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Section 1: 8-K (FORM 8-K Q1 2018)

Document


 UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
FORM 8-K
 
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): April 25, 2018
 
KITE REALTY GROUP TRUST
(Exact name of registrant as specified in its charter)
 
Maryland
1-32268
11-3715772
(State or other jurisdiction
(Commission
(IRS Employer
of incorporation)
File Number)
Identification Number)
 
 
 
30 S. Meridian Street
Suite 1100
Indianapolis, IN 46204
(Address of principal executive offices) (Zip Code)
 
 
(317) 577-5600
(Registrant’s telephone number, including area code)
 
 
Not applicable
(Former name or former address, if changed since last report)
      
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o






Item 2.02. Results of Operations and Financial Condition.
 
On April 25, 2018, Kite Realty Group Trust (the “Company”) announced its consolidated financial results for the quarter ended March 31, 2018. A copy of the Company’s press release is furnished as Exhibit 99.1 to this current report on Form 8-K. A copy of the Company’s First Quarter 2018 Supplemental Disclosure is furnished as Exhibit 99.2 to this current report on Form 8-K. The information contained in Item 2.02 of this current report on Form 8-K, including Exhibits 99.1 and 99.2, shall not be deemed “filed” with the Securities and Exchange Commission nor incorporated by reference in any registration statement filed by the Company under the Securities Act of 1933, as amended.
 
Item 9.01. Financial Statements and Exhibits.
 
(a) Not applicable.

(b) Not applicable.

(c) Not applicable.

(d) Exhibits.
 
Exhibit No.
 
Description
99.1
 
Kite Realty Group Trust Press Release dated April 25, 2018
99.2
 
Kite Realty Group Trust Fourth Quarter 2017 Supplemental Disclosure























SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
KITE REALTY GROUP TRUST
 
 
Date: April 25, 2018
By:
/s/ Daniel R. Sink
 
 
Daniel R. Sink
 
 
Executive Vice President and
 
 
Chief Financial Officer































EXHIBIT INDEX
Exhibit
 
Document
99.1
 
99.2
 



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Section 2: EX-99.1 (EXHIBIT 99.1 EARNINGS RELEASE)

Exhibit


 
Exhibit 99.1

393175801_pressrellogo12.jpg

PRESS RELEASE

Contact Information:
Dan Sink
EVP & CFO
(317) 577-5609
dsink@kiterealty.com


Kite Realty Group Trust Reports First Quarter 2018 Operating Results

Indianapolis, Ind., April 25, 2018 - Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced today its operating results for the first quarter ended March 31, 2018. Financial statements, exhibits, and reconciliations of non-GAAP measures attached to this release include the details of the Company’s results.
First Quarter Highlights
Net loss attributable to common shareholders of $17.9 million, or $0.21 per common share, which included a $24.1 million non-cash charge due to the impairment of an operating property.
Funds From Operations of the Operating Partnership (“FFO”), as defined by NAREIT, of $43.5 million, or $0.51 per diluted common share.
Increased Same-Property Net Operating Income (“NOI”) 1.5% compared to the same period in the prior year.
Generated aggregate rent spreads on 58 comparable new and renewal leases of 2.3%, or 8.2% excluding one new anchor tenant that did not require the Company to spend any capital and one strategic anchor renewal.
Generated $63.0 million in gross proceeds from the disposition of two non-core shopping centers and used these proceeds to pay down the Company’s revolving line of credit.
Completed one Redevelopment, Repurpose and Reposition (“3-R”) project, Burnt Store Marketplace (Punta Gorda, FL), with a projected annualized return of 11.5% on incurred costs of $8.9 million.
Subsequent to quarter end, recast the Company’s unsecured revolving credit facility, increasing the size by $100 million to $600 million and extending the maturity date.

“We started 2018 with another quarter of strong operations and execution on our stated objectives,” said John Kite, Chairman and Chief Executive Officer. “We were able to meet our asset disposition goal in the first quarter and continue to look to market select assets to further reduce leverage. We generated another high return on a completed 3-R project and are working to deliver on our remaining initiatives, including our Big Box Surge.”




1



Financial & Portfolio Results
Financial Results
Net loss attributable to common shareholders for the three months ended March 31, 2018, was $17.9 million, compared to net income of $5,000 for the same period in 2017. First quarter 2018 results included a $24.1 million charge for an operating property impairment due to changes during the quarter in facts and circumstances underlying the Company’s expected future hold period of this property.
For the three months ended March 31, 2018, FFO, as defined by NAREIT, was $43.5 million, or $0.51 per diluted common share, compared to $43.9 million, or $0.51 per diluted common share, for the same period in the prior year.
Portfolio Operations
As of March 31, 2018, the Company owned interests in 115 operating and redevelopment properties totaling approximately 22.5 million square feet and 2 development projects currently under construction totaling 0.7 million square feet. The owned gross leasable area in the Company’s retail operating portfolio was 94.6% leased as of March 31, 2018, and the Company’s total portfolio was 94.2% leased.
Same-property NOI, which includes 102 operating properties, increased 1.5% in the first quarter compared to the same period in the prior year. The leased percentage of properties included in the same-property pool was 94.6% at March 31, 2018, compared to 95.1% in the same period in the prior year, while the economic occupancy percentage for the same periods were 93.3% and 94.0%, respectively.
The Company executed leases on 65 individual spaces totaling 417,830 square feet during the first quarter of 2018, including 58 comparable new and renewal leases for 391,348 square feet. Cash rent spreads on comparable new and renewal leases executed in the quarter were (2.2%) and 3.1%, respectively, for a blended cash rent spread of 2.3%. Excluding one new anchor tenant lease that did not require the Company to expend any capital and one strategic anchor renewal, new and renewal leases were 16.5% and 7.0%, respectively, for a blended cash rent spread of 8.2%. The blended leasing spread on a GAAP basis, which includes periodic contractual rent increases over the term of the lease, was 5.3%.
Several tenants opened in the first quarter, including the following anchors: Aldi at Bolton Plaza (Jacksonville, FL), Nordstrom Rack at Portofino Shopping Center (Houston, TX) and Skechers Outlet at Eastern Beltway (Las Vegas, NV).
The Company is making progress on its anchor space repositioning efforts (“Big Box Surge”). Gander Outdoors is taking the 30,045 square-foot space formerly occupied by Gander Mountain at Bayport Commons (Tampa, FL), and Party City is taking the 11,072 square-foot space formerly occupied by Home Consignment at Centennial Gateway (Las Vegas, NV).







