Kite Realty Group Trust Q2 2025 Earnings Report

Kite Realty Group Trust EPS Results

• Actual EPS: $0.51
• Consensus EPS: $0.51
• Beat/Miss: Met Expectations
• One Year Ago EPS: N/A

Kite Realty Group Trust Revenue Results

• Actual Revenue: $211.18 million
• Expected Revenue: $211.74 million
• Beat/Miss: Missed by -$558.00 thousand
• YoY Revenue Growth: N/A

Kite Realty Group Trust Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, July 31, 2025
• Conference Call Time: 11:00AM ET

Kite Realty Group Trust (NYSE:KRG) (NYSE: KRG) is a real estate investment trust (REIT) headquartered in Indianapolis, IN that is one of the largest publicly traded owners and operators of open-air shopping centers and mixed-use assets. The Company's primarily grocery-anchored portfolio is located in high-growth Sun Belt and select strategic gateway markets. The combination of necessity-based grocery-anchored neighborhood and community centers, along with vibrant mixed-use assets makes the KRG portfolio an ideal mix for both retailers and consumers. Publicly listed since 2004, KRG has nearly 60 years of experience in developing, constructing and operating real estate. Using operational, investment, development, and redevelopment expertise, KRG continuously optimizes its portfolio to maximize value and return to shareholders. As of December 31, 2023, the Company owned interests in 180 U.S. open-air shopping centers and mixed-use assets, comprising approximately 28.1 million square feet of gross leasable space.

Kite Realty Group Trust Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: The company achieved 17% blended cash leasing spreads, its highest in five years, and doubled new anchor leasing volume sequentially with 11 deals, including major grocers and specialty tenants.
• Positive Sentiment: Management raised full-year guidance by $0.01 for NAREIT and core FFO per share and increased same-store NOI growth assumptions by 25 basis points, implying 2.5% year-over-year FFO growth.
• Positive Sentiment: Kite expanded its strategic portfolio through a joint venture with GIC on Legacy West and contributed three community centers to a second JV, creating over $1 billion in gross asset value.
• Negative Sentiment: Recent tenant bankruptcies led to a 90 basis-point reserve for bankruptcy-related credit issues, although over 80% of vacated space is now leased or in active negotiations.
• Positive Sentiment: The trust issued a $300 million seven-year bond at a 5.2% coupon, lowered credit spreads on its revolver, and maintains a net debt-to-EBITDA ratio of 5.1x, among the lowest in its peer set.

Presentation

[Operator]

Good day, and welcome to the Second Quarter twenty twenty five Kite Realty Group Trust Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session. Please there a be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Mr. Brian McCarthy, Senior Vice President of Corporate Communications. Please go ahead.

[Bryan McCarthy, SVP - Corporate Marketing & Communications at Kite Realty Group Trust]

Thank you, and good morning, 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 ks.

[Bryan McCarthy, SVP - Corporate Marketing & Communications at Kite Realty Group Trust]

Today's remarks also include certain non GAAP financial measures. Please refer to yesterday's earnings press release available on our website for a 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 Fear 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.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thanks, Brian, and thanks, everyone, for joining today. The KRG team delivered another strong quarter, highlighted by our sound operational performance and excellent execution on the transactional front. Demand for space in our high quality centers remains healthy, evidenced by our consistently solid leasing results. Blended cash leasing spreads in the second quarter were 17%, which is our highest quarterly blended spread in the past five years. Our ability to grow rents organically demonstrates the mark to market potential embedded within our portfolio.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Leasing spreads for non option renewals were almost 20% in the second quarter and 16% over the last twelve months. New leasing volume more than doubled sequentially, largely driven by 11 new anchor leases executed in the second quarter. Our anchor leasing activity included two new grocery leases with Whole Foods and Trader Joe's, alongside new leases with apparel, home furnishing and fitness tenants. While our lease rate declined sequentially due to the impact from recent bankruptcies, based on the depth of demand in our leasing pipeline, we will gladly trade the short term earnings disruption for the opportunity to upgrade our tenancy and bolster the durability of our cash flows. We continue to make great progress in backfilling space with well capitalized retailers.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And to date, over 80% of the boxes that we recaptured as a result of the recent bankruptcies are leased or in active negotiations. Our small shop lease rate increased 30 basis points sequentially and 80 basis points year over year. In addition to pushing occupancy, we continue to have success elevating our long term growth profile. Embedded escalators on our new and non option renewal small shop leases were 3.4% for the 2025. Activity this quarter included leases with Aloe Yoga, Lilly Pulitzer, Buck Mason, Sweetgreen, and Shake Shack.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

