Kite Realty Group Trust (NYSE:KRG) (the “Company”) announced today
its operating results for the fourth quarter and full year ended
December 31, 2017, and its 2018 guidance. Financial statements,
exhibits, and reconciliations of non-GAAP measures attached to this
release include the details of the Company’s results.
Fourth Quarter Highlights
- Generated net income attributable to common shareholders of
$2.3 million, or $0.03 per diluted common share.
- Realized Funds From Operations of the Operating Partnership
(“FFO”), as defined by NAREIT, of $42.8 million, or $0.50 per
diluted common share.
- Increased Same-Property Net Operating Income (“NOI”) 1.5%
compared to the same period in the prior year.
- Realized small shop leased percentage of 90.5% at the end of
the year, an increase of 160 basis points over the prior year.
- Executed 745,137 square feet of new and renewal leases on 131
individual spaces.
- Generated aggregate rent spreads on 102 comparable new and
renewal leases of 7.2% on a cash basis and 11.2% on a GAAP
basis.
- Completed two of the Company’s Redevelopment, Repurpose and
Reposition (“3-R”) projects with cumulative costs totaling $8.9
million and a projected annualized return of 10.1%.
- Increased quarterly common dividend by 5.0% to $0.3175 per
share.
Full Year Highlights
- Generated net income attributable to common shareholders of
$11.9 million, or $0.14 per diluted common share.
- Realized FFO, as defined by NAREIT, of $174.7 million, or $2.04
per diluted common share.
- Increased Same-Property NOI 2.9% for the comparable operating
portfolio, or 3.2% excluding the impact of the 3-R initiative.
- Achieved comparable and non-comparable new lease ABR of $23.46
compared to the portfolio average of $16.32, or a 44% premium.
- Executed over 2.3 million square feet of new and renewal leases
on 393 individual spaces.
- Generated aggregate rent spreads on 298 comparable new and
renewal leases of 9.0% on a cash basis and 13.3% on a GAAP
basis.
- Completed the sale of four assets generating $78 million of
gross proceeds: Cove Center in Stuart, Florida; The Shops at
Village Walk in Fort Myers, Florida; Clay Marketplace in
Birmingham, Alabama; and Wheatland Towne Crossing in Dallas,
Texas.
- Maintained a well-laddered debt maturity schedule, with only
$82.4 million of debt maturing through 2020 and a weighted average
maturity of 5.5 years across the Company’s debt portfolio.
- Completed development project at Parkside Town Commons, Phase
II, and the expansion of Holly Springs, Phase II, transitioning
both to our operating portfolio at 95.4% and 100% leased,
respectively.
“Our 2017 results demonstrate the
successful execution of our strategic plan,” said John Kite,
Chairman and Chief Executive Officer. “Operationally, we continue
to see strong demand for our well-positioned real estate, as
evidenced by our small shops leased at 90.5% and our signing 298
comparable leases at a 13.3% spread on a GAAP basis. From a capital
allocation perspective, we continued to execute by completing seven
3-R projects at a 12.3% yield and selling four assets for $78
million in gross proceeds. In 2018, we look forward to furthering
our strategic objectives as we remain focused on operating
fundamentals, expanding our relationships with strong, competitive
retailers, and selling non-core assets to reach our target
leverage.”
Financial & Portfolio
Results
Financial Results
Net income attributable to common shareholders
for the three months ended December 31, 2017, was $2.3 million,
compared to $3.4 million for the same period in 2016. For the
twelve months ended December 31, 2017, net income attributable to
common shareholders was $11.9 million, compared to $1.2 million for
the twelve months ended December 31, 2016. Full year 2017 results
included a $7.4 million operating property impairment, while full
year 2016 results included $2.8 million in transaction costs.
For the three months ended December 31, 2017,
FFO, as defined by NAREIT, was $42.8 million, or $0.50 per diluted
common share, compared to $42.1 million, or $0.49 per diluted
common share, for the same period in the prior year. For the
three months ended December 31, 2017, FFO, as adjusted, was $42.8
million, or $0.50 per diluted common share, compared to $42.9
million, or $0.50 per diluted common share, for the same period in
the prior year.
