Kite Realty Group Trust

Good day and thank you for standing by. Welcome to the Quarter 2, 2021 Kite Realty Group Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and then the number 1 on your telephone keypad. If you require any further assistance, please press star 0. I would now like to hand the conference over to your first speaker today, Mr. Brian McCarthy, Senior Vice President of Marketing and Communications. Sir, please go ahead.

Thank you, and good morning, everyone. Welcome to Kite Realty Group's second quarter earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties. Actual results may differ materially from these statements. For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group, our Chairman and Chief Executive Officer, John Kite. President and Chief Operating Officer Tom McGowan, Executive Vice President and Chief Financial Officer Heath Feer, Senior Vice President and Chief Accounting Officer Dave Buell, and Senior Vice President Capital Markets and Investor Relations Jason Colton. I will now turn the call over to John.

Thanks, Mark, Brian, and good morning, everybody. Thanks for joining us today. I think I would say that the only thing may be more compelling than our quarterly results is the impending merger between CHI Realty Group and RPAI. Regarding that, please note at this time we're unable to provide any additional information beyond what we've disclosed publicly to date. What I can tell you is that every day we learn more about RPAI, our conviction regarding the merits of this transaction grows exponentially. We are very much looking forward to discussing the outlook of the combination after we close the merger. In the meantime, the primary goal on both sides is continued operational outperformance. With respect to our second quarter results, the continuing theme is retailer demand. During the quarter, we leased 637,000 square feet, which is nearly double the amount of square footage as compared to the second quarter in 2019, and an additional 211,000 square feet sequentially. Blended lease spreads were 14.7% and 9.2% on a gap in cash basis, respectively. The outsized volume widens our total retail portfolio lease to occupied spread to 310 basis points, with current signed not open NOI of approximately $12 million. Our anchor acceleration program is also progressing nicely. We've signed three anchor leases this quarter for a cumulative total of seven anchor leases since the program's inception. These seven leases are expected to generate cash yields of over 36%. The specific details of our executed and potential anchor leases are laid out on page four of our investor presentation. Not only will we realize a healthy uptick in NOI based on these deals, but we're vastly improving the merchandising mix and creating value. Backfilling empty Steinmart spaces with tenants such as Adidas, Aldi, and Total Wine will dramatically increase traffic and compress the cap rate of the underlying centers. With respect to the remaining boxes, demand remains extremely strong with several leases in negotiation and at the LOI stage. We look forward to providing more details on these deals on our next call. We've also been experiencing healthy demand for our small shop space across a variety of categories such as beauty and cosmetics, health care, service tenants, and the return of fast, casual, and full-service restaurants. The strong box and small shop demand resulted in a portfolio retail leased rate of 91.5%. This 100 basis point increase from last quarter is indicative of the continuing recovery in our financials. On page three of our investor presentation, our total 21% 2021 revenues will be only 2% lower than the annualized first quarter of 2020. Many of you ask, when will we fully recover to pre-pandemic levels? While we still don't know the exact date, we do know that we're quickly gaining ground. While the last 18 months have been tumultuous, to say the least, through it all, we remain focused and work to operate from an offensive posture. Today, we find ourselves driving towards the completion of a transformative merger. The opportunity currently in front of us was only made possible by virtue of the successful execution of a series of initiatives prior to the end of 2019. This put KRG in one of the strongest financial positions in our sector, which allowed us to intensely focus on operations during COVID, which resulted in sector-leading collection rates. I think it's worth taking a look back at the hard work over the past several years that put us into this position of strength. During Project Focus, we shed our lower growth and most vulnerable assets, resulting in a portfolio of high-quality properties with long-term, durable cash flows. We exited some low-growth markets to focus on markets that are benefiting from favorable demographic trends. We reduced our leverage and cleared out our near-term maturities. Our net debt to EBITDA currently sits at 6.4 times, despite the fact that our lease rate dropped by over 500 basis points in 2020. We dialed down our development pipeline and structured our non-retail projects to minimize risk and capital outlay. We started in this business as developers across all property types. If there's one thing we learned, is that development should never be a financial mandate, but rather a risk-adjusted decision around the highest and best use of the property. We also learned, like most things in life, when it comes to development, timing is everything. Finally, we assembled the best team in the industry, a team that embodies our intentional and results-driven culture, a team that is poised to get even stronger once we join forces with RPAI. Nothing ever happens intentionally. Great without great people. With all this in mind, the next bold move we are taking doesn't represent a new direction for KRG, but rather the next step down a path that we are firmly committed to. Before I turn it over to Heath, I want to again thank the KRG and RPAI teams. It's been an intense few months, and it's going to remain that way through the end of the year. I have the utmost confidence that the teams will remain focused, maintain operational excellence, and emerge as a unified best-in-class platform. Now I'd like to turn the call to Heath.