Kite Realty Group Trust · NYSE:KRG
Kite Realty Group Trust — Q3 2022 Earnings Presentation
40 slides from Kite Realty Group Trust's earnings presentation, Nov 3, 2022
Slide 1: Kite Realty Group Investor Update Q3 2022
rl KITE KITE REALTY GROUP INVESTOR UPDATE Q3 2022 © 2022 Kite Realty Group | kiterealty.com
Slide 2: Kite Realty Group at a glance
Number of Operating Retail Properties • Top 5 open-air shopping center REIT primarily focused in Sun Belt markets with select strategic gateway presence Total Owned Retail GLA (SF) - 67% of ABR in Sun Belt markets Operating Retail Portfolio Percent Leased - 23% of ABR in strategic gateway markets An
Slide 3: Q3 2022 results highlights
NAREIT FFO / FFO, as adjusted NAREIT FFO impacted by $0.7M from prior period collections Same Property NOI1 Increased leasing activity drove outsized SSNOI growth Total Leasing Volume Strong leasing volume continues, resulting in a record high for KRG Leased percentages increased year-over-year by 1
Slide 4: 2022 guidance
NAREIT FFO1 FFO, as adjusted % Accretion at the midpoint over Consensus 2022 FFO2 (pre-merger) • – Increased same-property NOI growth range to 4.00% - 5.00%, which represents a 50-basis point increase at the midpoint – Full-year bad debt assumption of 1.00% of total revenues – Transaction activity e
Slide 5: 2023 guidance considerations
• • Land sale gains Termination fees Fee income TOTAL • – When establishing 2023 guidance, the company will not account for speculative land sales and termination fees – Fee income is expected to moderate as a result of anticipated third party development spend and construction schedules – Expect mo
Slide 6: KRG performance and valuation since merger
• FFO, as adjusted per Share Corporate GAAP G&A as a % of Total Revenue Operating Retail Portfolio Percent Leased Blended Comparable Cash Leasing Spreads Non-Option Renewal Cash Leasing Spreads ABR per SF 3-Mile Average Household Income1 3-Mile Population1 Net Debt to EBITDA Fitch Credit Rating Cons
Slide 7: Peer comparison
• Peer Average - 2Q'22 KRG - 3Q'21 KRG - 3Q'22 Peer Average - 2Q'22 KRG - 3Q'21 KRG - 3Q'22 Peer Average - 2Q'22 KRG - 3Q'21 KRG - 3Q'22 Peer Average - 2Q'22 KRG - 3Q'21 KRG - 3Q'22 Note: Peer group includes AKR, BRX, FRT, IVT, KIM, PECO, REG, ROIC, RPT, SITC and UE. Source of all peer data is from
Slide 8: Comparison to top 5 shopping center REITs
16.3x 15.7x 13.7x 11.0x 10.9x FRT REG KIM BRX KRG $30.05 34% 26% 25% $23.50 $19.86 $19.43 16% $16.02 11% FRT REG KRG KIM BRX FRT KRG REG KIM BRX 71% 67% 66% 6.4x 6.3x 5.8x 56% 5.4x 47% 4.9x REG KRG KIM BRX FRT REG KRG FRT KIM BRX Note: Comparison to top 5 shopping center REITs by total enterprise va
Slide 9: Potential NOI growth
• • Gross Signed Not Open Tenants Active Development Potential2 Potential Lease-up3 TOTAL POTENTIAL NOI GROWTH Note: These are hypothetical NOI growth and cap rates. KRG is not representing it can achieve these results or that a third party would ascribe a similar cap rate to the portfolio. 1. Perce
Slide 10: Signed-not-open pipeline
• – The signed-not-open pipeline decreased by $3M as a result of tenants that commenced rent in the third quarter, net of the new leases signed – Signed 61 tenants representing $10M of NOI in the third quarter – 60 tenants commenced rent in the third quarter totaling $13M of annualized NOI – Of the
Slide 11: Physical stores and omnichannel retail
• Approximately 95% of digital orders 75% of physical stores fulfill online are fulfilled with physical stores orders 15 consecutive quarters of brick & More than 50% of online orders are mortar comp growth fulfilled through physical stores Physical stores represented 90% of 100% of sales occur in p
Slide 12: KRG Difference: Further Strengthened Portfolio Has Significant Potential
KITE KRG DIFFERENCE FURTHER STRENGTHENED PORTFOLIO HAS SIGNIFICANT POTENTIAL Q3 2022 INVESTOR UPDATE pany 2022 kite Realty Group | kiterealty.com
