For the three months ended March 31, 2006, funds from operations (FFO), a widely accepted supplemental measure of REIT performance established by the National Association of Real Estate Investment Trusts, for the Kite Portfolio was $9.8 million, or $0.26 per diluted share based on 37,323,227 average diluted shares and units compared to $7.6 million, or $0.28 per diluted share, for the same period in the prior year based on 27,515,745 average diluted shares and units. The Company’s allocable share of diluted FFO was $7.6 million for the three months ended March 31, 2006 compared with the Company’s allocable share of $5.3 million for the same period in 2005.
Given the nature of the Company’s business as a real estate owner and operator, the Company believes that FFO is helpful to investors when measuring operating performance because it excludes various items included in net income that do not relate
to or are not indicative of operating performance, such as gains (or losses) from sales of operating properties and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. A reconciliation of net income to FFO is included in the attached table.
The Company’s total revenue for the first quarter of 2006 increased 48% to $28.4 million from $19.2 million for the Company for the same period in 2005. The Company’s net income was $1.8 million for both the first quarters of 2006 and 2005.
John A. Kite, President and Chief Executive Officer, said, “We are pleased with the progress on our development pipeline in the first quarter. Construction has commenced at several of our projects, including Tarpon Springs Plaza and Estero Town Commons, both in the Naples, Florida area. Our development pipeline continues to attract strong interest from tenants and is expected to fuel continued growth.”
Property Portfolio
At March 31, 2006, the Company owned interests in 42 retail operating properties totaling approximately 6.7 million square feet and in 12 retail development properties, which are anticipated to total 1.6 million square feet. The percentage of leased owned gross leaseable area (“GLA”) of the retail operating portfolio was 94.8% at quarter end, an increase of 100 basis points from March 31, 2005. In addition, the Company owned four commercial operating properties totaling 562,652 square feet and a related parking garage. At March 31, 2006, the percentage of leased owned net rentable area of the commercial operating portfolio was stable at 97.7%.
During the first quarter of 2006, the Company executed new leases for 70,882 square feet of GLA and a ground lease with Lowe’s Home Improvement at our Eagle Creek lowe’s property in Naples, Florida. From April 1, 2006 through May 8, 2006, the Company executed leases for an additional 72,069 square feet of GLA and a ground lease with Lowe’s Home Improvement at our Estero Town Commons property near Naples, Florida. Approximately 67.5% of the owned GLA at properties in the development pipeline is currently in various stages of lease negotiations.
Development Activities
As of March 31, 2006, the Company owned interests in 12 retail properties under development that are expected to total approximately 1.6 million square feet. Approximately 845,000 square feet are anticipated to be owned or ground leased by the Company and the remainder will be owned by anchor tenants upon completion of the developments. The total estimated cost of these projects is $177.7 million, of which approximately $101.8 million had been incurred as of March 31, 2006.
On February 24, 2006, the Company acquired 5.3 acres adjacent to its Gateway Shopping Center development property in Seattle, Washington for expansion of that center. Both the original Gateway Shopping Center project and this additional phase are being developed by the Company through a joint venture. In total, Gateway Shopping Center is expected to include two anchor-owned spaces, an 88,000 square foot Kohl’s Department Store and a 93,000 square foot Winco Foods, a growing supermarket chain in the Western United States. The center, which has an estimated total project cost of
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$24.4 million, will also include a 30,000 square foot junior box, approximately 45,000 square feet of small shops, and five outlots. Currently, 40% of the owned GLA at Gateway Shopping Center is in various stages of lease negotiations. Construction has commenced and we anticipate the project to open in the first quarter of 2007.
In the first quarter, the Company commenced construction on our Tarpon Springs Plaza development property in Naples, Florida. The center will be anchored by a non-owned Target. Approximately, 97% of the owned GLA at Tarpon Springs Plaza is in various stages of lease negotiations. The Company has signed leases with Staples, Cost Plus World Market, Panera Bread, Starbucks and Chili's. Tarpon Springs Plaza has an estimated total project cost of $21.5 million.
