Kite Realty Group Trust (NYSE: KRG) (the “Company”) announced
operating results for the third quarter ended September 30, 2016.
The attached financial statements, exhibits and reconciliations of
non-GAAP measures provide the details of these results.
Third Quarter Highlights
- Net loss attributable to common
shareholders was $1.7 million, or $0.02 per diluted common
share.
- Funds From Operations (“FFO”), as
adjusted, was $0.52 per diluted common share, or $44.7
million.
- FFO, as defined by NAREIT, was $0.51
per diluted common share, or $43.6 million.
- Weighted average debt maturities
increased to 6.6 years from 5.0 years in the prior quarter.
- The Company’s operating partnership,
Kite Realty Group, L.P., completed its inaugural public offering
for $300 million of 4.00% Senior Notes due 2026.
- Small shop occupancy was 88.7%, an
increase of 120 basis points compared to the same period in the
prior year.
- Same-property Net Operating Income
(“NOI”) increased 2.1% for the comparable operating portfolio, or
2.9% 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.
- The Company commenced construction on
four additional 3-R projects, for a total of 12 projects in
process. These 12 projects have an estimated incremental return
averaging approximately 9% to 10%, and aggregate costs for all of
these projects are expected to range between $58.1 million and
$67.0 million.
“Our third quarter performance marks another successful quarter
for Kite and has positioned us to finish 2016 on a strong note,”
said John A. Kite, Chairman and CEO. “Our team’s aggressive efforts
further improved our small shop leasing by 120 basis points
compared to last year, reaching 88.7%. The momentum also continued
for our anchor tenants as we opened over 180,000 square feet of
space since the end of the second quarter. Finally, we executed on
several balance sheet initiatives, furthering our strong position,
including our inaugural $300 million public bond offering as we
continue to enhance our balance sheet flexibility.”
Financial & Portfolio
Results
Net loss attributable to common shareholders for the three
months ended September 30, 2016, was $1.7 million compared to net
income of $0.4 million for the same period in 2015. Net loss
attributable to common shareholders for the nine months ended
September 30, 2016, was $2.2 million compared to net income of
$10.1 million for the same period in 2015.
FFO, as adjusted, for the three months ended September 30, 2016,
was $44.7 million, or $0.52 per diluted common share, for the Kite
Portfolio, compared to $43.9 million, or $0.51 per diluted common
share, for the same period in the prior year. FFO, as adjusted, was
$132.9 million, or $1.56 per diluted common share, for the nine
months ended September 30, 2016, compared to $127.8 million, or
$1.50 per diluted common share, for the same period in 2015.
FFO, as defined by NAREIT, was $43.6 million, or $0.51 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 $42.8 million, or $0.50 per
diluted common share, for the same period in the prior year. For
the nine months ended September 30, 2016, FFO, as defined by
NAREIT, was $128.5 million, or $1.50 per diluted common share,
compared to $130.7 million, or $1.53 per diluted common share, for
the same period in 2015.
Same-property NOI increased 2.1% for the comparable operating
portfolio, which includes 103 retail operating properties. If the
impact of the Company’s 3-R initiative is excluded, same-property
NOI increased 2.9%. Both of these percentages are based on
comparisons to the same period in the prior year.
As of September 30, 2016, the Company owned interests in 121
operating, development and redevelopment 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
September 30, 2016.
The Company executed leases on 110 individual spaces for a total
of 627,925 square feet during the third quarter of 2016, including
84 comparable new and renewal leases for 519,271 owned square feet.
The Company generated positive cash spreads of 13.1% on comparable
new leases executed during the quarter and 8.7% on comparable
renewals, for a blended spread of 9.7%.
Balance Sheet
During the third quarter, 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 2021, including extension options. The revised terms of
the unsecured financings improved the Company’s borrowing base,
lowered the interest rate and extended the term to maturity.
The Company also completed its inaugural $300 million public
bond offering of 4.00% Senior Notes due 2026. The majority of the
net proceeds from the offering were used to repay the $200 million
term loan maturing July 1, 2019 (or January 1, 2020, with the
six-month extension). The remaining net proceeds were used, along
with funds from the line of credit, to pay off approximately $70
million of CMBS debt that matured in the third quarter and $76
million attributable to the Parkside construction loan. As a result
of these initiatives, the Company’s weighted average debt maturity
extended from 5 years in the prior period to 6.6 years at the end
of the third quarter.
