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8-K - FORM 8-K 09/11/2017 - KITE REALTY GROUP TRUST | form8k_09112017.htm |
2
SHARE PRICE
(AS OF 9/6/17) $20.45
EQUITY MARKET
CAPITALIZATION
(AS OF 9/6/17)
$1.8 BN
ENTERPRISE
VALUE
(AS OF 9/6/17)
$3.4 BN
DIVIDEND YIELD1 5.9%
MOODY’S/S&P
RATINGS Baa3/BBB-
PORTFOLIO SUMMARY
Number of Properties 118
Number of States 20
Total GLA (SF) 23.2mm
Total Retail Operating Portfolio Leased 94.5%
Retail Operating Shop Portfolio Leased 89.2%
Annualized Base Rent (ABR) Per SF, Including 3-R Properties2 $16.20
Average Center Size (SF) ~200,000
PORTFOLIO DEMOGRAPHICS3
Average Household Income 3 Mile: $86,100 5 Mile: $85,500
Population 3 Mile: 67,300 5 Mile: 165,700
COMPANY
SNAPSHOT
Necessity-Driven
Open-Air
Shopping
Centers
September 2017
INVESTOR UPDATE
20162015201420132012
$1.71
$1.92
$2.02
$1.99
$2.06
~5%
CAGR
FFO PER SHARE, AS ADJUSTED
Note: Unless otherwise indicated, the source of all data contained herein is publicly available information that has been filed with the Securities & Exchanges Commission as of Q2 ‘17.
(1) Source: SNL; Dividend yield calculated as most recent quarterly dividend, annualized and expressed as a percentage of the security price.
(2) 3-R Properties are assets that are in the process of being developed, repositioned, or repurposed, as described in our Quarterly Financial Supplement.
(3) Demographic data source: STI: Popstats based on estimated 2016 data from the U.S. Census Bureau.
3
~$40mm in annual free cash flow1
$83mm limited debt maturities through 2020
5% floating rate debt exposure
3.6x debt service coverage
76% of ABR from top 50 MSAs and destination locations
93% of tenants are internet resistant/omni-channel
66% of grocery-anchored assets
Focusing on experiential tenants, consisting of food,
fitness, entertainment, and service
3.6% historical same-property NOI growth over the last four years
$9.2mm of additional cash NOI from in-process 3-R and transitional projects
Enhancing assets via the 3-Rs:
Redevelop, Reposition, Repurpose
Top-tier operating metrics
INVESTMENT
GRADE
BALANCE
SHEET
HIGH-QUALITY
PORTFOLIO
OPERATIONS
AND GROWTH
OPPORTUNITIES
BUILDING VALUE AND CRITICAL MASS IN AND AROUND REGIONAL FOOTPRINT
(1) After common dividends, capital expenditures, tenant improvements, and leasing commissions.
CORE
STRATEGY
Gearing Up
Shareholder Value
the Kite Way
September 2017
INVESTOR UPDATE
4
DIVIDEND VS. 2017E FFO1
PRICE VS. 2017E FFO1
KIMAKRRPAIFRTDDRROICUERPTWRIKRGREGBRXCDR
66%PEER GROUPMEDIAN
59.1%
FRTAKRREGUEROICRPAIWRIKIMKRGRPTCDRBRXDDR
13.5xPEER GROUPMEDIAN
9.8x
CONSERVATIVE FFO
PAYOUT RATIO
SUPPORTS FUTURE
DIVIDEND INCREASES
DISCOUNTED MULTIPLE
PROVIDES ATTRACTIVE
INVESTMENT
OPPORTUNITY
59.1%
DIVIDEND VS. 2017E FFO1
9.8x
PRICE VS. 2017E FFO1
(1) 2017E FFO per share refers to consensus estimates for companies as of August 2017 per FactSet, which may not reflect the Company’s or the peer companies’ estimates. FFO Payout Ratio calculated as dividends by 2017E FFO, on a per share basis.
September 2017
INVESTOR UPDATETOTAL RETURN KRG Provides Attractive Investment Opportunity
5
3.6%
SPNOI GROWTH AS
REPORTED OVER
LAST 4 YEARS
QUARTERLY AVERAGE SPNOI GROWTH FROM Q2'13-Q2'171
ROIC AKR KRG REG RPAI WRI BRX FRT DDR RPT KIM CDR
5.1%
4.1%
3.4%
3.6%
4.1%
3.4% 3.3%
3.1% 3.1%
2.7% 2.7%
2.5%
2.2%
1.2%
3.1%PEER AVERAGE
KRG SPNOI ADJ. FOR BAD DEBT EXPENSEKRG SPNOI AS REPORTEDKRG SPNOI EXCLUDING 3-R IMPACT
(1) Figures exclude redevelopments, when information is available, averaged on a quarterly basis from supplemental data for Q2’13-Q2’17. Our computation of NOI and Same Property NOI may not be comparable to the methodology used by other REITs.
