Welcome to Citi's 2026 Global Property CEO Conference. I'm Craig Mailman with Citi Research. We're pleased to have with us today Kite Realty Group and CEO John Kite. This session is for Citi clients only, and disclosures have been made available at the corporate access desk. To ask a question, you can raise your hand or go to liveqa.com and enter code GPC26 to submit questions. John, I'm gonna turn it over to you to introduce your company and team, provide any opening remarks, tell the audience the top reasons an investor should buy your stock today, and then we can jump into Q&A. Great. Thank you. Wait, there we go. red is on. Like, where'd this come from? It's the opposite, man. Did- No, no green lights here. Sorry about that. Thanks, Craig. Good morning, everybody. We're Kite Realty Group. We own about 170 open-air shopping centers throughout the country in 24 states, predominantly in the Sun Belt. About 2/3 of our income comes from the Sun Belt. Our TWO biggest states are Florida and Texas, we clearly have a strategy regarding, you know, the Sun Belt. Also about 80% of our ABR comes from properties with a grocery component, we're focused on that. We're currently just finishing the year at 95% leased, which is a strong increase from the last couple quarters. Our average base rent right now has grown to $23, which is a significant increase over the last couple years. Basically turning to the, I guess, the top three reasons from our perspective, it's pretty simple. You know, it's really more categories. One is strategy, two is execution, and three is value. I would add balance sheet, so I'm gonna go four. Sorry. Let's talk about strategy. If you rewind the clock a year ago to this conference, Craig, when we were sitting here, you remember people talking about concern around us acquiring a really large asset and it was weighing down. Why would we do that when we were trading where we're trading? You know, we were trying to explain that we were going to be prudent about how we would capitalize any large acquisition, and we ended up doing that with one of the best, you know, investors in the world in GIC as a partner. The deal was accretive. It made a lot of sense. At that same time, we made it clear that that was going to be part of a strategy of us pivoting away from a portion of the portfolio that we viewed as quality but lower growth, larger power centers. In the, you know, in the year that's gone by, you know, we've done exactly that. You know, we've reduced our exposure to power centers by almost, I think, 500 basis points, if I'm right, guys. 400, 500 basis points. Our growth rate has gone up, you know, in two years from 135, or 1.35% bumps to 1.8%, I believe today. The reason I'm talking about this is we have a very clear strategy, and we're executing on that strategy. If you look at the reduction in watchlist tenants that's come about, that's been significant. As a product of all this activity, you know, we bought back $300 million of stock in an accretive manner. You know, I think a lot of people talk about their frustrations and don't do anything about it. I think that's part of the execution part that I brought up, is we are executing very clearly on that strategy. I think we're going to continue to do that. As we do that, the value proposition becomes more evident. Again, we didn't buy back the stock for some point in time spot exercise. We did it because of the strategy, right? It created that opportunity. I think you'll see us continue to try to execute on that. From a value perspective, that kind of is what it is. I mean, right now we're at a period of time where, you know, when you look at the implied cap rate, you look at the NOI yields, you look at a lot of different metrics, it screens quite attractively. Again, I think that will take care of itself if we continue to stick to the strategy and execute. Of course, the balance sheet, you know, is sacrosanct in protecting it. As you see us execute on that strategy, you should not expect us to pressure the balance sheet in a material way. You know, we ran this business in 2008 and 2009. We remember what that was like. You always have to be prepared, and that's why we have the balance sheet that we have. That's a lot of rambling, but it's pretty simple. You know, we're gonna execute on that strategy. No, that was a good intro and a lot to unpack there. I guess maybe starting on the balance sheet, 'cause you guys are, you know, the lowest levered in the peer group. I kinda talked with Heath about this more recently. At some point, the optimal leverage level, it feels like you guys are running too efficiently or I guess less efficient, if you wanna look at it that way. I understand the hesitancy post GFC to run at a higher leverage level, but you're competing against private folks who can run with more leverage. I'm just kinda curious, the back and forth on, you know, would you ever bring it up to 6x for a short period of time to get a deal done with a pathway to bring it back down, or is it you guys are just dogmatic, never going above 5.5x to EBITDA? Go ahead. You don't wanna go down that