Toggle SGML Header (+)


Section 1: 8-K (FORM 8-K Q3 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): October 31, 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 October 31, 2018, Kite Realty Group Trust (the “Company”) announced its consolidated financial results for the quarter ended September 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 Third 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 October 31, 2018
99.2
 
Kite Realty Group Trust Third 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: October 31, 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

395577032_pressrellogo13.jpg
PRESS RELEASE
Contact Information:
Wade Achenbach
EVP, Portfolio Management
317.713.5660
wachenbach@kiterealty.com

Kite Realty Group Trust Reports Third Quarter 2018 Operating Results

Indianapolis, Indiana, October 31, 2018 - Kite Realty Group Trust (NYSE:KRG) (KRG) announced today its operating results for the third quarter ended September 30, 2018.
“2018 continues to be a year of strong operational performance and strategic execution,” said Chairman and Chief Executive Officer, John Kite. “During the third quarter, we improved our operating portfolio’s ABR, increased our small shop leased percentage, and executed 93 new and renewal leases for 446,000 square feet. Approximately 70% of our executed leases and tenant openings were restaurant, grocery, and service offerings. We recently announced noteworthy additions to our executive team with the hiring of Heath Fear as Executive Vice President & Chief Financial Officer, and the promotion of Wade Achenbach to Executive Vice President, Portfolio Management.”
Third Quarter Highlights

Financial Results
Realized net income attributable to common shareholders of $3.9 million, or $0.05 per common share (compared to a net loss of $0.6 million for the same period in 2017).
Generated Funds from Operations of the Operating Partnership (FFO), as defined by NAREIT, of $41.1 million, or $0.48 per diluted common share (compared to $41.8 million, or $0.49 per diluted common share, for the same period in 2017).

Portfolio Operations
Increased Same-Property Net Operating Income (NOI) 1.5% compared to the same period in the prior year, with base rent growth of 1.9% being partially offset by an increase in expenses net of recoveries.
Increased small shop leased percentage by 50 basis points sequentially to 90.9%.
Executed 93 leases and opened 39 new tenants, approximately 70% of which were restaurant, grocery, and service offerings.
Improved annualized base rent (ABR) for the operating retail portfolio to $16.77 per square foot (up 5% from the same period in 2017).

Development
Completed development of Embassy Suites by Hilton at Notre Dame - the newest addition to the Eddy Street Commons mixed-use development in South Bend, IN. The hotel is owned by an unconsolidated joint venture in which KRG has a 35% interest.
Delivered $10.5 million redevelopment project at Fishers Station (Indianapolis, IN MSA) with a projected annualized return of 11.4%.



1



Portfolio Operations
As of September 30, 2018, KRG owned interests in 115 operating and redevelopment properties totaling approximately 22.4 million square feet and one development project currently under construction totaling over 0.5 million square feet. ABR for the portfolio improved to $16.77, up 5% from the same period last year. Small shop leased percentage reached 90.9%, up 50 basis points sequentially. The owned gross leasable area in KRG’s retail operating portfolio was 93.5% leased as of September 30, 2018, and the total portfolio was 93.6% leased.
Same-property NOI, which includes 104 operating properties, increased 1.5% in the third quarter compared to the same period in the prior year. Base rent growth of 1.9% was partially offset by a net increase in operating expenses primarily related to short-term anchor vacancy. The properties included in the same-property pool were 93.9% and 94.4% leased as of September 30, 2018 and 2017, respectively, while economic occupancy was at 92.3% and 93.0%, respectively, for the same periods.
KRG continued progress on its anchor space repositioning efforts with the execution of two new retail anchor leases, totaling 42,528 square feet. The new anchor leases were Sprouts Farmer’s Market at Miramar Square (Miami, FL MSA) and Old Navy at Holly Springs Towne Center (Raleigh, NC MSA). Subsequent to quarter end, anchor leases were signed with REI and Burlington for a combined 79,000 square feet. Year to date, eight retail anchor leases have been executed.
KRG executed new and renewal leases on 93 individual spaces totaling 446,000 square feet during the third quarter of 2018, including 80 comparable new and renewal leases for 384,000 square feet. Cash rent spreads on comparable new and renewal leases executed in the quarter were 10.4% and 3.8%, respectively, for a blended cash rent spread of 4.9%. Excluding the disproportionate impact of one strategic anchor lease, the renewal and blended cash rental spreads were 6.7% and 7.3% respectively. The new, renewal, and blended leasing spreads on a GAAP basis, which includes periodic contractual rent increases over the term of the lease, were 30.2%, 8.6%, and 11.4%, respectively.
Balance Sheet
KRG currently has only a single $20.7 million mortgage maturing through 2020, and as of September 30th, the debt portfolio had a weighted average maturity of 5.0 years.
Subsequent to quarter end, KRG closed on a new $250 million ten-year unsecured term loan, extending the debt portfolio’s weighted average maturity by a full year to 6.0 years and laddering the debt maturity schedule such that no more than 20% of KRG’s debt comes due in any single calendar year (vs. 26% prior to the transaction). Execution of the term loan allowed KRG to fully retire the $200 million seven-year term loan due in 2022 and prepay $50 million of the $200 million five-year term loan due in 2021. KRG plans to fix the interest rate through an interest swap for the full $250 million within thirty days of closing. For additional information on this transaction, please see the Current Report on Form 8-K filed by KRG on October 26, 2018.
Development
During the third quarter, the Embassy Suites by Hilton at Notre Dame opened at KRG’s Eddy Street Commons mixed-use development. The hotel is the latest addition to the development that also features 170,000 square feet of retail and office space, along with 266 multi-family units and 201 previously sold residential units. Construction on phase two of the mixed-use development is underway, featuring 452 multi-family units, 21 for-sale residential units, a community center, and 8,500 square feet of retail space.