The consistent gains in our small shop lease rate are result of our team's disciplined approach that prioritizes credit quality, strong starting rents, and higher embedded escalators, and most importantly, a compelling merchandising mix. At the midpoint, we are increasing our NAREIT and core FFO per share guidance by a penny and our same store NOI assumption by 25 basis points. Our core FFO per share guidance now implies a 2.5 year over year growth despite the temporary disruption from anchor bankruptcies. At the midpoint of our 2025 guidance, our post merger core FFO CAGR since 2022 stands at 4.1%. Our business is strong and will continue to improve as we lease space at attractive returns and enhance our long term embedded growth profile.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

In recent quarters, we've alluded to an uptick in our capital recycling efforts to reshape the composition of our portfolio and reduce exposure to at risk tenants. Through the 2025, we've taken significant steps in executing our long term portfolio vision. In a joint venture with GIC, we acquired Legacy West, an iconic asset that further solidifies our position as a prominent owner of lifestyle and mixed use assets and expands our relationship with high caliber retail brands. Subsequently, we expanded our strategic partnership with GIC by contributing three assets to a second joint venture, which includes three larger format community and power centers in Port St. Lucie, Florida and the Dallas MSA.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Our strategic partnerships with GIC now comprise over $1,000,000,000 of gross asset value, with the potential to grow the relationship as additional opportunities arise. In addition to the JVs, we've sold three non core assets year to date: Stony Creek Commons in the Indianapolis MSA and LA Fitness Anchored Center Fullerton Metro Center in the Los Angeles MSA, an asset that presented an opportunity to monetize our limited exposure to California at attractive pricing and relocate the proceeds into target markets. And Humblewood Shopping Center in the Houston MSA, where the adjacent owner made an unsolicited offer and the sale reduced our exposure to at risk tenants. These transactions immediately improve the quality of our portfolio, are accretive to earnings, and have a modest impact on our net debt to EBITDA. As we move forward, we will remain active in refining our portfolio by reducing exposure to at risk tenants, while increasing our focus on smaller format grocery anchored centers and select lifestyle and mixed use assets.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Our second quarter results, inclusive of the highest blended spreads in five years, growing our strategic partnership with GIC to over $1,000,000,000 three non core asset sales and an opportunistic bond issuance, are the product of a dedicated team focused on executing our strategic initiatives. As always, we strive to produce strong results and deliver long term value for all our stakeholders. Before turning the call to Heath, I wanted to thank our tenants and team members at Eastgate Crossing in Chapel Hill, North Carolina for their continued partnership as we work toward quickly reopening the shopping center. Eastgate suffered flooding as a result of historic amount of rainfall caused by Tropical Storm Chantal. Fortunately, the company has comprehensive flood insurance with coverages well in excess of estimated damages.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

So now I'll turn the call over to Heath to discuss Q2 results.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Thank you, and good morning. I want to commend the KRG team on an incredibly productive quarter. I'm encouraged by the significant leasing momentum against the backdrop of a portfolio that has tremendous occupancy upside. I'm equally encouraged by the sheer velocity of transactional activity that showcases our allocation acumen and ability to seamlessly execute across our capital stack. Turning to our results, KRG earned $0.51 of NAREIT FFO per share and $0.50 of core FFO per share.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Same property NOI grew 3.3%, driven by a two fifty basis point contribution from higher minimum rents, a 50 basis point improvement in net recoveries, and a 30 basis point improvement in overdraft. We are increasing the midpoints of our twenty twenty five NAREIT and Core FFO per share guidance by $01 each. This $01 increase is primarily attributable to lower than anticipated bad debt and higher than anticipated overage rent. Accordingly, we are increasing the midpoint of our same property NOI assumption by 25 basis points and lowering our full year credit disruption to 185 basis points of total revenues, with 95 basis points reserved for the general bad debt bucket and 90 basis points earmarked for the credit disruption associated with recent tenant bankruptcies. The 95 basis point general reserve is a function of combining the 84 basis points of actual bad debt we experienced for the first half of the year with a continuing bad debt assumption of 100 basis points for the balance of this year.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

As for the 90 basis point bankrupt anchor reserve, it's important to note that we realized 30 basis points in the first half of the year and expect to experience the remaining 60 basis points in the 2025. This back half weighted disruption, together with the extremely strong same store results in the 2024, are responsible for the same store deceleration in the 2025. Finally, the sequential increase in our net interest expense assumption is driven by transactional timing, causing the balances on our revolver to remain longer than anticipated. Our investments in capital markets teams have been tireless. We sold three non core assets and completed two joint ventures involving four assets with a world class institutional partner.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

That represents over $1,000,000,000 of gross transactional activity. With investment grade credit spreads at historic lows, we opportunistically returned to the public debt market by issuing a seven year $300,000,000 bond at a coupon of 5.2%. We also reduced the credit spread on our $1,100,000,000 revolver and two term loans representing $550,000,000 When all the dust settles, our net debt to EBITDA stands at 5.1 times, which is among the lowest in our peer set. As John mentioned, we have consistently telegraphed our desire to accelerate the transformation of the portfolio within the confines of prudent balance sheet management. This past quarter is an excellent blueprint for what lies ahead.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

We are laser focused on delivering strong results, exceeding expectations and creating long term value. Again, thank you to our team and we look forward to seeing many of you over the next couple of weeks. Operator, this concludes our prepared remarks. Please open the line for questions.

