Kite Realty Trust(KRG) - 2025 Q2 - Quarterly Results

Earnings Press Release Provides a comprehensive overview of Kite Realty Group's strong second-quarter 2025 financial and operational performance, including key highlights, strategic initiatives, and updated guidance Second Quarter 2025 Highlights Kite Realty Group reported strong second-quarter 2025 results, highlighted by a significant turnaround in net income to $110.3 million from a net loss of $48.6 million year-over-year, raising its 2025 guidance driven by robust operational performance and strategic capital moves Q2 2025 vs Q2 2024 Net Income | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Net Income (Loss) Attributable to Common Shareholders | $110.3 million | ($48.6 million) | | Net Income (Loss) per Diluted Share | $0.50 | ($0.22) | - Key strategic and operational achievements for Q2 2025 include: - Raised full-year 2025 guidance[8] - Leased approximately 1.2 million square feet with 17.0% comparable blended cash leasing spreads[9] - Formed a second Joint Venture (JV) with GIC, generating $112.1 million in gross proceeds[9] - Sold Fullerton Metrocenter for gross proceeds of $118.5 million[9] - Issued $300 million of 5.20% senior unsecured notes due 2032[9] - CEO John A. Kite attributed the strong quarter to persistent tenant demand, leading to higher starting rents and an improved merchandising mix, with the company's capital allocation strategy involving acquiring a majority stake in Legacy West while monetizing minority interests and selling non-core assets[9] Second Quarter 2025 Financial and Operational Results The company generated NAREIT FFO of $0.51 per share and Core FFO of $0.50 per share, with Same Property NOI increasing by 3.3%, executing 170 leases totaling 1.2 million square feet at 17.0% blended cash leasing spreads, and retail portfolio ABR per square foot growing 5.4% year-over-year to $22.02 despite a 150 basis point decrease in leased percentage to 93.3% due to anchor bankruptcies Q2 2025 Key Financial Metrics | Metric | Value | Per Diluted Share | | :--- | :--- | :--- | | NAREIT FFO of the Operating Partnership | $114.0 million | $0.51 | | Core FFO of the Operating Partnership | $113.2 million | $0.50 | - Same Property Net Operating Income (NOI) increased by 3.3%[10] - Executed 170 new and renewal leases for approximately 1.2 million square feet[10] - Blended cash leasing spreads were 17.0%, with new leases at 31.3% and non-option renewals at 19.7%[10] - Operating retail portfolio ABR per square foot increased 5.4% YoY to $22.02[10] - Retail portfolio leased percentage was 93.3%, a 150 bps decrease YoY, mainly due to anchor bankruptcies[10] Second Quarter 2025 Capital Allocation and Balance Sheet KRG was active in capital allocation, acquiring a majority stake in Legacy West while monetizing minority interests and selling non-core assets, and issuing $300 million in senior unsecured notes to repay existing debt, resulting in a net debt to Adjusted EBITDA of 5.1x - Acquired a 52.0% interest in Legacy West (Dallas/Fort Worth MSA) for $785 million ($408 million at KRG's share) through a JV with GIC[14] - Formed a second JV with GIC by contributing three shopping centers, generating gross proceeds of $112.1 million while retaining a 52.0% ownership interest[14] - Sold Fullerton Metrocenter (Los Angeles MSA) for $118.5 million and two other properties for a combined $27.8 million[14] - Issued $300 million of 5.20% senior unsecured notes due 2032, using proceeds to repay a term loan and other borrowings[14] - Net debt to Adjusted EBITDA was 5.1x as of June 30, 2025[14] Dividend The Board of Trustees declared a third-quarter 2025 dividend of $0.27 per common share, marking a 3.8% increase compared to the previous year, payable on October 16, 2025 - A Q3 2025 dividend of $0.27 per common share was declared, a 3.8% year-over-year increase[13] - The dividend will be paid on or about October 16, 2025, to shareholders of record as of October 9, 2025[13] 2025 Earnings Guidance Kite Realty Group raised its full-year 2025 guidance, now expecting NAREIT FFO per diluted share between $2.06 and $2.10 and Core FFO between $2.02 and $2.06, based on assumptions including 1.50% to 2.50% Same Property NOI growth Updated 2025 Guidance (per diluted share) | Metric | Low | High | | :--- | :--- | :--- | | Net Income | $0.75 | $0.79 | | NAREIT FFO | $2.06 | $2.10 | | Core FFO | $2.02 | $2.06 | - Key assumptions