PRESS RELEASE
Contacts: Kite Realty Group Trust Chief Financial Officer (317) 577-5609 dsink@kiterealty.com |
Kite Realty Group Trust Investor Relations Manager (317) 713-5684 achavers@kiterealty.com |
Kite Realty Group Trust Reports
8.6% Increase in 2007 FFO Per Share
Highlights
| • | Funds From Operations (FFO) was $0.34 per diluted share for the fourth quarter of 2007 and $1.26 per diluted share for the full year |
| • | 82% of 2008 debt maturities were refinanced at favorable rates subsequent to year-end |
| • | Tarpon Springs Plaza property in Naples, FL became fully operational |
| • | Eddy Street Commons at the University of Notre Dame was added to development pipeline |
| • | For the fourth quarter, rental rate growth on a cash basis increased 9.5% excluding leases with options to renew |
Indianapolis, Ind., February 7, 2008 – Kite Realty Group Trust (NYSE: KRG) (the “Company”) today announced results for its fourth quarter and year ended December 31, 2007. Financial statements and exhibits attached to this release include results for the three and twelve months ended December 31, 2007 and December 31, 2006.
Financial and Operating Results
For the three months ended December 31, 2007, funds from operations (FFO), a widely accepted supplemental measure of REIT performance established by the National Association of Real Estate Investment Trusts, was $12.7 million, or $0.34 per diluted share for the Kite Portfolio compared to $11.8 million, or $0.32 per diluted share, for the Kite Portfolio for the same period in the prior year. FFO per diluted share for the fourth quarter of 2007 increased 6.3% over the same period in the prior year. The Company’s allocable share of FFO was $9.9 million for the three months ended December 31, 2007
1
compared with the Company’s allocable share of $9.2 million for the same period in 2006.
For the twelve months ended December 31, 2007, FFO for the Kite Portfolio was $47.2 million, or $1.26 per diluted share, as compared to $43.3 million, or $1.16 per diluted share for the prior year, an increase of 8.6%. The Company’s allocable share of FFO was $36.7 million for the year ended December 31, 2007 compared to $33.5 million for 2006, an increase of 9.6%.
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 fourth quarter of 2007 increased 1% to $39.6 million from $39.3 million for the same period in 2006. The Company’s net income for the fourth quarter of 2007 was $5.2 million, compared to net income of $3.7 million in the fourth quarter of 2006, an increase of 41%.
The Company’s total revenue for the twelve months ended December 31, 2007 increased 5.8% to $138.8 million from $131.2 million during 2006. The Company’s net income for the twelve months ended December 31, 2007 was $13.5 million, compared to $10.2 million during 2006, an increase of 32%.
John A. Kite, Kite Realty Group’s President and Chief Executive Officer said, "In 2007, we laid a strong foundation for the future by aggressively managing our capital plan and re-focusing on internal growth while continuing to post solid operating results. Our development pipeline represents notable embedded growth and we have been successful in pre-leasing and securing entitlements. As we look forward to a challenging year for the economy, we believe that our clear strategy, high quality portfolio, secure financing, and a proven track record of execution will allow us to capitalize on market-driven opportunities."
Operating Portfolio
As of December 31, 2007, the Company owned interests in 50 retail operating properties totaling approximately 7.4 million square feet. The owned gross leasable area (“GLA”) in the Company’s retail operating portfolio was 94.8% leased as of December 31, 2007, compared to 93.4% leased as of the end of 2006. In addition, the Company owned four commercial operating properties totaling 562,652 square feet and an associated parking garage. As of December 31, 2007, the owned net rentable area of the commercial operating portfolio was 93.0% leased, compared to 91.7% as of the end of the prior year.
2
Development Activities |
During the fourth quarter, Tarpon Springs Plaza in Naples, Florida became 100% leased and fully operational. This property totals 276,000 square feet including and includes Staples, Cost Plus and AC Moore as well as a non-owned Target anchor. An additional 10,000 square feet of owned small shop space is planned for the shopping center as a result of tenant demand.
Construction has commenced on our Spring Mill Medical II development. The Company has a 50% interest in this 41,000 square foot expansion project which is a 100% pre-leased medical office development adjacent to the Company’s existing 65,000 square foot Spring Mill Medical property near Indianapolis, Indiana. The total project cost (including our partner’s share) for this new development is approximately $8.5 million. Upon completion, the Company will evaluate a potential sale of its interests in both phases of Spring Mill Medical.