Also during the quarter, KRG delivered the Fishers Station (Indianapolis, IN MSA) redevelopment project. KRG invested $10.5 million in the redevelopment project for a projected annualized return of 11.4%.




2



2018 Earnings Guidance
KRG has reaffirmed its guidance for 2018 FFO, as defined by NAREIT, to a range of $1.98 to $2.01 per diluted common share. Please refer to the full list of guidance assumptions on page 43 of the third 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, November 1, 2018, at 11:00 a.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 8178656). In addition, a webcast replay link will be available on the corporate website.
Additional Materials
Financial statements, exhibits, and reconciliations of non-GAAP measures attached to this release include the details of KRG’s results.
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 neighborhood, community, 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; 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 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

3


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)
 
 
 
 
 
 
September 30,
2018
 
December 31,
2017
Assets:
 
 
 
 
Investment properties, at cost
 
$
3,752,472

 
$
3,957,884

Less: accumulated depreciation
 
(700,728
)
 
(664,614
)
 
 
3,051,744

 
3,293,270

 
 
 
 
 
Cash and cash equivalents
 
30,709

 
24,082

Tenant and other receivables, including accrued straight-line rent of $31,730 and $31,747 respectively, net of allowance for uncollectible accounts
 
57,133

 
58,328

Restricted cash and escrow deposits
 
10,307

 
8,094

Deferred costs and intangibles, net
 
99,253

 
112,359

Prepaid and other assets
 
17,371

 
12,465

Investments in unconsolidated subsidiaries
 
13,836

 
3,900

Asset held for sale
 
5,531

 

Total Assets
 
$
3,285,884

 
$
3,512,498

Liabilities and Shareholders’ Equity:
 
 
 
 

Mortgage and other indebtedness, net
 
$
1,578,328

 
$
1,699,239

Accounts payable and accrued expenses
 
98,537

 
78,482

Deferred revenue and other liabilities
 
82,723

 
96,564

Total Liabilities
 
1,759,588

 
1,874,285

Commitments and contingencies
 
 
 
 

Limited Partners’ interests in the Operating Partnership and other redeemable noncontrolling interests
 
47,426

 
72,104

Shareholders’ Equity:
 
 
 
 

Kite Realty Group Trust Shareholders’ Equity:
 
 
 
 

Common Shares, $.01 par value, 225,000,000 shares authorized, 83,720,286 and 83,606,068 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
 
837

 
836

Additional paid in capital
 
2,076,552

 
2,071,418

Accumulated other comprehensive loss
 
5,700

 
2,990

Accumulated deficit
 
(604,917
)
 
(509,833
)
Total Kite Realty Group Trust Shareholders’ Equity
 
1,478,172

 
1,565,411

Noncontrolling Interests
 
698

 
698

Total Equity
 
1,478,870

 
1,566,109

Total Liabilities and Shareholders' Equity
 
$
3,285,884

 
$
3,512,498



5


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

($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
  Minimum rent
 
$
65,328

 
$
67,585

 
$
202,475

 
$
204,926

  Tenant reimbursements
 
18,185

 
17,657

 
54,221

 
54,748

  Other property related revenue
 
2,129

 
1,896

 
8,119

 
10,226

  Fee income
 
105

 

 
2,430

 

Total revenue
 
85,747

 
87,138

 
267,245

 
269,900

Expenses:
 
 
 
 
 
 

 
 

  Property operating
 
12,092

 
11,859

 
37,184

 
36,950

  Real estate taxes
 
11,205

 
10,826

 
32,351

 
32,384

  General, administrative, and other
 
4,865

 
5,431

 
16,364

 
16,389

  Depreciation and amortization
 
36,858

 
42,793

 
115,864

 
131,333

  Impairment charges
 

 

 
38,847

 
7,411

Total expenses
 
65,020

 
70,909

 
240,610

 
224,467

Operating income
 
20,727

 
16,229

 
26,635

 
45,433

  Interest expense
 
(16,058
)
 
(16,372
)
 
(49,141
)
 
(49,250
)
  Income tax benefit of taxable REIT subsidiary
 
27

 
33

 
78

 
64

  Other expense, net
 
(379
)
 
