Q1 2024 Kite Realty Group Trust Earnings Call

Operator: Thank you for standing by and welcome to the first quarter 2024 Kite Realty Group. Trust Earnings Conference call. At this time, all participants are in listen-only mode.

Thank you for standing by and welcome to the first quarter 2020 for Kite Realty.

Speaker Change: Trust earnings Conference call at this time, all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press Star One again as a reminder, today's program.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

Speaker Change: Is being recorded and now I'd like to introduce your host for today's program.

Operator: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program. Bryan McCarthy, Senior Vice President of Corporate Development and Investor Relations Please go ahead. Thank you, and good afternoon, everyone.

Bryan McCarthy: Bryan Mccarthy Senior Vice President corporate development and Investor Relations. Please go ahead.

Bryan McCarthy: Welcome to Kite Realty Group's first quarter earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risk and uncertainty. Actual results may differ materially from these statements.

Bryan McCarthy: Thank you and good afternoon, everyone.

Bryan McCarthy: Come to kite Realty group's first quarter earnings call.

Bryan McCarthy: Today's comments contain forward looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties.

Speaker Change: Actual results may differ materially from these statements.

Bryan McCarthy: For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent Form 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release, available on our website, for a reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group are Chairman and Chief Executive Officer, John Kite, President and Chief Operating Officer, Tom McGowan, Executive Vice President and Chief Financial Officer, Heath Fear, Senior Vice President and Chief Accounting Officer, Dave Buell, and Senior Vice President, Capital Markets and Investor Relations, Tyler Henshaw. I'll now turn the call over to... Thanks, Bryan, and thanks, everybody, for joining us today.

Speaker Change: For more information about the factors that can adversely affect the companys results. Please see our SEC filings, including our most recent Form 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for a reconciliation of these non-GAAP performance measures to our GAAP.

Speaker Change: Financial results.

Speaker Change: On the call with me today from Kite Realty Group are chairman and Chief Executive Officer, John Kite.

Speaker Change: <unk> and Chief operating officer.

Speaker Change: Okay.

Speaker Change: Executive Vice President and Chief Financial Officer, Heath, Fear, Senior Vice President and Chief Accounting Officer, Dave fuel and senior Vice President capital markets and Investor Relations Tyler Henshaw.

Speaker Change: I'll now turn the call over to Scott.

Scott: Thanks, Brian and thanks, everybody for joining us today.

John A. Kite: CARE-G maintained its momentum into the first quarter of 2024, delivering exceptional execution across our platform and further strengthening our already best-in-class balance sheet. Heath will walk you through the details of our quarterly results and increase guidance. And I'll focus on recent sector trends, our operating priorities, and the series of strategic, well-timed initiatives that have allowed KRG to earn the highest total return in the open air retail space over the past five years. Open Air retail has demonstrated strong fundamentals and rapidly accelerated recognition of its central role in each community we serve.

Scott: <unk> has maintained our momentum into the first quarter of 2020 for delivering exceptional execution.

Speaker Change: Across our platform and further strengthening our already best in class balance sheet.

Speaker Change: Keith will walk you through the details of our quarterly results and increased guidance now I'll focus on recent sector trends our operating priorities.

Speaker Change: And the series of strategic well timed initiatives that have allowed <unk> to earn the highest total return in the open air retail space over the past five years.

Speaker Change: Open Air retail has demonstrated strong fundamentals and rapidly accelerated recognition of its central role in each community we serve.

John A. Kite: The reappreciation of Open Air's critical role as the most convenient and profitable distribution channel has resulted in consistent demand across our portfolio from both our tenants and shoppers. The renaissance of open air retail is amplified in the Sunbelt, where our portfolio benefits from migration trends out of higher cost of living metros into warmer, lower tax states. The top 10 MSAs for population growth in 2023 account for over 30% of our revenue and include cities like Dallas, Houston, Atlanta, Orlando, Tampa, and Phoenix.

Speaker Change: The re appreciation of open air its critical role as the most convenient and profitable distribution channel as a resulted in consistent demand across our portfolio from both our tenants and shoppers the.

Speaker Change: The Renaissance of open air retail is amplified in the sunbelt, where our portfolio benefits from migration trends out of higher cost living out of higher cost of living metros and to warmer lower tax states. The top 10 msas for population growth in 2023, okay.

Speaker Change: For over 30% of our revenue and includes cities like Dallas, Houston, Atlanta, Orlando, Tampa and Phoenix.

John A. Kite: On the operational front, we remain laser-focused on creating the best experience possible at our centers by selectively adding high-quality tenants to our portfolio. Since the beginning of 2022, we've executed 53 anchor leases to 36 different brands, over 90% of which were national tenants, and we increased our grocery exposure by 400 basis points to nearly 80%. We've generated 46% comparable cash spreads and 26% returns on capital, and we're very confident in our ability to continue this robust leasing effort.

Speaker Change: On the operational front, we remain laser focused on creating the best experience possible at our centers by selectively adding high quality tenants to our portfolio.

Speaker Change: Since the beginning of 2022, we've executed 53 anchor leases to 36 different brands over 90% of which were national tenants and we.

Speaker Change: We increased our grocery exposure by 400 basis points to nearly 80%.

Speaker Change: We've generated 46% comparable cash spreads and 26% returns on capital and we're very confident in our ability to continue the robust leasing efforts.

John A. Kite: Our thoughtful approach prioritizing quality and value creation will continue to enhance the merchandising mix at our centers and improve the credit profile of our tenant base. On the small shop side, we continue to have success pushing higher embedded growth for new and non-option renewal shop leases signed in the first quarter of 2024. The average annual growth was 3.4%.

Speaker Change: Our thoughtful approach prioritizing quality and value creation, we will continue to enhance the merchandising mix at our centers and improve the credit profile of our tenant base.

Speaker Change: On the small shop side, we continue to have success pushing higher embedded growth.

Speaker Change: For new and non option renewals shop leases signed in the first quarter of 2024.

Speaker Change: The average annual growth was three 4% and 70% of these leases have fixed rent bumps greater than or equal to 4% too.

John A. Kite: And 70% of these leases have fixed rent bumps greater than or equal to 4%. To illustrate the tremendous progress we've made, in 2022, the average annual growth was 2.7%, and only 3% of the leases had fixed rent bumps greater than or equal to 4%. The benefit of negotiating higher fixed rent bumps will take time to materialize, but our efforts are on track to provide tangible improvements to our long-term embedded growth profile. Maintaining a disciplined leasing approach by keeping quality and growth at the forefront will further strengthen our durable cash flow stream while generating strong risk-adjusted and absolute return.

Speaker Change: To illustrate the tremendous progress we've made in 2022, the average annual growth was two 7% and only 3% of the leases had fixed rent bumps greater than or equal to 4%.

Speaker Change: The benefit of negotiating higher fixed rent bumps will take time to materialize, but our efforts are on track to provide tangible improvements to our long term embedded growth profile.

Speaker Change: Maintaining a disciplined leasing approach by keeping quality and growth at the forefront will further strengthen our durable cash flow stream, while generating strong risk adjusted and absolute returns.

John A. Kite: Our sign not open pipeline increased to $32 million and we expect 76% of the NOI to commence in 2024. On pages six and seven of our latest investor deck, we detail the commencement timing of the of the sign not open pipeline and the compelling opportunity for investors based on current share price at various capitalization rates. These pages do not account for the future opportunity to allocate free cash flow, which we expect will significantly ramp up as our elevated leasing spend normalizes.

Speaker Change: Our signed not open pipeline increased to $32 million and we expect 76% of the NOI to commence in 2024.

Speaker Change: On pages, six and seven of our latest investor deck, we detailed the commencement timing of the of the signed not open pipeline and the compelling opportunity for investors based on current share price at various capitalization rates.

Speaker Change: These pages do not account for the future opportunity to allocate free cash flow.

Speaker Change: Which we expect will significantly ramp up as our elevated leasing spend normalizes.

John A. Kite: Along with our increased free cash flow, we expect meaningful AFFO and dividend growth. While the opportunity for investors is very compelling right now, we believe the future holds an even more convincing case for KRG with better growth and more capital to allocate. Over the last five years, KRG has earned the highest total return in our sector.

Speaker Change: Along with our increased free cash flow, we expect meaningful <unk> and dividend growth.

Speaker Change: While the opportunity for investors is very compelling right now we believe the future holds an even more convincing case for care G with better growth and more capital to allocate.

Speaker Change: Over the last five years <unk> has earned the highest total return in our sector. We were able to accomplish will accomplish this by improving the quality and location of our portfolio.

John A. Kite: We were able to accomplish this by improving the quality and location of our portfolio, fortifying our balance sheet, executing on a transformational merger, improving our credit ratings, and re-rating our cost of debt, these very well-timed success could not have dovetailed better with the open air retail supply and demand imbalance, the acceleration of consumer trends spurred by the pandemic and the increased commitment to physical retail. Our continued execution has allowed us to raise the midpoint of our 2024 FFO guidance by two cents, and our same property NOI growth assumption by 50 basis points.

Speaker Change: Fortifying our balance sheet executing on our transformational merger, improving our credit ratings and rewriting our cost of debt.

Speaker Change: These very well time successes.

Speaker Change: Could not have dovetailed better with the open air retail supply and demand imbalance the acceleration of <unk>.

Speaker Change: Consumer trends spurred by the pandemic and the increased commitment to physical retail.

Speaker Change: Our continued execution has allowed us to raise the midpoint of our 2024 <unk> guidance by <unk> <unk> and our same property NOI growth assumption by 50 basis points. Our team has produced solid results and collectively we are positioning the company to continue outperforming.

John A. Kite: Our team has produced solid results, and collectively, we've positioned the company to continue outperforming. We have an experienced group across all departments of the organization. And I hope each of you will get time to spend time with our various team members at our remaining four and 24 events in Dallas, Washington, DC, and Las Vegas. Thank you, as always, to our incredible team, and now I'll turn the call to Heath. Thank you, and good afternoon.

Speaker Change: We have an experienced group across all departments of the organization and I hope each of you will get time to spend we will get to spend time with our various team members at our remaining 4% and 24 events in Dallas, Washington, D C and Las Vegas.

Speaker Change: Thank you as always to our incredible team and now I'll turn the call to Heath.

Heath R. Fear: Thank you and good afternoon.

Heath R. Fear: Following John's remarks about our 4-in-24 series, our initial event last February was very well received and showcased the strength of the Naples market, the underlying quality of our bread and butter assets, and the intensity of our operating platform. We are anticipating a great turnout for our next event in Dallas, which is our largest market in terms of ABR and GLA. In Dallas, we will tour over 5% of KRG's total NOI while demonstrating the prowess of our leasing team, using South Lake Town Square as our case study.

Heath R. Fear: Following John's remarks about our 4% and 24 series. Our initial event last February it was very well received and showcased the strength of the Naples market the underlying quality of our bread and butter assets and the intensity of our operating platform. We are anticipating a great turnout for our next event in Dallas, which is our largest market in terms of <unk>.

Heath R. Fear: And GLA and Dallas, We will tour over 5% of <unk> total NOI, while demonstrating the promise of our leasing team using Southlake town square as our case study.

Heath R. Fear: South Lake is one of the nation's premier mixed-use lifestyle centers, and we can't wait to show you the tremendous progress we have made. Turning to our results for the first quarter of 2024, KFG earned 50 cents of NARIT FFO per share, which was slightly higher than anticipated due to outperformance in same property NOI and a non-budgeted termination. Sane Property NOI Group by 1.8%, bolstered by increases in minimum rent and lower bad debt as offset by a decrease in net recoveries primarily due to the timing of recoverable operating expenses.

Speaker Change: <unk> is one of the nation's premier mixed use lifestyle centers and we can't wait to show you the tremendous progress we have made.

Heath R. Fear: Based on the first quarter outperformance and our revised outlook for the balance of the year, we are increasing our 2024 FFO guidance by 2 cents at the midpoint to a range of 202 to 208. At the midpoint, we assume a full-year bad debt assumption of 80 basis points of total revenues and a full-year same property NLI growth assumption of 2%. This represents a 20 basis point bad debt improvement and a 50 basis point improvement in same property NMI growth as compared to our original guide.

Speaker Change: Turning to our results for the first quarter of 2024, <unk> earned 50 of NAREIT <unk> per share, which was slightly higher than anticipated due to outperformance in same property NOI and a non budgeted termination fee.

Speaker Change: Same property NOI grew by one 8% bolstered by increases in minimum rent and lower bad debt as offset by a decrease in net recoveries, primarily due to the timing of recovery recoverable operating expenses.

Speaker Change: Based on our first quarter outperformance and our revised outlook for the balance of the year. We are increasing our 2024 <unk> guidance by <unk> <unk> at the midpoint to a range of 202 to two <unk> at the midpoint, we assume a full year bad debt assumption of 80 basis points of total revenues and our full year same property NOI growth assumption of 2%.

Speaker Change: This represents a 20 basis point bad debt improvement and a 50 basis point improvement in same property NOI growth as compared to our original guidance the.

Heath R. Fear: The improvement in the full-year bad debt component is a function of combining the actual bad debt we experienced in the first quarter, which was approximately 30 basis points of first quarter revenues, with the continued assumption of 100 basis points of bad debt of total revenues for the remaining three quarters. As we detailed last quarter, our same property growth for 2024 was adversely impacted by our disproportionate exposure to bed bath, the unexpected departure of a large theater tenant, and the extremely low bad debt we experienced in 2023. Absent these three items, our same store growth assumption for 2024 would be 3.5%.

Speaker Change: The improvement in the full year bad debt component is a function of combining the actual bad debt, we experienced in the first quarter, which was approximately 30 basis points of first quarter revenues with the continued assumption of 100 basis points of bad debt of total revenues for the remaining three quarters as we detailed last quarter. Our same property growth for 2024 was.

Speaker Change: Firstly impacted by our disproportionate exposure to bed Bath.

Speaker Change: And expect the departure of a large state our tenant and the extremely.

Speaker Change: Extremely low bad debt, we experienced in 2023 absent. These three items, our same store growth assumption for 2024 would be three 5%.

Heath R. Fear: In terms of the trajectory for 2024, we expect same property NOI growth to accelerate in the back half of this year, providing a solid foundation for growth into 2025 and 2026. As always, our goal with giving guidance is to prudently set expectations while leaving room to outperform. With that in mind, our guidance does not include certain recurring but unpredictable items, including lease termination fees, land sale gains, or prior period collections, unless and until the same are committed.

Speaker Change: In terms of the trajectory for 2024, we expect same property NOI growth to accelerate in the back half of this year, providing a solid foundation for growth into 2025 and 2026.

Speaker Change: As always our goal of giving guidance is to prudently set expectations, while leaving room to outperform with that in mind. Our guidance does not include certain recurring but unpredictable items, including lease termination fees land sale gains or prior period collections unless and until the same are committed.

Heath R. Fear: Following our well-timed bond issuance, Moody's upgraded KRG to BAII, and Fitch revised our outlook to positive. Furthermore, we are optimistic that S&P's positive outlook will mature into a full upgrade to BBB in the next few quarters. On page 14 of our investor presentation, we show the complete overhaul in our cost of debt relative to the BBB REIT index. As we continue to demonstrate our commitment to maintaining a strong balance sheet and show the same commitment to the unsecured debt market, we expect our debt pricing will continue to compress.

Speaker Change: Following our well time to bond issuance, Moody's upgraded <unk> and Fitch revised our outlook to positive. Furthermore, we are optimistic that S&P's positive outlook will mature into a full upgrade to triple b in the next few quarters.

Speaker Change: On page 14 of our Investor presentation, We show the complete overhaul in our cost of debt relative to the Triple B REIT index as we continued to demonstrate our commitment to maintaining a strong balance sheet and show the same commitment to the unsecured debt market, we expect our debt our debt pricing will continue to compress.

Heath R. Fear: As a reminder, we continue to hold the proceeds from our $350 million January bond offering in an investment account, earning interest in excess of the yield on our 2024 maturities, which we intend to retire in late June and mid-July. At 5.1 times net debt to EBITDA, approximately $1.2 billion in available liquidity, a debt service coverage ratio of over five times, and healthy operating fundamentals, our credit profile is one of the best in the sector.

Speaker Change: As a reminder, we continue to hold the proceeds from our $350 million January bond offering and an investment account, earning interest in excess of the yield on our 2024 maturities, which we intend to retire in late June and mid July at five one times net debt to EBITDA approximately $1 2 billion in available liquidity at depth.

Speaker Change: Service coverage ratio of over five times and healthy operating fundamentals our credit profile is one of the best in the sector.

Heath R. Fear: As highlighted on page seven of our investor deck, the current stock price of KRG represents an extremely compelling entry point. The recent private market transactions serve to solidify our current value proposition. We believe that the catalysts for a change in our equity multiple are clear in the form of outsized occupancy gains over the next two years, strong pricing power, higher embedded growth, low leverage, improved cost of debt, and significant free cash flow in the outer year. Thank you all for joining the call today.

Speaker Change: As highlighted on page seven of our Investor deck. The current stock price of <unk> represents an extremely compelling entry point. The recent private market transactions served to solidify our current value proposition.

Speaker Change: We believe that the catalyst for a change in our equity multiple are clear in the form of outsized occupancy gains over the next two years strong pricing power higher embedded growth low leverage improved cost of debt and significant free cash flow in the outer years. Thank you all for joining the call today operator. This concludes our prepared remarks.

Operator: Operator, this concludes our prepared remarks. Please open the line for questions. Certainly. Thank you.

Speaker Change: <unk>. Please open the line for questions certainly thank you one moment for our first question and our first question comes from the line of Todd Thomas from Keybanc Capital markets. Your question. Please.

Operator: One moment for our first question. And our first question comes from the line of Todd, from KeyBank Capital Markets. Your question, please. Hi, thanks. Good afternoon.

Todd Michael Thomas: First question, just around the guidance and last quarter specifically, you talked about the two cent drag from the theater vacated city center in White Plains. Looks like a lease may have been signed. Curious if you can talk about that and provide some detail around The Wren, perhaps, timeline. Hey, Todd.

Todd Michael Thomas: Hi, Thanks. Good afternoon first question just around the guidance in last quarter, specifically you talked about.

Todd Michael Thomas: The <unk> <unk> drag from the theater vacate at City Center in White Plains. It looks like a lease may have been signed with a replacement tenant I'm. Just curious if you can talk about that and provide.

Todd Michael Thomas: Some detail around.

Speaker Change: The rent and perhaps timeline for rent to commence didn't sound like there was anything factored in the updated guidance as it pertains to that.

John A. Kite: Well, you can assume that the guidance does take that into account. And that, you know, we're not going to get specific about an individual tenant's rent, etc. But we can tell you that, you know, it's an 80,000 square foot deal. And it's a tremendous opportunity for us to quickly backfill something that is not easy to do. And we're really, we were focused on getting that done. The payback period for this deal is less than two years.

