Kite Realty Group Trust

Ladies and gentlemen, thank you for standing by and welcome to the Q2 2022 Kite Realty Group Trust Earnings Conference Call. At the time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. So, ask a question during the session when you depress star 11 on your telephone. I would like to turn the call over to your host, Rob McCarthy. You may begin.

Thank you, and good afternoon, 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 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 are 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, Tyler Henshaw. I will now turn the call over to John.

All right. Thanks very much, Brian, and good morning to everyone. Well, I'm very pleased to announce that KRG has once again achieved outstanding quarterly results. Despite the volatile macro landscape, We refuse to get distracted and are attacking the opportunities in front of us with a continued sense of urgency. In fact, one of our core values at KRG is urgency, and we will leverage this mindset to take full advantage of the strong demand for our high-quality real estate. As reported yesterday, KRG generated FFO per share of 49 cents, beating consensus estimates by 6 cents and representing a 44% increase per share over the comparable period last year. As set forth on page five of our investor presentation, this massive year over year accretion is accompanied by meaningful improvements across every metric that historically correlates to earnings multiples. Our same property NOI growth for the quarter was 3.8% and 4.9% year to date. Heath will discuss guidance and provide more details around the components of each metric. But suffice to say, we're outperforming both internal and external expectations across the board. The primary driver of KRG's results has been the outstanding leasing demand we're seeing across our portfolio. We signed 206 leases representing nearly 1.2 million square feet this quarter. The strong leasing volume was bolstered by superior blended cash spreads for comparable new and renewal leases of 13.2%. Excluding option renewals, blended cash spreads for comparable new and non-option renewals were 18.7%. For the first half of the year, we leased approximately 2.3 million square feet at a blended cash spread for comparable new and renewal leases of 14.5%. Our retention ratio for the quarter and year-to-date remains elevated at 90%. The leasing environment for the KRG portfolio remains extremely constructive. COVID forced many retailers to reimagine the use of their physical footprint to best serve the consumer. Five years ago, self-checkout, BOPIS, and curbside pickup did not exist in the same capacity as it does today. The structural shifts and how open-air retail is utilized by retailers and consumers has resulted in an 18-month period of record low retail bankruptcies, record high leasing volumes, and brick-and-mortar sales growth outpacing the growth in e-commerce. During our continuous discussions with retailers, they are making long-term real estate decisions to secure the best physical locations to serve their customers. One of our major focuses for the balance of 2022 is delivering our $41 million signed not open pipeline, which is sector leading on a percentage of NOI basis. As a reminder, our signed not open pipeline is contractually obligated rent that is scheduled to come online as outlined on page nine of our investor presentation. Thus far in 2022, tenants have commenced rent ahead of our internal budget, which is a testament to the intensity and dedication of the KRG platform. In a period where supply chain issues remain prevalent, we're thrilled with our construction and tenant coordination team's ability to deliver spaces on time coupled with the urgency retailers are showing to open the stores. Our team is acutely equipped to handle such challenges from a position of strength, considering the breadth of experience we have in the construction industry. Our Sign Not Open pipeline bodes extremely well for our growth trajectory going into 2023, as the rents from those leases will be fully realized. As a reminder, the $41 million of Sign Not Open NOI is only a portion of the near-term growth opportunity as shown on page 8 of our investor presentation. Leasing our active developments and the balance of our portfolio to pre-pandemic levels would equate to an additional $25 million of NOI coming online over the next few years. Looking out across our sector, the remaining near-term leasing upside embedded in our portfolio is quite compelling. While our near-term capital outlay is primarily dedicated to leasing, we continue to allocate and raise capital in a measured approach to improve our portfolio. During the second quarter, we sold Plaza del Lago in Chicago for approximately $59 million at a cap rate that is extremely accretive relative to the assets that we've acquired in 2022. The blended cap rate on our acquisitions this year sits at 5.75%, with unlevered IRRs expected to be in excess of 8%. In addition to our previously announced acquisitions in Dallas and Las Vegas, We acquired Palms Plaza, a 68,000 square foot neighborhood center, for $35.8 million. Palms Plaza is an infill location in Boca Raton, Florida, anchored by a highly productive specialty grocer, generating approximately $1,300 per square foot in sales. Year to date, we've completed 102 million of acquisitions in our target markets and 66 million in dispositions. On the development front, we stabilized two projects this quarter, Shops at Quarterfield and One Loudoun Residential. Shops at Quarterfield is a 61,000-square-foot neighborhood center anchored by Aldi and LA Fitness, which is 100% leased. The One Loudoun Residential project added 378 multifamily units to our exceptional development project in Loudoun County, one of the wealthiest counties in the country. As a company, we now have a financial interest in over 1,600 multifamily units, and we're in discussions with joint venture partners to add up to an additional 1,000 units over the next few years. The One Loudon apartments are approximately 90% leased, which is outperforming our initial expectations on base rent and absorption, which highlights the multi-use demand at One Loudon. Both projects were seamlessly transitioned during the merger, and with $80 million remaining to spend on our active developments, we are very comfortable with our outstanding capital commitments in relationship to our balance sheet position. KRG is executing on each strategic initiative we laid out when we announced the merger. As a top five open-air shopping center read, our increased relevance to our customers is clearly evident in the strong leasing volumes at outsized spreads. In turn, we are adding high-quality tenants and brands to enhance the merchandising mix in our portfolio. We're also making progress on the value creation opportunities through completing the active developments and determining the best use for our land bank. Each strategic benefit is operating on the shoulders of a rock-solid balance sheet, with our net debt dividend now standing at 5.3 times, one of the lowest in the sector. We've often been asked to compare the performance of legacy KRG and legacy RPAI assets. Both internally and externally, we're reticent to bifurcate the two portfolios because they now operate as one. That being said, The extreme accretion associated with merger was not just a function of the attractive deal terms. Bottom line, across every meaningful metric, the legacy RPI assets have benefited from the KRG operating platform. For example, for the first three and a half years prior to KRG's ownership, the legacy RPI portfolio achieved non-option renewal spreads of 4%. Since the merger closed, non-option renewal spreads have been 13%. This is a prime example of how KRG has been able to create more pricing friction and significantly increase rents across the very high-quality portfolio from RPAI. Moreover, since we executed the merger, on a year-over-year basis, KRG has increased FFO by 44%, increased our lease percentage by 230 basis points, all the while delivering double-digit blended comparable cash lease spreads and increasing our ABR per square foot by 6%. We've also improved key demographic metrics, including three-mile average household income up 13% and three-mile population up 34%. I give these metrics to drive home the point that the underlying quality of our portfolio has undoubtedly improved and our results speak for themselves. Our team is laser focused on continuing to produce strong operational results to prove that we have a best in class portfolio with outsized opportunities for future growth. The culmination of all the great things I've just discussed is allowing us to raise our 2022 FFO as adjusted guidance to a range of $1.80 to $1.86, a six cent increase per share at the midpoint. We're also raising our 2022 same property NOI growth assumption to a range of 3.5% to 4.5%, an increase of 1.25% at the midpoint. As always, I'm very proud of the KRG team, not only for their results, but for their extreme hard work and dedication and competitiveness. KRG is nothing without our people and our collective efforts. We've accomplished a lot as a team, but our best days absolutely lie ahead. I will now turn the call over to Heath to provide more color and quarter results, et cetera.