Kite Realty Group Trust · NYSE:KRG
Kite Realty Group Trust — Q4 2022 Earnings Presentation
38 slides from Kite Realty Group Trust's earnings presentation, Feb 14, 2023
Slide 1: Kite Realty Group Q4 2022 Investor Update
MIRAMAR SQUARE MSA: Fort Lauderdale, FL PARADISE VALLEY MARKETPLACE MSA: Phoenix, AZ NORTHCREST SHOPPING CENTER MSA: Charlotte, NC KITE REALTY GROUP DRAPER PEAKS INVESTOR UPDATE MSA: Salt Lake City, UT Q4 2022 © 2023 Kite Realty Group | kiterealty.com
Slide 2: A Solid Foundation: Why KRG?
KITE REALTY GROUP A SOLID FOUNDATION WHY KRG? • Highest total shareholder return among open-air peers3 in 2022 Number of Operating Retail Properties 183 with more room to run at a compelling entry point Total Owned Retail GLA (SF) 29M • Strong balance sheet with nearly $1.2 billion of available liqu
Slide 3: Fourth Quarter and 2022 Full-Year Highlights
KITE REALTY GROUP FOURTH QUARTER AND 2022 FULL-YEAR HIGHLIGHTS Q4 2022 FY 2022 FFO, as adjusted excludes the net impact of prior period NAREIT FFO / FFO, as adjusted $0.50 / $0.50 $1.94 / $1.93 collections less merger related costs Same Property NOI1 6.2% 5.1% Increased leasing activity drove outsiz
Slide 4: 2023 Guidance
KITE REALTY GROUP 2023 GUIDANCE Key assumptions at the midpoint: 2023 NAREIT FFO GUIDANCE LOW HIGH – Same-property NOI growth range of 2.0% - 3.0% Net income $0.03 $0.09 – Full-year bad debt assumption of 1.25% of Depreciation and amortization $1.86 $1.86 total revenues NAREIT FFO $1.89 $1.95 2023 F
Slide 5: More Room to Run at a Compelling Entry Point
KITE REALTY GROUP MORE ROOM TO RUN AT A COMPELLING ENTRY POINT • KRG achieved highest total shareholder return among peers in 2022 • During a potentially choppy 2023, KRG has the luxury of relying on a simple growth strategy to execute by focusing on our core competency which is leasing space • KRG
Slide 6: Triangulating Value
KITE REALTY GROUP TRIANGULATING VALUE We believe all valuation roads warrant a stock price between $26 - $32 before taking into account signed-not-open (SNO) NOI and land value KRG 4Q 2022 Analyst Consensus NAV Page Cap Rate: 6.7% Cap Rate: 5.75% - 6.75% NAV: $26.70 NAV: $25 - $32 WARRANTED STOCK PR
Slide 7: Significant Upside Potential: Potential NAV
KITE REALTY GROUP SIGNIFICANT UPSIDE POTENTIAL POTENTIAL NAV • We believe the market is currently mispricing KRG, using the NAV components laid out on page 18 of KRG’s 4Q’22 CAP RATE 5.75% 6.25% 6.75% supplemental • Potential NAV includes NOI and estimated leasing costs for the POTENTIAL NAV $33.14
Slide 8: Merger Lookback: 1 + 1 = 3
KITE REALTY GROUP MERGER LOOKBACK: 1 + 1 = 3 Tenacious integration efforts and a best-in-class operating platform applied to an expanded portfolio enabled KRG to exceed internal and external expectations and execute a transformative merger that improved key operating metrics and provided robust earn
Slide 9: Efficient Operators
KITE REALTY GROUP EFFICIENT OPERATORS RETAIL NOI MARGIN RETAIL RECOVERY RATIO 1 89.4% 74.3% 74.3% 87.0% 69.5% 76.4% Peer Average - 3Q'22 KRG - 3Q'21 KRG - 4Q'22 Peer Average - 3Q'22 KRG - 3Q'21 KRG - 4Q'22 #2 #3 G&A AS A % OF TOTAL REVENUE BLENDED CASH SPREADS (TTM) 12.6% 11.5% 9.3% 8.7% 6.8% 6.3% #
