Kite Realty Group Trust

Good day and thank you for standing by. Welcome to the fourth quarter 2024 Kite Realty Group 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 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 today's conference is being recorded. I want to hand the conference over to your first speaker today, Brian McCarthy, Senior Vice President, Corporate Marketing and Communications. Please go ahead.

Thank you, and good afternoon, everyone. Welcome to Kite Realty Group's fourth 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 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 join the queue again. I'll now turn the call over to John.

All right. Thanks, Brian, and good morning, everyone. The fourth quarter concluded an exceptionally strong 2024, highlighting a year of outstanding performance by the KRG team. In 2024, we leased 5 million square feet of space, our highest volume in history, and the demand for space in our high-quality centers remains strong. allowing our team to improve our embedded growth, establish higher starting rents, and enhance our merchandising mix. New and non-option renewal leases signed in 2024 have weighted average rent bumps of 290 basis points, which is well above the portfolio average of approximately 170 basis points. This is in large part due to our success in implementing embedded escalators of greater than or equal to 4% and 71% of our new and non-option renewal small shop leases in 2024. Pushing our portfolio to higher cruising speed has been a primary focus of our leasing team as we continue to elevate our long-term growth profile. For all comparable new leasing activity in 2024, we generated 31.9% blended spreads and a 46.4% gross return on capital. While spreads are an important factor in our decision-making, our fundamental objective is to earn a favorable risk-adjusted return on the capital that we invest in retailers. In 2024, our non-option renewal spreads were 13.3%, which illustrates our current pricing power and the significant mark-to-market opportunity in our portfolio. For comparative context, in 2018 and 2019, non-optional renewal spreads averaged 2.6%. We leased space to a diverse mix of well-capitalized and highly productive tenants in 2024, including Trader Joe's, L.L. Bean, Sierra, HomeSense, Ulta, Alo Yoga, Kava, Flower Child, and Sephora, just to name a few. The wide array of retail concepts and categories growing in our portfolio has well-positioned has well positioned us for continued improvement of our merchandising mix and our tenant credit profile. Our net debt to EBITDA at 4.7 times underscores the incredible condition of our balance sheet. And we are poised to evaluate and act on a variety of internal and external growth initiatives. We work diligently and strategically to place ourselves in this advantageous position. With approximately $1.2 billion in available liquidity, we can deploy significant capital while comfortably remaining within our long-term average target of 5 to 5.5 times net debt to EBITDA. Subsequent to quarter end, we acquired Publix Anchored Village Commons in West Palm Beach, Florida for $68.4 million. Coupled with our earlier acquisition of Sprouts Anchored Parkside West Cobb in Atlanta, our reallocation of proceeds from non-core dispositions to the Sun Belt has been accretive. Turning to our outlook for 2025, in broad strokes, our significant occupancy gains, strong spreads, and enhanced escalators are being tempered by certain non-cash headwinds and recent bankruptcies. Despite the short-term disruption, We are heading into 25 with strong momentum and are energized by the multitude of internal and external opportunities in front of us. We're swiftly addressing the fallout from tenant bankruptcies by securing higher quality tenants and maximizing returns. While the downtime in rent and capital invested in the backfills will delay our anticipated ramp up of AFFO and cashflow growth, in the short term, our long-term value proposition will be significant. We are experiencing strong demand for the anticipated vacancies as retailers compete for market share by growing their footprint in high-quality, well-positioned real estate. We'll continue to improve the cruising speed of our portfolio by converting the vast majority of our small shop tenants to 4% or higher bumps, and we'll push for improved terms with our anchor tenants, such as shorter option periods, more flexible co-tenancy provisions, and less restrictive use clauses. All phases of the One Loudon expansion project, retail, office, multifamily, and hotel are progressing as planned. On the retail front, we recently signed leases with Williams-Sonoma and Pottery Barn. They will be joining names like Our House, Bar Taco, and Tate. As for the 400-unit multifamily project and the 170-key full-service hotel, we are finalizing terms with our joint venture partners and anticipate adding these phases to our active development pipeline over the next several quarters. The current state of the transactional markets and the significant institutional capital formation for open-air assets gives us confidence that we can continue our capital recycling efforts. We will look to sell out of lower growth and single asset markets and redeploy capital into our target markets investing in assets with a greater percentage of small shop space, higher embedded growth rates, and generally consistent with the centers that we toured during our 4 and 24 series. Notwithstanding a potential uptick in activity, our guidance at the midpoint does not assume any impact from transactions as we intend to maintain our approach of match funding acquisitions with proceeds from dispositions in a way that is accretive or neutral to earnings. Based on our current leverage levels, we have the capacity to significantly front load our match funding exercises with strategic acquisitions, while staying within the long-term net debt to EBITDA target range of 5 to 5.5 times. As always, throughout the year, we will continue our best-in-class disclosure efforts and proactive investor outreach. Our 4 and 24 series solidified KRG's distinct advantage in operations, leasing, development, and investment within a highly competitive sector. In 2025, our objective is to define a portfolio vision that further separates and elevates our investment proposition and long-term growth prospects. Thank you as always to our incredible team for their commitment to constantly improving KRG. Together, we delivered another very good year. While we clearly have work to do in 2025, I look forward to our collective success in achieving our goals. I'll turn the call to Heath now.