As of December 31, 2007, the Company owned interests in nine retail properties in the current development pipeline that are expected to total approximately 1.0 million square feet. Approximately 514,000 square feet are anticipated to be owned directly by the Company or through various joint ventures. The remaining square footage will be owned by anchor tenants. The total estimated cost of these projects is $146 million, of which approximately $110 million had been incurred as of December 31, 2007. Approximately 77% of the owned GLA at properties in the development pipeline is currently leased or under negotiation with prospective tenants. The Company also has two properties under redevelopment representing a total of 757,000 square feet.
In addition, the initial phase of Eddy Street Commons at the University of Notre Dame, a $200 million (including partners’ share) mixed-use development project, was added to the development pipeline during the fourth quarter. This initial phase is anticipated to include retail, apartments, and office space totaling approximately 465,000 square feet.
Leasing Activities
During the fourth quarter of 2007, the Company executed 15 new leases and 16 renewals for 149,000 square feet of GLA in our development and operating portfolios. Rental rate growth on a cash basis increased 8.6% including option renewals and 9.5% excluding option renewals.
Financing Activities
During the fourth quarter of 2007, the Company extended the maturity dates for construction loans on Tarpon Springs Plaza ($20 million) and Estero Town Center ($18.8 million) to January 2009. Simultaneously, the Company entered into two interest rate
3
swaps with notional amounts totaling approximately $38 million. Both hedges carry fixed rates of 5.55% and expire in January 2009. Additionally, the Company entered into an $11 million hedge against the Beacon Hill construction loan at a fixed interest rate of 5.125% that expires in March 2009.
Property Dispositions
During the fourth quarter of 2007, the Company sold a single tenant property at 176th & Meridian in Puyallup, Washington for a net gain of $2.0 million. We also sold a single tenant build-to-suit asset in Pasco, Washington for a net gain of $1.0 million after taxes and minority interest.
Events Subsequent to December 31, 2007
In January 2008, the Company refinanced $81 million of the total $99 million of debt which was originally scheduled to mature throughout 2008. As a result of these actions, 82% of our 2008 maturities have been refinanced at overall favorable rates.
On February 1, 2008, the Company acquired Rivers Edge Shopping Center in Indianapolis, Indiana in an off-market transaction for a purchase price of $18.3 million, or $165 per square foot. The transaction was financed with proceeds from the November 2007 sale of the Puyallup, Washington property and acquisition financing at LIBOR + 1.25%. Rivers Edge is a 110,896 square foot community shopping center. The property is located along the vibrant Keystone-Castleton retail corridor which has an estimated average household income of $80,235 in a five-mile radius. Rivers Edge is currently 80% leased.
Distributions
On November 6, 2007, the Board of Trustees declared a quarterly cash distribution of $0.205 per common share for the quarter ended December 31, 2007 to shareholders of record as of January 7, 2008. This distribution was paid on January 15, 2008.
On February 5, 2008, the Board of Trustees declared a quarterly cash distribution of $0.205 per common share for the quarter ended March 31, 2008 to shareholders of record as of April 7, 2008. This distribution will be paid on or about April 17, 2008.
Earnings Guidance
The Company is reaffirming its earnings and FFO guidance, which it previously provided in its January 14, 2008 press release, for the fiscal year ending December 31, 2008 in the range of $1.28 to $1.33 per diluted share. Following is a reconciliation of the calculation of net income per share to FFO per share:
4
Guidance Range for 2008 | Low | High
|
Diluted net income per share | $0.39 | $0.43 |
Limited Partners’ interests in Operating Partnership | 0.11 | 0.12 |
Depreciation and amortization of consolidated entities | 0.77 | 0.77 |
Depreciation and amortization of unconsolidated entities | 0.01 | 0.01 |
| ||
Diluted FFO per share | $1.28 | $1.33 |
|
Earnings Conference Call
Management will host a conference call on Friday, February 8, 2008 at 11:00 a.m. EST to discuss financial results for the quarter and year ended December 31, 2007. A live webcast of the conference call will be available online on the Company’s corporate website at www.kiterealty.com. The dial-in numbers are (866) 270-6057 for domestic callers and (617) 213-8891 for international callers (passcode 58445741). In addition, a telephonic replay of the call will be available until May 8, 2008. The replay dial-in telephone numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers (passcode 47415562).
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.