[Operator]

Thank you. And our first question will come from the line of Craig Mailman with Citi. Your line is open.

[Nick Joseph, Head - US Real Estate & Lodging Research Team at Citigroup]

Thanks. It's Nick Joseph here with Craig. I guess just on the leasing side, have you seen any meaningful changes in lease gestation periods, including increase in willingness from tenants to sign leases, just as we get more clarity around tariffs?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

No, I don't think we have. In fact, if you see the activity we had in the second quarter, you would say it's picked up substantially. So perhaps in the beginning of the year, maybe there was a little more indecisiveness. But at this point in time, it feels as though there's significant demand and it's really all across the board. You know, we mentioned how much we did in the anchor business, but we also improved our shop occupancy with a very diverse, high quality group of tenants.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

So, you know, from my personal perspective, it's quite strong right now. Tom, you want to add anything?

[Thomas McGowan, President & COO at Kite Realty Group Trust]

Yeah, I think both sides are really trying to work together to find ways to improve scheduling, how to get drawings done earlier, how to sort out permits collectively to make sure they're done properly. So I'm actually seeing more cooperation between the two sides to open stores as quickly as possible.

[Nick Joseph, Head - US Real Estate & Lodging Research Team at Citigroup]

That's very helpful. Then just on the actual negotiations, what's the take for higher embedded escalators? You know, what are you hearing from prospective tenants as you look to do that?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Well, I think, you know, the proof's in the pudding. When you look at our results, it's clearly been successful in our ability to generate higher growth. Certainly, it's, you know, it's still a challenge at times with the anchor tenants, but we're quite a bit better than we were a few years ago. When you look at our anchor tenants, I think the average is like one and a half percent. And it used to be like, like right around one a couple years ago.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

So we've made strong strides there. And, you know, with 3.4% embedded growth in the overall portfolio in the first half of the year, I'd say we're leading the pack in that regard.

[Nick Joseph, Head - US Real Estate & Lodging Research Team at Citigroup]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Todd Thomas with KeyBanc Capital Markets. Your line is open.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

Hi. I just wanted to stick with leasing and new lease volume in particular, which John you highlighted Heath too. I wanted to ask about the forward leasing pipeline, if you can comment on July activity and your visibility to get additional anchor lease deals signed in the near term with some of the inventory that you recaptured? Also if you have any insight on retenanting spreads as you move ahead relative to this quarter?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Yeah, Todd, I think we feel very good about the way it's picked up in the last couple months. And I would say that, you know, where we sit here today, that if anything is continuing to accelerate. We have a very good portfolio of opportunities for, you know, retailers, and there's a limited number of those spaces, you know, in good locations. So generally speaking, when we're looking at one of these deals, we have a couple different opportunities per available space. And that was part of the point we wanted to make is that we're very focused on not how fast it happens, but rather how good the outcome is.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And it's probably why the first quarter we only did a couple deals, and the second quarter we did 11, right, in the anchor side. So I think the demand is strong. It's really more about us making smart decisions about what's the right merchandising mix, who has the best credit in terms of the tenants that we're looking at. And then also, you know, the growth that we talked about, we're very focused on that. But overall, it's strong. Tom, you want to add some color?

[Thomas McGowan, President & COO at Kite Realty Group Trust]

Yeah, I would, Todd, I just look at the 11 boxes that we've executed in the quarter. Cash spreads were 36.6%. You have returns close to 25%. So when you include the first and second quarter, say you're at 13%, we're going to see that volume of new box inventory getting signed increase significantly. And we're in the process of making sure that happens, But we know we have the inventory out there to transact on.

[Thomas McGowan, President & COO at Kite Realty Group Trust]

Now we just got to hit our key points that John talked about, making sure that the credits there, the quality, the merchandising, and I think we're going to be successful with that.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

That's helpful. You mentioned, John, that you would gladly trade the short term disruption for the mark to market and all the tenant merchandising decisions that you're making. Tom, it sounded like in response to an earlier question, the permitting and planning processes are getting a little bit more efficient, but does the anchor demand give you negotiating power over shortening that rent commencement timeframe and that disruption seems to be a little bit of a challenge in how the cash flow and NOI growth trends. Is there anything that is under consideration or anything that you can do to sort of shorten that rent commencement period in general?

