Kite Realty Raises Property Outlook as Leasing Spreads Widen
Blended cash leasing spreads widened to 15.9% as renewal pricing strengthened.
Kite Realty Group Trust (KRG), the shopping-center landlord, posted second-quarter net income attributable to common shareholders of $161.3 million, or $0.79 a diluted share, up from $110.3 million, or $0.50 a share, a year earlier.
Net income also climbed from $11.4 million in the first quarter, aided by an $87.7 million property-sale gain and a $60.6 million gain from deconsolidating a joint venture. Core FFO offered a steadier view of operations, slipping to $108.4 million from $113.3 million a year earlier while holding sequentially at $0.52 a diluted share.
Same-property NOI grew 3.7% from a year earlier, accelerating slightly from 3.6% in the first quarter. Total property NOI fell 8.7% to $143.3 million as NOI from sold properties declined to $7.6 million from $23.4 million. Same-property revenue rose 3.7% to $179.9 million, matching the increase in same-property expenses.
Leasing shifted toward larger transactions. Kite Realty completed 128 leases covering about 1.0 million square feet, compared with 151 leases covering 707,000 square feet in the preceding quarter. Cash spreads on comparable new and non-option renewal leases widened to 24.7% from 19.0%, driven by renewal spreads that climbed to 17.7% from 12.3%.
Retail leased occupancy edged up to 94.8%, with the year-over-year improvement accelerating to 150 basis points. Anchor occupancy reached 96.3% and small-shop occupancy rose to 92.3%. Annualized base rent increased sequentially to $23.41 a square foot, while signed-not-open NOI grew to about $37.3 million.
Kite Realty affirmed its 2026 NAREIT and Core FFO forecast of $2.06 to $2.12 a share and raised its same-property NOI growth outlook to 3.0%-4.0% from 2.5%-3.5%. The company also lowered its assumed bad-debt reserve and reduced the midpoint of its net-interest-expense forecast to $114.7 million from $121.2 million.
Full-year net-income guidance now stands at $1.02 to $1.08 a diluted share, up from $0.33 to $0.39, reflecting the property-sale and joint-venture gains. Net debt to Adjusted EBITDA improved to 5.1 times from 5.2 times at the end of the first quarter.
The company sold eight non-core assets for $314.0 million and acquired two neighborhood centers for $136.0 million during the quarter. It also began a 429-unit second phase at One Loudoun that is expected to cost about $175.1 million, partly supported by a $107.5 million construction loan, extending its development commitments as asset sales reshaped the portfolio.