Subsequent Events
On April 3, 2006, the Company acquired Kedron Village, a community shopping center that is under construction in Peachtree City, Georgia, an affluent suburb of Atlanta. Kedron Village will consist of 282,125 square feet (157,408 square feet of owned GLA) and will be anchored by Target, Ross, Bed Bath & Beyond, and Petco. The project is currently 77.6% pre-leased. The contract price for Kedron Village is $36.9 million, of which $22.0 million has been paid to date. The remainder of the purchase price will be paid as construction continues. The project is expected to open in the third quarter of 2006.
On April 7, 2006, the Company signed a ground lease with Lowe’s Home Improvement to anchor its Estero Town Commons development property near Naples, Florida. Estero Town Commons will be a 206,600 square foot community shopping center that will include the Lowe’s, 25,600 square feet of small shops, and five outlots. Construction at the center has commenced. Currently, 90% of the owned GLA at the center is in various stages of lease negotiations. Estero Town Commons has an estimated total project cost of $20 million and is being developed by the Company through a joint venture.
On April 28, 2006, the Company contributed $7.25 million for a 60% interest in a joint venture, which acquired approximately 14 acres of land in Oldsmar, Florida, a suburb of Tampa. This development is projected to include approximately 74,500 square feet of Company-owned gross leasable area and three outparcels and will be anchored by a big-box retailer. Construction on this project is anticipated to commence in the third quarter of 2006.
Distributions
On February 9, 2006, the Board of Trustees declared a quarterly cash distribution of $0.1875 per common share for the quarter ended March 31, 2006 to shareholders of record on April 6, 2006. This distribution was paid on April 18, 2006.
On May 4, 2006, the Board of Trustees declared a quarterly cash distribution of $0.1875 per common share for the quarter ending June 30, 2006 to shareholders of record on July 6, 2006. This distribution will be paid on July 18, 2006.
3
Earnings Guidance
The Company is re-affirming its previously established FFO guidance for the year ending December 31, 2006 in the range of $1.13 to $1.20 per diluted share. Following is a reconciliation of the calculation of net income per share to FFO per share:
Guidance Range for 2006 | | Low | | High | |
| |
| |
| |
Net income per share | | $ | 0.44 | | $ | 0.51 | |
Depreciation and amortization of consolidated entities | | | 0.68 | | | 0.68 | |
Depreciation and amortization of unconsolidated entities | | | 0.01 | | | 0.01 | |
| |
|
| |
|
| |
Funds From Operations | | $ | 1.13 | | $ | 1.20 | |
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|
| |
|
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Earnings Conference Call
Management will host a conference call on Tuesday, May 9, 2006 at 10:00 a.m. ET to discuss financial results for the quarter ending March 31, 2006. A live Web cast of the conference call will be available online on the Company’s corporate website at www.kiterealty.com. The dial-in numbers are (877) 407-8035 for domestic callers and (201) 689-8035 for international callers. After the live Web cast, the call will remain available on Kite Realty Group Trust’s website through June 18, 2006. In addition, a telephonic replay of the call will be available until May 23, 2006. The replay dial-in numbers are (877) 660-6853 for domestic callers and (201) 612-7415 for international callers. Please use account number 286 and reservation code 198393 for the telephonic replay.
About Kite Realty Group Trust
Kite Realty Group Trust is a full-service, vertically integrated real estate investment trust focused primarily on the development, construction, acquisition, ownership and operation of high quality neighborhood and community shopping centers in selected growth markets in the United States. The Company owns interests in a portfolio of operating retail properties, retail properties under development, operating commercial properties, a related parking garage, and parcels of land that may be used for future development of retail or commercial properties. As of March 31, 2006, Kite Realty Group owned interests in 47 operating properties totaling approximately 7.2 million square feet and in 12 properties under development which are expected to total approximately 1.6 million square feet.
Safe Harbor
Certain statements in this document that are not historical fact may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company to differ materially from historical results or from any results expressed or implied by such forward-looking statements, including without limitation: national and local economic, business, real estate and other market conditions; the ability of tenants to pay rent; the competitive environment in which the Company operates; financing risks; property management risks;
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the level and volatility of interest rates; financial stability of tenants; the Company’s ability to maintain its status as a REIT for federal income tax purposes; acquisition, disposition, development and joint venture risks; potential environmental and other liabilities; and other factors affecting the real estate industry generally. The Company refers you to the documents filed by the Company from time to time with the Securities and Exchange Commission, which discuss these and other factors that could adversely affect the Company’s results. The Company undertakes no obligation to publicly update or revise these forward-looking statements (including the FFO estimate), whether as a result of new information, future events or otherwise.
