Kite Realty Group Trust

Brian McCarthy, Senior Vice President, Corporate Marketing and Communications. Please go ahead.

Thank you, and good morning, everyone. Welcome to TITE Realty Group's first 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 Form 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 Feeder. 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.

All right. Thanks a lot, Brian. And good morning, everyone. As you can imagine, our team has been counting down the days to yesterday's release and this morning's earnings call. We're eager to share details regarding our exceptional first quarter results and outperformance across the board. 2022 is shaping up to be a monumental year for KRG. It goes without saying that we have high quality real estate in high quality places, but that really doesn't mean anything without a high performing team It communicates well and works in lockstep towards our operational goals. For those of you that were concerned about how our ability to swiftly integrate post-merger, you can rest at ease. As reported yesterday, KRG had FFO per share of 46 cents, beating consensus estimates by 5 cents per share and representing a 35% increase per share over the comparable period last year. Our same property NOI growth for the quarter was 5.9 percent as compared to the same period in 2021. HEIF will give more details around the components of each metric, but suffice to say we blew past expectations due to a combination of operational outperformance and lower bad debt. As invigorating as this past quarter feels, I'm even more energized about the future based on our tremendous leasing results. KRG signed 182 leases representing over a million square feet this quarter, including nine anchor leases. This strong leasing volume was bolstered by 16 percent blended cash spreads on comparable new and renewal leases. These spreads were three percent higher than the blended spreads we achieved in the fourth quarter of 2021. I'm going to speculate that, once again, These blended spreads will be amongst the highest, if not the highest, in the sector. I'd also like to call out the cash spread on our first quarter. Comparable non-option renewals was approximately 12 percent against the backdrop of a 90 percent retention ratio. Again, this is an important indicator of where market rents are headed for the KRG portfolio. KRG is experiencing strong demand from a deep and diverse set of retailers, across all of our open-air products. In fact, our national retailers are becoming increasingly agnostic to format type and more keenly focused on best-in-class real estate. This dovetails nicely with our diverse set of high-quality and well-located properties. Retailers are not only flexible with respect to format, but are also willing to modify typical sizings of their space. The current environment has led to some very long and productive lease approval meetings where we're seeing multiple tenants vying for the same space or tenants that are willing to occupy spaces that have been persistently vacant. We intend to ride these tailwinds into historically high occupancy levels. The portfolio has signed not open NOI of approximately $37 million, which will primarily come online during the back half of 2022 and the first half of 2023. This is an increase of $4 million as compared to last quarter, which is a result of $11 million of new signed not open NOI, partially offset by $7 million of new NOI that came online this quarter. The spread between leased and occupied for our retail operating portfolio has also grown to 320 basis points. This bodes extremely well for our growth trajectory going into 2023, as the rents from those leases will be fully realized. As a reminder, the $37 million of signed not open pipeline represents 7% of our projected future NOI growth, as shown on page 7 of our investor deck, and is only a portion of the near-term growth opportunity. Leasing our active developments and the balance of the portfolio to pre-pandemic levels, which is very achievable in the current environment, would equate to an additional $31 million of NOI coming online over the next several years. We've also been busy on the capital allocation front. We acquired two attractive Sunbelt assets for a total of $66 million, the first of which was Pebble Marketplace, a Smiths-anchored center in the desirable Green Valley area of Las Vegas. We also acquired a Sprouts and Total Wine that are literally attached to our MacArthur Crossing Center in the Las Colinas area of the Dallas MSA. We love adjacency acquisitions, especially when they can create a halo value by compressing the cap rate on the balance of the center. Collectively, these two assets feature a three-mile population of over 116,000 people and an average household income of $115,000. We've also made progress on the development front. All of our active developments are coming along on time and or under budget. As for the entitled land bank, we've unearthed additional value propositions as promised, and we are taking a bespoke approach to every single parcel. Over the course of 2022, we look forward to sharing our creative vision for maximizing value and minimizing risk. The best thing about the entitled land bank is the investor community historically attributed very little value to the land. and we certainly didn't put a price tag on it when we were underwriting the merger, but we see excellent opportunities ahead. The culmination of all the great things I've discussed is allowing us to raise our 2022 FFO as adjusted guidance to $1.77 per share at the midpoint. We're also raising our 2022 same property NOI growth assumption to a range of 2.25% to 3.25%. Before turning the call over to Heath, I want to address some of the macro elements that are on the horizon. REITs have historically outperformed broader markets during the inflationary periods. As prices rise and sales increase, it follows that the tenant's occupancy costs should decline, allowing us to continue to drive rents. As an open-air shopping center owner, we have a healthy balance between the duration of our assets and liabilities. Based on our embedded escalators and our ability to turn over 10% to 15% of our leases every year, we feel well-positioned to keep pace with inflation. Likewise, our longer lease durations temper the impact of any potential recessionary environment. On the supply chain front, we're acutely focused on ensuring all tenant build-outs are on time and on budget. Internally, we've been referring to 2022 as the year of the RCD, which stands for rent commencement date. Times like these are when KRG's hands-on management style shines. We have very experienced tenant coordination and construction teams that not only ensure we deliver on time, but help tenants with any challenges they may experience. Due to our tenacious and dogged approach, we're currently outperforming on deliveries. Finally, I want to address the change to our share buyback program. The primary purpose is to properly size this critical capital allocation tool in light of our post-merger market capitalization. With that said, we are keenly aware of the disconnect between our stock price and our underlying fundamentals. We have great real estate, a best-in-class platform, and we will continue to outperform until that disconnect resolves itself. Whether you're a value investor or growth investor, I can't think of a name in our space that screens more attractively. As always, thanks again to the entire KRG team for their hard work and dedication. KRG is nothing without these amazing people. I can't emphasize enough how proud I am of what we've accomplished as a team, but more importantly, what we will accomplish together in the future. Now I'll turn the call over to Heath to provide more details.