Kite Realty Group Trust

Good day and thank you for standing by. Welcome to the Q2 2023 Kite Realty Group Trust Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that this conference is being recorded. I would like to hand the conference over to your speaker today, Brian McCarthy. Please go ahead.

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, Keith 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. Good morning, everybody. Thanks a lot, Brian. During the second quarter, KRG delivered outstanding operational results, while continuing to fortify our best-in-class balance sheet. The demand for our high-quality space remains strong, and we are in a prime position to continue to drive pricing, improve our overall long-term growth profile, enhance tenancy, and further grow our revenue and cash flow. Turning to our results, we generated FFO per share of 51 cents beating consensus estimates by $0.03 per share. Our same property NOI growth for the quarter was 5.7% as compared to the same period in 2022. Our outperformance in the first half of the year is allowing us to increase our NARIT FFO guidance by $0.03 at the midpoint. We're also increasing our same property NOI growth assumption by 75 basis points moving from 2.75% to 3.5%. Keith will provide more details around our quarterly results and updated guidance. We signed 190 leases, representing over 1.3 million square feet, producing a sector-leading 14.8% blended cash spread on comparable new and renewal leases. Excluding the impact of option renewals, our blended cash spreads were 24%. More importantly, KRG earned a 32% return on capital for new leases. As I've emphasized previously, leasing existing space provides the best risk-adjusted return for our invested capital. While our ability to drive pricing on initial rents remains strong, we're taking this opportunity to redefine our long-term growth trajectory. Recognizing the favorable supply and demand dynamic in open-air retail, at the outset of the year, we focused our leasing efforts on implementing higher fixed rent bumps and CPI adjustments. I'm pleased to report that through the first half of 2023, we have been extremely successful with this initiative. 80% of our new and non-option renewal leases signed have fixed rent bumps that are greater than or equal to 3%, and 40% of those leases have CPI adjustments. The average annual fixed rent increases for new and non-optional renewals in the first half of 23 was 2.4%, including both our small shop and anchor tenants, which is 90 basis points higher than our portfolio average. We are laying a solid foundation to improve our long-term embedded growth profile. Based on the current tenant demand, I can't think of a better time for KRG to upgrade the merchandising mix at our centers. In a different leasing environment, the liquidation of Bed Bath could have been a real jolt to the sector. Instead, it's providing to be one of the best opportunities we've been afforded. I was adamant about maximizing this opportunity by prioritizing the best solution over the fastest solution. That said, I'm pleased to report that we are making great progress backfilling those boxes at higher rents with better tenants. The pool of tenants to backfill the attractively sized and well-located boxes is deep and diverse. Thus far, we're negotiating with 15 different brands across the retail spectrum, including grocery, sporting goods, big box wine and spirits, home furnishings, and off-price apparel. Heath will provide more detail on the current status, and we look forward to providing updates as we progress. Our success in enhancing the merchandising mix is not limited to the bed-bath spaces. Year-to-date, we have opened two grocery stores in the portfolio and have an additional four grocery stores in the sign-not-open pipeline. In addition to adding grocers to the portfolio, We also have several opportunities to add multifamily units to our mixed use and lifestyle portfolio. We currently have an ownership interest in nearly 1,700 apartment units and have entitlements for an additional 5,000 units. We look forward to further densifying our properties at healthy risk-adjusted returns and partnering with best-in-class operators when appropriate. The KRG team continues to capitalize upon the demand for open air retail and the resiliency of our cash flows. Our efforts to enhance our merchandising mix, drive pricing power, and increase our long-term embedded growth profile will undoubtedly increase the value of our open air centers. We have often talked about the optionality afforded to owners of high-quality real estate. That same optionality is exponentially increased when supported by unparalleled operational acumen and a best-in-class balance sheet with substantial liquidity. We're extremely well positioned to seize the opportunities that lie ahead. I want to take a minute to really thank our team for their continued dedication, outperformance, and commitment. I'll now turn over the call to Heath.