Kite Realty Trust(KRG) - 2024 Q1 - Quarterly Results

Earnings Press Release First Quarter 2024 Operating Results Kite Realty Group Trust reported strong Q1 2024 results, with net income increasing to $14.2 million and FFO at $0.50 per diluted share, raising full-year guidance Q1 2024 Key Financial Metrics | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net Income Attributable to Common Shareholders | $14.2 million | $5.4 million | | Net Income per Diluted Share | $0.06 | $0.02 | | NAREIT FFO of the Operating Partnership | $112.8 million | - | | NAREIT FFO per Diluted Share | $0.50 | - | | Same Property NOI Increase | 1.8% | - | - Executed 185 new and renewal leases totaling approximately 1.0 million square feet[8] - Achieved blended cash leasing spreads of 12.8% on comparable leases, with new leases at 48.1%[8] - The retail portfolio's leased percentage increased by 10 basis points sequentially to 94.0%[8] - Received a corporate credit rating upgrade to Baa2 from Baa3 by Moody's Investors Service and a 'Positive' outlook revision from Fitch Ratings[8][9] - Net debt to Adjusted EBITDA stood at 5.1x as of March 31, 2024[8] Dividend The Board of Trustees declared a Q2 2024 dividend of $0.25 per common share, a 4.2% increase year-over-year, payable July 16, 2024 - Declared a Q2 2024 dividend of $0.25 per common share, a 4.2% year-over-year increase[10] 2024 Earnings Guidance The company raised its 2024 NAREIT FFO guidance to $2.02-$2.08 per diluted share, based on improved Same Property NOI growth and lower bad debt assumption Updated 2024 NAREIT FFO Guidance (per diluted share) | Guidance | Low | High | | :--- | :--- | :--- | | Net income | $0.30 | $0.36 | | Depreciation and amortization | $1.73 | $1.73 | | Realized gains/losses on sales, net | ($0.01) | ($0.01) | | NAREIT FFO | $2.02 | $2.08 | - Raised 2024 Same Property NOI growth guidance to a range of 1.5% to 2.5%, a 50-basis point increase at the midpoint[14] - Decreased full-year bad debt assumption to 0.55% to 1.05% of total revenues, a 20-basis point decrease at the midpoint[14] Results Overview This section provides a comprehensive snapshot of KRG's financial and operational performance for Q1 2024, highlighting key metrics and updated guidance Summary Financial Results and Ratios In Q1 2024, KRG generated $207.4 million in revenue and $14.2 million net income, with NAREIT FFO at $0.50 per diluted share and Same Property NOI growth of 1.8% Q1 2024 Financial Highlights | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenue | $207,439 thousand | $206,750 thousand | | Net Income Attributable to Common Shareholders | $14,156 thousand | $5,391 thousand | | NAREIT FFO per Diluted Share | $0.50 | $0.51 | | Same Property NOI Performance | 1.8% | 6.5% | - Net debt to Adjusted EBITDA was 5.1x, consistent with the previous two quarters but down from 5.3x in Q1 2023[21] Summary Portfolio Statistics As of Q1 2024, KRG's portfolio comprised 180 retail properties, 94.0% leased, with ABR per square foot at $20.84 and a 12.8% blended cash rent spread Q1 2024 Portfolio and Leasing Metrics | Metric | Q1 2024 | | :--- | :--- | | Operating Retail Properties | 180 | | Owned Retail Operating GLA | 28.1 M sq. ft. | | Percent Leased – Retail | 94.0% | | ABR per Square Foot | $20.84 | | Total New and Renewal Lease Cash Rent Spread | 12.8% | - On January 31, 2024, a joint venture sold the 267-unit Glendale Center Apartments property[22] Consolidated Financial Statements Consolidated Balance Sheets As of March 31, 2024, KRG's total assets increased to $7.2 billion, primarily due to higher indebtedness, while total equity slightly decreased to $3.53 billion Balance Sheet Summary (in thousands) | Account | March 31, 2024 | Dec 31, 2023 | | :--- | :--- | :--- | | Net Investment Properties | $6,305,657 | $6,358,291 | | Cash and Cash Equivalents | $83,579 | $36,413 | | Total Assets | $7,204,494 | $6,944,078 | | Mortgage and Other Indebtedness, net | $3,167,513 | $2,829,202 | | Total Liabilities | $3,598,072 | $3,300,223 | | Total Equity | $3,532,709 | $3,570,568 | Consolidated Statements of Operations For Q1 2024, KRG reported total revenues of $207.4 million, with net income attributable to common shareholders significantly rising to $14.2 million ($0.06 per share) Statement of Operations Summary (in thousands) | Account | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Total Revenue | $207,439 | $206,750 | | Operating Income | $39,425 | $30,798 | | Interest Expense | ($30,364) | ($25,425) | | Gain on sale of unconsolidated property, net | $2,325 | $— | | Net Income Attributable to Common Shareholders | $14,156 | $5,391 | | Net Income per Diluted Share | $0.06 | $0.02 | NOI and EBITDA Analysis Same Property Net Operating Income (NOI) For Q1 2024, Same Property NOI increased by 1.8% to $143.8 million, driven by higher minimum rent, tenant recoveries, and reduced bad debt reserve Same Property NOI Growth (in thousands) | Metric | Q1 2024 | Q1 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $196,372 | $192,018 | - | | Total Expenses | ($52,576) | ($50,816) | - | | Same Property NOI | $143,796 | $141,202 | 1.8% | - The same property pool for the period consisted of 