• Leased Space: 5 million square feet in 2024, highest volume in history.
• Weighted Average Rent Bumps: 290 basis points for new and non-option renewal leases.
• Blended Spreads: 31.9% for all comparable new leasing activity in 2024.
• Gross Return on Capital: 46.4% for new leasing activity.
• Non-Option Renewal Spreads: 13.3% in 2024.
• Net Debt-to-EBITDA: 4.7 times.
• Available Liquidity: Approximately $1.2 billion.
• Acquisitions: Publix-anchored Village Commons for $68.4 million and Sprouts-anchored Parkside West Cobb.
• NAREIT FFO: $0.53 per share for Q4 2024 and $2.07 per share for the full year.
• Same-Property NOI Growth: 4.8% for Q4 2024 and 3% for the full year.
• Core FFO Growth: 4.7% in 2024 compared to 2023.
• 2025 NAREIT FFO Guidance: $2.02 to $2.08 per share.
• 2025 Core FFO Guidance: $1.98 to $2.04 per share.
• 2025 Same-Property NOI Growth Guidance: 1.75%.
• Interest Expense: $122 million net of interest income for 2025.
• Leased vs. Occupied Rate Spread: 240 basis points, representing $27 million of NOI.

• Warning! GuruFocus has detected 8 Warning Signs with KRG.

Release Date: February 12, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Kite Realty Group Trust (NYSE:KRG) achieved its highest leasing volume in history, with 5 million square feet leased in 2024.
• The company reported strong leasing spreads, with new leasing activity generating 31.9% blended spreads and a 46.4% gross return on capital.
• KRG's net debt-to-EBITDA ratio stands at 4.7 times, indicating a strong balance sheet and financial flexibility.
• The company has $1.2 billion in available liquidity, allowing for significant capital deployment while maintaining leverage targets.
• KRG successfully acquired high-quality assets, such as the Publix-anchored Village Commons in Florida, enhancing its portfolio in target markets.

Negative Points

• Recent tenant bankruptcies are expected to cause short-term disruptions, impacting AFFO and cash flow growth.
• The company faces a 160 basis points drag on same-property NOI growth due to anchor bankruptcies.
• KRG's guidance for 2025 includes a conservative assumption that only 5 of the 29 impacted anchor boxes will be assumed by replacement tenants.
• Non-cash items are resulting in a $0.05 drag on NAREIT FFO per share for 2025.
• The spread between leased and occupied rates remains elevated, representing a delay in realizing $27 million of NOI.

Q & A Highlights

Q: Can you provide an update on your current thinking regarding new investments and capital deployment, given the market volatility and balance sheet capacity? A: John Kite, CEO, explained that despite market volatility, Kite Realty Group Trust (NYSE:KRG) focuses on the long-term growth profile and quality of real estate. They recently acquired a Publix-anchored center in West Palm Beach, which met their criteria for growth and quality. KRG aims to pivot towards real estate that insulates them from current market conditions and will consider acquisitions that are accretive or neutral to earnings.

Q: Should we expect acquisitions to drive dispositions, or would you consider selling assets first? Also, any update on the sale of City Center in White Plains? A: John Kite stated that the sale of City Center is anticipated to close this year and is embedded in their guidance. Regarding acquisitions and dispositions, KRG may buy assets first and dispose of others later, depending on market conditions. They aim to control this process to ensure it is accretive.

Q: Are there any potential acquisitions close to completion beyond the recent Florida deal? A: John Kite mentioned that KRG is actively underwriting assets but has no new acquisitions to announce beyond the recent Florida deal. The strong balance sheet allows them to act on opportunities and pair trades later, ensuring acquisitions are accretive and involve high-quality real estate.

Q: With the current stock trading levels, is there any consideration for share buybacks? A: John Kite acknowledged that share buybacks are always considered when deploying external capital. However, the focus has been on backfilling vacancies and achieving substantial returns on capital through leasing. While share repurchases are under consideration, the priority remains on strategic leasing and capital deployment.

Q: Can you elaborate on the potential impact of recent bankruptcies and your approach to backfilling vacancies? A: Heath Fear, CFO, explained that KRG is conservatively estimating that only 5 of the 29 impacted anchor boxes will be assumed by replacement tenants. The focus is on securing high-quality tenants that enhance the merchandising mix and have strong balance sheets. The team is energized to address these vacancies and improve the portfolio's credit quality.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.