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Section 1: 8-K (FORM 8-K Q2 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): August 1, 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 August 1, 2018, Kite Realty Group Trust (the “Company”) announced its consolidated financial results for the quarter ended June 30, 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 Second 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 August 1, 2018
99.2
 
Kite Realty Group Trust Second Quarter 2018 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: August 1, 2018
By:
/s/ David E. Buell
 
 
David E. Buell
 
 
Senior Vice President and
 
 
Chief Accounting Officer































EXHIBIT INDEX
Exhibit
 
Document
99.1
 
99.2
 



(Back To Top)

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

Exhibit


 
Exhibit 99.1

394469376_pressrellogo12.jpg

PRESS RELEASE

Contact Information:
Wade Achenbach
SVP, Capital Markets & Corporate Treasurer
317.713.5660
wachenbach@kiterealty.com

Kite Realty Group Trust Reports Second Quarter 2018 Operating Results

Indianapolis, Indiana, August 1, 2018 - Kite Realty Group Trust (NYSE: KRG) (“KRG”) announced today its operating results for the second quarter ended June 30, 2018. Financial statements, exhibits, and reconciliations of non-GAAP measures attached to this release include the details of KRG’s results.
“We continued through the second quarter with strong operational performance and execution on our objectives,” said John A. Kite, Chairman and Chief Executive Officer. “We reached several key milestones during the quarter - improving our operating portfolio’s ABR, lowering our Net Debt to EBITDA ratio, and raising our liquidity level to an all-time high. We contributed three operating properties into a strategic partnership at cap rates that demonstrate the private market value of our well-positioned, open-air shopping centers while also reducing our leverage. We continue progress on our Big Box Surge, and we expect to complete four additional 3-R projects by year end with solid projected returns.”
Second Quarter Highlights
Financial Results
Realized net loss attributable to common shareholders of $1.4 million, or $0.02 per common share, including a $14.8 million impairment charge.
Generated Funds from Operations of the Operating Partnership (FFO), as defined by NAREIT, of $45.7 million, or $0.53 per diluted common share.
Balance Sheet
Generated $89.0 million in net proceeds from the contribution of three shopping centers to a joint venture involving TH Real Estate, a Nuveen company, and used the proceeds to pay down debt.
Reduced ratio of Net Debt to EBITDA to 6.5x from 6.8x at the end of the prior quarter.
Recast unsecured revolving credit facility, increasing the borrowing capacity to $600 million, reducing the interest rate, and extending the maturity date.
Realized an all-time high liquidity level of close to $500 million.
Portfolio Operations
Increased Same-Property Net Operating Income (NOI) 1.5% compared to the same period in the prior year.
Generated blended cash rent spreads of 10.3% on 66 comparable new and renewal leases - blended leasing spread on a GAAP basis was 16.3%.
Improved annualized base rent (ABR) for the operating retail portfolio to $16.66 per square foot.
Executed a 56,000 square foot lease at our Thirty South Meridian office building in Indianapolis, stabilizing our office portfolio leased percentage at 96.2%.




1


Redevelopment
Completed Redevelopment, Repurpose and Reposition (3-R) projects at City Center (New York / Northern New Jersey MSA) and Portofino Shopping Center (Houston MSA).

Financial & Portfolio Results
Financial Results
Net loss attributable to common shareholders for the three months ended June 30, 2018, was $1.4 million, compared to net income of $10.2 million for the same period in 2017. Second quarter 2018 results included a $14.8 million impairment charge relating to certain properties.
For the three months ended June 30, 2018, FFO, as defined by NAREIT, was $45.7 million, or $0.53 per diluted common share, compared to $46.2 million, or $0.54 per diluted common share, for the second quarter of 2017.
Portfolio Operations
As of June 30, 2018, KRG owned interests in 115 operating and redevelopment properties totaling approximately 22.5 million square feet and two development projects currently under construction totaling 0.7 million square feet. The owned gross leasable area in KRG’s retail operating portfolio was 93.6% leased as of June 30, 2018, and the total portfolio was 93.7% leased. Small shop leased percentage maintained a strong level at 90.4%
Same-property NOI, which includes 102 operating properties, increased 1.5% in the second quarter compared to the same period in the prior year. The properties included in the same-property pool were 93.7% and 94.7% leased as of June 30, 2018 and 2017, respectively, while economic occupancy was at 93.0% and 93.9%, respectively, for the same periods.
KRG executed leases on 81 individual spaces totaling 356,896 square feet during the second quarter of 2018, including 66 comparable new and renewal leases for 263,997 square feet. Cash rent spreads on comparable new and renewal leases executed in the quarter were 23.1% and 8.2%, respectively, for a blended cash rent spread of 10.3%. The blended leasing spread on a GAAP basis, which includes periodic contractual rent increases over the term of the lease, was 16.3%.
KRG continued progress on its anchor space repositioning efforts (Big Box Surge) with the execution of two new retail anchor leases. HomeGoods leased a 23,364 square-foot space at Centennial Center (Las Vegas MSA), and Ollie’s Bargain Outlet leased a 42,250 square-foot space at Colonial Square (Fort Myers MSA).
Balance Sheet
In the second quarter, KRG contributed three properties (Livingston Shopping Center in Livingston, New Jersey; Plaza Volente in Austin, Texas; and Tamiami Crossing in Naples, Florida) to a new joint venture with a fund managed by TH Real Estate, a Nuveen company, in exchange for a 20% ownership interest and $89.0 million in net proceeds. KRG will manage the day-to-day operations of the properties, for which it will receive property management and leasing fees. The net proceeds received from the joint venture transaction were used to pay down debt. As part of the formation of the joint venture, a 10-year $51.9 million fixed-rate loan (KRG share: $10.4 million) was placed on the contributed properties, bearing an interest rate of 4.09%.
KRG continues to strengthen its balance sheet, as it reduced its ratio of Net Debt to EBITDA to 6.5x from 6.8x at the end of last quarter. KRG currently has only $37.7 million of term maturities through 2020, and the debt portfolio has a weighted average maturity of 5.2 years.
During the second quarter, KRG successfully recast its unsecured revolving credit facility, increasing the borrowing capacity to $600 million and extending the maturity date to April 22, 2023 (which assumes KRG’s exercise of two six-month extensions that are subject to certain conditions). It also lowered the leverage pricing across the grid and