for the 2025 guidance include: - Same Property NOI growth between 1.50% and 2.50%[15] - Full-year credit disruption of 1.85% of total revenues at the midpoint[15] - Interest expense, net of interest income, of $124.75 million at the midpoint[15] Company and Risk Overview Kite Realty Group is a REIT specializing in open-air, grocery-anchored shopping centers and mixed-use assets, primarily in high-growth Sun Belt markets, facing risks including economic conditions, financing, tenant stability, and geographical concentration - KRG is a REIT owning and operating 181 U.S. open-air shopping centers and mixed-use assets, totaling ~29.8 million sq. ft. of GLA as of June 30, 2025[18] - The portfolio is primarily grocery-anchored and located in high-growth Sun Belt and strategic gateway markets[18] - Key risk factors include: - Economic slowdowns, rising interest rates, and inflation[20] - Financing risks, including availability and cost of liquidity[20] - Financial stability of tenants and the competitive retail environment[20] - Geographical concentration of properties in Texas, Florida, and North Carolina[20] Financial and Operating Data Presents detailed financial statements and key operating metrics for Kite Realty Group, offering a comprehensive view of its performance and balance sheet position Results Overview This section provides a comprehensive summary of KRG's financial results and operating statistics, with Q2 2025 total revenue at $213.4 million, net income at $110.3 million, and a Same Property NOI increase of 3.3% Q2 2025 Financial Summary (in thousands) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Total revenue | $213,395 | $212,434 | | Net income (loss) | $110,318 | $(48,638) | | NAREIT FFO | $113,965 | $117,487 | | Core FFO | $113,160 | $111,605 | Q2 2025 Operating Ratios and Statistics | Metric | Q2 2025 | | :--- | :--- | | Same Property NOI performance | 3.3% | | Net debt to Adjusted EBITDA | 5.1x | | Percent leased – retail | 93.3% | | Retail ABR per square foot | $22.02 | | Total new and renewal lease cash rent spread | 17.0% | Consolidated Balance Sheets As of June 30, 2025, Kite Realty Group reported total assets of $6.86 billion, a decrease from $7.09 billion at year-end 2024, with total liabilities decreasing to $3.44 billion and total equity remaining stable at $3.32 billion Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Net investment properties | $5,761,745 | $6,046,530 | | Total assets | $6,858,340 | $7,091,767 | | Mortgage and other indebtedness, net | $3,022,496 | $3,226,930 | | Total liabilities | $3,435,816 | $3,679,690 | | Total equity | $3,319,633 | $3,314,003 | Consolidated Statements of Operations For Q2 2025, KRG's total revenue was $213.4 million, and net income significantly improved to $112.6 million, driven by a $103.0 million gain on property sales, contrasting with a $49.3 million net loss in Q2 2024 Q2 Statement of Operations Summary (in thousands) | Account | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total revenue | $213,395 | $212,434 | | Total expenses | $166,809 | $233,515 | | Impairment charges | $— | $66,201 | | Gain (loss) on sales of operating properties, net | $103,022 | $(1,230) | | Net income (loss) | $112,599 | $(49,303) | | Net income (loss) attributable to common shareholders | $110,318 | $(48,638) | Same Property Net Operating Income (NOI) For Q2 2025, Same Property NOI for the 175-property pool increased by 3.3% to $144.1 million, driven by higher minimum rent and tenant recoveries, with total property NOI growing by 2.0% for the quarter Same Property NOI Growth (in thousands) | Period | 2025 Same Property NOI | 2024 Same Property NOI | Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $144,104 | $139,512 | 3.3% | | Six Months Ended June 30 | $287,903 | $279,038 | 3.2% | - The Same Property Pool consists of 175 properties[35][37] - It excludes properties acquired, sold, or in development/redevelopment during 2024 and 2025, as well as standalone office properties[35][37] Net Operating Income and Adjusted EBITDA by Quarter In Q2 2025, KRG generated Net Operating Income (NOI) of $157.0 million and Adjusted EBITDA of $144.5 million, with a consolidated NOI margin of 74.0% and a retail recovery ratio of 92.0% Quarterly NOI and Adjusted EBITDA (in thousands) | Metric | Q2 2025 | Q1 2025 | Q4 2024 | Q2 2024 | | :--- | :--- | :--- | :--- | :--- | | NOI | $157,010 | $163,750 | $159,429 | $153,925 | | Adjusted EBITDA | $144,473 | $151,917 | $146,321 | $144,411 | | NOI/Revenue – Retail | 74.4% | 74.7% | 75.1% | 74.3% | | Recovery Ratio – Retail | 92.0% | 91.4% | 92.1% | 91.6% | NAREIT Funds From Operations (FFO) For Q2 2025, NAREIT FFO was $114.0 million ($0.51 per diluted share), and Core FFO was $113.2 million ($0.50 per share), with Adjusted Funds From Operations (AFFO) at $81.7 million FFO Reconciliation Summary - Q2 2025 (in thousands) | Metric | Amount | | :--- | :--- | | Net income | $112,599 | | Adjustments (Depreciation, Gain on Sale, etc.) | $1,366 | | NAREIT FFO of the Operating Partnership | $113,965 | | Non-cash adjustments | $(805) | | Core FFO of the Operating Partnership | $113,160 | FFO Per Diluted Share | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | NAREIT FFO per share | $0.51 | $0.53 | | Core FFO per share | $0.50 | $0.50 | Portfolio and Capital Structure Details Kite Realty Group's joint ventures, debt profile, capital allocation activities including acquisitions and dispositions, and ongoing development projects Joint Venture Summary As of June 30, 2025, KRG's total investment in unconsolidated joint ventures was $390.8 million, including key interests in Legacy West and the GIC Portfolio, resulting in a Q2 2025 net loss of $3.2 million for KRG - KRG's total investment in unconsolidated JVs was $390.8 million as of June 30, 2025[48] - Key unconsolidated JVs include: - Legacy West (52% economic interest) - GIC Portfolio (52% economic interest) - Nuveen Portfolio (20% economic interest) Debt Profile KRG maintains a strong debt profile with investment-grade ratings, $1.28 billion in liquidity, a net debt to Adjusted EBITDA ratio of 5.1x, and $3.21 billion in total debt with 89% fixed-rate Key Debt Metrics As of Q2 2025, KRG reported a net debt to Adjusted EBITDA ratio of 5.1x, total liquidity of $1.28 billion, investment-grade credit ratings, and 95% unencumbered consolidated NOI - Net Debt to Adjusted EBITDA: 5.1x[52] - Total Liquidity: $1,277.5 million[51] - Senior Unsecured Debt Ratings: BBB/Positive (Fitch), Baa2/Stable (Moody's), BBB/Stable (S&P)[51] - Unencumbered Consolidated NOI: 95% of Total Consolidated NOI[51] Summary of Outstanding Debt As of June 30, 2025, KRG's total outstanding debt was $3.21 billion, with a weighted average interest rate of 4.46% and a 4.7-year maturity, with 89% of the debt being fixed-rate Total Outstanding Debt Summary | Debt Type | Amount Outstanding (in thousands) | Ratio | Weighted Avg. Interest Rate | Weighted Avg. Years to Maturity | | :--- | :--- | :--- | :--- | :--- | | Fixed rate debt | $2,857,178 | 89% | 4.28% | 4.9 | | Variable rate debt | $168,400 | 5% | 7.63% | 1.2 | | Total | $3,213,337 | 100% | 4.46% | 4.7 | Maturity Schedule of Outstanding Debt KRG's debt maturity schedule is staggered, with significant maturities in 2026 ($400 million) and 2027 ($284.7 million), and the company utilizes interest rate swaps to manage exposure - Upcoming significant debt maturities include: - 2025: $80.0 million - 2026: $400.0 million - 2027: $284.7 million - 2028: $350.0 million[59] - The company uses interest rate swaps to manage exposure, with an aggregate notional value of $700 million to fix variable-rate debt and $155 million to float fixed-rate debt as of June 30, 2025[59] Acquisitions and Dispositions During 2025, KRG acquired Village Commons and a 52% share in Legacy West for a total of $476.6 million, while disposing of six properties/interests, including Fullerton Metrocenter, generating $258.4 million in proceeds 2025 Acquisitions (at KRG's share, in thousands) | Property Name | MSA | Acquisition Price | | :--- | :--- | :--- | | Village Commons | Miami | $68,400 | | Legacy West | Dallas/Ft. Worth | $408,200 | | Total | | $476,600 | 2025 Dispositions (in thousands) | Property Name | MSA | Sales Price | | :--- | :--- | :--- | | Stoney Creek Commons | Indianapolis | $9,500 | | Fullerton Metrocenter | Los Angeles | $118,500 | | GIC Portfolio Contribution (48% interest) | Various | $112,120 | | Humblewood Shopping Center | Houston | $18,250 | | Total | | $258,370 | Development and Redevelopment Projects KRG has one active development project, the One Loudoun Expansion, with an estimated cost of $81.0M–$91.0M, and several future opportunities for expansion and redevelopment at existing properties - The primary active project is the One Loudoun Expansion (Washington, D.C. MSA), with a total project