Slide 13: Portfolio by market
Sun Belt Markets1 Strategic Gateway Markets (DC, Seattle and NYC) Seattle – 5% Highest Growth Markets2 (since onset of pandemic) New York – 8% Washington, D.C. / Baltimore – 10% Las Vegas – 5% Raleigh / Durham – 3% Charlotte – 2% Texas Atlanta – 4% Florida Phoenix – 2% Maryland Orlando / Daytona – 2
Slide 14: Portfolio by center type and grocery component
Grocery Grocery Grocery ABR % ABR % ABR % Component % Component % Component % • • • • Grocery Grocery ABR % ABR % • Component % Component % Average Population: 103K Average Household Income: $117K Note: 3-mile demographic statistics are weighted by 3Q 2022 ABR and sourced from PopStats. Remaining 3%
Slide 15: Portfolio segment metrics
Total Owned GLA ABR PSF % of Portfolio ABR Leased % Comp. Cash Lease Spread on Past 3 Non-Option Renewals 3 Mile Population 3 Mile Avg. HHI
Slide 16: Portfolio segment metrics
Total Owned GLA ABR PSF % of Portfolio ABR Leased % Comp. Cash Lease Spread on Past 3 Deals 3 Mile Population 3 Mile Avg. HHI
Slide 17: Portfolio segment metrics
Total Owned GLA ABR PSF % of Portfolio ABR Leased % Comp. Cash Lease Spread on Past 3 Deals 3 Mile Population 3 Mile Avg. HHI
Slide 18: Portfolio segment metrics
Total Owned GLA ABR PSF % of Portfolio ABR Leased % Comp. Cash Lease Spread on Past 3 Deals 3 Mile Population 3 Mile Avg. HHI
Slide 19: Anchor vacancy re-leasing potential
• • Count Square feet Capital / SF Total capital ($, M) Previous tenants ABR Estimated New ABR2 Cash lease spread Return on capital New NOI incl. NNN ($, M) FFO / Share 1. Estimate of potential outcomes of remaining anchor vacancies. 2. New ABR is actual for Signed-Not-Open and average in-place ABR
Slide 20: Leasing volume and spreads
• • # of Leases Signed Leased SF Signed Year-over-year % Change Blended Cash Spread Non-Option Renewal Spread
Slide 21: Top tenants
Grocery / Drug / Big Box Wine and Spirits 1 The TJX Companies, Inc. Office Supply / Electronics 2 Best Buy Co., Inc. Medical 3 Ross Stores, Inc. Pet Stores 4 PetSmart, Inc. Hardware / Auto 5 Michael Stores, Inc. Banks 6 Bed Bath & Beyond Inc. 7 Dick’s Sporting Goods, Inc. Quick Service Restaurants 8
Slide 22: Active development projects
• • ($ in M; GLA in ‘000s) One Loudoun Washington, Downtown – Pads D.C. / 100% Q2 2023 67 0 $9.9 $9.9 $7.7 $1.9 – $2.3 $0.1 – $0.5 G & H Commercial Baltimore The Landing at Port St. Lucie 100% Q3 2023 40 0 11.2 11.2 7.0 1.1 – 1.2 0.5 – 0.7 Tradition – Phase II Washington, Carillon MOB D.C. / 100% Q4
Slide 23: Development project economics
• Total Project Costs1 • KRG Ownership % KRG Remaining Spend Estimated Stabilized NOI to KRG • Remaining NOI to Come Online2 Projected Completion Date 1. Total project costs represent costs to KRG post-merger and exclude any costs spent to date prior to the merger. 2. Excludes in-place NOI and NOI r
Slide 24: Joint venture development project
• Total Project Cost at KRG’s Share1 KRG Ownership % • KRG Equity Requirement Est. Project Cash Yield Est. Incremental NOI @ Share Expected Stabilization Date 1. KRG does not have any equity requirements related to this development. Total project cost are at KRG’s share and are net of KRG’s share of
Slide 25: Redevelopment and land contribution examples
• • • - Converted an unused parking field into a 267-unit - Repurposing an outdated retail center into 285 - Redeveloping an outdated retail center into the multifamily development by contributing land to a multifamily units and 24k SF of retail. corporate headquarters of Republic Airways. developme
Slide 26: Land bank and entitlements
• • • • Carillon Washington, D.C. 1,200,000 3,000 One Loudoun Washington, D.C. 1,900,000 1,745 Hamilton Crossing Centre – Phase II Indianapolis 173,000 400 Main Street Promenade Chicago 10,000 47 Downtown Crown Washington, D.C. 42,000 1. Based on external estimates and completed entitlements.