2


lowered the capitalization rate from 6.75% to 6.50%. Additional details are available in the Form 8-K filed by KRG on April 25, 2018.
Redevelopment
During the quarter, KRG completed construction on 3-R projects at City Center (New York / Northern New Jersey MSA) and Portofino Shopping Center (Houston MSA). KRG invested $24.8 million in the redevelopment of these assets for a projected combined annualized return of 6.9%. Since inception, projects from KRG’s 3-R initiative have an approximate annualized return of 9.4%.

2018 Earnings Guidance
KRG has updated its guidance for 2018 FFO, as defined by NAREIT, to a range of $1.98 to $2.01 per diluted common share. This update reflects reduced ownership of the three properties contributed to the new joint venture as described in the Capital Recycling section of this release. Please refer to the full list of guidance assumptions on page 43 of the second quarter supplemental.
Guidance Range for Full Year 2018
Low
High
Consolidated net loss per diluted common share
 
$
(0.23
)
 
 
$
(0.20
)
 
Add: Depreciation, amortization and other
1.76
 
 
1.76
 
 
Add: Impairment Charge
 
0.45

 
 
0.45

 
FFO, as defined by NAREIT, per diluted common share
 
$
1.98

 
 
$
2.01

 

Earnings Conference Call
Kite Realty Group Trust will conduct a conference call to discuss its financial results on Thursday, August 2, 2018, at 1:00 p.m. Eastern Time. A live webcast of the conference call will be available on KRG’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 8090669). In addition, a webcast replay link will be available on the corporate website.
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 portfolio of open-air shopping 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; KRG’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

3


environment in which KRG operates; acquisition, disposition, development and joint venture risks; property ownership and management risks; KRG’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 KRG 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 KRG’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. KRG refers you to the documents filed by KRG from time to time with the SEC, specifically the section titled “Risk Factors” in KRG’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 KRG’s results. KRG 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)
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
Assets:
 
 
 
 
Investment properties, at cost
 
$
3,753,966

 
$
3,957,884

Less: accumulated depreciation
 
(677,124
)
 
(664,614
)
 
 
3,076,842

 
3,293,270

 
 
 
 
 
Cash and cash equivalents
 
32,384

 
24,082

Tenant and other receivables, including accrued straight-line rent of $31,164 and $31,747 respectively, net of allowance for uncollectible accounts
 
53,109

 
58,328

Restricted cash and escrow deposits
 
10,948

 
8,094

Deferred costs and intangibles, net
 
100,809

 
112,359

Prepaid and other assets
 
14,232

 
12,465

Investments in unconsolidated subsidiaries
 
13,873

 
3,900

Total Assets
 
$
3,302,197

 
$
3,512,498

Liabilities and Shareholders’ Equity:
 
 
 
 

Mortgage and other indebtedness, net
 
$
1,565,429

 
$
1,699,239

Accounts payable and accrued expenses
 
101,180

 
78,482

Deferred revenue and other liabilities
 
87,338

 
96,564

Total Liabilities
 
1,753,947

 
1,874,285

Commitments and contingencies
 
 
 
 

Limited Partners’ interests in the Operating Partnership and other redeemable noncontrolling interests
 
48,120

 
72,104

Shareholders’ Equity:
 
 
 
 

Kite Realty Group Trust Shareholders’ Equity:
 
 
 
 

Common Shares, $.01 par value, 225,000,000 shares authorized, 83,672,700 and 83,606,068 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
 
837

 
836

Additional paid in capital
 
2,075,191

 
2,071,418

Accumulated other comprehensive loss
 
5,649

 
2,990

Accumulated deficit
 
(582,245
)
 
(509,833
)
Total Kite Realty Group Trust Shareholders’ Equity
 
1,499,432

 
1,565,411

Noncontrolling Interests
 
698

 
698

Total Equity
 
1,500,130

 
1,566,109

Total Liabilities and Shareholders' Equity
 
$
3,302,197

 
$
3,512,498



5


Kite Realty Group Trust
Consolidated Statements of Operations
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)

($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
  Minimum rent
 
$
68,182

 
$
68,395

 
$
137,147

 
$
137,341

  Tenant reimbursements
 
17,664

 
18,521

 
36,036

 
37,091

  Other property related revenue
 
4,927

 
5,733

 
5,991

 
8,330

  Fee income
 
963

 

 
2,325

 

Total revenue
 
91,736

 
92,649

 
181,499

 
182,762

Expenses:
 
 
 
 
 
 

 
 

  Property operating
 
12,621

 
12,139

 
25,091

 
25,091

  Real estate taxes
 
10,392

 
11,228

 
21,146

 
21,559

  General, administrative, and other
 
5,553

 
5,488

 
11,499

 
10,958

  Depreciation and amortization
 
40,451

 
42,710

 
79,006

 
88,540

  Impairment charges
 
14,777

 

 
38,847

 
7,411

Total expenses
 
83,794

 
71,565

 
175,589

 
153,559

Operating income
 
7,942

 
21,084

 
5,910

 
29,203

  Interest expense
 
(16,746
)
 
(16,433
)
 
(33,084
)
 