road again. It's a great question, Craig. You know, listen, we've been very consistent always saying that we want to run between 5x and 5.5x. You know, as of late, we've been actually been running under that. As John said, you know, part of the ability to execute on this strategy is because of the strength of the balance sheet, because we have that conviction that allows us to take some risk. You know, it's a risky proposition to do... You know, everyone thinks it's so simple to sell assets and buy back stock, but there's a whole timing perspective there. You can get caught either way. If you had a good balance sheet, it's okay. I'm never gonna say we're never gonna run it above 5.5x. If there was an instance where there was some compelling transaction that was gonna temporarily drive us above it, we would do that. I would also be able to articulate in a very clear manner exactly how it was going to get back down into the range. The answer is yes. For a great opportunity, would we run it up a little bit? Sure. Would it stay there? Absolutely not. Yeah. I think there's a big difference between 6x and 5.5x as an example. I think 5.5x is you're at the top end of your of starting to lose flexibility. At 6x, I think you've lost flexibility, because if you just things happen very fast and you know, everybody sits there and thinks they can unwind this back down. When there's no liquidity, there's no liquidity. So we're not gonna put ourselves in that position. I do think he's right that, you know, being where we are right now, even if even again, executing on this strategy, maybe it goes up a little bit, maybe it goes up 20, 30 basis points over the next couple of quarters. You're still very low in the, in the big scheme of things, and you still have flexibility. That's why if you go back to 2021, I mean, that's why we were able to be in the position to do the RPAI merger, right? We were in the right place at the right time. Again, I think we're very comfortable with it. The other thing to think about, Craig, is that when you look at the yield curve and you look at how you price acquisitions, it's not enough juice in there right now. It's an interesting thing when you look out in the future, where the yield curve is right now. You have to assume that, you know, you're gonna be acquiring assets. If you're just out buying, you know, you're gonna be acquiring assets, and you're gonna have pressure on it right away just because of the curve. I think we'll be smart and deploy where we get the highest return. You know, we saw one of your peers price at like the tightest spread that they've ever done. I mean, where do you think, given your leverage profile and credit profile from the rating agencies, where do you think you can raise 10-year debt today or seven-year debt? Like, what's the spectrum of all-in costs? I mean, I think it's somewhere between 95 and 105 over, right? That's gonna be we saw, you know, PECO printed at 97 basis points. That's what you're referring to. You know, I think we can price, you know, at or inside of them. That's, that's the, that's the current marker. You guys have been active on the disposition side. You've been buying back some stock here. You talked about maybe another $500 million that could be put out in the market and sold longer term. How is the market, the receptivity of that, those assets to the market? Is it similar pricing to what you got on the last slug? You know, does that continue to embolden you to do that, to buy back more stock? Leave it there, and I'll follow up after. Well, look, I think the market is very liquid. There is a real bid for retail across the spectrum of different product types. Yeah, I think we think that the market, in terms of those particular type of assets, is the same as it was a couple months ago, if not better, just because there's more capital and less product, which is really what drives value. Yeah, I think that's out there. You know, we're not so certain in terms of what will happen and what the sizes would be, and, you know, it's more opportunistic than that. We'll see where that goes. I think from a strategy perspective, as I keep saying, that is part of the strategy to position ourselves to have a portfolio that's generating a higher growth rate. You do that by, you know, sometimes selling the ones that are pulling down the portfolio because of the growth rate. Yeah, that's a possibility. I don't know about that number, but that's a possibility. Yeah. I would add, Craig, you know, we said when we started this whole thing that there's you know, for us to do another pool, there would have to be market demand for the assets we want to sell, and we'd have to be able to put the proceeds to use logically in a way that was sort of flat or, you know, minimally dilutive or accretive to earnings. you know, we're still not through deploying the proceeds from the first round of sales, right? Before we can start considering the second round, we've got to get this finished and deployed. when we, you know, if we approach the second round, again, we've got to be able to have a clear path on how to