KRG - Earnings call transcript Q4 2018 | Kite Realty Group Trust

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Operator

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2018 Kite Realty Group Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] I would now like to turn the conference over to our host for today, Bryan McCarthy, Senior Vice President, Marketing and Communications.

You may begin.

Bryan McCarthy

morning, good and you, everyone. Thank Realty Welcome quarter call. fourth to Kite earnings Group’s

Actual these statements. forward-looking today’s are and subject and of comments statements future are differ uncertainties. from risks inherent Some contain to events of that results materially may assumptions based on

see about XX-K. please available Today’s measures. include non-GAAP SEC For remarks Company’s GAAP more adversely Please the our for a non-GAAP website financial these to financial yesterday’s our release factors also on the information filings, earnings refer can including that affect of results, results. our recent press measures to most certain reconciliation performance our

Vice the call Heath Fear; Chief Vice Chairman Kite; Buell. are Officer, Chief Financial President, On Group Executive John now Achenbach; Dave Wade to Officer, Portfolio President, me I Executive John. with the President Vice and Kite will Officer, and turn President, Realty Chief over Accounting Operating Senior Executive from Officer, and Chief Management, today McGowan; call Tom

John Kite

a Good morning, everyone, and lot, Bryan. thanks

even a huge tell And only energy. passion, him company. have I Before you minute to Many a onboard. RPAI. of on together to you brings for It’s we’ve experience, team. to our the working few he’s been impact already his though Kite we a welcome of can take a Heath months, I started Heath made at GGP Heath from wealth days and great get know want today, to

point climbed high lease And earnings XX.X%, small release, foot. at high increase. leased square in for anchor had $XX.XX increase. point our new company new to in sequential our percentage XXX at We XX.X%, shop reached we As XXX the a a our We basis basis percentage strong for year-over-year announced we a XXXX. ABR reached a

next to now company the level. to the We’re ready take

million leverage as let’s of between our several begun at program top $XXX part highlights. We last shortly. come sell designed reduce on of and efforts our months, talk XX markets a focus have our entire of bottoms-up analysis to reams operations. $XXX a and country’s this we’ve assets I’ll looked improve further our to first, the XXXX conducted to in our But million about portfolio data and quality, Over portfolio. back the

Our NOI year in reflect the year, full and for quarter expectations which We was fourth quarter solid XXXX at fourth $X end full the share quarter with per grew generated of and and in high X.X% our were consistent of the line for the by results year. per and Same-store $X.XX the for and full share FFO performance. X.X% fourth guidance.

Our year-end points We increase of past goal for leased program, in fourth to XXX our acceleration end rate basis saw an the our retail year Surge compared feet. XX.X%, operating XXX,XXX was anchor We these outperformed at quarter. XX with of leases our is quarter. square Box the on last for executing internal portfolio Big being five signed the of year this good deals which

from these was a being of proceeds XXXX million strong debt. primarily XXXX openings merchandising, an XXXX restaurant, The strategically $XX down service just on return perspective. in We combined redevelopment sales the incremental Also, schedule pay fourth $XXX sold in XXXX operational offerings. six grocery, for to our in and under quarter. assets entertainment sold of a completed with used tenant of projects X%. very two-thirds As we with and budget million in year under were were of

elevating ABR high will same-property exposure our and leverage. preemptively For new fair environment. us be our who about reduced these struggled maintain upgrade our to while And several XXXX rates to to our occupancy portfolio tier. and faced while to years, and continuing continued positive the adapt we’ve retail increasing to able the share efforts reducing tenants generating have last NOI to we’re changing challenges, a of and we

data, spent identified that months, major at XX several initially and U.S. average the population gain rents to hours of the markets, hundreds XX positioned attractive evaluations. third-party analyzing over data-driven our all mentioned I generate And the to best demographic allow call, last are long-term trends, the and we’ve markets start As conducting scale of We’ve us at in of to a portfolio. medium we’ve to returns. looked analysis

we’ll has preferred these concentrate the time We’re improved, geographic to markets footprint. Orlando, our many these And right Charlotte. properties and like new acquire time, of is we’ll and cost Raleigh, markets. in of in currently Dallas, capital be Nashville Over when able our