For the twelve months ended December 31, 2017,
FFO, as defined by NAREIT, was $174.7 million, or $2.04 per diluted
common share, compared to $170.6 million, or $2.00 per diluted
common share, for the prior year. For the twelve months ended
December 31, 2017, FFO, as adjusted, was $174.7 million, or $2.04
per diluted common share, compared to $175.8 million, or $2.06 per
diluted common share, for the prior year. Full year 2017 results
included the effects of $78 million of asset dispositions during
the year.
Portfolio Operations
As of December 31, 2017, the Company owned
interests in 117 operating and redevelopment properties totaling
approximately 23.3 million square feet and two development projects
currently under construction totaling 0.7 million square feet. The
owned gross leasable area in the Company’s retail operating
portfolio was 94.8% leased as of December 31, 2017, and the
Company’s total portfolio was 94.4% leased. We exceeded our
small-shop goal of 90% leased, reaching 90.5% at year-end,
representing an increase of 160 basis points over last year-end and
80 basis points over the prior quarter.
Same-property NOI, which includes 104 operating
properties, increased 1.5% in the fourth quarter compared to the
same period in the prior year. The leased percentage of properties
included in the same-property pool was 94.6% at December 31, 2017,
compared to 95.3% in the same period in the prior year. For
the full year, same-property NOI increased 2.9% compared to the
same period in the prior year, or 3.2% excluding the impact of the
Company’s 3-R initiative.
The Company executed leases on 131 individual
spaces totaling 745,137 square feet during the fourth quarter of
2017, including 102 comparable new and renewal leases for 672,970
square feet. Cash rent spreads on comparable new and renewal leases
executed in the quarter were 20.0% and 5.3%, respectively, for a
blended cash rent spread of 7.2%. The blended leasing spread on a
straight-line basis, which includes periodic contractual rent
increases over the term of the lease, was 11.2%.
Several noteworthy tenants recently opened,
including O2 Fitness at Holly Springs Towne Center (Raleigh, NC),
Hobby Lobby at Parkside Town Commons (Raleigh, NC), Aldi at Bolton
Plaza (Jacksonville, FL), Ross at Trussville Promenade (Birmingham,
AL), and North Italia, Talbots, and Athleta, all at Rampart Commons
(Las Vegas, NV).
Development and
Redevelopment
As of December 31, 2017, we had two development
projects under construction across the street from the University
of Notre Dame campus. In the fourth quarter, the Company entered
into a joint venture in which we own a 35% non-controlling interest
to develop a full-service Embassy Suites hotel at Eddy Street
Commons. In addition to the hotel, the development will include new
upscale apartments, residential townhomes, condos, retail space,
and a community center.
We completed construction on two 3-R projects
during the fourth quarter: Bolton Plaza, Phase II (Jacksonville,
FL) and Trussville Promenade (Birmingham, AL). The Company invested
$8.9 million into these properties for a projected annualized
return of 10.1%.
The Company’s 3-R program currently includes
seven projects under various stages of construction, with estimated
combined costs ranging from $71.0 to $77.0 million and an estimated
combined annualized return ranging from 8.0% to 9.0%. During the
quarter, the Company commenced construction on one new 3-R project
at Beechwood Promenade (Athens, GA), which will include a new
21,668 square foot lease with Michaels and a new outlot for
Starbucks.
2018 Earnings Guidance
The Company is introducing guidance for 2018
FFO, as defined by NAREIT, in a range of $1.98 to $2.04 per diluted
common share. The 2018 earnings guidance is based on the following
key assumptions:
Operations
- Increase in same-property NOI of
1.0% to 1.5% (including bad debt expense);
- Year-end retail portfolio leased
rate of 94.5% to 95.5%;
Investments
- Dispositions of operating
properties of +/- $60 million in the first quarter;
- No acquisition or capital markets
activity;
- The effects of prior-year operating
property dispositions of $78 million;
Other
- General and administrative expense
of $21.5 million to $22.5 million;
- GAAP interest expense of $66
million to $67 million;
- Non-cash below market lease
amortization and straight line rent of $9.0 to $9.5 million;
- Gain on sale of non-depreciable
assets included in Other Property Related Revenue of $2 million to
$3 million; and
- Fee Revenue of $2.0 million to $2.5
million.