Excludes companies that have not been public for the four-year time period.
September 2017
INVESTOR UPDATE
OPERATIONAL
EXCELLENCE
Kite’s Consistent, Strong Operational
Performance Is at the Top End of Its Peer Group
September 2017
INVESTOR UPDATE
HIGH-QUALITY
PORTFOLIO
Necessity-Driven and
Experiential-Based
Open-Air
Shopping Centers
7
NORTHEAST
11.4%
OF ABR
SOUTHEAST
18.4%
OF ABR
FLORIDA
24.3%
OF ABR
MID-CENTRAL
16.8%
OF ABR
WEST
12.1%
OF ABR
MIDWEST
17.0%
OF ABR
76% OF ABR DERIVED FROM TOP 50 MSAs AND DESTINATION LOCATIONS1
(1) Destination locations (i.e., areas with high-disposable income) include Beechwood Promenade in Athens, GA, Eddy Street Commons in South Bend, IN, Gainesville Plaza in Gainesville, FL, as well as Kings Lake Square, Pine Ridge Crossing, Riverchase Plaza, Shops at Eagle Creek, Tamiami
Crossing, Tarpon Bay Plaza, and Courthouse Shadows, all located in Naples, FL.
September 2017
INVESTOR UPDATE
GEOGRAPHIC
DIVERSITY Well-Positioned Real Estate Footprint
118
PROPERTIES ACROSS
THE COUNTRY
IN 6 REGIONS
8
CITY CENTER MSA: New York City, NY LANDSTOWN COMMONS MSA: Virginia Beach, VA
CENTENNIAL CENTER MSA: Las Vegas, NV PORTOFINO SHOPPING CENTER MSA: Houston, TX
OWNED
GLA 365,905 SF
ABR
PER SF $27.19
OWNED
GLA 398,349 SF
ABR
PER SF $19.17
OWNED
GLA 334,205 SF
ABR
PER SF $24.85
OWNED
GLA 386,414 SF
ABR
PER SF $19.73
September 2017
INVESTOR UPDATE
HIGH-QUALITY
PROPERTIES
Top 12 Centers Comprise 28%
of Total Core Portfolio ABR
9
PARKSIDE TOWN COMMONS MSA: Raleigh, NC DELRAY MARKETPLACE MSA: Miami, FL
THE LANDING AT TRADITION MSA: Port St. Lucie, FL CENTENNIAL GATEWAY MSA: Las Vegas, NV
OWNED
GLA 347,071 SF
ABR
PER SF $19.87
OWNED
GLA 260,138 SF
ABR
PER SF $26.00
OWNED
GLA 360,974 SF
ABR
PER SF $15.72
OWNED
GLA 193,033 SF
ABR
PER SF $24.14
September 2017
INVESTOR UPDATE
HIGH-QUALITY
PROPERTIES
Top 12 Centers Comprise 28%
of Total Core Portfolio ABR
10
DRAPER PEAKS MSA: Salt Lake City, UT PLAZA AT CEDAR HILL MSA: Dallas, TX
EASTERN BELTWAY MSA: Las Vegas, NV SUNLAND TOWNE CENTER MSA: El Paso, TX
OWNED
GLA 227,494 SF
ABR
PER SF $19.63
OWNED
GLA 302,458 SF
ABR
PER SF $13.25
OWNED
GLA 162,444 SF
ABR
PER SF $24.06
OWNED
GLA 306,437 SF
ABR
PER SF $11.98
September 2017
INVESTOR UPDATE
HIGH-QUALITY
PROPERTIES
Top 12 Centers Comprise 28%
of Total Core Portfolio ABR
11
Top 10 Tenants by ABR Credit Rating # Stores % ABR
1 The TJX Companies, Inc. A+ 22 2.5%
2 Publix Supermarkets, Inc. A 13 2.3%
3 Petsmart, Inc. B+ 19 2.2%
4 Bed Bath & Beyond, Inc. BBB+ 19 2.2%
5 Ross Stores, Inc. A- 18 2.1%
6 Lowe's Companies, Inc. A- 5 1.9%
7 Office Depot B 15 1.6%
8 Dick's Sporting Goods, Inc. NR 8 1.5%
9 Ascena Retail Group BB- 34 1.5%
10 Michaels Stores, Inc. BB- 14 1.5%
TOTAL 167 19.3%
INVESTMENT GRADE-RATED TOP TENANTS
2017 LEASE ACTIVITY EXAMPLES
September 2017
INVESTOR UPDATE
DIVERSE
TENANT BASE
Strong Mix of High-Quality Tenants
Across Our Diversified Portfolio
12
Asset Classification Key
Power Center (No Grocer): 3 + anchors over 20K SF
Grocer: No more than 2 anchors over 20K SF in addition to grocer
Power Center (w/Grocer): 3 + anchors over 20K SF in addition to grocer
(1) Grocer includes traditional grocers, specialty grocers, and big box retailers that have a grocer component.