The process step assets. in this non-core first is sell to

have strong line our maturity ample maturities sheet satisfy could on schedule. The balance through and investment-grade with of capacity XXXX. well-staggered liquidity debt We a alone all credit a

have that, start balance a want we tendency think about about to To defensively, do we While sheet lower want offensively. to our thinking our leverage further. we even to

over mid intend a of expect pool Using our that the currently we times. to assets $XXX down XX our Upon in high mind, identified We million debt-to-EBITDA next with net debt and X.X $XXX With press disposition to between net mid growth EBITDA a generate and debt long-term between net our times. conservative to X.X forward to high have approximately Our assumption, of have the years, target ground to five hit EBITDA sales few dispositions, to the XXXX. successful million five proceeds the in resulting in is execution million. We’ve proceeds. in EBITDA long-term our the be planned of and and $XXX market estimated times. goal in to glides running we

investment dollars, to In with starts for We improvements scale share program our a town markets ABR of team Last to And investor our focused local hosted retail we call foot to this a matters. to and lots and our addition, and thesis. a company-wide is done. Friday, distinct in produce disproportionate per expect hall believe an get The This assets, our KRG profile, is earn markets. action, create ready goal selling business, material and of the shared team. have internal growth demographics. with in of details we a need that our to was investors options. our individual REIT and non-core we by this

development the University assets preferred right these portfolio we Notre mean plan a every of the majority our in in are mixed-use NOI come we portfolio will that certain at great markets, more own Eddy Commons there Street our cluster will outside that the does vast Though properties in to we Dame are desirable of market. these sell markets, their areas. not own asset like While of of regardless at identified our from

about be and retain properties. we continue where to very acquire will We intentional

we clear. I move before to make So to on want guidance, something abundantly

disposition not are a We on multiyear embarking program.

are indications We’re moving get these swiftly done, and transactions to early positive.

be successful year. of we’ll that the optimistic over course the We’re

earnings new year-over-year exercise. moving XXXX FFO For and not size, occurred The our debt-reduction planned just allocation. the provided release. point. just a disposition in walk-down with quantifies real business earnings impact of last dispositions. million making program changes this dilution the real more this requires detailed also we in It a transparent walk-down a appreciate this good disposition variety items our associated $XXX of program We including also the estate the the requires company overemphasize in that Running capital long-term estate call, This is on the prudent our meaningful. about our a can’t is I It’s fourth than program. the specifically We’ve pieces guidance, But decisions. quarter acumen.

net X.XX% X.XX%. Our start dispositions, on planned come as our recoveries XXXX to same-property FFO assumptions contractual NOI $X.XX, and relies to leases range This the impact the including of back primarily of $X.XX of is the online to of in comprised of of half anchor increases some the year. rent growth

incorporates from such of Toys served impacts midpoint To XXX and debt a basis some guidance assumptions property as Pay bankruptcies known to context, and of these of the NOI the impact NOI. the $X.XX Kmart a points Firm, Less, XXXX historically all by same lower XXX reserve points and basis consistent same-property Our and FFO respectively. NOI bankruptcies collective our range our of assumes bad Mattress give

best-in-class $X represent our approximately building leased balance blocks everybody Coupling with collectively rent call nicely. higher spread points our total run disproportionate This to primarily operating size XXX points. to that rate we Thanks rate is in our come between sheet, XXX we look spread forward was online executed growth to XXXX, basis for joining XXX of occupied chances. that which of annualized up Looking beyond at portfolio and related than of to for the begins like a XXXX. XXXX basis late we million typical basis is our future which are setting XXXX, the questions. to and end today gross for the The retail in boxes our outsized points, XX

Operator

you. Thank question of comes Instructions] Christy Our [Operator McElroy from first Citi.

open. now is line Your

Christy McElroy

good Hey, morning, everyone.

give of context just a from have dilution debt the the the use you you asset Just don’t for due. bit that sales, much could you expect us the sense of better proceeds, in coming a of little maybe

a have You line balance of credit. the small on

pay assumed on down sales? execute you if debt what’s asset the So these

Heath Fear

Hi Christy, this is Heath.

a debt on floating rate paying be So mortgages debt. of our mixture we’ll down our and our fixed-rate also

penalty them, selling so yield we’re penalties the but associated some be million million entire we intend mortgages between is with lot the be we if of yield assets with $XX all $XX maintenance $XXX penalties, the maintenance associated a of we that to have million actually $X will will program, So, somewhere that complete and million, assets sell. incurring

a fixed-rate So debt. debt again, and of rate it’s mixture floating

Christy McElroy

of the debt what’s that’s assumption? that weighted into average So cost baked

Heath Fear

number, the have right a X%. know, as that I’m somewhere I It’s change, hate X%. It’s you to to between you give to X% exact between to you these pool we and on somewhere give $XXX pool, so an reluctant again, X% going now, really but million depend pools numbers. but identified

Christy McElroy

context dividend then looking XXXX, the to and the just, are your shrinking how the out about of thinking the XXXX? on asset of earnings you Okay, based and payout,

