KRG - Earnings call transcript Q2 2024 | Kite Realty Group Trust

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Operator

Thank you for standing by, and welcome to Kite Realty Group Trust Second Quarter 2024 Earnings Conference Call. [Operator Instructions] As a reminder, today's program is being recorded. And now I'd like to introduce your host for today's program, Bryan McCarthy, Senior Vice President, Corporate Development and Investor Relations. Please go ahead, sir.

Bryan McCarthy

Thank you, and good afternoon, everyone. Group's Earnings Realty Kite to Second Call. Quarter Welcome

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

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

President the and Chief Fear; Heath Vice today Chief and On and Vice Financial from President Chairman John Senior Accounting Tyler Officer, Markets turn Capital and Officer, Senior Group, to Investor Vice the Kite; Instructions] I and President our Relations, Tom me Dave Henshaw. [Operator John. and with call Executive now over President, Officer, Buell; Chief Officer, Kite call Operating Chief Realty Executive will McGowan;

John Kite

demand Bryan. of focus for in XXXX. the leverage another formidable balance sheet credit XXXX from through rating agencies in marking results I'll while increased details revision Heath history. of outperformance the and quarter walk the will and operational delivered the in our quarter, the lowest our our high-quality BBB, our portfolio. In levels guidance. S&P the to space continued second rating KRG's quarterly upgraded achieving on third Thanks, KRG positive you

$X.X ratio, net X.Xx cost of improvements higher With one and debt our credit debt and our sheet even profiles balance the we're best debt. have in rating X.Xx, in EBITDA liquidity, sector. service ratings, of available that confident attractive more warrants pleased our coverage of nearly to While with we we billion the are a an of

is leasing to long-term current of which to currently debt our level below target spend. considering EBITDA, net leverage remarkable our low mid-Xx of is the Our

of subsides leasing dry communicated months. as powder our a XX pipeline elevated to XX significant next and commences growth poised the flow is on generating sequentially cash lease signed-not-open by clear growth for amount large significant rate spend rent XX increase our XX.X% over free XX.X% that and consistently our are We AFFO points with We've to will basis spreads as increased that our approaching. Operationally, comparable nonoption while path cash by rapidly and highlighted spreads. renewal blended time outsized

they rate X.X renewal the in XXXX. The context, opportunity and renewals and portfolio. a comparable the leases primarily X As we X.X% to lease spreads pricing the years, are in XX% anchor average past report of sequential XX.X% demonstrates for our reminder, as stark as was spreads increase power believe in demand our cash XXXX over spread best the The portfolio. in second on the by spreads nonoption an increase capital. driven in compared in executed this space put XX% the our mark-to-market at barometer averaged renewal nonoption in we returns the on To nonoption has for quarter and

continue to embedded growth. we successfully side, shop drive small the On higher

For these of new and -- bumps leases or greater of the had signed rent average X%. renewal first to than the in quarter quarters X.X%, growth and XXXX, leases was XX% annual first fixed nonoption equal X

of sustainable remain credit the than shop X X% generating We rent leases committed reminder, improving to embedded more long-term drive outsized quality, to have our small of flows to greater ago, stream X%. or equal long-term growth only profile mix and merchandising to returns. cash a As fixed years bumps

by foreseeable the by expect grew spread million the from basis quarter, of $X.X elevated of million XXX future as new historical XXX the to to Our our $XX.X occupied we basis signed-not-open and points, XXX to between to pipeline to points. and compared leased offset NOI for grew leases, past spreads average commenced remain by quarter this million driven $X.X $X NOI. This of million,

over mentioned contributor call, X we growth significant on years. next As our last the we be to occupancy NOI to expect a

we in approximately the to in Southeast -- in center Ashland under is On pods, quarter. front, MSA third & the a Consistent acquire Roosevelt transact the million. close our in sold $XX we to to the transactional contract Chicago for in desire that are with Chicago expected grocery-anchored

centers we've and number of past corresponding market seen increase in a several in buyers. of number a shopping months, qualified sharp the Over increase on the high-quality the the

further private As which ours rates compress for up, pricing particular. cap between highlights in the public competition quality assets disconnect and valuations, we market are real seeing the time, heats market

