Kite Realty to unload up to $500M in properties

Indianapolis-based Kite Realty Group Trust says it plans to sell between $350 million and $500 million of its non-core properties this year—and has already put 11 properties on the market—but it’s not saying which of its holdings it plans to sell.

After announcing the plan and underwhelming fourth-quarter numbers on Tuesday afternoon, shares of the retail-focused real estate investment trust fell in Wednesday morning trading about 5.6 percent, from $16.93 to $15.98. Including Wednesday morning's results, share value has increased about 3 percent in the last year.

Kite currently owns 111 properties with a combined value of $3.6 billion, so its planned divestment would reduce the value of its holdings by 10 to 14 percent. 

The property sales will help Kite reduce its debt levels, improve the quality of its assets, and focus its efforts on preferred markets around the country, Chairman and CEO John Kite said during a call with analysts Wednesday morning.

Over the past few months, Kite said, “we’ve looked at reams of data on the country’s top 50 markets.” 

From this analysis, the company has developed a list of 15 to 20 markets with favorable population and income growth trends, among other metrics. 

Those markets include Nashville, Tennessee; Dallas; Charlotte and Raleigh, North Carolina; and Orlando, Florida, among others. The long-range goal, Kite said, is to eventually acquire additional properties in its preferred markets.

Kite said the company has identified the properties it plans to sell and has already put 11 of these properties on the market, with a combined value of $250 million. He did not identify those properties, but said they represent a mix of retail power centers, neighborhood centers, legacy properties and acquisitions.

“These assets are stable, but they just don’t have the profile of what we’re going to end up with afterwards,” Kite said. 

Kite also said that the company does not plan to get rid of all its properties in non-preferred markets. Kite Realty currently owns properties in 46 metro areas within 19 different states. 

The 2019 divestitures will come on top of Kite Realty’s sale of about $200 million of its properties in 2018. Kite said the company is acting swiftly to sell a significant number of properties at once. “We are not embarking on a multi-year disposition program,” he said.

Kite Realty also released its fourth-quarter and year-end financial reports Tuesday. 

The company posted a quarterly loss of $31.2 million, or 37 cents per share, as compared with profits of $2.3 million, or 3 cents per share, during the same period a year earlier.

For the full year, Kite Realty posted a quarterly loss of $46.6 million, or 56 cents per share. In 2017, the company posted a profit of $11.9 million or 14 cents per share.

The company said its 2018 results were negatively affected by $70.4 million in impairment charges related to certain properties.

Kite Realty’s funds from operations, a key performance metric for real estate investment trusts that indicates cash flow, totaled $39.9 million, or 48 cents per share, for the fourth quarter as compared with $41.8 million, or 50 cents per share, during the same period a year earlier.

The company’s full-year funds from operations totaled $167.1 million, or $2 per share; as compared with $170.8 million, or $2.04 per share, in 2017.