(94
)
 
(643
)
 
(314
)
Income (loss) from continuing operations
 
4,317

 
(204
)
 
(23,071
)
 
(4,067
)
  Gains on sales of operating properties
 

 

 
8,329

 
15,160

Net income (loss)
 
4,317

 
(204
)
 
(14,742
)
 
11,093

  Net income attributable to noncontrolling interests
 
(379
)
 
(418
)
 
(604
)
 
(1,528
)
Net income (loss) attributable to Kite Realty Group Trust common shareholders
 
$
3,938

 
$
(622
)
 
$
(15,346
)
 
$
9,565

 
 
 
 
 
 
 
 
 
Income (loss) per common share - basic and diluted
 
$
0.05

 
$
(0.01
)
 
(0.18
)
 
0.11

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,706,704

 
83,594,163

 
83,670,038

 
83,581,847

Weighted average common shares outstanding - diluted
 
83,767,655

 
83,594,163

 
83,670,038

 
83,689,590

Cash dividends declared per common share
 
$
0.3175

 
$
0.3025

 
$
0.9525

 
$
0.9075

 
 
 
 
 
 
 
 
 

6


Kite Realty Group Trust
Funds From Operations
For the Three and Nine Months Ended September 30, 2018 and 2017
(Unaudited)
($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Funds From Operations
 
 
 
 
 
 
 
 
Consolidated net income (loss)
 
$
4,317

 
$
(204
)
 
$
(14,742
)
 
$
11,093

Less: net income attributable to noncontrolling interests in properties
 
(285
)
 
(432
)
 
(979
)
 
(1,302
)
Less: gains on sales of operating properties
 

 

 
(8,329
)
 
(15,160
)
Add: impairment charges
 

 

 
38,847

 
7,411

Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests
 
37,045

 
42,474

 
115,501

 
129,890

   FFO of the Operating Partnership1
 
41,077

 
41,838

 
130,298

 
131,932

Less: Limited Partners' interests in FFO
 
(986
)
 
(949
)
 
(3,127
)
 
(2,995
)
   FFO attributable to Kite Realty Group Trust common shareholders1
 
$
40,091

 
$
40,889

 
$
127,171

 
$
128,937

FFO, as defined by NAREIT, per share of the Operating Partnership - basic
 
$
0.48

 
$
0.49

 
$
1.52

 
$
1.54

FFO, as defined by NAREIT, per share of the Operating Partnership - diluted
 
$
0.48

 
$
0.49

 
$
1.52

 
$
1.54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,706,704

 
83,594,163

 
83,670,038

 
83,581,847

Weighted average common shares outstanding - diluted
 
83,767,655

 
83,708,719

 
83,719,308

 
83,689,590

Weighted average common shares and units outstanding - basic
 
85,768,857

 
85,580,993

 
85,717,440

 
85,561,343

Weighted average common shares and units outstanding - diluted
 
85,829,808

 
85,695,549

 
85,766,710

 
85,669,087

 
 
 
 
 
 
 
 
 
FFO, as defined by NAREIT, per diluted share/unit
 
 
 
 
 
 
 
 
Consolidated net income (loss)
 
$
0.05

 
$

 
$
(0.17
)
 
$
0.13

Less: net income attributable to noncontrolling interests in properties
 

 
(0.01
)
 
(0.01
)
 
(0.02
)
Less: gains on sales of operating properties
 

 

 
(0.10
)
 
(0.18
)
Add: impairment charges
 

 

 
0.45

 
0.09

Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests
 
0.43

 
0.50

 
1.35

 
1.52

FFO, as defined by NAREIT, of the Operating Partnership per diluted share/unit1
 
$
0.48

 
$
0.49

 
$
1.52

 
$
1.54

 
 
 
 
 
 
 
 
 
____________________
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 Nine Months Ended September 30, 2018 and 2017
(Unaudited)

($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Number of properties for the quarter
104

 
104

 
 
 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased percentage at period end
93.9
%
 
94.4
%
 
 
 
93.9
%
 
94.4
%
 
 
Economic Occupancy percentage2
92.3
%
 
93.0
%
 
 
 
92.9
%
 
93.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum rent
$
59,913

 
$
58,820

 
 
 
$
175,734

 
$
173,448

 
 
Tenant recoveries 
17,299

 
16,188

 
 
 
50,432

 
48,722

 
 
Other income
430

 
391

 
 
 
941

 
849

 
 
 
77,642

 
75,399

 
 
 
227,107

 
223,019

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses 
(11,144
)
 
(10,368
)
 
 
 
(32,611
)
 
(30,873
)
 
 
Bad debt expense
(537
)
 
(508
)
 
 
 
(1,352
)
 
(1,971
)
 
 
Real estate taxes 
(10,601
)
 
(9,981
)
 
 
 
(30,291
)
 
(29,693
)
 
 
 
(22,282
)
 