John Kite

had cash Board, you look Yes, needing wouldn’t my that, so where established were a but lower, dividend lower ratio conservative payout our are to – that if knowing way. Christy very the that, think, to corresponding concern we give we’ve know, us flow flexibility, is would dividend any relative comments by we earnings historically around have a were in in the position as a I and

CapEx look and based fine it’s of when our sit happening because is that today, our we’re year and of in our a cross that the in liquidity of how next the we the feel as shrinking all tremendous amount past comfortable asset we majority very of have. we frankly, we that with we there, on right purposes deleveraging, and this not now that liquidity the half, said really we kind you see of fact the have, base the where So

we’re we So, now. like feel in shape right good

Christy McElroy

Okay, you. great. Thank

John Kite

you. Thank

Operator

you. Thank

question next Todd of Thomas KeyBanc Our comes from Markets. Capital

open. now is line Your

Todd Thomas

morning. good thanks, Hi,

to the NOI the of regard anchor It that the sounds a online that have like year growth same-store with growth amount the and Just you to suggesting the commencements are accelerate should into forecast expected fair throughout second quarter and maybe X.XX%. year a how of quarter could think little throughout X.XX% lease effort half, year is and provide bit? set the trajectory maybe right you the that in around about we the some should expectations throughout color first on the to read second just an growth come

John Kite

Yes, Todd. I – Hey, think

longer-term significant build of boxes right last early my question a of the is the the that and a in that, are hold, towards begin and as that factor into in we that that’s capital as as obviously we XXXX. right begins point assume to of going debt was I a that think see fairly it that lot this accelerate do is to that now, the year of You’re benefit of the in you relates in so year, trajectory, assumptions end but a take a things of but on lot the to really what reserve, trajectory should that it doing we’re kind in to one of bad the it has lot these we’re built

Heath So that? to you want to add

Heath Fear

in comps. that about income the of Todd, off. based just the think had the last Toys We’ve on year beginning fell trajectory,

what XXXX. mirror our trajectory basically us is sort to of to happened in going So

Todd Thomas

reserving does compare that, outside historically, assumptions, then the so reserve, store and that’s Mattress given Less, have just Pay and Firm, on guidance what helpful, of And the are the I other that. so Okay. reserved you to how outside of of already it, same they the top comments activities may reserves for that’s some accounted all in are that reserve, that on much how but that you’ve already of missed in other

John Kite

of Right, translates XX revenues, into its of NOI. basis same-store points basis a same-store which XXX points

to addition And to is then is into disruption taking that’s that So yes, today. consistent your historically. reserve point, happened account that in the all

Todd Thomas

on that look metrics looking regard a about Got bit process went that you the marketing were and it. the you little you or variables some mentioned Are And entertaining then market this detail taking assets you or you more in just Can of marketed XX through, these begin and one-off a a the then subset? little more are just the portfolio anything here. within did of portfolio larger talk at on market a at of sales you exercise, sort $XXX assets, million in when bit any with basis? like that being to that have key primarily

John Kite

we markets, how up the estate, in want looked Well, at where of say going starting of at I’d that beginning this a and we at at looked specific the altitude, the terms at looked that of at that, looked real higher end we at parter, backing Todd, be we okay. tenants to three movie, we we at looked

themselves, at other Green Street and terms in reports, on brokerage data existing dug reports. of so And markets, also only analyst community, the own outside that not through things we we our the our like data markets but in looked had

unleveraged we where it made that’s of really could we the figure But markets population we operate named, risk thought would we us of felt in in we a type named that Nashville growth, and CapEx own the generate centers markets. of of I what dug markets after rankings the we sevens we in a the attractive, why penetrate those of the where of cap et out to levels, in market looked work actually. end return – where higher growth, make and can’t we’re we So into that a by cetera. mid-six which income to And IRRs those some at markets that centers, that in sense we those in we into what were than where income rate of is whether on Dallas had better will are we or the terms that very few actually is IRRs is just much in a much ones IRRs, trying that’s the going rate lower going generating either growth or cap returns disposable ultimately, got some the markets to neighborhood markets, think disposing focused Charlotte I range, we because returns the and like a that down looked centers, to the sense in those where the in the adjusted community can maybe up or end, those day, end scores, tap CapEx we before for way people where at generate

reason guys actually and be about markets more are. understand, sense by to the we sure So wanted work that’s And you that more where other XX hopefully in these we do and it’s might stone we just be don’t markets, you’re forever. is said that cost capital we are going not of in set you and the by as to looking are time expand, – there initially that XX as make way high those to level we you around through land, move this our of and improves, to will then the talking and winning where contract, to start say goes markets, initial, the what

different that. You’ve got things a lot at when to to of adjust you’re looking

Todd Thomas

helpful. that’s you. Okay, Thank

John Kite

you. Thank

Operator

you. Thank

next Our of Craig from Schmidt Bank comes question America. of

is line Your open. now

Craig Schmidt

Good morning. you. Thank

the and be $XXX than timing wondered the cap guidance maybe out. to just give dispositions you at dispositions looks dilution rates you how and XXXX, greater million for it you’re us will your million from XXXX see could then expecting if of the in dispositions for the what $XXX Looking actually page, like I playing