Slide 10: FFO Multiple Disconnect Based on Key Metrics
KITE REALTY GROUP FFO MULTIPLE DISCONNECT BASED ON KEY METRICS FFO MULTIPLE DISCONNECT (2023 CONSENSUS)1 17.2x 16.2x 13.7x 11.5x 11.4x #4 FRT REG KIM KRG BRX $30.36 ABR PSF 34% % OF VALUE IN SUPERZIPS2 26% 25% $23.77 $20.02 $19.66 16% $16.02 #2 11% #3 FRT REG KRG KIM BRX FRT KRG REG KIM BRX SUN BELT
Slide 11: Retailers Depend on Brick & Mortar Footprint
KITE REALTY GROUP RETAILERS DEPEND ON BRICK & MORTAR FOOTPRINT “The biggest central competitive advantage of brick-and-mortar retail is your physical stores and your employees that work in those stores.” – Marvin Ellison Lowe’s Chairman, President and CEO STORE STORE COUNT1 COUNT1 Approximately 95%
Slide 12: Further Strengthened Portfolio Has Significant Potential
KRG DIFFERENCE FURTHER STRENGTHENED PORTFOLIO HAS SIGNIFICANT POTENTIAL Q4 2022 INVESTOR UPDATE © 2023 Kite Realty Group | kiterealty.com
Slide 13: Predominantly Sun Belt with Strategic Gateway Components
KRG DIFFERENCE PREDOMINANTLY SUN BELT WITH STRATEGIC GATEWAY COMPONENTS ABR Concentration 67% Sun Belt Markets1 23% Strategic Gateway Markets (DC, Seattle and NYC) Seattle – 5% Highest Growth Markets2 35% (since onset of pandemic) New York – 8% Washington, D.C. / Baltimore – 10% Las Vegas – 5% Ralei
Slide 14: Diverse Portfolio of Durable Cash Flow and Growth Potential
KRG DIFFERENCE DIVERSE PORTFOLIO OF DURABLE CASH FLOW AND GROWTH POTENTIAL COMMUNITY CENTERS NEIGHBORHOOD CENTERS MIXED-USE CENTERS Grocery Grocery Grocery ABR % 48% Component % 86% ABR % 12% Component % 86% ABR % 12% Component % 61% • Expanding offerings to retailers through a more POWER CENTERS LI
Slide 15: Well-Balanced Portfolio Delivered Strong Results
KRG DIFFERENCE WELL-BALANCED PORTFOLIO DELIVERED STRONG RESULTS • KRG is focused on achieving the highest risk-adjusted return on capital • KRG has demonstrated a well-balanced portfolio can produce similar returns on capital and illustrates the importance of a balanced portfolio to capitalize on in
Slide 16: High-Quality Properties: Centennial Gateway
KRG DIFFERENCE HIGH-QUALITY PROPERTIES CENTENNIAL GATEWAY MSA: LAS VEGAS Total Owned GLA 193,057 ABR PSF $26.17 % of Portfolio ABR 0.9% Leased % 100.0% Comp. Cash Lease 21.8% Spread Past 3 Deals 3 Mile Population 126K © 2023 Kite Realty Group | kiterealty.com 3 Mile Avg. HHI $102K 16
Slide 17: High-Quality Properties: Main Street Promenade
KRG DIFFERENCE HIGH-QUALITY PROPERTIES MAIN STREET PROMENADE MSA: CHICAGO Total Owned GLA 74,410 ABR PSF $45.85 % of Portfolio ABR 0.5% Leased % 94.2% Comp. Cash Lease 32.2% Spread on Past 3 Deals 3 Mile Population 92K © 2023 Kite Realty Group | kiterealty.com 3 Mile Avg. HHI $150K 17
Slide 18: High-Quality Properties: Parkway Towne Crossing
KRG DIFFERENCE HIGH-QUALITY PROPERTIES PARKWAY TOWNE CROSSING MSA: DALLAS / FORT WORTH Total Owned GLA 180,749 ABR PSF $21.19 % of Portfolio ABR 0.7% Leased % 100.0% Comp. Cash Lease 20.9% Spread on Past 3 Deals 3 Mile Population 86K © 2023 Kite Realty Group | kiterealty.com 3 Mile Avg. HHI $160K 18