179 properties[28] Net Operating Income and Adjusted EBITDA by Quarter In Q1 2024, KRG's total property NOI was $152.5 million and Adjusted EBITDA was $140.0 million, both showing stability with a 73.8% NOI margin Quarterly NOI and Adjusted EBITDA (in thousands) | Metric | Q1 2024 | Q4 2023 | Q1 2023 | | :--- | :--- | :--- | :--- | | NOI | $152,509 | $151,917 | $150,482 | | Adjusted EBITDA | $140,040 | $138,073 | $138,869 | | NOI Margin - Retail | 74.4% | 76.5% | 74.4% | | Recovery Ratio - Retail | 91.6% | 92.2% | 87.2% | - Minimum rent in Q1 2024 included $2.0 million of lease termination income[31] Funds From Operations (FFO) For Q1 2024, KRG reported FFO of $112.8 million ($0.50 per diluted share), slightly down from Q1 2023, with Total Recurring Adjusted FFO at $83.2 million Joint Venture Summary As of March 31, 2024, KRG holds interests in consolidated and unconsolidated joint ventures, with a $2.3 million gain from a recent property sale Debt Profile and Liquidity Key Debt Metrics As of Q1 2024, KRG maintained a strong balance sheet with a Net Debt to Adjusted EBITDA ratio of 5.1x and total liquidity of approximately $1.45 billion - The ratio of Company share of Net Debt to Annualized Adjusted EBITDA was 5.1x[46] - Total liquidity was $1.45 billion, including $1.1 billion available under the unsecured credit facility[45] - The company is in compliance with all major debt covenants, such as total debt to undepreciated assets at 36% (vs. <60% limit)[44] - 95% of the company's Total NOI is unencumbered[45] Summary of Outstanding Debt KRG's total outstanding debt was $3.22 billion with a 4.37% weighted average interest rate and 4.3 years to maturity, with 93% fixed-rate debt Total Outstanding Debt Overview | Debt Type | Amount Outstanding (in thousands) | Ratio | Weighted Avg. Interest Rate | Weighted Avg. Years to Maturity | | :--- | :--- | :--- | :--- | :--- | | Fixed Rate Debt | $2,980,273 | 93% | 4.05% | 4.4 | | Variable Rate Debt | $171,400 | 5% | 9.09% | 2.5 | | Total | $3,222,086 | 100% | 4.37% | 4.3 | - Proceeds from the January 2024 issuance of $350.0 million in senior unsecured notes are expected to satisfy all 2024 debt maturities[51] Maturity Schedule of Outstanding Debt The company has a well-staggered debt maturity profile, with $269.6 million maturing in 2024 and larger maturities in 2025 and 2026 Upcoming Debt Maturities (Unsecured) | Year | Amount Maturing (in thousands) | | :--- | :--- | | 2024 | $269,635 | | 2025 | $430,000 | | 2026 | $550,000 | | 2027 | $250,000 | - The company utilizes interest rate swaps to manage interest rate risk, with $820.0 million of variable rate debt hedged to fixed rates and $155.0 million of fixed rate debt hedged to floating rates[49][50] Development and Redevelopment Projects KRG has two active development projects, Carillon and The Corner, expected to complete in Q4 2024 and add $5.2-$5.9 million in stabilized NOI Portfolio Diversification Geographic Diversification KRG's retail portfolio is heavily concentrated in the Southern U.S., accounting for 62.8% of ABR, with Texas as the largest single state at 26.3% Retail ABR by Region | Region | % of Weighted Retail ABR | | :--- | :--- | | South | 62.8% | | West | 16.5% | | Midwest | 11.8% | | Northeast | 8.9% | - Texas is the most significant state, representing 26.3% of total retail ABR from 44 properties[68] Top 25 Tenants by ABR KRG's tenant base is diversified, with the top 25 tenants representing 28.7% of total ABR, and The TJX Companies as the top tenant at 2.7% - The top 25 tenants represent 28.7% of the total weighted ABR[71] Top 5 Tenants by ABR | Rank | Tenant | % of Weighted ABR | S&P Rating | | :--- | :--- | :--- | :--- | | 1 | The TJX Companies, Inc. | 2.7% | A | | 2 | Best Buy Co., Inc. | 2.0% | BBB+ | | 3 | Ross Stores, Inc. | 1.9% | BBB+ | | 4 | PetSmart, Inc. | 1.8% | B+ | | 5 | Michaels Stores, Inc. | 1.4% | N/A | Leasing Activity Retail Leasing Spreads In Q1 2024, KRG executed 185 leases for 968,681 square feet, achieving a 12.8% blended cash rent spread, with new leases at 48.1% Q1 2024 Comparable Cash Rent Spreads | Category | Leases | Sq. Ft. | Cash Rent Spread | | :--- | :--- | :--- | :--- | | New Leases | 19 | 115,295 | 48.1% | | Non-Option Renewals | 57 | 174,284 | 12.2% | | Option Renewals | 54 | 462,628 | 5.3% | | Total | 130 | 752,207 | 12.8% | Lease Expirations KRG has a manageable lease expiration schedule, with 5.5% of ABR expiring in 2024 and larger maturities in 2025 and 2028 Lease Expiration Schedule by ABR | Year | % of Total ABR Expiring | | :--- | :--- | | 2024 | 5.5% | | 2025 | 12.3% | | 2026 | 11.9% | | 2027 | 13.2% | | 2028 | 15.6% | - The expiring ABR per square foot for leases maturing in 2024 is $23.98, which is above the portfolio average of $20.84, suggesting potential for positive re-leasing spreads[79] Components of Net Asset Value This section details the calculation of Annualized Normalized Portfolio Cash NOI, a key input for NAV, reaching $603.6 million including ground leases Non-GAAP Financial Measures This section defines non-GAAP financial measures like FFO, AFFO, NOI, Same Property NOI, and EBITDA, provided to help investors assess operating performance