GROCER
28%
NON-GROCER
STRIP
4%
LIFESTYLE
CENTER
3%
COMMERCIAL
3%
UNANCHORED
STRIP
1%
POWER/
COMMUNITY
CENTER
(W/ GROCER)
38%
POWER
CENTER
(NO GROCER)
23%
66% OF ABR
GENERATED FROM
ASSETS ANCHORED
WITH A GROCER1
LIVINGSTON SHOPPING CENTER
COBBLESTONE PLAZA
KINGS LAKE SQUARE
EDDY STREET COMMONS
AT NOTRE DAME
DIVERSE
TENANT BASE
Necessity-Focused
Retail Portfolio
September 2017
INVESTOR UPDATE
13
INTERNET-RESISTANT 52.3%
Services, Entertainment 21.3%
Grocer, Specialty Stores 15.0%
Restaurants 16.0%
MULTI-CHANNEL 40.4%
Soft Goods 14.5%
Home Improvement Goods 11.8%
Discount Retailers 10.6%
Sporting Goods 3.5%
INTERNET RISK 7.3%
Electronic / Books 4.9%
Office Supplies 2.4%
WELL-POSITIONED TO MANAGE EVOLVING CONSUMER
PREFERENCES WITH EXPERIENTIAL TENANTS
TENANT TYPE
COMPOSITION
BY ABR
MULTI-
CHANNEL
40.4%
INTERNET-
RESISTANT
52.3%
INTERNET
RISK
7.3%
Kite’s tenant base is 81% non-apparel and
93% internet-resistant / multi-channel.1
(1) Apparel tenants comprise 64.1% of soft goods and 88.0% of discount retailers.
September 2017
INVESTOR UPDATE
DIVERSE
TENANT BASE
Internet-Resistant Retail Base
14
RECENT TENANT OPENINGS
FOOD / FITNESS /
ENTERTAINMENT /
SERVICE
DISCOUNT RETAILERS /
SOFT GOODS / SPORTING
GOODS / SPECIALTY
91% OF TOTAL
SQUARE FEET
OPENED
DIVERSE
TENANT BASE
Enhancing Kite’s
Portfolio
with Strong
Retail Tenants
September 2017
INVESTOR UPDATE
15
MINIMAL IMPACT REALIZED IN 2017: <1% OF ABR1
TENANT
# OF KRG
LOCATIONS AT
3/31/2017
# OF KRG
LOCATIONS AT
8/31/2017
REMAINING ABR
EXPOSURE AT 8/31/17
Gander Mountain 1 0 None
HH Gregg 1 0 None
JCPenney 3 3 0.14%
Kmart / Sears 1 / 2 1 / 2 0.32% / 0.20%
Macy’s 1 1 0.11%
Marsh Supermarkets 1 0 None
Payless 9 8 0.23%
Rue 21 8 2 0.05%
No exposure to the following retailers that have filed bankruptcy or have
announced store closings:
Abercrombie & Fitch, American Apparel, Banana Republic, BCBG, bebe, Dillard’s,
Eastern Outfitters, Guess, True Religion, Wet Seal
(1) Includes ABR from operating and redevelopment properties from KRG Q2’17 financial supplemental.
DIVERSE
TENANT BASE
Minimal Exposure
to Announced
Store Closures
September 2017
INVESTOR UPDATE
September 2017 Investor Update
GROWTH
OPPORTUNITIES
Increasing Value Through
Efficient Operations and
the 3-R Platform
17
• Attractive NOI Margin: 74.4%, trailing twelve months
• Efficient G&A / Revenues: 5.9%, trailing twelve months
• Opportunity Areas: Operating expense savings, overage rent,
and ancillary income
• New and renewal cash rent spreads of 18.6% and 7.1%,
respectively, in 2016
• Embedded average contractual rent bumps of ~1.5%
• Fixed CAM recovery initiative, ~20% of operating portfolio currently
with goal to increase to ~50%
• $9.2mm of additional cash NOI from $68.5mm-$74.0mm
in-process 3-R and transitional projects
• Seven future 3-R opportunities with a total cost of $65-$85mm
• Potential future acquisitions assuming a more favorable
cost of capital
• Anchor lease-up from 97% to 98.5%, or ~153,000 SF
• Small shops leased at 89.2% with additional upside to 90% +
OPERATING
PROPERTIES
CONTRACTUAL
RENT STEPS /
FIXED CAM
RECOVERY
3-R INITIATIVE /
DEVELOPMENT /
ACQUISITIONS
OCCUPANCY
GROWTH
INCREASING
VALUE
Embedded
NOI Growth
Opportunities
in Portfolio
September 2017
INVESTOR UPDATE
18
KRG CONSISTENTLY RANKS IN TOP TIER ACROSS PEERS FOR EFFICIENCY
ROIC
75.1%
KRG
74.4%
BRX
73.4%
KIM
72.5%
RPAI
70.1%
WRI
68.7% 68.5%
FRT
NOI MARGIN %
REG
72.3%
DDR
71.6%
RPT
71.5%
FRT
4.1%
WRI
4.6%
ROIC
5.3%
KRG
5.9%
KIM
8.3%
RPT
8.8% 9.1
%
DDR
G&A / REVENUES %
BRX
7.2%
RPAI
7.7%
REG
8.3%
(1) Data reflects trailing four quarters average as of Q2’17. Reflects pro rata income statement figures.
