Kite Realty Group Trust Announces First Quarter 2008 Financial Results

Kite Realty Group Trust (NYSE: KRG) (the "Company”) today announced results for its first quarter ended March 31, 2008. Financial statements and exhibits attached to this release include results for the three months ended March 31, 2008 and 2007. Financial and Operating Results For the three months ended March 31, 2008, funds from operations (FFO), a widely accepted supplemental measure of REIT performance established by the National Association of Real Estate Investment Trusts, was $11.6 million, or $0.31 per diluted share for the Kite Portfolio compared to $10.9 million, or $0.29 per diluted share, for the Kite Portfolio for the same period in the prior year. FFO per diluted share for the first quarter of 2008 increased 6.9% over the same period in the prior year. The Company’s allocable share of FFO was $9.0 million for the three months ended March 31, 2008 compared with the Company’s allocable share of $8.4 million for the same period in 2007. Given the nature of the Company’s business as a real estate owner and operator, the Company believes that FFO is helpful to investors when measuring operating performance because it excludes various items included in net income that do not relate to or are not indicative of operating performance, such as gains (or losses) from sales of operating properties and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. A reconciliation of net income to FFO is included in the attached table. The Company’s total revenue for the first quarter of 2008 increased 9.3% to $33.0 million from $30.2 million for the same period in 2007. The Company’s net income for the first quarter of 2008 was $2.7 million, compared to $1.6 million for the first quarter of 2007. "We are pleased to report significant progress on several company initiatives,” said John A. Kite, Kite Realty Group’s President and Chief Executive Officer. "In the first quarter alone, we successfully addressed $83 million in 2008 debt maturities, acquired an operating center with redevelopment potential in one of the best retail corridors in Indianapolis, and transitioned the first phase of Eddy Street Commons at Notre Dame to the current development pipeline. Our first quarter financial results were also strong with FFO per share and revenue growth of 6.9% and 9.3%, respectively.” Operating Portfolio As of March 31, 2008, the Company owned interests in 52 retail operating properties totaling approximately 7.6 million square feet. The owned gross leasable area ("GLA”) in the Company’s retail operating portfolio was 92.8% leased as of March 31, 2008, compared to 94.8% leased as of the end of the prior quarter. Contributing to this decrease was the termination of our lease with Circuit City at Sunland Town Centre and the first quarter transfer of two properties in the leasing phase from the development pipeline to the operating portfolio. In addition, the Company owned five commercial operating properties totaling 562,652 square feet. As of March 31, 2008, the owned net rentable area of the commercial operating portfolio was 98.4% leased, compared to 93.0% as of the end of the fourth quarter of 2007. On a same property basis, the leased percentage of 50 total operating properties was 94.3% at March 31, 2008 and 95.5% at March 31, 2007. Same property net operating income for these properties increased 0.5% between the three months ended March 31, 2008 and 2007. Excluding two boxes previously occupied by Office Max and Circuit City at Sunland Town Centre, the 50 properties were 95.5% leased at the end of both March 31, 2008 and 2007 and net operating income increased 1.7% between the quarters then ended. The Company is currently negotiating with two junior box retailers to occupy the vacated spaces. Capital Markets Activities The Company extended the maturity dates for eight loans totaling approximately $83 million during the first quarter. The weighted average interest rates on these loans were comparable to the previous rates. Included in the first quarter activity was an eighteen-month extension of the $55 million Parkside Town Commons loan at a loan rate of LIBOR plus 0.85%. The Company financed the acquisition of Rivers Edge Shopping Center in Indianapolis with proceeds from the November 2007 sale of a single-tenant property in Puyallup, Washington and loan proceeds bearing interest at a rate of LIBOR plus 1.25%. Development Activities As of March 31, 2008, the Company owned interests in 7 retail properties in the current development pipeline that are expected to total approximately 1.3 million square feet. Approximately 559,000 square feet are anticipated to be owned directly by the Company or through joint ventures. The remaining square footage will be owned by anchor tenants or joint venture partners upon completion of the developments. The total estimated cost of these projects is $185 million, of which approximately $92 million had been incurred as of March 31, 2008. Approximately 71.5% of the owned GLA at properties in the development pipeline is currently leased or in various stages of lease negotiations with tenants. The first phase of the Eddy Street Commons project at the University of Notre Dame was transitioned to the current development pipeline as of the end of the quarter. Phase I is expected to total 165,000 square feet of retail, office, and multi-family components and is anticipated to cost $70 million. The Company will own the retail and office portions of the project with an estimated total cost to complete of $35 million. Tax Increment Financing ("TIF”) bonds of $30 million have been sold and