Kite Realty Group Trust · NYSE:KRG
Kite Realty Group Trust — Kite Realty Group — Q1 2022 Earnings Presentation
40 slides from Kite Realty Group Trust's earnings presentation, Jul 14, 2022
Slide 1: Kite Realty Group Investor Update Q1 2022
CHAPEL HILL SHOPPING CENTER MSA: Dallas / Ft Worth, TX HOLLY SPRINGS TOWNE CENTER MSA: Raleigh, NC RAMPART COMMONS MSA: Las Vegas, NV DOWNTOWN CROWN KITE REALTY GROUP MSA: Washington, D.C. / Baltimore INVESTOR UPDATE Q1 2022 © 2022 Kite Realty Group | kiterealty.com
Slide 2: A Solid Foundation: Why KRG?
KITE REALTY GROUP A SOLID FOUNDATION WHY KRG? Number of Operating Retail Properties 181 • Top 5 open-air shopping center REIT primarily focused in Sun Belt markets with select strategic gateway presence Total Owned Retail GLA (SF) 29M - 67% of ABR in Sun Belt markets Operating Retail Portfolio Perce
Slide 3: First Quarter Highlights
KITE REALTY GROUP FIRST QUARTER HIGHLIGHTS NAREIT FFO impacted by $1.1M from prior period collection impact, NAREIT FFO / FFO, as adjusted $0.46 / $0.46 offset by $0.9M of merger and acquisition costs Same Property NOI1 5.9% Increased leasing activity drove outsized SSNOI growth Total Leasing Volume
Slide 4: 2022 Guidance
KITE REALTY GROUP 2022 GUIDANCE CURRENT PREVIOUS NAREIT FFO1 $1.72 – $1.78 $1.67 – $1.73 FFO, as adjusted $1.74 - $1.80 $1.69 - $1.75 % Accretion over Consensus 2022 FFO2 (pre-merger) 26% 22% % Accretion over 2020 FFO 37% 33% ASSUMPTIONS • Key assumptions at the midpoint: – Increase same-property NO
Slide 5: Top Publicly Traded Shopping Center REITs by Enterprise Value
KITE REALTY GROUP TOP 5 PUBLICLY TRADED SHOPPING CENTER REITS BY ENTERPRISE VALUE TOP 5 SHOPPING CENTER REITs $23.7 TOTAL ENTERPRISE VALUE ($, B) $16.3 $14.1 $12.8 $8.2 $6.2 $5.5 $4.0 $3.9 $3.9 $3.7 $2.2 KIM REG FRT BRX KRG PECO SITC ROIC UE AKR AAT RPT © 2022 Kite Realty Group | kiterealty.com Note
Slide 6: FFO Multiple Disconnect Based on Key Metrics
KITE REALTY GROUP FFO MULTIPLE DISCONNECT BASED ON KEY METRICS FFO MULTIPLE DISCONNECT1 20.4x 18.5x 17.0x 13.6x 13.2x #5 FRT REG KIM BRX KRG $29.69 ABR PSF 34% % OF VALUE IN SUPERZIPS2 $23.18 26% 25% $19.57 $19.12 16% $15.42 #2 11% #3 FRT REG KRG KIM BRX FRT KRG REG KIM BRX SUN BELT EXPOSURE3 71% (N
Slide 7: Organic Growth Not Priced In
KITE REALTY GROUP ORGANIC GROWTH NOT PRICED IN POTENTIAL STOCK PRICE • We believe the market is currently mispricing KRG and ignoring CAP RATE significant signed-not-open pipeline, active development pipeline POTENTIAL NOI GROWTH and potential NOI growth from vacant spaces 5.00% 5.50% 6.00% • Based
Slide 8: Components of Signed-Not-Open Pipeline
KITE REALTY GROUP COMPONENTS OF SIGNED-NOT-OPEN PIPELINE • Outsized leased-to-occupied spread (320 bps) due to strong leasing demand following the fallout from COVID is driving a strong signed-not-open NOI pipeline commencing rent in 2022 and 2023 – Grew the signed-not-open pipeline by $4M as a resu
Slide 9: Three Horizons of Growth
KITE REALTY GROUP THREE HORIZONS OF GROWTH • Through the merger, KRG has improved its near-term and long-term growth prospects in a variety of different ways LONG-TERM OPERATIONAL SIGNIFICANT FREE NATURAL EFFICIENCIES CASH FLOW DELEVERAGING $11M OF EXPECTED $21M POTENTIAL LAND BANK MEDIUM-TERM CONTI
Slide 10: Traffic Rebounded Strongly
KITE REALTY GROUP TRAFFIC REBOUNDED STRONGLY • Foot traffic in KRG portfolio rebounded strongly in 2021 and is now outpacing 2019 levels – Despite slight declines in early first half of 2021, continued leasing volume supported increasing levels of foot traffic at KRG centers TOTAL VISITS FOR KRG POR
Slide 11: Further Strengthened Portfolio Has Significant Potential