John Kite

year the to we – a dispositions your walk-down that the I we’ve effect full suggested. timeline greater can yes, when you impact first to question, see that’s from XXXX mean, at the the assuming that Craig, look the page, in is you hit due

growth box mentioned – we would yes, yes, to that vacuum, obviously correct. vacuum, that will the hold going in there NOI, the that, a the is So same have in in purely we relative answer other and on are but to that answer that’s store be taking in the is to things XXXX, all

think other we’re you’re to an because at that. pool, assets, than specific relates what $XXX today, selling – overall it don’t was a I to into really of boxed between but As cap be not that’s rates, – looking be to a your question on pool will million you I greater asset rate get $XXX want to have get and into million, think don’t pool the we cap here, intending need going we we

change, past, bit. joint there venture change that scale programs said might we and we with would the be as in little also So this that – better we’ve may out in – maybe would opportunities a mix potential have again, the assets

because going there So get have we a and pool And it’s will great it about last stuff market ago. not than think relates the before, the – on, we’ve on traded, we don’t treasury where the below rate, was ultimately probably want by is into and as like on hovering there the things is less and product because that and feel that cap year, of boxed timing, our market, to that zeroing three the that example, look, in the going that. way, sold trade is XX-year year we we’re we’re to like market focused to we single the but and ebb really traded a anybody flow for

you have probably thought, like others in through you think opposite on So once blended but what cap rate have good anyway, is timing the give I past we very total a our the we’ll program. get the update we’ll we some and of actually this, to

Craig Schmidt

you. Great, thank

John Kite

Thank you.

Operator

Thank you.

Our of from question Collin next Raymond comes James. Mings

Your now line is open.

Collin Mings

you Good morning. more the bit other about joint John, you’re prioritizing remarks, going talk to a just how prepared venture just can little Thanks. back versus opportunities? and sales outright

John Kite

Sure. side on have spectrum established looking – focused but that to. that are with, – obviously venture with have I opportunities we joint a that pool on plan mean let’s we’ve doing the identified a partner is we’re certainly out laid of we’re other relationship lower that priority the a also that we of that we’ve the while you we’ve we the capable talk assets, at say, is, others that growth

think mutually I worked that in we the of don’t do, I mean think exclusive, where overall quality. have which portfolio is they’re always opportunity, the definitely So kind I of way we improving a plan we a best is

a us of That identified some vis-a-vis money a ways. to joint it assets out for said, reinvest might a focus of profits more pool. on multitude venture and make that’s So dispo of sense also have the we that in pull that

say that to I’m So we’re really other over prioritizing one right not now. going the

Collin Mings

Okay. of of the given think about and And you load reset the G&A the kind you how going XXXX, a year? expect as in of especially about then asset you again think just incremental next into roll some that as meaningful of base, kind terms you do into dilution

John Kite

perspective position to a of be one-and-done at Company the manageable a basis, defensive of we’ve a – the lower and but this much run time at sort whole as on stronger the continue a be feel not the hold, potential where to G&A in from fortunately, takes been always very is a that. that be our our mode Well, might a to and on very and this comparable isn’t to mode. end always will It’s program situation of look we has obviously, in Sure. others efficiently offensive more operation this point

will advantage and But two I figure a but to forever. here XXXX a down that So be of is that we’ll future. that good very in positioned go, we be XXXX, in obviously I base suggesting take feel things steps size a the be couple know be going goes at trying that I we to from forward this mean asset and a of aware step-back of terms to some don’t a it it the very we’re looking of that and out in on actually we’re road. or will year where focused we’ll

Collin Mings

leads next bit me little And question, Okay. actually my to a that John.

that sales the delevering because far for some as other reduction, in I’m here. that moving mean, to I – of you to again, general, the sales. some not made do point was debt the pieces there anything Just a as times curious it’s just asset compelled and really this market some Was a you’ve and just at you But there’s kind you expected kind while asset it’s this communicated particular to to couple again, about kind target to of $XXX and get with million up again or this you this that process set you down this anything of get aggressive? point that is chunk as asset. in million caused – of meaningful as engaged caused aggressive in $XXX come you of to there a