Todd: Hey, Todd.

Todd: Well you can assume that the guidance does take that into account.

Todd: And that we're not going to obviously get specific about an individual tenants rents et cetera, but we can tell you that its an 80000 square foot deal and.

Todd Michael Thomas: It's a tremendous opportunity for us to quickly backfill something that is not easy to do and were really we were focused on getting that done the payback period for this deal is less than two years.

John A. Kite: It's almost a 50% return on cost. So it's a fabulous deal. And suffice to say, the rent, the in-place rent is less than the previous tenant was paying. But there's definitely a small pickup for the year, it's probably less than half, it's around a half a penny for the year. So it's really more about the fact that we were able to get a great operator in quickly, and again, to a difficult situation in terms of going into a vertical retail establishment. So very happy with it, Tom, if you want to add anything.

Todd: It's almost a 50% return on cost.

Todd: So it's a fabulous deal and suffice to say the rent the in place rent is less than the previous tenant was paying but there's definitely a small pickup for the year, it's probably less than half of its around half a penny for the year.

Speaker Change: So it's really more about the fact that we were able to get a great operator and <unk>.

Speaker Change: Quickly.

Speaker Change: So a difficult situation in terms of going into a vertical retail establishment, so very happy with it Tom if you want to add anything the only thing I would add Todd is one of the things that we really wanted to accomplish.

Thomas K. McGowan: Yeah, the only thing I'd add, Todd, is one of the things that we really wanted to accomplish to protect that zone, from an exhibitor standpoint, was get them open as quickly as possible. They're going to start doing some soft openings next week, and then I think the week after, we should be ready to go. So that was one of our big goals that we achieved. Okay, and the timeline for, is there a free rent period or any concessions, or is rent scheduled to commence? Relatively speaking. All right. Yeah, rent will commence when they open. So, no pre-rent.

Tom: That zone from an exhibitor standpoint was get them open as quickly as possible.

Tom: We're going to start doing some soft openings next week and then I think the week after or we should be we should be ready to go. So that was one of our big goals that we have achieved.

Speaker Change: Okay, and the timeline for us.

Tom: Is there a free rent period or any concessions or is scheduled to commence.

Tom: Relative rent.

Speaker Change: Yes rent will commence when they open.

Speaker Change: So no free rent.

Speaker Change: Okay got it and then.

Thomas K. McGowan: Okay, got it. And then, you know, can you provide a little bit of additional detail on the lease term in the quarter? Sounds like that was or was not. Yeah, it's not very simple.

Speaker Change: Can you provide a little bit of additional detail on the lease termination fee.

Speaker Change: In the quarter it sounds like that was that was not previously anticipated.

Speaker Change: You just discuss that a little bit more and provide some additional color.

Heath R. Fear: It was just a bank branch that decided to close, and you know, we got a healthy NPV and the remaining rent payments, and they paid us a termination fee. So not something we were expecting, but I'm happy to take that rent termination fee and go ahead and release that space. So it was a win-win for us.

Speaker Change: Yes, Todd very simple it was just a bank branch has decided to close and we did it.

Speaker Change: Healthy NPV in the remaining payments on the payment of a termination fee. So not something we were expecting but.

Todd: I'm happy to take that rent termination fee and go ahead and re leased that space. So it.

Todd: It was a win win for us.

Heath R. Fear: Okay, and then, you know, just lastly... Heath, you talked about the company's leverage profile and credit metric. I wanted to ask about acquisitions again this quarter. Sounds like there's a little bit more deal flow across the industry, just given where the balance sheet sits today. Transcripts provided by Transcription Outsourcing, LLC. If you could, please.

Speaker Change: Okay, and then just lastly.

Speaker Change: Heath, you talked about the company's leverage profile and credit metrics.

Speaker Change: I wanted to ask about acquisitions again this quarter at.

Heath R. Fear: It sounds like Theres, a little bit more deal flow across the industry, just given where the balance sheet sits today and.

Heath R. Fear: Sort of the position that you're in I, just wanted to get a sense of your appetite for investments and if you can.

Heath R. Fear: Discuss kind of price trends that youre seeing in.

Todd Michael Thomas: Price Trends Sure, Todd. I think we continue to be very focused on the execution of our operating platform right now and a little less focused on external opportunities. You know, look, we've been very clear that, you know, in the next two years, we're going to spend over $200 million in terms of TI's and LC's. Some people may call that redevelopment, but it's leasing.

Heath R. Fear: In the market.

Heath R. Fear: Sure.

Heath R. Fear: Look I think we continue to be very focused on.

Heath R. Fear: The execution in our operating platform right now and a little less focused on external.

Heath R. Fear: Opportunities.

Heath R. Fear: Look we've been very clear that in the next two years, we're going to spend over $200 million.

Heath R. Fear: In terms of Ti and Lcs, some people may call that redevelopment, but its leasing.

Heath R. Fear: And it's great because the returns on capital are extremely high.

Heath R. Fear: Everything is very quantifiable in terms of the risk.

Heath R. Fear: So that is really our focus.

Heath R. Fear: And it will generate significant free cash flow for us.

Heath R. Fear: Once we complete that lease up plan. So that doesn't mean, we aren't looking at outside opportunities. We obviously are we will continue to do some paired trades like we've talked about in the past, where we would sell some assets and then look to redeploy the capital into higher growing better positioned properties.

Heath R. Fear: In terms of what we're seeing in the market. The market is getting more activity there is liquidity.

Heath R. Fear: Look open air retail is a very sought after.

Heath R. Fear: Asset class right now despite the fact that.

Heath R. Fear: You look at R. R.

Heath R. Fear: Where our stock trades, you wouldn't think that but in the private market. This is a very sought after asset class and our properties are very sought after so.

Heath R. Fear: It's definitely compressed it's harder to find opportunities.

Heath R. Fear: At yields that we want to even think about relative to the yields that we're getting in our leasing platform. So.

John A. Kite: So we will do some transactions. I would say that, you know, the high-quality stuff continues to trade in kind of the high-5 to low-7 area, depending on what it is and where it is. And so, obviously, that's quite disproportionate from where we trade from a stock price perspective. Okay, thank you.

Heath R. Fear: We will do some transactions I would say that the high quality stuff.

Heath R. Fear: <unk> continues to trade in kind of the high five to low seven area, depending on what it is and where it is.

Heath R. Fear: And so obviously thats quite disproportionate from where we trade in the.

Heath R. Fear: From a stock price perspective.

Speaker Change: Okay. Thank you.

Operator: Thank you. Moment for our next question. And our next question comes from the line of Floris Van Dykum from Compass Point. Hey guys, thanks for taking my question. John, I hear you talk about the discounted multiple and, you know, the lack of recognition in the market potentially for some of the, you know, the significant improvements you've done. And I'm curious what your thoughts are to, share buybacks because you are generating a fair amount of free cash flow after dividends.

Speaker Change: Thanks, Todd moment for our next question.

Heath R. Fear: And our next question comes from the line of Floris Van <unk> from Compass point Your question. Please.

Floris Gerbrand Hendrik Van Dijkum: Hey, guys. Thanks for taking my question so.

Floris Gerbrand Hendrik Van Dijkum: John I hear you talk about the discounted.

Floris Gerbrand Hendrik Van Dijkum: Multiple and.

Floris Gerbrand Hendrik Van Dijkum: The lack of recognition in the market potentially for some of the the significant improvements you've done and I'm curious what your thoughts are to.

Floris Gerbrand Hendrik Van Dijkum: Share buybacks, because you are generating a fair amount of free cash flow after dividends.

Floris Gerbrand Hendrik Van Dijkum: You are trading at a discount and your balance sheet.

Operator: You are trading at a discount and your balance sheet, thanks to the work that Heath has done on the balance sheet, is the best or tied for the best or lowest leverage in the shopping center space. Why would you not at least show the market that you're undervalued by buying back, even if it's a small amount of stock?

Floris Gerbrand Hendrik Van Dijkum: Two.

Floris Gerbrand Hendrik Van Dijkum: The work that he has done on the on the balance sheet.

Floris Gerbrand Hendrik Van Dijkum: It's the best ore types with the best or lowest leverage in the in the shopping center space.

Speaker Change: Why would you not.

Speaker Change: At least show the markets that you're undervalued by buying back even if it is.

Speaker Change: Small amount of stock.

Floris Gerbrand Hendrik Van Dijkum: Sure. Thanks for the question. Look, I think, first of all, first and foremost, as a team and as a very focused operating platform, we have priorities. And certainly, when you look at the value creation aspect of our priorities, that is something that we think about and contemplate. I think that we will, as we move through the next year and a half, Floris, and we execute on our leasing plan, which we are doing rapidly, we will certainly always be evaluating that.

Speaker Change: Sure. Thanks.

Speaker Change: Thanks for the question look I think first of all first and foremost as as a.

Speaker Change: Team and as a very focused operating platform.

Floris Gerbrand Hendrik Van Dijkum: And it becomes more and more compelling, the greater amount of free cash flow that we have distributable. You know, I don't think it's our job to go out and buy small amounts of stock to try to prove a point. Our job is to execute, lease the space, create value internally, and make great allocation decisions as we have over the past couple years. And, you know, eventually, either the stock or the value of the business will be reflected, will be reflected, whether that be in the public markets, the private markets, whatever. So I don't want you to think we don't value it because we do. But when we do it, we want it to be material if we do do it.

Floris Gerbrand Hendrik Van Dijkum: We have priorities.

Floris Gerbrand Hendrik Van Dijkum: And certainly when you look at the value creation aspect of our priorities that is something that we think about and contemplate.

Floris Gerbrand Hendrik Van Dijkum: I think that we will as we move through the next year and a half.

Floris Gerbrand Hendrik Van Dijkum: For us and we execute on our leasing plan, which we are doing rapidly.

Floris Gerbrand Hendrik Van Dijkum: We will certainly be always evaluating that and it becomes more and more compelling the greater amount of free cash flow that we have distributable.

Floris Gerbrand Hendrik Van Dijkum: I don't think its our job to go out and buy small amounts of stock to try to prove a point.

Floris Gerbrand Hendrik Van Dijkum: Our job is to execute lease the space create value internally.

Floris Gerbrand Hendrik Van Dijkum: Great allocation decisions as we have over the past couple of years and eventually either.

Floris Gerbrand Hendrik Van Dijkum: The value of the business will be a frac that will be reflected whether that be in the public markets. The private markets. Whatever so I think I don't want you to think we don't evaluate it because we do but when we do it we want it to be material. If we do do it.

Floris Gerbrand Hendrik Van Dijkum: And we would hope that investors, who do this for a living would recognize this very quickly.

John A. Kite: And, you know, we would hope that investors who do this for a living would recognize this very quickly. Thanks, John. Maybe a follow-up question. I mean, obviously, you put out in your deck. I love the information you guys always provide in your supplemental deck or your investor decks with calls. A significant amount of your leasing over the last three years has had significantly higher rent bumps than 3%. And also fixed cam. And maybe if you could talk about, you know, what you see as the result of that? What percentage of your existing in-place rents now have, you know, those kinds of escalators and cam recovery? And what's the upside?

Speaker Change: Thanks, John maybe a follow up question I mean, obviously you put out in your deck I look the information you guys always provide in your supplemental deck or your investor decks with calls.

Speaker Change: Significant amount of your.

John A. Kite: Leasing over the last three years.

Speaker Change: Higher rent bumps than 3% and also.

Floris Gerbrand Hendrik Van Dijkum: Cam.

Speaker Change: And maybe if you could talk about.

Speaker Change: What do you see as the result of that what percentage of your existing in place rents now have.

Speaker Change: Those kinds of escalators.

Speaker Change: And Cam recovery and whats the upside what does that do to <unk> cruising speeds.

John A. Kite: What does that do to, you know, KRG's cruising speed in two to three years' time? I mean, the biggest impact of cruising speed would be on the rent side. Obviously, fixed cams are important for us. But when you look at our total revenue, you know, the fixed cam element, the reimbursement element is probably 20-30% of our total revenue. So we're focused on it; it's impactful. And it's also impactful operationally from the efficiency perspective and how we differentiate ourselves against our competition. From a time perspective, it is on the base rent side.

Speaker Change: In two to three Years' time.

Speaker Change: Yes, I mean, the biggest impact of cruising speed would be on the rent side.

Speaker Change: Obviously fixed cam as important floris, but when you look at our total revenue.

Speaker Change: Fixed <unk>.

Speaker Change: Cam element.

Speaker Change: The reimbursement element is probably 20, 30% of our total revenue. So we are we're focused on it as impactful.

Speaker Change: And it's also impactful operationally from the efficiency perspective, and how we differentiate ourselves against our competition.

Speaker Change: So we are focused on fixed cam and its in terms of totality in terms of number of leases is probably around 50% of the leases that are outstanding. It grows rapidly by quarter, and then and I think at this point people that do business with tight expect that and they know that that is actually better for them. So we.

Speaker Change: Continue to grow that and yes. It will help but we're really really is going to be helpful and more impactful from a time perspective is on the base rent side and that's why we talked about it and I think we are absolutely the market leader in pushing that and certainly when you see.

John A. Kite: And, you know, that's why we talked about it. And I think we are absolutely the market leader in pushing that. And certainly, when you see that we gave you the stats about our small shop business, I mean, when 70% of the deals that you've done in one quarter in the small shop business are at 4% or greater, that really indicates that we have a very focused plan organizationally, not just the people that you're talking to on this call organizationally. So, you know, we're wildly successful in that effort. And that that also needs to be pivoted into the anchor space.

Speaker Change: That we gave you the stats about our small shop business I mean, when you're when 70% of the deals that you've done in one quarter in the small shop business are at 4% or greater that really indicates that we have a.

Speaker Change: We have a <unk>.

Speaker Change: <unk> focused plan organizationally not just the people that youre talking to you on this call organizationally. So were wildly successful on that effort and that needs to be pivoted also into the anchor space.

John A. Kite: And I've been very open about the fact that I don't think it's appropriate that, you know, we as an industry have accepted 1% annual bumps or whatever it is when you do, you know, your discounted analysis of a 10% bump after five years. So that's also a focus. And we're going to lean into that, and that just has to be the entire industry leaning into that. And I think it will. I think, as the supply and demand continue to look like it looks today, you'll see the industry move. So, look, this is great.

Speaker Change: I've been very open about the fact that I don't think it's appropriate that we as an industry have accepted.

Speaker Change: 1%, a year bumps or whatever it is when you do your discounted analysis of a 10% bump after five years. So that's also a focus and we're going to lean into that and that just has to be the entire industry leaning into that and I think it will I think I think as the supply demand continues to look like it looks today, you'll see the industry move so.

John A. Kite: And remember, by the way, you're getting these bumps with very good credit profiles across the board and very durable cash flow across the board. I mean, look at what we've absorbed in the last several years, you know, in terms of the GFC, and then COVID. So this business is a great business. It's just gonna I just want the investors to recognize it. Flores is a seat.

Speaker Change: Look this is great and remember by the way Youre getting these bumps with very good credit profiles across the board and very durable cash flow across the board I mean look at what we absorbed in the last several years in terms of the GSC and then Covid. So this business is a great business.

Speaker Change: I just want the investors to recognize that Floris associates also if you look at our Naples deck, we gave a slide which talks about our cruising speed.

Heath R. Fear: Also, if you look in our Naples deck, we gave a slide which talks about our cruising speed. You know, currently, we call it two and a half to three and a half percent is the cruising altitude. But if you're just able to convert the small shops, like john discussed, you know, within five years, that moves to 275 to 375. And again, that's not assuming any movement in the anchors. So we were hopeful that ultimately, we can see get the anchors to also make similar moves in their growth rates. But you know, this is planting seeds for better, long term cruising altitude to your point. So really, really pleased.

Speaker Change: Currently we call it two 5% to three 5% as the cruising altitude, but if youre just able to convert the small shops like John discussed within five years that moves to $2 75 to $3 75, and again, that's not assuming any movement in the anchors.

Speaker Change: So we are hopeful that ultimately we can get the anchors to also make similar moves in their growth rates, but this is planting seeds for better long term cruising altitude to your point, so really really pleased and I think the numbers that John gave here at 70% of our leases in the small shop side.

Heath R. Fear: And I think the numbers that John gave here, 70% of our leases on the small shop side have escalators at 4% or above. That's just an incredible change from what we were seeing two years ago. So we're moving in the right direction. Thanks, guys. Thank you.

Speaker Change: Escalators at 4% or above that's just an incredible changed when we were seeing two years ago. So we are moving in the right direction.

Speaker Change: Thanks Scott.

Speaker Change: Thank you.

Operator: One moment for our next question. And our next question comes from the line of Craig Mailman from Citi. Your question, please. Hey guys.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Craig Mailman from Citi. Your question. Please.

Craig Allen Mailman: Hey, guys.

Craig Allen Mailman: Keith, just on the, uh, the penny coming from same store, uh, how much of that is, is coming from bad debt versus, you know, just better, other operational kind of, I think John alluded to it, Craig, you know, about half of it is, is really related to the same property performance we had in, you know, in the first quarter, some of that was bad debt related. And the rest of it is, you know, getting this lease signed up.

Craig Allen Mailman: Keith just on the <unk>.

Craig Allen Mailman: Penny coming from same store how much of that is.

Craig Allen Mailman: Is coming from bad debt versus just better.

Speaker Change: Other operational metrics.

Speaker Change: I think John alluded to or Craig or half of it is really related to the same property performance we have.

Speaker Change: The first quarter some of that was bad debt related and the rest of it is getting this lease signed up so thats basically split half between what already happened.

Craig Allen Mailman: So that penny is basically split in half between what already happened and the improved outlook for the balance of the year. Hey, Craig, one thing I would point to, though, when you look at pace and where we are, kind of sequentially, like if you look at the sequential base rent growth, you know, we're talking like 4.6% sequentially. And even if you eliminate the term fee, it's three and a half percent. So going back over the last four quarters, that was a little slow.

Speaker Change: Proved outlook for the balance of the year.

Speaker Change: Greg One thing I would point to though when you when you look at pace and when you look at where we are kind of sequentially like if you look at the sequential base rent growth, we're talking like four 6% sequentially and even if you eliminate the term fee is three 5% so going back over the last.

Speaker Change: Four quarters that was a little slow and now it's accelerating so that's all part of what's going on here as these as all of this leasing, particularly on the anchor side, which takes time to deliver delivers that's why you have to look at the business over two to three years, not two or three quarters. So I think when we look at it we feel.

John A. Kite: And now it's accelerating. So that's all part of what's going on here as all this leasing, particularly on the anchor side, which takes time to deliver, delivers. That's why you have to look at the business, you know, over two, three years, not two or three quarters. So I think when we look at it, we feel very encouraged by that sequential base rent growth. And, you know, as you think about a kind of calm.

Speaker Change: Very encouraged by that sequential base rent growth.

Speaker Change: Okay.

