Kite Realty Group Trust · NYSE:KRG

Kite Realty Group Trust — Q2 2021 Earnings Presentation

41 slides from Kite Realty Group Trust's earnings presentation, Aug 3, 2021

Slide 2: Company overview: Number of Operating Retail Properties and key metrics
Number of Operating Retail Properties • Only open-air retail REIT primarily focused on Southern and Western US (aka “Warmer & Cheaper”) Total Retail GLA (SF) • Southern and Western US will continue to benefit from Operating Retail Portfolio Percent Leased current and projected demographic trends • H
Slide 3: Revenue trend and updated 2021 guidance
• Bad debt made headlines – more credence should be paid to the trend in revenues • The impact of COVID can be seen by comparing annualized Q1 2020 to Q4 2020 – Collected revenues decreased ~7% (compared to peak decrease of 15% in Q2), but stabilized in Q4 • Updated 2021 guidance implies a 2% decrea
Slide 4: Anchor acceleration: outsized organic NOI growth opportunity
• Strong risk-adjusted returns provide opportunity for outsized organic NOI growth • Additional value creation at properties due to new, stronger tenants Count Square feet Capital / SF Total capital ($, M) Previous tenants ABR Estimated New ABR2 Cash lease spread Return on capital New NOI incl. NNN
Slide 5: Market mispricing cap rates and ignoring potential NOI growth
• Market is currently mispricing cap rates AND ignoring potential NOI growth from vacant spaces • Based on annualized 2Q’21 NOI levels, potential lease-up of vacant space and NOI growth could be substantial Anchor Lease-up2 Shop Lease-up3 Signed Not Open Tenants TOTAL POTENTIAL NOI GROWTH *Excludes
Slide 6: Q2 2021 results highlights
NAREIT FFO impacted by $1.1M from 2020 Collection Impact, offset by $0.8M of merger and acquisition costs Increased 2020 related rent collections drove outsized SSNOI growth Strong leasing volume continues Leasing is starting to rebound following the pandemic dislocation Collections have primarily r
Slide 7: 2021 FFO guidance and key assumptions
FFO, as adjusted • 2020 Collection Impact: In order to provide a clean runway, 2021 guidance does not include any potential impacts from a change in 2020 bad debt or accounts receivable – Should there be previous bad debt collected (recognized as revenue) or accounts receivable written off (recogniz
Slide 9: Asset quality and location 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 – Por
Slide 10: Portfolio map by market, Warmer and Cheaper states
⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫⚫⚫ ⚫ ⚫ ⚫⚫ ⚫ ⚫⚫⚫ ⚫⚫ ⚫⚫⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫⚫ ⚫ Las Vegas – 11% ⚫ ⚫ ⚫ ⚫⚫ ⚫ ⚫ ⚫ ⚫ ⚫⚫ ⚫⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫⚫ ⚫ ⚫ ⚫⚫ ⚫ ⚫ Raleigh / Durham – 8% ⚫ ⚫ Charlotte – 3% ⚫ ⚫ ⚫⚫ ⚫ ⚫⚫ ⚫ ⚫ Florida ⚫⚫⚫ ⚫⚫ ⚫ Texas ⚫ ⚫ ⚫ ⚫ ⚫ ⚫ ⚫⚫ ⚫⚫ ⚫ ⚫ ⚫⚫ Orlando / Daytona – 5% ⚫ ⚫ North Carolina Tampa – 3% ⚫
Slide 11: Representative markets and properties
MSA: MIAMI / FORT LAUDERDALE, FL MSA: RALEIGH-DURHAM, NC MSA: LAS VEGAS, NV MSA: HOUSTON, TX © 2021 Kite Realty Group | kiterealty.com MSA: INDIANAPOLIS, IN MSA: RALEIGH-DURHAM, NC
Slide 12: Portfolio evolution 2004, 2015 and Q2 2021
# of Operating Retail Properties # of States # of Markets Top Region (% of ABR) Top State (% of ABR) Top MSA (% of ABR) ABR Top Tenant (% of ABR) Net-debt-to-EBITDA Note: Based on retail operating portfolio in supplemental disclosures for YE 2004, 2015, and Q2 2021. © 2021 Kite Realty Group | kitere
Slide 13: Grocery-anchored centers and demographics
• 75% of retail ABR is from centers with a grocer component • Strong 3-mile demographics: • Average asset size is 140k square feet – Average Population: 77,400 – Average Household Income: $100,900 – Est. Annual 5-year Population Growth: 1.4% 1. Per Green Street Advisors. 2. Based on ABR. Remaining 6
Slide 14: Leasing volumes and spreads
• 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 # of leases signed Leased SF signed Year-over-year % change1 Blended GAAP Spread 1. Year-over-year leasing statistics have
Slide 15: Top tenants and tenant mix
Grocery / Drug Office / Communication 1 Publix Supermarkets, Inc. Pet Stores 2 The TJX Companies, Inc. Medical Hardware / Auto 3 PetSmart, Inc. Banks 4 Ross Stores, Inc. Quick Service Restaurants 5 Dick’s Sporting Goods, Inc. Full Service Restaurants 6 Nordstrom Rack Soft Goods Discount Retailers 7
Slide 16: Balance sheet strength and limited capital needs
