Kite Realty Trust(KRG) - 2022 Q4 - Annual Report

PART I Business Kite Realty Group Trust is a REIT specializing in grocery-anchored shopping centers, focused on maximizing property value and cash flow through strategic leasing and redevelopment Portfolio Overview as of December 31, 2022 | Metric | Value | | :--- | :--- | | Operating Retail Properties | 183 | | Total Square Feet | ~28.8 million | | Retail Leased Percentage | 94.6% | | ABR per Square Foot | $20.02 | | Largest Tenant Concentration (by ABR) | < 2.5% | - The company's primary business objectives are to increase cash flow and property value, achieve long-term growth, and maximize shareholder value through the ownership, operation, and development of its retail assets[30] - Key strategies include maximizing internal growth via leasing and redevelopment, maintaining a strong balance sheet with flexible funding sources, and prudently pursuing selective acquisitions and renovations[33] Key 2022 Financial & Operating Highlights | Metric | Value | | :--- | :--- | | Net Loss Attributable to Common Shareholders | ($12.6 million) | | Funds From Operations (FFO) | $431.2 million | | Same Property NOI Growth (YoY) | 5.1% | | New & Renewal Leases Executed | 782 leases (~4.9M sq. ft.) | | Blended Cash Leasing Spread | 12.6% | | Dividends Declared per Share | $0.87 | - As of December 31, 2022, the company had 236 full-time employees and demonstrated a commitment to diversity, with a workforce that was approximately 48% female and 20% minority[49][51] - The company has established an ESG Task Force and published its inaugural Corporate Responsibility Report, with goals to improve energy efficiency, water conservation, and expand EV charging stations across its portfolio by 2026[56][57] Risk Factors The company faces diverse risks including operational challenges, significant indebtedness, anti-takeover provisions, and critical tax risks related to maintaining REIT qualification - Operational risks include inflation impacting consumer spending and tenant health, potential tenant bankruptcies (noting Party City, Bed Bath & Beyond, and Regal Cinemas), and e-commerce competition[64][69][70] - The company has significant geographic concentration, with Texas (25.7%), Florida (10.9%), Maryland (6.8%), New York (6.0%), and North Carolina (5.4%) representing a substantial portion of its base rent, exposing it to regional economic downturns[72] - Financial risks are significant, with $3.0 billion in consolidated indebtedness as of year-end 2022, and rising interest rates could materially increase borrowing costs and adversely affect financial results[84] - Organizational risks include anti-takeover provisions in the company's declaration of trust, such as a 7% ownership limit for most shareholders, which may deter potential changes in control[109][110] - A primary tax risk is the potential failure to qualify as a REIT, which would result in corporate-level income tax and substantially reduce cash available for distribution to shareholders[127][128] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[141] Properties As of December 31, 2022, the company's portfolio comprised 183 operating retail properties and three development projects, featuring geographic and tenant diversification, with 9.3% of retail ABR expiring in 2023 Geographic Diversity by % of Weighted Retail ABR (Top 5 States) | State | % of Weighted Retail ABR | | :--- | :--- | | Texas | 25.7% | | Florida | 10.9% | | Maryland | 6.8% | | New York | 6.0% | | Washington | 5.4% | Top 5 Tenants by % of Weighted ABR | Tenant | % of Weighted ABR | | :--- | :--- | | The TJX Companies, Inc. | 2.5% | | Best Buy Co., Inc. | 1.9% | | Ross Stores, Inc. | 1.8% | | PetSmart, Inc. | 1.8% | | Gap Inc. | 1.4% | - The company has three active development projects under construction: The Landing at Tradition - Phase II (FL), Carillon MOB (DC/Baltimore), and The Corner (IN), with a total estimated remaining NOI of $4.2 million - $5.1 million to come online[146] - In 2023, leases representing 9.3% of total retail Annualized Base Rent (ABR) are scheduled to expire[152] - During 2022, the company executed 782 new and renewal leases totaling 4.9 million square feet, achieving a blended cash leasing spread of 12.6% on comparable leases[154] Legal Proceedings The company is not subject to any material litigation, and existing routine legal matters are not expected to have a material adverse impact - The company is not subject to any material litigation and does not expect current routine litigation to have a material adverse impact on its financial condition or results[155] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[156] PART II Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities The company's common shares trade on the NYSE under 'KRG', with a $300 million share repurchase program in place, and 18,521 shares repurchased in Q4 2022 for employee tax obligations - The company's common shares are traded on the New York Stock Exchange (NYSE) under the ticker symbol 'KRG'[159] - For the taxable year ended December 31, 2022, approximately 86.1% of distributions were taxable ordinary income dividends and 13.9% were taxable capital gains dividends[162] - The company has a Share Repurchase Program, increased to $300 million