deploy. Yeah. That's how we think about it. It's kind of a you stairstep your way through this, which is why we did it in phases. We don't want to get too stressed out as being a net seller. We don't want to get too stressed out in buying stock back that, you know, we haven't generated proceeds for yet. It's a, it's a very methodical. You know, we call it internally, it's threading a needle, so to speak, to get all this stuff done. Again, stay tuned on the second half of this. Yeah. It's a lot easier to be a seller than a buyer, I can tell you that. Yeah. That's the thing too, right? Like, if you sell another pool, you have to kind of thread the needle, I guess, to use your turn of phrase, on maintaining as much proceeds as you can, right? You don't wanna have to special it all out because that defeats the purpose versus being able to have the proceeds to buy back or kind of redeploy. I mean, at this point, would you have enough uses to even outside of buybacks to make sense to do the next slug, o r as you said, I mean, could this be a 2027 event as you guys work through the proceeds of the last round? I'm just trying to get a sense of expectations of management around, you know, everyone... We had talked about maybe doing the next pool, but could it be a longer period between this last one and maybe the next one? You wanna start? Listen, again, the period of time is all gonna be driven by our ability to finish this first, you know, circuit out before we commence the next one. Again, it's a stairstep process. If we were to do a second pool, it would be a very similar exercise. You know, it may not be the exact percentages in terms of buying back stock or, you know, doing 1031 acquisitions. To your point, there would be gains associated with it, so we would have to be acquiring some assets. Listen, we're not completely opposed to a special dividend. It's a perfectly good use of capital. That would obviously be a dilutive event. You know, from a IRR perspective, it's better for investors if we're thinking of a special dividend out earlier rather than later. Again, it's also market dependent and, you know, we wanna get through this first cycle first. We'll start thinking about the second piece. Just one last one on this topic, then we'll move on, I promise. You know, you guys talk about the impacts of the higher leverage. As you guys think about buybacks and the capacity or, you know, ultimate size of that, right, how do you think about the impacts on liquidity, the impact on where you are from a index weighting and what kind of pressure that could put on from the passes? What do you think the right number for buybacks is that's accretive, it shows that you guys have confidence in the company, but also doesn't trigger some technical issues that ultimately increase your cost of equity, which is counterproductive to what you guys are trying to do. Well, I mean, I think, I think at this point, we're not terribly concerned about that part of it in terms of the size. I mean, we're not talking about, you know, half the business. So it's been relatively minor in terms of impact to liquidity and, you know, any availability to the indexes. But of course, you have to think about that. You know, certain investors, frankly, are very opposed to any shrinking of the company, and certain investors are very engaged by the idea of you shrinking the company. It's really you can't please everybody all the time. I think we just have to try to do the best we can to manage that. It's really. Again, I don't wanna keep coming back to it. We have a clear understanding of where we wanna end up. So this isn't random. This is a very clear understanding of where we wanna end up, and we're well on the way to that. And if we do another something of that nature, it would be with that strategy in mind. If we don't, it means that, you know, we feel like we can do other things to get growth. The whole agenda here is to get the company or to get the portfolio position to generate the kind of annual return, you know, vis-à-vis earnings growth and dividend that an investor will say, "That's worth owning." That's it. I mean, we've got to position ourselves to be that person and to be one of those companies that this company gets it. They take the cues from the capital markets. They know when to do the kind of things that we just did and when not to. That really is what comes. It's our most important job of us sitting up here, is how we allocate capital, by far. Craig, I'll just note that we have not seen any decline in our average trading volume, so it's not impacting the liquidity of the stock. Actually, our enterprise value today is higher than it was by virtue of the expansion of our multiple. We haven't shrunk from an enterprise value perspective as well. I misled you. There was a question coming in on buyback. I'll ask that, and then there's other questions that are not buyback related, I promise. It's just do stock buybacks still make sense after the rise in the stock price? Sorry, what was the last part? Do stock buybacks still make sense after the rise in the stock price? I mean, as we said, we're