INCREASING
VALUE
Top-Tier Operating
Efficiency Metrics
September 2017
INVESTOR UPDATE
19
(1) KRG Supplementals Q4’10 through Q2’17.
Q2'172016201520142013201220112010
92.2%
93.3%
94.2%
95.3%
94.8%
95.4% 95.4%
94.5%
2.
5
%
GR
O
WT
H
SINCE
2010 Q2'172016201520142013201220112010
$12.80
$13.26
$12.95
$13.18
$15.15 $15.22
$15.78
$16.20
26.
6
%
GR
O
WT
H
SINCE
2010
Q2'172016201520142013201220112010
78.1%
79.5%
82.5%
85.5% 85.7
%
87.6%
88.9% 89.2
%
14.
2
%
GR
O
WT
H
SINCE
2010 Q2'172016201520142013201220112010
85.7%
87.3%
82.5%
85.9%
89.6%
87.3%
89.2%
93.1%
8.
6
%
GR
O
WT
H
SINCE
2010
RETAIL PORTFOLIO LEASE % ABR PER SQUARE FOOT
SMALL SHOP LEASE % RETAIL RECOVERY RATIO
September 2017
INVESTOR UPDATE
INCREASING
VALUE
Proven Ability to Create
Positive Operating Results1
20
REDEVELOP REPURPOSE REPOSITION
Substantial renovations,
including teardowns,
remerchandising,
and exterior/interior
improvements
Significant property
alterations, including
product-type changes
Less substantial asset
enhancements, generally
$5mm or less
investment
COMPLETED IN-PROCESS FUTURE
$22.9mm of 3-R projects
with 13% Return on
Investment (ROI)
$68.5mm - $74.0mm of
projects with 8-9% ROI
$65.0mm - $85.0mm of
projects with 9-11% ROI
SOURCE OF CAPITAL
Free cash flow + non-core, low-growth property sales
KITE’S 3-R PLATFORM HAS GENERATED ATTRACTIVE RISK-ADJUSTED
RETURNS, IMPROVED PROPERTY-LEVEL CASH FLOW AND ASSET
QUALITY, AND INCREASED SHAREHOLDER VALUE
RAMPART COMMONS MSA: Las Vegas, NV FISHERS STATION MSA: Indianapolis, IN
3-R OVERVIEW
Redevelopment
Execution and
Opportunity
September 2017
INVESTOR UPDATE
September 2017 Investor Update
INVESTMENT GRADE
BALANCE SHEET
Well-Positioned
for the Future
22(1) KRG Supplementals Q4’11 through Q2’17.
Q2'17201620152014201320122011
9.7x
8.6x
7.4x
6.5x
7.0x 7.0x
6.8x
2.9x
LOWERED
Q2'17201620152014201320122011
1.6x 1.6x
2.0x
3.2x
3.4x
3.3x
3.6x
2.0x
INCREASED
Q2'17201620152014201320122011
42%
28%
30%
23%
12%
7%
5%
3,700
bps
DECREASED
NET DEBT / EBITDA DEBT SERVICE COVERAGE FLOATING RATE EXPOSURE
September 2017
INVESTOR UPDATE
STRONG
BALANCE SHEET
Significantly Improved Metrics1
23
6.0
YEARS
WEIGHTED AVERAGE
DEBT MATURITY
WEIGHTED AVERAGE DEBT MATURITIES AND WEIGHTED AVERAGE INTEREST RATE1
DDR ROIC BRX RPAI REG RPT KRG WRI KIM
4.0%
6.0 YEARS
WEIGHTED AVERAGE DEBT MATURITY (YEARS)
WEIGHTED AVERAGE INTEREST RATE (%)
(1) Peer data sourced from publicly available Q2’17 information.
Note: Only inclusive or peers who provided both weighted average debt maturity and weighted average interest rates.
4.0%
WEIGHTED AVERAGE
INTEREST RATE
September 2017
INVESTOR UPDATE
STRONG
BALANCE SHEET
Efficient Debt Structure Relative to Peers
24(1) Chart excludes annual principal payments and net premiums on fixed rate
ONLY
$83mm
THROUGH 2020
SCHEDULE OF DEBT MATURITIES ($ IN MILLIONS)1
2017 2018 2019 2020 2021 2022 2023 20252024 2027+2026
MORTGAGE DEBT LINE OF CREDIT TERM LOAN PRIVATE PLACEMENT SENIOR UNSECURED NOTES
38 45
80 75
11
300
169
215 215
95
33
200
200
Only $83mm of debt
maturing through 2020
September 2017
INVESTOR UPDATE
STRONG
BALANCE SHEET
Well-staggered Debt Maturity Profile
25
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 Exchange Act of 1934.
Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and
other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual
results, performance, transactions or achievements, financial or otherwise, may differ materially from the results, performance, transactions or
achievements, financial or otherwise, expressed or implied by the forward-looking statements. Risks, uncertainties and other factors that might
cause such differences, some of which could be material, include but are not limited to:
• national and local economic, business, real estate and other market conditions, particularly in light of low growth in the U.S. economy
as well as economic uncertainty caused by fluctuations in the prices of oil and other energy sources;
• financing risks, including the availability of, and costs associated with, sources of liquidity;
• our ability to refinance, or extend the maturity dates of, our indebtedness;
• the level and volatility of interest rates;
• the financial stability of tenants, including their ability to pay rent and the risk of tenant bankruptcies;
• the competitive environment in which the Company operates;
• acquisition, disposition, development and joint venture risks;
• property ownership and management risks;
• our ability to maintain our status as a real estate investment trust for federal income tax purposes;
• potential environmental and other liabilities;
• impairment in the value of real estate property the Company owns;
• the impact of online retail and the perception that such retail has on the value of shopping center assets;
• risks related to the geographical concentration of our properties in Florida, Indiana and Texas;
• insurance costs and coverage;
• risks associated with cybersecurity attacks and the loss of confidential information and other business disruptions;
• other factors affecting the real estate industry generally; and
• other risks identified in reports the Company files with the Securities and Exchange Commission (“the SEC”) or in other documents that
it publicly disseminates, including, in particular, the section titled “Risk Factors” in our Annual Report on Form
• 10-K for the fiscal year ended December 31, 2016, and in our quarterly reports on Form 10-Q.
The Company undertakes no obligation to publicly update or revise these forward-looking statements, whether as a result of new information,
future events or otherwise.
September 2017
INVESTOR UPDATEDISCLAIMER
26
FREE CASH FLOW
Free Cash Flow is reflected on an annual basis and is defined as Funds From Operations (FFO) as adjusted, less capital expenditures, capitalized
internal costs, tenant improvements, plus non-cash items, and after dividends paid.
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 practices described in the
April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (“NAREIT”). The NAREIT white paper defines FFO
as net income (determined in accordance with GAAP), excluding gains (or losses) from sales and impairments of depreciated property, plus de-
preciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
Considering the nature of our business as a real estate owner and operator, the Company believes that FFO is helpful to investors in measuring
our operational performance because it excludes various items included in net income that do not relate to or are not indicative of our operat-
ing performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and
peer analyses of operating performance more difficult. For informational purposes, the Company has also provided FFO adjusted for transaction
costs and a severance charge in 2016. The Company believes this supplemental information provides a meaningful measure of our operating
performance. The Company believes our presentation of FFO, as adjusted, provides investors with another financial measure that may facilitate
comparison of operating performance between periods and among our peer companies. FFO should not be considered as an alternative to net
income (determined in accordance with GAAP) as an indicator of our financial performance, is not an alternative to cash flow from operating
activities (determined in accordance with GAAP) as a measure of our liquidity, and is not indicative of funds available to satisfy our cash needs,
including our ability to make distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define
the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. A reconciliation
of net income (computed in accordance with GAAP) to FFO is included elsewhere in this Financial Supplement.
ADJUSTED FUNDS FROM OPERATIONS
Adjusted Funds From Operations (“AFFO”) is a non-GAAP financial measure of operating performance used by many companies in the REIT
industry. AFFO modifies FFO, as adjusted for certain cash and non-cash transactions not included in FFO, as adjusted. AFFO should not be con-
sidered an alternative to net income as an indication of the company’s performance or as an alternative to cash flow as a measure of liquidity
or ability to make distributions. Management considers AFFO a useful supplemental measure of the company’s performance. The Company’s
computation of AFFO may differ from the methodology for calculating AFFO used by other REITs, and therefore, may not be comparable to such
other REITs. A reconciliation of net income (computed in accordance with GAAP) to AFFO is included elsewhere in this Financial Supplement.
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 tenants, less our property operating ex-
penses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and corporate level expenses. The Compa-
ny believes that NOI is helpful to investors as a measure of our operating performance because it excludes various items included in net income
that do not relate to or are not indicative of our operating performance, such as depreciation and amortization, interest expense, and impair-
ment, if any.
September 2017
INVESTOR UPDATENON-GAAP FINANCIAL MEASURES
27
NET OPERATING INCOME AND SAME PROPERTY NET OPERATING INCOME (CONT.)
