Unless the context suggests otherwise, references to “we,” “us,” “our” or the “Company” refer to Kite Realty Group Trust and our business and operations conducted through our directly or indirectly owned subsidiaries, including Kite Realty Group, L.P., our operating partnership (the “Operating Partnership”). References to “Kite Property Group” or the “Predecessor” mean our predecessor businesses.
Overview
Kite Realty Group Trust is a full-service, vertically integrated real estate company engaged in the development, construction, acquisition, ownership, and operation of high-quality neighborhood and community shopping centers in selected markets in the United States.
We conduct all of our business through our Operating Partnership, of which we are the sole general partner. As of December 31, 2011, we held an 89% interest in our Operating Partnership with limited partners owning the remaining 11%.
As of December 31, 2011, we owned interests in a portfolio of 54 retail operating properties totaling approximately 8.4 million square feet of gross leasable area (including approximately 2.9 million square feet of non-owned anchor space) located in nine states. Our retail operating portfolio was 93.3% leased to a diversified retail tenant base, with no single retail tenant accounting for more than 2.9% of our total annualized base rent. In the aggregate, our largest 25 tenants accounted for 38.1% of our annualized base rent. See Item 2, “Properties” for a list of our top 25 tenants by annualized base rent.
We also own interests in four commercial (office/industrial) operating properties totaling approximately 0.6 million square feet of net rentable area, all located in the state of Indiana. The leased percentage of our commercial operating portfolio was 93.3% as of December 31, 2011.
As of December 31, 2011, we also had an interest in five in-process development or redevelopment retail projects. Upon completion, these projects are anticipated to have approximately 0.8 million square feet of gross leasable area (including approximately 0.2 million square feet of non-owned anchor space). In addition to our in-process developments and redevelopments, we have future developments, which include land parcels that are undergoing pre-development activities and are in various stages of preparation for construction to commence, including pre-leasing activity and negotiations for third-party financings. As of December 31, 2011, these future developments consisted of three projects that are expected to contain 2.0 million square feet of total gross leasable area (including non-owned anchor space) upon completion.
In addition, as of December 31, 2011, we owned interests in various land parcels totaling approximately 101 acres. These parcels are classified as “Land held for development” in the accompanying consolidated balance sheets and are expected to be used for future expansion of existing properties, development of new retail or commercial properties or sold to third parties.
Significant 2011 Activities
Financing and Capital Raising Activities. As discussed in more detail below in “Business Objectives and Strategies,” our primary business objectives are to generate increasing cash flow, achieve long-term growth and maximize shareholder value primarily through the operation, acquisition, development and redevelopment of well-located community and neighborhood shopping centers. In 2011, one of our primary objectives was the cost effective and opportunistic strengthening of our balance sheet to allow access to various sources of capital to fund our future commitments. We endeavor in 2012 to continue improving our key financial ratios including our debt to EBITDA ratio. We ended the year 2011 with approximately $38 million of combined cash and borrowing capacity on our unsecured revolving credit facility and Fishers Station revolving line of credit. We will remain focused on 2012 financing activity and will continue to aggressively manage our operating portfolio and development pipeline.
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During 2011, we successfully completed various financing, refinancing and capital-raising activities including the following significant activities:
Unsecured Revolving Credit Facility
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In June 2011, we entered into an amended and restated three-year $200 million unsecured revolving credit facility with a one-year extension option. Terms of the agreement include pricing at LIBOR plus 225 to 325 basis points depending on the Company’s leverage and an expansion feature allowing up to $300 million of total borrowing capacity, subject to certain conditions.
Secured Financing Activity
In December 2011, we closed on a $16.8 million loan secured by the Eastgate Pavilion property to replace the existing secured variable rate loan that was scheduled to mature in April 2012. The loan has a maturity date of December 31, 2016 and a variable interest rate of LIBOR plus 225 basis points;
In August 2011, we closed on $82 million of nonrecourse loans secured by our Bayport Commons, Eddy Street Commons, Hamilton Crossing, Boulevard Crossing, Publix at Acworth, and Naperville Marketplace properties. Each of these loans has a ten-year term and a fixed interest rate of 5.44%;
In March 2011, we closed on a $7.8 million loan secured by land held for development in Naples, Florida. The loan has a 30-month term and a variable interest rate of LIBOR plus 300 basis points; and
In March 2011, we closed on a $21.0 million loan secured by the International Speedway Square property in Daytona, Florida. The loan has a ten-year term and a fixed interest rate of 5.77%.
Construction Financing
Draws totaling $15.7 million were made on the variable rate construction loans related to the Eddy Street, Commons, Cobblestone Plaza, South Elgin Commons, and Rivers Edge developments;
In November 2011, we closed on a $62 million construction loan to fund the construction of the Delray Marketplace development in Delray Beach, Florida. The loan has a maturity date of November 18, 2014 and variable interest rate of LIBOR plus 200 basis points, which reduces to 175 basis points when a coverage ratio of 1.0 is achieved; and
In December 2011, we closed on a $4.7 million construction loan to fund the construction of the Zionsville Walgreen’s development in Zionsville, Indiana. The loan has a maturity date of June 30, 2015 and a variable interest rate of LIBOR plus 225 basis points.
2011 Development and Redevelopment Activities
Rivers Edge in Indianapolis, Indiana was substantially completed and transitioned to the operating portfolio. This Indianapolis, Indiana center was successfully redeveloped and is 100% leased. The center is anchored by Nordstrom Rack, The Container Store, and buy buy Baby. Additional anchors Arhaus Furniture and an expanded BGI Fitness are projected to open in mid-2012;
Cobblestone Plaza in Fort Lauderdale, Florida was substantially completed and transitioned to the operating portfolio. As of December 31, 2011, this Whole Foods-anchored center was 92.2% leased; and
South Elgin Commons, Phase II, in Chicago, Illinois was completed and transitioned to the operating portfolio. This project is 100.0% leased and is anchored by Toys “R” Us/Babies “R” Us and Ross Stores and a non-owned Super Target.
As of December 31, 2011, we had five in-process development or redevelopment projects consisting of the following:
Delray Marketplace in Delray Beach, Florida was transitioned to an in-process development in 2011. This center will be anchored by Publix and Frank Theatres along with multiple shop retailers including Charming Charlie’s, Chico’s, Jos. A Bank, Max’s Grille, and White House | Black Market. The Company closed on a $62 million construction loan in November 2011 to fund future costs. The Company anticipates that total project costs of the development will be $93 million, of which $51.7 million had been incurred as of December 31, 2011;