The 2018 earnings guidance is based on a number
of factors, many of which are outside the Company’s control and all
of which are subject to change. The Company may change its
guidance during the year if actual or anticipated results vary from
these or other assumptions, although the Company undertakes no
obligation to do so.
|
|
|
Guidance Range
For Full Year 2018 |
Low |
High |
Consolidated net income
per diluted common share |
$ |
0.27 |
|
$ |
0.33 |
|
Add: Depreciation,
amortization and other |
1.71 |
|
1.71 |
|
FFO, as defined
by NAREIT, per diluted common share |
$ |
1.98 |
|
$ |
2.04 |
|
|
Earnings Conference Call
The Company will conduct a conference call to
discuss its financial results on Friday, February 2, 2018, at 11:00
a.m. Eastern Time. A live webcast of the conference call will
be available online on the Company’s corporate website at
www.kiterealty.com. The dial-in numbers are (844) 309-0605
for domestic callers and (574) 990-9933 for international callers
(passcode 7059307). In addition, a webcast replay link will
be available on the corporate website
About Kite Realty Group
Trust
Kite Realty Group Trust is a full-service,
vertically integrated real estate investment trust (REIT) 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
December 31, 2017, we owned interests in 117 operating and
redevelopment properties totaling approximately 23.3 million square
feet and two development projects currently under construction.
Our strategy is to maximize the cash flow of our
operating properties, successfully complete the construction and
lease-up of our redevelopment and development portfolio, and
identify additional opportunities to acquire or dispose of
properties to further strengthen the Company. New investments are
focused in the shopping center sector primarily in markets where we
believe we can leverage our existing infrastructure and
relationships to generate attractive risk-adjusted returns or
otherwise in desirable trade areas. Dispositions are generally
designed to increase the quality of our portfolio and to strengthen
the Company’s balance sheet.
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; financing risks, including the
availability of, and costs associated with, sources of liquidity;
the Company’s ability to refinance, or extend the maturity dates
of, its indebtedness; the level and volatility of interest rates;
the financial stability of tenants, including their ability to pay
rent and the risk of tenant bankruptcies; the competitive
environment in which the Company operates; acquisition,
disposition, development and joint venture risks; property
ownership and management risks; the Company’s ability to maintain
its status as a real estate investment trust for federal income tax
purposes; potential environmental and other liabilities; impairment
in the value of real estate property the Company owns; the impact
of online retail and the perception that such retail has on the
value of shopping center assets; risks related to the geographical
concentration of the Company’s properties in Florida, Indiana and
Texas; insurance costs and coverage; risks associated with