While our disciplined opportunistic with of capital respect the a will posture, sheet best the return. remain a way our allocating very that we balance risk-adjusted to earns strength in affords

Trustees an of our levels income. increasing to of Board has Our year-over-year taxable increase authorized in our X.X% accommodate dividend

suit. As occupancy next dividend and follow NOI years, ramp over our we to up few anticipate the

our Heath, consistent operating to through aspect of you, the is is risk-adjusted has and who of as will always, REIT for the investing. the work with hard outperformance. guidance. critical our our our now the results again dividend attractive many dedication. I'll of KRG's for their once investors, XXXX outstanding of results produced turn Thank positioned call strength sheet, details walk and and incredible the sheet dividend extremely balance balance long-term and a For platform the yield. KRG an team And to you the

Heath Fear

you, and afternoon. Thank good

updated renovated success events recap responsible and In and operating transformation NOI our hands-on Florida, the for structure, property high-quality we of management of of grinded a of Vegas. our culture segment let's response. a the results smaller look and top-tier showcased were grocery-anchored our Las we shops Southlake Town portfolio. and Legacy the towards and series In Naples, in our team, their at in-depth X first Square. Before explored ratios. We into at initial West moment Place Naples entered final East, we've D.C. Prestonwood our and best-in-class chapters give an newly margins out preview representative philosophy take large providing recovery the touring are a assets you positive in in set remarkable market resounding the May, a several dive 'XX of the to that Four guidance, quarterly overwhelmingly Dallas, chapters with an X into The

center generates a mixed-use premier annualized million KRG's approximately $XX contributor. is NOI, open-air that lifestyle NOI in Southlake making it largest

John team Aritzia, leasing example seasoned of as brands used as Nike, that proactive Vuori. L. attract merchandising an the to and Our Southlake has us such approach to allowed Verity, Covis, our

heading This for second KRG's NOI, featuring our our chapter, project. approximately making million contributor. powerhouse $XX it mixed-use third annualized September, second generates One Loudoun we're northeast largest

KRG quality is feet for dominant a on portion adjacent total of units uses the in that additional assessing XX the positions vision multiused X% nearly a it's team eager demand responsible for of One Our and space. expect the we land our our Southlake lineup. Loudoun are When currently over share that the commercial expansion most asset NOI, important assets The X our for of over development of as portfolio, to grow. remember and of square for residential to retail, number to lodging rival residential million these and X to X,XXX acres zoned

to hope We the will Las line beyond of strip. Las the experience Vegas the opportunity Navy of the Vegas. with chapter final will you vibrancy many in Conference Our take

vision from first about provide and long-term for and Four presentations our KRG's capital details. During the allocation a X event to you chapters this decisions influence our session, future. and the half visit in upcoming we into previous how themes We're will of 'XX the our for glimpse illustrate thrilled website invite

results. our to Turning

consensus. quarter a in experienced the points improvement XX in for assumption outlook second improvement quarter full NOI bad a point the represents and of second paid the bad X.X% revenues, a of our same-property basis increase minimum are quarter. rent guidance. The to XXXX, signed-not-open bad the net half only is same-property was assumption the higher total bolstered of basis accelerate debt quarter for recoveries, that on than For outperformance by same-property XX year the $X.XX the basis year, and revenues. by Subsequent by which point the $X.XX. At pipeline, midpoint KRG XX range FFO the debt bad we growth share, NAREIT basis of X.X%, basis into and of and XXX the basis the approximately on in total to debt growth offset our FFO assumption maturity debt quarter-end, previous periods expect NOI XXXX bad basis we and a XX XX of the we a X basis a increase comparable year. Based growth moderate up full XXX of with debt Same-property in XXXX Based period. XXXX. continued per we of increasing and component third the for of $X.XX of actual grew remaining the to NOI This compared year-to-date, was the year points year relative of of activation our a comparable of point to points midpoint, in bad full at $X.XX which balance we earned of assume point to in our debt fourth as points NOI $X.XX the combining function guidance sharply back improvement to revised a