2


Capital Recycling
In the first quarter, we completed the sale of two non-core operating properties: Trussville Promenade in Birmingham, Alabama, and Memorial Commons in Goldsboro, North Carolina. These sales generated $63.0 million in gross proceeds, which were used to pay down the Company’s revolving line of credit.
Balance Sheet
We continue to strengthen our balance sheet, as we have reduced our Net Debt to EBITDA from 6.92x at the end of the fourth quarter of 2017 to 6.76x. We currently have only $48.7 million of term maturities through 2020, and our debt portfolio has a weighted average maturity of 5.3 years.
Subsequent to quarter end, the Company successfully recast its unsecured revolving credit facility, increasing the size by $100 million to $600 million, extending the maturity date to April 22, 2022 (which can be further extended by up to two six month periods, subject to certain conditions), lowering the leverage pricing across the grid, and changing the definition of the capitalization rate from 6.75% to 6.50%, which increases total asset value and available borrowing capacity. Additional details are available in the Form 8-K filed by the Company on April 25, 2018.
Development and Redevelopment
During the quarter, we completed construction on one 3-R project, Burnt Store Marketplace (Punta Gorda, FL). We invested $8.9 million into this asset to demolish and rebuild the 45,000 square-foot Publix and upgrade the center for a projected annualized return of 11.5%.

The Company’s 3-R program currently includes six projects under various stages of construction, with estimated combined costs ranging from $61.5 to $66.5 million and an estimated combined annualized return ranging from 8.0% to 9.0%.
2018 Earnings Guidance
The Company maintains its guidance for 2018 FFO, as defined by NAREIT, in a range of $1.98 to $2.04 per diluted common share. Please refer to the full list of guidance assumptions on page 43 of the Company’s first quarter supplemental.
Guidance Range for Full Year 2018
Low
High
Consolidated net income/(loss) per diluted common share
$
(0.02)
 
$
0.04
 
Add: Depreciation, amortization and other
1.72
 
1.72
 
Add: Impairment Charge
 
0.28
 
 
0.28
 
FFO, as defined by NAREIT, per diluted common share
$
1.98
 
$
2.04
 

Earnings Conference Call
The Company will conduct a conference call to discuss its financial results on Thursday, April 26, 2018, at 12:00 p.m. Eastern Time. A live webcast of the conference call will be available online on the Company’s corporate website at www.kiterealty.com. The dial-in numbers are (844) 309-0605 for domestic callers and (574) 990-9933 for international callers (passcode 7895509). In addition, a webcast replay link will be available on the corporate website


3


About Kite Realty Group Trust
Kite Realty Group Trust is a full-service, vertically integrated real estate investment trust (REIT) that provides communities with convenient and beneficial shopping experiences. We connect consumers to tenants in desirable markets through our diverse portfolio of high-quality community, neighborhood, and lifestyle centers. Using operational, development, and redevelopment expertise, we continuously optimize our portfolio to maximize value and return to our shareholders. For more information, please visit our website at kiterealty.com.
Safe Harbor
Certain statements in this document that are not historical fact may constitute 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 and inflationary trends or outlook; financing risks, including the availability of, and costs associated with, sources of liquidity; the Company’s ability to refinance, or extend the maturity dates of, its 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; the Company’s ability to maintain its 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 competition and the perception that such competition has on the value of shopping center assets; risks related to the geographical concentration of the Company’s properties in Florida, Indiana and Texas; insurance costs and coverage; risks associated with cybersecurity attacks and the loss of confidential information and other business interruptions; and other factors affecting the real estate industry generally. The Company refers you to the documents filed by the Company from time to time with the SEC, specifically the section titled “Risk Factors” in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which discuss these and other factors that could adversely affect the Company’s results. 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.










4


Kite Realty Group Trust
Consolidated Balance Sheets
(Unaudited)

($ in thousands)
 
 
 
 
 
 
March 31,
2018
 
December 31,
2017
Assets:
 
 
 
 
Investment properties, at cost
 
$
3,865,567

 
$
3,957,884

Less: accumulated depreciation
 
(671,384
)
 
(664,614
)
 
 
3,194,183

 
3,293,270

 
 
 
 
 
Cash and cash equivalents
 
28,753

 
24,082

Tenant and other receivables, including accrued straight-line rent of $32,182 and $31,747 respectively, net of allowance for uncollectible accounts
 
57,172

 
58,328

Restricted cash and escrow deposits
 
9,795

 
8,094

Deferred costs and intangibles, net
 
108,612

 
112,359

Prepaid and other assets
 
20,342

 
16,365

Total Assets
 
$
3,418,857

 
$
3,512,498

Liabilities and Shareholders’ Equity:
 
 
 
 

Mortgage and other indebtedness, net
 
$
1,650,547

 
$
1,699,239

Accounts payable and accrued expenses
 
102,851

 
78,482

Deferred revenue and other liabilities
 
90,940

 
96,564

Total Liabilities
 
1,844,338

 
1,874,285

Commitments and contingencies
 
 
 
 

Limited Partners’ interests in the Operating Partnership and other redeemable noncontrolling interests
 
48,834

 
72,104

Shareholders’ Equity:
 
 
 
 

Kite Realty Group Trust Shareholders’ Equity:
 
 
 
 

Common Shares, $.01 par value, 225,000,000 shares authorized, 83,675,982 and 83,606,068 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
 
837

 
836

Additional paid in capital
 
2,073,316

 
2,071,418

Accumulated other comprehensive loss
 
5,147

 
2,990

Accumulated deficit
 
(554,313
)
 
(509,833
)
Total Kite Realty Group Trust Shareholders’ Equity
 
1,524,987

 
1,565,411

Noncontrolling Interests
 
698

 
698

Total Equity
 
1,525,685

 
1,566,109

Total Liabilities and Shareholders' Equity
 
$
3,418,857

 
$
3,512,498



5


Kite Realty Group Trust
Consolidated Statements of Operations
For the Three Months Ended March 31, 2018 and 2017
(Unaudited)

($ in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
 
 
2018
 
2017
 
Revenue:
 
 
 
 
 
  Minimum rent
 
$
68,965

 
$
68,946

 
  Tenant reimbursements
 
18,373

 
18,570

 
  Other property related revenue
 
1,063

 
2,596

 
  Fee income
 
1,362

 

 
Total revenue
 
89,763

 
90,112

 
Expenses:
 
 
 
 
 
  Property operating
 
12,470

 
12,953

 
  Real estate taxes
 
10,754

 
10,330

 
  General, administrative, and other
 
5,945

 
5,470

 
  Transaction costs
 

 

 
  Depreciation and amortization
 
38,556

 
45,830

 
  Impairment charge
 
24,070

 
7,411

 
Total expenses
 
91,795

 
81,994

 
Operating (loss) income
 
(2,032
)
 
8,118

 
  Interest expense
 
(16,337
)
 
(16,445
)
 
  Income tax benefit of taxable REIT subsidiary
 
23

 
33

 
  Other expense, net
 
(151
)
 
(139
)
 
Loss from continuing operations
 
(18,497
)
 
(8,433
)
 
  Gains on sales of operating properties
 
500

 
8,870

 
Net (loss) income
 
(17,997
)
 
437

 
  Net loss (income) attributable to noncontrolling interests
 
80

 
(432
)
 
Net (loss) income attributable to Kite Realty Group Trust common shareholders
 
$
(17,917
)
 
$
5

 
 
 
 
 
 