(32,878
)
  Income tax benefit (expense) of taxable REIT subsidiary
 
28

 
(3
)
 
51

 
30

  Other expense, net
 
(115
)
 
(80
)
 
(265
)
 
(219
)
(Loss) income from continuing operations
 
(8,891
)
 
4,568

 
(27,388
)
 
(3,864
)
  Gains on sales of operating properties
 
7,829

 
6,290

 
8,329

 
15,160

Net (loss) income
 
(1,062
)
 
10,858

 
(19,059
)
 
11,296

  Net income attributable to noncontrolling interests
 
(304
)
 
(678
)
 
(225
)
 
(1,110
)
Net (loss) income attributable to Kite Realty Group Trust common shareholders
 
$
(1,366
)
 
$
10,180

 
$
(19,284
)
 
$
10,186

 
 
 
 
 
 
 
 
 
(Loss) income per common share - basic and diluted
 
$
(0.02
)
 
$
0.12

 
(0.23
)
 
0.12

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,672,896

 
83,585,736

 
83,651,402

 
83,575,587

Weighted average common shares outstanding - diluted
 
83,672,896

 
83,652,627

 
83,651,402

 
83,640,327

Cash dividends declared per common share
 
$
0.3175

 
$
0.3025

 
$
0.6350

 
$
0.6050

 
 
 
 
 
 
 
 
 

6


Kite Realty Group Trust
Funds From Operations
For the Three and Six Months Ended June 30, 2018 and 2017
(Unaudited)
($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Funds From Operations
 
 
 
 
 
 
 
 
Consolidated net (loss) income
 
$
(1,062
)
 
$
10,858

 
$
(19,059
)
 
$
11,296

Less: net income attributable to noncontrolling interests in properties
 
(343
)
 
(438
)
 
(694
)
 
(870
)
Less: gains on sales of operating properties
 
(7,829
)
 
(6,290
)
 
(8,329
)
 
(15,160
)
Add: impairment charges
 
14,777

 

 
38,847

 
7,411

Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
40,178

 
42,050

 
78,457

 
87,416

   FFO of the Operating Partnership1
 
45,721

 
46,180

 
89,222

 
90,093

Less: Limited Partners' interests in FFO
 
(1,119
)
 
(1,056
)
 
(2,141
)
 
(2,045
)
   FFO attributable to Kite Realty Group Trust common shareholders1
 
$
44,602

 
$
45,124

 
$
87,081

 
$
88,048

FFO, as defined by NAREIT, per share of the Operating Partnership - basic
 
$
0.53

 
$
0.54

 
$
1.04

 
$
1.05

FFO, as defined by NAREIT, per share of the Operating Partnership - diluted
 
$
0.53

 
$
0.54

 
$
1.04

 
$
1.05

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,672,896

 
83,585,736

 
83,651,402

 
83,575,587

Weighted average common shares outstanding - diluted
 
83,722,444

 
83,652,627

 
83,694,898

 
83,640,327

Weighted average common shares and units outstanding - basic
 
85,739,745

 
85,572,566

 
85,691,306

 
85,551,356

Weighted average common shares and units outstanding - diluted
 
85,789,293

 
85,639,457

 
85,734,802

 
85,616,096

 
 
 
 
 
 
 
 
 
FFO, as defined by NAREIT, per diluted share/unit
 
 
 
 
 
 
 
 
Consolidated net (loss) income
 
$
(0.01
)
 
$
0.13

 
$
(0.22
)
 
$
0.13

Less: net income attributable to noncontrolling interests in properties
 

 
(0.01
)
 
(0.01
)
 
(0.01
)
Less: gains on sales of operating properties
 
(0.09
)
 
(0.07
)
 
(0.10
)
 
(0.17
)
Add: impairment charges
 
0.17

 

 
0.45

 
0.08

Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
0.46

 
0.49

 
0.92

 
1.02

FFO, as defined by NAREIT, of the Operating Partnership per diluted share/unit1
 
$
0.53

 
$
0.54

 
$
1.04

 
$
1.05

 
 
 
 
 
 
 
 
 
____________________
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 and Six Months Ended June 30, 2018 and 2017
(Unaudited)

($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Number of properties for the quarter
102

 
102

 
 
 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased percentage at period end
93.7
%
 
94.7
%
 
 
 
93.7
%
 
94.7
%
 
 
Economic Occupancy percentage2
93.0
%
 
93.9
%
 
 
 
93.1
%
 
93.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum rent
$
58,168

 
$
57,500

 
 
 
$
115,820

 
$
114,628

 
 
Tenant recoveries 
16,451

 
16,217

 
 
 
33,133

 
32,534

 
 
Other income
240

 
173

 
 
 
510

 
457

 
 
 
74,859

 
73,890

 
 
 
149,463

 
147,619

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses 
(10,795
)
 
(9,988
)
 
 
 
(21,467
)
 
(20,505
)
 
 
Bad debt expense
(452
)
 
(865
)
 
 
 
(816
)
 
(1,463
)
 
 
Real estate taxes 
(9,743
)
 
(9,940
)
 
 
 
(19,690
)
 
(19,711
)
 
 
 
(20,990
)
 
(20,793
)
 
 
 
(41,973
)
 
(41,679
)
 
 
Same Property NOI3
$
53,869

 
$
53,097

 
1.5%
 
$
107,490

 
$
105,940

 
1.5%
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure: 
 
 
 
 
 
 
 
 
 
 
 
Net operating income - same properties
$
53,869

 
$
53,097

 
 
 
$
107,490

 
$
105,940

 
 
Net operating income - non-same activity4
13,891

 
16,185

 
 
 
25,447

 
30,172

 
 
Other income (expense), net
876

 
(83
)
 
 
 