Redevelopment and
Development
The Company’s 3-R initiative, which includes a total of 24
different projects in various stages, continued to progress during
the third quarter. The Company commenced construction at Burnt
Store Promenade (Punta Gorda, FL), Centennial Gateway (Las Vegas,
NV), Traders Point (Indianapolis, IN), and Trussville Promenade
(Birmingham, AL). Combined with projects already in process, the
Company now has 12 3-R projects under construction, with an
estimated incremental return averaging approximately 9% to 10% and
aggregate estimated costs of $58.1 million to $67.0 million.
Earnings Guidance
The Company is updating its guidance for 2016 FFO, as adjusted,
to $2.05 to $2.07 from $2.04 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 and charges. Please refer to the full list of guidance
assumptions on page 37 of the Company’s Quarterly Financial
Supplemental.
Guidance Range For
Full Year 2016 Low High Consolidated
net loss per diluted common share $ (0.04 ) $ (0.02 ) Add:
Depreciation, amortization and other 2.03
2.03 FFO, per diluted common share, as defined by
NAREIT 1.99 2.01 Add: Transaction costs and certain other charges
0.06 0.06
FFO, as adjusted,
per diluted common share $ 2.05 $
2.07
Earnings Conference Call
The Company will conduct a conference call to discuss its
financial results on Friday, October 28, 2016, at 1:00 p.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 (574) 990-9933 for domestic callers and (844) 309-0605
for toll-free (passcode 67725615). 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 September 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, as well as
economic uncertainty caused by fluctuations in the prices of oil
and other energy sources, financing risks, including the
availability of and costs associated with sources of liquidity, 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 the Company’s properties in Florida,
Indiana and Texas, insurance costs and coverage, risks associated
with cybersecurity attacks and the loss of confidential information
and other business interruptions, 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 SEC, specifically the section titled “Risk Factors” in the
Company’s and the Operating Partnership’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) September 30, December 31,
2016 2015 Assets: Investment properties, at
cost $ 3,990,208 $ 3,933,140 Less: accumulated depreciation
(531,946 ) (432,295 ) 3,458,262 3,500,845 Cash and cash
equivalents 28,793 33,880 Tenant and other receivables, including
accrued straight-line rent of $27,875 and $23,809 respectively, net
of allowance for uncollectible accounts 50,350 51,101 Restricted
cash and escrow deposits 9,585 13,476 Deferred costs and
intangibles, net 133,114 148,274 Prepaid and other assets 10,814
8,852
Total Assets $ 3,690,918 $
3,756,428
Liabilities and Shareholders’ Equity:
Mortgage and other indebtedness, net $ 1,732,344 $ 1,724,449
Accounts payable and accrued expenses 93,440 81,356 Deferred
revenue and other liabilities 120,550 131,559
Total Liabilities 1,946,334 1,937,364 Commitments and
contingencies Limited Partners’ interests in the Operating
Partnership and other redeemable noncontrolling interests 99,478
92,315
Shareholders’ Equity: Kite Realty Group Trust
Shareholders’ Equity:
Common Shares, $.01 par value, 225,000,000
shares authorized, 83,545,486 and 83,334,865 shares issued and
outstanding at September 30, 2016 and December 31, 2015,
respectively
835 833 Additional paid in capital 2,049,702 2,050,545 Accumulated
other comprehensive loss (8,738 ) (2,145 ) Accumulated deficit
(397,391 ) (323,257 )
Total Kite Realty Group Trust
Shareholders’ Equity 1,644,408 1,725,976 Noncontrolling