 
(Loss) income per common share - basic and diluted
 
$
(0.21
)
 
$
0.00

 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,629,669

 
83,565,325

 
Weighted average common shares outstanding - diluted
 
83,629,669

 
83,643,608

 
Cash dividends declared per common share
 
$
0.3175

 
$
0.3025

 
 
 
 
 
 
 

6


Kite Realty Group Trust
Funds From Operations
For the Three Months Ended March 31, 2018 and 2017
(Unaudited)
($ in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
 
 
2018
 
2017
 
Funds From Operations
 
 
 
 
 
Consolidated net (loss) income
 
$
(17,997
)
 
$
437

 
Less: net income attributable to noncontrolling interests in properties
 
(351
)
 
(432
)
 
Less: gains on sales of operating properties
 
(500
)
 
(8,870
)
 
Add: impairment charge
 
24,070

 
7,411

 
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
38,278

 
45,366

 
   FFO of the Operating Partnership1
 
43,500

 
43,912

 
Less: Limited Partners' interests in FFO
 
(1,022
)
 
(989
)
 
   FFO attributable to Kite Realty Group Trust common shareholders1
 
$
42,478

 
$
42,923

 
FFO, as defined by NAREIT, per share of the Operating Partnership - basic
 
$
0.51

 
$
0.51

 
FFO, as defined by NAREIT, per share of the Operating Partnership - diluted
 
$
0.51

 
$
0.51

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,629,669

 
83,565,325

 
Weighted average common shares outstanding - diluted
 
83,668,918

 
83,643,608

 
Weighted average common shares and units outstanding - basic
 
85,642,329

 
85,529,910

 
Weighted average common shares and units outstanding - diluted
 
85,681,578

 
85,608,193

 
 
 
 
 
 
 
FFO, as defined by NAREIT, per diluted share
 
 
 
 
 
Consolidated net (loss) income
 
$
(0.21
)
 
$
0.01

 
Less: net income attributable to noncontrolling interests in properties
 

 
(0.01
)
 
Less: gains on sales of operating properties
 
(0.01
)
 
(0.10
)
 
Add: impairment charge
 
0.28

 
0.08

 
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
0.45

 
0.53

 
FFO, as defined by NAREIT, of the Operating Partnership per diluted share1
 
$
0.51

 
$
0.51

 
 
 
 
 
 
 
____________________
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.
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 depreciation 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 operating 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. 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.

7


Kite Realty Group Trust
Same Property Net Operating Income
For the Three Months Ended March 31, 2018 and 2017
(Unaudited)

($ in thousands)
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2018
 
2017
 
% Change
 
Number of properties for the quarter
102

 
102

 
 
 
 
 
 
 
 
 
 
Leased percentage at period end
94.6
%
 
95.1
%
 
 
 
Economic Occupancy percentage2
93.3
%
 
94.0
%
 
 
 
 
 
 
 
 
 
 
Minimum rent
$
57,653

 
$
57,128

 
 
 
Tenant recoveries 
16,682

 
16,317

 
 
 
Other income
271

 
284

 
 
 
 
74,606

 
73,729

 
 
 
 
 
 
 
 
 
 
Property operating expenses 
(10,672
)
 
(10,517
)
 
 
 
Bad debt expense
(364
)
 
(598
)
 
 
 
Real estate taxes 
(9,947
)
 
(9,771
)
 
 
 
 
(20,983
)
 
(20,886
)
 
 
 
Same Property NOI3
$
53,623

 
$
52,843

 
1.5%
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure: 
 
 
 
 
 
 
Net operating income - same properties
$
53,623

 
$
52,843

 
 
 
Net operating income - non-same activity4
11,554

 
13,987

 
 
 
Other income (expense), net
1,234

 
(107
)
 
 
 
General, administrative and other
(5,945
)
 
(5,470
)
 
 
 
Impairment charge
(24,070
)
 
(7,411
)
 
 
 
Depreciation and amortization expense
(38,556
)
 
(45,830
)
 
 
 
Interest expense
(16,337
)
 
(16,445
)
 
 
 
Gains on sales of operating properties
500

 
8,870

 
 
 
Net loss (income) attributable to noncontrolling interests
80

 
(432
)
 
 
 
Net (loss) income attributable to common shareholders
$
(17,917
)
 
$
5

 
 
 
____________________
1
Same Property NOI excludes seven properties in redevelopment, the recently completed Northdale Promenade, Burnt Store Marketplace, and Parkside Town Commons - Phase II, 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, lease termination fees, amortization of lease intangibles and significant prior period expense recoveries and adjustments, if any.
4
Includes non-cash activity across the portfolio as well as net operating income from properties not included in the same property pool.
The Company uses same property NOI ("Same Property NOI"), a non-GAAP financial measure, to evaluate the performance of our properties. 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, 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 and fully operational for the full quarters presented. The Company believes such presentation eliminates disparities in net income due to the acquisition or disposition of properties during the particular quarters presented and thus provides a more consistent 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 indicators 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 inclusion 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 March 31, 2018, the Company excluded seven redevelopment properties and the recently completed Northdale Promenade and Burnt Store Marketplace redevelopments from the same property pool that met these criteria and were owned in both comparable periods.

8
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Section 3: EX-99.2 (EXHIBIT 99.2 Q1 2018 SUPPLEMENTAL)

Exhibit
 
 
Exhibit 99.2

393175801_supplementalcovermarch2018.jpg



QUARTERLY FINANCIAL SUPPLEMENTAL – MARCH 31, 2018
393175801_image46.jpg


 
PAGE NO.
 
TABLE OF CONTENTS
 
 
 
3
 
Earnings Press Release 
7
 
Corporate Profile 
8
 
Contact Information 
9
 
Important Notes Including Non-GAAP Disclosures
11
 
Consolidated Balance Sheets 
12
 
Consolidated Statements of Operations for the Three Months Ended March 31, 2018
13
 
Funds from Operations for the Three Months Ended March 31, 2018
14
 
Adjusted Funds From Operations and Other Financial Information for the Three Months Ended March 31, 2018
15
 
Market Capitalization as of March 31, 2018
15
 
Ratio of Debt to Total Undepreciated Assets as of March 31, 2018
15
 
Ratio of Company Share of Net Debt to EBITDA as of March 31, 2018
16
 
Same Property Net Operating Income for the Three Months Ended March 31, 2018
17
 
Net Operating Income by Quarter 
18
 
Consolidated Joint Venture Summary as of March 31, 2018
19
 
Summary of Outstanding Debt as of March 31, 2018
20
 
Maturity Schedule of Outstanding Debt as of March 31, 2018
22
 
Unsecured Public Debt Covenants
23
 
Top 10 Retail Tenants by Total Gross Leasable Area 
24
 
Top 25 Tenants by Annualized Base Rent 
25
 
Retail Leasing Spreads
26
 
Lease Expirations – Operating Portfolio 
27
 
Lease Expirations – Retail Anchor Tenants 
28
 
Lease Expirations – Retail Shops 
29
 
Lease Expirations – Office Tenants and Other
30
 
Development Projects Under Construction
31
 
Under Construction Redevelopment, Reposition, and Repurpose Projects
32
 
Redevelopment, Reposition, and Repurpose Opportunities
33
 
2018 Property Dispositions
34
 
Geographic Diversification – Annualized Base Rent by Region and State
35
 
Operating Retail Portfolio Summary Report
40
 
Operating Office Properties and Other
41
 
Components of Net Asset Value
42
 
Earnings Guidance – 2018


p. 2
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

 
 
