Kite Realty Trust(KRG) - 2023 Q2 - Quarterly Report

PART I — FINANCIAL INFORMATION Presents unaudited consolidated financial statements for Kite Realty Group Trust and its Operating Partnership, including notes Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements for Kite Realty Group Trust and its Operating Partnership, including notes Kite Realty Group Trust Financial Statements Kite Realty Group Trust reports increased net income for Q2 and H1 2023, with slight asset and liability decreases Kite Realty Group Trust - Key Financial Highlights (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Balance Sheet | | | | Total Assets | $7,165,099 | $7,341,982 | | Total Liabilities | $3,405,861 | $3,516,130 | | Total Shareholders' Equity | $3,692,807 | $3,766,515 | | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Income Statement (3 Months) | | | | Total Revenue | $208,759 | $202,605 | | Net Income Attributable to Common Shareholders | $32,058 | $13,131 | | EPS (basic and diluted) | $0.15 | $0.06 | | Metric | H1 2023 | H1 2022 | | :--- | :--- | :--- | | Income Statement (6 Months) | | | | Total Revenue | $415,509 | $396,996 | | Net Income (Loss) Attributable to Common Shareholders | $37,449 | $(3,673) | | EPS (basic and diluted) | $0.17 | $(0.02) | - Net cash provided by operating activities for the six months ended June 30, 2023, was $180.4 million, an increase from $154.3 million in the prior-year period[24] - Net cash used in financing activities decreased to $175.5 million from $224.2 million year-over-year[24] Kite Realty Group, L.P. and subsidiaries Financial Statements Operating Partnership financials mirror the Parent Company, differing primarily in the equity section Kite Realty Group, L.P. - Key Financial Highlights (in thousands) | Metric | June 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Balance Sheet | | | | Total Assets | $7,165,099 | $7,341,982 | | Total Liabilities | $3,405,861 | $3,516,130 | | Total Partners' Equity | $3,692,807 | $3,766,515 | | Metric | Q2 2023 | Q2 2022 | | :--- | :--- | :--- | | Income Statement (3 Months) | | | | Total Revenue | $208,759 | $202,605 | | Net Income Attributable to Common Unitholders | $32,451 | $13,263 | | Net Income per Common Unit | $0.15 | $0.06 | Notes to Consolidated Financial Statements Detailed notes explain accounting policies, property portfolio, debt, and equity programs, with 181 retail properties Property Portfolio as of June 30, 2023 | Property Type | Properties | Square Footage | | :--- | :--- | :--- | | Operating retail properties | 181 | 28,590,350 | | Office properties | 1 | 287,291 | | Development/redevelopment projects | 2 | 150,000 | - During the first six months of 2023, the company sold two properties for a total of $79.4 million, recognizing a gain of $28.4 million[68] - No properties were acquired during this period[68] Consolidated Indebtedness as of June 30, 2023 (in thousands) | Debt Type | Amount Outstanding | Weighted Avg. Interest Rate | Weighted Avg. Years to Maturity | | :--- | :--- | :--- | :--- | | Fixed rate debt | $2,727,256 | 4.02% | 4.3 | | Variable rate debt | $182,933 | 8.87% | 2.7 | | Total | $2,910,189 | 4.32% | 4.2 | - The company has a $300 million Share Repurchase Program, extended through February 28, 2024[107] - No shares have been repurchased under this program as of June 30, 2023[107] - The company also has a $150 million At-The-Market (ATM) offering program, under which no shares have been sold[108] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q2 2023 operations, financial results, non-GAAP measures, liquidity, and critical accounting estimates Overview and Operating Activity Overview of REIT operations, portfolio of 181 retail properties, and Q2 2023 leasing activity - In Q2 2023, the company signed 190 leases for 1,331,056 sq. ft. with a blended cash leasing spread of 24.0% for comparable new and non-option renewal leases[127] - Management notes that while most leases have provisions to mitigate inflation, the high inflation environment and rising interest rates have increased borrowing costs[125] Results of Operations Detailed comparison of Q2 and H1 2023 operating results, including non-GAAP measures like Same Property NOI and FFO Comparison of Operating Results (Three Months Ended June 30, in thousands) | Line Item | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Rental income | $205,836 | $196,205 | $9,631 | | Total revenue | $208,759 | $202,605 | $6,154 | | Total expenses | $177,890 | $187,549 | $(9,659) | | Operating income | $59,309 | $39,014 | $20,295 | | Net income attributable to common shareholders | $32,058 | $13,131 | $18,927 | Same Property NOI Growth (in thousands) | Period | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $140,434 | $132,852 | 5.7% | | Six Months Ended June 30 | $279,442 | $263,328 | 6.1% | FFO, as adjusted, per Share (Diluted) | Period | 2023 | 2022 | | :--- | :--- | :--- | | Three Months Ended June 30 | $0.51 | $0.49 | | Six Months Ended June 30 | $1.02 | $0.94 | - The company's Net Debt to Annualized Adjusted EBITDA ratio was 5.0x as of June 30, 2023[168] Liquidity and Capital Resources Strong liquidity with $129.3 million cash and $1.1 billion available on credit facility as of June 30, 2023 - As of June 30, 2023, liquidity consisted of $129.3 million in cash and $1.1 billion of availability under the unsecured revolving credit facility[171] - The company anticipates incurring approximately $100 million in major tenant improvement costs over the next 12-18 months, largely related to re-leasing vacant space, including former Bed Bath & Beyond locations[182] Debt Maturities as of June 30, 2023 (in thousands) | Year | Total Debt Maturing | | :--- | :--- | | 2023 (remainder) | $124,246 | | 2024 | $272,356 | | 2025 | $682,848 | | 2026 | $552,981 | | 2027 | $253,120 | | Thereafter | $1,024,638 | Cash Flow Summary (Six Months Ended June 30, in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $180,425 | $154,322 | | Net cash provided by investing activities | $8,013 | $68,646 | | Net cash used in financing activities | $(175,454) | $(224,179) | Quantitative and Qualitative Disclosures About Market Risk Discusses market risk, primarily interest rate risk, with 94% of debt fixed-rate as of June 30, 2023 - As of June 30, 2023, after considering interest rate hedges, 94% ($2.7 billion) of the company's debt was fixed-rate and 6% ($182.9 million) was variable-rate[197] - A 100-basis point change in interest rates on unhedged variable-rate debt would change annual cash flow by $1.8 million[198] Controls and Procedures Management confirms effective disclosure controls and procedures with no material changes in internal controls - The CEO and CFO of both the Parent Company and the Operating Partnership concluded that disclosure controls and procedures were effective as of June 30, 2023[199][201] - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal controls[200][202] PART II — OTHER INFORMATION Covers legal proceedings, risk factors, equity sales, related-party transactions, and exhibits Legal Proceedings The company is not subject to any material litigation or threatened legal proceedings - The company is not subject to any material litigation, nor is any material litigation currently threatened against it[205] Risk Factors No material changes to risk factors previously disclosed in the 2022 Annual Report on Form 10-K - There have been no material changes from the risk factors disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022[206] Unregistered Sales of Equity Securities and Use of Proceeds No share repurchases in Q2 2023; $300 million remains available under repurchase program - No shares of common stock were repurchased during the three months ended June 30, 2023[207] - As of June 30, 2023, $300.0 million remained available under the Share Repurchase Program, which now terminates on February 28, 2024[208] Other Information Discloses a related-party transaction involving assignment of development rights for Pan Am Plaza site - On August 7, 2023, a company subsidiary assigned development rights for the Pan Am Plaza site to Pan Am Development Partners, LLC, an entity affiliated with Chairman Emeritus Alvin E. Kite, CEO John A. Kite, and COO Thomas K. McGowan[117][211] - In exchange for the rights, the assignee will pay an assignment fee of up to $3.5 million, payable upon completion of certain development activities expected in 2024[117][212] - The transaction was approved by a special committee of independent trustees[117][212] Exhibits Lists all exhibits filed with the Form 10-Q, including certifications and XBRL financial data - Exhibits filed include certifications from the CEO and CFO (Exhibits 31.1-31.4, 32.1-32.2) and Inline XBRL documents (Exhibits 101, 104)[213]