cybersecurity attacks and the loss of confidential information and
other business interruptions; and other factors affecting the real
estate industry generally. The Company refers you to the documents
filed by the Company from time to time with the SEC, specifically
the section titled “Risk Factors” in the Company’s and the
Operating Partnership’s Annual Report on Form 10-K for the fiscal
year ended December 31, 2016, 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
TrustConsolidated Balance
Sheets(Unaudited)
|
|
|
|
|
($ in
thousands) |
|
|
|
|
|
|
December 31, 2017 |
|
December 31, 2016 |
Assets: |
|
|
|
|
Investment properties,
at cost |
|
$ |
3,957,884 |
|
|
$ |
3,996,065 |
|
Less:
accumulated depreciation |
|
(664,614 |
) |
|
(560,683 |
) |
|
|
3,293,270 |
|
|
3,435,382 |
|
Cash and cash
equivalents |
|
24,082 |
|
|
19,874 |
|
Tenant and other
receivables, including accrued straight-line rent of $31,747
and$28,703 respectively, net of allowance for uncollectible
accounts |
|
58,328 |
|
|
53,087 |
|
Restricted cash and
escrow deposits |
|
8,094 |
|
|
9,037 |
|
Deferred costs and
intangibles, net |
|
112,359 |
|
|
129,264 |
|
Prepaid and other
assets |
|
16,365 |
|
|
9,727 |
|
Total
Assets |
|
$ |
3,512,498 |
|
|
$ |
3,656,371 |
|
Liabilities and
Shareholders’ Equity: |
|
|
|
|
Mortgage and other
indebtedness, net |
|
$ |
1,699,239 |
|
|
$ |
1,731,074 |
|
Accounts payable and
accrued expenses |
|
78,482 |
|
|
80,664 |
|
Deferred revenue and
other liabilities |
|
96,564 |
|
|
112,202 |
|
Total
Liabilities |
|
1,874,285 |
|
|
1,923,940 |
|
Commitments and
contingencies |
|
|
|
|
Limited Partners’
interests in the Operating Partnership and other
redeemablenoncontrolling interests |
|
72,104 |
|
|
88,165 |
|
Shareholders’
Equity: |
|
|
|
|
Kite Realty Group Trust Shareholders’ Equity: |
|
|
|
|
Common
Shares, $.01 par value, 225,000,000 shares authorized, 83,606,068
and83,545,398 shares issued and outstanding at December 31, 2017
and December 31, 2016, respectively |
|
836 |
|
|
835 |
|
Additional paid in capital |
|
2,071,418 |
|
|
2,062,360 |
|
Accumulated other comprehensive income (loss) |
|
2,990 |
|
|
(316 |
) |
Accumulated deficit |
|
(509,833 |
) |
|
(419,305 |
) |
Total Kite Realty Group Trust Shareholders’
Equity |
|
1,565,411 |
|
|
1,643,574 |
|
Noncontrolling
Interests |
|
698 |
|
|
692 |
|
Total
Equity |
|
1,566,109 |
|
|
1,644,266 |
|
Total
Liabilities and Equity |
|
$ |
3,512,498 |
|
|
$ |
3,656,371 |
|
|
Kite Realty Group
TrustConsolidated Statements of
OperationsFor the Three and Twelve Months Ended
December 31, 2017 and 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
($ in
thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Revenue: |
|
|
|
|
|
|
|
|
Minimum rent |
|
$ |
68,518 |
|
|
$ |
68,622 |
|
|
$ |
273,444 |
|
|
$ |
274,059 |
|
Tenant reimbursements |
|
18,252 |
|
|
17,791 |
|
|
73,000 |
|
|
70,482 |
|
Other property related revenue |
|
1,772 |
|
|
2,461 |
|
|
11,998 |
|
|
9,581 |
|
Fee income |
|
377 |
|
|
— |
|
|
377 |
|
|
— |
|
Total
revenue |
|
88,919 |
|
|
88,874 |
|
|
358,819 |
|
|
354,122 |
|
Expenses: |
|
|
|
|
|
|
|
|
Property operating |
|
12,693 |
|
|
12,469 |
|
|
49,643 |
|
|
47,923 |
|
Real estate taxes |
|