John Kite

a specific I we and people you way happened, to think larger asset," to “If analyze landed to desire when force situation how – look discussed And may is own And market we what this look look this bottom-up the the we at improve. don’t process a a at. And from that begin I’m your said many that’s I the as – went does know by know profile to – back you read. your I’ve market this through. that couple look Collin, growth on operator buying that Look, is time that program operators But what on profile you not if of this, some don’t focus we assets and I assets when you once that continue that, number. going a think, never own that than yourself Yes. quarter at you a think the you and public at less to about things thought, last better-quality we assets go how these your certainly talked have of asset, it the private I we I and way, to you or on kind you got it, that you are be we and a with frankly, want and time assets say, have, going where to that are it created

it that to we it relates So timing I relates looked look really accretive at that us force became for we what went no be and And into IRRs and it’s to to we – NAV process, was going think grow, we’re to the us lean our it to at as ourselves through And about as good ended There’s it we to the ability yes, when clear able it. end on. you in question just dilutive. generate. as it’s further. to – up that’s to and focusing that the But

better than in very consideration we that frankly these IRR and are clearly think generate we we very a better that’s this more buy market. can to that these asset into be markets IRRs, try IRRs flow us got take and an good long-term good and in popped a You’ve like we a gateway build out and think will okay, in scale, if how for CapEx competitive, cash markets market, to get

I’ve values, deeper look and frankly, look want what we of short, when story going do We also, and selling long million we there, assets, weren’t which you the example, there the $XXX have and in at their on at I And balance it. made to get sense. number to it just enables going end a for this to companies it a day, – So best-in-class us weren’t got And heard. sheet. to at think you get is we

balance we’re on leads that growth. that asset that and We have profile laser-focused but having to execute, having obviously, sheet to

Collin Mings

Thank the color, appreciate I over. you. turn it Okay. I’ll John.

Operator

Thank you.

question comes next Goldfarb from Alexander of Sandler O’Neill. Our

now Your line open. is

Alexander Goldfarb

out you John, sense you – million $XXX full the selling good Hey, dilution assets there. of will just theme. $XXX presumably sticking morning CapEx FFO. what mentioned, an you gave maybe that impact, as the you’re the a Can through with bit because to million a just you do on should – the of more just the be maybe AFFO you are intensive. Can sort walk impact

shrinks. So maybe AFFO FFO the delta to

Christy’s So a just to sense, going want just on coverage, for want back where the AFFO a out. will to dividend to get get first question net sense

John Kite

without and foot mean, it I that we’re these a that intensive, as will hold we specific utilizing continue the correct more than were assets over that, mean, time, think we more I per in. Alex, you’re number, to assets I giving relates to dollars AFFO, Yes. and yes, capital think invest

Program, our will than As covering said, that see is been because but the go these really of would And the obviously when I AFFO annualized done, tighter I we’ll we I been X-R program majority timing in be have know had Surge mean, dispositions. the the think crunch spent. don’t with basis, investments all an and much in I will still be of tighter, Box as we it CapEx think of the the dividend, – that at before, we’re we the on fine think XXXX. already But that the because it’s said

XXXX our of into time in – the over to and So in. we’re free choose time we that to And we XXXX, assets. we’re essentially by as redirecting dollars for a really flow. where back models, period cash XXXX, begin And the a get build then XXXX, we reinvest you you reinvest as back we shorter improve to get are in position in to to whatever

to want we’ve you So giving anything comfortable to with the that. are number, Heath, looked add and I that? mean, specific at we that do closely, very without

Heath Fear

No.

good a that’s think I summary.

Alexander Goldfarb

second a just then And Okay. one.

NOI keep you profile to the guys at earnings. just selling or to us That growth XX the XX helps versus that provide talk Kite you’re currently? you better versus you see to than can mentioned back, mentioned folks upfront a us growth something and new looking want versus about to of something don’t markets not for – waiting the of Is that Going tangible sort that you of that differentiate peers, needs that down rates. you we’re ones way we sort portfolio one XXXX is the bridge? to until Is there way, the there

tangibly We’re quantified looking can growth. that is at, we there see hey, better

John Kite

pool when growth that Absolutely. mean, is dispose assets The I we’ll almost XX% you equate would foot upon of NOI the Yes. the below. completion. circled household be where think The mean, low is in rate we’ve ABR the the look at million, income X%. XX% per I to is $XXX average I to of that below

the you CapEx they million I growing really can at divert is underestimate that that, in and be X%, up CapEx just cash we that – an what much mean, these do but you to or to NOI take better. difference at afterwards. asset – that how is or growth low talking started it right, it growing so impactful, said, a I we And that $XXX Alex, will isn’t and once we’re and million, be that $XXX think going flat profile money we’re about the assets associated as able when that but X% a of whether have So That’s material frankly into and are will to asset, stable, people money be growth. and made that flow goes hopefully don’t

household want to that we line, we move very want not to get will we $XXX,XXX, $XX,XXX in a we through average clear, finish the $XX,XXX. we – our average we’ll for the portfolio the when and or but example, our and as make approaching program So, whole be income

will want and the higher, – be. be we and to populations So they

be will think your move sink things this be do we that able that to tangible there as into. teeth through I you’ll So

Alexander Goldfarb

you. thank Okay,

John Kite

Thank you.