• Balance Sheet Strength – $215M of cash on hand – $422M of revolver availability – NDE = 6.4x with no outstanding preferred shares • Limited Capital Needs – ’22 debt maturities = $155M – Signed Anchor Acceleration = $9M – Potential Re-leasing Capital = $68M • Prudent Remaining Development Spend – G
Slide 17: ESG milestones and COVID-19 response
• Key milestones/accomplishments established in 2020 – 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 – Planted 9,400 trees in partnership with One Tree Planted and do
Slide 19: Well-positioned to address COVID-related dislocation
• Project Focus resulted in a more optimal portfolio and a stronger balance sheet, allowing KRG to weather the storm, focus on the future and take advantage of any opportunities – Convertible debt issuance proceeds will be used to fund 2022 maturities • Well-positioned to address COVID-related dislo
Slide 20: Anchor Acceleration and tenant bankruptcy backfill
• KRG entered 2020 in a very strong occupancy # of Leases Signed position with a KRG record and sector-leading 92.5% of shop space occupancy and only 6 vacant # of Different Tenants Signed anchors Square Feet of New Leases • COVID-19 has created large retailer disruption Total Expected Cost leading
Slide 21: 2020 tenant bankruptcies and backfill
1 Guitar Center 2 Francesca’s 3 Rubio’s Restaurant 4 New York Sports Club 5 Stein Mart 6 It’s Sugar 7 Ruby Tuesday 8 Ascena 9 Tailored Brands 10 24 Hour Fitness 11 GNC 12 Tuesday Morning 13 J Crew 14 Hair Cuttery 15 Earth Fare 16 Pier 1 Imports 17 AC Moore 18 Bar Louie 19 Destination Maternity 1. KR
Slide 22: Re-leasing capital and returns on vacant spaces
• Increased vacancy has resulted in the need for increased capital related to re-tenanting spaces • Potential re-leasing returns could provide near-term internal growth and can be very strong on a risk-adjusted basis – In a typical year, leasing capex can range from $10 - $15 million – 2021 and 2022
Slide 24: Multi-family JV development on unused parking field
• 267 multi-family units on an unused parking field through a JV with a third-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 KRG Ownership % KRG Capital Required Est. Project Ca
Slide 25: Macy's box redevelopment in Indianapolis
Cost • Redeveloping vacant Macy’s box with Ross Dress for Less, KRG Ownership % Old Navy, Five Below and additional small shop tenants KRG Capital Required • Received a $7.1 million TIF from the City of Indianapolis, Est. Project Cash Yield lowering KRG’s capital commitment Est. Incremental NOI @ sh
Slide 27: Eddy Street Phase III with Notre Dame
Cost • Partnered with the University of Notre Dame to complete KRG Ownership % the Eddy Street development master plan by creating a KRG Capital Required bookend to the project anchored by Trader Joe’s Est. Project Cash Yield • The project will contain a 13k square foot Trader Joe’s, 6k square foot
Slide 29: Migration shift to the 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.) • From 2010 to 2018, cumulative net change in adjusted gross income (AGI) demonstrated the exodus from high cost of living states into lower cost of liv
Slide 30: Population migration by state and region
Florida Texas North Carolina Indiana Nevada TOTAL South West Midwest Northeast TOTAL Source: Synergos Technologies. Pre pandemic analysis. © 2021 Kite Realty Group | kiterealty.com
Slide 32: Omnichannel: stores fulfilling online orders
• “For inexpensive items or large ones that would incur hefty shipping fees, it is often cheaper to refund the purchase price and let customers keep the products.”1 Curbside pickup at ~3,750 locations Drive-up pick up increased 123% from and same-day delivery from ~3,000 compared to Q1’20 stores Gre
Slide 33: Open-air centers lower retailer costs
• 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 and easily accessible parking fields that satisfy BOPIS / curbside pick up methods • 13 of 14 had increased sa
Slide 34: Omnichannel fulfillment methods
Shop and purchase in the physical store Order online and Order online and pick up in store select a delivery time slot Drive up and have order Product shipped brought to your from store car © 2021 Kite Realty Group | kiterealty.com
Slide 35: Essential and service-oriented 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 shopping cente
Slide 36: 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 Exchan
Slide 37: 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 38: EBITDA and Adjusted EBITDA definitions
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