[Thomas McGowan, President & COO at Kite Realty Group Trust]

Yeah, I mean, I think, Todd, the biggest thing we can do is work with the tenant, get their layouts done and then get drawings start. And we're not afraid to get drawings started early, we'll work out a reasonable arrangement in terms of a reimbursement if the deal doesn't move forward. But if we can get those drawings started, we can get the permitting started early, you start putting yourself in a positive ninety day position in terms of a normal delivery. And then we're also putting tremendous pressure on the tenants saying, look, if you want this deal, here are the terms and the parameters you need to work with us in to get open as quickly as possible. And that then gives you a leg up on other tenants that we're talking to.

[Thomas McGowan, President & COO at Kite Realty Group Trust]

So we're trying to pull as many levers as possible, Todd.

[Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets]

All right. Thank you.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thanks.

[Operator]

One moment for our next question. And that will come from the line of Andrew Riel with Bank of America. Your line is open.

[Andrew Reale, Equity Research Analyst at Bank of America]

Hi. Good morning. Thanks for taking my questions. First, what's the latest on the sale of City Center?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

City Center, you know, we still are marketing the property for sale in the last quarter. Well, we were we had a buyer that was identified that is no longer capable of moving forward. So we're continuing to market the property. Meanwhile, the good news is that the property, we have some good new leasing activity. So probably just helps us quite frankly, but we continue to market for sale.

[Andrew Reale, Equity Research Analyst at Bank of America]

Okay. Does the Humblewood sale satisfy the asset sale proceeds to fund Legacy West, or is there still more dispositions if City Center is delayed?

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Yeah, let me listen. All cash is fungible, right? So to the extent that Humblewood is a replacement for City Center, I'd tell you that Humblewood traded better at cap rate than we anticipate City Center will trade. So to the extent we're using Humblewood and a potential other sale sort of complete that circle we had last quarter, it's no longer going to make the accretion more.

[Andrew Reale, Equity Research Analyst at Bank of America]

Okay, thanks. And I guess just one more. If I can just think long term, what's a realistic ceiling for small shop occupancy?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Well, I mean, hard to say. We don't put a cap on it, right? I mean, we were our I think our occupancy in 2019 was 92.5%. And so we're obviously getting closer to that. I would think we could exceed that.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And I mean, I know we can exceed it. I wouldn't think we can. I know we can exceed that. So the goal is to continue to push it. But again, no different than any of our strategies.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

We're always looking for the best outcome, not the fastest outcome. So but it happens to have a lot of momentum right now. So we feel very good about continuing to grow it.

[Andrew Reale, Equity Research Analyst at Bank of America]

Okay. Thank you.

[Operator]

One moment for our next question. And that will come from the line of Paulina Rojas with Green Street. Your line is open.

[Daniel Purpura, Senior Associate - Equity Research at Green Street Advisors, LLC]

Good morning. You mentioned the efforts to reduce exposure to at risk tenants already. But more broadly, how are you seeing investor interest in these larger, I assume community centers or more power center like type of assets? And are there any particular retailers that the market is showing more hesitation to absorb sharing your concerns?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

So the first part of the question in terms of how I think the demand is quite strong in that category, Paulina, in the larger format. Obviously, when you look at the yield dispersion between the different property types, it can be very attractive to an investor and there's leverage available as well. So, and in fact, you know, when we transacted in our second joint venture with GIC, that was, that's a good indication of, you know, very sophisticated investor with an interest in the product type. And I think that carries through to a lot of other assets that we would consider. You know, in terms of, I think the second part of that about investors, I believe having issues with certain retailers.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

I mean, generally speaking, you know, when you're buying a center, especially when we're talking about the larger format centers, they're large enough that not one or two tenants is really going to change the view of the value. It's really more important to us on the backside of that just to, you know, over time change the makeup of our cash flow. So it's really more about us and less about what some other investor would think about a particular property.

[Daniel Purpura, Senior Associate - Equity Research at Green Street Advisors, LLC]

And then my other question is, so you're starting from a lower occupancy than your peers impacted by these recent bankruptcies. To what degree do you believe that sets the stage for above peer group growth in 'twenty six and 'twenty seven? And is this dynamic something we should expect, detailed performance? And to what degree do you feel comfortable being held accountable for an expectation like that?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Well, that's a multi part question you got there. But I'll say this that, yeah, you know, when you look at where we are from a lease percentage and an occupancy percentage, and where we've been, and you look at the activity that is brewing and that we just delivered in the second quarter, I would say we feel very optimistic that the lease percentage will gain, you know, significantly in the next three, four quarters. Obviously, as Tom pointed out, you know, when a big part of this disruption is obviously in the anchor space, and the anchor space turning on rent takes time. So to and we've always said that if you look at the deliveries that we've had and the rent commencement dates that we've had over the last few years, that generally is somewhere between twelve and eighteen months to turn on rent after lease execution. So, you know, pick the pick the middle, say it's fourteen, fifteen months.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Obviously, leases that we signed in Q3, you know, would be lucky to begin, you know, we'd probably begin turning on rent in late twenty six. And then leases we sign in Q4 would obviously be turning on in '27 based on those timelines. Now, the flip side of that is we're doing everything possible to accelerate that. In fact, if you look at some of the leases that we signed this year, we are having, we have three or four tenants that are opening within the calendar year, anchor tenants. So it can be done.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And that's what Tom and his team are very focused on, this can be done. So that's, I would say that when you look at the next couple years of growth, you you look at it over the next two, three years, we are positioned extremely well. And I think, you know, it's not reflected in the stock. And I think whether you own the stock today, or you're thinking about investing in it, I guarantee you, you won't be able to buy it for this price over the, you know, in the next couple of years. So I think we have a tremendous upside in front of us and we're totally comfortable with pressure.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