 


393175801_pressrellogo12.jpg

PRESS RELEASE

Contact Information:
Dan Sink
EVP & CFO
(317) 577-5609
dsink@kiterealty.com


Kite Realty Group Trust Reports First Quarter 2018 Operating Results

Indianapolis, Ind., April 25, 2018 - Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced today its operating results for the first quarter ended March 31, 2018. Financial statements, exhibits, and reconciliations of non-GAAP measures attached to this release include the details of the Company’s results.
First Quarter Highlights
Net loss attributable to common shareholders of $17.9 million, or $0.21 per common share, which included a $24.1 million non-cash charge due to the impairment of an operating property.
Funds From Operations of the Operating Partnership (“FFO”), as defined by NAREIT, of $43.5 million, or $0.51 per diluted common share.
Increased Same-Property Net Operating Income (“NOI”) 1.5% compared to the same period in the prior year.
Generated aggregate rent spreads on 58 comparable new and renewal leases of 2.3%, or 8.2% excluding one new anchor tenant that did not require the Company to spend any capital and one strategic anchor renewal.
Generated $63.0 million in gross proceeds from the disposition of two non-core shopping centers and used these proceeds to pay down the Company’s revolving line of credit.
Completed one Redevelopment, Repurpose and Reposition (“3-R”) project, Burnt Store Marketplace (Punta Gorda, FL), with a projected annualized return of 11.5% on incurred costs of $8.9 million.
Subsequent to quarter end, recast the Company’s unsecured revolving credit facility, increasing the size by $100 million to $600 million and extending the maturity date.

“We started 2018 with another quarter of strong operations and execution on our stated objectives,” said John Kite, Chairman and Chief Executive Officer. “We were able to meet our asset disposition goal in the first quarter and continue to look to market select assets to further reduce leverage. We generated another high return on a completed 3-R project and are working to deliver on our remaining initiatives, including our Big Box Surge.”




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Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18


Financial & Portfolio Results
Financial Results
Net loss attributable to common shareholders for the three months ended March 31, 2018, was $17.9 million, compared to net income of $5,000 for the same period in 2017. First quarter 2018 results included a $24.1 million charge for an operating property impairment due to changes during the quarter in facts and circumstances underlying the Company’s expected future hold period of this property.
For the three months ended March 31, 2018, FFO, as defined by NAREIT, was $43.5 million, or $0.51 per diluted common share, compared to $43.9 million, or $0.51 per diluted common share, for the same period in the prior year.
Portfolio Operations
As of March 31, 2018, the Company owned interests in 115 operating and redevelopment properties totaling approximately 22.5 million square feet and 2 development projects currently under construction totaling 0.7 million square feet. The owned gross leasable area in the Company’s retail operating portfolio was 94.6% leased as of March 31, 2018, and the Company’s total portfolio was 94.2% leased.
Same-property NOI, which includes 102 operating properties, increased 1.5% in the first quarter compared to the same period in the prior year. The leased percentage of properties included in the same-property pool was 94.6% at March 31, 2018, compared to 95.1% in the same period in the prior year, while the economic occupancy percentage for the same periods were 93.3% and 94.0%, respectively.
The Company executed leases on 65 individual spaces totaling 417,830 square feet during the first quarter of 2018, including 58 comparable new and renewal leases for 391,348 square feet. Cash rent spreads on comparable new and renewal leases executed in the quarter were (2.2%) and 3.1%, respectively, for a blended cash rent spread of 2.3%. Excluding one new anchor tenant lease that did not require the Company to expend any capital and one strategic anchor renewal, new and renewal leases were 16.5% and 7.0%, respectively, for a blended cash rent spread of 8.2%. The blended leasing spread on a GAAP basis, which includes periodic contractual rent increases over the term of the lease, was 5.3%.
Several tenants opened in the first quarter, including the following anchors: Aldi at Bolton Plaza (Jacksonville, FL), Nordstrom Rack at Portofino Shopping Center (Houston, TX) and Skechers Outlet at Eastern Beltway (Las Vegas, NV).
The Company is making progress on its anchor space repositioning efforts (“Big Box Surge”). Gander Outdoors is taking the 30,045 square-foot space formerly occupied by Gander Mountain at Bayport Commons (Tampa, FL), and Party City is taking the 11,072 square-foot space formerly occupied by Home Consignment at Centennial Gateway (Las Vegas, NV).







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Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18


Capital Recycling
In the first quarter, we completed the sale of two non-core operating properties: Trussville Promenade in Birmingham, Alabama, and Memorial Commons in Goldsboro, North Carolina. These sales generated $63.0 million in gross proceeds, which were used to pay down the Company’s revolving line of credit.
Balance Sheet
We continue to strengthen our balance sheet, as we have reduced our Net Debt to EBITDA from 6.92x at the end of the fourth quarter of 2017 to 6.76x. We currently have only $48.7 million of term maturities through 2020, and our debt portfolio has a weighted average maturity of 5.3 years.
Subsequent to quarter end, the Company successfully recast its unsecured revolving credit facility, increasing the size by $100 million to $600 million, extending the maturity date to April 22, 2022 (which can be further extended by up to two six month periods, subject to certain conditions), lowering the leverage pricing across the grid, and changing the definition of the capitalization rate from 6.75% to 6.50%, which increases total asset value and available borrowing capacity. Additional details are available in the Form 8-K filed by the Company on April 25, 2018.
Development and Redevelopment
During the quarter, we completed construction on one 3-R project, Burnt Store Marketplace (Punta Gorda, FL). We invested $8.9 million into this asset to demolish and rebuild the 45,000 square-foot Publix and upgrade the center for a projected annualized return of 11.5%.