(20,857
)
 
 
 
(64,254
)
 
(62,537
)
 
 
Same Property NOI3
$
55,360

 
$
54,542

 
1.5%
 
$
162,853

 
$
160,482

 
1.5%
 
 
 
 
 
 
 
 
 
 
 
 
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure: 
 
 
 
 
 
 
 
 
 
 
 
Net operating income - same properties
$
55,360

 
$
54,542

 
 
 
$
162,853

 
$
160,482

 
 
Net operating income - non-same activity4
6,985

 
9,911

 
 
 
32,427

 
40,084

 
 
Other (expense) income, net
(247
)
 
(61
)
 
 
 
1,865

 
(250
)
 
 
General, administrative and other
(4,865
)
 
(5,431
)
 
 
 
(16,364
)
 
(16,389
)
 
 
Impairment charges

 

 
 
 
(38,847
)
 
(7,411
)
 
 
Depreciation and amortization expense
(36,858
)
 
(42,793
)
 
 
 
(115,864
)
 
(131,333
)
 
 
Interest expense
(16,058
)
 
(16,372
)
 
 
 
(49,141
)
 
(49,250
)
 
 
Gains on sales of operating properties

 

 
 
 
8,329

 
15,160

 
 
Net income attributable to noncontrolling interests
(379
)
 
(418
)
 
 
 
(604
)
 
(1,528
)
 
 
Net (loss) income attributable to common shareholders
$
3,938

 
$
(622
)
 
 
 
$
(15,346
)
 
$
9,565

 
 
____________________
1
Same Property NOI excludes five properties in redevelopment, the recently completed City Center, Burnt Store Marketplace, and Fishers Station redevelopments 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, fee income 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 September 30, 2018, the Company excluded five redevelopment properties and the recently completed City Center, Burnt Store Marketplace, and Fishers Station 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 Q3 2018 SUPPLEMENTAL)

Exhibit
 
 
Exhibit 99.2

395577032_supplementalcoverseptember22.jpg


QUARTERLY FINANCIAL SUPPLEMENTAL – SEPTEMBER 30, 2018
395577032_image47.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 Nine Months Ended September 30, 2018
13
 
Funds from Operations for the Three and Nine Months Ended September 30, 2018
14
 
Adjusted Funds From Operations and Other Financial Information for the Three and Nine Months Ended September 30, 2018
15
 
Market Capitalization as of September 30, 2018
15
 
Ratio of Debt to Total Undepreciated Assets as of September 30, 2018
15
 
Ratio of Company Share of Net Debt to EBITDA as of September 30, 2018
16
 
Same Property Net Operating Income for the Three and Nine Months Ended September 30, 2018
17
 
Net Operating Income by Quarter 
18
 
Consolidated Joint Venture Summary as of September 30, 2018
19
 
Unconsolidated Joint Venture Summary as of September 30, 2018
20
 
Summary of Outstanding Debt as of September 30, 2018
21
 
Maturity Schedule of Outstanding Debt as of September 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 –9/30/18

 
 
 


395577032_pressrellogo13.jpg

PRESS RELEASE
Contact Information:
Wade Achenbach
EVP, Portfolio Management
317.713.5660
wachenbach@kiterealty.com

Kite Realty Group Trust Reports Third Quarter 2018 Operating Results

Indianapolis, Indiana, October 31, 2018 - Kite Realty Group Trust (NYSE:KRG) (KRG) announced today its operating results for the third quarter ended September 30, 2018.
“2018 continues to be a year of strong operational performance and strategic execution,” said Chairman and Chief Executive Officer, John Kite. “During the third quarter, we improved our operating portfolio’s ABR, increased our small shop leased percentage, and executed 93 new and renewal leases for 446,000 square feet. Approximately 70% of our executed leases and tenant openings were restaurant, grocery, and service offerings. We recently announced noteworthy additions to our executive team with the hiring of Heath Fear as Executive Vice President & Chief Financial Officer, and the promotion of Wade Achenbach to Executive Vice President, Portfolio Management.”

Third Quarter Highlights

Financial Results
Realized net income attributable to common shareholders of $3.9 million, or $0.05 per common share (compared to a net loss of $0.6 million for the same period in 2017).
Generated Funds from Operations of the Operating Partnership (FFO), as defined by NAREIT, of $41.1 million, or $0.48 per diluted common share (compared to $41.8 million, or $0.49 per diluted common share, for the same period in 2017).

Portfolio Operations
Increased Same-Property Net Operating Income (NOI) 1.5% compared to the same period in the prior year, with base rent growth of 1.9% being partially offset by an increase in expenses net of recoveries.
Increased small shop leased percentage by 50 basis points sequentially to 90.9%.
Executed 93 leases and opened 39 new tenants, approximately 70% of which were restaurant, grocery, and service offerings.
Improved annualized base rent (ABR) for the operating retail portfolio to $16.77 per square foot (up 5% from the same period in 2017).