still analyzing that. The needle moves all the time. We think if we transact where we think we would transact on something, then it would still make sense. Yeah. I I mean, FFO yield right now is 8% still at $26. We would be trading, you know, at cap rates well inside of that. A couple other questions here. Do you see a market that is shrinking or expanding? For some years, we have seen B or C assets struggle, is there only space for new A class assets or B and C improving? Well, I don't know about these ratings, B and C. I mean, our business is a little that sounds like a mall thing. In terms of open air, you know, there's a place for each product type in my mind, and there's a place for all kinds of different types of real estate and open air. You can see it vis-à-vis the occupancy growth that's happened, the rent growth. I mean, if you just look at our the one metric that we think about the most, you know, in terms of leasing spreads is, you know, our non-option renewals. Those have been double-digit for a long time now, and that's a real change in our business, which indicates strength. You know, a B asset, you know, may not be desired by a publicly traded company, but it will absolutely be desired by the right capital stack. That's all about, you know, what kind of discounted cash flow analysis are you doing against that risk-adjusted return? That's why people wanna own that stuff. It's pretty stable. It generates a nice yield, and you've got positive arbitrage and leverage right now, and a lot of liquidity. I think it's a little different than, like, there's a cutoff somewhere. To what, if any extent, will a desire to show accelerating earnings growth in 2027 factor into your capital allocation decisions in 2026? You know, we generally don't think that way. We generally don't short-term think. We're trying to create a portfolio that has growth over the next five years, and I understand that we have a constituency of investors that do have to think that way, so we have to understand and respect and appreciate that. When we talk about the things that we're going to do, we always talk about in terms of our goal in any sale and any distribution of those proceeds of that sale is always to do limited or no damage to that short-term growth rate. If we think that it's increasing the value of the business in the long term, sometimes you do have to do that, and we have done that in the past. Fortunately, what we just did, the actual transactions were accretive. It's the deployment of the capital, that takes time. That, you know, money, you know, time hurts you. I think we continue to look to do whatever we do in an accretive manner, but if it's, if it's not, it would be very minimal, in terms of dilution. That would be the goal. You wanna add to that, Andrew? One more. Other than CPI built lease structure, are there any material opportunities to increase same-store NOI going forward, i.e., CapEx to improve quality, et cetera? Well, second part of the question was what, Craig? Is there any meaningful opportunities? Um- Repeat the whole thing. Sorry. Other than CPI built lease structure, are there any material opportunities to increase same-store NOI going forward, i.e., CapEx to improve quality, et cetera? You know, for us, it's been pushing on 4% bumps in our small shops and continuing to try to push on anchors. One opportunity for us is the continued conversion of our tenants to fixed CAM. You know, fixed CAM typically grows in excess of the base rent. The more that we convert right now, we're what, 60% or 65% leases, Tyler? Yep. At fixed CAM. That's another opportunity for us to grow. You know, there's another other income bucket which we think is a real opportunity across Kite, you know, especially as we're getting more scale in some of these higher touch assets, like, you know, Legacy West, and Southwick, and, you know, having our One Loudoun asset, having the expansion come online. There's some real specialty leasing opportunities and sponsorship opportunities that we intend on taking advantage of. There's a variety of levers other than just escalators, you know, to pull to help us grow our same-store NOI. A part of it is, you know, is the escalator, right? What's the bump? As John mentioned, we can all be hyper-focused on our near-term growth, for us, it's all about the long-term growth. The fact that we moved our escalators by 25 basis points in two years, you know, we're sitting at 180. We've been very public about trying to move that to 200. You know, once we're at 200, even now, you know, we're one of the highest in the, in the peer group in terms of those bumps, and that's your starting point. Your growth, that's the fundamental basement of our growth in any particular year, especially on same-store, is where your starting point is, which is your escalator. That's one of the main drivers of this recycling activity that we spent so much time talking about earlier, is to get that growth higher, and that's an exercise in addition by subtraction. The assets we sold in the late, you know, fourth quarter of last year, those grew at 1.4%, right? You