 Premium Net Debt FFO AFFO Market / Discount NOI Recovery Net Debt + Pref / 22.0x FFO Multiple / ABR PSF Ticker Multiple Multiple Cap to NAV ABR PSF Margin
Slide 14: Absolute and Relative Discount to Net Asset Value
ABSOLUTE AND RELATIVE DISCOUNT TO NET ASSET VALUE ▪ At $16.00 per share, KRG currently trades at a 31% discount to consensus NAV of $23.05 per share ▪ While the entire retail sector has been under pressure for several years, the retail peer group1 trades at a median NAV discount of 15% to consensus
Slide 15: Addressing the NAV Discount
ADDRESSING THE NAV DISCOUNT During 2019 KRG is taking the following steps to address the absolute and relative discount to NAV Portfolio and Company Leverage ▪ Sell assets to generate between $350mm and $500mm of proceeds ▪ Use the proceeds to pay down and fortify the balance sheet ▪ Articulate an a
Slide 16: Proforma Maturity Ladders
PROFORMA MATURITY LADDERS $ in millions $300 95.0 $200 95.0 45.6 300.0 250.0 Current $100 212.5 165.9 181.9 80.0 75.0 10.1 11.5 $0 20.7 16.9 10.4 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2030 $300 95.0 $200 28.1 $350mm 300.0 Dispositions 250.0 $100 189.9 181.9 80.0 75.0 10.1 52.9 11.5 $0 16
Slide 17: Metrics Impact from Sales
METRICS IMPACT FROM SALES Improved metrics relative to peer group based on $500mm of sales1,2 ABR PSF Net Debt / EBITDA Net Debt + Pref / EBITDA Avg Debt Duration (Yrs) AKR $ 28.15 ROIC 7.9x CDR 9.5x KIM 10.5 FRT $ 27.50 CDR 7.6x ROIC 7.9x FRT 10.0 REG $ 21.67 KRG (Today) 6.7x KIM 7.9x REG 8.0 ROIC
Slide 18: Debt Metrics Post Sales
DEBT METRICS POST SALES KRG has a strong balance sheet that will improve post sales compared to REIT peers 1 Peer Debt Comparison Avg Peer FFO Multiple = 12.7x 10.0x 90% 9.0x 80% Avg Peer FFO Multiple = 16.6x 8.0x 70% 7.0x 60% 6.0x 50% to EBITDAto 5.0x 40% Net Debt & Preferred Equity Preferred & Deb
Slide 19: Inefficient Public Market
INEFFICIENT PUBLIC MARKET KRG aims to take advantage of an inefficient public market ▪ Assuming an efficient market and a REIT with “optimal leverage,” a dollar-for-dollar asset-for-debt exchange should not impact the equity valuation Miller & Modgiliani: Theoretical Leverage & Firm Value Optimal Le
Slide 20: Illustrative Multiple Expansion
ILLUSTRATIVE MULTIPLE EXPANSION - Asset sales reduce FFO, but could result in a higher FFO multiple - Potential Multiple Expansion Net Debt to EBITDA drops ABR increases Breakeven Multiple: ~10x Asset Sales Estimated Multiple / 8.9x / n/a 8.9x / 0.0x 11.8x / 2.8x 12.9x / 4.0x 12.9x / 4.0x Multiple I
Slide 21: Disposition Update – 2019 YTD
DISPOSITION UPDATE – 2019 YTD Management selected the disposition pool by combining an intensive, data-driven analysis with institutional expertise and knowledge SALE CONSIDERATIONS $500M ▪ Market Rankings ▪ Asset Demographics/Location Launching in 30 days ▪ Tenant Considerations ▪ Proforma and hist
Slide 22: 2019: A Year of Change & Continued Operational Excellence
2019: A Year of Change & Continued Operational Excellence Presentation or Section Name | 22
Slide 23: 2019 Priorities
2019 PRIORITIES ▪ High performance business as usual in terms of increasing value across the portfolio ▪ Extreme focus on re-tenanting anchors with Big Box Surge initiative ▪ Continue to cultivate redevelopment opportunities so they are “shovel ready” when Big Box Surge is complete and capital becom
Slide 24: Increasing Value of Current Portfolio
INCREASING VALUE OF CURRENT PORTFOLIO Embedded NOI Growth Opportunities in Portfolio 3-R Initiative / Development / ▪ $2.0mm of additional cash NOI from in-process 3-R and transitional projects Portfolio Optimization ▪ Identified 3-R opportunities with total cost of $30-50mm and projected returns of
Slide 25: Big Box Leasing
BIG BOX LEASING KRG has successfully addressed big box vacancies BIG BOX OVERVIEW RECENTLY EXECUTED ▪ KRG’s portfolio is: ▪ 48% box and 52% small shop/ground lease by ABR ▪ 68% box and 32% small shop by GLA ▪ 96.2% leased ▪ Primary vacancies coming from struggling and/or bankrupt retailers such as T
Slide 26: Multiple Ways to Address a Box Vacancy
MULTIPLE WAYS TO ADDRESS A BOX VACANCY BOX SPLIT CASE STUDY: RE-TENANT BOX SPLIT BELLE ISLE STATION + No loss of square footage + More demand for smaller • Converted 38k sf Babies “R” Us into 2 spaces + Less capital required spaces • 8.8k SF Five Below + Higher return on capital + Higher ABR psf • 2
Slide 27: Re-Tenant Value Creation: Rampart Commons Redevelopment
RE-TENANT VALUE CREATION RAMPART COMMONS REDEVELOPMENT • Key actions taken: • Replaced a 17k SF GAP with a diverse lineup of lifestyle retailers • Filled 4.5k SF of vacant space with an expansion of restaurant and signing of service retailer • Relocated soft goods retailer to more appropriate locati
Slide 28: Kite Markets
KITE MARKETS Market Thesis ▪ KRG’s long term to goal is to have at least 80% of its NOI generated from 15-20 focus markets that meet certain data-driven criteria ▪ Assets outside of the 15-20 focus markets will generally be located in extremely productive submarkets (e.g. Naples) or will be assets t
Slide 29: Tax Impacts Should Benefit KRG Portfolio
TAX IMPACTS SHOULD BENEFIT KRG PORTFOLIO KRG current portfolio is positioned well in light of the new federal tax legislation that limits the deductibility of state and local taxes © 2019 Kite Realty Group Fourth Quarter 2018 Investor Presentation | 29
Slide 30: Kite Real Estate
KITE REAL ESTATE Real Estate Thesis ▪ KRG will focus on holding and/or acquiring best-in-class assets that meet the criteria ▪ Until KRG’s cost of capital normalizes any near term material acquisition activity would likely be in a JV vehicle with KRG as a minority operating partner Real Estate Crite
Slide 31: 2019 FFO Guidance
2019 FFO GUIDANCE 2019 FFO Guidance1 Low High 2018 FFO $ 2.00 $ 2.00 Previously Disclosed FFO Impacts: Q1 - Q3 Dispositions (0.03) (0.03) Lease Accounting Rules 2 (0.06) (0.06) Interest Expense (0.03) (0.03) One-Time Income Items 3 (0.06) (0.06) Subtotal - Previously Disclosed (0.17) (0.17) Q4 2018
Slide 32: Disclaimer
DISCLAIMER 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 Excha
Slide 33: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES 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
Slide 34: Appendix: Reconciliation of Same Property NOI to Net Income
APPENDIX: RECONCILIATION OF SAME PROPERTY NOI TO NET INCOME © 2019 Kite Realty Group Fourth Quarter 2018 Investor Presentation | 34
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