Safe Harbor
Statements regarding the Company’s 2008 FFO and earnings guidance, including the underlying assumptions are, and 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; 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 discusses 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 and net income estimates), whether as a result of new information, future events or otherwise.
5
Kite Realty Group Trust
Consolidated Balance Sheets
(Unaudited)
|
| December 31, |
| December 31, |
| ||
|
|
|
| ||||
Assets: |
|
|
|
|
|
|
|
Investment properties, at cost: |
|
|
|
|
|
|
|
Land |
| $ | 210,486,125 |
| $ | 190,886,884 |
|
Land held for development |
|
| 23,622,458 |
|
| 21,687,309 |
|
Buildings and improvements |
|
| 624,500,501 |
|
| 582,715,399 |
|
Furniture, equipment and other |
|
| 4,571,354 |
|
| 5,492,726 |
|
Construction in progress |
|
| 187,006,760 |
|
| 155,569,117 |
|
|
|
|
|
|
| ||
|
|
| 1,050,187,198 |
|
| 956,351,435 |
|
Less: accumulated depreciation |
|
| (84,603,939 | ) |
| (63,726,825 | ) |
|
|
|
|
|
| ||
|
|
| 965,583,259 |
|
| 892,624,610 |
|
Cash and cash equivalents |
|
| 19,002,268 |
|
| 23,952,594 |
|
Tenant receivables, including accrued straight-line rent of $6,653,244 and $4,774,063, respectively, net of allowance for uncollectible accounts |
|
| 17,200,458 |
|
| 15,215,858 |
|
Other receivables |
|
| 7,124,485 |
|
| 18,247,435 |
|
Investments in unconsolidated entities, at equity |
|
| 1,079,937 |
|
| 1,174,371 |
|
Restricted cash and escrow deposits |
|
| 14,036,877 |
|
| 8,604,580 |
|
Deferred costs, net |
|
| 20,563,664 |
|
| 17,532,939 |
|
Prepaid and other assets |
|
| 3,643,696 |
|
| 5,808,926 |
|
|
|
|
|
|
| ||
Total Assets |
| $ | 1,048,234,644 |
| $ | 983,161,313 |
|
|
|
|
|
|
| ||
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity: |
|
|
|
|
|
|
|
Mortgage and other indebtedness |
| $ | 646,833,633 |
| $ | 566,975,980 |
|
Accounts payable and accrued expenses |
|
| 36,173,195 |
|
| 33,007,119 |
|
Deferred revenue and other liabilities |
|
| 26,127,043 |
|
| 30,156,299 |
|
Cash distributions and losses in excess of net investment in unconsolidated entities, at equity |
|
| 234,618 |
|
| — |
|
Minority interest |
|
| 4,731,211 |
|
| 4,295,723 |
|
|
|
|
|
|
| ||
Total Liabilities |
|
| 714,099,700 |
|
| 634,435,121 |
|
Commitments and contingencies |
|
|
|
|
|
|
|
Limited Partners’ interests in Operating Partnership |
|
| 74,512,093 |
|
| 78,812,120 |
|
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 28,981,594 shares and 28,842,831 shares issued and outstanding at December 31, 2007 and December 31, 2006, respectively |
|
| 289,816 |
|
| 288,428 |
|
Additional paid in capital and other |
|
| 293,897,673 |
|
| 291,159,647 |
|
Accumulated other comprehensive (loss) income |
|
| (3,122,482 | ) |
| 297,540 |
|
Accumulated deficit |
|
| (31,442,156 | ) |
| (21,831,543 | ) |
|
|
|
|
|
| ||
Total Shareholders’ Equity |
|
| 259,622,851 |
|
| 269,914,072 |
|
|
|
|
|
|
| ||
Total Liabilities and Shareholders’ Equity |
| $ | 1,048,234,644 |
| $ | 983,161,313 |
|
|
|
|
|
|
|
6
Kite Realty Group Trust
Consolidated Statements of Operations
For the Three and Twelve Months Ended December 31, 2007 and 2006
(Unaudited)
| Three Months Ended December 31, |
| Year Ended December 31, |
| ||||||||
|
|
| ||||||||||