to anticipate in credit the secondary are when Looking our markets improvement levels we the forward on compared the spread Based maturities, we time to our poised unsecured achieved tap right. to January. we last as XXXX is trading, significant

we're the in profile forward And we Las last Vegas. resulting satisfy available it today. Operator, altered and of sheets be balance defensive the line to open reached the quarter, Thank viewed entire can lens. with of completely D.C. however, our flow have do current team level $X.X all anticipated the of mentioned overhaul the beyond represents and a opportunity. Thank joining call weathering AFFO, have only investment questions. liquidity dividends, quarter, billion you company. experiencing in just viewed spectacular through capital. KRG another complete the our sheet, believe cash the Not point and through we ramp-up in remarks. of maturities capital, weighted are As tremendous vein, storm. we KRG often cost or for has you compelling cost to optionality a concludes the debt Coupled we debt into of seeing Please many are our our Balance deploy looking risk-adjusted deserves entry a our of this to to and for XXXX. KRG's prepared you that for in a

Operator

from first comes Spector of our the Securities. line question from And today Jeffrey for BofA

Andrew Reale

is This on for Jeff. Reale Andrew

stronger? like at just talk about an X.Xx. So rating It your bit bit you all-time to lever if at growth you January then at all took tenure fund changed S&P, leverage I XXX think you low your has Where you that on below a think more sheet, upgrade sounds the your to [ a one in net today? the could you mentioned, credit your you at ] target. like is And received that's down balance now to over. Can up do profile price appetite priced

John Kite

lower, and get the X that those just half the look interested point to in the of our leverage I'll have terms in us Well, we leverage increasing of hard first if forward over question over in next the the kind out we've strength of business. and right to I what opportunities EBITDA debt sheet at we can sheet was years, X.Xx remains of the going and with arose, and that opportunity second net operating and levels take to our would worked terms that -- today half. But Heath the of Heath's what balance balance provides projections be get extremely your think to the so that we when

us the the to to rate opportunities. significant a accord we interest right we as still we flexibility extremely of Xs, low mid-Xs growth low of could be take that So in if that lean think fact, into environment. and quite does, And find and and or we're do able look that bit levered will kind forward, in we generate future the leverage

you But the and generating and not tackling definitely with spending hit that. right capital we're cash on to the... we're now, down to flow. leasing of advantage opportunity doing So do the road take poised the certainly right free now, space significant and blocking again, Right environment, that. Heath, want right we're and

Heath Fear

Yes.

XX is current the I will On points, pricing. it minus indicative points, XXX spreads, or plus think, basis our be basis

Andrew Reale

maybe the & Okay. on for more the just And rationale follow-up Ashland hoping and on for just little rate Roosevelt on a the color cap disposition, sale? the the

John Kite

we really rationale Chicago, wise, we for forward. want didn't us asset the I Sure. to not fit any asset a of side the view mean, It longer. near be west was profile for as where the in core going

of on the buyer And it's the on that a we an the that able deploy as for grocery-anchored were redeploy sense said to price. into into which intention cap capital, the can Southeast to able an a that rate in a lot money attractive us. I our So to center, call, opportunity is being made simply we and only the find at accretive say way.

So are a cap in ours of kind pre-prepared have the low goal in as couple Xs, rates rapidly is, time. the definitely things that's real mid-high we line the in the we that bottom mentioned of all most moved of months. And And see transacting of remarks, the last down Xs.

other trades. why little right that's than we're doing very now so And pairing

Operator

Todd Capital And Thomas from line KeyBanc our next the question Markets. comes of from

Antara Nag-Chaudhuri

is Nag-Chaudhuri for Antara Todd This on Thomas.

me. Just a one quick for

is growth, But that related the drivers? earlier other commencements? know the in the increase Is the it XX of are piece what What to lower point a to basis regard upward with better revision? debt. retention, led to same-store bad So I

Heath Fear

higher Yes. asset held the of bad that for lower It's we debt, removal and retention sale. the

those things So the are contributed in that the print. same-store the increase to X