saw that our same-store print in 2025 was assisted 30 basis points by getting rid of those assets, right? Again, this is simply a growth exercise for us. What's the conversation with tenants? Listen, they've been able to push through some of the inflation to end consumers. There's cost pressures on them as well. Like, as you're putting forth these 3%- 4% escalators, has there been any change more recently in the pushback on these, or is it pretty similar to where it's been the last couple of years? Well, I mean, you got two categories of tenants, right? You have anchor tenants and small shop tenants, and I think Heath is referring to the small shop tenants when we're talking about that kind of growth. The conversation is it's a supply and demand conversation. There's a lot of demand for the space. We wanna make sure that, you know, the tenants that we're putting in, are also accretive to the property, not just in rent, but in merchandising. You know, we've gotta merchandise these things, and that ultimately pays off long term versus making short-term decisions on who's gonna pay the most rent. On the anchor side, you know, the conversation is much more difficult. We need to do a better job, frankly, across the board, and we are pushing on that, and we are very focused on that at our organization. I think, unfortunately, sometimes people just want to fill space and, you know, they want to eliminate downtime. Frankly, it takes a long time to backfill these anchor spaces. You know, this is why some people negotiate a renewal that is, you know, a negative renewal versus trying to say, "Look, my space is more valuable than that." I think there's an art to this as well, and it takes the industry understanding that what we own is very valuable, and it has to be priced that way. I think we got very conditioned as an industry just to fill space. Fill space. Don't have a vacancy. We, on the other hand, felt very strongly that when these opportunities arise, when you do get back spaces, vis-a-vis one of these bankruptcies, you know, be very, very thoughtful about what you're doing, what the rents are gonna be, who the merchandising is. I think we as an industry just need to do better. I don't know how else to say that. We had another question come in. Is it possible to charge additional CAM to tenants if actual CAM expense exceeds fixed CAM charges in a given year? This doesn't sound like something that we should be answering. It's called fixed CAM for a reason, so it's fixed. you know. Listen, the good news on fixed CAM is, again, it's got a healthy growth rate typically associated with it, and it's only on things that we can control. To the extent it's something, an uncontrollable expense, snow removal, for example, that's still on a pro rata basis. Things like power washing, striping, painting, those things that we control. you know, to the extent that we found ourselves, you know, at a particular property where actual expenses were looking like they may exceed the fixed CAM, we would just pull back. I mean, COVID was a great example. We actually learned some important lessons. In COVID, we were able to pull back some of these expenses. You know, rather than doing flowers 4x a year, maybe you do them 2x a year, right? You know, there's not a version, I think, where we're gonna get stuck with fixed CAM. If fixed CAM to, you know, from this point on has been a, you know, it's been a moneymaker for us. I think said another way, fixed CAM obviously has a margin associated with it, but it is very productive for both sides. The retailers like to be able to know what the budget is. They like to be able to set the budget. The problem with, you know, doing triple net deals that you come to the end of the year and then you spend the next three months figuring out what your actual expenses were, who owes who. That's just destructive to, you know, efficiency. Fixed CAM is quite efficient, and I think it's why it works, and, you know, we're way ahead of the game on that. On tenant credit, any update on Container Store or any other tenants on the watch list we should be or that are already embedded in guidance that hasn't happened? On The Container Store, we stay very close with them. We're their largest landlord, so we have, you know, access to their management team. You know, they've received some additional funding, we don't see them as any immediate risk. I will say that we have one of The Container Stores is rolling off the natural expiration this year. Another one's rolling off the following year in 2027. You know, we see this, you know, currently as hopefully a natural wind down of the business. You know, for better or for worse, I think their business model is very dependent on the housing market, especially the existing housing product. We're seeing some improvements there. You know, predictions are sort of, you know, mid-single-digit growth in existing sales. Hopefully that helps their business. Again, you know, we've got seven locations, you know, on a path to reduce that hopefully over time. It's 70 basis points total of exposure on an ABR basis. Shifting, we're