| 2007 |
| 2006 |
| 2007 |
| 2006 |
| ||||
|
|
|
|
| ||||||||
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rent | $ | 18,364,742 |
| $ | 17,530,947 |
| $ | 72,083,108 |
| $ | 66,713,135 |
|
Tenant reimbursements |
| 4,535,221 |
|
| 4,730,484 |
|
| 18,401,181 |
|
| 16,631,735 |
|
Other property related revenue |
| 3,048,596 |
|
| 2,795,632 |
|
| 11,010,553 |
|
| 6,358,086 |
|
Construction and service fee revenue |
| 13,629,831 |
|
| 14,219,610 |
|
| 37,259,934 |
|
| 41,447,364 |
|
|
|
|
|
|
|
|
|
| ||||
Total revenue |
| 39,578,390 |
|
| 39,276,673 |
|
| 138,754,776 |
|
| 131,150,320 |
|
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
Property operating |
| 3,684,425 |
|
| 3,828,056 |
|
| 15,121,325 |
|
| 13,580,369 |
|
Real estate taxes |
| 3,068,768 |
|
| 3,306,361 |
|
| 11,917,299 |
|
| 11,259,794 |
|
Cost of construction and services |
| 10,950,145 |
|
| 13,021,605 |
|
| 32,077,014 |
|
| 35,901,364 |
|
General, administrative, and other |
| 1,540,623 |
|
| 1,072,282 |
|
| 6,298,901 |
|
| 5,322,594 |
|
Depreciation and amortization |
| 7,991,774 |
|
| 7,069,829 |
|
| 31,850,770 |
|
| 29,579,123 |
|
|
|
|
|
|
|
|
|
| ||||
Total expenses |
| 27,235,735 |
|
| 28,298,133 |
|
| 97,265,309 |
|
| 95,643,244 |
|
|
|
|
|
|
|
|
|
| ||||
Operating income |
| 12,342,655 |
|
| 10,978,540 |
|
| 41,489,467 |
|
| 35,507,076 |
|
Interest expense |
| (7,048,534 | ) |
| (6,083,583 | ) |
| (25,965,141 | ) |
| (21,221,758 | ) |
Loss on sale of asset |
| — |
|
| — |
|
| — |
|
| (764,008 | ) |
Income tax expense of taxable REIT subsidiary |
| (466,233 | ) |
| (324,948 | ) |
| (761,628 | ) |
| (965,532 | ) |
Other income |
| 59,197 |
|
| 100,717 |
|
| 778,552 |
|
| 344,537 |
|
Minority interest in income of consolidated subsidiaries |
| (323,411 | ) |
| (38,966 | ) |
| (587,413 | ) |
| (117,469 | ) |
Equity in earnings of unconsolidated entities |
| 72,811 |
|
| 64,469 |
|
| 290,710 |
|
| 286,452 |
|
Limited Partners’ interests in the Operating Partnership |
| (1,023,328 | ) |
| (1,057,665 | ) |
| (3,399,534 | ) |
| (2,966,730 | ) |
|
|
|
|
|
|
|
|
| ||||
Income from continuing operations |
| 3,613,157 |
|
| 3,638,564 |
|
| 11,845,013 |
|
| 10,102,568 |
|
Discontinued operations: |
|
|
|
|
|
|
|
|
|
|
|
|
Operating income from discontinued operations, net of Limited Partners’ interests |
| 31,835 |
|
| 18,515 |
|
| 95,551 |
|
| 77,082 |
|
Gain on sale of operating property, net of Limited Partners’ interest |
| 1,582,119 |
|
| — |
|
| 1,582,119 |
|
| — |
|
|
|
|
|
|
|
|
|
| ||||
Income from discontinued operations |
| 1,613,954 |
|
| 18,515 |
|
| 1,677,670 |
|
| 77,082 |
|
|
|
|
|
|
|
|
|
| ||||
Net income | $ | 5,227,111 |
| $ | 3,657,079 |
| $ | 13,522,683 |
| $ | 10,179,650 |
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per common share – basic |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations | $ | 0.12 |
| $ | 0.13 |
| $ | 0.41 |
| $ | 0.35 |
|
Discontinued operations |
| 0.06 |
|
| — |
|
| 0.06 |
|
| — |
|
|
|
|
|
|
|
|
|
| ||||
| $ | 0.18 |
| $ | 0.13 |
| $ | 0.47 |
| $ | 0.35 |
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per common share – diluted |
|
|
|
|
|
|
|
|
|
|
|
|
Continuing operations | $ | 0.12 |
| $ | 0.13 |
| $ | 0.40 |
| $ | 0.35 |
|
Discontinued operations |
| 0.06 |
|
| — |
|
| 0.06 |
|
| — |
|
|
|
|
|
|
|
|