10,796 |
|
|
10,511 |
|
|
43,180 |
|
|
42,838 |
|
General, administrative, and other |
|
5,360 |
|
|
5,375 |
|
|
21,749 |
|
|
20,603 |
|
Transaction costs |
|
— |
|
|
— |
|
|
— |
|
|
2,771 |
|
Impairment charge |
|
— |
|
|
— |
|
|
7,411 |
|
|
— |
|
Depreciation and amortization |
|
40,758 |
|
|
42,939 |
|
|
172,091 |
|
|
174,564 |
|
Total
expenses |
|
69,607 |
|
|
71,294 |
|
|
294,074 |
|
|
288,699 |
|
Operating
income |
|
19,312 |
|
|
17,580 |
|
|
64,745 |
|
|
65,423 |
|
Interest expense |
|
(16,452 |
) |
|
(17,613 |
) |
|
(65,702 |
) |
|
(65,577 |
) |
Income tax benefit (expense) of taxable REIT subsidiary |
|
36 |
|
|
(51 |
) |
|
100 |
|
|
(814 |
) |
Other expense, net |
|
(101 |
) |
|
(75 |
) |
|
(415 |
) |
|
(169 |
) |
Income (loss)
from continuing operations |
|
2,795 |
|
|
(159 |
) |
|
(1,272 |
) |
|
(1,137 |
) |
Gains on sales of operating properties |
|
— |
|
|
4,059 |
|
|
15,160 |
|
|
4,253 |
|
Net
income |
|
2,795 |
|
|
3,900 |
|
|
13,888 |
|
|
3,116 |
|
Net income attributable to noncontrolling interests |
|
(486 |
) |
|
(541 |
) |
|
(2,014 |
) |
|
(1,933 |
) |
Net income
attributable to Kite Realty Group Trust
commonshareholders |
|
$ |
2,309 |
|
|
$ |
3,359 |
|
|
$ |
11,874 |
|
|
$ |
1,183 |
|
|
|
|
|
|
|
|
|
|
Income per
common share - basic |
|
$ |
0.03 |
|
|
$ |
0.04 |
|
|
$ |
0.14 |
|
|
$ |
0.01 |
|
Income per
common share - diluted |
|
$ |
0.03 |
|
|
$ |
0.04 |
|
|
$ |
0.14 |
|
|
$ |
0.01 |
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding - basic |
|
83,595,677 |
|
|
83,545,807 |
|
|
83,585,333 |
|
|
83,436,511 |
|
Weighted average common
shares outstanding - diluted |
|
83,705,764 |
|
|
83,571,663 |
|
|
83,690,418 |
|
|
83,465,500 |
|
Cash dividends
declared per common share |
|
$ |
0.3175 |
|
|
$ |
0.3025 |
|
|
$ |
1.2250 |
|
|
$ |
1.1650 |
|
|
Kite Realty Group
TrustFunds From OperationsFor the
Three and Twelve Months Ended December 31, 2017 and 2016
(Unaudited)
|
|
|
|
|
|
|
|
|
($ in
thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
|
2017 |
|
2016 |
|
2017 |
|
2016 |
Funds From
Operations ("FFO") |
|
|
|
|
|
|
|
|
Consolidated net
income |
|
$ |
2,795 |
|
|
$ |
3,900 |
|
|
$ |
13,888 |
|
|
$ |
3,116 |
|
Less: net income
attributable to noncontrolling interests in properties |
|
(428 |
) |
|
(461 |
) |
|
(1,731 |
) |
|
(1,844 |
) |
Less: gains on sales of
operating properties |
|
— |
|
|
(4,059 |
) |
|
(15,160 |
) |
|
(4,253 |
) |
Add: impairment
charge |
|
— |
|
|
— |
|
|
7,411 |
|
|
— |
|
Add: depreciation and
amortization of consolidated entities, net of noncontrolling
interests |
|
40,425 |
|
|
42,670 |
|
|
170,315 |
|
|
173,578 |
|
FFO of the
Operating Partnership1 |
|
42,792 |
|
|
42,050 |
|
|
174,723 |
|
|
170,597 |
|
Less: Limited Partners'
interests in FFO |
|
(971 |
) |
|
(1,164 |
) |
|
(3,966 |
) |
|
(3,872 |
) |
FFO attributable
to Kite Realty Group Trust common shareholders1 |
|
$ |
41,821 |
|
|
$ |
40,886 |
|
|
$ |
170,757 |
|
|
$ |
166,725 |
|
FFO, as defined by
NAREIT, per share of the Operating Partnership - basic |
|
$ |
0.50 |
|
|
$ |
0.49 |
|
|
$ |
2.04 |
|
|
$ |
2.00 |
|
FFO, as defined by
NAREIT, per share of the Operating Partnership - diluted |
|
$ |
0.50 |
|
|
$ |