Kite Realty Group Trust — Q2 2021 Earnings Presentation on 6ix

Kite Realty Group Trust — Q2 2021 Earnings Presentation

Slide 1: © 2021 Kite Realty Group | kiterealty.com

Slide 2: Company overview: Number of Operating Retail Properties and key metrics

Slide 3: Revenue trend and updated 2021 guidance

Slide 4: Anchor acceleration: outsized organic NOI growth opportunity

Slide 5: Market mispricing cap rates and ignoring potential NOI growth

Slide 6: Q2 2021 results highlights

Slide 7: 2021 FFO guidance and key assumptions

Slide 8: © 2021 Kite Realty Group | kiterealty.com

Slide 9: Asset quality and location matter

Slide 10: Portfolio map by market, Warmer and Cheaper states

Slide 11: Representative markets and properties

Slide 12: Portfolio evolution 2004, 2015 and Q2 2021

Slide 13: Grocery-anchored centers and demographics

Slide 14: Leasing volumes and spreads

Slide 15: Top tenants and tenant mix

Slide 16: Balance sheet strength and limited capital needs

Slide 17: ESG milestones and COVID-19 response

Slide 18: © 2021 Kite Realty Group | kiterealty.com

Slide 19: Well-positioned to address COVID-related dislocation

Slide 20: Anchor Acceleration and tenant bankruptcy backfill

Slide 21: 2020 tenant bankruptcies and backfill

Slide 22: Re-leasing capital and returns on vacant spaces

Slide 23: © 2021 Kite Realty Group | kiterealty.com

Slide 24: Multi-family JV development on unused parking field

Slide 25: Macy's box redevelopment in Indianapolis

Slide 26: © 2021 Kite Realty Group | kiterealty.com

Slide 27: Eddy Street Phase III with Notre Dame

Slide 28: © 2021 Kite Realty Group | kiterealty.com

Slide 29: Migration shift to the Southern and Western US

Slide 30: Population migration by state and region

Slide 31: © 2021 Kite Realty Group | kiterealty.com

Slide 32: Omnichannel: stores fulfilling online orders

Slide 33: Open-air centers lower retailer costs

Slide 34: Omnichannel fulfillment methods

Slide 35: Essential and service-oriented tenants drive daily trips

Slide 36: Forward-Looking Statements

Slide 37: Net Operating Income and Same Property NOI

Slide 38: EBITDA and Adjusted EBITDA definitions

Slide 39: © 2021 Kite Realty Group | kiterealty.com

Slide 40: © 2021 Kite Realty Group | kiterealty.com

Slide 41: © 2021 Kite Realty Group | kiterealty.com