Operator

McElroy have of Thank follow-up We do a from Citi. you. Christy question

is open. line Your now

Christy McElroy

Hey guys, thanks.

sales, arise assets. that do how potential does special there out of the factor or the that manage could no how potential the do you tax a pay situation need the sort would from that? of And asset you took into dividend a to how because you So – is you in QX the basis that impairments of

John Kite

gain A two prices. on total $XX payments. by going the disposition, current assuming the million is portion tax million around covered dividend part be gain That of our question, on in so of return situation, the based capital $XXX estimated purchase our to a it’s

this then pay the impairments quarter, on need that we’ll was assets, impairments, each – one million special identifying That looking period, haul factor disposition probability second So there’s very the triggered $XX short an the really situation a our not process on of realized And then pool. question of fourth did a weighted and in a of the we at we that was assets. unlikely in outgrowth highly in a entire very, a dividend. that to

be And $XX so sort it million out of – the around to slug first impairments. of in came

as the Looking we $XX impairment. entire $XX and factor ahead if kind program, and done. million million higher, it But XXXX, forward, get $XX the it the course or between do at over million in another another we’ll gets $XXX around see if an get impairments we’re we entire particular and we as probability should $XX again, go of confidence more estimating the assets million look anticipate needs of million we program

Christy McElroy

about But you buying Okay. And value? get I then market you desire and there think into times a of here down five back real sort and would is think said arbitrage the pay to private between not you deleveraging, that and it’s range. a if that public stock, debt get about just

John Kite

always execute at as we in recent we and this Christy, on discussions I obviously program. we that would has see be lower joint relative probably that lengthy rates, we’re more discussed quite as at we these on think today to we as ultimately of And this the at to to about the be that which proceeds and JV, meeting – move have. Board program, We look we spread possibility. sort that a a the depending trades, to we be stock our with where more that our opportunity. than meaning for and I process think quite Yeah, generate through thought discussed example, cap able dollars frankly, that be do, potential If vis-à-vis some that’s talking what venture that, could place were that – possibilities a and to,

primary are us to that all, goal that we way, in don’t we So get ourselves by table not is that – the that leverage our any times at that saying five makes the we preferred. mid position have of taking off are

So we kind levered including that lower or one when players, preferred. players of the entire of REIT the would to you – the would strip be compare

that we’ll decide have to capital. that best of at So what is use and the point, highest

Heath Fear

I us million It’s that debt, us in dollars $XXX apply telling example those consensus and to typically with debt. about are works using Heath. is in of go often private that I the our these and to we’re only dollar talk those $XXX to assets. sell trading I while an reduction take the ahead buyback also stock, investors giving this for debt. market assets give and market Christy, those If $XXX private Street is The to but and value you selling dollar arbitrage it in interesting. to We million, the the going assets assets, NAV, arbitrage grow, also in of Giving XX% for a us and million at discount

rather So back the in but still than of we’re our we are of taking doing stock. the arbitrage, context advantage buying it debt

Christy McElroy

portfolio? give for the think spread value follow-up could, just sense of of XXX and $XXX sort Alex’s of to you to then assets, XX% and the you’re from the $XXX XXX a to the you do going XX% of you those understand spread? I points, the basis of but not basis how that give I rest is a million to the us other million third, bucket Okay, cap the terms about sort if just of a a portfolio, about in can points, if versus of So, rate, it think question the sort valuation how

John Kite

let’s and if it made again, be you look, out it assume think, you of easily I Christy, us at NAV understand laid think that, we kind cap, and of has our right. sense. – question. this selling look a can portfolio would Look, And north I your that be when entire here you assets the way, we way X a consensus we’d that around do obviously, that understand I I that the Well, your – reading note

we from dispositions spread JV us for flexibility clearly that that lower it in that where want time. that, reason totally doing the I also the which something there on I is to cap to don’t So, a rate the think is I that side, determine preclude significantly these we that on period as want to zero of that little spectrum don’t land said, we in to would and want

have been So you’re to going assumption just I your own think do think to assumption reasonable. there, has I and your

Christy McElroy

so Okay, thank you much.