cost at KRG's share of $81.0M–$91.0M and an estimated remaining spend of $58.0M–$68.0M[66] - Future opportunities include potential expansions and redevelopments at properties like Carillon, One Loudoun (hotel and residential), and Glendale Town Center, among others[67] Portfolio Characteristics Describes the geographic diversification of Kite Realty Group's properties, its top tenants, retail leasing trends, and the schedule of upcoming lease expirations Geographic Diversification KRG's portfolio is heavily concentrated in the South (65.4% of ABR), with Texas as the largest state (29.2%), followed by Florida (11.2%), demonstrating regional focus ABR by Region | Region | % of Weighted ABR | | :--- | :--- | | South | 65.4% | | West | 14.1% | | Midwest | 12.6% | | Northeast | 7.9% | Top 5 States by ABR | State | % of Weighted ABR | | :--- | :--- | | Texas | 29.2% | | Florida | 11.2% | | Indiana | 6.2% | | Virginia | 5.9% | | Maryland | 5.5% | Top 25 Tenants by ABR KRG's tenant base is diversified, with the top 25 tenants accounting for 26.1% of total ABR, led by The TJX Companies (2.6%), Ross Stores (1.8%), and PetSmart (1.7%) - The top 25 tenants represent 26.1% of total weighted ABR[74] Top 5 Tenants by % of Weighted ABR | Rank | Tenant | % of Weighted ABR | | :--- | :--- | :--- | | 1 | The TJX Companies, Inc. | 2.6% | | 2 | Ross Stores, Inc. | 1.8% | | 3 | PetSmart, Inc. | 1.7% | | 4 | Best Buy Co., Inc. | 1.4% | | 5 | Dick's Sporting Goods, Inc. | 1.3% | Retail Leasing Spreads In Q2 2025, KRG achieved a strong blended cash rent spread of 17.0% on over 1 million square feet of comparable leases, with new leases showing a 31.3% increase and non-option renewals up 19.7% Q2 2025 Comparable Cash Rent Spreads | Category | Leases | Sq. Ft. | Cash Rent Spread | | :--- | :--- | :--- | :--- | | New Leases | 38 | 219,271 | 31.3% | | Non-Option Renewals | 52 | 159,247 | 19.7% | | Option Renewals | 43 | 648,679 | 8.2% | | Total | 133 | 1,027,197 | 17.0% | Lease Expirations KRG has a well-staggered lease expiration schedule, with only 3.0% of pro-rata ABR expiring in the remainder of 2025, and the highest concentrations in 2027 (12.8%) and 2028 (15.4%) Lease Expirations by % of Pro Rata ABR | Year | % of Total ABR Expiring | | :--- | :--- | | 2025 | 3.0% | | 2026 | 10.6% | | 2027 | 12.8% | | 2028 | 15.4% | | 2029 | 14.9% | | 2030 and Beyond | 32.4% | Supplemental Information Offers additional context through components of Net Asset Value, definitions of non-GAAP financial measures, and essential contact information for investors and analysts Components of Net Asset Value This section details the components for estimating Net Asset Value (NAV), including an annualized normalized portfolio cash NOI of $585.4 million and total annualized portfolio cash NOI of $627.2 million, alongside net debt and other assets/liabilities Key NAV Components (in thousands) | Component | Value | | :--- | :--- | | Annualized Normalized Portfolio Cash NOI (excl. ground leases) | $585,390 | | Annualized ground lease NOI | $41,800 | | Total Annualized Portfolio Cash NOI | $627,190 | | Mortgage and other indebtedness, net | $(3,025,578) | | Pro rata adjustment for joint venture debt | $(181,064) | Non-GAAP Financial Measures This section defines key non-GAAP financial measures such as NAREIT FFO, Core FFO, AFFO, NOI, Same Property NOI, and Adjusted EBITDA, explaining their relevance for evaluating operating performance - NAREIT FFO: Defined as net income excluding real estate depreciation, gains/losses from property sales, and impairment write-downs[93] - Core FFO: Modifies FFO to exclude certain non-cash items like amortization of financing costs, non-cash compensation, and straight-line rent adjustments[96] - Same Property NOI: Measures NOI for a consistent pool of properties owned for the full periods presented to eliminate the impact of acquisitions and dispositions[100][101] - Adjusted EBITDA: Defined as EBITDA adjusted for items like gains on sales, merger costs, and other non-recurring activities to provide a measure of core operational earnings[104] Contact Information This section provides contact details for Kite Realty Group's corporate office and investor relations personnel, along with a list of covering analysts from various investment banks - Investor Relations Contact: - Tyler Henshaw, SVP, Capital Markets & Investor Relations - Phone: 317.713.7780 - Email: thenshaw@kiterealty.com[7][25]