The Company’s 3-R program currently includes six projects under various stages of construction, with estimated combined costs ranging from $61.5 to $66.5 million and an estimated combined annualized return ranging from 8.0% to 9.0%.
2018 Earnings Guidance
The Company maintains its guidance for 2018 FFO, as defined by NAREIT, in a range of $1.98 to $2.04 per diluted common share. Please refer to the full list of guidance assumptions on page 43 of the Company’s first quarter supplemental.
Guidance Range for Full Year 2018
Low
High
Consolidated net income/(loss) per diluted common share
$
(0.02)
 
$
0.04
 
Add: Depreciation, amortization and other
1.72
 
1.72
 
Add: Impairment Charge
 
0.28
 
 
0.28
 
FFO, as defined by NAREIT, per diluted common share
$
1.98
 
$
2.04
 

Earnings Conference Call
The Company will conduct a conference call to discuss its financial results on Thursday, April 26, 2018, at 12:00 p.m. Eastern Time. A live webcast of the conference call will be available online on the Company’s corporate website at www.kiterealty.com. The dial-in numbers are (844) 309-0605 for domestic callers and (574) 990-9933 for international callers (passcode 7895509). In addition, a webcast replay link will be available on the corporate website


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Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18


About Kite Realty Group Trust
Kite Realty Group Trust is a full-service, vertically integrated real estate investment trust (REIT) that provides communities with convenient and beneficial shopping experiences. We connect consumers to tenants in desirable markets through our diverse portfolio of high-quality community, neighborhood, and lifestyle centers. Using operational, development, and redevelopment expertise, we continuously optimize our portfolio to maximize value and return to our shareholders. For more information, please visit our website at kiterealty.com.
Safe Harbor
Certain statements in this document that are not historical fact may constitute 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 and inflationary trends or outlook; financing risks, including the availability of, and costs associated with, sources of liquidity; the Company’s ability to refinance, or extend the maturity dates of, its 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; the Company’s ability to maintain its 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 competition and the perception that such competition has on the value of shopping center assets; risks related to the geographical concentration of the Company’s properties in Florida, Indiana and Texas; insurance costs and coverage; risks associated with cybersecurity attacks and the loss of confidential information and other business interruptions; and other factors affecting the real estate industry generally. The Company refers you to the documents filed by the Company from time to time with the SEC, specifically the section titled “Risk Factors” in the Company’s and the Operating Partnership’s Annual Report on Form 10-K for the fiscal year ended December 31, 2017, which discuss these and other factors that could adversely affect the Company’s results. 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.






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Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

CORPORATE PROFILE
 
393175801_image46.jpg


 
General Description
 
Kite Realty Group Trust is a full-service, vertically integrated real estate investment trust (REIT) engaged primarily in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States. As of March 31, 2018, we owned interests in 115 operating and redevelopment properties totaling approximately 22.5 million square feet and two development projects currently under construction.
 
Our strategy is to maximize the cash flow of our operating properties, successfully complete the construction and lease-up of our redevelopment and development portfolio, and identify additional opportunities to acquire or dispose of properties to further strengthen the Company. New investments are focused in the shopping center sector primarily in markets where we believe we can leverage our existing infrastructure and relationships to generate attractive risk-adjusted returns or otherwise in desirable trade areas. Dispositions are generally designed to increase the quality of our portfolio and to strengthen the Company’s balance sheet.  

Company Highlights as of March 31, 2018  
 
 
# of Properties
Total
GLA /NRA1
Owned
 GLA /NRA1
Operating Retail Properties
 
104

20,628,137

14,517,597

Operating Office Properties and Other
 
4

496,728

496,728

Redevelopment Properties
 
7

1,351,172

1,067,331

Total Operating and Redevelopment Properties
 
115

22,476,037

16,081,656

Development Projects
 
2

682,460

160,960

Total All Properties
 
117

23,158,497

16,242,616

 
 
Retail
Office & Other
Total
Operating Properties –  Leased Percentage1
 
94.6%
82.5%
94.2%
States
 
 
 
19


Stock Listing: New York Stock Exchange symbol: KRG
  
____________________
1
Excludes square footage of structures located on land owned by the company and ground leased to tenants.

p. 7
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

CONTACT INFORMATION    
 
393175801_image46.jpg
                                



 
Corporate Office
30 South Meridian Street, Suite 1100
Indianapolis, IN 46204
(888) 577-5600
(317) 577-5600
www.kiterealty.com
 
Investor Relations Contact:
 
Analyst Coverage:
 
Analyst Coverage:
 
 
 
 
 
Daniel R. Sink
 
Robert W. Baird & Co.
 
DA Davidson
EVP & CFO
 
Mr. RJ Milligan
 
Mr. James O. Lykins
Kite Realty Group Trust 
(813) 273-8252
(503) 603-3041
30 South Meridian Street, Suite 1100 
 
rjmilligan@rwbaird.com
 
jlykins@dadco.com
Indianapolis, IN 46204 
 
 
 
 
(317) 577-5609
 
Bank of America/Merrill Lynch
 
Hilliard Lyons
dsink@kiterealty.com
 
Mr. Jeffrey Spector/Mr. Craig Schmidt
 
Ms. Carol L. Kemple
 
 
(646) 855-1363/(646) 855-3640
 
(502) 588-1839
Transfer Agent:
 
jeff.spector@baml.com
 
ckemple@hilliard.com
 
 
craig.schmidt@baml.com
 
 
Broadridge Financial Solutions
 
 
 
KeyBanc Capital Markets
Ms. Kristen Tartaglione
 
Barclays
 
Mr. Jordan Sadler/Mr. Todd Thomas
2 Journal Square, 7th Floor
 
Mr. Ross Smotrich/Ms. Linda Tsai
 
(917) 368-2280/(917) 368-2286
Jersey City, NJ  07306
 
(212) 526-2306/(212) 526-9937
 
tthomas@keybanccm.com
(201) 714-8094
 
ross.smotrich@barclays.com
 
jsadler@keybanccm.com
 
 
linda.tsai@barclays.com
 
 
Stock Specialist:
 
 
 
Raymond James 
 
 
BTIG
 
Mr. Paul Puryear/Mr. Collin Mings
GTS
 
Mr. Michael Gorman
 
(727) 567-2253/(727) 567-2585
545 Madison Avenue
 
(212) 738-6138
 
paul.puryear@raymondjames.com 
15th Floor 
 
mgorman@btig.com
 
collin.mings@raymondjames.com
New York, NY 10022 
 
 
 
 
(212) 715-2830
 
Capital One Securities, Inc.
 
Sandler O’Neill
 
 
Mr. Christopher Lucas
 
Mr. Alexander Goldfarb
 
 
(571) 633-8151
 
(212) 466-7937
 
 
christopher.lucas@capitalone.com
 
agoldfarb@sandleroneill.com
 
 
 
 
 
 
 
Citigroup Global Markets 
 
Wells Fargo Securities, LLC
 
 
Mr. Michael Bilerman/Ms. Christy McElroy
 
Mr. Jeffrey J. Donnelly, CFA /Ms. Tamara Fique
 
 
(212) 816-1383/(212) 816-6981
 
(617) 603-4262/(443) 263-6568
 
 
michael.bilerman@citigroup.com 
 
jeff.donnelly@wellsfargo.com 
 
 
christy.mcelroy@citigroup.com
 
tamara.fique@wellsfargo.com
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

IMPORTANT NOTES INCLUDING NON-GAAP DISCLOSURES    
393175801_image46.jpg
                                


Interim Information 
This Quarterly Financial Supplemental contains historical information of Kite Realty Group Trust (“the Company” or “KRG”) and is intended to supplement the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018 to be filed on or about May 4, 2018, which should be read in conjunction with this supplement. The supplemental information is unaudited, although it reflects all adjustments which, in the opinion of management, are necessary for a fair presentation of operating results for the interim periods.
 