The Company also uses same property NOI (“Same Property NOI”), a non-GAAP financial measure, to evaluate the performance of our proper-
ties. Same Property NOI excludes properties that have not been owned for the full period presented. It also excludes net gains from outlot sales,
straight-line rent revenue, bad debt expense and recoveries, lease termination fees, amortization of lease intangibles and significant prior period
expense recoveries and adjustments, if any. The Company believes that Same Property NOI is helpful to investors as a measure of our operating
performance because it includes only the NOI of properties that have been owned for the full period presented, which eliminates disparities in
net income due to the acquisition or disposition of properties during the particular period presented and thus provides a more consistent metric
for the comparison of our properties. The year to date results represent the sum of the individual quarters, as reported.
NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indica-
tors of our financial performance. Our computation of NOI and Same Property NOI may differ from the methodology used by other REITs, and
therefore may not be comparable to such other REITs.
When evaluating the properties that are included in the same property pool, the Company has established specific criteria for determining the in-
clusion of properties acquired or those recently under development. An acquired property is included in the same property pool when there is a
full quarter of operations in both years subsequent to the acquisition date. Development and redevelopment properties are included in the same
property pool four full quarters after the properties have been transferred to the operating portfolio. A redevelopment property is first excluded
from the same property pool when the execution of a redevelopment plan is likely and the Company begins recapturing space from tenants. For
the quarter ended June 30, 2017, the Company excluded eight redevelopment properties and the recently completed Northdale Promenade from
the same property pool that met these criteria and were owned in both comparable periods.
EARNINGS BEFORE INTEREST EXPENSE, INCOME TAX EXPENSE, DEPRECIATION AND AMORTIZATION (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 de-
fines as EBITDA less (i) EBITDA from unconsolidated entities, (ii) gains on sales of operating properties or impairment charges, (iii) other income
and expense, (iv) noncontrolling interest EBITDA and (v) other non-recurring activity or items impacting comparability from period to period.
Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. Net Debt to Adjusted EBITDA is the Company’s
share of net debt divided by Annualized Adjusted EBITDA. EBITDA, Adjusted EBITDA, Annualized Adjusted EBITDA and Net Debt to Adjusted
EBITDA, as calculated by us, are not comparable to EBITDA and EBITDA-related measures reported by other REITs that do not define EBITDA
and EBITDA-related measures exactly as we do. EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated
from operating activities in accordance with GAAP, and should not be considered alternatives to net income as an indicator of performance or as
alternatives to cash flows from operating activities as an indicator of liquidity.
Considering the nature of our business as a real estate owner and operator, the Company believes that EBITDA, Adjusted EBITDA and the ratio
of Net Debt to Adjusted EBITDA are helpful to investors in measuring our operational performance because they exclude various items included
in net income that do not relate to or are not indicative of our operating performance, such as gains or losses from sales of depreciated prop-
erty and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational
purposes, the Company has also provided Annualized Adjusted EBITDA, adjusted as described above. The Company believes this supplemental
information provides a meaningful measure of our operating performance. The Company believes presenting EBITDA and the related measures
in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.
September 2017
INVESTOR UPDATENON-GAAP FINANCIAL MEASURES
28
September 2017
INVESTOR UPDATE
APPENDIX – CONSOLIDATED
STATEMENTS OF OPERATIONS
7
Kite Realty Group Trust
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 20 1 7 and 20 1 6
(U naudited)
($ in thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2 0 1 7 2 0 1 6 2 0 1 7 2 0 1 6
Revenue:
Min i m u m re n t $ 68 , 3 9 5 $ 68 , 4 5 5 $ 137,34 1 $ 13 5 , 9 1 8
Ten a n t re i m b u r s e m e n t s 18, 5 2 1 17,00 6 37,09 1 35,1 6 1
Oth e r pr o p e r t y re l a t e d re v e n u e 5,733 2,11 4 8,3 3 0 5,0 4 6