2,111

 
(189
)
 
 
General, administrative and other
(5,553
)
 
(5,488
)
 
 
 
(11,499
)
 
(10,958
)
 
 
Impairment charges
(14,777
)
 

 
 
 
(38,847
)
 
(7,411
)
 
 
Depreciation and amortization expense
(40,451
)
 
(42,710
)
 
 
 
(79,006
)
 
(88,540
)
 
 
Interest expense
(16,746
)
 
(16,433
)
 
 
 
(33,084
)
 
(32,878
)
 
 
Gains on sales of operating properties
7,829

 
6,290

 
 
 
8,329

 
15,160

 
 
Net income attributable to noncontrolling interests
(304
)
 
(678
)
 
 
 
(225
)
 
(1,110
)
 
 
Net (loss) income attributable to common shareholders
$
(1,366
)
 
$
10,180

 
 
 
$
(19,284
)
 
$
10,186

 
 
____________________
1
Same Property NOI excludes six properties in redevelopment, the recently completed City Center, 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 June 30, 2018, the Company excluded six redevelopment properties and the recently completed City Center, Northdale Promenade and Burnt Store Marketplace redevelopments from the same property pool that met these criteria and were owned in both comparable periods.

8
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2 Q2 2018 SUPPLEMENTAL)

Exhibit
 
 
Exhibit 99.2

394469376_supplementalcoverjune2018.jpg


QUARTERLY FINANCIAL SUPPLEMENTAL – JUNE 30, 2018
394469376_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 and Six Months Ended June 30, 2018
13
 
Funds from Operations for the Three and Six Months Ended June 30, 2018
14
 
Adjusted Funds From Operations and Other Financial Information for the Three and Six Months Ended June 30, 2018
15
 
Market Capitalization as of June 30, 2018
15
 
Ratio of Debt to Total Undepreciated Assets as of June 30, 2018
15
 
Ratio of Company Share of Net Debt to EBITDA as of June 30, 2018
16
 
Same Property Net Operating Income for the Three and Six Months Ended June 30, 2018
17
 
Net Operating Income by Quarter 
18
 
Consolidated Joint Venture Summary as of June 30, 2018
19
 
Unconsolidated Joint Venture Summary as of June 30, 2018
20
 
Summary of Outstanding Debt as of June 30, 2018
21
 
Maturity Schedule of Outstanding Debt as of June 30, 2018
23
 
Unsecured Public Debt Covenants
24
 
Top 10 Retail Tenants by Total Gross Leasable Area 
25
 
Top 25 Tenants by Annualized Base Rent 
26
 
Retail Leasing Spreads
27
 
Lease Expirations – Operating Portfolio 
28
 
Lease Expirations – Retail Anchor Tenants 
29
 
Lease Expirations – Retail Shops 
30
 
Lease Expirations – Office Tenants and Other
31
 
Development Projects Under Construction
32
 
Under Construction Redevelopment, Reposition, and Repurpose Projects
33
 
Redevelopment, Reposition, and Repurpose Opportunities
34
 
2018 Property Dispositions
35
 
Geographic Diversification – Annualized Base Rent by Region and State
36
 
Operating Retail Portfolio Summary Report
41
 
Operating Office Properties and Other
42
 
Components of Net Asset Value
43
 
Earnings Guidance – 2018


p. 2
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18

 
 
 


394469376_pressrellogo12.jpg



PRESS RELEASE

Contact Information:
Wade Achenbach
SVP, Capital Markets & Corporate Treasurer
317.713.5660
wachenbach@kiterealty.com

Kite Realty Group Trust Reports Second Quarter 2018 Operating Results

Indianapolis, Indiana, August 1, 2018 - Kite Realty Group Trust (NYSE: KRG) (“KRG”) announced today its operating results for the second quarter ended June 30, 2018. Financial statements, exhibits, and reconciliations of non-GAAP measures attached to this release include the details of KRG’s results.
“We continued through the second quarter with strong operational performance and execution on our objectives,” said John A. Kite, Chairman and Chief Executive Officer. “We reached several key milestones during the quarter - improving our operating portfolio’s ABR, lowering our Net Debt to EBITDA ratio, and raising our liquidity level to an all-time high. We contributed three operating properties into a strategic partnership at cap rates that demonstrate the private market value of our well-positioned, open-air shopping centers while also reducing our leverage. We continue progress on our Big Box Surge, and we expect to complete four additional 3-R projects by year end with solid projected returns.”
Second Quarter Highlights
Financial Results
Realized net loss attributable to common shareholders of $1.4 million, or $0.02 per common share, including a $14.8 million impairment charge.
Generated Funds from Operations of the Operating Partnership (FFO), as defined by NAREIT, of $45.7 million, or $0.53 per diluted common share.
Balance Sheet
Generated $89.0 million in net proceeds from the contribution of three shopping centers to a joint venture involving TH Real Estate, a Nuveen company, and used the proceeds to pay down debt.
Reduced ratio of Net Debt to EBITDA to 6.5x from 6.8x at the end of the prior quarter.
Recast unsecured revolving credit facility, increasing the borrowing capacity to $600 million, reducing the interest rate, and extending the maturity date.
Realized an all-time high liquidity level of close to $500 million.
Portfolio Operations
Increased Same-Property Net Operating Income (NOI) 1.5% compared to the same period in the prior year.
Generated blended cash rent spreads of 10.3% on 66 comparable new and renewal leases - blended leasing spread on a GAAP basis was 16.3%.
Improved annualized base rent (ABR) for the operating retail portfolio to $16.66 per square foot.
Executed a 56,000 square foot lease at our Thirty South Meridian office building in Indianapolis, stabilizing our office portfolio leased percentage at 96.2%.

