Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced
operating results for the second quarter ended June 30, 2016. The
attached financial statements, exhibits and reconciliations of
non-GAAP measures provide the details of these results.
Second Quarter
Highlights
- Net loss attributable to common
shareholders was $1.9 million, or $0.02 per diluted common share,
including $2.8 million ($0.03 per diluted common share) of
transaction costs.
- Funds From Operations (“FFO”), as
adjusted, increased 6% compared to the same period in the prior
year and was $0.52 per diluted common share, or $44.2 million.
- Small shop occupancy was 88.3%, an
increase of 210 basis points compared to the same period in the
prior year.
- Same-property NOI, which includes 102
retail operating properties, increased 2.6% for the comparable
operating portfolio and 3.6% excluding the impact of the Company’s
Redevelopment, Repurpose and Reposition ("3-R") initiative, both
percentages compared to the same period in the prior year.
- Ground-up development projects were
substantially completed at Tamiami Crossing (Naples, FL) and Holly
Springs Towne Center (Phase II) (Raleigh/MSA, NC), and these
properties were transitioned into the operating portfolio.
- The Company commenced construction on
three additional 3-R projects, for a total of eight projects in
process. These eight projects have an estimated incremental return
averaging approximately 9% to 11%, and aggregate costs for all of
these projects are expected to range between $40.5 million and
$47.0 million.
- Guidance for 2016 FFO, as adjusted,
increased to a range of $2.04 to $2.08 per diluted common share
from a range of $2.02 to $2.08 per diluted common share.
“We are pleased with our second quarter performance,” said John
A. Kite, Chairman and CEO. “We substantially completed two
development projects, Holly Springs Towne Center in Raleigh, North
Carolina, and Tamiami Crossing in Naples, Florida. We continued to
expand our 3-R initiative, starting construction on three
additional projects during the quarter. Our leasing efforts
remained focused and aggressive as reflected in our continued
improvement in small shop leasing. Finally, our proactive balance
sheet approach further strengthened our financial flexibility and
liquidity position.”
Second Quarter Financial &
Portfolio Results
Net loss attributable to common shareholders for the three
months ended June 30, 2016, was $1.9 million compared to a net
income of $4.6 million for the same period in 2015. The decrease is
primarily attributable to a $4.5 million settlement gain in the
second quarter of 2015 and terminated transaction costs of $2.8
million in the second quarter of 2016.
FFO, as adjusted, for the three months ended June 30, 2016, was
$44.2 million, or $0.52 per diluted common share, for real estate
properties in which the Company’s operating subsidiaries own an
interest (to which we refer as the “Kite Portfolio”), compared to
$41.6 million, or $0.49 per diluted common share, for the same
period in the prior year.
Reported FFO, as defined by NAREIT, was $41.4 million, or $0.48
per diluted common share, for the Kite Portfolio, compared to $45.8
million, or $0.54 per diluted common share, for the same period in
the prior year. The decrease is primarily attributable to the
non-recurring settlement gain and terminated transaction costs
described above.
As of June 30, 2016, the Company owned interests in 121
operating properties totaling approximately 24 million square feet.
The owned gross leasable area in the Company’s retail operating
portfolio was 95.2% leased as of June 30, 2016.
Same-property NOI, which includes 102 retail operating
properties, increased 2.6% for the comparable operating portfolio
and 3.6% excluding the impact of the Company’s 3-R initiative, both
percentages compared to the same period in the prior year.
The Company executed leases on 98 individual spaces during the
second quarter of 2016 totaling 423,346 square feet, including 71
comparable new and renewal leases for 363,419 owned square feet.
The Company generated positive cash spreads of 19.5% on new
comparable leases executed during the quarter and 6.7% on renewals,
for a blended spread of 9.4%.
Balance Sheet
The Company funded the remaining $100 million on its existing
7-year term loan facility during the quarter, using the proceeds to
repay the balance on its revolving line of credit. Previously in
the quarter, the Company had repaid $20 million of property level
debt related to Mullins Crossing using the line of credit.
Subsequent to quarter end, property level debt of $26 million
related to Pine Ridge and Riverchase was repaid using the line of
credit.