asking some AI questions this go around, get a better sense of kind of who the REITs are partnering with and the level of investment so far. I'm just kind of curious, what is the mix of build, buy or partnering in AI within Kite? What's the mix of building it internally versus partnering? Yeah. I mean, right now this is obviously fluid, and we have been utilizing existing product, but we've also been doing a fairly deep dive around our own ideas about, you know, what we can create internally. What we wanna be cautious of is, you know, overspending, particularly overspending on something that is, you know, become, what's the right word? Has been leapfrogged, you know, the month later. We are definitely engaged in this heavily. We actually have someone internally who is solely focused on, you know, figuring out where we're going to land here. I think it's a combination. I think for us it's gonna be a combination of things. There's no question in our mind that there are lots of efficiencies that we can utilize and there are also lots of opportunities, for us to create, you know, revenue generators. I think it's going to change our business. Frankly, you know, in one sense, being in the fact that we're in the shopping center business, it might be good that we're a little bit analog as it relates to that, right? There's it'd be very difficult for AI to replicate what we do, but we wanna utilize it, obviously, to make ourselves more efficient. You wanna add to that? No, I think, and it's a great question, Craig, as the current debate is, you know, internally, do you wait for your existing providers to have solutions and rely on that SaaS, or do you build it yourself? I can tell you that if you dive in, it's very, very easy, as John mentioned, to have a spend, create a product, and when it's done, it's already obsolete. The trick is trying to make sure you're navigating it properly, that you're looking at your spend, that you have clear, you know, expectations on your return on your spend. you know, early innings, but obviously a huge conversation internally. Is there one provider that you focus on more than others or... Listen, we're a Salesforce shop, MRI, you know, ARGUS. These are your typical providers that we rely heavily on to run our business, and they are all in various stages right now of, you know, of improving their AI capabilities. We'll see. You know, we're a Microsoft shop as well, we've heavily leaned into Copilot, which obviously there's wonderful things that can help with people's productivity there as well. Again, we're in the early innings, but it's a active live conversation. As John said, we appointed somebody internally to sort of shepherd this entire process. Hopefully we'll have some exciting things to talk about as the next few years unfold. As you guys anticipate it, I mean, is this a headcount reducer or just a productivity enhancer internally? John, I know you mentioned it could be a revenue driver. I mean, I assume you mean just by freeing up people's time to do more leasing? Yeah. Or... I mean, look, I think we don't know exactly where that's going to land and, you know, I think ultimately no one knows where that's going to land. Even some of the recent headlines in terms of staff reductions from some tech companies. I mean, when you go from 1,500 employees to 9,000 employees in 3 years, you know, do you really know what you're doing? Separate topic. I think as it relates to us, you know, we're not afraid to say that if it's gonna be able to enable us to do what we do better, that's, you know, and that's with less people, that's one thing. I do think at this point it, you know, you probably have an opportunity to redistribute, into more productive, you know, kind of, endeavors, and I think that would be our goal. Just in general, like, how lean do you think you guys run over the last couple of years versus are there inefficiencies internally? I know we don't hear you guys talk about G&A a lot in terms of, like, need to cut it back. I'm just kinda curious from a headcount perspective. Yeah. I mean, I think we talk about it a lot internally. I think we think we're very efficient. You know, when you look at our G&A to revenue as a percentage compared to the peer group, we're at the lower end of that spectrum. When you look at our margins, more importantly, our NOI margin, our recovery ratios, we're at the highest levels. Operating efficiency doesn't get talked about enough, but it produces cash flow, so we should talk about it more. We're very focused on that. I think we can do better. I mean, I think there's no question that we can have a slightly sharper edge of the sword. I think we're, you know, we've been very focused on that and seems like others don't talk about it much. Any last questions before I move to rapid fires? All right. same-store NOI for the retail group in 2027. I don't know, 3.5.. More, fewer, the same amount of companies this time next year in the retail space? Hopefully fewer. Hopefully fewer. Perfect. Well, thank you guys so much. Thank you. Thanks, Craig. Have a great conference, everybody. Appreciate you.