Interests 698 773
Total Equity 1,645,106
1,726,749
Total Liabilities and Shareholders'
Equity $ 3,690,918 $ 3,756,428
Kite Realty
Group Trust Consolidated Statements of Operations For
the Three and Nine Months Ended September 30, 2016 and 2015
(Unaudited) ($ in thousands, except per share
data) Three Months Ended Nine Months Ended
September 30, September 30, 2016 2015
2016 2015 Revenue: Minimum rent $ 69,518 $
66,279 $ 205,436 $ 196,656 Tenant reimbursements 17,531 16,787
52,691 51,891 Other property related revenue 2,073 4,081
7,120 9,163
Total revenue 89,122 87,147
265,247 257,710
Expenses: Property operating 11,916 11,994
35,454 36,519 Real estate taxes 10,690 10,045 32,327 29,821
General, administrative, and other 5,081 4,559 15,228 14,131
Transaction costs — 1,089 2,771 1,550 Depreciation and amortization
45,543 42,549 131,625 124,196
Total
expenses 73,230 70,236 217,405 206,217
Operating income 15,892 16,911 47,842 51,493 Interest
expense (17,139 ) (13,881 ) (47,964 ) (40,995 ) Income tax expense
of taxable REIT subsidiary (15 ) (9 ) (763 ) (134 ) Gain on
settlement — — — 4,520 Other expense, net — (60 ) (94 ) (189
)
(Loss) income from continuing operations (1,262 ) 2,961
(979 ) 14,695 Gain on sales of operating properties — —
194 3,363
Net (loss) income (1,262 )
2,961 (785 ) 18,058 Net income attributable to noncontrolling
interest (420 ) (435 ) (1,391 ) (1,626 ) Dividends on preferred
shares — (2,114 ) — (6,342 )
Net (loss) income
attributable to Kite Realty Group Trust common shareholders $
(1,682 ) $ 412 $ (2,176 ) $ 10,090
(Loss)
income per common share - basic and diluted $ (0.02 ) $ 0.00
$ (0.03 ) $ 0.12 Weighted average common
shares outstanding - basic 83,474,348 83,325,074
83,399,813 83,453,660 Weighted average common shares
outstanding - diluted 83,474,348 83,433,379
83,399,813 83,566,554
Common dividends declared
per common share $ 0.2875 $ 0.2725 $ 0.8625
$ 0.8175
Kite Realty Group Trust Funds From
Operations For the Three and Nine Months Ended September 30,
2016 and 2015 (Unaudited) ($ in thousands,
except per share data) Three Months Ended Nine Months
Ended September 30, September 30, 2016
2015 2016 2015 Funds From Operations
Consolidated net (loss) income $ (1,262 ) $ 2,961 $ (785 ) $ 18,058
Less: cash dividends on preferred shares — (2,114 ) — (6,342 )
Less: net income attributable to noncontrolling interests in
properties (461 ) (415 ) (1,383 ) (1,416 ) Less: gains on sales of
operating properties — — (194 ) (3,363 ) Add: depreciation and
amortization of consolidated entities, net of noncontrolling
interests 45,310 42,387 130,909 123,812
Funds From Operations of the Operating Partnership1 43,587 42,819
128,547 130,749 Less: Limited Partners' interests in Funds From
Operations (918 ) (967 ) (2,708 ) (2,698 ) Funds From Operations
attributable to Kite Realty Group Trust common shareholders $
42,669 $ 41,852 $ 125,839 $ 128,051 FFO
per share of the Operating Partnership - basic $ 0.51 $ 0.50
$ 1.51 $ 1.53 FFO per share of the Operating
Partnership - diluted $ 0.51 $ 0.50 $ 1.50 $
1.53 Funds From Operations of the Operating
Partnership1 $ 43,587 $ 42,819 $ 128,547 $ 130,749 Less: gain on
settlement — — — (4,520 ) Add: accelerated amortization of debt
issuance costs (non-cash) 1,121 — 1,121 — Add: transaction costs —
1,089 2,771 1,550 Add: severance charge — — 500
— Funds From Operations of the Operating Partnership,
as adjusted $ 44,708 $ 43,908 $ 132,939 $
127,779 FFO per share of the Operating Partnership, as
adjusted - basic $ 0.52 $ 0.52 $ 1.56 $ 1.50
FFO per share of the Operating Partnership, as adjusted -
diluted $ 0.52 $ 0.51 $ 1.56 $ 1.50
Weighted average Common Shares outstanding - basic
83,474,348 83,325,074 83,399,813 83,453,660