Speaker Change: As you think about kind of comps I know you guys are pushing fixed cam and clearly inflation has it.

John A. Kite: I know you guys are pushing 6KM, and clearly inflation has... [inaudible] to save, store, protect, guide, and protect this year outside of just continuing to lease up, which again it takes time to open some of the, Yeah, look, I mean, I think if you're only looking at that one metric of same store sales, then, you know, I think he's already covered it in his prepared remarks that the three elements So, you know, in the back half of this year, particularly later in the year, then the same store NOI begins to look a lot like it did last year. It's just a timing thing in terms of that lease up. And we were definitely disproportionately impacted by Bed Bath & Beyond.

Speaker Change: It's still there, but not as maybe aggressive as it was the last two years.

Speaker Change: You guys are setting kind of the growth in that fixed cam does that become.

Speaker Change: Is that becoming less or somewhat of a tailwind as you think about comps going throughout the year I'm just trying to think about potential levers now that you've got the theater Dod.

Speaker Change: Further improvements.

Speaker Change: Same store potentially guidance this year outside of just.

Speaker Change: Continue to lease up again, it takes time to open some of these.

Speaker Change: Some of these new stores.

Speaker Change: Yes look I mean, I think if youre only looking at that one metric of same store then I think heath already covered it in his prepared remarks, the three elements that impacted us the most so the back half of this year.

Speaker Change: Particularly later in the year than the same store NOI begins to look a lot like it did last year. It's just it's just a timing thing in terms of that lease up.

Speaker Change: And we were definitely disproportionately impacted by bed Bath, we've already we've already taken care of about 80% of our exposure there.

John A. Kite: We've already, you know, we've already taken care of about 80% of our exposure there. And the rents are great, and the users are way better. So I think, look, I think, you know, occupancy really matters there, as we talked about in Naples, you were there. I mean, that's potentially five to 600 basis points to get that when you get that back on track. So, the bottom line is, you know, you can look at this as if you're purely looking at same store NOI; the profile hasn't changed at all for us. It's the timing.

Speaker Change: And the rents are great and the users are way better. So I think look I think.

Speaker Change: Occupancy is.

Speaker Change: Really matters there as we talked about in Naples, you are there I mean, that's potentially $5 to 600 basis points to get that when you get that back on track. So bottom line is you can look at this as if you are purely looking at same store NOI the profile Hasnt changed at all for US it's the timing.

Heath R. Fear: And Craig, I would say, listen, it's your typical levers, you know, we're here after the first quarter. So what are the things that we're thinking about, that we can control or not control going forward into this year? You know, can we continue to get lower bad debt? Can we get people turned on faster for rent commencement dates?

Speaker Change: Craig I would say it is.

Speaker Change: It's your typical levers we're here after the first quarter. So what are the things that we're thinking about that we can control are not control and going forward into this year can we can we get continued lower bad debt can we get people turned on faster for rent commencement dates can we retain more tenants can.

Heath R. Fear: Can we retain more tenants? Can we sign up some spec deals and turn people on later in the year? Can we do better in overage rent?

Speaker Change: Can we sign ups and spec deals in turn people off later in the year can we do better in all of our direct so we've got a lot of levers to pull to improve us entry year, and then as John mentioned looking out to $25 26, and beyond just the pure occupancy gains that we have holding aside any other organic growth and we said this enables yes, we're looking at a five to 600.

Heath R. Fear: So we've got a lot of levers to pull to improve our entry year. And then, as John mentioned, looking out into the 25 and 26 and beyond, just the pure occupancy gains that we have holding aside any other organic growth, and we said this in Naples, we're looking at a five to 600 basis point contribution from just getting ourselves back to pre-COVID plus, you know, over the next two or three years.

Speaker Change: <unk> point contribution from just getting ourselves back to pre Covid plus.

Speaker Change: Over the next two or three years so.

Heath R. Fear: So yeah, we've got things that we're going to be working on the entire year to beat that number we're currently guiding at. And then beyond that, we've got a lot of levers to pull. So we're feeling really good at where we're sitting right now.

Speaker Change: Yes, we've got things that we're going to be working on the entire year to beat that number. We're currently guiding up and then beyond that we've got a lot of levers to pull so we're feeling really good at where we're sitting right now.

Craig Allen Mailman: And I guess, you know, the last question, just as you guys have talked about kind of cost of capital coming down, and the flywheel effect of better free cash flow. You know, clearly this the stow pipeline, some of that some anchor leases, there may be more capex intensive, and then really the occupancy left is more kind of small shop. So as you think about from a timing perspective here, you know, as we get through the next 12-18 months, Is that the timeframe you think of to think of CAPEX kind of normalizing because more of the work you have to do would be kind of small shops and then, you know, how do you view and maybe it's a relative from here, but, you know, you've gotten the benefit of the, Credit Upgrades, and you're a more seasoned issuer, and so you've seen spreads compressed there, but just having that higher amount of free cash flow coming in at a lower cost. What do you think?

Speaker Change: No that's helpful and I guess.

Speaker Change: The last question.

Speaker Change: Just as you guys had talked about kind of cost of capital coming down and the flywheel effect, a better free cash flow.

Speaker Change: Clearly this is still pipeline some of that some anchor leases there maybe more capex.

Speaker Change: Tentative and then really the occupancy left is more kind of a small shop. So as you think about from a timing perspective here as we get through the next 12 to 18 months.

Speaker Change: Is that the timeframe you think to think of Capex kind of normalizing because more of the work you have to do it would be kind of small shops and then.

Speaker Change: How do you view and maybe to a relative from here, but.

Speaker Change: <unk> gotten.

Speaker Change: The benefit of the.

Speaker Change: Credit upgrades.

Speaker Change: You are more seasoned issuer and so you've seen spreads compress there, but just having that higher amount of free cash flow coming in at a lower cost what do you think on top of kind of the higher once you guys have talked about but just at that.

John A. Kite: on top of kind of the higher rent you guys have talked about, but just that. That cost of capital advantage two, three years out will be when you guys think about, you know, whether you go on certain developments or redevelopments or do, Uh, well, big, big picture focusing on the CapEx. Yeah, I'm looking, I'm gonna find a question in there.

Speaker Change: That cost of capital advantage two three years out will be when you guys think about.

Speaker Change: Whether you go on certain developments or redevelopments or do acquisitions.

Speaker Change: Well Big Big picture, just focusing in on the Capex.

Speaker Change: Im looking for I'm going to find the question in there.

Speaker Change: But the big picture Craig No doubt when you are spending.

John A. Kite: But the big picture, Craig, no doubt when you're spending, you know, over 100 million a year in two consecutive years on TI and LC and a normal year for you is 60 ish, then you're absorbing a lot more of that cash into that TILC. But it's also, as I pointed out in my prepared remarks, at like 30% returns on capital, right? So the free cash flow that comes out of that exercise in late 25, 26, 27 puts you in a position where there's nothing better than cost of capital from significant free cash flow, right? That we can deploy in very accretive manner. And back to Floris' question, if we don't think the place to put it is external, then it's internal.

Speaker Change: Over $100 million a year in two consecutive years on Ti and LC in a normal year for you is 60 ish then than you are absorbing a lot more of that cash into that.

Speaker Change: And to that TLC, but it's also as I pointed out in my prepared remarks at like 30% returns on capital right. So the free cash flow that comes out of that exercise.

Speaker Change: In late 'twenty five 'twenty six 'twenty seven puts you in a position where there is nothing better than cost of capital from significant free cash flow right that we can deploy and very accretive manner and back to <unk> question. If it isn't if we do.

Speaker Change: Thank the place to put it is external then its internal and you are buying back stock with free cash flow not with leverage right. So that we can maintain this incredible balance sheet that we have.

John A. Kite: And you're buying back stock with free cash flow, not with leverage, right? So that we can maintain this incredible balance sheet that we have. So the optionality is quite significant, Craig. But yeah, I mean, look, we're spending money organically and we're getting great returns on that organic spend. So I don't think people should be concerned about it.

Speaker Change: So the Optionality is quite significant Craig, but yes, I mean look we've got we're spending money organically and we're getting great returns on that organic spend so I don't think people should be concerned about it I think they should be happy about the fact that this is a simple business plan right.

John A. Kite: I think they should be happy about the fact that this is a simple business plan, right? And we just have to go execute it. That's helpful. All right, thanks, buddy.

Speaker Change: And we just got to go execute it.

Craig Allen Mailman: That's helpful. Thanks.

Speaker Change: Alright, Thanks Buddy.

Craig Allen Mailman: Thank you. One moment for our next question. And our next question comes from the line of Linda Tsai from Jeffreys. Your question, please. I know it's the beginning of the call. Give us an update on your box inventory, you know, how much is left. Sure. At this point, we have 26 boxes in our inventory today.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Linda Tsai from Jefferies. Your question. Please.

Linda Tsai: Yes, Hi, I know at the beginning of the call you mentioned that since 2022, you've executed 53 anchor leases to 36 different brands.

Linda Tsai: Can you give us an update on your box inventory how much is left and are any of those getting lease to grocers.

Linda Tsai: And we have done a great job not only leasing these boxes but putting in much better quality tenants with strong spreads and great return on investments in the capital. So we feel like that's a manageable number. We're looking very closely at how we continue to make progress on that anchor lease percentage. Right now, we're running at, you know, 95.9% on the anchor side.

Speaker Change: Sure at this point, we have 26 boxes in our inventory today.

Speaker Change: We have done a great job not only leasing these boxes, but put it in a much better quality tenants with strong spreads and great return on investments on the capital. So we.

Speaker Change: We feel like Thats, a manageable number we're looking very closely at how we continue to make progress on that that anchor lease percentage right now we're running.

Unknown Executive: So if you look at our run rates, and how we've been able to chip away at the inventory, I mean, sometimes it's between 5, 10, 11 boxes as we're moving through the year. So we have a good run on it. We have quite a few properties that are in lease, you know, five or seven that that are ongoing.

Speaker Change: 95, 9% on the anchor side. So if you look at our run rates and how we've been able to chip away at the inventory I mean, sometimes its between 510 11.

Speaker Change: Boxes.

Speaker Change: As we're moving through the year so.

Speaker Change: We have a good run on it we have quite a few properties that are in lease negotiation right now just on one segment we have.

Unknown Executive: So the I think the sentiment is very positive. And that is being buoyed by the fact that we have a low demand scenario. But is it really to the grocery side, Linda?

Speaker Change: Five or seven that are ongoing so.

Speaker Change: I think the sentiment is very positive and that is being buoyed by the fact that we have a low demand scenario, but as it relates to the grocery side Linda I mean definitely if you just look at our investor presentation.

John A. Kite: I mean, you definitely if you just look at our investor presentation. I think we cover it, like, on page 19, just in terms of the new deals that we've done recently, but, you know, Whole Foods, Trader Joe's, Lidl, Total Wine, you know, we've done a couple fresh market deals, Grocery Outlet out in the West Coast. So there is real strong demand there, and there continues to be demand across each kind of segment of the grocery business.

Speaker Change: I think we cover it like on page 19, just in terms of the new deals that we've done recently, but whole foods trader Joe's.

Speaker Change: Lidl.

Speaker Change: Total wine.

Speaker Change: Done couple of fresh market deals grocery outlet out in the West coast. So there is real strong demand there and there continues to be demand across each kind of segment of the grocery business.

John A. Kite: And I'm sure you've seen a lot of this recent data on when, you know, we've come to the point now where people are shopping multiple types of grocers per week, so they're not just going to one grocer, right? So if you've got a Kroger, you're going to the Kroger, but then you're going to either Whole Foods or Sprouts or Fresh Market for something, you know, particular, and then maybe you're going to Trader Joe's in addition to that.

Speaker Change: And I'm sure you've seen a lot of this recent data on.

Speaker Change: We've come to the point now where people are shopping multiple types of grocers per week.

Speaker Change: They're not just going to one grocer right. So if you've got a kroger youre going to the Kroger, but then youre going to.

Speaker Change: Either whole foods sprouts fresh market for something particular in then maybe youre going to trader Joe's. In addition to that so I think that's why these guys are continuing to expand and as we mentioned now our exposure to grocery.

John A. Kite: So I think that's why these guys are continuing to expand, and as we mentioned, now we're, you know, our exposure to grocery is getting up towards 80%. So it's a big part of our business, but again, it's all about your merchandising mix. What's the best thing to bring to that particular center?

Speaker Change: Is getting up towards 80% so.

Speaker Change: It's a big part of our business, but again, it's all about your merchandising mix, what's the best thing to bring to that particular center.

John A. Kite: So, yeah, the market is strong as it relates to that, Linda, and that's why I just said on the previous question that we're very happy to be kind of self-deploying capital back into that. And then on the shop side, you know, it seems like you have a little bit more leeway than some of your peers. Just as you head into ICFC, you know, what are some of the things that you're looking for? I'll start that and let Tom get to the more meat of it.

Speaker Change: So yes, the market is strong as it relates to that Linda and that's.

Speaker Change: Why I just said on the previous question that we're very happy to beat to be kind of self deploying capital back into that.

Speaker Change: And then on the shop side.

Speaker Change: Seems like you have a little bit more leeway than some of your peers as you head into ICSC.

Speaker Change: What are some of the things that youre looking for.

Speaker Change: Expect to hear.

John A. Kite: But look, like we always do going into ICSC, Linda, we take it very seriously. And I think our leasing people know that we're going in there and we have an agenda. And it's, it's not, we're not going there to have fun, we're going there to execute.

Speaker Change: I'll start that and let Tom get to the more meat of it but it looks like we always do going into ICSC. When do we take it very seriously and I think our leasing people know that we're going in there and we have an agenda and it's not we're not going there to have fun, we're going there to execute.

Tom: I think as it relates to the shop side.

Tom: The breadth the depth of the users has really changed in the last 18 to 24 months. The Optionality that we see right now in the tenants that are moving from one specific property type into another property type were really benefiting from that so I think our objective is to continue to do.

John A. Kite: And I think as it relates to the shop side, that the breadth, the depth of the users is really changed in the last, you know, 18-24 months. The optionality that we see right now and the tenants that are moving from one specific property type into another property type, we're really benefiting from that. So I think our objective is to continue to do what we're doing, which is not only to sign leases, but to sign leases with embedded growth that reflects the profile that we want.

Tom: What we're doing which is not only to sign leases, but to sign leases with embedded growth that reflects the profile that we want so maybe thats why maybe we're taking a little bit longer to lease up space. Because we are getting as we said 70% of the deals we did had 4% or greater bumps that will.

John A. Kite: Right. So maybe that's why, maybe we're taking a little bit longer to lease up space, because we are getting, you know, as we said, 70% of the deals we did had 4% or greater bumps. That will pay dividends in the future. So that's kind of the overall macro. Tom, you want to talk about like the specifics?

Tom: Pay dividends in the future. So that's kind of the overall macro Tom do you want to talk about like the specifics, yes, I think we want to focus on what we call our bread and butter type tenants.

Thomas K. McGowan: Yeah, I think we want to focus on what we call our bread and butter type tenants, which are restaurants, service, health, and beauty. But at the same time, we also want to pay particular attention to new concepts. And, you know, we recently signed some great restaurants that were basically generated out in the Scottsdale area by culinary dropouts, flower child. And as that line grays, and people find the attractiveness of pull in retail, we can really see that continuing to improve for our company. So we have a very quick strategy, but it hits a lot of different points and does not ignore any as we move forward. Thanks.

Tom: Those being restaurants service health and beauty, but at the same time.

Tom: Also want to pay particular attention to new concepts.

Tom: We recently signed some some great restaurants that.

Tom: Basically generated Scottsdale area culinary dropout flower child, and we're dealing with what you may, particularly say as some higher end.

Speaker Change: Paul or mixed use tenants in a risky flatter Nike.

Speaker Change: Yes, the Oreo worthy partner et cetera. So.

Speaker Change: Company, It really expanded our breadth and our reach to different types of tenants throughout the portfolio and as that line with Grays and people find the attractiveness of pull in retail we can really see that continuing to improve for our company. So we have a very.

Speaker Change: Clear strategy, but it hits a lot of different points.

Speaker Change: Does not ignore any as we move forward.

Speaker Change: Okay.

Speaker Change: Thanks.

Thomas K. McGowan: Thank you. What moment for our next question? And our next question comes on the line from Connor Mitchell from Piper Sandler.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Conor Mitchell from Piper Sandler Your question. Please.

Connor Mitchell: Your question, please. Hey, thanks for taking my question. So you guys have talked a lot about like the strength of the hand on lease negotiations for the industry and focus on, Redbubs and FixCam. Just wondering if, you know, maybe you could discuss any other levers that you guys haven't touched on that you're seeing to take advantage of the current environment and maybe increase the cash margin on leases that you know, we haven't talked about yet. Sure.

Connor Mitchell: Hey, Thanks for taking my question.

Connor Mitchell: So you guys have talked a lot about the strength, we had on lease negotiations for the industry.

Connor Mitchell: Focus on rent bumps.

Connor Mitchell: Fixed Cam just wondering if maybe you could discuss any other levers that you guys have touched on that.

Connor Mitchell: Youre seeing to take advantage of the current environment and maybe increase the cash margin on leases that we haven't talked about yet.

John A. Kite: I mean, Connor, we're always focused on how we can increase margins, which is probably why we have the highest NOI margin in the business and one of the highest recovery ratios consistently over time. I think, you know, frankly, controlling costs and getting better growth is what it's all about. And that's how we create free cash flow. We're already very good at it. We're already the market leader in fixed cameras in the open air space.

Speaker Change: Sure I mean.

Speaker Change: We're always focused on how we can increase margins, which is probably why we have the highest.

Connor Mitchell: AOI margin in the business and one of the highest recovery ratios consistently over time.

Speaker Change: I think.

Speaker Change: Frankly controlling cost and getting better growth.

Connor Mitchell: That's what it's all about and that's how we create free cash flow.

John A. Kite: So we're just leaning into that more. We don't we're not going to get into specifics about what those, you know, what those exact margins are fixed cam versus triple net, etc. Suffice to say, we're the leader.

Connor Mitchell: Already very good at it we're already the market leader in.

Connor Mitchell: In fixed Cam in the open air space. So, we're just leaning into that more.

Connor Mitchell: We don't we're not going to get into specifics about what those.

Connor Mitchell: What those exact margins are fixed cam versus triple net et cetera, suffice to say, we're the leader so that ought to tell you something are generally closer to the top so but the other things that we're doing right now to take advantage of the environment.

John A. Kite: So that ought to tell you something, or generally close to the top. So, but, you know, the other things that we're doing right now to take advantage of the environment is all the things within the lease, you know, all the things that we look at within the lease. You know, for example, when you look at our overage rent, our percentage rent that comes from sales, it's higher than it's ever been. It continues to be kind of an extra cherry on the top, but it should be because our tenants are doing great when they're paying that percentage rent. That obviously increases margins. Um, and then just how we look at the leases themselves in terms of, uh, exclusives and, you know, in terms of co-tenancy requirements.