Antara Nag-Chaudhuri

the couple it looks there And list. I on have floating been a you had same-store one closing and know then Okay. around of like for with X another closures, list me. that stop-and-shops Ahold

So the looks what locations the X any regarding close that to be status opportunities you those would an line backfill have? able of time and like potential to update those for or you provide

Thomas McGowan

Yes.

now going a interested in from perspective, a there's parties. So backfill right of bit terms quite on

end we'll it's early locations. where activity exactly we but have do tell both up, on to So

able we'll color be to So provide later. further

Operator

comes from Raymond question R.J. the And James. next line our from of Milligan

R.J. Milligan

that went I and quarter it the elevated. that remain expect comments your in to we It shouldn't John, close? just when I'm wanted comments to spread and back Or to close? go that the to to you on your curious, up occupied. between were start to leased start should expect

John Kite

I the mean, remain quarters it our I when or Yes. it elevated, over be mean R.J., to relative I will so X say say, elevated but remain historical, declining. next,

coming depending probably of of by will basis think in range be next XXX gets the the on I down it to timing end So and things. -- down point year,

actually lease will yes, online new takes commenced, what I again, highlighted what It which what be open, we growth it what you was So why but space. gave mean, is came occupied time and declining, we to continue the to and and leased.

be believe it down, gets So but it's bit down yes, begin historical a kind I to before to it do coming going of will that norm.

R.J. Milligan

going costs And said today? the Or think what's for that. doing -- leasing maybe -- what's to of the that you the XX elevated why And I'm previously, half you're for I XXXX? driving first so it's into comments or that does leasing your those just elevated at curious curious 'XX. seems like 'XX I'm would that into the about remaining just sort to of tail XX is months, of think leasing spilling next I remain tie which potentially And costs implies 'XX. end it

John Kite

some timing is I pushing at of you to right yes, the tie we're quarter just were total where Well, points below still now, of look But it if stuff in basis were of XXXX. that. that quarter-by-quarter. XXX mean, does we we But we where where percentage I lease fourth -- think are

the between It's if if points to billion period million where XXXX end that about you over 'XX low quarter-by-quarter mean, be grew of kind call you redevelopment. at XXXX, X.Xx as I pretty go X high pay $XXX that's range in next is to of that, still we're we so million going here if net on X. development 'XX, XXX -- we it of kind $XXX the leasing of our positive to We X kind honestly, but will of thing dividends timing. terms that remain the to you LC. and in and years. And But and in period we I close million -- at of time, of been spend think to of clear have spent between go. same points from probably couple XX said, just $X EBITDA look over probably spend TI and and basis -- So -- is We're to basis that debt low we've sequentially, a over going the $XXX in

if So we're cash. amount say. That's that trying generating a large to And through is of those of sense. the what quarters, growth I'm itself one each acquiring makes

Heath Fear

XXX leasing we're mentioned, feel points that very also higher. push can I said, the this confident watermark back In John to as we even XXXX. high that sort in environment, R.J., basis we of

elevated to early higher. just the -- 'XX, is occupancy the extent, that we're and of So that higher driving spend sort means and that the leasing beyond higher

as long demand as in down coming there, So the pipe next good the feeling X very, about what's very years. is we're

John Kite

other lot, there, of a leasing where XX to this add in it is happening just the months anchor R.J. -- from That's to And leased a remember, up that's only had The we catch a that what where on little it lot general, That's XX it just bit takes changed front. sign to takes. a opening. to hasn't lot

a of also that's So that. part

R.J. Milligan

could quarter. quarter one give growth the just for Heath, And in the dig NOI in just slowing helpful. and same-store third maybe accelerating then into guidance -- the fourth That's you follow-up.

curious components that. what Just the of are

Heath Fear

Yes.

year, the Bed last we same-store So third in third X.X% first really the NOI. year period the quarter a in in Beyond strong & a prior large million. still was well. collections Bath quarter, comp had had month quarter, We last of of we And third a as of it had, $X all, year last