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5
Kite Realty Group Trust
Consolidated Balance Sheets
(Unaudited)
| | March 31,
2006 | | December 31,
2005 | |
| |
| |
| |
Assets: | | | | | | | |
Investment properties, at cost: | | | | | | | |
Land | | $ | 172,211,722 | | $ | 172,509,684 | |
Land held for development | | | 53,293,610 | | | 51,340,820 | |
Buildings and improvements | | | 485,808,204 | | | 485,129,649 | |
Furniture, equipment and other | | | 5,384,093 | | | 5,675,980 | |
Construction in progress and other | | | 85,558,803 | | | 65,903,868 | |
| |
|
| |
|
| |
| | | 802,256,432 | | | 780,560,001 | |
Less: accumulated depreciation | | | (47,194,381 | ) | | (41,825,911 | ) |
| |
|
| |
|
| |
| | | 755,062,051 | | | 738,734,090 | |
Cash and cash equivalents | | | 9,560,171 | | | 15,208,835 | |
Tenant receivables, including accrued straight-line rent, net of allowance for bad debts | | | 12,954,605 | | | 11,302,923 | |
Other receivables | | | 6,865,736 | | | 6,082,511 | |
Investments in unconsolidated entities, at equity | | | 1,191,443 | | | 1,303,919 | |
Escrow deposits | | | 5,466,752 | | | 6,718,198 | |
Deferred costs, net | | | 17,532,778 | | | 17,380,288 | |
Prepaid and other assets | | | 2,603,042 | | | 2,499,042 | |
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|
| |
|
| |
Total Assets | | $ | 811,236,578 | | $ | 799,229,806 | |
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|
| |
|
| |
Liabilities and Shareholders’ Equity: | | | | | | | |
Mortgage and other indebtedness | | $ | 390,950,748 | | $ | 375,245,837 | |
Cash distributions and losses in excess of net investment in unconsolidated entities, at equity | | | 53,551 | | | — | |
Accounts payable and accrued expenses | | | 31,530,388 | | | 30,642,822 | |
Deferred revenue and other liabilities | | | 25,210,889 | | | 25,369,152 | |
Minority interest | | | 4,748,825 | | | 4,847,801 | |
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|
| |
|
| |
Total liabilities | | | 452,494,401 | | | 436,105,612 | |
Commitments and contingencies | | | | | | | |
Limited Partners’ interests in operating partnership | | | 83,228,186 | | | 84,244,814 | |
Shareholders’ Equity: | | | | | | | |
Preferred Shares, $.01 par value, 40,000,000 shares authorized, no shares issued and outstanding | | | — | | | — | |
Common Shares, $.01 par value, 200,000,000 shares authorized, 28,583,414 shares and 28,555,187 shares issued and outstanding at March 31, 2006 and December 31, 2005, respectively | | | 285,834 | | | 285,552 | |
Additional paid in capital and other | | | 288,206,406 | | | 288,976,563 | |
Unearned compensation | | | — | | | (808,015 | ) |
Accumulated other comprehensive income | | | 610,371 | | | 427,057 | |
Accumulated deficit | | | (13,588,620 | ) | | (10,001,777 | ) |
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|
| |
|
| |
Total shareholders’ equity | | | 275,513,991 | | | 278,879,380 | |
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|
| |
|
| |
Total Liabilities and Shareholders’ Equity | | $ | 811,236,578 | | $ | 799,229,806 | |
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Kite Realty Group Trust
Condensed Consolidated Statements of Operations
(Unaudited)
| | Three Months Ended March 31, | |
| |
| |
| | 2006 | | 2005 | |
| |
| |
| |
Revenue: | | | | | | | |
Minimum rent | | $ | 15,734,672 | | $ | 12,530,628 | |
Tenant reimbursements | | | 3,695,873 | | | 2,623,188 | |
Other property related revenue | | | 1,051,701 | | | 948,500 | |
Construction and service fee revenue | | | 7,896,936 | | | 3,088,976 | |
Other income, net | | | 53,876 | | | 12,564 | |
| |
|
| |
|
| |
Total revenue | | | 28,433,058 | | | 19,203,856 | |
Expenses: | | | | | | | |
Property operating | | | 3,034,174 | | | 2,728,090 | |
Real estate taxes | | | 2,506,914 | | | 1,498,381 | |
Cost of construction and services | | | 7,185,364 | | | 2,908,384 | |