KRG DIFFERENCE FURTHER STRENGTHENED PORTFOLIO HAS SIGNIFICANT POTENTIAL Q1 2022 INVESTOR UPDATE © 2022 Kite Realty Group | kiterealty.com
Slide 12: 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, DC / Baltimore – 10% Las Vegas – 5% Raleigh
Slide 13: 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 % 85% ABR % 11% Component % 87% ABR % 12% Component % 64% • Expanding offerings to retailers via a more POWER CENTERS LIFEST
Slide 14: High-Quality Properties: Downtown Crown
KRG DIFFERENCE HIGH-QUALITY PROPERTIES DOWNTOWN CROWN MSA: WASHINGTON, D.C. / BALTIMORE Total Owned GLA 201,459 ABR PSF $39.23 % of Portfolio ABR 1.6% Leased % 96.5% Cash Lease Spread 11.5% on Past 3 New Deals 3 Mile Population 137K 3 Mile© 2022 Avg. HHI Kite Realty Group | kiterealty.com $143K 14
Slide 15: High-Quality Properties: Miramar Square
KRG DIFFERENCE HIGH-QUALITY PROPERTIES MIRAMAR SQUARE MSA: FORT LAUDERDALE Total Owned GLA 231,709 ABR PSF $18.04 % of Portfolio ABR 0.9% Leased % 97.2% Cash Lease Spread 8.0% on Past 3 New Deals 3 Mile Population 184K 3 Mile©Avg. HHI 2022 Kite Realty Group | kiterealty.com $74K 15
Slide 16: High-Quality Properties: Portofino Shopping Center
KRG DIFFERENCE HIGH-QUALITY PROPERTIES PORTOFINO SHOPPING CENTER MSA: HOUSTON Total Owned GLA 339,286 ABR PSF $21.54 % of Portfolio ABR 1.3% Leased % 97.7% Cash Lease Spread 107.4% on Past 3 New Deals 3 Mile Population 53K 3 Mile Avg. HHI $139K © 2022 Kite Realty Group | kiterealty.com 16
Slide 17: High-Quality Properties: Holly Springs Towne Center
KRG DIFFERENCE HIGH-QUALITY PROPERTIES HOLLY SPRINGS TOWNE CENTER MSA: RALEIGH-DURHAM Total Owned GLA 354,874 ABR PSF $19.00 % of Portfolio ABR 1.2% Leased % 96.5% Cash Lease Spread 15.8% on Past 3 New Deals 3 Mile Population 41K 3 Mile Avg. HHI $125K © 2022 Kite Realty Group | kiterealty.com 17
Slide 18: Anchor Inventory Update: Solid Returns & Better Tenants
KRG DIFFERENCE ANCHOR INVENTORY UPDATE SOLID RETURNS & BETTER TENANTS • Strong risk-adjusted returns provide opportunity for outsized NEW OFFERINGS organic NOI growth • Additional value creation at properties due to new, stronger tenants STARTING OPPORTUNITY ACTUAL TO DATE AND (as of YE 2020) POTENT
Slide 19: Solid Leasing Activity
KRG DIFFERENCE SOLID LEASING ACTIVITY TENANTS SIGNED IN LAST 6 MONTHS • KRG continues to see strong retailer demand for its well- positioned, open-air centers • Leasing volumes are up significantly coming out of last year along with strong spreads STRONG MOMENTUM CONTINUES 3Q’21 4Q’21 1Q’22 # of Lea
Slide 20: Strong Mix of Convenience and Experiential Diverse Tenant Base
KRG DIFFERENCE STRONG MIX OF CONVENIENCE DIVERSE TENANT BASE AND EXPERIENTIAL % of ABR TOP 15 TENANTS BY ABR COUNT1 % OF ABR2 ESSENTIAL RETAIL 30% 1 The TJX Companies, Inc. 44 2.5% Grocery / Drug / Big Box Wine and Spirits 12% Office Supply / Electronics 7% 2 Best Buy Co., Inc. 16 2.0% Medical 3% 3
Slide 21: Value Creation: Active Developments
KRG DIFFERENCE VALUE CREATION: ACTIVE DEVELOPMENTS • Total active developments are right-sized for the combined company and should provide strong NOI growth prospects • Active development pipeline poised to deliver additional value creation in the future ($ in M; GLA in ‘000s) PROJECTED MULTI- TOTAL
Slide 22: One Loudoun Downtown
KRG DIFFERENCE ONE LOUDOUN DOWNTOWN OVERVIEW KEY METRICS MULTI-FAMILY COMMERCIAL • Developing two additional pads (G & H) to include 378 multi-family units, 33k square feet of office and 34k square Total Project Costs1 $11.5M $10.2M feet of retail KRG Ownership % 90% 100% • Pads G & H will each cont
Slide 23: The Corner