0.49 |
|
|
$ |
2.04 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
|
FFO of the Operating
Partnership1 |
|
$ |
42,792 |
|
|
$ |
42,050 |
|
|
$ |
174,723 |
|
|
$ |
170,597 |
|
Add: accelerated
amortization of debt issuance costs (non-cash) |
|
— |
|
|
— |
|
|
— |
|
|
1,121 |
|
Add: transaction
costs |
|
— |
|
|
— |
|
|
— |
|
|
2,771 |
|
Add: severance
charge |
|
— |
|
|
— |
|
|
— |
|
|
500 |
|
Add: loss on debt
extinguishment |
|
— |
|
|
819 |
|
|
— |
|
|
819 |
|
FFO, as adjusted, of
the Operating Partnership |
|
$ |
42,792 |
|
|
$ |
42,869 |
|
|
$ |
174,723 |
|
|
$ |
175,808 |
|
FFO, as adjusted, per
share of the Operating Partnership - basic |
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
$ |
2.04 |
|
|
$ |
2.06 |
|
FFO, as adjusted, per
share of the Operating Partnership - diluted |
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
$ |
2.04 |
|
|
$ |
2.06 |
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding - basic |
|
83,595,677 |
|
|
83,545,807 |
|
|
83,585,333 |
|
|
83,436,511 |
|
Weighted average common
shares outstanding - diluted |
|
83,705,764 |
|
|
83,571,663 |
|
|
83,690,418 |
|
|
83,465,500 |
|
Weighted average common
shares and units outstanding - basic |
|
85,580,898 |
|
|
85,488,234 |
|
|
85,566,272 |
|
|
85,374,910 |
|
Weighted average common
shares and units outstanding - diluted |
|
85,690,986 |
|
|
85,514,090 |
|
|
85,671,358 |
|
|
85,403,899 |
|
|
|
|
|
|
|
|
|
|
FFO, as defined by
NAREIT, per diluted common share |
|
|
|
|
|
|
|
|
Consolidated net
income |
|
$ |
0.03 |
|
|
$ |
0.05 |
|
|
$ |
0.16 |
|
|
$ |
0.04 |
|
Less: net income
attributable to noncontrolling interests in properties |
|
(0.01 |
) |
|
(0.01 |
) |
|
(0.03 |
) |
|
(0.02 |
) |
Less: gains on sales of
operating properties |
|
— |
|
|
(0.05 |
) |
|
(0.18 |
) |
|
(0.05 |
) |
Add: impairment
charge |
|
— |
|
|
— |
|
|
0.09 |
|
|
— |
|
Add: depreciation and
amortization of consolidated entities, net of noncontrolling
interests |
|
0.48 |
|
|
0.50 |
|
|
2.00 |
|
|
2.03 |
|
FFO, as defined by
NAREIT, of the Operating Partnership per diluted common share1 |
|
$ |
0.50 |
|
|
$ |
0.49 |
|
|
$ |
2.04 |
|
|
$ |
2.00 |
|
|
|
|
|
|
|
|
|
|
Add: accelerated
amortization of debt issuance costs |
|
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
Add: transaction
costs |
|
— |
|
|
— |
|
|
— |
|
|
0.03 |
|
Add: severance
charge |
|
— |
|
|
— |
|
|
— |
|
|
0.01 |
|
Add: loss on debt
extinguishment |
|
— |
|
|
0.01 |
|
|
— |
|
|
0.01 |
|
FFO, as adjusted, of
the Operating Partnership per diluted common share |
|
$ |
0.50 |
|
|
$ |
0.50 |
|
|
$ |
2.04 |
|
|
$ |
2.06 |
|
|
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. For informational
purposes, the Company has also provided FFO adjusted for
accelerated amortization of debt issuance costs, transaction costs,
a severance charge and a debt extinguishment loss in 2016. The
Company believes this supplemental information provides a
meaningful measure of our operating performance. The Company
believes 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. A reconciliation of net
income (computed in accordance with GAAP) to FFO is included
elsewhere in this Financial Supplement.