Total revenue 92,6 4 9 87,575 182 ,762 176,1 2 5
E xpenses:
Pro p e r t y op e r a t i n g 12, 1 3 9 11,3 4 6 25,0 9 1 23,5 3 8
Rea l es t a t e ta x e s 11,2 2 8 10,5 0 3 21,5 5 9 21,6 37
Gen e r a l , ad m i n i s t r a t i v e , an d oth e r 5,4 8 8 4,8 5 6 10,9 5 8 10,1 47
Tra n s a c t i o n co s t s — 2,771 — 2,771
Im p a i r m e n t ch a rg e — — 7,411 —
Dep r e c i a t i o n an d am o r t i z a t i o n 42,710 43,8 4 1 88,5 4 0 86,0 8 2
Total expenses 71,56 5 73,3 17 153 , 5 5 9 144 , 175
Operating income 21,0 8 4 14,2 5 8 29,2 0 3 31,9 5 0
Inte r e s t ex p e n s e (16 , 4 3 3 ) (15 , 5 0 0 ) (32 , 878 ) (30 , 8 2 5 )
Inc o m e ta x (e x p e n s e ) be n e f i t of ta x a b l e R E I T su b s i d i a r y (3 ) (33 8 ) 30 (748 )
Oth e r ex p e n s e , ne t (80 ) (11 0 ) (21 9 ) (94 )
I n come (loss) from continuing operations 4,5 6 8 (1,6 9 0 ) (3,8 6 4 ) 283
Gain s on sa l e s of op e r a t i n g pr o p e r t i e s 6,2 9 0 194 15,1 6 0 194
Net income (loss) 10,8 5 8 (1,4 9 6 ) 11,2 9 6 477
Net in c o m e att r i b u t a b l e to no n c o n t r o l l i n g in t e r e s t s (678 ) (39 9 ) (1,11 0 ) (971 )
Net income (loss) attributable to Kite Realty Group Trust common
shareholders $ 10, 1 8 0
$ (1, 8 9 5 ) $ 10 , 1 8 6
$ (49 4 )
I n come (loss) per common share - basic $ 0.1 2 (0.0 2 ) 0.1 2 (0.0 1 )
I n come (loss) per common share - diluted $ 0.1 2 $ (0. 0 2 ) $ 0.1 2 $ (0. 0 1 )
Weig h t e d av e r a g e co m m o n sh a r e s ou t s t a n d i n g - bas i c 83,5 8 5 ,736 83,375,765 83,575,5 87 83,3 6 2 , 1 3 6
Weig h t e d av e r a g e co m m o n sh a r e s ou t s t a n d i n g - dilu t e d 83, 6 5 2 , 6 27 83,375,765 83,6 4 0 , 3 27 83,3 6 2 , 1 3 6
Cash dividends declared per common share $ 0.3 0 2 5 $ 0.2 875 $ 0.6 0 5 0 $ 0.5750
29
(1) “FFO of the Operating Partnership” measures 100% of the operating performance of the Operating Partnership’s real estate properties. “FFO attributable to Kite Realty Group Trust common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest
in the Operating Partnership.
September 2017
INVESTOR UPDATE
APPENDIX – RECONCILIATION
OF FFO TO NET INCOME
($ in thousands, except per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2017 2016 2017 2016
Funds From Operations
Consolidated net income $ 10,858 $ (1,496 ) $ 11,296 $ 477
Less: net income attributable to noncontrolling interests in properties (438 ) (461 ) (870 ) (922 )
Less: gains on sales of operating properties (6,290 ) (194 ) (15,160 ) (194 )
Add: impairment charge — — 7,411 —
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests 42,050
43,545
87,416
85,599
FFO of the Operating Partnership1 46,180 41,394 90,093 84,960
Less: Limited Partners' interests in FFO (1,056 ) (809 ) (2,045 ) (1,790 )
FFO attributable to Kite Realty Group Trust common shareholders1 $ 45,124 $ 40,585 $ 88,048 $ 83,170
FFO, as defined by NAREIT, per share of the Operating Partnership - basic $ 0.54 $ 0.49 $ 1.05 $ 1.00
FFO, as defined by NAREIT, per share of the Operating Partnership - diluted $ 0.54 $ 0.48 $ 1.05 $ 0.99
FFO of the Operating Partnership1 $ 46,180 $ 41,394 $ 90,093 $ 84,960
Add: transaction costs — 2,771 — 2,771
Add: severance charge — — — 500
FFO, as adjusted, of the Operating Partnership $ 46,180 $ 44,165 $ 90,093 $ 88,231
FFO, as adjusted, per share of the Operating Partnership - basic $ 0.54 $ 0.52 $ 1.05 $ 1.03
FFO, as adjusted, per share of the Operating Partnership - diluted $ 0.54 $ 0.52 $ 1.05 $ 1.03
Weighted average common shares outstanding - basic 83,585,736 83,375,765 83,575,587 83,362,136
Weighted average common shares outstanding - diluted 83,652,627 83,475,474 83,640,327 83,460,521
Weighted average common shares and units outstanding - basic 85,572,566 85,320,923 85,551,356 85,295,968
Weighted average common shares and units outstanding - diluted 85,639,457 85,420,633 85,616,096 85,394,353
FFO, as defined by NAREIT, per diluted share
Consolidated net income $ 0.13 $ (0.02 ) $ 0.13 $ 0.01
Less: net income attributable to noncontrolling interests in properties (0.01 ) (0.01 ) (0.01 ) (0.01 )
Less: gains on sales of operating properties (0.07 ) — (0.17 ) —
Add: impairment charge — — 0.08 —
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests 0.49
0.51
1.02
1.00
FFO, as defined by NAREIT, of the Operating Partnership per diluted share1 $ 0.54 $ 0.48 $ 1.05 $ 1.00
Add: transaction costs — 0.04 — 0.03
Add: severance charge — — — —
FFO, as adjusted, of the Operating Partnership per diluted share $ 0.54 $ 0.52 $ 1.05 $ 1.03
30
(1) Same Property NOI excludes eight properties in redevelopment, the recently completed Northdale Promenade as well as office properties (Thirty South Meridian and Eddy Street Commons).