fully funded to finance a 1,281 space parking facility and all site infrastructure improvements. The City of South Bend is funding an additional $5 million of project incentives. During the first quarter, the Company transferred two properties from the development pipeline to the operating portfolio. Naperville Marketplace is a 169,600 square foot community shopping center located in the western suburbs of Chicago. The property is anchored by TJ Maxx, PetSmart, and a non-owned Caputo’s Fresh Market. Bridgewater Marketplace I is a 50,820 square foot center anchored by a Walgreens that was previously developed and sold by the Company. Leasing Activities During the first quarter, the Company executed 10 new leases for first generation space totaling 154,000 square feet of gross leasable area. These new lease rates represent a 42.1% increase over the existing average rental rates in our operating portfolio. Rental rate growth on a cash basis increased 4.8% on five renewal leases. Acquisition Activities In February 2008, the Company acquired Rivers Edge Shopping Center in Indianapolis, Indiana in an off-market transaction for $18.3 million, or $165 per square foot. Rivers Edge is a 110,896 square foot community shopping center and is currently 79% leased. The Company intends to redevelop this property which is located along the vibrant Keystone-Castleton retail corridor and has an estimated average household income of $80,235 within a five-mile radius. The purchase transaction was financed with proceeds from the November 2007 sale of a single-tenant property in Puyallup, Washington and acquisition debt bearing interest at a rate of LIBOR + 1.25%. During the first quarter, the Company acquired the remaining 15% economic interest from its joint venture partner in its Bolton Plaza property in Jacksonville, Florida for $250,000. On April 4, 2008, one of the Company’s consolidated joint ventures, in which the Company owns an 85% interest, purchased approximately 4 acres of land in downtown Indianapolis, commonly known as Pan Am Plaza. This land is situated across the street from the Convention Center and adjacent to the recently constructed Indianapolis Colts Stadium. The joint venture intends to develop restaurants and retail space on this property. Distributions On May 6, 2008, the Board of Trustees declared a regular quarterly cash distribution of $0.205 per common share for the quarter ended June 30, 2008 to shareholders and unit holders of record as of July 7, 2008. This distribution will be paid on or about July 17, 2008. On February 16, 2008, the Board of Trustees declared a regular quarterly cash distribution of $0.205 per common share for the quarter ended March 31, 2008 to shareholders and unit holders of record as of April 7, 2008. This distribution was paid on April 17, 2008. Earnings Guidance The Company is reaffirming its earnings and FFO guidance for the year ending December 31, 2008 in the range of $1.28 to $1.33 per diluted common share. Following is a reconciliation of the calculation of net income per common share to FFO per share: FFO Guidance Range for 2008   Low   High   Diluted net income per common share $0.39 $0.43 Limited Partners’ interests in Operating Partnership 0.11 0.12 Depreciation and amortization of consolidated entities 0.77 0.77 Depreciation and amortization of unconsolidated entities 0.01   0.01 Diluted FFO per common share $1.28   $1.33 Earnings Conference Call Management will host a conference call on Friday, May 9, 2008 at 10:00 a.m. ET to discuss financial results for the quarter ended March 31, 2008. A live webcast of the conference call will be available online on the Company’s corporate website at www.kiterealty.com. The dial-in numbers are (888) 713-4215 for domestic callers and (617) 213-4867 for international callers (passcode 97183311). After the live webcast, the call will remain available on the Company’s website until August 9, 2008. In addition, a telephonic replay of the call will be available until June 9, 2008. The replay dial-in telephone numbers are (888) 286-8010 for domestic callers and (617) 801-6888 for international callers (passcode 68240940). About Kite Realty Group Trust Kite Realty Group Trust is a full-service, vertically integrated real estate investment trust engaged primarily on the development, construction, acquisition, ownership and operation of high quality neighborhood and community shopping centers in selected growth markets in the United States. The Company owns interests in a portfolio of operating retail properties, retail properties under development and redevelopment, operating commercial properties, a related parking garage, and parcels of land that may be used for future development of retail or commercial properties. Safe Harbor Statements regarding the Company’s 2008 FFO and earnings guidance, including the underlying assumptions are, and certain statements in this document that are not historical fact may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company to differ materially from historical results or from any results expressed or implied by such forward-looking statements, including without limitation: national and local economic, business, real estate and other market conditions; the ability of tenants to pay rent; the competitive environment in which the Company operates; financing risks, including access to capital at desirable terms; property management risks; the level and volatility of interest rates; financial stability of tenants; the Company’s ability to maintain its status as a REIT for federal income tax purposes; acquisition, disposition, development and joint venture risks; potential