Slide 27: Sources and uses of liquidity
• $1,400 – $88M of cash and cash equivalents on hand – $1.1B of revolver availability – 2022 Estimated FFO (midpoint of NAREIT FFO $1,200 guidance), net of dividend = $206M – NDE = 5.4x with no outstanding preferred shares • $1,000 – 2022 debt maturities = $0M – SNO Tenant Capital Required = $114M –
Slide 28: Debt maturity schedule
Weighted Average Maturity Debt Type Weighted Average Interest Rate Rate Type $1,000 $800 $600 $400 $200 $- 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031+ ($ in M) Mortgage Debt Unsecured Debt Unsecured Term Loans Line of Credit JV Debt 1. Fixed rate debt includes the portion of variable rate deb
Slide 29: ESG 5-year targets
• - Establishing and publishing 5-year targets will align internal and external expectations with KRG’s ESG program Install LED parking lot lighting at 50% of KRG-owned and managed properties 47% Install smart irrigation controls at 25% of KRG-owned and managed properties 7% Implement a policy to tr
Slide 30: ESG highlights for the quarter
Commenced installation KRG was awarded a 6 Executive Leadership KRG teams at multiple Implemented smart The KRG team collected Contributed to the ICSC of 15 LED lighting Provided annual point increase on our Currently hosting 2 high- held informal summits in office locations packed irrigation system
Slide 31: Open-Air Retail: Thriving Open-Air Real Estate
KITE OPEN-AIR RETAIL THRIVING OPEN-AIR REAL ESTATE Q3 2022 INVESTOR UPDATE roe 2022 kite Realty Group | kiterealty.com
Slide 32: Open-air operating cost advantages
• • • • • • • – Operating costs at other retail property types can range from $20 - $70 psf – KRG’s open-air operating costs can range from $5 - $10 psf – 30% lower gross rent charges • – Expected sales increased to $1.27M from – Lower operating costs equate to retailer savings $977k in other locati
Slide 33: Omnichannel shopping options
Shop and purchase in the physical store Order online Order online and pick up in and select a store delivery time slot Drive up and Product have order shipped from brought to the store your car
Slide 34: Forward-Looking Statements
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 Securities Exchange
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 definitions
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 defines as EBITDA less (i) EBI
Slide 37: Reconciliation of same property NOI to net income
APPENDIX: RECONCILIATION OF SAME PROPERTY NOI TO NET INCOME KRG NYSE © 2022 Kite Realty Group | kiterealty.com Kite Realty Group Trust Same Property Net Operating Income ("NOI")'” (dollars in thousands) (unaudited) ‘Three Months Ended September 30, Months Ended September 30, 2022 2021 Change __2022
Slide 38: Funds from operations
APPENDIX: FUNDS FROM OPERATIONS KRG NYSE © 2022 Kite Realty Group | kiterealty.com Kite Realty Group Trust Funds From Operations (“FFO”)'"" (dollars in thousands, except per share amounts) (unaudited) Net (loss) income Less: net income attributable to nonconttolling interests in properties Less: gai
Slide 39: Reconciliation of EBITDA to net income
APPENDIX: RECONCILIATION OF EBITDA TO NET INCOME KRG NYSE © 2022 Kite Realty Group | kiterealty.com Kite Realty Group Trust Earnings Before Interest, Tax, Depreciation, and Amortization (“EBITDA”) Net loss Depreciation and amortization Interest expense Income tax benefit of taxable REIT subsidiary E
Slide 40: Reconciliation of net income to FFO, as adjusted, guidance
af APPENDIX: RECONCILIATION OF NET INCOME TO FFO, AS ADJUSTED, GUIDANCE MITE Low High Net loss ($0.13) ($0.09) | Gain on sales of operating properties. net = NZ) AZ) Depreciation and amortization 241 241 NAREITFFO S186 SLID Non-recurring merger and acquisition costs 0.01 0.01 | Priorperiod collectio
Kite Realty Group Trust — Q3 2022 Earnings Presentation on 6ix