Development
Completed development of Embassy Suites by Hilton at Notre Dame - the newest addition to the Eddy Street Commons mixed-use development in South Bend, IN. The hotel is owned by an unconsolidated joint venture in which KRG has a 35% interest.
Delivered $10.5 million redevelopment project at Fishers Station (Indianapolis, IN MSA) with a projected annualized return of 11.4%.

p. 3
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18



Portfolio Operations
As of September 30, 2018, KRG owned interests in 115 operating and redevelopment properties totaling approximately 22.4 million square feet and one development project currently under construction totaling over 0.5 million square feet. ABR for the portfolio improved to $16.77, up 5% from the same period last year. Small shop leased percentage reached 90.9%, up 50 basis points sequentially. The owned gross leasable area in KRG’s retail operating portfolio was 93.5% leased as of September 30, 2018, and the total portfolio was 93.6% leased.
Same-property NOI, which includes 104 operating properties, increased 1.5% in the third quarter compared to the same period in the prior year. Base rent growth of 1.9% was partially offset by a net increase in operating expenses primarily related to short-term anchor vacancy. The properties included in the same-property pool were 93.9% and 94.4% leased as of September 30, 2018 and 2017, respectively, while economic occupancy was at 92.3% and 93.0%, respectively, for the same periods.
KRG continued progress on its anchor space repositioning efforts with the execution of two new retail anchor leases, totaling 42,528 square feet. The new anchor leases were Sprouts Farmer’s Market at Miramar Square (Miami, FL MSA) and Old Navy at Holly Springs Towne Center (Raleigh, NC MSA). Subsequent to quarter end, anchor leases were signed with REI and Burlington for a combined 79,000 square feet. Year to date, eight retail anchor leases have been executed.
KRG executed new and renewal leases on 93 individual spaces totaling 446,000 square feet during the third quarter of 2018, including 80 comparable new and renewal leases for 384,000 square feet. Cash rent spreads on comparable new and renewal leases executed in the quarter were 10.4% and 3.8%, respectively, for a blended cash rent spread of 4.9%. Excluding the disproportionate impact of one strategic anchor lease, the renewal and blended cash rental spreads were 6.7% and 7.3% respectively. The new, renewal, and blended leasing spreads on a GAAP basis, which includes periodic contractual rent increases over the term of the lease, were 30.2%, 8.6%, and 11.4%, respectively.
Balance Sheet
KRG currently has only a single $20.7 million mortgage maturing through 2020, and as of September 30th, the debt portfolio had a weighted average maturity of 5.0 years.
Subsequent to quarter end, KRG closed on a new $250 million ten-year unsecured term loan, extending the debt portfolio’s weighted average maturity by a full year to 6.0 years and laddering the debt maturity schedule such that no more than 20% of KRG’s debt comes due in any single calendar year (vs. 26% prior to the transaction). Execution of the term loan allowed KRG to fully retire the $200 million seven-year term loan due in 2022 and prepay $50 million of the $200 million five-year term loan due in 2021. KRG plans to fix the interest rate through an interest swap for the full $250 million within thirty days of closing. For additional information on this transaction, please see the Current Report on Form 8-K filed by KRG on October 26, 2018.
Development
During the third quarter, the Embassy Suites by Hilton at Notre Dame opened at KRG’s Eddy Street Commons mixed-use development. The hotel is the latest addition to the development that also features 170,000 square feet of retail and office space, along with 266 multi-family units and 201 previously sold residential units. Construction on phase two of the mixed-use development is underway, featuring 452 multi-family units, 21 for-sale residential units, a community center, and 8,500 square feet of retail space.

Also during the quarter, KRG delivered the Fishers Station (Indianapolis, IN MSA) redevelopment project. KRG invested $10.5 million in the redevelopment for a projected annualized return of 11.4%



p. 4
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18




2018 Earnings Guidance
KRG has reaffirmed its guidance for 2018 FFO, as defined by NAREIT, to a range of $1.98 to $2.01 per diluted common share. Please refer to the full list of guidance assumptions on page 43 of the third 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, November 1, 2018, at 11:00 a.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 8178656). In addition, a webcast replay link will be available on the corporate website.
Additional Materials
Financial statements, exhibits, and reconciliations of non-GAAP measures attached to this release include the details of KRG’s results.
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 neighborhood, community, 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; 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 environment in which KRG operates; acquisition, disposition, development and joint venture risks; property

p. 5
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18


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 –9/30/18

CORPORATE PROFILE
 
395577032_image47.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 September 30, 2018, we owned interests in 115 operating and redevelopment properties totaling approximately 22.4 million square feet and one development project 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. 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/or to strengthen the Company’s balance sheet.  