General, administrative, and other | | | 1,343,537 | | | 1,232,269 | |
Depreciation and amortization | | | 7,522,235 | | | 4,819,333 | |
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|
| |
|
| |
Total expenses | | | 21,592,224 | | | 13,186,457 | |
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|
| |
|
| |
Operating income | | | 6,840,834 | | | 6,017,399 | |
Interest expense | | | 4,569,992 | | | 3,758,434 | |
Income tax expense of taxable REIT subsidiary | | | 13,287 | | | — | |
Minority interest income | | | (37,524 | ) | | (41,019 | ) |
Equity in earnings of unconsolidated entities | | | 87,973 | | | 75,795 | |
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|
| |
|
| |
Income from continuing operations | | | 2,308,004 | | | 2,293,741 | |
Operating income from discontinued operations | | | — | | | 306,009 | |
Limited Partners’ interest in operating partnership | | | (535,457 | ) | | (785,090 | ) |
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|
| |
|
| |
Net income | | $ | 1,772,547 | | $ | 1,814,660 | |
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|
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|
| |
Income per common share - basic: | | | | | | | |
Continuing operations | | $ | 0.06 | | $ | 0.08 | |
Discontinued operations | | | — | | | 0.01 | |
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|
| |
|
| |
| | $ | 0.06 | | $ | 0.09 | |
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|
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|
| |
Income per common share - diluted: | | | | | | | |
Continuing operations | | $ | 0.06 | | $ | 0.08 | |
Discontinued operations | | | — | | | 0.01 | |
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|
| |
|
| |
| | $ | 0.06 | | $ | 0.09 | |
| |
|
| |
|
| |
Weighted average common shares outstanding - basic | | | 28,571,440 | | | 19,148,267 | |
| |
|
| |
|
| |
Weighted average common shares outstanding - diluted | | | 28,704,563 | | | 19,231,484 | |
| |
|
| |
|
| |
Dividends declared per common share | | $ | 0.1875 | | $ | 0.1875 | |
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|
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|
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7
Kite Realty Group Trust
Funds From Operations
(Unaudited)
| | Three Months Ended March 31, | |
| |
| |
| | 2006 | | 2005 | |
| |
| |
| |
Net income | | $ | 1,772,547 | | $ | 1,814,660 | |
Add Limited Partners’ interests | | | 535,457 | | | 785,090 | |
Add depreciation and amortization of consolidated entities and discontinued operations, net of minority interest | | | 7,428,693 | | | 4,913,703 | |
Add depreciation and amortization of unconsolidated entities | | | 102,019 | | | 68,212 | |
| |
|
| |
|
| |
Funds From Operations of the Kite Portfolio | | | 9,838,716 | | | 7,581,665 | |
Less Limited Partners’ interests | | | (2,271,952 | ) | | (2,289,562 | ) |
| |
|
| |
|
| |
Funds From Operations allocable to the Company | | $ | 7,566,764 | | $ | 5,292,103 | |
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|
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|
| |
Basic FFO per Share of the Kite Portfolio | | $ | 0.26 | | $ | 0.28 | |
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|
| |
|
| |
Diluted FFO per Share of the Kite Portfolio | | $ | 0.26 | | $ | 0.28 | |
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|
| |
|
| |
Basic weighted average Common Shares outstanding | | | 28,571,440 | | | 19,148,267 | |
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|
| |
|
| |
Diluted weighted average Common Shares outstanding | | | 28,704,563 | | | 19,231,484 | |
| |
|
| |
|
| |
Basic weighted average Common Shares and Units outstanding | | | 37,190,104 | | | 27,432,527 | |
| |
|
| |
|
| |
Diluted weighted average Common Shares and Units outstanding | | | 37,323,227 | | | 27,515,745 | |
| |
|
| |
|
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8