Connor Mitchell: Is all of the things within the lease.

Connor Mitchell: All the things that we look at within the lease.

Connor Mitchell: For example, when you look at our overage rent our percentage rent that comes from sales is higher than it's ever been and it continues to be.

Connor Mitchell: Kind of in an extra cherry on the top but it should be because our tenants are doing great. When they are paying that percentage rent that obviously increases margins.

Connor Mitchell: And then just how we look at the leases themselves in terms of.

Connor Mitchell: Exclusives and in terms of co tenancy requirements.

John A. Kite: It's a, it's, it's a situation where we want to take care of our customers, but we also have to, you know, take care of the business. Um, and over time, it's gotten, you know, it's continued to improve. I don't think people talk enough about when you do business with a company like ours or some others; the retailers themselves would prefer to do business with somebody like us who delivers. It's one thing that you have a space that somebody wants, but it's another thing; how do we reinvest in our properties?

Connor Mitchell: It's a situation, where we want to take care of our customer, but we also have to take care of the business.

Connor Mitchell: Over time, it's gotten it's gotten continues to improve and.

Connor Mitchell: I don't think people talk enough about when you do business with a company like ours or some others the retailer themselves.

Connor Mitchell: We would prefer to do business with somebody like us who delivers its one thing that you have a space that somebody wants but it's another thing how do we reinvest in our properties how are we going about that.

Thomas K. McGowan: How are we, you know, going about that? You're making it very, very attractive to the consumer. So I think retailers appreciate that, and they're willing to pay for it in the right circumstances.

Connor Mitchell: Making it very very attractive to the consumer so I think retailers appreciate that and they're willing to pay for that in the right circumstances.

Thomas K. McGowan: Yeah, I mean, the only other one I would add is one of the key goals for our company is to, of course, start rent as quickly as possible, and we have this machine at Kite that's got pre-development, tenant coordination, project managers, and it's our job to work with all these tenants where they may struggle with permits, et cetera, run into problems on code issues and really work to get these tenants open as quickly as possible. We don't look at it as just a tenant issue, we look at it as our issue as well, so another big point of trying to generate that revenue earlier. Okay, appreciate all the color there.

Connor Mitchell: Yes, I mean, the only other one I would add is one of the key goals for our company as a core start rent as quickly as possible and we have this machine Thats got pretty development tenant.

Connor Mitchell: <unk> project managers, and it's our job to work with all of these tons or they may struggle with permits et cetera.

Connor Mitchell: Run into problems on code issues and really work to get these these tenants open as quickly as possible. We don't look at it as just the 10 of this year. We would look at it is our issue as well so another big point of trying to generate that revenue earlier.

Connor Mitchell: And then Bad Debt was the guy that was brought down and just kind of thinking about some, [inaudible] of False Fewer Credit Issues or, you know, maybe the sector's ability to wrangle troubled tenants. Oh, I don't know about that. I mean, you know, were as we laid out in our prepared remarks. I mean, when you look at the first quarter for us, if you exclude prior periods, you know, we were around 90 basis points. So the bottom line is you can save when you exclude prior periods, but that's part of our business. We're always collecting information. We just don't want to, you know, project that because it's volatile.

Speaker Change: Okay I appreciate all the color there.

Connor Mitchell: And then bad debt was.

Speaker Change: The guidance was brought down and just kind of thinking about some.

Connor Mitchell: Some factors from the past bed Bath that Joanne seem to be relatively seamless for the industry is there is there any chance we could be getting a mortgage with sensors.

Connor Mitchell: False fewer credit issues or maybe the sector's ability to wrangle troubled tenants.

Speaker Change: I don't know about that.

Speaker Change: We're as we laid out in our prepared remarks.

Speaker Change: When you look at the first quarter for us if.

Speaker Change: If you excluded prior periods, we were around 90 basis points. So the bottom line is you can say when you exclude prior periods, but that's part of our business. We're always collecting we just don't want to project that because it's volatile.

John A. Kite: So, you know, if you're assuming that bad debt's around 1% and you're always going to be collecting something, that's probably pretty stable. So I don't think we're being lulled. It's a function of the fact that supply and demand is putting us in a position that, you know, tenants want to be in these spaces and they're going to do everything in their power to continue to stay there, which means pay rent. So I don't think that it's particularly different, but it's better. Look, the reality is it's better. But right now we're being conservative and looking at the back balance of the year and we'll see where it shakes out. Appreciate the thought for me.

Speaker Change: So if youre, assuming that bad debts around 1% and youre always going to be collecting something.

Connor Mitchell: That's probably pretty stable so.

Connor Mitchell: So I don't think we're being Lord.

Connor Mitchell: It's a function of the fact that supply and demand.

Connor Mitchell: Is putting us in a position that tenants want to be in these spaces and they're going to do everything in their power to continue to stay there which means pay rent.

Connor Mitchell: So I don't think that it's particularly different.

Connor Mitchell: But it's better look the reality is it's better but right now we're being conservative in looking at the back balance of the year, and we'll see where it shakes out.

Speaker Change: I appreciate the thought for me.

Connor Mitchell: Thanks.

Connor Mitchell: Thanks. Thank you. One moment for our next question. And our next question comes from the line of Lizzie Doykin from Bank of America. Your question, please. Hi, everyone.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of let's see to it.

Speaker Change: Bank of America. Your question please.

Elizabeth Yang Doykan: I was hoping to get more color on the leasing spread on option renewals in the quarter, which looks like that compressed for the third straight quarter. And when I'm looking at the past four quarters, it looks like option renewals made up over 60% of the comparable space that's been executed. So, just wanted to see, you know, what's going on there, what's sort of been happening in the renewal discussions you're having with tenants, and maybe why is this proportion not coming down? You know, maybe you're signing renewals with fewer options?

Speaker Change: Hi, everyone.

Speaker Change: Was hoping to get more color on.

Speaker Change: The leasing spread on option renewals in the quarter, which looks like.

Speaker Change: That compressed for the third straight quarter.

Speaker Change: And when I'm looking at the past four quarters, it looks like option renewals made up over 60% of the comparable space that's been executed.

Speaker Change: So just wanted to see.

Speaker Change: What's going on there.

Speaker Change: What's sort of been happening and the renewal discussions you are having with tenants.

Speaker Change: And maybe why is this proportion not coming down.

Speaker Change: Maybe are you signing renewals with fewer options.

John A. Kite: Now, so so well, first of all, we're not having a lot of discussions on an option renewal, because the tenant is just hitting an option. So let's start there. And if you have a particular quarter, where you have multiple anchor options, you know, anchors hitting options, generally speaking, those aren't those are lower. So I think a lot of it's timing. And over the last couple quarters, I think we've probably had more anchors, I'm not looking at the data in front of me.

Speaker Change: No. So so well first of all we're not having a lot of discussions on an option renewal because the tenant is just hitting an option.

Speaker Change: So let's.

Speaker Change: Let's start there and if you have a particular quarter, where you have multiple anchor options anchors hitting options generally speaking those arent those are lower so I think a lot of its timing and over the last couple of quarters. I think we've probably had more anchors I'm not looking at the data in front of me.

Speaker Change: But it really comes down to mix what is the mix per per quarter.

John A. Kite: But it really comes down to mix, what is the mix per, you know, per quarter? It's kind of why we talk about non-option renewals. And, you know, when I look, you know, over the past, I think, two and a half years, the non-option renewals have been 12%. So, our goal is to have fewer options.

Speaker Change: Why do we talk about non option renewals.

Speaker Change: And.

Speaker Change: When I look over the past I think two and a half years, the non option renewals have been 12%.

Speaker Change: So our goal is to have less options I mean, it's part of our strategy around new leasing in kantar.

John A. Kite: I mean, you know, it's part of our strategy around new leasing and, you know, containing the options. And if the options do exist, that we have to get the appropriate rental increases in those options. But it would be pretty focused on the anchor side, and that's it.

Speaker Change: Containing the options and if the options do exist that we have to get the appropriate rental increases in those options.

Speaker Change: It would be pretty focused on the anchor side.

Speaker Change: And that's it.

Elizabeth Yang Doykan: Okay, thanks. And then back to Heath's comments on the 500 to 600 basis points of occupancy bill that's expected over the next, [inaudible] Well, I'm sorry, in terms of the it's probably going to be basically what our revenue is 50-50, right? 50% of our revenue comes from shops, 50% from anchors. Timing-wise, Heath, do you want to?

Speaker Change: Okay. Thanks.

Speaker Change: Then back to Keith's comments on the five to 600 basis points of occupancy build that's expected over the next.

Speaker Change: Two to three years.

Speaker Change: Just curious on how much you think that would be weighted towards anchors versus small shop and then maybe.

Speaker Change: Is there thoughts around the cadence over which that would happen.

Speaker Change: Whether thats and Thats weighted in the back half of 'twenty four versus 2025 2026.

Speaker Change: <unk>.

Speaker Change: Oh I'm sorry in terms of the <unk>.

Speaker Change: Are we going to be basically what our revenue is 50 50, 50% of our revenue comes from shops, 50% from anchors timing Wise Heath, you want to lessen and looking out to our model I think I'll stick with the two to three years is the timing.

Heath R. Fear: No, listen, looking out to our model, I think I'll stick with the two to three years as a timing. Again, it's getting us to sort of pre-COVID levels. But you know, based on the velocity of the leasing activities happening now, based on what we're seeing in this quarter as well, I'm not feeling better about that being closer to the two-year mark than the three-year mark, but I'll leave it at that in terms of the timing of that. Okay, and just one more from me.

Speaker Change: Again, it's getting us to sort of pre COVID-19 levels.

Speaker Change: Based on the velocity of the leasing activity that's happening now based on what we're seeing in this quarter as well feeling better about that being closer to the two year marked in the three year, Mark but I'll leave it at that in terms of about in terms of the timing of that.

Elizabeth Yang Doykan: It looks like you guys pulled down your interest in Glendale apartments. I think that was the only transaction made in the quarter. It seemed pretty quiet other than that, but just seeing what the rationale was there and if there were any other opportunities to make note of when it comes to disposition. Yeah, pretty simple.

Speaker Change: Okay.

Speaker Change: Just one more from me it looks like you guys slowed down your interest in Glendale apartments, I think that was the only.

Speaker Change: Transaction made in the quarter it seemed pretty quiet other than that just seeing what the rationale was there.

Speaker Change: Theres any other opportunities to make note of when it comes to dispositions.

John A. Kite: You know, that was a great deal. First of all, it was a fabulous deal, where we took a parking lot, contributed the parking lot into a partnership, got a 12% interest, and made a couple million bucks. So we'll keep doing that as long as we can keep doing that. You know, and I think our partner, who is obviously the primary partner, the multifamily developer, thought that the timing was right to monetize, and we agreed. So I think we will continue to look at those opportunities as we move forward. The multifamily side of our mix of NOI continues to grow; it's small, but it's growing.

Speaker Change: Yes.

Speaker Change: Pretty simple.

Speaker Change: Great Day first of all is a fabulous deal.

Speaker Change: We took a parking lot contributed the parking lot into a partnership got a 12% interest and made a couple of million Bucks. So we'll keep doing that as long as we can keep doing that.

Speaker Change: I think the our partner who is obviously the primary partner the multifamily developer thought that the timing was right to monetize.

Speaker Change: We agreed so I think we will continue to look at those opportunities as we move forward the multifamily side of our mix of NOI continues to grow its small but its growing.

John A. Kite: You know, prior to the sale of this asset, we have a pre-sale equity interest in around 1700 units, and you know, we're obviously doing more. And I like the way that we go about it in terms of trying to limit our capital into each deal. But yet, you know, thinking about IRR, obviously, this was a tremendous IRR, a tremendous return.

Speaker Change: We have a pre the sale of this asset we have we have an equity interest in around 700 units.

Speaker Change: We're obviously doing more.

Speaker Change: And I like the way that we go about it in terms of trying to limit our capital into each deal but yet.

Speaker Change: Thinking about IRR, obviously this was a tremendous IRR tremendous return.

John A. Kite: So I think we'll continue to do that. We have a couple projects that we're working on. And generally speaking, you know, we're probably going to probably max out around 50% ownership, but it'll depend on each individual deal. Just to give you some numbers, the IRR was 22%. The return on equity multiple was 1.8 times, and that was before the benefit of a $7 million TIF, which Kite was a sole beneficiary of. So again, if we can find more of those, you know, we're ready to go. It was a grand slam is an understatement for that particular deal.

Speaker Change: So I think we will continue to do that we have a couple of projects that we're working on and generally speaking, we're going to probably Max out around 50% ownership, but it will depend on each individual deal, but just put some numbers. The IRR was 22% return on equity multiple is one eight times and Thats before the.

Speaker Change: Benefit of $7 million, which was assault beneficiary of so again, if we can find more of those.

Speaker Change: We're ready to go.

Speaker Change: He was a grand Slam is an understatement for that particular deal not to drone on about it but it is another example that I want people to think about as it relates to our particular space and what you can do with retail real estate, which is very very different than a lot of these other sectors that.

John A. Kite: Not to drone on about it, but it is another example that I want people to think about as it relates to our particular, space, and what you can do with retail real estate, which is very, very different than a lot of these other sectors that seem to be very crowded trades, where all this money goes, but yet the reuse of the real estate is extremely limited, right? It is a very specific piece of real estate, data, industrial, whatever.

Speaker Change: Seem to be very crowded trades, where all this money goes but yet the reuse of the of the real estate is extremely limited right. It is a very specific piece of real estate data industrial whatever our real estate is so it's so fungible.

John A. Kite: Our real estate, it's so fungible, it's got so much flexibility, and when you're sitting on a piece of property that's an unused parking lot that can, you know, can be a 22% IRR, that should tell you that the stuff that we own, you know, probably in the sector, but particularly to kite, is really, really attractive. So good, good small example that I think people should think about.

Speaker Change: So much flexibility and when you're sitting on a piece of property that has an unused parking lot. They can.

Speaker Change: It can be a 22% IRR that should tell you that the stuff that we own.

Speaker Change: Probably in the sector, but particularly to kite is really really attractive.

Speaker Change: Good. Good small example that I think people should think about.

Speaker Change: Great. Thank you.

Elizabeth Yang Doykan: Great, thank you. Thank you. One moment for our next question, and our next question comes from the line of Honglian Cheng from J.P. Morgan. Your question, please? Yeah, hey, guys, I guess it looks like small shop occupancy declined slightly in the first quarter compared to the fourth quarter. Was there anything specific that drove that? Or is that, it's really seasonal. I mean, the same thing happened last year in the first quarter.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of hung beyond Chung from Jpmorgan. Your question. Please.

Speaker Change: Yeah, Hey, guys I guess, it looks like small shop occupancy declined slightly in the first quarter compared to the fourth quarter was there anything specific that drove that or is that just seasonal friction.

Honglian Cheng: It was almost the exact same as 30 or 40 basis points last year. So it's really timing. You know, when we look at our pace, our pace is good. And look, I think we did make a pretty significant statement about the type of shop leasing that we're getting, which is a little different than everybody else, maybe. You know, I don't hear a lot of other people talking about 4% bumps.

Speaker Change: It's really seasonal I mean same thing happened last year in the first quarter. It was almost the exact same as in the 30 or 40 basis points last year. So it is really timing.

Speaker Change: When we look at our pace our pace is good.

Speaker Change: And look I think we did make a we're trying to make a pretty significant statement around the type of shop leasing that we're getting is a little different than everybody else maybe.

Speaker Change: I don't hear a lot of other people talking about 4% bumps.

Speaker Change: So.

Speaker Change: I think it's timing.

John A. Kite: So, you know, I think it's timing. Got it. And when you and when you talk about occupancy going back to pre COVID levels in the next two, three years, is that on a lease basis or an economic? It's a lease basis, but it would be both.

Speaker Change: Got it and when you and when you talk about occupancy going back to pre COVID-19 levels. In next two three years is that on a lease basis or an economic basis.

Speaker Change: It's a lease basis, but it would be both I mean, ultimately it flows through the economic occupancy as well.

John A. Kite: I mean, ultimately, it flows through the economic occupancy as well. And, you know, from my personal perspective, you know, three years is probably a long time frame, but I would say within that. But yeah, I mean, we're we're we're very focused on maximizing the portfolio, but a little less focused on the timing of that. Got it.

Speaker Change: From my personal perspective.

Speaker Change: Three years is probably a long timeframe, but.

Speaker Change: I would say within that but yes, I mean, we're very focused on maximizing the portfolio, but a little less focused on the timing of that.

Speaker Change: Thank you.

Speaker Change: Thanks.

Honglian Cheng: Thank you. Thanks. Thank you. One moment for our next question. And our next question comes from the line of Anthony Powell from Barclays Capital. Your question, please. Hi, good afternoon.

Speaker Change: Thank you one moment for our next question.

Speaker Change: And our next question comes from the line of Anthony Powell from Barclays Capital. Your question. Please.

Anthony Franklin Powell: Just one for me a question on some of the coastal gateway exposure you bought in the arch ideal Seattle, DC, New York, I know there's some discussion about whether you keep those long term, maybe talk about how those are performed and where you see them kind of fitting your portfolio over the long, Sure. Look, I think I think we've been clear that we think we have a unique kind of footprint, and we like the footprint. Obviously, the great majority of our revenue comes from the Sunbelt.

Anthony Franklin Powell: Hi, good afternoon just.

Anthony Franklin Powell: One for me a question on some of the coastal Gateway explosion, you bought an archived deal Seattle DC, New York I know there was some discussion about whether you keep them long term.

Anthony Franklin Powell: Maybe talk about how those performed and where you see them kind of getting our portfolio over the long run.

John A. Kite: But we think that the kind of the gateway markets that we're operating in, particularly New York, DC, Seattle, are very attractive markets that our retailers want to, you know, grow and expand in. That being said, you know, we're always analyzing does it make sense to operate in a particular market? And certainly, you know, the coastal markets, you know, have their challenges as it relates to the things that we talked about around, you know, the tax status of each individual state, and the business friendliness of each individual state, right? So it is something that we're monitoring and talking about. And I'm not, I would never take off the table that we would look to, to make changes.

Anthony Franklin Powell: Sure.

Speaker Change: Look I think I think we've been clear that we think we have a unique kind of footprint and we like the footprint. Obviously the great majority of our revenue comes from the Sun belt, but we think that the kind of the gateway markets that we're operating in particularly New York DC Seattle are very attractive mark.

Speaker Change: <unk> that our retailers want.

Speaker Change: To grow and expand in that being said, we're always analyzing does it makes sense to operate in a particular market and certainly the coastal markets.

Speaker Change: Have their challenges as it relates to the things that we talked about around the tax status of each individual state and business friendliness of each individual state rate.

Speaker Change: It is something that we're monitoring and talking about and I'm not I would never take off the table that we would look to to make changes, but we're never going to make a change just to make a change that has to make sense economically and right. Now we are happy with the footprint, but we're always analyzing it.