Company Highlights as of September 30, 2018  
 
 
# of Properties
Total
GLA /NRA
Owned
 GLA /NRA2
Operating Retail Properties 1
 
106

21,275,004

15,010,223

Operating Office Properties and Other
 
4

498,108

498,108

Redevelopment Properties
 
5

653,169

653,169

Total Operating and Redevelopment Properties
 
115

22,426,281

16,161,500

Development Projects
 
1

530,000

8,500

Total All Properties
 
116

22,956,281

16,170,000

 
 
Retail
Non-Retail
Total
Operating Properties –  Leased Percentage2
 
93.5%
97.0%
93.6%
States
 
 
 
19


Stock Listing: New York Stock Exchange symbol: KRG
  
____________________
1
Includes Whitehall Pike, which is held for sale as of September 30, 2018.
2
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 –9/30/18

CONTACT INFORMATION    
 
395577032_image47.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
Executive Vice President, Portfolio Management
 
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
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

p. 8
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18

IMPORTANT NOTES INCLUDING NON-GAAP DISCLOSURES    
395577032_image47.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 September 30, 2018 to be filed on or about November 2, 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 connection with 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 actual and perceived impact of online retail 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.
 








p. 9
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18

IMPORTANT NOTES INCLUDING NON-GAAP DISCLOSURES (CONTINUED)
395577032_image47.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 September 30, 2018, the Company excluded five redevelopment properties and the recently completed City Center, Burnt Store Marketplace, and Fishers Station 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 –9/30/18

CONSOLIDATED BALANCE SHEETS (UNAUDITED)
395577032_image47.jpg


($ in thousands)
 
 
 
 
 
 
September 30,
2018
 
December 31,
2017
Assets:
 
 
 
 
Investment properties, at cost
 
$
3,752,472

 
$
3,957,884

Less: accumulated depreciation
 
(700,728
)
 
(664,614
)
 
 
3,051,744

 
3,293,270

Cash and cash equivalents
 
30,709

 
24,082

Tenant and other receivables, including accrued straight-line rent of $31,730 and $31,747 respectively, net of allowance for uncollectible accounts
 
57,133

 
58,328

Restricted cash and escrow deposits
 
10,307

 
8,094

Deferred costs and intangibles, net
 
99,253

 
112,359

Prepaid and other assets
 
17,371

 
12,465

Investments in unconsolidated subsidiaries
 
13,836

 
3,900

Asset held for sale
 
5,531

 
$

Total Assets
 
$
3,285,884

 
$
3,512,498

Liabilities and Shareholders’ Equity:
 
 
 
 

Mortgage and other indebtedness, net
 
$
1,578,328

 
$
1,699,239

Accounts payable and accrued expenses
 
98,537

 
78,482

Deferred revenue and other liabilities
 
82,723

 
96,564

Total Liabilities
 
1,759,588

 
1,874,285

Commitments and contingencies
 
 
 
 

Limited Partners’ interests in the Operating Partnership and other redeemable noncontrolling interests
 
47,426

 
72,104

Shareholders’ Equity:
 
 
 
 

Kite Realty Group Trust Shareholders’ Equity:
 
 
 
 

Common Shares, $.01 par value, 225,000,000 shares authorized, 83,720,286 and 83,606,068 shares issued and outstanding at September 30, 2018 and December 31, 2017, respectively
 
837

 
836

Additional paid in capital
 
2,076,552

 
2,071,418

Accumulated other comprehensive income
 
5,700

 
2,990

Accumulated deficit
 
(604,917
)
 
(509,833
)
Total Kite Realty Group Trust Shareholders’ Equity
 
1,478,172

 
1,565,411

Noncontrolling Interests
 
698

 
698

Total Equity
 
1,478,870

 
1,566,109

Total Liabilities and Equity
 
$
3,285,884

 
$
3,512,498












p. 11
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
395577032_image47.jpg
     





($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Revenue:
 
 
 
 
 
 
 
 
  Minimum rent
 
$
65,328

 
$
67,585

 
$
202,475

 
$
204,926

  Tenant reimbursements
 
18,185

 
17,657

 
54,221

 
54,748

  Other property related revenue
 
2,129

 
1,896

 
8,119

 
10,226

  Fee income
 
105

 

 
2,430

 

Total revenue
 
85,747

 
87,138

 
267,245

 
269,900

Expenses:
 
 

 
 

 
 
 
 
  Property operating
 
12,092

 
11,859

 
37,184

 
36,950

  Real estate taxes
 
11,205

 
10,826

 
32,351

 
32,384

  General, administrative, and other
 
4,865

 
5,431

 
16,364

 
16,389

  Depreciation and amortization
 
36,858

 
42,793

 
115,864

 
131,333

  Impairment charges
 

 

 
38,847

 
7,411

Total expenses
 
65,020

 
70,909

 
240,610

 
224,467

Operating income
 
20,727

 
16,229

 
26,635

 
45,433

  Interest expense
 
(16,058
)
 
(16,372
)
 
(49,141
)
 
(49,250
)
  Income tax benefit of taxable REIT subsidiary
 
27

 
33

 
78

 
64

  Other expense, net
 
(379
)
 
(94
)
 
(643
)
 
(314
)
Income (loss) from continuing operations
 
4,317

 
(204
)
 