environmental and other liabilities; and other factors affecting the real estate industry generally. The Company refers you to the documents filed by the Company from time to time with the Securities and Exchange Commission, which discusses these and other factors that could adversely affect the Company's results. The Company undertakes no obligation to publicly update or revise these forward-looking statements (including the FFO and net income estimates), whether as a result of new information, future events or otherwise. Kite Realty Group Trust Consolidated Balance Sheets (Unaudited)     March 31, 2008 December 31,2007 Assets: Investment properties, at cost: Land $ 223,550,510 $ 210,486,125 Land held for development 23,622,458 23,622,458 Buildings and improvements 662,284,559 624,500,501 Furniture, equipment and other 4,825,396 4,571,354 Construction in progress 171,371,783 187,006,760 1,085,654,706 1,050,187,198 Less: accumulated depreciation (90,990,680 ) (84,603,939 ) 994,664,026 965,583,259 Cash and cash equivalents 19,262,193 19,002,268 Tenant receivables, including accrued straight-line rent of $6,974,101 and $6,653,244, respectively, net of allowance for uncollectible accounts 15,404,565 17,200,458 Other receivables 8,998,848 7,124,485 Investments in unconsolidated entities, at equity 1,056,810 1,079,937 Escrow deposits 11,698,693 14,036,877 Deferred costs, net 20,509,562 20,563,664 Prepaid and other assets 3,744,943 3,643,696 Total Assets $ 1,075,339,640 $ 1,048,234,644 Liabilities and Shareholders’ Equity: Mortgage and other indebtedness $ 677,290,946 $ 646,833,633 Accounts payable and accrued expenses 38,888,403 36,173,195 Deferred revenue and other liabilities 26,565,569 26,127,043 Cash distributions and losses in excess of net investment in unconsolidated entities, at equity 1,281,198 234,618 Minority interest 4,422,670 4,731,211 Total Liabilities 748,448,786 714,099,700 Commitments and contingencies Limited Partners’ interests in Operating Partnership 72,896,660 74,512,093 Shareholders’ Equity: Preferred Shares, $.01 par value, 40,000,000 shares authorized, no shares issued and outstanding — — Common Shares, $.01 par value, 200,000,000 shares authorized, 29,076,441 and 28,981,594 shares issued and outstanding at March 31, 2008 and December 31, 2007, respectively 290,764 289,816 Additional paid in capital and other 293,409,467 293,897,673 Accumulated other comprehensive loss (5,004,530 ) (3,122,482 ) Accumulated deficit (34,701,507 ) (31,442,156 ) Total Shareholders’ Equity 253,994,194 259,622,851 Total Liabilities and Shareholders’ Equity $ 1,075,339,640 $ 1,048,234,644 Kite Realty Group Trust Consolidated Statements of Operations For the Three Months Ended March 31 (Unaudited)   Three Months Ended March 31, 2008   2007 Revenue: Minimum rent $ 18,379,614 $ 17,233,952 Tenant reimbursements 5,210,545 4,678,714 Other property related revenue 5,157,085 2,451,935 Construction and service fee revenue 4,288,522 5,870,553 Total revenue 33,035,766 30,235,154 Expenses: Property operating 4,479,748 4,089,915 Real estate taxes 3,167,449 2,638,065 Cost of construction and services 3,764,234 5,065,374 General, administrative, and other 1,709,949 1,427,076 Depreciation and amortization 8,153,857 8,727,389 Total expenses 21,275,237 21,947,819 Operating income 11,760,529 8,287,335 Interest expense (7,253,566 ) (6,122,344 ) Income tax expense of taxable REIT subsidiary (1,153,228 ) (254,615 ) Other income 65,232 109,543 Minority interest in loss (income) of consolidated subsidiaries 4,156 (1,756 ) Equity in earnings of unconsolidated entities 61,174 70,296 Limited Partners’ interests in the Operating Partnership (776,998 ) (469,903 ) Income from continuing operations 2,707,299 1,618,556 Operating income from discontinued operations, net of Limited Partners’ interests — 19,494 Net income $ 2,707,299 $ 1,638,050   Income per common share – basic & diluted: Continuing operations $ 0.09 $ 0.06 Discontinued operations — — $ 0.09 $ 0.06   Weighted average Common Shares outstanding - basic 29,028,953 28,859,164 Weighted average Common Shares outstanding - diluted 29,059,809 29,177,004 Dividends declared per common share $ 0.205 $ 0.195 Kite Realty Group Trust Funds From Operations For the Three Months Ended March 31, 2008 and 2007 (Unaudited)   Three Months Ended March 31, 2008   2007 Net income $ 2,707,299 $ 1,638,050 Add Limited Partners’ interests in income 776,998 475,563 Add depreciation and amortization of consolidated entities, net of minority interest 7,983,114 8,635,874 Add depreciation and amortization of unconsolidated entities 101,057 101,202 Funds From Operations of the Kite Portfolio1 11,568,468 10,850,689 Deduct Limited Partners’ interests in Funds From Operations (2,579,768 ) (2,430,554 ) Funds From Operations allocable to the Company1 $ 8,988,700 $ 8,420,135   Basic FFO per share of the Kite Portfolio $ 0.31 $ 0.29 Diluted FFO per share of the Kite Portfolio $ 0.31 $ 0.29   Basic weighted average Common Shares outstanding 29,028,953 28,859,164 Diluted weighted average Common Shares outstanding 29,059,809 29,177,004 Basic weighted average Common Shares and Units outstanding 37,367,201 37,259,012 Diluted weighted average Common Shares and Units outstanding 37,398,057 37,576,852       1 "Funds from Operations of the Kite Portfolio” represents 100% of the operating performance of the Operating Partnership’s real estate properties and construction and service subsidiaries in which the Company owns an interest. "Funds from Operations allocable to the Company” reflects a reduction for the Limited Partners’ weighted average diluted interests in the Operating Partnership.