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 and inflationary trends or outlook;
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, 2017, 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.

Non-GAAP Disclosures
 
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 depreciation 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 operating 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. 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.
 









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Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

IMPORTANT NOTES INCLUDING NON-GAAP DISCLOSURES (CONTINUED)
393175801_image46.jpg


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. AFFO should not be considered 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 expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and certain corporate level expenses. The Company 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 impairment, if any.

The Company also uses same property NOI ("Same Property NOI"), a non-GAAP financial measure, to evaluate the performance of our properties. 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, 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 and fully operational for the full quarters presented. The Company believes such presentation eliminates disparities in net income due to the acquisition or disposition of properties during the particular quarters presented and thus provides a more consistent 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 indicators 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 inclusion 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 March 31, 2018, the Company excluded seven redevelopment properties and the recently completed Northdale Promenade and Burnt Store Marketplace redevelopments 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 defines 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 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 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.


p. 10
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
393175801_image46.jpg


($ in thousands)
 
 
 
 
 
 
March 31,
2018
 
December 31,
2017
Assets:
 
 
 
 
Investment properties, at cost
 
$
3,865,567

 
$
3,957,884

Less: accumulated depreciation
 
(671,384
)
 
(664,614
)
 
 
3,194,183

 
3,293,270

Cash and cash equivalents
 
28,753

 
24,082

Tenant and other receivables, including accrued straight-line rent of $32,182 and $31,747 respectively, net of allowance for uncollectible accounts
 
57,172

 
58,328

Restricted cash and escrow deposits
 
9,795

 
8,094

Deferred costs and intangibles, net
 
108,612

 
112,359

Prepaid and other assets
 
20,342

 
16,365

Total Assets
 
$
3,418,857

 
$
3,512,498

Liabilities and Shareholders’ Equity:
 
 
 
 

Mortgage and other indebtedness, net
 
$
1,650,547

 
$
1,699,239

Accounts payable and accrued expenses
 
102,851

 
78,482

Deferred revenue and other liabilities
 
90,940

 
96,564

Total Liabilities
 
1,844,338

 
1,874,285

Commitments and contingencies
 
 
 
 

Limited Partners’ interests in the Operating Partnership and other redeemable noncontrolling interests
 
48,834

 
72,104

Shareholders’ Equity:
 
 
 
 

Kite Realty Group Trust Shareholders’ Equity:
 
 
 
 

Common Shares, $.01 par value, 225,000,000 shares authorized, 83,675,982 and 83,606,068 shares issued and outstanding at March 31, 2018 and December 31, 2017, respectively
 
837

 
836

Additional paid in capital
 
2,073,316

 
2,071,418

Accumulated other comprehensive income
 
5,147

 
2,990

Accumulated deficit
 
(554,313
)
 
(509,833
)
Total Kite Realty Group Trust Shareholders’ Equity
 
1,524,987

 
1,565,411

Noncontrolling Interests
 
698

 
698

Total Equity
 
1,525,685

 
1,566,109

Total Liabilities and Equity
 
$
3,418,857

 
$
3,512,498















p. 11
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
393175801_image46.jpg
     


($ in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
 
 
2018
 
2017
 
Revenue:
 
 
 
 
 
  Minimum rent
 
$
68,965

 
$
68,946

 
  Tenant reimbursements
 
18,373

 
18,570

 
  Other property related revenue
 
1,063

 
2,596

 
     Fee income
 
1,362

 

 
Total revenue
 
89,763

 
90,112

 
Expenses:
 
 

 
 

 
  Property operating
 
12,470

 
12,953

 
  Real estate taxes
 
10,754

 
10,330

 
  General, administrative, and other
 
5,945

 
5,470

 
  Depreciation and amortization
 
38,556

 
45,830

 
  Impairment charge
 
24,070

 
7,411

 
Total expenses
 
91,795

 
81,994

 
Operating (loss) income
 
(2,032
)
 
8,118

 
  Interest expense
 
(16,337
)
 
(16,445
)
 
  Income tax benefit of taxable REIT subsidiary
 
23

 
33

 
  Other expense, net
 
(151
)
 
(139
)
 
Loss from continuing operations
 
(18,497
)
 
(8,433
)
 
  Gains on sales of operating properties
 
500

 
8,870

 
Net (loss) income
 
(17,997
)
 
437

 
  Net loss (income) attributable to noncontrolling interests
 
80

 
(432
)
 
Net (loss) income attributable to Kite Realty Group Trust common shareholders
 
$
(17,917
)
 
$
5

 
 
 
 
 
 
 
(Loss) income per common share - basic and diluted
 
$
(0.21
)
 
$
0.00

 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,629,669

 
83,565,325

 
Weighted average common shares outstanding - diluted
 
83,629,669

 
83,643,608

 
Cash dividends declared per common share
 
$
0.3175

 
$
0.3025

 
  


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Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

FUNDS FROM OPERATIONS1
393175801_image46.jpg



($ in thousands, except per share data)
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
 
 
2018
 
2017
 
Funds From Operations ("FFO")
 
 
 
 
 
Consolidated net (loss) income
 
$
(17,997
)
 
$
437

 
Less: net income attributable to noncontrolling interests in properties
 
(351
)
 
(432
)
 
Less: gains on sales of operating properties
 
(500
)
 
(8,870
)
 
Add: impairment charge
 
24,070

 
7,411

 
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
38,278

 
45,366

 
   FFO of the Operating Partnership1
 
43,500

 
43,912

 
Less: Limited Partners' interests in FFO
 
(1,022
)
 
(989
)
 
   FFO attributable to Kite Realty Group Trust common shareholders1
 
$
42,478

 
$
42,923

 
FFO, as defined by NAREIT, per share of the Operating Partnership - basic
 
$
0.51

 
$
0.51

 
FFO, as defined by NAREIT, per share of the Operating Partnership - diluted
 
$
0.51

 
$
0.51

 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,629,669

 
83,565,325

 
Weighted average common shares outstanding - diluted
 
83,668,918

 
83,643,608

 
Weighted average common shares and units outstanding - basic
 
85,642,329

 
85,529,910

 
Weighted average common shares and units outstanding - diluted
 
85,681,578

 
85,608,193

 
 
 
 
 
 
 
FFO, as defined by NAREIT, per diluted share
 
 
 
 
 
Consolidated net (loss) income
 
$
(0.21
)
 
$
0.01

 
Less: net income attributable to noncontrolling interests in properties
 

 
(0.01
)
 
Less: gains on sales of operating properties
 
(0.01
)
 
(0.10
)
 
Add: impairment charge
 
0.28

 
0.08

 
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
0.45

 
0.53

 
FFO, as defined by NAREIT, of the Operating Partnership per diluted share1
 
$
0.51

 
$
0.51

 
 
 
 
 
 