Slide 19: Anchor Inventory Update: Solid Returns & Stronger Tenants
KRG DIFFERENCE ANCHOR INVENTORY UPDATE SOLID RETURNS & STRONGER TENANTS • Strong risk-adjusted returns provide opportunity for NEW OFFERINGS outsized organic NOI growth • Additional value creation at properties due to new, stronger tenants STARTING OPPORTUNITY ACTUAL TO DATE AND (as of YE 2020) POTE
Slide 20: Solid Leasing Activity: Strong Momentum Continues
KRG DIFFERENCE SOLID LEASING ACTIVITY TENANTS SIGNED IN PAST 6 MONTHS • KRG continues to see strong retailer demand for its well- positioned, open-air centers • Leasing volumes remain elevated at strong spreads STRONG MOMENTUM CONTINUES 1Q’22 2Q’22 3Q’22 4Q’22 # of Leases Signed 182 206 221 173 TRAD
Slide 21: Strong Mix of Convenience and Experiential: Diverse Tenant Base
KRG DIFFERENCE STRONG MIX OF CONVENIENCE DIVERSE TENANT BASE AND EXPERIENTIAL % of ABR STORE % OF WTD. ESSENTIAL RETAIL 30% TOP 15 TENANTS BY ABR COUNT1 ABR2 Grocery / Drug / Big Box Wine and Spirits 12% 1 The TJX Companies, Inc. 45 2.5% Office Supply / Electronics 6% 2 Best Buy Co., Inc. 16 1.9% Me
Slide 22: Deep and Diverse Pool of Small Shop Tenants
KRG DIFFERENCE DEEP AND DIVERSE POOL OF SMALL SHOP TENANTS TOP 50 SMALL 30% OF SMALL 15% OF SHOP 98% NATIONAL ~825 STORES SHOP ABR PORTFOLIO ABR TENANTS: PAIRING TYPICAL SMALL SHOP TENANTS WITH NEWER RETAIL CONCEPTS KEY TOP 50 SHOP TENANTS (by ABR) KEY NEW SHOP TENANTS SIGNED IN 2022 #2 #3 #2 #2 © 2
Slide 23: Value Creation: Active Developments
KRG DIFFERENCE VALUE CREATION: ACTIVE DEVELOPMENTS • Total active developments are right-sized for the combined company and is expected to provide strong NOI growth prospects • Active development pipeline poised to deliver additional value creation in the future ($ in M; GLA in ‘000s) TOTAL PROJECT
Slide 24: The Corner
KRG DIFFERENCE THE CORNER OVERVIEW KEY METRICS TOTAL • 285 multifamily units and 24k square feet of ground floor retail on a land parcel through a 50/50 joint venture with a third party developer Total Project Cost at KRG’s Share1 $31.9M KRG Ownership % 50% • KRG’s contribution was primarily fulfill
Slide 25: Entitled Land – Development and/or Capital Source
KRG DIFFERENCE ENTITLED LAND – DEVELOPMENT AND/OR CAPITAL SOURCE • KRG is taking a fresh look at each piece of entitled land to determine the optimal real estate use and capital allocation decision • KRG, while experienced developers, may or may not pursue all the development opportunities • At One
Slide 26: Well-Staggered Maturity Ladder
KRG DIFFERENCE WELL-STAGGERED MATURITY LADDER Weighted Average Maturity 4.3 years Debt Type 91% Unsecured / 9% Secured Weighted Average Interest Rate 4.23% Rate Type 93% Fixed1 / 7% Floating2 $1,000 Debt Maturity Profile as of February 13, 2023 $800 $600 15% of Total Debt Outstanding 150 $400 12 117
Slide 27: ESG Core Responsibilities Are Woven Throughout the Organization
