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Kite Realty Trust(KRG) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company generated FFO per share of $0.51 for Q3, with same-property NOI growing by 4.7% year-over-year, driven by minimum rent growth, lower bad debt, and overage rent [39][68] - Year-to-date, the company has earned $1.54 of NAREIT FFO per share and increased same-property NOI by 5.5% year-over-year [47][68] - The company raised its NAREIT FFO guidance to a range of $1.99 to $2.03 per share, reflecting a $0.03 increase at the midpoint [47][62] Business Line Data and Key Metrics Changes - The company signed 214 leases in Q3, representing approximately 1.4 million square feet, with blended cash spreads of 14.2% on comparable new and renewal leases [40] - Non-option renewal spreads for the quarter were 17.8%, indicating strong performance in lease renewals [40] - Average annual fixed rent increases for new and non-option renewals year-to-date was 2.5%, which is 100 basis points higher than the portfolio average [41] Market Data and Key Metrics Changes - The company reported a predictable step backward in lease rates due to the Bed Bath & Beyond situation, but has seen a flurry of activity on empty boxes, signing five box deals at 53% comparable cash spreads [42] - The company is negotiating leases with 16 boxes, including eight related to Bed Bath & Beyond, indicating strong leasing activity [22] Company Strategy and Development Direction - The company aims to drive value by leasing space and commencing rent, with a focus on organic growth opportunities in open-air retail environments [43] - The company is committed to maintaining a strong balance sheet while being opportunistic in the unsecured bond market [48] - The company is focused on enhancing its merchandising mix and operational efficiencies to further drive demand for its properties [44] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the retail environment, noting that retailers recognize the benefits of opening stores quickly [17][18] - The company believes that supply and demand dynamics are favorable, with limited high-quality space available [31][32] - Management anticipates that the current favorable conditions will continue in the medium term [33] Other Important Information - The company reported a bad debt reserve assumption of 45 basis points for the full year, which is below the typical run rate of 75 to 100 basis points [13][14] - The company has a limited active development pipeline but is working on several projects, including Hamilton Crossing and Carillon [70][92] Q&A Session Summary Question: How did the rents stack up versus original pro forma on backfilling boxes? - Management indicated that they are focused on the right tenant mix and are pleased with the current leasing activity [8] Question: Can you provide more color around the dispositions that closed during the quarter? - Management noted that the pricing for disposed assets was attractive, with a cap rate in the high five range [9][10] Question: What is the bad debt reserve assumption for the full year? - The bad debt reserve was reaffirmed at 45 basis points, which is lower than the typical run rate [13][14] Question: Are there any markets that are slower in the approval process? - Management acknowledged that the approval process has been slow but emphasized their success in pushing for timely approvals [17][54] Question: What is the outlook for fee income trends over the next few quarters? - Management indicated that fee income from the Hamilton Crossing project will wind down, but there are potential new projects that could generate fee income [106]