(23,071
)
 
(4,067
)
  Gains on sales of operating properties
 

 

 
8,329

 
15,160

Net income (loss)
 
4,317

 
(204
)
 
(14,742
)
 
11,093

  Net income attributable to noncontrolling interests
 
(379
)
 
(418
)
 
(604
)
 
(1,528
)
Net income (loss) attributable to Kite Realty Group Trust common shareholders
 
$
3,938

 
$
(622
)
 
$
(15,346
)
 
$
9,565

 
 
 
 
 
 
 
 
 
Income (loss) per common share - basic and diluted
 
$
0.05

 
$
(0.01
)
 
$
(0.18
)
 
$
0.11

 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,706,704

 
83,594,163

 
83,670,038

 
83,581,847

Weighted average common shares outstanding - diluted
 
83,767,655

 
83,594,163

 
83,670,038

 
83,689,590

Cash dividends declared per common share
 
$
0.3175

 
$
0.3025

 
$
0.9525

 
$
0.9075

  


p. 12
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18

FUNDS FROM OPERATIONS1
395577032_image47.jpg



($ in thousands, except per share data)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2018
 
2017
 
2018
 
2017
Funds From Operations ("FFO")
 
 
 
 
 
 
 
 
Consolidated net income (loss)
 
$
4,317

 
$
(204
)
 
$
(14,742
)
 
$
11,093

Less: net income attributable to noncontrolling interests in properties
 
(285
)
 
(432
)
 
(979
)
 
(1,302
)
Less: gains on sales of operating properties
 

 

 
(8,329
)
 
(15,160
)
Add: impairment charges
 

 

 
38,847

 
7,411

Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests
 
37,045

 
42,474

 
115,501

 
129,890

   FFO of the Operating Partnership1
 
41,077

 
41,838

 
130,298

 
131,932

Less: Limited Partners' interests in FFO
 
(986
)
 
(949
)
 
(3,127
)
 
(2,995
)
   FFO attributable to Kite Realty Group Trust common shareholders1
 
$
40,091

 
$
40,889

 
$
127,171

 
$
128,937

FFO, as defined by NAREIT, per share of the Operating Partnership - basic
 
$
0.48

 
$
0.49

 
$
1.52

 
$
1.54

FFO, as defined by NAREIT, per share of the Operating Partnership - diluted
 
$
0.48

 
$
0.49

 
$
1.52

 
$
1.54

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average common shares outstanding - basic
 
83,706,704

 
83,594,163

 
83,670,038

 
83,581,847

Weighted average common shares outstanding - diluted
 
83,767,655

 
83,708,719

 
83,719,308

 
83,689,590

Weighted average common shares and units outstanding - basic
 
85,768,857

 
85,580,993

 
85,717,440

 
85,561,343

Weighted average common shares and units outstanding - diluted
 
85,829,808

 
85,695,549

 
85,766,710

 
85,669,087

 
 
 
 
 
 
 
 
 
FFO, as defined by NAREIT, per diluted share/unit
 
 
 
 
 
 
 
 
Consolidated net income (loss)
 
$
0.05

 
$

 
$
(0.17
)
 
$
0.13

Less: net income attributable to noncontrolling interests in properties
 

 
(0.01
)
 
(0.01
)
 
(0.02
)
Less: gains on sales of operating properties
 

 

 
(0.10
)
 
(0.18
)
Add: impairment charges
 

 

 
0.45

 
0.09

Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests
 
0.43

 
0.50

 
1.35

 
1.52

FFO, as defined by NAREIT, of the Operating Partnership per diluted share/unit1
 
$
0.48

 
$
0.49

 
$
1.52

 
$
1.54

 
 
 
 
 
 
 
 
 
____________________
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 –9/30/18

ADJUSTED FUNDS FROM OPERATIONS AND OTHER FINANCIAL INFORMATION
395577032_image47.jpg

 
($ in thousands)
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 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
 
$
41,077

 
$
41,838

 
$
130,298

 
$
131,932

Add:
 
 

 
 

 
 

 
 

Depreciation of non-real estate assets
 
290

 
319

 
840

 
1,450

Amortization of deferred financing costs
 
662

 
664

 
2,220

 
2,014

Non-cash compensation expense
 
852

 
1,253

 
3,156

 
3,732

Less:
 
 

 
 

 
 

 
 

Straight-line rent
 
760

 
1,173

 
2,322

 
3,593

Market rent amortization income
 
847

 
715

 
5,488

 
2,515

Amortization of debt premium
 
547

 
713

 
2,083

 
2,200

Other cash and non-cash adjustments1
 
344

 

 
1,264

 
866

Capital expenditures2:
 
 
 
 
 
 
 
 
     Maintenance capital expenditures3
 
1,165

 
983

 
3,313

 
2,224

     Revenue enhancing tenant improvements – retail
 
4,115

 
1,825

 
9,262

 
11,554

     Revenue enhancing tenant improvements – office
 
693

 
144

 
1,318

 
461

     External lease commissions
 
670

 
327

 
1,903

 
1,426

Total AFFO of the Operating Partnership
 
$
33,740

 
$
38,194

 
$
109,561

 
$
114,289

 
 