Beyond turning And accelerating No that's quarter of and fourth see sharply into X.X% S&L, and we're at quarter, of piece the & us the accelerate quarter. moderating last happening the into 'XX. that of was last comments, number in fourth my one, going rent the you're the like fourth Bed fourth I third what's on to biggest to right? So sort quarter we're and why year comp the the year. in really then that's easier said Bath 'XX in So and into quarter

Operator

line And our Citi. next question comes Mailman Craig of from the from

Craig Mailman

views on comments has seeing an real more growth noncore move And or are back you a view? the Xs. CapEx ]? compressing into and you mid- cap of time, of if one-to-one what's tenure of expecting a right given sell above mean, high this low it's that kind here like to rates [ Xs, rent the going I debt from been compression and even just that thing AFFO or perspective can long It's accretion? the to quality are in to beyond kind for to John, kind near it with or just your spreads, maybe do said term, Or about there perspective? you your dilutive a in bit term assets the see

John Kite

Sure.

I X, mean, That's your of compression ago. think that X. the part we medium-term long [ wasn't It was terms I expectations. clearly, around around significant on sit pretty to in question, the of ] today, tenure first is a as here yield long-term

We bit. And too personal be longer. going that's so that's for a to probably that much factor, a no my little So belief is inverted down things inverted have that, an doubt. curve, still slows not

bit a So stability financing. market. There's I a definitely quite lot in there's a lot been a there's of Also of available cash. think There's that's the a lot stability, factor. -- more

at nature at people of few also XX growth this I looking and investments capital, and figured And out so then a last the buyers. of very to you are IRRs these these that at rates cash a your combination underwriting, and X-year, when screens at underwriting you're looking them that it's alternative the risk-adjusted where things, So all realization you're of is well. you're and a then strong. And the looking yield, things you're look of that think years when and you're you're have in put product those the going months. Yes, lot lot

that your I So the think will we that part second that then of question? was -- that being And will continue. what said, -- think

Craig Mailman

little Just right to more from the sell noncore you a are a or bit at CapEx long term, FFO how assets but just, would it? there dilutive, perspective be move look

John Kite

disposition transact able been balanced on we've do. Sure. to said we've these our I to to call and try desire always has what in acquisition that maintain approach the front we pods, a been pretty mean which

much a very So been brighter cetera. That kind it's right as on AFFO shining relates space now. FFO, doubt been it and it's being there's no et there that of -- to a said, our light nonevent is

certainly, So individual could growth easily looking the a And lean quality always we the deal. portfolio. portfolio, at of each the always are more, the into profile little that of we're underwriting and we

possibility. So it's a absolutely

Craig Mailman

Page the And well. then as It here look just Okay. going going kind you is strong, is still right? we the Heath, looks Renewal out X. for Leasing of well. SNO have pipeline, on commencements

the of I headwinds there we Tom know watch are here. and list could trajectory bit that think As kind we 'XX is an AFFO on accelerating stop to potential year-over-year? about think about looking shops. the of kind But tenants things anticipated? any should about in other maybe than like growth a X bigger the headwind a Or be little acceleration margin still talked or

Heath Fear

and points on year XX bad an of is look pretty to our will I general relative the when tenants still into like bucket that XXX debt likely it, of, our exposure total list basis looks next mean good at the I everyone's watch Craig. revenue. fit think happening we you feel to the call acceleration, whatever list,

ramping this So to next elevated flow there's really we're which and except something that next obviously, was leasing this XXXX. also still on spend, AFFO, the note, said going for, despite our and kicking off cash free we're up year year, out important pressure we in not spend. But to to elevated as that's discussed, year John putting looking what thinking be

flywheel company high to year. look it's sort this still at forward this and moving that leverage here into we leasing have deleveraging, level next at and spend happening and of we're the amazing just -- again So an it's

John Kite

a that, retailer the would mean to there's to that thing particular have to only an Craig, is be going going I always issue. add that's I Yes.

the -- that's platforms time, didn't of majority The weak operating So difference ones make through. is that's tremendously the it these the since after changed. weak balance post-COVID, balance start today to very the very -- that that's retailers' sheets of with change. strength sheets always of And been and not going

So we're in things the people got past. it are now place -- being and there a said, better withstand portfolio accelerated much rapidly, a prime few Of the Bath struggling? than a there is we're can so are. That course, sure, where, I mean, Bed example.

the in X/X You mean, and over still of Bath just I on look the they've quickly a leased the and last third across space, that minute of how leased had said them. landlords in of we've year, all major universe portfolio that quarter and Bed the already ago Heath we

strong. So it's really

Operator

line And from of Bely Nikita next our question from the comes JPMorgan.