in April 2022 and extended through February 2024, with no shares repurchased under this specific program during the quarter[166] Share Repurchases (Q4 2022) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | Oct 2022 | — | $ — | | Nov 2022 | 18,521 | $21.11 | | Dec 2022 | — | $ — | | Total | 18,521 | $21.11 | Management's Discussion and Analysis of Financial Condition and Results of Operations The company's 2022 financial results show significant revenue growth to $802.0 million and improved net loss due to the RPAI merger, with 5.1% Same Property NOI growth and $1.2 billion in liquidity Comparison of Operating Results (Years Ended Dec 31) | (in thousands) | 2022 | 2021 | | :--- | :--- | :--- | | Total revenue | $801,996 | $373,324 | | Rental income | $782,349 | $367,399 | | Total expenses | $737,396 | $426,057 | | Merger and acquisition costs | $925 | $86,522 | | Depreciation and amortization | $469,805 | $200,460 | | Operating income (loss) | $91,669 | ($21,524) | | Interest expense | ($104,276) | ($60,447) | | Net loss attributable to common shareholders | ($12,636) | ($80,806) | - The significant increase in revenue and expenses in 2022 compared to 2021 is primarily due to the full-year impact of the 100 operating properties acquired in the merger with RPAI, which closed on October 22, 2021[185][192] Non-GAAP Performance Measures (Year Ended Dec 31, 2022) | Metric | Value | | :--- | :--- | | Same Property NOI Growth | 5.1% | | FFO of the Operating Partnership | $431.2 million | | FFO, as adjusted, of the Operating Partnership | $429.6 million | | Net Debt to Adjusted EBITDA | 5.2x | - The company enhanced its liquidity in 2022 by increasing its unsecured revolving credit facility to $1.1 billion and entering into a new seven-year $300.0 million unsecured term loan, with total liquidity approximately $1.2 billion as of year-end[182][220] - As of December 31, 2022, the company had $284.4 million of debt maturing in 2023, which it expects to repay using cash on hand and its revolving credit facility[221][230] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure on its $3.0 billion consolidated indebtedness, with 94% effectively fixed-rate, and a 100-basis point rate increase impacting cash flow by $1.8 million - The company's main market risk exposure is from changes in interest rates on its variable-rate debt[269] - As of December 31, 2022, total consolidated indebtedness was $3.0 billion, with 94% ($2.8 billion) of the debt fixed-rate and 6% ($183.3 million) variable-rate after accounting for interest rate hedges[270] - A hypothetical 100-basis point increase in interest rates on the company's unhedged variable-rate debt would decrease future annual cash flows by approximately $1.8 million[271] Financial Statements and Supplementary Data This section refers to the consolidated financial statements of the company, which are listed in Part IV, Item 15(a) of the report - This item indicates that the company's consolidated financial statements are included in Part IV, Item 15(a) of the Form 10-K[272] Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[273] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of December 31, 2022, with no material changes to internal control over financial reporting, and KPMG LLP issued an unqualified opinion - Management concluded that the disclosure controls and procedures for both Kite Realty Group Trust and Kite Realty Group, L.P. were effective as of December 31, 2022[274][278] - There were no changes to internal control over financial reporting during the fourth quarter of 2022 that materially affected, or are reasonably likely to materially affect, internal controls[275][279] - Management's report on internal control over financial reporting concluded that controls were effective, and this assessment was attested to by the independent registered public accounting firm, KPMG LLP[276][280] Other Information The company reports no other information for this item - None[299] Disclosure Regarding Foreign Jurisdictions that Prevent Inspections This item is not applicable to the company - Not applicable[300] PART III Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, and Principal Accountant Fees Information for Items 10 through 14, covering directors, executive officers, corporate governance, executive compensation, security ownership, and principal accountant fees, is incorporated by reference from the company's 2023 Annual Meeting Proxy Statement - Information for Item 10 (Directors, Executive Officers and Corporate Governance) is incorporated by reference from the 2023 Annual Meeting Proxy Statement[302] - Information for Item 11 (Executive Compensation) is incorporated by reference from the Proxy Statement[303] - Information for Items 12, 13, and 14 (Security Ownership, Certain Relationships, and Principal Accountant Fees) is incorporated by reference from the Proxy Statement[304][305][306] PART IV Exhibits and Financial Statement Schedules This section provides a comprehensive index of all documents filed as part of the Form 10-K report, including consolidated financial statements, schedules, and various exhibits - This item lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report[309] Form 10-K Summary This item is not applicable - Not applicable[320]