John Kite

Thank you.

Operator

Thank you.

from Tsai question next comes of Barclays. Our Linda

Your line is open. now

Linda Tsai

benefiting much NOI like SS the or looked how the you said dispositions of SS have XXXX what in NOI do Hi, guidance if would is didn’t XXXX, differently, tailwind a from dispositions?

Heath Fear

If – FFO within midpoint the our look out you of base call the at $X.XX was page, it our a walkdown of no sort with dispose, case range.

between $X.XX and without $X.XX dispose. that’s So,

John Kite

to you And in $X.XX, that we if thing last the I’d when kind to Linda back that alright. the QX, walk add that down look only down of we did is walked

right land So Kmart, transcript. but there the literally two out we February is in that’s a January and there unknown we add another bankruptcies you with to in in then were $X.XX you obviously take and those difference into our where the our numbers, pointed December, account you between that going occurred if – and that –

and we of So reject were kind because in our gets accept whether know of we they on QX bankruptcies where down, to in February about we Kmart, where you the that or going and January those know didn’t top walk were December, right didn’t lease.

you XQ on So, include our we of walk down top when basically are right that.

Linda Tsai

on out, environment. XXXX, a this NOI, the of and and/or reserve bad assets function year down realize would a in it but be would debt XXX go I assume then is And guess a I Okay. quality I bps this SS of whole higher better of more

Heath Fear

same-store to also reserve revenue. of less it’s – function points of just XX going I revenue, be a Well, historical basis believe of it’s just

just maintaining very a reserve think consistent up I denominator. end smaller forward, we’re have going going probably we’ll to So a

John Kite

Right, getting points. also impacted bankruptcies mentioned and we’d XXX basis NOI the our that be by same-store that you may also,

So on. points. reserve that is those One is XXX the are two which intact, we separate things basis going have

basis other and is going The we which is bankruptcies by this points. the pointing XXX have out on, that that course impacted of everybody by affected thing us just

really separate So issues have you two there.

Linda Tsai

boxes XX. do the then anchor and did anchor have that there left How many leased were to you you Okay, go? in boxes XXXX,

John Kite

And is what now. now Right whether are we’re there we to we’ll make with anchor determination but the any and that, not have we have will be that focused XX splits on a accompanied as currently inventory boxes that vacant. or that right

Linda Tsai

and has months? terms the in the all last then buyers who they, the changed question, assets, composition pool last XX of And over for of at XX are the

John Kite

below credit where months has the below. the think think ago, changed, composition – The is are don’t X open, XX-year very I I the it below the is is No, actually pool deep. well Linda, tenure well markets was

– have can players think of have Geez, that of But that are institutional want really So spectrum market with opportunity you mentioned the buyers XXXX lined is that assets credit private assuming, you private you are is buyers size to like funds there, if these because is of you between the I deals, some we’re buyers the the zones, run in using at depended currently there, can we’ll pool XXXX the the on buyers that that market. look total ones private our are if operate these equity, maybe leverage, at on the this, what the there’s that. here. so we using buyers up assets buy actually look

think a I is pool, deep as and pretty said, I timing think right on. it’s our I

Linda Tsai

Thanks.

John Kite

you. Thank

Operator

Thank you.

One Lucas question next of Our from Chris comes Capital Securities.

Your line now is open.

Chris Lucas

guys. morning good Hey,

a of Just follow-ups, couple John. quick

it to through going matter. it you is disposition figuring relates really pool your sounds to be, like – didn’t Just thinking as for you’re out about the went as what sounds protocols it format sort of that

or is that whether it neighborhood on lifestyle centers, or that was agnostic right? community You’re

John Kite

sense major weren’t Well, as we the I comfortable mean, heavy equation, of their In But that other part it we overriding were of was very that the as in particularly a I of think factor, words in the meaning, was the adaptability, at. looked we format to that format, Chris. factor. with, boxes end, just four, relates it had centers if factors a wasn’t one was five that it boxes,

properties is centers, there there properties centers. example, on that you for mean, on would are there that so power I consider neighborhood And there’s

is by portfolio way, the terms across also in distributed evenly acquired spectrum legacy or portfolios. and our So the over it portfolios of it’s

Chris, So, overriding not factor a but it the was one.