That was the third part of your question. That's what we're, you know, that's what we're here for, is to deliver. Obviously, we took a hit on these bankruptcies. We were more exposed. You look at the last major bankruptcies, we were more exposed.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And that's part of our strategy to move away from some of that and boost our cash growth. So I actually think this is a great time for us and a great time to get into the stock.

[Daniel Purpura, Senior Associate - Equity Research at Green Street Advisors, LLC]

Thank you for answering my multi question.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Always. Always. We appreciate it. Thank you.

[Operator]

One moment for our next question. And that will come from the line of Alexander Goldfarb with Piper Sandler. Your line is open.

[Alexander Goldfarb, MD & Senior Research Analyst at Piper Sandler Companies]

Hey, good morning out there. And John, I like that money back guarantee on where the stock will be in a few years. So gives Tom and the team a bunch to work on. So two questions here. The first one is on tariffs.

[Alexander Goldfarb, MD & Senior Research Analyst at Piper Sandler Companies]

Based on what you guys have reported in your peers, it doesn't seem like there was any impact in leasing activity, demand, anything from the retailers. So in your view, were the tariffs sort of a non issue from a retailer perspective either because one, all the weaker tenants were sorted out a few years ago or two, lack of supply? Or why do you think that there was just no consequence despite you know, the, you know, the stock market turmoil, the talking head turmoil, but it doesn't sound like from a retailer perspective, there was any slowdown at all?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Well, I think obviously there's a big difference between the stock market, which is trading, you know, all day long consistently, headlines are moving around. The retailers are looking out over much longer periods of time, Alex, obviously, when especially the national retailers who signed ten year leases. A lot of the as we've all said, a lot of the retailers pivoted during COVID to diversify their distribution channels and their supply channels. Now to say it's irrelevant, it's not irrelevant. You know, it's still a factor in the sense of stability.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And we've just gotten a lot more stable as these deals have been announced over the last few weeks. There's obviously still a few major trading partners that need to be buttoned up. But I would think that it's pretty clear that we're moving to a place of stability. And that's been a big part of it. But bottom line is that it kind of goes back to the supply demand equation that we always talk about.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

There is very limited supply in our space. And, you know, so when you have an opportunity to get a new space, and you're a retailer looking to grow, you want to move on that. You know, we've obviously taken a disruption in the last few months in this kind of really strange set of events with bankruptcies and then how people felt about all this, but now it seems to be very and we're in a much better place today.

[Alexander Goldfarb, MD & Senior Research Analyst at Piper Sandler Companies]

Yeah. It's interesting. I mean, it just shows the resilience of their supply chains that they can pivot, Second adjust, you know, to price question, Heath, can you just remind us on RPI, I know you're not 26 guidance, but still on RPI specifically, what is the noncash burn off that we should be thinking about as we're updating our '26?

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Sure. So going in from '24 to '25, you will call it was about $05 good news is it's about half of that going in from $25 into $26 and that'll be split between marks on the debt and marks on the leases.

[Alexander Goldfarb, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. So about $05

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

About $25 Correct.

[Alexander Goldfarb, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. Thank you. Thank you.

[Operator]

One moment for our next question. And that will come from the line of Michael Goldsmith with UBS. Your line is open.

[Michael Goldsmith, US REITs Analyst at UBS Group]

Good morning. Thanks a lot for taking my questions. Given your strategic transformation and capital recycling, you probably have some of the most unique insight into the raised buyer interest in the retail real estate space. So what have you learned about the buyers? What are they looking for specifically in the centers?