Nikita Bely

any in recent retailers at release, of any spending. the some potential to you bit that I earnings looks through And maybe to Given flow McDonald's your in mean, seeing past? the versus front, Are today hesitant more expand little on the all consumer like cracks it that centers? a there's maybe

John Kite

larger the such be demand. ebbs to there's out guys. And this the when No, that guys, X-, as strong obviously, we no. mean ago, sheets. -- going consumer, there's flows large -- in far the strong a the as they over our financed, but I smaller at with there and have stores, well And particularly quite not. national looking deal I as we XX-year they're balance retailers are retailers And point, underwrite minute are periods the said

individual We for multiple opportunity vacancy have we players have. each

see strength that. of the fact, types kind tenants, retailers strength we as So at you in the opportunities handle create And we disruption us. can it demographics, of might our of and portfolio, of for this frankly, any they that composition our more have look point, don't the and if at the

Nikita Bely

expectation Maybe will just other now, those your just when Bed re-lease boxes and Got mentioned start come it paying you Bath of online since question, actually one rent? what's it.

Heath Fear

on -- coming them coming this some are year. of They're on

XXXX. are them into coming Some of

but back into addressed. again, ones are of and like X year far. half we've that them said, so I So the we've of this 'XX, John all, signed think And

on signed, So obviously we'll 'XX 'XX. those once those or come get in late

Thomas McGowan

to be move should by end able them we through of this year. Yes, the

Operator

And our of from from Securities. line Dori Fargo next comes question Kesten Wells the

Dori Kesten

small date. We shop you bumps, aren't it on leases, bumps achieving like a appreciate those of Is that your see of the Is that disclosure surpassing theme about within new there location the can rent over any about to the retailer center? showing X%? XX% category X% consistent maybe

John Kite

been from not really case new able by get Dori. sector when really, to what's No, of obviously, we're And terms been in to ground breaking It's you X% case. have achieved a perspective.

large might whoever. So it's national dealing or takes with just it we something it also Starbucks, have time. there, player credit it XX%, have deal perhaps the pushing. you're frankly, with a like other to profile But -- XX% getting keep when to individual And do a an or

from XX% available. So to the very space just we're our trying there sometimes dynamics little think there's area. think people have over forgotten make But these it's shop of And I that comes is I small the deals. is individual point and on -- revenue

keep bit do driving leverage we than more and anchor a side. have obviously, little there, the just we we So that on

trying we're to make. point the that's So

Dori Kesten

your And from Okay. not that around expectations spend away event, to at when total provide returns generating project? of One any then take just excitement investment D.C. but then general may Loudoun you and sense from you start likely your can

Heath Fear

we've an some exciting around vision. activate Dori, it and Listen, returns adjacent will you we're there. spend a our on We're got front I'm to right that we attend portion achieving going land. of details range numbers event you we but ask We'll the anticipating to to give going run that some have some range and it, don't want now. of of to

in you see see -- in we'll hopefully, So September. you

Thomas McGowan

will talk play this But to drawings Yes. ultimately out. plenty and how perspectives have of we'll about and

you So in take plenty all it'll on to the of for trip. be

Operator

This the to today's John session question-and-answer to any of does like back for remarks. conclude Kite program. further program I'd hand the

John Kite

seeing look we you, dialed Thank in. that appreciate soon. Well, forward Okay. and you to those

Operator

conference. today's does you, and This Thank ladies your in program. participation the gentlemen, for conclude

may Good day. disconnect. You now

Kite Realty Group Trust (KRG) 31 Jul 242024 Q2 Earnings call transcript