 
 
 
 
 
 
 
Other Financial Information:
 
 
 
 
 
 
 
 
Scheduled debt principal payments 
 
$
1,078

 
$
1,320

 
$
3,961

 
$
3,709

Capitalized interest cost
 
$
479

 
$
787

 
$
1,415

 
$
2,320

Mark to market lease amount in Deferred revenue and other liabilities on consolidated balance sheet
 
$
72,238

 
$
85,163

 


 


Acreage of undeveloped, vacant land in the operating portfolio4
 
40.6

 
 
 
 
 
 


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

 
 

Land, building and improvements4
 
$
3,677,536

 
$
3,873,149

Furniture, equipment and other
 
9,151

 
8,453

Land held for development
 
31,142

 
31,142

Construction in progress
 
34,643

 
45,140

Total
 
$
3,752,472

 
$
3,957,884

 
____________________
1
The year-to-date amount reflects non-cash termination fees.
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 $17.3 million at September 30, 2018.
 


p. 14
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18

MARKET CAPITALIZATION AS OF SEPTEMBER 30, 2018    
395577032_image47.jpg

($ in thousands)
 
 
 
 
 
 
Percent of
Total Equity
 
Total
Market
Capitalization
 
Percent of
Total Market
Capitalization
Equity Capitalization:
 
 
 
 
 
Total Common Shares Outstanding
97.6
%
 
83,720,286

 
 
Operating Partnership ("OP") Units Outstanding
2.4
%
 
2,048,849

 
 
Combined Common Shares and OP Units
100.0
%
 
85,769,135

 
 
Market Price of Common Shares
 
 
$
16.65

 
 
Total Equity Capitalization
 
 
1,428,056

 
48
%
Debt Capitalization:
 
 
 

 
 
Company Consolidated Outstanding Debt
 
 
1,578,328

 
 
Plus: Debt Premium and Issuance Costs, net
 
 
4,330

 
 
Plus: Company Share of Unconsolidated Joint Venture Debt
 
 
20,641

 
 
Less: Partner Share of Consolidated Joint Venture Debt1
 
 
(5,603
)
 
 
Company Share of Outstanding Debt
 
 
1,597,696

 
 
Less: Cash, Cash Equivalents, and Restricted Cash
 
 
(41,016
)
 
 
Total Net Debt Capitalization
 
 
1,556,680

 
52
%
Total Enterprise Value
 
 
$
2,984,736

 
100
%
 
 
 
 
 
 
RATIO OF DEBT TO TOTAL UNDEPRECIATED ASSETS AS OF SEPTEMBER 30, 2018
Consolidated Undepreciated Real Estate Assets
 
 
$
3,752,472

 
 
Company Share of Unconsolidated Real Estate Assets
 
 
37,743

 
 
 
 
 
3,790,215

 
 
Total Debt Capitalization
 
 
1,562,283

 
 
Ratio of Debt to Total Undepreciated Real Estate Assets
 
 
41.2
%
 
 
 
 
 
 
 
 
RATIO OF COMPANY SHARE OF NET DEBT TO EBITDA AS OF SEPTEMBER 30, 2018
Company's Consolidated Debt & Share of Unconsolidated Debt
 
 
$
1,597,696

 
 
Less: Cash, Cash Equivalents, and Restricted Cash
 
(41,016
)
 
 
 
 
 
1,556,680

 
 
Q3 2018 EBITDA, Annualized:
 
 
 
 
 
        -  Consolidated EBITDA
$
230,340

 
 
 
 
        -  Unconsolidated EBITDA
2,393

 
 
 
 
        - Minority interest EBITDA 1
(1,004
)
 
231,729

 
 
Ratio of Company Share of Net Debt to EBITDA
 

 
6.7x

 
 
 
 
 
 
 
 
 


____________________
 
 
 
 
1
See page 18 for details.

p. 15
Kite Realty Group Trust Supplemental Financial and Operating Statistics –9/30/18

SAME PROPERTY NET OPERATING INCOME (NOI)
395577032_image47.jpg




($ in thousands)
 
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2018
 
2017
 
% Change
 
2018
 
2017
 
% Change
Number of properties for the quarter
104

 
104

 
 
 


 


 
 
 
 
 
 
 
 
 
 
 
 
 
 
Leased percentage at period end
93.9
%
 
94.4
%
 
 
 
93.9
%
 
94.4
%
 
 
Economic Occupancy percentage2
92.3
%
 
93.0
%
 
 
 
92.9
%
 
93.6
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Minimum rent
$
59,913

 
$
58,820

 
 
 
$
175,734

 
$
173,448

 
 
Tenant recoveries 
17,299

 
16,188

 
 
 
50,432

 
48,722

 
 
Other income
430