Kite Realty Group
TrustSame Property Net Operating
IncomeFor the Three and Twelve Months Ended
December 31, 2017 and 2016(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
($ in
thousands) |
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
|
2017 |
|
2016 |
|
%Change |
|
2017 |
|
2016 |
|
%Change |
Number of properties
for the quarter1 |
104 |
|
|
104 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Leased
percentage at period end |
94.6 |
% |
|
95.3 |
% |
|
|
|
94.6 |
% |
|
95.3 |
% |
|
|
Economic
Occupancy percentage2 |
93.2 |
% |
|
93.3 |
% |
|
|
|
93.6 |
% |
|
93.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rent |
$ |
59,124 |
|
|
$ |
57,940 |
|
|
|
|
$ |
234,739 |
|
|
$ |
228,652 |
|
|
|
Tenant recoveries |
16,172 |
|
|
15,905 |
|
|
|
|
65,245 |
|
|
62,866 |
|
|
|
Other income |
1,159 |
|
|
1,412 |
|
|
|
|
1,998 |
|
|
2,133 |
|
|
|
|
76,455 |
|
|
75,257 |
|
|
|
|
301,982 |
|
|
293,651 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating
expenses |
(10,490 |
) |
|
(10,474 |
) |
|
|
|
(40,373 |
) |
|
(39,430 |
) |
|
|
Real estate taxes |
(9,534 |
) |
|
(9,202 |
) |
|
|
|
(39,342 |
) |
|
(38,124 |
) |
|
|
|
(20,024 |
) |
|
(19,676 |
) |
|
|
|
(79,715 |
) |
|
(77,554 |
) |
|
|
Same Property
NOI3 |
$ |
56,431 |
|
|
$ |
55,581 |
|
|
1.5 |
% |
|
$ |
222,267 |
|
|
$ |
216,097 |
|
|
2.9 |
% |
Same Property
NOI - excluding the impact of the 3-R initiative4 |
|
|
|
|
1.5 |
% |
|
|
|
|
|
3.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of Same
Property NOI to Most DirectlyComparable GAAP Measure: |
|
|
|
|
|
|
|
|
|
|
|
Net operating income -
same properties |
$ |
56,431 |
|
|
$ |
55,581 |
|
|
|
|
$ |
222,267 |
|
|
$ |
216,097 |
|
|
|
Net operating income -
non-same activity5 |
9,546 |
|
|
10,886 |
|
|
|
|
46,156 |
|
|
49,078 |
|
|
|
Provision for bad debts
- same properties |
(547 |
) |
|
(573 |
) |
|
|
|
(2,427 |
) |
|
(1,814 |
) |
|
|
Other expense, net |
(65 |
) |
|
(126 |
) |
|
|
|
(315 |
) |
|
(983 |
) |
|
|
General, administrative
and other |
(5,360 |
) |
|
(5,375 |
) |
|
|
|
(21,749 |
) |
|
(20,603 |
) |
|
|
Transaction costs |
— |
|
|
— |
|
|
|
|
— |
|
|
(2,771 |
) |
|
|
Impairment charge |
— |
|
|
— |
|
|
|
|
(7,411 |
) |
|
— |
|
|
|
Depreciation and
amortization expense |
(40,758 |
) |
|
(42,939 |
) |
|
|
|
(172,091 |
) |
|
(174,564 |
) |
|
|
Interest expense |
(16,452 |
) |
|
(17,613 |
) |
|
|
|
(65,702 |
) |
|
(65,577 |
) |
|
|
Gains on sales of
operating properties |
— |
|
|
4,059 |
|
|
|
|
15,160 |
|
|
4,253 |
|
|
|
Net income attributable
to noncontrolling interests |
(486 |
) |
|
(541 |
) |
|
|
|
(2,014 |
) |
|
(1,933 |
) |
|
|
Net income attributable
to common shareholders |
$ |
2,309 |
|
|
$ |
3,359 |
|
|
|
|
$ |
11,874 |
|
|
$ |
1,183 |
|
|
|
|
____________________ |
1 |
Same Property NOI excludes
eight properties in redevelopment, the recently completed Northdale
Promenade 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 and expiration during the
period. |
3 |
Same Property NOI 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 period expense recoveries
and adjustments, if any. |
4 |
See pages 30 and 31 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 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, bad debt
expense and recoveries, 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 for the full period presented, which eliminates
disparities in net income due to the acquisition or disposition of
properties during the particular period presented and thus provides
a more consistent metric for the 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 December 31, 2017, the Company
excluded eight redevelopment properties and the recently completed
Northdale Promenade redevelopment from the same property pool that
met these criteria and were owned in both comparable periods.
Contact
Information: |
Dan Sink |
EVP & CFO |
(317) 577-5609 |
dsink@kiterealty.com |
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