John A. Kite: But we're never going to make a change just to make a change. It has to make sense economically. And right now, we're happy with the footprint, but you know, we're always analyzing it. Okay, great. Thank you. Thank you. Thank you.

Speaker Change: Okay, great. Thank you.

Speaker Change: Thank you.

Anthony Franklin Powell: One moment for our next question, and our next question, comes from the line of Wes Golladay from Baird. Your question, please. Hey guys, looks like there's about a 4 million increase in leases opening this year, including the 6 million that opened in the first quarter. Is the F&O opening faster?

Speaker Change: One moment for our next question.

Speaker Change: And our next question.

Wesley Keith Golladay: Are you pulling anything from 2025? Or is it just the new lease that you're signing this year that's opening later in the year that is, Yeah, Wes. So, I'm sorry, can you repeat the question again? You're a little muffled.

Speaker Change: Comes from the line of.

Speaker Change: Wes Golladay from Baird. Your question please.

Wesley Keith Golladay: Hey, guys I think there was about a $4 million increase in leases opening this year, including the 6 million that opened in the first quarter is the ethanol opening faster your point anything from 2025 or is it just the new leasing because signing this year. That's opening later in the year that is driving that.

Speaker Change: Yes.

Speaker Change #101: I'm sorry can you repeat the question that you're a little muffled.

Wesley Keith Golladay: Oh, yeah. So, you have about $4 million more in your S&O, including the leases that opened this year. Yeah, I'm just curious if that's, and the theater's obviously in there, it's going to be a small part of it, but I'm just wondering what is driving the $4 million increase? in the F&O this year opening. Is it?

Speaker Change: Yes, so you have about four.

Speaker Change: $4 million more in your ethanol, including the leases that opened this year I'm just curious if thats the theaters, obviously and there is going to be a small part of it but I'm just wondering what is driving the $4 million increase in the <unk> This year opening.

Speaker Change: Sure.

Heath R. Fear: That's all new leases, Wes, okay yeah, that's just new leases opening greater than correct now the leases that were in the previous quarter. Okay, and then you also added some new disclosure in your AFFO, the amortization of debt discount premium and hedge instruments. Is $3.8 million a good run rate going forward for this year? Hold on a second, I have that answer right here. For the run rate, yeah, it's directional.

Speaker Change: That's all new leases Wes.

Speaker Change: Okay.

Speaker Change: Although all of the new leases signed up that's just new leases opening greater than correct the leases that in the previous quarter.

Speaker Change: Okay and then you also added some new disclosure in your <unk>, the amortization of debt discount premium and hedge instruments is the $3 8 million a good run rate going forward for this year.

Speaker Change: Hold on a second 12 I have that answer right here.

Speaker Change: Run rate, yes, it's directional.

Wesley Keith Golladay: Okay, thanks a lot guys. Thank you. One moment for our next question, and our next question comes from the line of Paulina Rojas from Green Street. Your question, please. Hello, everyone.

Speaker Change: Okay. Thanks, a lot guys.

Speaker Change: Yes.

Speaker Change #102: Thank you one moment for our next question.

Paulina Alejandra Rojas: My question is about the transaction market. So treasury yields have rebounded. Have you seen any change in cap rates given the higher base? Any change in investors' appetite to transact? especially in the last month really. No, I don't think so, Paulina.

Speaker Change: And our next question comes from the line of Paulino Rojas from Green Street. Your question. Please.

Speaker Change: Okay.

Paulina Alejandra Rojas: Hello, everyone. My question is about the transaction market.

Paulina Alejandra Rojas: Yields have rebounded.

Paulina Alejandra Rojas: Have you seen any change in cap rates.

Paulina Alejandra Rojas: Given the higher eight any changing distressed appetite to transact, especially in the last months Sweeney.

Paulina Alejandra Rojas: Yes.

John A. Kite: I mean, I think we're kind of in a place right now where the market is finding stability. So, the, the curve has changed a little bit in the last 30 days, and the 10 years, you know, at 460 470 versus four. But the reality is, I think the majority of the investment community community believes that over time that that will stabilize lower. And when you look at the rent growth and the NOI growth that people are getting, particularly if something has upside associated with it, I think the IRRs are very comfortable. And my personal opinion is, as we move into next year, you will probably see the 10 year begin to settle in the lower four range. This is just my personal opinion.

Sweeney: No I don't think so Pauline.

Speaker Change: I think look the reality of.

Sweeney: We're kind of in a place right now where the market is finding stability.

Speaker Change: So sure.

Paulina Alejandra Rojas: The curve has changed a little bit in the last 30 days in the 10 years.

Paulina Alejandra Rojas: At $464 70 versus for but the reality is I think the majority of the investment community community believes over time that that will stabilize lower and when you look at the rent growth and the NOI growth that people are getting particularly if something has upside associated with it.

Paulina Alejandra Rojas: The IRR is are very comfortable.

Paulina Alejandra Rojas: And my personal opinion is as we move into next year, you probably see the 10 year begin to settle in the lower four range Theres just my personal opinion.

John A. Kite: And when you're, you know, when you can buy something at a six, that has two 3% growth embedded has some upside, you know, that's a great return. So I think I think probably back half of this year, you'll probably see it accelerate even more. Again, this is all my personal opinion, but we haven't seen anything slow down because of the volatility over the last month. And quite frankly, the fact that we're tethered to that is unfortunate. And, you know, I wish I wish people could look beyond that.

Paulina Alejandra Rojas: And when you are.

Paulina Alejandra Rojas: When you can buy something at a six that has 2% to 3% growth embedded has some upside that's a great return so I think I think.

Paulina Alejandra Rojas: Back half of this year Youll, probably see it accelerate even more again. This is all my personal opinion, but we haven't seen.

Paulina Alejandra Rojas: Anything slowdown because of the volatility over the last month and quite frankly, the fact that we're tethered to that is unfortunate.

Paulina Alejandra Rojas: And I particularly wish the Fed would think about a range of inflation versus one hard number that just doesn't make sense against an unemployment market at three and a half percent. So one of these days, maybe they'll take my advice, but not not not looking not looking. I'm not betting it on Draft King. Let's put it that way. Okay. And then you mentioned a drag on expenses net of recoveries that had to do with the timing of some of the recovery.

Paulina Alejandra Rojas: I wish I wish people could look beyond that and I.

Paulina Alejandra Rojas: Particularly wished the fed would think about a range of inflation versus one hard number that just doesn't make sense.

Paulina Alejandra Rojas: Against an unemployment market at three 5%. So one of these days, maybe they will take my advice, but not not not looking.

Paulina Alejandra Rojas: And really I'm not betting on draft King, let's put it that way.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: And then you mentioned and Dragon and expenses net of recoveries that had to do with the timing of some of the recovery.

Paulina Alejandra Rojas: So, overall, what's your expectation for this line item for the year? And I think the easiest way for me to see it is if you expect it to be a contributor to the same property and like growth or not.

Paulina Alejandra Rojas: Overall, what's your expectation for the line item for the year and I think the easiest way for me.

Paulina Alejandra Rojas: Peter if you expect it to be.

Paulina Alejandra Rojas: <unk> and same property NOI growth or not.

Heath R. Fear: So, the expenses in the first quarter, Paulina, again, this is just timing, and so we have higher expenses, and you'll see a little bit of a dip in our recovery ratios because of the fixed CAM, but as the year goes on, we'll see that expense normalize. So, again, it was just the timing of sort of front-loaded first quarter expenses. Yeah, in terms of, I mean, look, it's particularly around real estate taxes. So if we have previous years' experience in real estate taxes, it's probably a contributor, but, you know, we've got to wait and see when we get into the end of the year. Okay, thank you very much.

Paulina Alejandra Rojas: So the expenses in the first quarter Paulina. There were again. This is just timing and so we had higher expenses and then youll see it a little bit youll see a little bit of a dip in our recovery ratio is because because of the fixed cam, but as the as the year goes on we will see that expense normalized. So again. It was just the timing of sort of frontloaded.

Paulina Alejandra Rojas: First quarter expenses in terms of I mean look it's particularly around real estate taxes. So if you. If we have previous years' experience in real estate taxes, Thats, probably a contributor but we've got to wait and see when we get into the end of the year.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you.

Paulina Alejandra Rojas: Thank you. Thank you. One moment for our next question. And our next question comes from the line of Dori Kesten from Wells Fargo. Your question, please. Thanks, good afternoon.

Speaker Change: Thank you one moment for our next question.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: And our next question comes from line of Dori Kesten from Wells Fargo. Your question. Please.

Dori Lynn Kesten: Heath, can you talk about how the Moody's upgrade may benefit your interest costs going forward and just when you may look to address your 25? Um, yeah, listen, I don't know I can put an exact, you know, spread differential on it. It certainly helps. You know, we had two great things happen to us.

Dori Lynn Kesten: Thanks, Good afternoon.

Dori Lynn Kesten: Keith can you talk about how the Moody's upgrade may benefit your interest costs going forward and just when you may look to address your 25.

Paulina Alejandra Rojas: Yes, listen I don't know I can put an exact <unk>.

Dori Lynn Kesten: Spread differential onto that certainly helped.

Dori Lynn Kesten: We had two great things average was one Moody's upgraded us Fitch put us on positive. So we're hopeful that they'll move to triple B plus.

Heath R. Fear: One, Moody's upgraded us, Fitch put us on positive, so we're hopeful that they'll move to BBB+, soon. And then S&P, you know, they put us to a positive outlook as well. And again, we're hopeful that we'll mature into a pure triple V rating over the next couple of quarters. So all those things combined will certainly help compress it.

Paulina Alejandra Rojas: Soon and then S&P.

Paulina Alejandra Rojas: Put us to a positive outlook as well and again, we're hopeful mature into a pure triple B rating over the next couple of quarters. So all those things combined will certainly help compress it.

Paulina Alejandra Rojas: Listen we issued back in January when the tenure was around 390 and the spread was 170 over current indicative as have us somewhere between $1 40, and 150. So were certainly see some compression and then as we go into the market more often in our bonds become more liquid we only see that getting better and better and better so in terms of <unk>.

Heath R. Fear: Listen, you know, we issued back in January when, you know, the 10-year was around 390, and the spread was 170 over. Current indicatives have us somewhere between 140 and 150. So we're certainly seizing the impression. And as we go into the market more often and our bonds become more liquid, we only see that getting better and better and better. So, you know, in terms of the timing of when we're going to address the 25s, listen, we're going to be opportunistic.

Paulina Alejandra Rojas: Or when we're going to address the 20 fives listen we're going to be opportunistic I think we've been really good.

Heath R. Fear: I think we've been really good at sort of looking at the macro environment and picking our spots. I think now, in hindsight, when we picked that day to trade in January, what was a really good time was before the 10-year started to gap out again.

Paulina Alejandra Rojas: Sort of looking at the macro environment of picking our spots I think now in hindsight when we pick that data to trade in January is a really good time as before the 10 year started two to gap out again, and so we're going to do our best to sort of read the macro cues and take a good spot. When we think we can also do another nice print so I would say.

Heath R. Fear: And so we're going to, you know, do our best to sort of read the macro cues and pick a good spot when we think we can also do another nice print. So I would say, you know, late 24, early 25 is when we'd look to be looking to address those maturities. Okay, thank you. Thanks.

Paulina Alejandra Rojas: Late 'twenty for early 'twenty five is when we'd look to be looking to address those maturities.

Speaker Change: Okay. Thank you.

Speaker Change: Thanks.

John A. Kite: This does conclude the question and answer session of today's program. I'd like to hand the program back to John Kite for any further remarks. I just want to say thank you to everybody for tuning in today and thanks for the interest in the company. Really looking forward to hopefully seeing a lot of you in Dallas in a couple weeks at our foreign 24 where we're going to see some, really awesome properties. And I would also say, please take a look at the stock because it is incredible value. Thank you very much.

Speaker Change: This does conclude the question and answer session of today's program I'd like to hand, the program back to John Kite for any further remarks.

John A. Kite: Just wanted to say, thank you to everybody for tuning in today and thanks for the interest in the company.

John A. Kite: Really looking forward to hopefully seeing a lot of you in Dallas in a couple of weeks at our 424, where we're going to see some.

Paulina Alejandra Rojas: Really awesome properties.

Paulina Alejandra Rojas: And.

Paulina Alejandra Rojas: I would also say please take a look at the stock because it has incredible value. Thank you very much.

Operator: Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day. Goodbye.

Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Paulina Alejandra Rojas: Goodbye.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: [music].

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: [music].

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: [music].

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas:

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: [music].

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: [music].

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: [music].

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Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: [music].

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: [music].

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Paulina Alejandra Rojas: Yes.

Paulina Alejandra Rojas: Yes.

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Paulina Alejandra Rojas: Okay.

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Paulina Alejandra Rojas: Yes.

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Paulina Alejandra Rojas: Okay.

Paulina Alejandra Rojas: Sure.

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Paulina Alejandra Rojas: [music].

Paulina Alejandra Rojas: Yes.

Operator: ??? ??? ??? ??? ??? ??? ?? ?? ?? ?? ?? ?? Thank you for standing by and welcome to the first quarter 2024 Kite Realty Group. Trust Earnings Conference call. At this time, all participants are in listen-only mode.

Speaker Change #100: Thank you for standing by and welcome to the first quarter 2020 for Kite Realty.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. If your question has been answered and you'd like to remove yourself from the queue, simply press star 11 again.

Speaker Change #103: Trust earnings Conference call at this time, all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you will need to press star one on your telephone. If your question has been answered and you'd like to remove yourself from the queue simply press Star One again as a reminder, today's program is being.

Operator: As a reminder, today's program is being recorded. And now, I'd like to introduce your host for today's program. Bryan McCarthy, Senior Vice President of Corporate Development and Investor Relations Please go ahead. Thank you, and good afternoon, everyone.

Speaker Change: We recorded and now I'd like to introduce your host for today's program.

Bryan McCarthy: Bryan Mccarthy Senior Vice President corporate development and Investor Relations. Please go ahead.

Bryan McCarthy: Welcome to Kite Realty Group's first quarter earnings call. Some of today's comments contain forward-looking statements that are based on assumptions of future events and are subject to inherent risk and uncertainty. Actual results may differ materially from these statements.

Bryan McCarthy: Thank you and good afternoon, everyone welcome to Kite Realty group's first quarter earnings call.

Bryan McCarthy: Some of today's comments contain forward looking statements that are based on assumptions of future events and are subject to inherent risks and uncertainties.

Bryan McCarthy: Actual results may differ materially from these statements.

Bryan McCarthy: For more information about the factors that can adversely affect the company's results, please see our SEC filings, including our most recent Form 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for a reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group are Chairman and Chief Executive Officer, John Kite, President and Chief Operating Officer, Tom McGowan, Executive Vice President and Chief Financial Officer, Heath Fear, Senior Vice President and Chief Accounting Officer, Dave Buell, and Senior Vice President, Capital Markets and Investor Relations, Tyler Henshaw. I'll now turn the call over to... Thanks, Bryan, and thanks, everybody, for joining us today.

Bryan McCarthy: For more information about the factors that can adversely affect the companys results. Please see our SEC filings, including our most recent Form 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to yesterday's earnings press release available on our website for a reconciliation of these non-GAAP performance measures to our GAAP.

Speaker Change: Financial results on.

Speaker Change: On the call with me today from Kite Realty Group are chairman and Chief Executive Officer, John Kite, President and Chief operating Officer.

Speaker Change: Okay.

Speaker Change: Executive Vice President and Chief Financial Officer, Heath, Fear, Senior Vice President and Chief Accounting Officer, Dave fuel and senior Vice President capital markets and Investor Relations Tyler Henshaw I'll now turn the call over to Scott.

Scott: Thanks, Brian.

Scott: Thanks, everybody for joining today.

John A. Kite: CARE-G maintained its momentum into the first quarter of 2024, delivering exceptional execution across our platform and further strengthening our already best-in-class balance sheet. Heath will walk you through the details of our quarterly results and increase guidance. And I'll focus on recent sector trends, our operating priorities, and the series of strategic, well-timed initiatives that have allowed KRG to earn the highest total return in the open air retail space over the past five years. Open Air retail has demonstrated strong fundamentals and rapidly accelerated recognition of its central role in each community we serve.

Speaker Change: <unk> has maintained our momentum into the first quarter of 2020 for delivering exceptional execution across our platform and further strengthening our already best in class balance sheet.

Speaker Change: We'll walk you through the details of our quarterly results and increased guidance now I'll focus on recent sector trends our operating priorities.

Speaker Change: And the series of strategic well timed initiatives that have allowed <unk> to earn the highest total return in the open air retail space over the past five years.

Speaker Change: Open Air retail has demonstrated strong fundamentals and rapidly accelerated recognition of its central role in each community we serve.

John A. Kite: The reappreciation of Open Air's critical role as the most convenient and profitable distribution channel has resulted in consistent demand across our portfolio from both our tenants and shoppers. The renaissance of open air retail is amplified in the Sunbelt, where our portfolio benefits from migration trends out of higher cost of living metros into warmer, lower tax states. The top 10 MSAs for population growth in 2023 account for over 30% of our revenue and include cities like Dallas, Houston, Atlanta, Orlando, Tampa and Phoenix.

Speaker Change: The re appreciation of open air his critical role as the most convenient and profitable distribution channel as a resulted in consistent demand across our portfolio from both our tenants and shoppers.

Speaker Change: The Renaissance of open air retail is amplified in the sunbelt, where our portfolio benefits from migration trends out of higher cost living out of higher cost of living metros and to warmer lower tax states. The top 10 msas for population growth in 2023, okay.

Speaker Change: For over 30% of our revenue and includes cities like Dallas, Houston, Atlanta, Orlando, Tampa and Phoenix.

John A. Kite: On the operational front, we remain laser focused on creating the best experience possible at our centers by selectively adding high-quality tenants to our portfolio. Since the beginning of 2022, we've executed 53 anchor leases to 36 different brands, over 90% of which were national tenants, and we increased our grocery exposure by 400 basis points to nearly 80%. We've generated 46% comparable cash spreads and 26% returns on capital, and we're very confident in our ability to continue this robust leasing effort.

Speaker Change: On the operational front, we remain laser focused on creating the best experience possible at our centers by selectively adding high quality tenants to our portfolio.

Speaker Change: Since the beginning of 2022, we've executed 53 anchor leases to 36 different brands over 90% of which were national tenants and we.

Speaker Change: We increased our grocery exposure by 400 basis points to nearly 80%, we've generated 46% comparable cash spreads and 26% returns on capital and we're very confident in our ability to continue the robust leasing efforts are.