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Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18


Redevelopment
Completed Redevelopment, Repurpose and Reposition (3-R) projects at City Center (New York /Northern New Jersey MSA) and Portofino Shopping Center (Houston MSA).

Financial & Portfolio Results
Financial Results
Net loss attributable to common shareholders for the three months ended June 30, 2018, was $1.4 million, compared to net income of $10.2 million for the same period in 2017. Second quarter 2018 results included a $14.8 million impairment charge relating to certain properties.
For the three months ended June 30, 2018, FFO, as defined by NAREIT, was $45.7 million, or $0.53 per diluted common share, compared to $46.2 million, or $0.54 per diluted common share, for the second quarter of 2017.
Portfolio Operations
As of June 30, 2018, KRG owned interests in 115 operating and redevelopment properties totaling approximately 22.5 million square feet and two development projects currently under construction totaling 0.7 million square feet. The owned gross leasable area in KRG’s retail operating portfolio was 93.6% leased as of June 30, 2018, and the total portfolio was 93.7% leased. Small shop leased percentage maintained a strong level at 90.4%
Same-property NOI, which includes 102 operating properties, increased 1.5% in the second quarter compared to the same period in the prior year. The properties included in the same-property pool were 93.7% and 94.7% leased as of June 30, 2018 and 2017, respectively, while economic occupancy was at 93.0% and 93.9%, respectively, for the same periods.
KRG executed leases on 81 individual spaces totaling 356,896 square feet during the second quarter of 2018, including 66 comparable new and renewal leases for 263,997 square feet. Cash rent spreads on comparable new and renewal leases executed in the quarter were 23.1% and 8.2%, respectively, for a blended cash rent spread of 10.3%. The blended leasing spread on a GAAP basis, which includes periodic contractual rent increases over the term of the lease, was 16.3%.
KRG continued progress on its anchor space repositioning efforts (Big Box Surge) with the execution of two new retail anchor leases. HomeGoods leased a 23,364 square-foot space at Centennial Center (Las Vegas MSA), and Ollie’s Bargain Outlet leased a 42,250 square-foot space at Colonial Square (Fort Myers MSA).
Balance Sheet
In the second quarter, KRG contributed three properties (Livingston Shopping Center in Livingston, New Jersey; Plaza Volente in Austin, Texas; and Tamiami Crossing in Naples, Florida) to a new joint venture with a fund managed by TH Real Estate, a Nuveen company, in exchange for a 20% ownership interest and $89.0 million in net proceeds. KRG will manage the day-to-day operations of the properties, for which it will receive property management and leasing fees. The net proceeds received from the joint venture transaction were used to pay down debt. As part of the formation of the joint venture, a 10-year $51.9 million fixed-rate loan (KRG share: $10.4 million) was placed on the contributed properties, bearing an interest rate of 4.09%.
KRG continues to strengthen its balance sheet, as it reduced its ratio of Net Debt to EBITDA to 6.5x from 6.8x at the end of last quarter. KRG currently has only $37.7 million of term maturities through 2020, and the debt portfolio has a weighted average maturity of 5.2 years.
During the second quarter, KRG successfully recast its unsecured revolving credit facility, increasing the borrowing capacity to $600 million and extending the maturity date to April 22, 2023 (which assumes KRG’s exercise of two six-month extensions that are subject to certain conditions). It also lowered the leverage pricing across the grid and lowered

p. 4
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18


the capitalization rate from 6.75% to 6.50%. Additional details are available in the Form 8-K filed by KRG on April 25, 2018.
Redevelopment
During the quarter, KRG completed construction on 3-R projects at City Center (New York / Northern New Jersey MSA) and Portofino Shopping Center (Houston MSA). KRG invested $24.8 million in the redevelopment of these assets for a projected combined annualized return of 6.9%. Since inception, projects from KRG’s 3-R initiative have an approximate annualized return of 9.4%.

2018 Earnings Guidance
KRG has updated its guidance for 2018 FFO, as defined by NAREIT, to a range of $1.98 to $2.01 per diluted common share. This update reflects reduced ownership of the three properties contributed to the new joint venture as described in the Capital Recycling section of this release. Please refer to the full list of guidance assumptions on page 43 of the second quarter supplemental.
Guidance Range for Full Year 2018
Low
High
Consolidated net loss per diluted common share
 
$
(0.23
)
 
 
$
(0.20
)
 
Add: Depreciation, amortization and other
1.76
 
 
1.76
 
 
Add: Impairment Charge
 
0.45

 
 
0.45

 
FFO, as defined by NAREIT, per diluted common share
 
$
1.98

 
 
$
2.01

 

Earnings Conference Call
Kite Realty Group Trust will conduct a conference call to discuss its financial results on Thursday, August 2, 2018, at 1:00 p.m. Eastern Time. A live webcast of the conference call will be available on KRG’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 8090669). In addition, a webcast replay link will be available on the corporate website.
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 portfolio of open-air shopping 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; KRG’s ability to refinance, or extend the maturity dates of, its indebtedness; the level and volatility of interest rates; the financial

p. 5
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18


stability of tenants, including their ability to pay rent and the risk of tenant bankruptcies; the competitive environment in which KRG operates; acquisition, disposition, development and joint venture risks; property ownership and management risks; KRG’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 KRG 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 KRG’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. KRG refers you to the documents filed by KRG from time to time with the SEC, specifically the section titled “Risk Factors” in KRG’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 KRG’s results. KRG undertakes no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.


p. 6
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18

CORPORATE PROFILE
 
394469376_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 June 30, 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 June 30, 2018  
 
 
# of Properties
Total
GLA /NRA
Owned
 GLA /NRA1
Operating Retail Properties
 
105

21,141,980

14,947,831

Operating Office Properties and Other
 
4

496,728

496,728

Redevelopment Properties
 
6

828,713

705,713

Total Operating and Redevelopment Properties
 
115

22,467,421

16,150,272

Development Projects
 
2

682,460

160,960

Total All Properties
 
117

23,149,881

16,311,232

 
 
Retail
Office & Other
Total
Operating Properties –  Leased Percentage1
 
93.6%
97.0%
93.7%
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 –6/30/18

CONTACT INFORMATION    
 
394469376_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:
 
 
 
 
 
Wade B. Achenbach
 
Robert W. Baird & Co.
 