[Michael Goldsmith, US REITs Analyst at UBS Group]

And how are they thinking about cap rates? And then just I know this a lot, given that you had a buyer back out of City Center, do you think that is going to be more frequent just given the raised interest in the buyer pool going forward? Thanks.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

To take the last part, no. I think that's kind of an aberration with one particular group and those things happen. And it's why you have a pool and you go back to the pool. But as it relates to overall, I just think that there is very strong institutional demand for open air retail. It was a kind of a product type that some investors did not invest in for the last five plus years.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And as the ground has got a lot firmer and returns have improved, you've seen a lot of people move into the space. I just think it's a great kind of risk adjusted return for investors when you compare it to other product types, certainly from a going in cap rate perspective, but more importantly, from an IRR perspective. And so I think that you're just seeing a catch up. There's people that weren't in the space that now are very actively trying to rebalance their portfolios. Obviously, if you look at the typical institutional investor, they were probably overweighted to office, and now they're probably pivoting to other things, including retail.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

And when you look at the IRRs that can be generated, this is if you ask me, it's still undervalued. I mean, I would say that's going to change. And so you can't put one specific cap rate on it because of the different product types within the retail genre, so to speak. But demand is strong and I think we continue to transact on both sides.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

I would say that we're seeing some themes in product type, Michael. Obviously, core grocery, that demand has remained steady. You're seeing a pickup in demand for larger format. That's a lot due to the just the capital formation that's happening and the return hurdles that these guys need to make. So you're seeing again, a better bid for larger format because of the ingoing yield.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

And you're also seeing sort of lifestyle mix use also increase in the buyer pools, also the sellers as well. Legacy West, for example, Scottsdale Quarter, Burkdale Village, you're starting to see more of these sort of generational lifestyle assets trading and pricing accordingly. So it's been really interesting. We're seeing raw demand across the entire spectrum of the asset class.

[Michael Goldsmith, US REITs Analyst at UBS Group]

Thanks for that. Super helpful. And as a follow-up, you noted earlier, over 80% of the boxes that you recaptured as a result of the recent bankruptcies are leased or in active negotiations. For the remaining 20% or so. Are those in lesser locations and maybe more difficult to lease or is that just kind of the result of timing and competition and whatnot?

[Michael Goldsmith, US REITs Analyst at UBS Group]

Just trying to get a sense of, you know, the first 80% came pretty quickly, you know, does the next 20% take a little bit longer to get done just due to like they're just, they're not as in demand? Thanks.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Yeah, no, I don't think it's necessarily about that. And I don't think you can paint a broad brush when you're talking about 20% of these vacant boxes. I mean, if you go back in time, I think we peaked at like 98% occupancy in our box inventory. So, I mean, you're always going to have some that are more difficult than others and for various reasons. But also, I think it goes to the way that we negotiate and the objectives that we have.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

We I can't overemphasize the fact that this is not a, you know, a race to fill space. This is this is more about creating value for our stakeholders over the long term, not the short term. And frankly, if we wanted to fill space and erase, we would have done some deals that we don't want to do, that just aren't good for the long term value of the shopping center. So I think it's all going to come together over time, and we're just not counting quarters. We're thinking about the next two, three, four, five years.

[Michael Goldsmith, US REITs Analyst at UBS Group]

Thank you very much. Good luck in the back half.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Cooper Clark with Wells Fargo. Your line is open.

[Cooper Clark, VP - Equity Research at Wells Fargo]

Hey, thank you for taking the question. I wanted to ask about the JVs with GIC and comments earlier on continuing to grow relationship. Could you provide any color on the current pipeline of deals you're underwriting with them on the acquisition side and how we should think about the JV portfolio at GIC growing longer term as you execute on some of the strategic goals?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Yeah, I mean, look, in terms of our relationship with GIC, of course, we couldn't be more happy to partner with one of the world's most active and sophisticated investors. You know, I don't think we want to comment on specifics on underwriting with them. But bottom line is, as Heath mentioned, there are more and more opportunities for larger scale deals that we could look to JV. You know, we both have an understanding of what each other is interested in. So, you know, we will go about that one at a time.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

But yeah, we're super happy with the relationship and, you know, we want to go do a great job for them as a partner. Heath, do you want to comment?

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Yeah, I would just mention that neither party has a specific mandate. We don't have to, or exclusive with each other, to the extent that we're looking at something that they find interesting, that's where the opportunities will arrive. So we don't have to partner with them on the future, neither with us. So again, it's been a great partnership, it's over a billion dollars in value, and certainly it's repeatable.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Yeah. Let's just say it went from 0 to a billion pretty quickly.

