Kite Realty sees 25% of tenants ask for rent deferrals in first quarter

Indianapolis-based Kite Realty Group Trust said it was able to collect 67% of rents in April despite widespread retail disruptions caused by the COVID-19 pandemic.

Overall, the real estate investment trust reported a 16% year-over-year drop in revenue during the first quarter of 2020, as many tenants sought rent deferrals to weather business closures stemming from stay-at-home orders.

The firm owns interests in 82 retail properties totaling about 16 million square feet in 16 states. About half of Kite’s tenants have continued to operate in some capacity throughout the shutdowns.

During an earnings call Thursday, Kite Chairman John Kite said about 25% of the firm’s tenants have sought deferrals or not yet paid their rent.

“Every one of our retailers … are battling and doing everything they can possibly do” to survive this period, he said. “This is a very, very unique situation and, frankly, there are some companies that have been extremely disrupted.”

He said smaller tenants “can stay open and operating if well-capitalized tenants pay their rent,” but indicated—without offering specifics—that some larger tenants have also tried to seek assistance or pushed back on the requirement to pay rent.

Kite also clarified that no tenant’s rent obligations are being abated, merely delayed for a “very short window” of time.

While the publicly-traded company has worked closely with smaller tenants on deferrals, including through a $5 million loan program, the firm is still requiring larger companies to meet their obligations on time.

The firm’s loan program, which was open to companies with five or fewer national locations that were able to demonstrate true need, carries a 4% annual interest rate, with repayment over three years starting in August.

Kite missed analyst targets for both first-quarter revenue and funds from operations, or FFO. FFO is a closely watched measure in the REIT industry. It takes profit and adds back items such as depreciation and amortization.

Revenue, which was just shy of $70 million for the quarter, was 1.25% below the expectations of analysts from Zacks Investment Research. It also trailed revenue of $83.5 million a year ago.

FFO was $300 million, or 36 cents per share, compared with analyst expectations 38 cents per share. It was 8 cents lower per share than a year ago.

The company said it had a loss of $74,000, or less than 1 cent on a per-share basis. That was down from $5.7 million, or 7 cents per share, a year ago.

The company said it has about $350 million in cash, including about $300 million from its $600 million line of credit.

The firm is still trying to determine what will happen with dividends from this quarter, which were about 31 cents per share. The board will consider liquidity, cash flow and rent collections for May and future months before deciding.

“This is a situation that is a point in time. This is changing by the minute, by the hour, by the day,” Kite said. It’s “a battle of inches.”

KRG released its earnings report after the close of trading Wednesday. Company shares closed at $9.26 Thursday, up 6% on the day.