|
| ||||
| $ | 0.18 |
| $ | 0.13 |
| $ | 0.46 |
| $ | 0.35 |
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding - basic |
| 28,964,641 |
|
| 28,842,092 |
|
| 28,908,274 |
|
| 28,733,228 |
|
|
|
|
|
|
|
|
|
| ||||
Weighted average common shares outstanding - diluted |
| 29,175,748 |
|
| 29,099,790 |
|
| 29,180,987 |
|
| 28,903,114 |
|
|
|
|
|
|
|
|
|
| ||||
Dividends declared per Common Share | $ | 0.205 |
| $ | 0.195 |
| $ | 0.800 |
| $ | 0.765 |
|
|
|
|
|
|
|
|
|
|
7
Kite Realty Group Trust
Funds From Operations
For the Three and Twelve Months Ended December 31, 2007 and 2006
(Unaudited)
|
| Three Months Ended December 31, |
| Year Ended December 31, | |||||||||
|
|
| |||||||||||
|
| 2007 |
| 2006 |
| 2007 |
| 2006 | |||||
|
|
|
|
| |||||||||
Net income |
| $ | 5,227,111 |
| $ | 3,657,079 |
| $ | 13,522,683 |
| $ | 10,179,650 |
|
Deduct gain on sale of operating property |
|
| (2,036,189 | ) |
| — |
|
| (2,036,189 | ) |
| — |
|
Add loss on sale of asset, net of tax |
|
| — |
|
| — |
|
| — |
|
| 458,405 |
|
Add Limited Partners’ interests in income |
|
| 1,477,398 |
|
| 1,063,010 |
|
| 3,853,604 |
|
| 2,989,366 |
|
Add depreciation and amortization of consolidated entities, net of minority interest |
|
| 7,954,636 |
|
| 7,004,407 |
|
| 31,475,146 |
|
| 29,313,102 |
|
Add depreciation and amortization of unconsolidated entities |
|
| 100,972 |
|
| 100,199 |
|
| 403,799 |
|
| 401,549 |
|
|
|
|
|
|
|
|
|
|
| ||||
Funds From Operations of the Kite Portfolio1 |
|
| 12,723,928 |
|
| 11,824,695 |
|
| 47,219,043 |
|
| 43,342,072 |
|
Deduct Limited Partners’ interests in Funds From Operations |
|
| (2,798,821 | ) |
| (2,654,425 | ) |
| (10,529,847 | ) |
| (9,838,650 | ) |
|
|
|
|
|
|
|
|
|
| ||||
Funds From Operations allocable to the Company1 |
| $ | 9,925,107 |
| $ | 9,170,270 |
| $ | 36,689,196 |
| $ | 33,503,422 |
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic FFO per share of the Kite Portfolio |
| $ | 0.34 |
| $ | 0.32 |
| $ | 1.27 |
| $ | 1.16 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted FFO per share of the Kite Portfolio |
| $ | 0.34 |
| $ | 0.32 |
| $ | 1.26 |
| $ | 1.16 |
|
|
|
|
|
|
|
|
|
|
| ||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic weighted average Common Shares outstanding |
|
| 28,964,641 |
|
| 28,842,092 |
|
| 28,908,274 |
|
| 28,733,228 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted weighted average Common Shares outstanding |
|
| 29,175,748 |
|
| 29,099,790 |
|
| 29,180,987 |
|
| 28,903,114 |
|
|
|
|
|
|
|
|
|
|
| ||||
Basic weighted average Common Shares and Units outstanding |
|
| 37,316,897 |
|
| 37,244,707 |
|
| 37,296,010 |
|
| 37,217,588 |
|
|
|
|
|
|
|
|
|
|
| ||||
Diluted weighted average Common Shares and Units outstanding |
|
| 37,528,004 |
|
| 37,502,405 |
|
| 37,568,722 |
|
| 37,387,473 |
|
|
|
|
|
|
|
|
|
|
|
____________________ | |
1 | “Funds from Operations of the Kite Portfolio” represents 100% of the operating performance of the Operating Partnership’s real estate properties and construction and service subsidiaries in which the Company owns an interest. “Funds from Operations allocable to the Company” reflects a reduction for the Limited Partners’ weighted average diluted interests in the Operating Partnership. |
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