[Cooper Clark, VP - Equity Research at Wells Fargo]

Great. Thank you.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Floris Van Dijkum with Ladenburg. Your line is open.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Hey, guys. Thanks for taking my question. So going back on legacy and returns, I think you talked about a 6.5% return that you're getting from that investment. How does that compare to the latest power center deal that you just disposed? And then maybe also talk about the purchase accounting because I think that your prior 6.5 cap was a cash yield.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

The gap yield, how does that differ? And what does that mark the retail markets or retail rents to market at? If you can give some more details, please.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Sure. So I'll first start with the yields, Florisson, and you're correct and you're remembering correctly, which I think is a really elegant part of this joint venture transaction is our effective yield taking into account the management fees on Legacy West is right around 6.5%. Conversely, 48% that we contributed into the partnership, the sell yield on that is also 6.5%. So in essence, we're doing is we took portions from our power centers and we used it to buy a portion of Legacy West at the same exact yield, which we think again, is extremely elegant. In terms of the purchase price accounting floors, it is going to be on a non cash basis, minimally accretive.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

So basically we're saying is that the mark to market on the below market leases is greater than the mark to market on the below market debt. So again, slightly accretive, nothing material, but net net positive.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Great. And then I guess my follow-up more, I guess, maybe for Tom or John, but your recovery ratio, I believe it's the highest in the sector around 92%. And it went up, even though your occupancy went down this past quarter. I'm curious, what are the initiatives that you are doing to keep improving that recovery ratio and how much higher can that go? Is there a ceiling there?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Well, don't, I mean, first of all, as you said, we are, if not the highest, one of the highest recovery ratios. I think the first thing to look at is that we have probably the most fixed CAM in our portfolio as compared to peers. And, you know, that's taken years to develop. So you can't just start it and think that it's going to make a big impact in a year. We've been working on this probably for seven years, converting to fixed CAM.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

94% of the deals, I think, or maybe 95% of the deals we've done so far this year have been fixed CAM. You know, so we know what we're doing in that space. Again, it's not just a simple transition. You have to kind of understand how do you run these portfolios when you set a budget and, you know, you need to hit that budget. I think we're very, very aggressive about how we operate.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

You know how we do that. You've seen how we do that for us on the ground. That flows through the whole organization that everyone is very laser focused on efficiency, but yet presenting a Class A product, which obviously we have, and you've seen that too. So I think it's I would turn to that and then just overall expense control, you know, how we control expenses at the property, how we control expenses in terms of pass through. So it's not just one silver bullet, it's a way of living, it's a way of operating. Tom, you want to?

[Thomas McGowan, President & COO at Kite Realty Group Trust]

Yeah, I mean, this is really where the team earns their keep. And this is where the grinding occurs in terms of making sure we're bidding out these contracts every year, getting efficiencies, doing the things that we need to do while keeping the balance that John said of delivering a first class center. But I think we're even more proud of not just the components of fixed CAM, but that below the belt, just really digging into the numbers and we'll continue to do that.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Thanks guys.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Thank you, Floris. And Floris, congratulations on your new shop. Great news.

[Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc]

Thanks Keith.

[Operator]

One moment for our next question. And that will come from the line of Hong Liang Zhang with JPMorgan. Your line is open.

[Hongliang Zhang, Vice President at JP Morgan]

Yes. Hey, guys. Two questions. I guess the first question, the fact that you have two JVs with the both GIC, could you provide some guideposts to how we should think about how the equity and JV line should trend for the rest of the year?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

You mean from an accounting perspective?

[Hongliang Zhang, Vice President at JP Morgan]

Yeah, for yeah, within the income statement.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

So geography wise, on the balance sheet, you're going see it all netted out and unconsolidated subsidiaries. And then you'll see the NOI, the depreciation and the interest expense all netted out again in the income statement under the unconsolidated line. However, what we've done is in the new presentation in the supplemental, you'll see we've consolidated it also. We've given you all those pieces individually, and that's for all of our unconsolidated JVs. So take a look in the supplemental, and you'll see the information in there.

[Hongliang Zhang, Vice President at JP Morgan]

Got it. And I guess my second question, your noncash rents bounced around a little bit so far this year. I was just wondering if there's anything onetime in the current quarter's numbers tied to the bankruptcies.

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

I don't think there's anything, you know, there's just natural lumpiness in that sometimes. So there's nothing in there that's, you know, other than we had a, you know, with a big lots bankruptcy, we did have a one time acceleration. So other than that, it shouldn't be too bouncy.

[Hongliang Zhang, Vice President at JP Morgan]

Okay, thank you.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Alex Fagan with Baird. Your line is open.

[Alexander Fagan, Analyst at Baird]

Hey, thank you for taking our questions. I guess one for me is what is the appetite for share buybacks today?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

I mean, I think, like we always say, we know we a we can currently have a buyback plan in place and an ATM plan in place. And, you know, we always want to be thinking about that from an opportunistic perspective. Also, what we've been clear about is that we're, you know, spending a lot of capital right now and getting really high returns on the backfilling of the space. And, you know, we still are growing our dividend and we still generate free cash flow. So bottom line is, think we're always looking at that and always thinking about it.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Certainly, as we move forward, you know, over the next several quarters and continue to backfill and continue to generate new cash flow, probably becomes more of a opportunity to look at. But you never know. I mean, we're always analyzing the best place to invest.