In July, the Company refinanced $700 million in unsecured bank
facilities, including the extensions of $200 million of its $400
million term loan for an additional five years to mature in 2021
and its $500 million revolving credit facility to mature in 2020.
The revolving credit facility may be extended beyond 2020, for two
additional periods of six months each, at the Operating
Partnership's option, subject to certain conditions. The revised
terms of the unsecured financings improve the borrowing base
calculation, lower the Company’s interest rate and extend the term
to maturity.
Redevelopment and
Development
The Company’s 3-R initiative, which includes a total of 23
different projects in various stages, continued to progress during
the second quarter. The Company commenced construction at Hitchcock
Plaza (Aiken, SC), Shops at Moore (Oklahoma City, OK) and Tarpon
Bay Plaza (Naples, FL), during the second quarter. Combined with
projects already in process, the Company now has eight 3-R projects
under construction, with an average targeted incremental return of
approximately 9% to 11% and aggregate estimated costs of $40.5
million to $47 million. Additional 3-R opportunities have been
identified at fifteen properties and have an average targeted
incremental return of approximately 9% to 11% and total estimated
costs of approximately $90 million to $110 million.
Two development properties, Holly Springs Towne Center (Phase
II) (Raleigh, NC) and Tamiami Crossing (Naples, FL) were
substantially completed during the second quarter and transitioned
into the operating portfolio. Tamiami Crossing is fully occupied by
Ulta, Marshalls, Michaels, PetSmart, Ross, and Stein Mart. The
Company’s remaining development project, the second phase of
Parkside Town Commons (Raleigh, NC), was 89.2% pre-leased or
committed.
Updated Guidance
The Company is updating its guidance for 2016 FFO, as adjusted,
to $2.04 to $2.08 from $2.02 to $2.08 per diluted common share.
This guidance excludes certain non-recurring items such as
transaction costs, debt extinguishment gains/losses and certain
other income or charges. Please refer to the full list of guidance
assumptions on page 36 of the Quarterly Financial Supplemental.
Guidance Range For Full Year 2016
Low
High
Consolidated net income per diluted common share $ 0.03 $ 0.05 Add:
Depreciation, amortization and other 1.97 1.97 FFO,
per diluted common share, as defined by NAREIT 2.00
2.02 Add: Transaction costs and certain other charges 0.04
0.06
FFO, as adjusted, per diluted common share $
2.04 $ 2.08
Earnings Conference Call
The Company will conduct a conference call to discuss its
financial results on Friday, July 29, 2016, at 10:00 a.m. EDT. A
live webcast of the conference call will be available online on the
Company’s corporate website at www.kiterealty.com. The dial-in
numbers are (844) 309-0605 for domestic callers and (574) 990-9933
for international callers (passcode 14937527). 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 engaged in the ownership, operation,
management, leasing, acquisition, construction, redevelopment and
development of neighborhood and community shopping centers in
selected markets in the United States. As of June 30, 2016, the
Company owned interests in a portfolio of 121 operating,
development and redevelopment properties totaling approximately 24
million total square feet across 20 states. For more information,
please visit the Company’s website at www.kiterealty.com.
Safe Harbor
This press release 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, financing
risks, including the availability of and costs associated with
sources of liquidity, the Company’s ability to refinance, or extend
the maturity dates of, its indebtedness, the level and volatility
of interest rates, the financial stability of tenants, including
their ability to pay rent and the risk of tenant bankruptcies, the
competitive environment in which the Company operates, acquisition,
disposition, development, joint venture, property ownership and
management risks, the Company’s ability to maintain its status as a
real estate investment trust for federal income tax purposes,
potential environmental and other liabilities, impairment in the
value of real estate property the Company owns, risks related to
the geographical concentration of our properties in Florida,
Indiana and Texas, the dilutive effects of future offerings of
issuing additional securities, and other factors affecting the real
estate industry generally. The Company refers you to the documents
filed by the Company from time to time with the Securities and
Exchange Commission, specifically the section titled “Risk Factors”
in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2015, which discuss these and other factors that could
adversely affect the Company’s results. The Company undertakes no
obligation to publicly update or revise these forward-looking
statements, whether as a result of new information, future events
or otherwise.