 
____________________
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.

p. 13
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

ADJUSTED FUNDS FROM OPERATIONS AND OTHER FINANCIAL INFORMATION
393175801_image46.jpg

 
($ in thousands)
 
 
 
 
 
 
 
Three Months Ended
March 31,
 
 
 
2018
 
2017
 
Reconciliation of FFO, as adjusted, to Adjusted Funds from Operations (AFFO)
 
 

 
 

 
FFO, as defined by NAREIT, of the Operating Partnership
 
$
43,500

 
$
43,912

 
Add:
 
 

 
 

 
Depreciation of non-real estate assets
 
277

 
471

 
Amortization of deferred financing costs
 
660

 
682

 
Non-cash compensation expense
 
1,186

 
1,195

 
Less:
 
 

 
 

 
Straight-line rent
 
951

 
1,321

 
Market rent amortization income
 
2,576

 
850

 
Amortization of debt premium
 
990

 
773

 
Other cash and non-cash adjustments1
 

 
866

 
Capital expenditures2:
 
 
 
 
 
     Maintenance capital expenditures3
 
721

 
873

 
     Revenue enhancing tenant improvements – retail
 
2,793

 
6,554

 
     Revenue enhancing tenant improvements – office
 

 

 
     External lease commissions
 
450

 
620

 
Total AFFO of the Operating Partnership
 
$
37,142

 
$
34,403

 
 
 
 
 
 
 
Other Financial Information:
 
 
 
 
 
Scheduled debt principal payments 
 
$
1,530

 
$
1,115

 
Capitalized interest cost
 
$
434

 
$
742

 
Mark to market lease amount in Deferred revenue and other liabilities on consolidated balance sheet
 
$
76,600

 
$
93,290

 
Acreage of undeveloped, vacant land in the operating portfolio4
 
46.9

 
 
 


 
 
March 31,
2018
 
December 31,
2017
Investment Properties, at Cost:
 
 

 
 

Land, building and improvements4
 
$
3,781,646

 
$
3,873,149

Furniture, equipment and other
 
8,757

 
8,453

Land held for development
 
31,142

 
31,142

Construction in progress
 
44,022

 
45,140

Total
 
$
3,865,567

 
$
3,957,884

 
____________________
1
Reflects a non-cash termination fee for the quarter ended March 31, 2017.
2
Excludes landlord work, tenant improvements and leasing commissions relating to development and 3-R projects.
3
A portion of these capital improvements are reimbursed by tenants and are revenue producing.
4
Includes undeveloped vacant land with a book value of $21.0 million at March 31, 2018.
 


p. 14
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

MARKET CAPITALIZATION AS OF MARCH 31, 2018    
393175801_image46.jpg

($ in thousands)
 
 
 
 
 
 
Percent of
Total Equity
 
Total
Market
Capitalization
 
Percent of
Total Market
Capitalization
Equity Capitalization:
 
 
 
 
 
Total Common Shares Outstanding
97.6
%
 
83,675,982

 
 
Operating Partnership ("OP") Units Outstanding
2.4
%
 
2,066,849

 
 
Combined Common Shares and OP Units
100.0
%
 
85,742,831

 
 
Market Price of Common Shares
 
 
$
15.23

 
 
Total Equity Capitalization
 
 
1,305,863

 
45
%
Debt Capitalization:
 
 
 

 
 
Company Consolidated Outstanding Debt
 
 
1,650,547

 
 
Plus: Debt Premium and Issuance Costs, net
 
 
1,742

 
 
Plus: Company Share of Unconsolidated Joint Venture Debt
 
 
4,168

 
 
Less: Partner Share of Consolidated Joint Venture Debt1
 
 
(13,373
)
 
 
Company Share of Outstanding Debt
 
 
1,643,084

 
 
Less: Cash, Cash Equivalents, and Restricted Cash
 
 
(38,548
)
 
 
Total Net Debt Capitalization
 
 
1,604,536

 
55
%
Total Enterprise Value
 
 
$
2,910,399

 
100
%
 
 
 
 
 
 
RATIO OF DEBT TO TOTAL UNDEPRECIATED ASSETS AS OF MARCH 31, 2018
Consolidated Undepreciated Real Estate Assets
 
 
$
3,865,567

 
 
Company Share of Unconsolidated Real Estate Assets
 
 
6,934

 
 
 
 
 
3,872,501

 
 
Total Debt Capitalization
 
 
1,617,909

 
 
Ratio of Debt to Total Undepreciated Real Estate Assets
 
 
41.8
%
 
 
 
 
 
 
 
 
RATIO OF COMPANY SHARE OF NET DEBT TO EBITDA AS OF MARCH 31, 2018
Company's Consolidated Debt & Share of Unconsolidated Debt
 
 
$
1,643,084

 
 
Less: Cash, Cash Equivalents, and Restricted Cash
 
(38,548
)
 
 
 
 
 
1,604,536

 
 
Q1 2018 EBITDA, Annualized:
 
 
 
 
 
        -  Consolidated EBITDA
$
242,376

 
 
 
 
        -  Unconsolidated EBITDA
136

 
 
 
 
        - Minority interest EBITDA 1
(1,404
)
 
 
 
 
        - Pro-forma adjustments 2
(3,613
)
 
237,495

 
 
Ratio of Company Share of Net Debt to EBITDA
 

 
6.76x

 
 
 
 
 
 
 
 
 


____________________
 
 
 
 
1
See page 18 for details
2
Relates to current quarter GAAP operating income, annualized, for properties sold during the quarter.

p. 15
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

SAME PROPERTY NET OPERATING INCOME (NOI)
393175801_image46.jpg




($ in thousands)
 
 
 
 
 
 
 
Three Months Ended March 31,
 
 
2018
 
2017
 
% Change
 
Number of properties for the quarter
102

 
102

 
 
 
 
 
 
 
 
 
 
Leased percentage at period end
94.6
%
 
95.1
%
 
 
 
Economic Occupancy percentage2
93.3
%
 
94.0
%
 
 
 
 
 
 
 
 
 
 
Minimum rent
$
57,653

 
$
57,128

 
 
 
Tenant recoveries 
16,682

 
16,317

 
 
 
Other income
271

 
284

 
 
 
 
74,606

 
73,729

 
 
 
 
 
 
 
 
 
 
Property operating expenses 
(10,672
)
 
(10,517
)
 
 
 
Bad debt expense
(364
)
 
(598
)
 
 
 
Real estate taxes 
(9,947
)
 
(9,771
)
 
 
 
 
(20,983
)
 
(20,886
)
 
 
 
Same Property NOI3
$
53,623

 
$
52,843

 
1.5%
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure: 
 
 
 
 
 
 
Net operating income - same properties
$
53,623

 
$
52,843

 
 
 
Net operating income - non-same activity4
11,554

 
13,987

 
 
 
Other income (expense), net
1,234

 
(107
)
 
 
 
General, administrative and other
(5,945
)
 
(5,470
)
 
 
 
Impairment charge
(24,070
)
 
(7,411
)
 