John A. Kite: Our thoughtful approach prioritizing quality and value creation will continue to enhance the merchandising mix at our centers and improve the credit profile of our tenant base. On the small shop side, we continue to have success pushing higher embedded growth for new and non-option renewal shop leases signed in the first quarter of 2024. The average annual growth was 3.4%, and 70% of these leases have fixed rent bumps greater than or equal to 4%. To illustrate the tremendous progress we've made in 2022, the average annual growth was 2.7%, and only 3% of the leases had fixed rent bumps greater than or equal to 4%.

Speaker Change: Our thoughtful approach prioritizing quality and value creation, we will continue to enhance the merchandising mix at our centers and improve the credit profile of our tenant base.

Speaker Change: On the small shop side, we continue to have success pushing higher embedded growth.

Speaker Change: For new and non option renewals shop leases signed in the first quarter of 2024.

Speaker Change: The average annual growth was three 4% and 70% of these leases have fixed rent bumps greater than or equal to 4%.

Speaker Change: To illustrate the tremendous progress we've made in 2022, the average annual growth was two 7% and only 3% of the leases had fixed rent bumps greater than or equal to 4%.

John A. Kite: The benefit of negotiating higher fixed rent bumps will take time to materialize, but our efforts are on track to provide tangible improvements to our long term embedded growth profile, maintaining a disciplined leasing approach by keeping quality and growth at the forefront will further strengthen our durable cash flow stream, while generating strong risk adjusted and absolute return. Our sign not open pipeline increased to $32 million and we expect 76% of the NOI to commence in 2024.

Speaker Change: The benefit of negotiating higher fixed rent bumps will take time to materialize, but our efforts are on track to provide tangible improvements to our long term embedded growth profile.

Speaker Change: Maintaining a disciplined leasing approach by keeping quality and growth at the forefront will further strengthen our durable cash flow stream, while generating strong risk adjusted and absolute returns.

Speaker Change: Our signed not open pipeline increased to $32 million and we expect 76% of the NOI to commence in 2024.

John A. Kite: On pages six and seven of our latest investor deck, we detail the commencement timing of the sign-not-open pipeline and the compelling opportunity for investors based on current share price at various capitalization rates. These pages do not account for the future opportunity to allocate free cash flow, which we expect will significantly ramp up as our elevated leasing spend normalizes.

Speaker Change: On pages, six and seven of our latest investor deck, we detail the commencement timing of of the signed not open pipeline and the compelling opportunity for investors based on current share price at various capitalization rates.

Speaker Change: These pages do not account for the future opportunity to allocate free cash flow.

Speaker Change: Which we expect will significantly ramp up as our elevated leasing spend normalizes.

John A. Kite: Along with our increased free cash flow, we expect meaningful AFFO and dividend growth. While the opportunity for investors is very compelling right now, we believe the future holds an even more convincing case for KRG with better growth and more capital to allocate. Over the last five years, KRG has earned the highest total return in our sector.

Speaker Change: Along with our increased free cash flow, we expect meaningful <unk> and dividend growth.

Speaker Change: While the opportunity for investors is very compelling right now we believe the future holds an even more convincing case for care G with better growth and more capital to allocate.

Speaker Change: Over the last five years <unk> has earned the highest total return in our sector. We were able to accomplish will accomplish this by improving the quality and location of our portfolio fortifying our balance sheet executing on a transformational merger improving our credit ratings and rewriting our cost.

John A. Kite: We were able to accomplish this by improving the quality and location of our portfolio, fortifying our balance sheet, executing on a transformational merger, improving our credit ratings, and re-rating our cost of debt, these very well-timed successes, could not have dovetailed better with the open air retail supply and demand imbalance, the acceleration of consumer trends spurred by the pandemic and the increased commitment to physical retail. Our continued execution has allowed us to raise the midpoint of our 2024 FFO guidance by two cents, and our same property NOI growth, assumption by 50 basis points.

Speaker Change: Debt.

Speaker Change: These very well time successes.

Speaker Change: Could not have dovetailed better with the open air retail supply and demand imbalance the acceleration of <unk>.

Speaker Change: Consumer trends spurred by the pandemic and the increased commitment to physical retail.

Speaker Change: Our continued execution has allowed us to raise the midpoint of our 2024 <unk> guidance by <unk> <unk> and our same property NOI growth assumption by 50 basis points. Our team has produced solid results and collectively we have positioned the company to continue outperforming.

John A. Kite: Our team has produced solid results, and collectively, we've positioned the company to continue outperforming. We have an experienced group across all departments of the organization. And I hope each of you will get time to spend time with our various team members at our remaining four and 24 events in Dallas, Washington, DC, and Las Vegas. Thank you, as always, to our incredible team, and now I'll turn the call to Heath. Thank you, and good afternoon.

Speaker Change #104: We have an experienced group across all departments of the organization and I hope each of you will get time to spend we will get to spend time with our various team members at our remaining 4% and 24 events in Dallas, Washington, D C and Las Vegas.

Speaker Change: Thank you as always to our incredible team and now I'll turn the call to Heath.

Heath R. Fear: Thank you and good afternoon. Following John's remarks about our $4 24 series. Our initial event last February it was very well received and showcased the strength of the Naples market the underlying quality of our bread and butter assets and the intensity of our operating platform. We are anticipating a great turnout for our next event in <unk>.

Heath R. Fear: Following John's remarks about our 4-in-24 series, our initial event last February was very well received, and showcased the strength of the Naples market, the underlying quality of our bread and butter assets, and the intensity of our operating platform. We are anticipating a great turnout for our next event in Dallas, which is our largest market in terms of ABR and GLA. In Dallas, we will tour over 5% of KRG's total NY while demonstrating the prowess of our leasing team using Southlake Town Square as our case study. Southlake is one of the nation's premier mixed-use lifestyle centers, and we can't wait to show you the tremendous progress we have made.

Heath R. Fear: <unk>, which is our largest market in terms of ABR and GLA and Dallas, We will tour over 5% of <unk> total NOI, while demonstrating the promise of our leasing team using Southlake town square as our case study.

Heath R. Fear: <unk> is one of the nation's premier mixed use lifestyle centers and we can't wait to show you the tremendous progress we have made.

Heath R. Fear: Turning to our results for the first quarter of 2024, KMG earned 50 cents of NARIT FFO per share, which was slightly higher than anticipated due to outperformance in same property NOI and a non-budgeted termination, same property NOI group by 1.8%, bolstered by increases in minimum rent and lower bad debt as offset by a decrease in net recoveries primarily due to the timing of recoverable operating expenses. Based on the first quarter outperformance and our revised outlook for the balance of the year, we are increasing our 2024 FFO guidance by two cents at the midpoint to a range of 202 to 208.

Heath R. Fear: Turning to our results for the first quarter of 2024, <unk> earned <unk> 50 of NAREIT <unk> per share, which was slightly higher than anticipated due to outperformance in same property NOI and a non budgeted termination fee.

Heath R. Fear: Same property NOI grew by one 8% bolstered by increases in minimum rent and lower bad debt as offset by a decrease in net recoveries, primarily due to the timing of recoverable recoverable operating expenses.

Heath R. Fear: Based on our first quarter outperformance and our revised outlook for the balance of the year. We are increasing our 2024 <unk> guidance by <unk> <unk> at the midpoint to a range of 202 to two <unk>.

Heath R. Fear: At the midpoint, we assume a full-year bad debt assumption of 80 basis points of total revenues and a full-year same property NLI growth assumption of 2%. This represents a 20 basis point bad debt improvement and a 50 basis point improvement in same property NMI growth as compared to our original guide. The improvement in the full-year bad debt component is a function of combining the actual bad debt we experienced in the first quarter, which was approximately 30 basis points of first quarter revenues, with the continued assumption of 100 basis points of bad debt of total revenues for the remaining three quarters.

Heath R. Fear: At the midpoint, we assume a full year bad debt assumption of 80 basis points of total revenues.

Heath R. Fear: Our full year same property NOI growth assumption of 2%. This represents a 20 basis point bad debt improvement and a 50 basis point improvement in same property NOI growth as compared to our original guidance the.

Heath R. Fear: The improvement in the full year bad debt component is a function of combining the actual bad debt, we experienced in the first quarter, which was approximately 30 basis points of first quarter revenues with the continued assumption of 100 basis points of bad debt of total revenues for the remaining three quarters as we detailed last quarter. Our same property growth for 2024 was adverse.

Heath R. Fear: As we detailed last quarter, our same property growth for 2024 was adversely impacted by our disproportionate exposure to Bed Bath & Beyond, the unexpected departure of a large theater tenant, and the extremely low bad debt we experienced in 2023. Absent these three items, our same store growth assumption for 2024 would be 3.5%.

Heath R. Fear: Actually impacted by our disproportionate exposure to bed Bath, the unexpected departure of a large state or tenant and the extremely extremely low bad debt. We experienced in 2023 absent. These three items our same store growth assumption for 2024 would be three 5%.

Heath R. Fear: In terms of the trajectory for 2024, we expect same property NOI growth to accelerate in the back half of this year, providing a solid foundation for growth into 2025 and 2026. As always, our goal with giving guidance is to prudently set expectations while leaving room to outperform. With that in mind, our guidance does not include certain recurring but unpredictable items, including lease termination fees, land sale gains, or prior period collections, unless and until the same are committed. Following our well-timed bond issuance, Moody's upgraded KRG to BA2, and Fitch revised our outlook to positive.

Heath R. Fear: In terms of the trajectory for 2024, we expect same property NOI growth to accelerate in the back half of this year, providing a solid foundation for growth into 2025 and 2026.

Heath R. Fear: As always our goal of giving guidance is to prudently set expectations, while leaving room to outperform with that in mind. Our guidance does not include certain recurring but unpredictable items, including lease termination fees land sale gains or prior period collections unless and until the same are committed.

Heath R. Fear: Following our well time to bond issuance, Moody's upgraded <unk> and Fitch revised our outlook to positive. Furthermore, we are optimistic that S&P's positive outlook will mature into a full upgrade to triple b in the next few quarters.

Heath R. Fear: Furthermore, we are optimistic that S&P's positive outlook will mature into a full upgrade to BBB in the next few quarters. On page 14 of our investor presentation, we show the complete overhaul in our cost of debt relative to the BBB REIT index. As we continue to demonstrate our commitment to maintaining a strong balance sheet and show the same commitment to the unsecured debt market, we expect our debt pricing will continue to compress.

Heath R. Fear: On page 14 of our Investor presentation, we showed a complete overhaul in our cost of debt relative to the Triple B REIT index as we continued to demonstrate our commitment to maintaining a strong balance sheet and show the same commitment to the unsecured debt market, we expect our debt our debt pricing won't continue to compress.

Heath R. Fear: As a reminder, we continue to hold the proceeds from our $350 million January bond offering in an investment account, earning interest in excess of the yield on our 2024 maturities, which we intend to retire in late June and mid-July. At 5.1 times net debt to EBITDA, approximately $1.2 billion in available liquidity, a debt service coverage ratio of over five times, and healthy operating fundamentals, our credit profile is one of the best in the sector.

Heath R. Fear: As a reminder, we continue to hold the proceeds from our $350 million January bond offering and an investment account, earning interest in excess of the yield on our 2024 maturities, which we intend to retire in late June and mid July.

Heath R. Fear: Five one times net debt to EBITDA, approximately $1 2 billion in available liquidity or debt service coverage ratio of over five times and healthy operating fundamentals our credit profile is one of the best in the sector.

Heath R. Fear: As highlighted on page 7 of our investor deck, the current stock price of KRG represents an extremely compelling entry point, and the recent private market transactions serve to solidify our current value proposition. We believe that the catalysts for a change in our equity multiple are clear in the form of outsized occupancy gains over the next two years, strong pricing power, higher embedded growth, low leverage, an improved cost of debt, and significant free cash flow in the outer year. Thank you all for joining the call today.

Heath R. Fear: As highlighted on page seven of our Investor deck. The current stock price of <unk> represents an extremely compelling entry point. The recent private market transactions served to solidify our current value proposition.

Heath R. Fear: We believe that the catalyst for a change in our equity multiple are clear in the form of outsized occupancy gains over the next two years strong pricing power higher embedded growth low leverage improved cost of debt and significant free cash flow in the outer years. Thank you all for joining the call today operator. This concludes our prepared remarks.

Operator: Operator, this concludes our prepared remarks. Please open the line for questions. Certainly. Thank you.

Heath R. Fear: <unk>. Please open the line for questions certainly thank you one moment for our first question and our first question comes from the line of Todd Thomas from Keybanc Capital markets. Your question. Please.

Operator: One moment for our first question. And our first question comes from the line of Todd, from KeyBank Capital Markets. Your question, please. Hi, thanks. Good afternoon.

Todd Michael Thomas: First question, just around the guidance and last quarter specifically, you talked about the two cent drag from the theater vacated city center in White Plains. It looks like a lease may have been signed. Curious if you can talk about that and provide some details around that. The Wren, perhaps the timeline. Hey Todd.

Todd Michael Thomas: Hi, Thanks. Good afternoon first question just around the guidance in last quarter, specifically, you talked about the <unk> <unk> drag from the theater vacate at City Center in White Plains. It looks like a lease may have been signed with a replacement tenant I'm. Just curious if you can talk about that and provide.

Some detail around.

The rent and perhaps timeline for rent to commence it didn't sound like there was anything factored in the updated guidance as it pertains to that.

John A. Kite: Well, you can assume that the guidance does take that into account and that, you know, we're not going to get specific about an individual tenant's rent, etc. But we can tell you that, you know, it's an 80,000 square foot deal, and it's a tremendous opportunity for us to quickly backfill something that is not easy to do. And we're really, we were focused on getting that done; the payback period for this deal is less than two years. It's almost a 50% return on cost.

Speaker Change #105: Hey, Todd.

Todd Michael Thomas: Well you can assume that the guidance does take that into account.

Todd Michael Thomas: And that we're not going to obviously get specific about an individual tenants rent et cetera, but we can tell you that its an 80000 square foot deal and it's a tremendous opportunity for us to quickly backfill something that is not easy to do and were really we were focused on <unk>.

Todd Michael Thomas: That done the payback period for this deal is less than two years.

John A. Kite: So it's a fabulous deal. And suffice to say the rent, the in-place rent, is less than the previous tenant was paying. But there's definitely a small pickup for the year, it's probably less than half, it's around a half a penny for the year. So it's really more about the fact that we were able to get a great operator in quickly and again to a difficult situation in terms of going into a vertical retail establishment. So I am very happy with it, Tom, if you want to add anything.

Todd Michael Thomas: It's almost a 50% return on cost.

Todd Michael Thomas: So it's a fabulous deal and suffice to say that the in place rent is less than the previous tenant was paying but there is definitely a small pickup for the year, it's probably less than half of its around half a penny for the year.

Todd Michael Thomas: So it's really more about the fact that we were able to get a great operator and <unk>.

Todd Michael Thomas: Quickly and again to a difficult situation in terms of going into a vertical retail establishment, so very happy with it Tom if you want to add anything the only thing I'd add Todd is one of the things that we really wanted to accomplish.

Thomas K. McGowan: Yeah, the only thing I'd add, Todd, is one of the things that we really wanted to accomplish to protect that zone, from an exhibitor standpoint, was get them open as quickly as possible. They're going to start doing some soft openings next week, and then I think the week after, we should be ready to go. So that was one of our big goals that we have achieved. Okay, and the timeline for, is there a free rent period or any concessions or is rent scheduled to commence? Relative Right, right. Yeah, rent will commence when they open. So no free rent.

Tom: Protect that.

From an exhibitor standpoint was get them open as quickly as possible.

Tom: We're going to start doing some soft openings next week and then I think the week after or we should be we should be ready to go. So that was one of our big goals that we have achieved.

Speaker Change #106: Okay and the timeline for.

Speaker Change #106: Their free rent period, or any concessions or is scheduled to commence.

Relative.

Speaker Change #107: Yes rent will commence when they open.

So no free rent.

Thomas K. McGowan: Okay, got it. And then, you know, can you provide a little bit of additional detail on the lease term in the quarter? Sounds like that was, but it wasn't. Yeah, Todd, very simple.

Speaker Change #107: Okay got it and then.

Speaker Change #107: Can you provide a little bit of additional detail on the lease termination fee.

Speaker Change #107: In the quarter it sounds like that was that was not previously anticipated.

Can you just discuss that a little bit more and provide some additional color.

Heath R. Fear: It was just a bank branch that decided to close and you know, we did a healthy NPV and the remaining rent payments and they paid us a termination fee. So not something we were expecting, but I'm happy to take that rent termination fee and go ahead and release that space. So it was it was a win-win for us. Okay, and then, you know, just lastly... You know, Heath, you talked about, you know, the company's leverage profile and credit metrics.

Speaker Change #108: Yes, Tom very simple it was just a bank branch has decided to close in.

Speaker Change #109: Healthy NPV in the remaining payments on payments a termination fee. So not something we were expecting but I'm happy to take that rent termination fee and go ahead and re leased that space. So.

Speaker Change #109: Was a win win for us.

Speaker Change #110: Okay, and then just lastly.

Speaker Change #110: Heath, you talked about the company's leverage profile and credit metrics.

Heath R. Fear: You know, I wanted to ask about acquisitions again this quarter. Sounds like there's a little bit more deal flow across the industry, just given where, you know, the balance sheet sits today. Transcripts provided by Transcription Outsourcing, LLC. If you could, please.

Speaker Change #111: I wanted to ask about acquisitions again this quarter.

Heath R. Fear: It sounds like Theres, a little bit more deal flow across the industry, just given where the balance sheet sits today and.

Heath R. Fear: Sort of the position that you're in I, just wanted to get a sense of your appetite for investments and if you can.

Heath R. Fear: Could discuss kind of price trends that youre seeing in.

Heath R. Fear: In the market.

Heath R. Fear: Price Trends Sure. You know, look, I think we continue to be very focused on the execution of our operating platform right now and a little less focused on external opportunities. You know, look, we've been very clear that, you know, in the next two years, we're going to spend over $200 million in terms of TI's and LC's. Some people may call that redevelopment, but it's leasing.

Speaker Change #112: Sure Todd.

Speaker Change #113: Look I think we continue to be very focused on.

Todd Michael Thomas: The execution in our operating platform right now and a little less focused on external.

Todd Michael Thomas: Opportunities.

Todd Michael Thomas: We've been very clear that in the.

Todd Michael Thomas: The next two years, we're going to spend over $200 million.

Todd Michael Thomas: In terms of Ti and Lcs, some people may call that redevelopment, but its leasing.

Todd Michael Thomas: And it's great because the returns on capital are extremely high.

Todd Michael Thomas: Everything is very quantifiable in terms of the risk so that is really our focus.

Todd Michael Thomas: And it will generate significant free cash flow for us.

Todd Michael Thomas: Once we complete that lease up plan. So that doesn't mean, we aren't looking at outside opportunities. We obviously are we will continue to do some paired trades like we've talked about in the past, where we would sell some assets and then look to redeploy the capital into higher growing better positioned properties.

In terms of what we're seeing in the market. The market is getting more activity there is liquidity.