Weighted average Common Shares outstanding - diluted
83,565,227 83,433,379 83,488,618 83,566,554
Weighted average Common Shares and Units outstanding - basic
85,417,753 85,238,537 85,336,859 85,214,390
Weighted average Common Shares and Units outstanding -
diluted 85,508,632 85,346,842 85,425,664
85,327,283
Funds From Operations per
diluted share Consolidated net (loss) income $ (0.01 ) $ 0.03 $
(0.01 ) $ 0.21 Less: cash dividends on preferred shares — (0.02 ) —
(0.07 ) Less: net income attributable to noncontrolling interests
in properties (0.01 ) (0.01 ) (0.02 ) (0.02 ) Less: gains on sales
of operating properties — — — (0.04 ) Add: depreciation and
amortization of consolidated entities, net of noncontrolling
interests 0.53 0.50 1.53 1.45 Funds
From Operations of the Operating Partnership per diluted share1 $
0.51 $ 0.50 $ 1.50 $ 1.53 Funds
From Operations of the Operating Partnership per diluted share1 $
0.51 $ 0.50 $ 1.50 $ 1.53 Less: gain on settlement — — — (0.05 )
Add: accelerated amortization of debt issuance costs 0.01 — 0.01 —
Add: transaction costs — 0.01 0.04 0.02 Add: severance charge —
— 0.01 — Funds From Operations of the
Operating Partnership per diluted share, as adjusted $ 0.52
$ 0.51 $ 1.56 $ 1.50
____________________
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,
accelerated amortization of debt issuance costs and transaction
costs in 2016 and a gain on settlement and transaction costs 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 Nine Months
Ended September 30, 2016 and 2015 (Unaudited)
($ in thousands) Three Months Ended September 30,
Nine Months Ended September 30, 2016 2015 %
Change 2016 2015 % Change Number of
properties for the quarter1 103 103
Leased percentage
95.3 % 95.4 % 95.3 % 95.2 %
Economic Occupancy
percentage2 93.6 % 93.7 % 93.8 % 93.6 % Minimum
rent $ 55,630 $ 54,828 $ 164,809 $ 162,155 Tenant recoveries 14,973
14,931 44,865 45,038 Other income 614 551 1,177
1,120 71,217 70,310 210,851 208,313 Property
operating expenses (8,619 ) (8,689 ) (25,360 ) (27,517 ) Real
estate taxes (8,936 ) (9,042 ) (27,123 ) (26,576 ) (17,555 )
(17,731 ) (52,483 ) (54,093 )
Net operating income - same
properties3 $ 53,662 $
52,579 2.1 % $ 158,368
$ 154,220 2.7 % Net
operating income - same properties excluding the impact of the 3-R
initiative4 2.9 % Reconciliation of
Same Property NOI to Most Directly Comparable GAAP Measure: Net
operating income - same properties $ 53,662 $ 52,579 $ 158,368 $
154,220 Net operating income - non-same activity5 12,854 12,529
39,098 37,150 Other expense, net (15 ) (69 ) (857 ) (323 ) General,
administrative and other (5,081 ) (4,559 ) (15,228 ) (14,131 )
Transaction costs — (1,089 ) (2,771 ) (1,550 ) Depreciation expense
(45,543 ) (42,549 ) (131,625 ) (124,196 ) Interest expense (17,139
) (13,881 ) (47,964 ) (40,995 ) Gain on settlement — — — 4,520
Gains on sales of operating properties — — 194 3,363 Net income
attributable to noncontrolling interests (420 ) (435 ) (1,391 )
(1,626 ) Dividends on preferred shares — (2,114 ) —
(6,342 ) Net (loss) income attributable to common shareholders $
(1,682 ) $ 412 $ (2,176 ) $ 10,090
____________________
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
See pages 27 and 28 for further detail of
the properties included in the 3-R initiative.
5
Includes non-cash activity across the portfolio as well as net
operating income from properties not included in the same property
pool.
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 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/20161027006638/en/
Kite Realty Group TrustMaggie Daniels, CFA Investor Relations
and Strategy317-713-7644mdaniels@kiterealty.com
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