(2) Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent. Calculated as a weighted average based on the timing of cash rent commencement and expiration during the period.
(3) Same Property NOI excludes net gains from outlot sales, straight-line rent revenue, bad debt expense and recoveries, lease termination fees, amortization of lease intangibles and significant prior period expense recoveries and adjustments, if any.
(4) See pages 27 and 28 of Q2 2017 supplemental for further detail of the properties included in the 3-R initiative.
(5) Includes non-cash activity across the portfolio as well as net operating income from properties not included in the same property pool.
September 2017
INVESTOR UPDATE
APPENDIX – RECONCILIATION OF
SAME PROPERTY NOI TO NET INCOME
($ in thousands)
Three Months Ended June 30, Six Months Ended June 30,
2017 2016
%
Change 2017 2016
%
Change
Number of properties for the quarter1 102 102
Leased percentage at period end 94.3 % 95.1 % 94.3 % 95.1 %
Economic Occupancy percentage2 93.8 % 92.7 % 93.9 % 93.0 %
Minimum rent $ 58,028 $ 56,358 $ 116,809 $ 113,716
Tenant recoveries 16,233 15,231 33,059 31,640
Other income 168 121 453 264
74,429 71,710 150,321 145,620
Property operating expenses (9,992 ) (9,547 ) (19,747 ) (18,914 )
Real estate taxes (9,945 ) (9,381 ) (19,987 ) (19,509 )
(19,937 ) (18,928 ) (39,734 ) (38,423 )
Same Property NOI3 $ 54,492 $ 52,782 3.2% $ 110,587 $ 107,197 3.2%
Same Property NOI - excluding the impact of the 3-R
initiative4 3.8% 3.9%
Reconciliation of Same Property NOI to Most Directly
Comparable GAAP Measure:
Net operating income - same properties $ 54,492 $ 52,782 $ 110,587 $ 107,197
Net operating income - non-same activity5 15,655 13,287 26,996 24,629
Other expense, net (83 ) (448 ) (189 ) (842 )
General, administrative and other (5,488 ) (4,856 ) (10,958 ) (10,147 )
Transaction costs — (2,771 ) — (2,771 )
Bad Debt Expense – Same Properties (865 ) (343 ) (1,471 ) (876 )
Impairment charge — — (7,411 ) —
Depreciation and amortization expense (42,710 ) (43,841 ) (88,540 ) (86,082 )
Interest expense (16,433 ) (15,500 ) (32,878 ) (30,825 )
Gains on sales of operating properties 6,290 194 15,160 194
Net income attributable to noncontrolling interests (678 ) (399 ) (1,110 ) (971 )
Net income (loss) attributable to common shareholders $ 10,180 $ (1,895 ) $ 10,186 $ (494 )
31
(1) Relates to (a) a reduction reflecting the second quarter GAAP operating income of $0.8 million for properties sold during the second quarter of 2017, which adjustment to EBITDA (an income measure) corresponds with the use of proceeds from such sales to pay down the Credit Facility, as
reflected in the change in net debt (a balance sheet measure) for the period ending June 30, 2017, and (b) a reduction of approximately $2.6 million in other property related revenue to normalize the impact on comparability of a $4.9 million net gain from the sale of an outlot at Cove Center
during the second quarter of 2017 to the Company’s quarterly average of other property related revenue.
(2) Represents Adjusted EBITDA for the three months ended June 30, 2017 (as shown in the table above) multiplied by four.
(3) Partner share of consolidated joint venture debt is calculated based upon the partner’s pro-rata ownership of the joint venture, multiplied by the related secured debt balance. In all cases, this debt is the responsibility of the consolidated joint venture.
September 2017
INVESTOR UPDATE
APPENDIX – RECONCILIATION OF
EBITDA/ADJUSTED EBITDA TO NET INCOME
($ in thousands)
Three Months Ended
June 30, 2017
Consolidated net income $ 10,858
Adjustments to net income
Depreciation and amortization 42,710
Interest expense 16,433
Income tax benefit of taxable REIT subsidiary 3
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 70,004
Adjustments to EBITDA:
Unconsolidated EBITDA 34
Gain on sale of operating property (6,290 )
Pro-forma adjustments1 (3,369 )
Other income and expense, net 80
Noncontrolling interest (432 )
Adjusted EBITDA 60,027
Annualized Adjusted EBITDA2 $ 240,108
Company share of net debt:
Mortgage and other indebtedness 1,675,064
Less: Partner share of consolidated joint venture debt3 (13,373 )
Less: Cash, cash equivalents, and restricted cash (36,352 )
Less: Net debt premiums and issuance costs, net 1,146
Company Share of Net Debt 1,626,485
Net Debt to Adjusted EBITDA 6.77x
888 577 5600
kiterealty.com
30 S MERIDIAN STREET
SUITE 1100
INDIANAPOLIS, IN 46204