Kite Realty Group Trust Consolidated
Balance Sheets (Unaudited) ($ in
thousands) June 30, December 31, 2016
2015 Assets: Investment properties, at cost $
3,968,116 $ 3,933,140 Less: accumulated depreciation (494,884 )
(432,295 ) 3,473,232 3,500,845 Cash and cash equivalents
37,902 33,880 Tenant and other receivables, including accrued
straight-line rent of $26,981 and $23,809 respectively, net of
allowance for uncollectible accounts 48,702 51,101 Restricted cash
and escrow deposits 11,500 13,476 Deferred costs and intangibles,
net 137,201 148,274 Prepaid and other assets 8,647 8,852
Total Assets $ 3,717,184 $ 3,756,428
Liabilities and Shareholders’ Equity: Mortgage and other
indebtedness, net $ 1,740,487 $ 1,724,449 Accounts payable and
accrued expenses 92,142 81,356 Deferred revenue and other
liabilities 122,669 131,559
Total Liabilities
1,955,298 1,937,364 Commitments and contingencies Limited Partners’
interests in the Operating Partnership and other redeemable
noncontrolling interests 100,179 92,315
Shareholders’
Equity: Kite Realty Group Trust Shareholders’ Equity:
Common Shares, $.01 par value, 225,000,000 shares authorized,
83,385,991 and 83,334,865 shares issued and outstanding at June 30,
2016 and December 31, 2015, respectively 834 833 Additional paid in
capital 2,043,715 2,050,545 Accumulated other comprehensive loss
(11,850 ) (2,145 ) Accumulated deficit (371,690 ) (323,257 )
Total Kite Realty Group Trust Shareholders’ Equity 1,661,009
1,725,976 Noncontrolling Interests 698 773
Total
Equity 1,661,707 1,726,749
Total Liabilities
and Shareholders' Equity $ 3,717,184 $ 3,756,428
Kite Realty Group Trust
Consolidated Statements of Operations For the Three and
Six Months Ended June 30, 2016 and 2015 (Unaudited)
($ in thousands, except per share data) Three
Months Ended Six Months Ended June 30, June
30, 2016 2015 2016 2015
Revenue: Minimum rent $ 68,455 $ 64,897 $ 135,918 $ 130,377
Tenant reimbursements 17,006 16,489 35,161 35,104 Other property
related revenue 2,114 2,349 5,046 5,083
Total revenue 87,575 83,735 176,125 170,564
Expenses:
Property operating 11,346 11,801 23,538 24,525 Real estate taxes
10,503 9,755 21,637 19,777 General, administrative, and other 4,856
4,566 10,147 9,572 Transaction costs 2,771 302 2,771 461
Depreciation and amortization 43,841 41,212 86,082
81,648
Total expenses 73,317 67,636
144,175 135,983
Operating income 14,258
16,099 31,950 34,581 Interest expense (15,500 ) (13,181 ) (30,825 )
(27,114 ) Income tax expense of taxable REIT subsidiary (338 ) (69
) (748 ) (124 ) Gain on settlement — 4,520 — 4,520 Other expense,
net (110 ) (134 ) (94 ) (130 )
(Loss) income from continuing
operations (1,690 ) 7,235 283 11,733 Gain on sales of operating
properties 194 — 194 3,363
Net
(loss) income (1,496 ) 7,235 477 15,096 Net income attributable
to noncontrolling interest (399 ) (508 ) (971 ) (1,191 ) Dividends
on preferred shares — (2,114 ) — (4,228 )
Net
(loss) income attributable to Kite Realty Group Trust common
shareholders $ (1,895 ) $ 4,613 $ (494 ) $ 9,677
(Loss) income per common share - basic and diluted $
(0.02 ) $ 0.06 $ (0.01 ) $ 0.12 Weighted
average common shares outstanding - basic 83,375,765
83,506,078 83,362,136 83,519,013 Weighted
average common shares outstanding - diluted 83,375,765
83,803,879 83,362,136 83,818,890
Common
dividends declared per common share $ 0.2875 $ 0.2725
$ 0.5750 $ 0.5450
Kite Realty Group Trust Funds From Operations
For the Three and Six Months Ended June 30, 2016 and 2015
(Unaudited) ($ in thousands, except per share
data) Three Months Ended Six Months Ended June
30, June 30, 2016 2015 2016
2015 Funds From Operations Consolidated net (loss)
income $ (1,496 ) $ 7,235 $ 477 $ 15,096 Less: cash dividends on
preferred shares — (2,114 ) — (4,228 ) Less: net income
attributable to noncontrolling interests in properties (461 ) (414
) (922 ) (1,001 ) Less: gains on sales of operating properties (194
) — (194 ) (3,363 ) Add: depreciation and amortization of
consolidated entities, net of noncontrolling interests 43,545