DA Davidson
Senior Vice President, Finance & Capital Markets
 
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) 577-5660
 
Bank of America/Merrill Lynch
 
KeyBanc Capital Markets
wachenbach@kiterealty.com
 
Mr. Jeffrey Spector/Mr. Craig Schmidt
 
Mr. Jordan Sadler/Mr. Todd Thomas
 
 
(646) 855-1363/(646) 855-3640
 
(917) 368-2280/(917) 368-2286
Transfer Agent:
 
jeff.spector@baml.com
 
tthomas@keybanccm.com
 
 
craig.schmidt@baml.com
 
jsadler@keybanccm.com
Broadridge Financial Solutions
 
 
 
 
Ms. Kristen Tartaglione
 
Barclays
 
Raymond James 
2 Journal Square, 7th Floor
 
Mr. Ross Smotrich/Ms. Linda Tsai
 
Mr. Paul Puryear/Mr. Collin Mings
Jersey City, NJ  07306
 
(212) 526-2306/(212) 526-9937
 
(727) 567-2253/(727) 567-2585
(201) 714-8094
 
ross.smotrich@barclays.com
 
paul.puryear@raymondjames.com 
 
 
linda.tsai@barclays.com
 
collin.mings@raymondjames.com
Stock Specialist:
 
 
 
 
 
 
BTIG
 
Sandler O’Neill
GTS
 
Mr. Michael Gorman
 
Mr. Alexander Goldfarb
545 Madison Avenue
 
(212) 738-6138
 
(212) 466-7937
15th Floor 
 
mgorman@btig.com
 
agoldfarb@sandleroneill.com
New York, NY 10022 
 
 
 
 
(212) 715-2830
 
Capital One Securities, Inc.
 
Wells Fargo Securities, LLC
 
 
Mr. Christopher Lucas
 
Mr. Jeffrey J. Donnelly, CFA /Ms. Tamara Fique
 
 
(571) 633-8151
 
(617) 603-4262/(443) 263-6568
 
 
christopher.lucas@capitalone.com
 
jeff.donnelly@wellsfargo.com 
 
 
 
 
tamara.fique@wellsfargo.com
 
 
Citigroup Global Markets 
 
 
 
 
Mr. Michael Bilerman/Ms. Christy McElroy
 
 
 
 
(212) 816-1383/(212) 816-6981
 
 
 
 
michael.bilerman@citigroup.com 
 
 
 
 
christy.mcelroy@citigroup.com
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18

IMPORTANT NOTES INCLUDING NON-GAAP DISCLOSURES    
394469376_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 June 30, 2018 to be filed on or about August 9, 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 –6/30/18

IMPORTANT NOTES INCLUDING NON-GAAP DISCLOSURES (CONTINUED)
394469376_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 June 30, 2018, the Company excluded six redevelopment properties and the recently completed City Center, 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 –6/30/18

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
394469376_image46.jpg


($ in thousands)
 
 
 
 
 
 
June 30,
2018
 
December 31,
2017
Assets:
 
 
 
 
Investment properties, at cost
 
$
3,753,966

 
$
3,957,884

Less: accumulated depreciation
 
(677,124
)
 
(664,614
)
 
 
3,076,842

 
3,293,270

Cash and cash equivalents
 
32,384

 
24,082

Tenant and other receivables, including accrued straight-line rent of $31,164 and $31,747 respectively, net of allowance for uncollectible accounts
 
53,109

 
58,328

Restricted cash and escrow deposits
 
10,948

 
8,094

Deferred costs and intangibles, net
 
100,809

 
112,359

Prepaid and other assets
 
14,232

 
12,465

Investments in unconsolidated subsidiaries
 
13,873

 
3,900

Total Assets
 
$
3,302,197

 
$
3,512,498

Liabilities and Shareholders’ Equity:
 
 
 
 

Mortgage and other indebtedness, net
 
$
1,565,429

 
$
1,699,239

Accounts payable and accrued expenses
 
101,180

 
78,482

Deferred revenue and other liabilities
 
87,338

 
96,564

Total Liabilities
 
1,753,947

 
1,874,285

Commitments and contingencies
 
 
 
 

Limited Partners’ interests in the Operating Partnership and other redeemable noncontrolling interests
 
48,120

 
72,104

Shareholders’ Equity:
 
 
 
 

Kite Realty Group Trust Shareholders’ Equity:
 
 
 
 

Common Shares, $.01 par value, 225,000,000 shares authorized, 83,672,700 and 83,606,068 shares issued and outstanding at June 30, 2018 and December 31, 2017, respectively
 
837

 
836

Additional paid in capital
 
2,075,191

 
2,071,418

Accumulated other comprehensive income
 
5,649

 
2,990

Accumulated deficit
 
(582,245
)
 
(509,833
)
Total Kite Realty Group Trust Shareholders’ Equity
 
1,499,432

 
1,565,411

Noncontrolling Interests
 
698

 
698

Total Equity
 
1,500,130

 
1,566,109

Total Liabilities and Equity
 
$
3,302,197

 
$
3,512,498













p. 11
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
394469376_image46.jpg
     