Todd Michael Thomas: Look open air retail is a very sought after.

Todd Michael Thomas: Asset class right now despite the fact that.

Todd Michael Thomas: You look at R. R.

Todd Michael Thomas: Where our stock trades, you wouldn't think that but in the private market. This is a very sought after asset class and our properties are very sought after so it's definitely.

Todd Michael Thomas: Only compressed it's harder to find opportunities.

Todd Michael Thomas: At yields that we want to even think about relative to the yields that we're getting in our leasing platform. So.

John A. Kite: So we will do some transactions. I would say that, you know, the high quality stuff continues to trade in kind of the high five to low seven area, depending on what it is and where it is. And so obviously, that's quite disproportionate from where we trade from a stock price perspective. Okay, thank you.

Todd Michael Thomas: We will do some transactions I would say that the high quality.

Todd Michael Thomas: All of these stuff.

Todd Michael Thomas: <unk> continues to trade in kind of the high five to low seven area, depending on what it is and where it is.

Todd Michael Thomas: And so obviously, that's quite disproportionate from where we trade and.

Todd Michael Thomas: From a stock price perspective.

Speaker Change #114: Okay. Thank you.

Todd Michael Thomas: Thank you. Moment for our next question. And our next question comes from the line of Floris Van Dykum from Compass Point. Hey guys, thanks for taking my question. John, I hear you talk about the discounted multiple and the lack of recognition in the market potentially for some of the significant improvements you've made. And I'm curious what your thoughts are on share buybacks because you are generating a fair amount of free cash flow after dividends.

Speaker Change #115: Thank you thanks, Todd moment for our next question.

Speaker Change #115: And our next question comes from the line of Floris Van <unk> from Compass point Your question. Please.

Hey, guys. Thanks for taking my question so.

Floris Gerbrand Hendrik Van Dijkum: John I hear you talk about the discounted.

Floris Gerbrand Hendrik Van Dijkum: Multiple and.

Floris Gerbrand Hendrik Van Dijkum: The lack of recognition in the market potentially for some of the significant.

Speaker Change #116: Improvements you've done.

Speaker Change #117: And I'm curious what your thoughts are too.

Speaker Change #117: Share buybacks, because you are generating a fair amount of free cash flow after dividends.

Todd Michael Thomas: You are trading at a discount and your balance sheet, you know, thanks to, you know, the work that Heath has done on the balance sheet is the best or tied for the best or lowest leverage in the shopping center space. Why would you not at least show the market that you're undervalued by buying back, even if it's a small amount of stock?

Speaker Change #117: You are trading at a discount and your balance sheet. Thanks to.

Speaker Change #117: The work that he has done on the on the balance sheet.

Speaker Change #117: <unk> is the best ore types with the best or lowest leverage in the in the shopping center space.

Speaker Change #117: Why would you not.

At least show the markets that you're undervalued by buying back even if it's.

Speaker Change #117: A small amount of stock.

Floris Gerbrand Hendrik Van Dijkum: Sure. Thanks for the question. Look, I think, first of all, first and foremost, as a as a team and as a very focused operating platform, you know, we have priorities. And certainly, when you look at the value creation aspect of our priorities, that is something that we think about and contemplate. I think that we will, as we move through the next year and a half, for us, and we execute on our leasing plan, which we are doing rapidly, we will certainly be always evaluating that.

Speaker Change #117: Sure.

Speaker Change #118: Thanks for the question look I think first of all first and foremost as as a team and as a very focused operating platform.

Speaker Change #118: We have priorities.

Speaker Change #119: And certainly when you look at the value creation aspect of our priorities that is something that we think about and contemplate.

Speaker Change #119: I think that we will as we move through the next year and a half for us and we execute on our leasing plan, which we are doing rapidly.

Speaker Change #119: We will certainly be always evaluating that and it becomes more and more compelling the greater amount of free cash flow that we have distributable.

Floris Gerbrand Hendrik Van Dijkum: And it becomes more and more compelling, the greater amount of free cash flow that we have distributable. You know, I don't think it's our job to go out and buy small amounts of stock to try to prove a point. Our job is to execute, lease the space, create value internally, and make great allocation decisions as we have over the past couple years. And, you know, eventually, either the stock or the value of the business will be reflected, will be reflected, whether that be in the public markets, the private markets, whatever. So I don't want you to think we don't value it because we do. But when we do it, we want it to be material if we do do it.

Speaker Change #119: <unk>.

Speaker Change #119: I don't think its our job to go out and buy small amounts of stock to try to prove a point.

Speaker Change #119: Our job is to execute lease the space create value internally.

Speaker Change #119: Make great allocation decisions as we have over the past couple of years and eventually either the.

Speaker Change #119: The value of the business will be a frac will be reflected whether that be in the public markets. The private markets. Whatever so I think I don't want you to think we don't evaluate it because we do but when we do it we want it to be material. If we do do it.

Speaker Change #119: And we would hope that investors, who do this for a living would recognize this very quickly.

John A. Kite: And, you know, we would hope that investors who do this for a living would recognize this very quickly. Thanks, John. Maybe a follow-up question. I mean, obviously, you put out in your deck. I love the information you guys always provide in your supplemental deck or your investor decks with calls. A significant amount of your leasing over the last three years has had significantly higher rent bumps than 3%. And also fixed cam. And maybe if you could talk about, you know, what you see as the result of that? What percentage of your existing in-place rents now have, you know, those kinds of escalators and cam recovery? And what's the upside?

Speaker Change #120: Thanks, John maybe a follow up question I mean, obviously you put out in your deck I look the information you guys always provide in your supplemental deck or your investor decks with calls.

Speaker Change #120: Significant amount of your.

Leasing over the last three years has had significant higher rent bumps spend 3% and I'd also.

Speaker Change #120: Fixed cam.

Speaker Change #120: And maybe if you could talk about.

Speaker Change #120: What do you see as the result of that what percentage of your existing in place rents now has.

Speaker Change #120: Those kinds of escalators and Cam recovery and whats the upside what does that do to <unk> cruising speeds in two to three years' time.

John A. Kite: What does that do to, you know, KRG's cruising speeds in two to three years' time? I mean, the biggest impact of cruising speed would be on the rent side. Obviously, fixed cams are important for us. But when you look at our total revenue, you know, the fixed cam element, the reimbursement element is probably 20-30% of our total revenue. So we're focused on it; it's impactful. And it's also impactful operationally from the efficiency perspective and how we differentiate ourselves against our competition. From a time perspective, it is on the base rent side.

Speaker Change #120: Yes, I mean, the biggest impact of cruising speed would be on the rent side.

Speaker Change #120: Obviously fixed cam as important floris, but when you look at our total revenue.

Speaker Change #120: Fixed cam element.

Speaker Change #120: The reimbursement element is probably 20% 30% of our total revenue. So we're we're focused on it as impactful.

Speaker Change #120: And it's also impactful operationally from the efficiency perspective, and how we differentiate ourselves against our competition.

Speaker Change #120: So we are focused on fixed cam and its in terms of totality in terms of number of leases is probably around 50% of the leases that are outstanding it grows rapidly by quarter and.

And I think at this point people that do business with tight expect that and they know that that is actually better for them. So we continue to grow that and yes. It will help but we're really really is going to be helpful and more impactful from a time perspective is on the base rent side and.

John A. Kite: And, you know, that's why we talked about it. And I think we are absolutely the market leader in pushing that. And certainly when you see that we gave you the stats about our small shop business. I mean, when you're when 70% of the deals that you've done in one quarter in the small shop business are at 4% or greater, that really indicates that we have a, we have a very focused plan organizationally, not just the people that you're talking to on this call organizationally. So, you know, we're wildly successful on that effort. And that that needs to be pivoted also into the anchor space.

Speaker Change #120: That's why we talked about it and I think we are absolutely the market leader in pushing that and certainly when you see that we gave you the stats about our small shop business I mean, when you're when 70% of the deals that you've done in one quarter in the small shop business are at 4% or greater that really indicates that we have.

Speaker Change #120: <unk>.

Speaker Change #120: We have a very focused plan organizationally not just the people that youre talking to you on this call organizationally.

John A. Kite: And I've been very open about the fact that I don't think it's appropriate that, you know, we as an industry have accepted 1% a year bumps or whatever it is, when you do, you know, your discounted analysis of a 10% bump after five years. So that's also a focus. And we're going to lean into that. And that just has to be the entire industry leaning into that. And I think it will. I think I think as the supply demand continues to look like it looks today, you'll see the industry move. So look, this is great.

Speaker Change #120: So we're wildly successful on that effort and that needs to be pivoted also into the anchor space.

Speaker Change #120: I've been very open about the fact that I don't think it's appropriate that we as an industry have accepted.

Speaker Change #120: A 1% a year bumps or whatever it is when you do your discounted analysis of a 10% bump after five years. So that's also a focus and we're going to lean into that and that just has to be the entire industry leaning into that and I think it will I think I think as the supply demand continues to look like it looks today, you'll see the industry move so.

John A. Kite: And remember, by the way, you're getting these bumps with very good credit profiles across the board and very durable cash flow across the board. I mean, look at what we've absorbed in the last several years, you know, in terms of the GFC and then COVID. So this business is a great business. It's just gonna I just want the investors to recognize it. Floor assistance seats.

Speaker Change #120: Look this is great and remember by the way Youre getting these bumps with very good credit profiles across the board and very durable cash flow across the board I mean look at what we absorbed in the last several years.

Speaker Change #120: In terms of the GSC and then Covid. So this business is a great business. It's just kind of I just want the investors to recognize that Floris associates also if you look at our Naples deck, we gave a slide which talks about our cruising speed.

Heath R. Fear: Also, if you look in our Naples deck, we gave a slide which talks about our cruising speed. You know, currently, we call it two and a half to three and a half percent is the cruising altitude. But if you're just able to convert the small shops like John discussed, you know, within five years, that moves to 275 to 375. And again, that's not assuming any movement in the anchors. So we were hopeful that ultimately, we can see get the anchors to also make similar moves in their growth rates. But you know, this is planting seeds for better long term cruising altitude to your point. So really, really pleased.

Speaker Change #120: Currently we call it two 5% to three 5% as the cruising altitude, but if youre just able to convert the small shops like John discussed within five years that moves to $2 75 to $3 75, and again, that's not assuming any movement in the anchors.

Speaker Change #120: So we are hopeful that ultimately we can see the anchors to also make similar moves in their growth rates, but this is planting seeds for better long term cruising altitude to your point, so really really pleased and I think the numbers that John gave here at 70% of our leases in the small shop side have escalators at 4% or above that's just an incredible change when.

Heath R. Fear: And I think the numbers that John gave here. 70% of our leases in the small shop side have escalators at 4% or above. That's just an incredible change from what we were seeing two years ago. So we're moving in the right direction. Thanks, guys. Thank you.

Speaker Change #120: We were seeing two years ago. So we are moving in the right direction.

Speaker Change #121: Thanks Scott.

Speaker Change #122: Thank you.

Operator: One moment for our next question. And our next question comes from the line of Craig Mailman from Citi. Your question, please. Hey, guys.

Speaker Change #123: One moment for our next question.

Speaker Change #123: And our next question comes from the line of Craig Mailman from Citi. Your question. Please.

Craig Allen Mailman: Hey, guys.

Craig Allen Mailman: Chief, just on the, uh, the penny coming from same store, uh, how much of that is, is coming from bad debt versus, you know, just better, other operational kind of, I think John alluded to it, Craig, you know, the half of it is really related to the same property performance we had in, you know, in the first quarter, some of that was bad debt related. And the rest of it is, you know, getting this lease signed up.

Craig Allen Mailman: Keith just on the <unk>.

Penny coming from same store, how much of that is coming from bad debt versus just better.

Speaker Change #124: Other operational metrics.

Speaker Change #124: I think John alluded to or Craig or half of it is really related to the same property outperformance. We had in the first quarter. Some of that was bad debt related and the rest of it is getting this lease signed up so thats basically split half between what already happened in the <unk>.

Speaker Change #124: <unk> outlook for the balance of the year.

Craig Allen Mailman: So those pennies basically split half between what already happened and the improved outlook and the balance of the year. Hey, Craig, one thing I would point to, though, when you look at pace and where we are, kind of sequentially, like if you look at the sequential base rent growth, you know, we're talking like 4.6% sequentially. And even if you eliminate the term fee, it's three and a half percent. So going back over the last four quarters, that was a little slow.

Speaker Change #124: Hey, Craig one thing I would point to though when you when you look at pace and when you look at where we are kind of sequentially like if you look at the sequential base rent growth, we're talking like four 6% sequentially and even if you eliminate the term fee at three 5% so going back over the.

Speaker Change #124: Last four quarters that was a little slow and now it's accelerating so that's all part of what's going on here as these as all of this leasing, particularly on the anchor side, which takes time to deliver delivers that's why you have to look at the business over two to three years, not two or three quarters. So I think when we look at it.

John A. Kite: And now it's accelerating. So that's all part of what's going on here as all this leasing, particularly on the anchor side, which takes time to deliver, delivers. That's why you have to look at the business, you know, over two, three years, not two or three quarters. So I think when we look at it, we feel very encouraged by that sequential base rent growth. And, you know, as you think about a kind of calm.

Speaker Change #124: We feel very encouraged by that sequential base rent growth.

Speaker Change #124: Okay.

Speaker Change #124: As you think about kind of comps I know you guys are pushing fixed cam and clearly inflation has it.

John A. Kite: I know you guys are pushing 6KM and clearly inflation has... [inaudible] to save, store, protect, and guide, this year outside of just um you know continue to lease up which again it takes time to open some of, um some of these new, Yeah, look, I mean, I think if you're only looking at that one metric of same store, then, you know, I think he's already covered it in his prepared remarks that the three elements that impacted us the most. So, you know, the back half of this year, particularly later in the year, then the same store NOI begins to look a lot like it did last year. It's just a it's just a timing thing in terms of that lease up. And we were definitely disproportionately impacted by Bed Bath.

It's still there, but not as aggressive as it was the last two years.

Speaker Change #124: Where you guys are setting kind of the growth in that fixed cam does that become.

Speaker Change #124: Is that becoming less of a or.

Speaker Change #124: Somewhat of a tailwind as you think about comps going throughout the year I'm just trying to think about potential levers now that you've got the theater Dod.

Speaker Change #124: Further improvements.

Speaker Change #124: Same store potentially guidance this year outside of just.

Speaker Change #124: Continuing to lease up again, it takes time to open some of these.

Some of these new stores.

Speaker Change #125: Yes look I mean, I think if you're only looking at that one metric of same store then I think heath already covered it in his prepared remarks, the three elements that impacted us the most so the back half of this year.

Speaker Change #125: Particularly later in the year than the same store NOI begins to look a lot like it did last year. It's just it's just the timing thing in terms of that lease up.

Speaker Change #125: And we were definitely disproportionately impacted by bed Bath, we've already we've already taken care of about 80% of our exposure there and the rents are great and the users are way better. So I think look I think.

John A. Kite: We've already, you know, we've already taken care of about 80% of our exposure there. And the rents are great, and the users are way better. So I think, look, I think, you know, occupancy really matters there, as we talked about in Naples, you were there. I mean, that's potentially five to 600 basis points to get that when you get that back on track. So, the bottom line is, you know, you can look at this as if you're purely looking at same store NOI; the profile hasn't changed at all for us. It's the timing.

Speaker Change #125: Occupancy is.

Speaker Change #125: Really matters there as we talked about in Naples, you were there I mean, that's potentially $5 to 600 basis points to get that when you get that back on track. So bottom line is you can look at this as if you are purely looking at same store NOI the profile Hasnt changed at all for US it's the timing.

John A. Kite: And Craig, I would say, listen, it's your typical levers, you know, we're here after the first quarter. So what are the things that we're thinking about that we can control or not control going forward into this year? You know, can we get continued lower bad debt? Can we get people turned on faster for rent commencement dates?

Speaker Change #125: And Craig I would say that it's your typical levers we're here after the first quarter. So what are the things that we're thinking about that we can control are not control and going forward into this year can we can we get continued lower bad debt can we get people turned on faster for rent commencement dates can we retained more tenants.

Speaker Change #125: Can we sign ups and spec deals in turn people on later in the year can we do better in all of our reps. So we've got a lot of levers to pull to improve us entry year, and then as John mentioned looking out into 'twenty, five and 26 and beyond just the pure occupancy gains that we have holding aside any other organic growth and we said this enables yes, we're looking at a five to 600.

Heath R. Fear: Can we retain more tenants? Can we sign up some spec deals and turn people on later in the year? Can we do better in overage rent?

Speaker Change #125: <unk> point contribution from just getting ourselves back to pre Covid plus.

Speaker Change #125: Over the next two or three years so.

Speaker Change #125: Yes, we've got things that we're going to be working on the entire year to beat that number. We're currently guiding app and then beyond that we've got a lot of levers to pull so we're feeling really good at where we're sitting right now.

Speaker Change #125: And that's helpful and I guess the.

Speaker Change #125: The last question.

Speaker Change #125: Just as you guys had talked about kind of cost of capital coming down and the flywheel effect, a better free cash flow.

Heath R. Fear: So we've got a lot of levers to pull to improve us entry year. And then as John mentioned, looking out into the 25 and 26 and beyond, just the pure occupancy gains that we have holding aside any other organic growth, and we said this in Naples, you know, we're looking at a five to 600 basis point contribution from just getting ourselves back to pre COVID plus, you know, over the next two or three years.

Speaker Change #125: Clearly this is still pipeline some of that some anchor leases there maybe more capex intensive and then really the accuracy lapses more small shop. So as you think about from a timing perspective here as we get through the next 12 to 18 months.

Heath R. Fear: So, yeah, we've got things that we're going to be working on the entire year to beat that number we're currently guiding at. And then beyond that, we've got a lot of levers to pull. So we're feeling really good at where we're sitting right now. Now, and that's helpful.

Craig Allen Mailman: And I guess, you know, the last question, just as you guys have talked about kind of cost of capital coming down, and the flywheel effect of better free cash flow. You know, clearly this the stow pipeline, some of that some anchor leases, they're maybe more capex intensive, and then really the accuracy left is more kind of small shop. So as you think about from a timing perspective here, you know, as we get through the next, 12 to 18 months.

John A. Kite: Is that the timeframe you think of to think of CAPEX kind of normalizing because more of the work you have to do would be kind of small shops, and then you know, how do you view, and maybe it's a relative from here, but you've gotten the benefit of the credit upgrades, and you're a more seasoned issuer? And so you've seen spreads compress there, but just having that higher amount of free cash flow coming in at a lower cost. What do you think? Do you agree?

Is that the timeframe you think to think of Capex kind of normalizing because more of the work you have to do it would be kind of small shops and then.

Speaker Change #125: How do you view and maybe to a relative from here, but.

Speaker Change #125: You've gotten.

Speaker Change #125: The benefit of the.