41,132 85,599 81,425 Funds From
Operations of the Kite Portfolio1 41,394 45,839 84,960 87,929 Less:
Limited Partners' interests in Funds From Operations (809 ) (924 )
(1,790 ) (1,731 ) Funds From Operations attributable to Kite Realty
Group Trust common shareholders $ 40,585 $ 44,915 $
83,170 $ 86,198 FFO per share of the Operating
Partnership - basic $ 0.49 $ 0.54 $ 1.00 $
1.03 FFO per share of the Operating Partnership - diluted $
0.48 $ 0.54 $ 0.99 $ 1.03 Funds
From Operations of the Kite Portfolio1 $ 41,394 $ 45,839 $ 84,960 $
87,929 Less: gain on settlement — (4,520 ) — (4,520 ) Add:
transaction costs 2,771 302 2,771 461 Add: severance charge —
— 500 — Funds From Operations of the
Kite Portfolio, as adjusted $ 44,165 $ 41,621 $
88,231 $ 83,870 FFO per share of the Operating
Partnership, as adjusted - basic $ 0.52 $ 0.49 $ 1.03
$ 0.98 FFO per share of the Operating Partnership, as
adjusted - diluted $ 0.52 $ 0.49 $ 1.03 $ 0.98
Weighted average Common Shares outstanding - basic
83,375,765 83,506,078 83,362,136 83,519,013
Weighted average Common Shares outstanding - diluted
83,475,474 83,803,879 83,460,521 83,818,890
Weighted average Common Shares and Units outstanding - basic
85,320,923 85,231,284 85,295,968 85,202,110
Weighted average Common Shares and Units outstanding -
diluted 85,420,633 85,529,084 85,394,353
85,501,987
Funds From Operations per
share Consolidated net (loss) income $ (0.02 ) $ 0.08 $ 0.01 $
0.18 Less: cash dividends on preferred shares — (0.02 ) — (0.05 )
Less: net income attributable to noncontrolling interests in
properties (0.01 ) — (0.01 ) (0.01 ) Less: gains on sales of
operating properties — — — (0.04 ) Add: depreciation and
amortization of consolidated entities, net of noncontrolling
interests 0.51 0.48 1.00 0.95 Funds
From Operations of the Kite Portfolio per share1 $ 0.48 $
0.54 $ 1.00 $ 1.03 Funds From
Operations of the Kite Portfolio per share1 $ 0.48 $ 0.54 $ 1.00 $
1.03 Less: gain on settlement — (0.05 ) — (0.05 ) Add: transaction
costs 0.04 — 0.03 — Add: severance charge — — —
— Funds From Operations of the Kite Portfolio per
share, as adjusted $ 0.52 $ 0.49 $ 1.03 $ 0.98
____________________ 1 “Funds From Operations
of the Kite Portfolio" measures 100% of the operating performance
of the Operating Partnership’s real estate properties and
construction and service subsidiaries in which the Company owns an
interest. “Funds From Operations 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. We calculate FFO in accordance
with the best practices described in the April 2002 National Policy
Bulletin of the National Association of Real Estate Investment
Trusts (NAREIT), which we refer to as the White Paper. The White
Paper defines FFO as net income (determined in accordance with
generally accepted accounting principles (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, we believe 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. For informational purposes,
we have also provided FFO adjusted for a severance charge in 2016,
transaction costs in 2016 and 2015 and a gain on settlement in
2015. We believe this supplemental information provides a
meaningful measure of our operating performance. We believe our
presentation of FFO, as adjusted, provides investors with another
financial measure that may facilitate comparison of operating
performance between periods and among our peer companies. FFO
should not be considered as an alternative to net income
(determined in accordance with GAAP) as an indicator of our
financial performance, is not an alternative to cash flow from
operating activities (determined in accordance with GAAP) as a
measure of our liquidity, and is not indicative of funds available
to satisfy our cash needs, including our ability to make
distributions. Our computation of FFO may not be comparable to FFO
reported by other REITs that do not define the term in accordance
with the current NAREIT definition or that interpret the current
NAREIT definition differently than we do.