KRG DIFFERENCE THE CORNER OVERVIEW KEY METRICS TOTAL • 285 multi-family units and 24K square feet of ground floor retail on a land parcel through a 50/50 JV with a third party developer Cost1 $63.9M KRG Ownership % 50% • KRG’s contribution was primarily fulfilled by selling the land to the venture a
Slide 24: Development Has Many Forms
KRG DIFFERENCE DEVELOPMENT HAS MANY FORMS • KRG is a bespoke developer • A successful development does not always entail going vertical and/or owning 100% of every project • In fact, monetizing portions of the property, contributing the land and partnering with third parties have proven an effective
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 • An inde
Slide 26: Sources and Uses: Liquidity Through 2022
KRG DIFFERENCE SOURCES AND USES LIQUIDITY THROUGH 2022 • Balance Sheet Strength 1,100 – $207M of cash on hand EST. CASH – $714M of revolver availability FFO LESS 1,000 DIVIDENDS, – 2022 Estimated FFO (midpoint of NAREIT FFO $191 guidance), net of dividend 900 – NDE = 5.7x with no outstanding preferr
Slide 27: Well-Staggered Maturity Ladder
KRG DIFFERENCE WELL-STAGGERED MATURITY LADDER Weighted Average Maturity 4.4 years Debt Type 89% Unsecured / 11% Secured Weighted Average Interest Rate 3.91% Rate Type 89% Fixed1 / 11% Floating2 $800 $700 $600 $500 150 15% of Total Debt Outstanding 200 12 $400 135 10 $300 95 3 120 430 250 400 $200 40
Slide 28: ESG Strides Continue
KRG DIFFERENCE ESG STRIDES CONTINUE • Key 2021 Accomplishments: – Established KRG’s 5-year ESG targets – Completed GRESB report for the second year, receiving an improved score from 2019 – Continued to implement Green Lease language with our tenants to help KRG’s ability to monitor and track each pr
Slide 29: 5-Year ESG Goals
KRG DIFFERENCE 5-YEAR ESG GOALS • Setting goals will improve ESG scores at various institutions and signals a long-term ESG commitment from management - Establishing and publishing 5-year targets will align internal and external expectations with KRG’s ESG program 5-YEAR GOALS (End of 2026) CURRENT
Slide 30: Thriving Open-Air Real Estate
OPEN-AIR RETAIL THRIVING OPEN-AIR REAL ESTATE Q1 2022 INVESTOR UPDATE © 2022 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 • 14 relocations to open-air centers nature for retailers and consumers • All 14 had lower costs • Conveniently located a
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: Open-Air Centers: Commerce Hubs – Pine Ridge Crossing
OPEN-AIR RETAIL OPEN-AIR CENTERS: COMMERCE HUBS PINE RIDGE CROSSING COMMUNITY CENTER | MSA: NAPLES, FL 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 sha
Slide 34: 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 Securi
Slide 35: 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”), a non-GAAP financial measure, to evaluate the performance of our properties. The Company defines NOI as income from our real estate, including lease termina
Slide 36: Non-GAAP Financial Measures: EBITDA
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 37: Appendix: Reconciliation of Same-Property NOI to Net Income
APPENDIX: RECONCILIATION OF SAME-PROPERTY NOI TO NET INCOME © 2022 Kite Realty Group | kiterealty.com 37
Slide 38: Appendix: Funds From Operations
APPENDIX: FUNDS FROM OPERATIONS © 2022 Kite Realty Group | kiterealty.com 38
Slide 39: Appendix: Reconciliation of EBITDA to Net Income
APPENDIX: RECONCILIATION OF EBITDA TO NET INCOME © 2022 Kite Realty Group | kiterealty.com 39
Slide 40: Appendix: Reconciliation of Net Income to FFO, As Adjusted, Guidance
APPENDIX: RECONCILIATION OF NET INCOME TO FFO, AS ADJUSTED, GUIDANCE Low High Net loss ($0.30) ($0.24) Depreciation and amortization 2.02 2.02 NAREIT FFO $1.72 $1.78 Non-recurring merger and acquisition costs 0.02 0.02 FFO, as adjusted $1.74 $1.80 © 2022 Kite Realty Group | kiterealty.com 40