($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
  Minimum rent
 
$
68,182

 
$
68,395

 
$
137,147

 
$
137,341

  Tenant reimbursements
 
17,664

 
18,521

 
36,036

 
37,091

  Other property related revenue
 
4,927

 
5,733

 
5,991

 
8,330

  Fee income
 
963

 

 
2,325

 

Total revenue
 
91,736

 
92,649

 
181,499

 
182,762

Expenses:
 
 

 
 

 
 
 
 
  Property operating
 
12,621

 
12,139

 
25,091

 
25,091

  Real estate taxes
 
10,392

 
11,228

 
21,146

 
21,559

  General, administrative, and other
 
5,553

 
5,488

 
11,499

 
10,958

  Depreciation and amortization
 
40,451

 
42,710

 
79,006

 
88,540

  Impairment charges
 
14,777

 

 
38,847

 
7,411

Total expenses
 
83,794

 
71,565

 
175,589

 
153,559

Operating income
 
7,942

 
21,084

 
5,910

 
29,203

  Interest expense
 
(16,746
)
 
(16,433
)
 
(33,084
)
 
(32,878
)
  Income tax benefit (expense) of taxable REIT subsidiary
 
28

 
(3
)
 
51

 
30

  Other expense, net
 
(115
)
 
(80
)
 
(265
)
 
(219
)
(Loss) income from continuing operations
 
(8,891
)
 
4,568

 
(27,388
)
 
(3,864
)
  Gains on sales of operating properties
 
7,829

 
6,290

 
8,329

 
15,160

Net (loss) income
 
(1,062
)
 
10,858

 
(19,059
)
 
11,296

  Net income attributable to noncontrolling interests
 
(304
)
 
(678
)
 
(225
)
 
(1,110
)
Net (loss) income attributable to Kite Realty Group Trust common shareholders
 
$
(1,366
)
 
$
10,180

 
$
(19,284
)
 
$
10,186

 
 
 
 
 
 
 
 
 
(Loss) income per common share - basic and diluted
 
$
(0.02
)
 
$
0.12

 
$
(0.23
)
 
$
0.12

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,672,896

 
83,585,736

 
83,651,402

 
83,575,587

Weighted average common shares outstanding - diluted
 
83,672,896

 
83,652,627

 
83,651,402

 
83,640,327

Cash dividends declared per common share
 
$
0.3175

 
$
0.3025

 
$
0.6350

 
$
0.6050

  


p. 12
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18

FUNDS FROM OPERATIONS1
394469376_image46.jpg



($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Funds From Operations ("FFO")
 
 
 
 
 
 
 
 
Consolidated net (loss) income
 
$
(1,062
)
 
$
10,858

 
$
(19,059
)
 
$
11,296

Less: net income attributable to noncontrolling interests in properties
 
(343
)
 
(438
)
 
(694
)
 
(870
)
Less: gains on sales of operating properties
 
(7,829
)
 
(6,290
)
 
(8,329
)
 
(15,160
)
Add: impairment charges
 
14,777

 

 
38,847

 
7,411

Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
40,178

 
42,050

 
78,457

 
87,416

   FFO of the Operating Partnership1
 
45,721

 
46,180

 
89,222

 
90,093

Less: Limited Partners' interests in FFO
 
(1,119
)
 
(1,056
)
 
(2,141
)
 
(2,045
)
   FFO attributable to Kite Realty Group Trust common shareholders1
 
$
44,602

 
$
45,124

 
$
87,081

 
$
88,048

FFO, as defined by NAREIT, per share of the Operating Partnership - basic
 
$
0.53

 
$
0.54

 
$
1.04

 
$
1.05

FFO, as defined by NAREIT, per share of the Operating Partnership - diluted
 
$
0.53

 
$
0.54

 
$
1.04

 
$
1.05

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,672,896

 
83,585,736

 
83,651,402

 
83,575,587

Weighted average common shares outstanding - diluted
 
83,722,444

 
83,652,627

 
83,694,898

 
83,640,327

Weighted average common shares and units outstanding - basic
 
85,739,745

 
85,572,566

 
85,691,306

 
85,551,356

Weighted average common shares and units outstanding - diluted
 
85,789,293

 
85,639,457

 
85,734,802

 
85,616,096

 
 
 
 
 
 
 
 
 
FFO, as defined by NAREIT, per diluted share/unit
 
 
 
 
 
 
 
 
Consolidated net (loss) income
 
$
(0.01
)
 
$
0.13

 
$
(0.22
)
 
$
0.13

Less: net income attributable to noncontrolling interests in properties
 

 
(0.01
)
 
(0.01
)
 
(0.01
)
Less: gains on sales of operating properties
 
(0.09
)
 
(0.07
)
 
(0.10
)
 
(0.17
)
Add: impairment charges
 
0.17

 

 
0.45

 
0.08

Add: depreciation and amortization of consolidated entities, net of noncontrolling interests
 
0.46

 
0.49

 
0.92

 
1.02

FFO, as defined by NAREIT, of the Operating Partnership per diluted share/unit1
 
$
0.53

 
$
0.54

 
$
1.04

 
$
1.05

 
 
 
 
 
 
 
 
 
____________________
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 –6/30/18

ADJUSTED FUNDS FROM OPERATIONS AND OTHER FINANCIAL INFORMATION
394469376_image46.jpg

 
($ in thousands)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
 
2018
 
2017
 
2018
 
2017
Reconciliation of FFO, as adjusted, to Adjusted Funds from Operations (AFFO)
 
 

 
 

 
 

 
 

FFO, as defined by NAREIT, of the Operating Partnership
 
$
45,721

 
$
46,180

 
$
89,222

 
$
90,093

Add:
 
 

 
 

 
 

 
 