Kite Realty Group
Trust Same Property Net Operating Income For the
Three and Six Months Ended June 30, 2016 and 2015
(Unaudited) ($ in thousands) Three Months
Ended June 30, Six Months Ended June 30, 2016
2015
%Change
2016 2015
%Change
Number of properties for the quarter1 102 102
Leased
percentage 95.3 % 95.4 % 95.3 % 95.4 %
Economic Occupancy
percentage2 94.0 % 93.8 % 94.0 % 93.8 % Minimum
rent $ 54,827 $ 53,982 $ 109,178 $ 107,327 Tenant recoveries 14,557
14,488 29,892 30,107 Other income 238 295 563
569 69,622 68,765 139,633 138,003 Property operating
expenses (8,245 ) (9,006 ) (16,763 ) (18,821 ) Real estate taxes
(8,917 ) (8,613 ) (18,186 ) (17,534 ) (17,162 ) (17,619 ) (34,949 )
(36,355 )
Net operating income - same properties3
$ 52,460 $ 51,146
2.6 % $ 104,684 $
101,648 3.0 % Net operating income -
same properties excluding the impact of the 3-R
initiative5 3.6 % Reconciliation of
Same Property NOI to Most Directly Comparable GAAP Measure: Net
operating income - same properties $ 52,460 $ 51,146 $ 104,684 $
101,648 Net operating income - non-same activity4 13,266 11,033
26,266 24,614 Other expense, net (448 ) (203 ) (842 ) (254 )
General, administrative and other (4,856 ) (4,566 ) (10,147 )
(9,572 ) Transaction costs (2,771 ) (302 ) (2,771 ) (461 )
Depreciation expense (43,841 ) (41,212 ) (86,082 ) (81,648 )
Interest expense (15,500 ) (13,181 ) (30,825 ) (27,114 ) Gain on
settlement — 4,520 — 4,520 Gains on sales of operating properties
194 — 194 3,363 Net income attributable to noncontrolling interests
(399 ) (508 ) (971 ) (1,191 ) Dividends on preferred shares —
(2,114 ) — (4,228 ) Net income attributable to common
shareholders $ (1,895 ) $ 4,613 $ (494 ) $ 9,677
____________________ 1 Same property analysis
excludes operating properties in redevelopment 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 during the
period. 3 Same property net operating income excludes net gains
from outlot sales, straight-line rent revenue, bad debt expense and
recoveries, lease termination fees, amortization of lease
intangibles and significant prior year expense recoveries and
adjustments, if any. 4 Includes non-cash accounting items across
the portfolio as well as net operating income from properties not
included in the same property pool. 5 See Quarterly Financial
Supplemental for further detail of the properties included in the
3-R initiative.
The Company believes that Net Operating Income ("NOI") is
helpful to investors as a measure of its operating performance
because it excludes various items included in net income that do
not relate to or are not indicative of its operating performance,
such as depreciation and amortization, interest expense, and
impairment, if any. The Company believes that Same Property NOI is
helpful to investors as a measure of its operating performance
because it includes only the NOI of properties that have been owned
for the full period presented, which eliminates disparities in net
income due to the redevelopment, acquisition or disposition of
properties during the particular period presented and thus provides
a more consistent metric for the comparison of the Company's
properties. NOI and Same Property NOI should not, however, be
considered as alternatives to net income (calculated in accordance
with GAAP) as indicators of the Company's financial performance.
The Company’s computation of Same Property NOI may differ from the
methodology for calculating Same Property NOI used by other REITs,
and therefore, may not be comparable to such other REITs.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20160728006328/en/
Kite Realty Group TrustMaggie Daniels, CFA, 317-713-7644Investor
Relations and Strategymdaniels@kiterealty.com
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