[Alexander Fagan, Analyst at Baird]

Got it. That's it for me. Thank you.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Ken Billingsley with Compass Point Research. Your line is open.

[Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC]

Hi. Good morning. I wanted to follow-up just on the anchors. You had discussed, and it was in the press release, about on the new anchor cash lease spread of 36%. Just looking at the supplement, looks like that was about 40% of anchor signing in the quarter.

[Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC]

What were you getting on the other piece? I'm not sure we understand.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Can you Comparable versus non comparable?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Ken, are you trying to ask what's the comparable versus non comparable anchors?

[Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC]

What's Yeah, well, yeah, since she said the new anchor lease, it looks like it was 207,000 feet, but it looks like you did 557,000. So I was just curious what you were getting on the other 350,000. What was the lease spread on those anchors?

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Yeah, I believe those are probably close to 25%.

[Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC]

And as we look into the remainder of the year, the expiring ABR, I think it's a twenty point one one dollars that jumped up. It's a very small sample, so less than 200,000 square feet. There any reason that that's significantly higher? Is there something unique about those tenants? Or are we likely to still see over 20% cash leave spreads through the remainder of this year even on that group?

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

I would say that composition of that pool is more shop heavy, which is why you're seeing a higher number. So there's nothing really happening there other than just the mix of leases that are left to get done.

[Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC]

So nothing unique about those anchor tenants themselves?

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

No.

[Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC]

To be done?

[Heath Fear, EVP & CFO at Kite Realty Group Trust]

Okay.

[Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC]

Thank you.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thank you.

[Operator]

One moment for our next question. And that will come from the line of Zachary White with BTIG. Your line is open.

[Analyst]

Hi. Yes. This is Zach White on for Mike Gorman. Thanks for taking my question. Can you expand more on the strategic gateway market exposure, specifically Seattle and the other non Sunbelt markets in the wake of Fullerton sale?

[Analyst]

Mainly asking, are you seeing any differentiation in performance? And are there additional opportunities to maybe rotate out of some of those markets and back into the Sunbelt as the transaction market starts to loosen?

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

No, I think in terms of performance, I think when we look at our markets, it's pretty broad based in terms of, you know, I think it's pretty tightly packed together in terms of how these markets are performing. We continue to be happy with the composition of our portfolio. I think we had made it pretty clear that in terms of California, that our representation there just was not big enough for us to continue to want to be there, quite frankly. And look, the reality is there's some difficult things about doing business there. But we only had three properties in California.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

We sold one, one of them is going through a rezoning, which we will then sell. And then the third one likely would be probably a candidate to sell as well. But as it relates to the rest of the, you know, those markets like Seattle and New York and Chicago, which we would consider gateway markets, we feel very good about our positions in those markets. That being said, we're always thinking about it. We're always thinking about what's the best place for us to operate, where do we generate the highest return, we compare margins, we look at demand in the pipeline.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

But right now that demand is pretty strong across the board. And I think if you look at where we're doing deals, we're doing deals across the board in all those markets that you mentioned. We'll see how it evolves. We're very happy. By the way, you know, we have 40% of our revenue comes from Texas and Florida.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

We still think that that's pretty smart. And then the balance in the Southeast has become is strong too. So we'll continue to always monitor it, but we're happy where we are right now.

[Analyst]

Got it. Okay. Great. Thanks for the time.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Thank you.

[Operator]

Thank you. I'm showing no further questions in the queue at this time. I would now like to turn the call back over to Mr. John Kite for any closing remarks.

[John Kite, Chairman of the Board of Trustees & CEO at Kite Realty Group Trust]

Well, I just want to say again, thank you all for taking the time to be on the call with us today, and we look forward to seeing you soon.

[Operator]

This concludes today's program. Thank you all for participating. You may now disconnect.

Participants

Executives

• Bryan McCarthy, SVP - Corporate Marketing & Communications
• John Kite, Chairman of the Board of Trustees & CEO
• Heath Fear, EVP & CFO
• Thomas McGowan, President & COO

Analysts

• Nick Joseph, Head - US Real Estate & Lodging Research Team at Citigroup
• Todd Thomas, MD & Equity Research Analyst at KeyBanc Capital Markets
• Andrew Reale, Equity Research Analyst at Bank of America
• Daniel Purpura, Senior Associate - Equity Research at Green Street Advisors, LLC
• Alexander Goldfarb, MD & Senior Research Analyst at Piper Sandler Companies
• Michael Goldsmith, US REITs Analyst at UBS Group
• Cooper Clark, VP - Equity Research at Wells Fargo
• Floris van Dijkum, MD & Equity Research at Ladenburg Thalmann & Co. Inc
• Hongliang Zhang, Vice President at JP Morgan
• Alexander Fagan, Analyst at Baird
• Kenneth Billingsley, Senior Analyst at Compass Point Research & Trading LLC
• Analyst