Chris Lucas

XXXX? sort Firm supplement, Okay, we Or units specific all on just question from of fourth store think we Mattress relief In two supplement? what rents quarter is you’re factors, see the I other the Mattress quarter, Firm. with closings of that incorporated slightly. associated then, issues through third or rent the down detailed see will in down Are into and a to the there

John Kite

right of there. of all of all as now, that No, in the – is

that preclude balance billion the to back We do differently. a runway road have something company of we so come issues took they equity, try wanting $X doesn’t from of turned that think that’ll think – it basically certainly don’t $X debt happen, to they the and sheet down they perspective. having from Now or and into have billion

And have renegotiated completely deals and with so with our them. that we done them feel we’re

want that we that probably happen else would anything to give. So something that wouldn’t be would they want would

Chris Lucas

about relates thinking of we that is timing the loaded. back-end thinking like Or – for we of Or should equal on sort the it of as just call, a basis. then sort of the should how about And disposition? be you the it there be dispositions this Okay. to is articulated throughout sort

Heath Fear

sale date Chris, weighted of average if at you X it walk look August footnote down, the on the gives XX.

think in average we hope is on we that can the market things have basis. lot an where now, outperform we we comfortable August can a pretty we date, stuff think these of weighted but we and get So done

Chris Lucas

I’ve Okay, the and well, just quick detail Heath, on then you questions two walk got down.

guided? from you the that lease something what there Was than was increase $X.XX was did adjustments conservatism? rule $X.XX. accounting different that Or previously to saw You

Heath Fear

of what to just and No, the went capitalizable through was figure out we of trying a wasn’t. – what process was it matter

our we just the into auditors, more was rather with $X.XX number than on As landed get $X.XX. details we

around is we just it conservative, as and $X.XX process year the the more it So impact. know this $X.XX was being details not giving what, wasn’t a a said, you unfolded, impact,

Chris Lucas

one same lines. then the along And Okay. more

bucket BI and had and the of item you quarter. items, that $X.XX lease would else the $X.XX the other termination you the bucket quarter items in fourth is sort – other What of $X.XX in line On to the to of is other $X.XX? fourth get in that income

Heath Fear

That’s really about it.

the the that sort on this $X.XX we got a it’s Chris, termination is – the that we year of included took option we And in income, non-recurring. the approach was lease midpoint. then quarter, an fairly again So conservative at this fourth

income. $XXX,XXX We’re looking at an termination assumption lease about in of

rate is run to million million. typically $X $X Our around

little a more with conservative prudent we in again, So a us for hand. this pieces terms actually lot of felt we was have just of it moving to year take view that lease

Chris Lucas

you. Appreciate Okay, it. thank

Heath Fear

Chris. Thanks,

Operator

do you. James. follow-up have a from Instructions] Thank We question Collin [Operator Mings of Raymond

is Your open. line now

Collin Mings

Thanks.

reduction to free in want go the back to cash flow. Just

Just as the program now? forward. And just box into – factored effectively for opportunities portfolio as of then as kind should we the on going view upon XR redevelopment being pause maybe far expand how

John Kite

XR that, Yes, question. think you should good mean is years on the started assume that I we probably Sure, ago. what four three, I

what and we of delivered finishing a is eight. started So obviously, we lot

we’re that pause are I we because to on mean are said, not portfolio slightly it I’d as look as from basically and different – now we going But up yes, we��re now. think end So as on year doesn’t reinvesting pause we on a a saying, – the we say, that we’re pivoting we’re with – dollars. very

I want as back we and point, reengage begins will said that we be cash and to leaning at into build, value flow we XXXX to that, adding then and – because So the and XXXX, assets. would always as in be that XXXX to in

radically enables think would the was the that right. with as where what Commons asset from and in end ebb it skill we it mean, for – means and redevelopment, changed property was have where of that fact improved to set relates I essentially a that’s what flow that it like And Vegas, at to radically kind I have an acquired, look Las Rampart pool us up that. the it I we when So, with and and we

acquiring do be did that want we cost that a we have better of forward, to what a capital can we we love when do is some So of we what exactly going ramp-up. to markets assets in

where that, Collin, road. adjusted that you buy NAV about, And when tremendous. think been risk where I we we you that just a talking the when development use our the you when at down create, you is that’s we’ve That’s it IRR do especially skill. So go, –

ability out we’re time. skill actually use up point that at can things the So on in and fired about to that we acquire go that

Collin Mings

Thanks, John. Okay.

John Kite

Thank you.

Operator

remarks. would to this session. John closing the I does conclude now Thank and for back Kite to gentlemen, question-and-answer like call any over you. ladies And turn our

John Kite

it. the want of Thanks us to do. you we’re a what in I we’re say thank month Well, the again. going today and to next to And in everyone look soon to lot be time forward to going with you over and taking engaging seeing person for just

Operator

gentlemen, for today’s concludes in conference. and you Ladies program. today’s participating This thank

You all disconnect. may have Everyone day. great a

Kite Realty Group Trust (KRG) 20 Feb 192018 Q4 Earnings call transcript