Depreciation of non-real estate assets
 
273

 
660

 
550

 
1,131

Amortization of deferred financing costs
 
898

 
668

 
1,558

 
1,350

Non-cash compensation expense
 
1,119

 
1,285

 
2,304

 
2,479

Less:
 
 

 
 

 
 

 
 

Straight-line rent
 
611

 
1,099

 
1,562

 
2,420

Market rent amortization income
 
2,065

 
950

 
4,641

 
1,800

Amortization of debt premium
 
547

 
713

 
1,536

 
1,486

Other cash and non-cash adjustments1
 
920

 

 
920

 
866

Capital expenditures2:
 
 
 
 
 
 
 
 
     Maintenance capital expenditures3
 
1,427

 
367

 
2,148

 
1,240

     Revenue enhancing tenant improvements – retail
 
2,355

 
3,175

 
5,148

 
9,730

     Revenue enhancing tenant improvements – office
 
625

 
318

 
625

 
318

     External lease commissions
 
783

 
479

 
1,233

 
1,099

Total AFFO of the Operating Partnership
 
$
38,678

 
$
41,692

 
$
75,821

 
$
76,094

 
 
 
 
 
 
 
 
 
Other Financial Information:
 
 
 
 
 
 
 
 
Scheduled debt principal payments 
 
$
1,353

 
$
1,274

 
$
2,883

 
$
2,389

Capitalized interest cost
 
$
502

 
$
792

 
$
936

 
$
1,533

Mark to market lease amount in Deferred revenue and other liabilities on consolidated balance sheet
 
$
73,653

 
$
86,815

 


 


Acreage of undeveloped, vacant land in the operating portfolio4
 
42.5

 
 
 
 
 
 


 
 
June 30,
2018
 
December 31,
2017
Investment Properties, at Cost:
 
 

 
 

Land, building and improvements4
 
$
3,670,110

 
$
3,873,149

Furniture, equipment and other
 
9,022

 
8,453

Land held for development
 
31,142

 
31,142

Construction in progress
 
43,692

 
45,140

Total
 
$
3,753,966

 
$
3,957,884

 
____________________
1
Reflects a non-cash termination fee for the quarter ended June 30, 2018.
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 $17.5 million at June 30, 2018.
 


p. 14
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18

MARKET CAPITALIZATION AS OF JUNE 30, 2018    
394469376_image46.jpg

($ in thousands)
 
 
 
 
 
 
Percent of
Total Equity
 
Total
Market
Capitalization
 
Percent of
Total Market
Capitalization
Equity Capitalization:
 
 
 
 
 
Total Common Shares Outstanding
97.6
%
 
83,672,700

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

 
 
Combined Common Shares and OP Units
100.0
%
 
85,739,549

 
 
Market Price of Common Shares
 
 
$
17.08

 
 
Total Equity Capitalization
 
 
1,464,431

 
49
%
Debt Capitalization:
 
 
 

 
 
Company Consolidated Outstanding Debt
 
 
1,565,429

 
 
Plus: Debt Premium and Issuance Costs, net
 
 
4,307

 
 
Plus: Company Share of Unconsolidated Joint Venture Debt
 
 
18,164

 
 
Less: Partner Share of Consolidated Joint Venture Debt1
 
 
(10,073
)
 
 
Company Share of Outstanding Debt
 
 
1,577,827

 
 
Less: Cash, Cash Equivalents, and Restricted Cash
 
 
(43,332
)
 
 
Total Net Debt Capitalization
 
 
1,534,495

 
51
%
Total Enterprise Value
 
 
$
2,998,926

 
100
%
 
 
 
 
 
 
RATIO OF DEBT TO TOTAL UNDEPRECIATED ASSETS AS OF JUNE 30, 2018
Consolidated Undepreciated Real Estate Assets
 
 
$
3,753,966

 
 
Company Share of Unconsolidated Real Estate Assets
 
 
26,906

 
 
 
 
 
3,780,872

 
 
Total Debt Capitalization
 
 
1,544,568

 
 
Ratio of Debt to Total Undepreciated Real Estate Assets
 
 
40.9
%
 
 
 
 
 
 
 
 
RATIO OF COMPANY SHARE OF NET DEBT TO EBITDA AS OF JUNE 30, 2018
Company's Consolidated Debt & Share of Unconsolidated Debt
 
 
$
1,577,827

 
 
Less: Cash, Cash Equivalents, and Restricted Cash
 
(43,332
)
 
 
 
 
 
1,534,495

 
 
Q2 2018 EBITDA, Annualized:
 
 
 
 
 
        -  Consolidated EBITDA
$
252,680

 
 
 
 
        -  Unconsolidated EBITDA
136

 
 
 
 
        - Minority interest EBITDA 1
(1,404
)
 
 
 
 
        - Pro-forma adjustments 2
(16,775
)
 
234,637

 
 
Ratio of Company Share of Net Debt to EBITDA
 

 
6.5x

 
 
 
 
 
 
 
 
 


____________________
 
 
 
 
1
See page 18 for details
2
Relates to current quarter GAAP operating income, annualized, for properties sold during the quarter and a reduction to normalize other property related revenue to historical run rate.

p. 15
Kite Realty Group Trust Supplemental Financial and Operating Statistics –6/30/18

SAME PROPERTY NET OPERATING INCOME (NOI)
394469376_image46.jpg




($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Number of properties for the quarter
102

 
102

 
 
 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased percentage at period end
93.7
%
 
94.7
%
 
 
 
93.7
%
 
94.7
%
 
 
Economic Occupancy percentage2
93.0
%
 
93.9
%
 
 
 
93.1
%
 
93.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum rent
$
58,168

 
$
57,500

 
 
 
$
115,820

 
$
114,628

 
 
Tenant recoveries 
16,451

 
16,217