KRG DIFFERENCE ESG CORE RESPONSIBILITIES ARE WOVEN THROUGHOUT THE ORGANIZATION BOARD OF DIRECTOR / EXECUTIVE OVERSIGHT - Tenant relationships and satisfaction - Vendor relationships and satisfaction - Identify and execute energy efficient initiatives - Execute green leases PROPERTY - Foster tenant r
Slide 28: Updated 5-Year ESG Goals
KRG DIFFERENCE UPDATED 5-YEAR ESG GOALS (ESTABLISHED IN 2021) • KRG recognizes the importance ESG initiatives play in our ability to generate long-term, sustainable returns, and setting goals signals our long-term ESG commitment CURRENT STATUS 5-YEAR GOALS (To be completed by 12/31/2026) (4Q’22) E I
Slide 29: KRG: ESG 360°
KRG DIFFERENCE KRG: ESG 360° While KRG progresses toward its long-term ESG goals, our team is consistently living and implementing our KRG and ESG values on a daily basis. Some recent highlights: TEAM BIKE CORPORATE CHARITABLE GIVING SUSTAINABILITY WEAR COMMUNITY IREM KRG PROJECT BUILDING RESPONSIBI
Slide 30: Thriving Open-Air Real Estate
OPEN-AIR RETAIL THRIVING OPEN-AIR REAL ESTATE Q4 2022 INVESTOR UPDATE © 2023 Kite Realty Group | kiterealty.com
Slide 31: Open-Air Centers: Convenient and Less Costly
OPEN-AIR RETAIL OPEN-AIR CENTERS: CONVENIENT CONFIDENTIAL RETAILER CASE STUDY AND LESS COSTLY CLEAR BENEFITS • Open-air assets are thriving due to their convenient and affordable nature • 14 relocations to open-air centers for retailers and consumers • All 14 locations tenants experienced lower cost
Slide 32: Convenient Shopping Destinations and Last-Mile Fulfillment
OPEN-AIR RETAIL CONVENIENT SHOPPING DESTINATIONS AND LAST-MILE FULFILLMENT SHOP IN STORE Shop and purchase in the physical store IN-STORE SCHEDULED PICKUP DELIVERY Order online Order online and pick up in and select a OPEN-AIR delivery time store CENTER slot TRANSACTIONS REDUCE FRICTION POINTS CURBS
Slide 33: Disclaimer
DISCLAIMER Forward-Looking Statements • This Investor Update, 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 (the “Securities Act”) and Section 21E of the Securiti
Slide 34: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES NET OPERATING INCOME AND SAME PROPERTY NET OPERATING INCOME The Company uses property net operating income (“NOI”) and cash NOI, which are non-GAAP financial measures, to evaluate the performance of our properties. The Company defines NOI and cash NOI as income from our r
Slide 35: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES EBITDA The Company defines EBITDA, a non-GAAP financial measure, as net income before interest expense, income tax expense of the taxable REIT subsidiary, and depreciation and amortization. For informational purposes, the Company also provides Adjusted EBITDA, which it de
Slide 36: Appendix: Reconciliation of Same Property NOI to Net Income
APPENDIX: RECONCILIATION OF SAME PROPERTY NOI TO NET INCOME © 2023 Kite Realty Group | kiterealty.com 36
Slide 37: Appendix: Funds From Operations
APPENDIX: FUNDS FROM OPERATIONS © 2023 Kite Realty Group | kiterealty.com 37
Slide 38: Appendix: Reconciliation of EBITDA to Net Income
APPENDIX: RECONCILIATION OF EBITDA TO NET INCOME © 2023 Kite Realty Group | kiterealty.com 38
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