 
 
Depreciation and amortization expense
(38,556
)
 
(45,830
)
 
 
 
Interest expense
(16,337
)
 
(16,445
)
 
 
 
Gains on sales of operating properties
500

 
8,870

 
 
 
Net loss (income) attributable to noncontrolling interests
80

 
(432
)
 
 
 
Net (loss) income attributable to common shareholders
$
(17,917
)
 
$
5

 
 
 
 
____________________
1
Same Property NOI excludes seven properties in redevelopment, the recently completed Northdale Promenade, Burnt Store Marketplace, and Parkside Town Commons - Phase II, 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, lease termination fees, amortization of lease intangibles and significant prior period expense recoveries and adjustments, if any.
4
Includes non-cash activity across the portfolio as well as net operating income from properties not included in the same property pool.
 


p. 16
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

NET OPERATING INCOME BY QUARTER
393175801_image46.jpg



($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
 
 
March 31,
2018
 
December 31, 2017
 
September 30, 2017
 
June 30,
2017
 
March 31, 2017
Revenue: 
 
 
 
 
 
 
 
 
 
 
Minimum rent1
 
$
68,965

 
$
68,518

 
$
67,585

 
$
68,395

 
$
68,946

Tenant reimbursements 
 
18,373

 
18,252

 
17,657

 
18,521

 
18,570

Other property related revenue2 
 
434

 
358

 
1,252

 
5,267

 
1,858

Overage rent
 
148

 
780

 
82

 
16

 
266

Parking revenue, net3
 
67

 
218

 
138

 
137

 
81

 
 
87,987

 
88,126

 
86,714

 
92,336

 
89,721

Expenses: 
 
 
 
 
 
 
 
 
 
 
Property operating  - Recoverable4
 
10,235

 
10,018

 
9,533

 
9,386

 
10,376

Property operating - Non-Recoverable4
 
1,984

 
2,417

 
2,053

 
2,573

 
2,318

Real estate taxes 
 
10,591

 
10,638

 
10,675

 
11,095

 
10,198

 
 
22,810

 
23,073

 
22,261

 
23,054

 
22,892

Net Operating Income - Properties 
 
65,177

 
65,053

 
64,453

 
69,282

 
66,829

Other (Expenses) Income: 
 
 
 
 
 
 
 
 
 
 
General, administrative, and other 
 
(5,945
)
 
(5,360
)
 
(5,431
)
 
(5,488
)
 
(5,470
)
Fee income
 
1,362

 
377

 

 

 

 
 
(4,583
)
 
(4,983
)
 
(5,431
)
 
(5,488
)
 
(5,470
)
Earnings Before Interest, Taxes, Depreciation and Amortization
 
60,594

 
60,070

 
59,022

 
63,794

 
61,359

Impairment charge
 
(24,070
)
 

 

 

 
(7,411
)
Depreciation and amortization 
 
(38,556
)
 
(40,758
)
 
(42,793
)
 
(42,710
)
 
(45,830
)
Interest expense
 
(16,337
)
 
(16,452
)
 
(16,372
)
 
(16,433
)
 
(16,445
)
Income tax benefit (expense) of taxable REIT subsidiary 
 
23

 
36

 
33

 
(3
)
 
33

Other expense, net
 
(151
)
 
(101
)
 
(94
)
 
(80
)
 
(139
)
(Loss) Income From Continuing Operations
 
(18,497
)
 
2,795

 
(204
)
 
4,568

 
(8,433
)
Gains on sales of operating properties
 
500

 

 

 
6,290

 
8,870

Net (loss) income
 
(17,997
)
 
2,795

 
(204
)
 
10,858

 
437

Less: Net loss (income) attributable to noncontrolling interests
 
80

 
(486
)
 
(418
)
 
(678
)
 
(432
)
Net (loss) income attributable to Kite Realty Group Trust
 
$
(17,917
)
 
$
2,309

 
$
(622
)
 
$
10,180

 
$
5

NOI/Revenue
 
74.1
%
 
73.8
%
 
74.3
%
 
75.0
%
 
74.5
%
Recovery Ratios5
 
 
 
 
 
 
 
 
 
 
       - Retail Properties
 
90.5
%
 
90.9
%
 
89.9
%
 
93.1
%
 
92.0
%
       - Consolidated
 
88.2
%
 
88.4
%
 
87.4
%
 
90.4
%
 
90.3
%
 
____________________
1
Minimum rent includes $5.0 million in ground lease-related revenue for the three months ended March 31, 2018.
2
Other property related revenue for the three months ended March 31, 2018 includes $0.1 million of lease termination income.
3
Parking revenue, net represents the net operating results of the Eddy Street Parking Garage and the Union Station Parking Garage. In the three months ended March 31, 2018, this amount was calculated as revenue of $487,000 less real estate taxes and property operating expenses of $162,000 and $253,000, respectively.
4
Recoverable expenses include total management fee expense (or recurring G&A expense of $1.3 million) allocable to the property operations in the three months ended March 31, 2018, a portion of which is recoverable. Non-recoverable expenses primarily include bad debt provision, ground rent, professional fees, and operating costs for Lake Lofts at Deerwood.
5
“Recovery Ratio” is computed by dividing tenant reimbursements by the sum of recoverable property operating expense and real estate tax expense.

p. 17
Kite Realty Group Trust Supplemental Financial and Operating Statistics –3/31/18

CONSOLIDATED JOINT VENTURE SUMMARY - MARCH 31, 2018
393175801_image46.jpg



($ in thousands)

Ownership
 
 
 
 
 
 
 
 
 
Joint Venture Entity
Location (MSA)
Owned GLA
 
KRG
Ownership %
 
Current
KRG
Economic
Ownership%1
 
 
Delray Marketplace
Delray, FL

260,255

50%
 
98%
 
 
Pan Am Plaza
Indianapolis, IN


85%
 
85%
 
 
Crossing at Killingly Commons
Killingly, CT

208,929

55%
 
90%
 
 
Territory Portfolio2
Las Vegas, NV

847,690

78%
 
94%
 
 
Balance Sheet
 
Current
Partner
Economic
Ownership %
 
 
 
 
 
Joint Venture Entity
Debt Balance
Partner Share
of Debt
 
Redeemable
Noncontrolling Interest
 
 
Delray Marketplace
$
56,850

2%
$
1,138

 
$

 
 
Pan Am Plaza

15%

 

 
 
Crossing at Killingly Commons
33,000

10%
3,300

 
10,070

 
 
Territory Portfolio2
148,940

6%
8,935

 

 
 
Total
$
238,790

 
$
13,373

 
$
10,070

 
 
Income Statement
 
 
 
 
 
Joint Venture Entity
Quarterly
Minority Interest
 
Annualized Minority
Interest
 
Delray Marketplace
 
 
$

 
$

 
KRG has an 8% cumulative preferred return
Pan Am Plaza
 
 

 

 
Project currently in Land Held For Development
Crossing at Killingly Commons
 
 
132

 
528