Kite Realty Group Trust

Good day and thank you for standing by. Welcome to the third quarter 2024 Kite Reality Group Trust Earnings Conference Call. At this time all participants are in a lesson only mode. After the speaker's presentation there will be a question and answer session. To ask a question during this session you will need to press star 1 1 on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question please press star 1 1 again. Please be advised today's conference is being recorded. I would now like to have conference over to your speaker today, Brian McCarthy, senior vice president, corporate marketing and communications. Please go ahead.

Thank you. And good morning, everyone. Welcome to Kite Realty Group's third quarter earnings call. Some of today's comments contain forward-looking statements that are based upon 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, Keith Fear. Senior Vice President and Chief Accounting Officer, Dave Buell. And Senior Vice President, Capital Markets and Investor Relations, Tyler Henshaw. Given the number of participants on the call, we kindly ask that you limit yourself to one question and one follow-up. If you have additional questions, we ask that you please rejoin the queue. I'll now turn the call over to John.

Thanks, Brian, and welcome everyone to our quarterly conference call. KRG delivered another very strong quarter, leasing approximately 1.7 million square feet of space, which is the highest quarterly volume in the company's history. Heath will walk you through the details of our quarterly results and our updated 2024 guidance. I'll focus on the progress we continue to make on the leasing front and our longer-term growth levers, including the recently announced development project at One Loudon. Over the last three years, the primary focus of our capital allocation efforts has been leasing. Our portfolio now sits at 95% leased, which represents a 160 basis point year-over-year increase. We're optimistic that this environment we can continue to drive both the anchor and small shop occupancy to historical heights. Year to date, we've executed 17 anchor leases at 38% comparable cash spreads and 33% returns on capital. Demand continues to be strong in both our anchor and small shops. Year over year, our small shop lease rate is up by 100 basis points as a result of signing over 180 new leases with tenants spanning a wide spectrum of complementary uses. The credit profiles of our new small shop tenants are also strong, and these leases are expected to generate a 57% return on capital. Our Sign Not Open pipeline remains elevated at $33 million. It's important to note that the average ABR in our Sign Not Open pipeline is over $26, which is nearly 25% above our current ABR in the portfolio. Based on the current leasing velocity, we expect our Sign Not Open pipeline to stay elevated through the first half of 2025 and start to drift down to our historical average as we head into 2026. As KRG enters the latter part of our lease-up phase, we remain acutely focused on levers of growth beyond occupancy gains. The organic mark-to-market opportunity embedded in the portfolio continues to be strong, as highlighted by the year-to-date blended non-optional renewal spreads of nearly 13%. We consistently promote this statistic as the most reliable indicator for movement of market rents as it's not influenced by landlord capital. We're successfully driving higher embedded growth, especially on the small shop front. For new and non-optional renewal leases signed in the first three quarters of 2024, the average annual growth was 3.5%, which is 50 basis points higher than the small shop new and non-optional new leases executed in 2023. The progress we've made over the past three quarters represents a significant step towards our long-term goals of generating a more sustainable stream of cash flows and driving an outside cruising speed for NOI growth. On the development front, We recently announced our expansion plans for one Loudoun in the Washington DC MSA. As we detailed in our third installment of 4 in 24, the development will include 86,000 square feet of retail and 33,000 square feet of office. We're also in the late stage negotiations with two developers to incorporate 170 room hotel and a 400 unit multifamily complex into this next phase. Our philosophy on non-retail uses for mixed-use projects is to manage our capital contribution while maintaining a stake in the project. We'll share our plans for both the hotel and multifamily phases once the agreements are finalized. One of the takeaways we communicated at our 4-in-24 event was our significant amount of developable land adjacent to One Loudon. Excluding the proposed next phase, we have entitlements for an additional 1,300 multifamily units, and 1.7 million square feet of commercial GLA on over 30 acres of entitled land. While we're focused on executing this next phase, we have plenty of optionality for additional phases to continue creating value. One Loudon is on track to becoming one of the premier open air mixed use projects in the country. While on the topic of premier open air mixed use projects, We hosted our second installment of our 4 in 24 series at Southlake Town Square in the Dallas MSA, which is currently our largest asset. When we took control of this property in 2021, it was generating just over $20 million of NOI. Three years later and Southlake is producing over $30 million of NOI, which speaks to the intensity of our leasing platform and the underlying quality of the real estate. The combined impact of One Loudon and Southlake on KRG as a whole is extremely compelling. While generational assets like these trade infrequently, there's one currently in the market and another that will be in the market by the end of the year. We're confident that these assets will trade at levels which will underscore the importance of One Loudon and Southlake to our portfolio. This past quarter, we acquired Parkside West Cobb, a Sprouts-anchored shopping center in the Atlanta suburbs for $40 million. We locked up this property in advance of the recent compression in cap rates, which allowed us to acquire this asset at a positive arbitrage to the asset we sold in Chicago earlier in the year. For the past several years, we've been disciplined in our desire to remain relatively net neutral on our buying and selling activity. It's important to note that the number of high-quality assets in the market continues to increase, as does the liquidity for all open-air product types. With our current leverage meaningfully below our long-term targets, KRG is well positioned to take advantage of any compelling opportunities that may arise. Our Board of Trustees has authorized an increase in our dividend to $0.27 per share, which represents a 3.8% sequential increase and an 8% increase year over year. As occupancy and NOI ramp up over the next few years, we anticipate our dividend to follow suit. For many of our long-term investors, the dividend is a critical aspect of reinvesting, and with the strength of our balance sheet, KRG's dividend is an extremely attractive risk-adjusted yield. In closing, thank you, as always, to our incredible team for their hard work and dedication. But before turning the call to Heath, I wanted to specifically recognize the dedication and grit of our Southeast team for their efforts related to the recent hurricanes. As a result of their vigilance and preparation, our assets suffered minimal damage and downtime. We proudly serve our Southeast customers and our communities and are grateful for their support and patronage. I'll now call the turn the call to Heath to walk you through results in 2024 guidance.