Speaker Change #125: Credit upgrades.

Speaker Change #125: More seasoned issuer and so you've seen spreads compressed there, but just having that higher amount of free cash flow coming in at a lower cost like.

Speaker Change #126: What do you think.

John A. Kite: on top of kind of the higher rent you guys have talked about, but just that. That cost of capital advantage two, three years out will be when you guys think about, you know, whether you go on certain developments or redevelopments or do, Uh, well, big, big picture focusing on the CapEx. Yeah, I'm looking, I'm gonna find a question in there.

Speaker Change #126: On top of kind of the higher rents you guys had talked about but just that.

Speaker Change #126: That cost of capital advantage two three years out will be when you guys think about.

Speaker Change #126: Whether you go on certain developments or redevelopments or do acquisitions.

Speaker Change #126: Well big Big picture to focusing in on the Capex.

John A. Kite: But the big picture, Craig, no doubt when you're spending, you know, over 100 million a year for two consecutive years on TI and LC and a normal year for you is 60 ish, then you're absorbing a lot more of that cash into that TILC. But it's also, as I pointed out in my prepared remarks, at like 30% returns on capital, right? So the free cash flow that comes out of that exercise in late 25, 26, 27 puts you in a position where there's nothing better than cost of capital from significant free cash flow, right? That we can deploy in a very creative manner.

Yes, I am looking for I'm going to find the question in there.

Speaker Change #127: But the big picture Craig No doubt when you are spending.

Speaker Change #127: Over $100 million a year in two consecutive years on Ti and LC in a normal year for you is 60 ish then than you are absorbing a lot more of that cash into that.

Speaker Change #127: And to that TLC, but it's also as I pointed out in my prepared remarks at like 30% returns on capital right. So the free cash flow that comes out of that exercise.

Speaker Change #127: In late 'twenty five 'twenty six 'twenty seven puts you in a position where there is nothing better than cost of capital from significant free cash flow right that we can deploy and very accretive manner and back to <unk> question.

John A. Kite: And back to Floris' question, if we don't think the place to put it is external, then it's internal and you're buying back stock with free cash flow, not with leverage, right? So that we can maintain this incredible balance sheet that we have. So the optionality is quite significant, Craig. But yeah, I mean, look, we're spending money organically and we're getting great returns on that organic spend. So I don't think people should be concerned about it.

Speaker Change #127: If it isn't if.

Speaker Change #127: If we don't think the place to put it is external then its internal and you are buying back stock with free cash flow not with leverage right. So that we can maintain this incredible balance sheet that we have.

Speaker Change #127: So the Optionality is quite significant Greg, but yes, I mean look we've got we're spending money organically and we're getting great returns on that organic spend so I don't think people should be concerned about it I think they should be happy about the fact that this is a simple business plan right.

Craig Allen Mailman: I think they should be happy about the fact that this is a simple business plan, right? And we just have to execute it. Helpful, thanks.

Speaker Change #127: And we just got to go execute it.

Greg: That's helpful. Thanks.

Linda Tsai: All right, thanks, buddy. Thank you. One moment for our next question. And our next question comes from the line of Linda Tsai from Jeffreys. Your question, please. I know it's the beginning of the call. Give us an update on your box inventory, you know, how much is left. Sure. At this point, we have 26 boxes in our inventory today.

Greg: Alright, thanks Paddy.

Speaker Change #129: Thank you one moment for our next question.

Speaker Change #129: And our next question comes from the line of Linda Tsai from Jefferies. Your question. Please.

Linda Tsai: Yes, Hi, I know at the beginning of the call you mentioned since 2022, you've executed 53 anchor leases to 36 different brands. Thank you.

Linda Tsai: As an update on your box inventory how much is left and are any of those getting lease to grocers.

Unknown Executive: And we have done a great job not only leasing these boxes but putting in much better quality tenants with strong spreads and great return on investments in the capital. So we feel like that's a manageable number. We're looking very closely at how we continue to make progress on that anchor lease percentage. Right now, we're running at, you know, 95.9% on the anchor side.

Speaker Change #130: Sure at this point, we have 26 boxes in our inventory today.

Speaker Change #130: We have done a great job not only leasing these boxes, but put it in a much better quality tenants was strong spreads in <unk>.

Speaker Change #130: Rates of return on investments on the capital so.

Speaker Change #130: We feel like Thats, a manageable number.

Speaker Change #130: We're looking very closely at how we continue to make progress on that that anchor lease percentage right now we're running.

Unknown Executive: So if you look at our run rates, and how we've been able to chip away at the inventory, I mean, sometimes it's between 5, 10, 11 boxes as we're moving through the year. So we have a good run on it. We have quite a few properties that are in lease, you know, five or seven that that are ongoing.

Speaker Change #130: 95, 9% on the anchor side. So if you look at our run rates and how we've been able to chip away at the inventory I mean, sometimes its between 510 11 boxes.

Speaker Change #130: As we're moving through the year so.

Speaker Change #130: We have a good run on it we have quite a few properties that are in lease negotiation right now just on one segment we have.

Unknown Executive: So the I think the sentiment is very positive. And that is being buoyed by the fact that we have a low demand scenario. But is it really to the grocery side, Linda?

Speaker Change #130: <unk>.

Speaker Change #130: $5 seven that are ongoing so I think the sentiment is very positive and that is being buoyed by the fact that we have a low demand scenario, but as it relates to the grocery side Linda I mean definitely if you just look at our investor presentation.

John A. Kite: I mean, you definitely if you just look at our investor presentation. I think we cover it, like, on page 19, just in terms of the new deals that we've done recently, but, you know, Whole Foods, Trader Joe's, Lidl, Total Wine, you know, we've done a couple fresh market deals, Grocery Outlet out on the West Coast. So there is real strong demand there, and there continues to be demand across each kind of segment of the grocery business.

I think we cover it like on page 19, just in terms of the new deals that we've done recently, but whole foods trader Joe's.

Speaker Change #130: <unk> at all.

Speaker Change #130: Total wine, we've done couple of fresh market deals grocery outlet out in the West coast. So there is a real strong demand there and there continues to be demand across each segment of the grocery business and I'm sure you've seen a lot of this recent data on.

John A. Kite: And I'm sure you've seen a lot of this recent data on when, you know, we've come to the point now where people are shopping multiple types of grocers per week, so they're not just going to one grocer, right? So if you've got a Kroger, you're going to the Kroger, but then you're going to either Whole Foods or Sprouts or Fresh Market for something, you know, particular, and then maybe you're going to Trader Joe's in addition to that.

Speaker Change #130: We've come to the point now where people are shopping multiple types of grocers per week. So they're not just going to one grocer right. So if you've got a kroger youre going to the Kroger, but then youre going to.

Speaker Change #130: Either whole foods sprouts or fresh market for something particular in then maybe youre going to trader Joe's. In addition to that so I think that's why these guys are continuing to expand and as we mentioned now our exposure to grocery.

John A. Kite: So I think that's why these guys are continuing to expand, and as we mentioned, now we're, you know, our exposure to grocery is getting up towards 80%. So it's a big part of our business, but again, it's all about your merchandising mix. What's the best thing to bring to that particular center?

Speaker Change #130: Is getting up towards 80% so.

It's a big part of our business, but again, it's all about your merchandising mix, what's the best thing to bring to that particular center.

John A. Kite: So, yeah, the market is strong as it relates to that, Linda, and that's why I just said on the previous question that we're very happy to be kind of self-deploying capital back into that. And then on the shop side, you know, it seems like you have a little bit more leeway than some of your peers. Just as you head into ICFC, you know, what are some of the things that you're looking for?

Speaker Change #130: So yes, the market is strong as it relates to that Linda.

Speaker Change #130: It's why I just said on the previous question that we're very happy to beat to be kind of self deploying capital back into that.

Speaker Change #131: Thanks, and then on the shop side.

Speaker Change #131: Seems like you have a little bit more leeway than some of your peers as you head into ICSC.

Speaker Change #131: What are some of the things that youre looking for.

Speaker Change #131: Expect to hear.

John A. Kite: I'll start that and let Tom get to the meat of it. But look, like we always do going into ICSC, Linda, we take it very seriously. And I think our leasing people know that we're going in there and we have an agenda. And it's not, we're not going there to have fun; we're going there to execute.

Speaker Change #132: I'll start that and let Tom get to the more meat of it but looks like we always do going into ICSC. When do we take it very seriously and I think our leasing people know that we're going in there and we have an agenda and it's not we're not going there to have fun, we're going there to execute.

Tom: I think as it relates to the shop side.

Tom: The breadth the depth of the users has really changed in the last 18 to 24 months. The Optionality that we see right now in the tenants that are moving from one specific property type into another property type were really benefiting from that so I think our objective is to continue to do.

John A. Kite: And I think as it relates to the shop side, that the breadth, the depth of the users is really changed in the last, you know, 18-24 months. The optionality that we see right now and the tenants that are moving from one specific property type into another property type, we're really benefiting from that. So I think our objective is to continue to do what we're doing, which is not only to sign leases, but to sign leases with embedded growth that reflects the profile that we want. Right?

What we're doing which is not only to sign leases, but to sign leases with embedded growth that reflects the profile that we want right. So maybe thats why maybe we're taking a little bit longer to lease up space. Because we are getting as we said 70% of the deals we did had 4% or greater bumps that will.

Thomas K. McGowan: So maybe that's why, maybe we're taking a little bit longer to lease space because we are getting, you know, as we said, 70% of the deals we did had 4% or greater bumps. That will pay dividends in the future. So that's kind of the overall macro. Tom, do you want to talk about the specifics?

Tom: Pay dividends in the future. So that's kind of the overall macro Tom you want to talk about like the specifics, yes, I think we want to focus on what we call our bread and butter type tenants.

Thomas K. McGowan: Yeah, I think we want to focus on what we call our bread and butter type tenants. And, you know, those being restaurants, service, health and beauty. But at the same time, we also want to pay particular attention to new concepts. And, you know, we recently signed some great restaurants that were basically generated out in the Scottsdale area, culinary dropout, flower child. And as that line grays, and people find the attractiveness of pull in retail, we can we really see that continuing to improve for our company.

Those being restaurants service health and beauty, but at the same time.

Tom: Also want to pay particular attention to new concepts.

Tom: We recently signed some some great restaurants that.

Tom: Basically generated out in the Scottsdale area culinary dropout flower child, and we're dealing with what you may, particularly say as some higher end.

Tom: All are mixed use tenants in a risky athleta Nike.

Tom: <unk> Parker et cetera. So.

Tom: Company really expanded our breadth and our reach to different types of tenants throughout the portfolio and as that line Grays and people find the attractiveness of pull in retail we can really see that continuing to improve for our company. So we have a <unk>.

Thomas K. McGowan: So we have a very clear strategy, but it hits a lot of different points and does not ignore any as we move forward. Thanks. Thank you for one moment for our next question. And our next question comes from the line of Connor Mitchell from Piper Sandler.

Tom: Clear strategy, but it hits a lot of different points.

Tom: Does not ignore any as we move forward.

Speaker Change #133: Thank you.

Thanks.

Speaker Change #134: Thank you one moment for our next question.

Speaker Change #134: And our next question comes from the line of Conor Mitchell from Piper Sandler Your question. Please.

Connor Mitchell: Your question, please. Hey, thanks for taking my question. So you guys have talked a lot about like the strength of the hand on lease negotiations for the industry and focused on, Rent Buffs and FixCam. Just wondering if, you know, maybe you could discuss any other levers that you guys haven't touched on that you're seeing to take advantage of the current environment and maybe increase the cash margin on leases that you know, we haven't talked about yet. Sure.

Connor Mitchell: Hey, Thanks for taking my question.

Connor Mitchell: So you guys have talked a lot about the strength, we had on lease negotiations for the industry.

Connor Mitchell: Focus on rent bumps.

Connor Mitchell: Fixed Cam just wondering if maybe you could discuss any other levers that you guys have touched on that.

Connor Mitchell: Youre seeing two to take advantage of the current environment and maybe increase the cash margin on leases that we haven't talked about yet.

John A. Kite: I mean, Connor, we're always focused on how we can increase margins, which is probably why we have the highest NOI margin in the business and one of the highest recovery ratios consistently over time. I think, you know, frankly, controlling costs and getting better growth is what it's all about. And that's how we create free cash flow. We're already very good at it. We're already the market leader in fixed cameras in the open air space.

Speaker Change #135: Sure I mean.

Speaker Change #135: We are always focused on how we can increase margins, which is probably why we have the highest NOI margin in the business.

Speaker Change #135: One of the highest recovery ratios consistently over time.

Speaker Change #136: I think.

Speaker Change #136: Frankly controlling costs and getting better growth.

Speaker Change #136: That's what it's all about and that's how we create free cash flow.

Speaker Change #136: Already very good at it we're already the market leader in.

Speaker Change #136: Fixed cam in the open air space. So, we're just leaning into that more.

John A. Kite: So we're just leaning into that more. We don't we're not going to get into specifics about what those, you know, what those exact margins are fixed cam versus triple net, etc. Suffice to say, we're the leader.

Speaker Change #136: We're not going to get into specifics about what those.

Speaker Change #136: What those exact margins are fixed cam versus triple net et cetera, suffice to say, we're the leader so that ought to tell you something are generally closer to the top.

John A. Kite: So that ought to tell you something, or generally close to the top. So but, you know, the other things that we're doing right now to take advantage of the environment are all the things within the lease, you know, all the things that we look at within the lease. You know, for example, when you look at our overage rent, our percentage rent that comes from sales, it's higher than it's ever been, and it continues to be kind of an extra cherry on top, but it should be because our tenants are doing great. When they're paying that percentage rent, that obviously increases margins. And then just how we look at the leases themselves in terms of, uh, exclusivities and, you know, in terms of co-tenancy requirements.

Speaker Change #136: But the other things that we're doing right now to take advantage of the environment is all of the things within the lease all the things that we look at within the lease.

Speaker Change #136: For example, when you look at our overage rent our percentage rent that comes from sales, it's higher than it's ever been and continues to be kind.

Speaker Change #137: Kind of.

Speaker Change #137: An extra cherry on the top but it should be because our tenants are doing great when theyre paying that percentage rent that obviously increases margins.

Speaker Change #137: And then just how we look at the leases themselves in terms of.

Speaker Change #137: Exclusives and in terms of co tenancy requirements.

John A. Kite: It's a, it's a situation where we want to take care of our customers, but we also have to, you know, take care of the business. Um, and over time, it's gotten, you know, it's continued to improve. I don't think people talk enough about when you do business with a company like ours or some others; the retailers themselves would prefer to do business with somebody like us who delivers. It's one thing that you have a space that somebody wants, but it's another thing; how do we reinvest in our properties?

Speaker Change #137: It's a situation where we wanted to take care of our customer, but we also have to take care of the business.

Speaker Change #137: Over time, it's gotten it's gotten continues to improve and.

Speaker Change #137: I don't think people talk enough about when you do business with a company like ours or some others the retailer themselves.

Speaker Change #137: I would prefer to do business with somebody like us who delivers its one thing that you have a space that somebody wants but it's another thing how do we reinvest in our properties. How are we going about that how you are making it very very attractive to the consumer so I think retailers appreciate that and they're willing to pay for that in the right circumstances.

Thomas K. McGowan: How are we going about that? You're making it very, very attractive to the consumer. So, I think retailers appreciate that, and they're willing to pay for that in the right circumstances. Yeah, I mean, one of the key goals for our company is to, of course, start rent as quickly as possible. We have this machine at Kite that's got pre-development, tenant coordination, project managers, and it's our job to work with all these tenants where they may struggle with permits, et cetera, run into problems with code issues, and really work to get these tenants open as quickly as possible.

Speaker Change #138: Yes, I mean, the only other one I would add is one of the key goals for our company as a core start rent as quickly as possible and we have this machine.

Speaker Change #138: Got pretty development tenant coordination project managers and it's our job to work with all of these tons or they may struggle with permits et cetera.

Speaker Change #138: <unk> run into problems on code issues and really work to get these these tenants open as quickly as possible. We don't look at it as just the 10 of this year. We would look at it is our issue as well so another big point of trying to generate that revenue earlier.

Thomas K. McGowan: We don't look at it as just a tenant issue, we look at it as our issue as well, so another big point of trying to generate that revenue earlier. Okay, appreciate all the color there. And then Bad Debt was the guy that was brought down and just kind of thinking about some, Some factors from the past, you know, Bed Bath and Joanne seem to be relatively seamless for the industry. Is there is there any chance like we could be getting involved into a sense?

Okay I appreciate all the color there.

Speaker Change #138: And then bad debt was.

Speaker Change #138: The guidance was brought down and just kind of thinking about some.

Some factors from the past bed Bath that Joanne seem to be relatively seamless for the industry is there is there any chance like we could be getting rolled into our sensors.

Connor Mitchell: of False Fewer Credit Issues, or, you know, maybe the sector's ability to wrangle troubled tenants. Oh, I don't know about that. I mean, you know, as we laid out in our prepared remarks. I mean, when you look at the first quarter for us, if you excluded prior periods, you know, we were around 90 basis points. So the bottom line is you can save when you exclude prior periods, but that's part of our business. We're always collecting. We just don't want to, you know, project that because it's volatile.

Speaker Change #138: Fewer credit issues or maybe the sector's ability to wrangle troubled tenants.

Speaker Change #139: I don't know about that.

Speaker Change #139: We're as we laid out in our prepared remarks.

Speaker Change #139: <unk>.

Speaker Change #139: When you look at the first quarter for us.

Speaker Change #139: If you excluded prior periods, we were around 90 basis points. So the bottom line is you can say when you exclude prior periods, but we're that's part of our business. We're always collecting we just don't want to project that because it's volatile.

John A. Kite: So, you know, if you're assuming that bad debt's around 1% and you're always going to be collecting something, that's probably pretty stable. So I don't think we're being lulled. It's a function of the fact that supply and demand is putting us in a position that, you know, tenants want to be in these spaces and they're going to do everything in their power to continue to stay there, which means pay rent. So I don't think that it's particularly different, but it's better. Look, the reality is it's better.

Speaker Change #139: So if you're assuming that bad debts around 1% and youre always going to be collecting something.

Speaker Change #139: It's probably pretty stable so.

Speaker Change #139: So I don't think we're being Lord.

Speaker Change #139: It's a function of the fact that supply and demand.

Speaker Change #139: Is putting us in a position that tenants want to be in these spaces and they're going to do everything in their power to continue to stay there which means pay rent.

Speaker Change #139: So I don't think that it's particularly different.

Connor Mitchell: But right now, we're being conservative and looking at the back balance of the year, and we'll see where it shakes out. Appreciate the thought for me. Thank you. Please take a moment for our next question. And our next question comes from the line of Lizzie Doykin from Bank of America. Your question, please. Hi everyone.

Speaker Change #139: But it's better look the reality is it's better but right now we're being conservative in looking at the.

Speaker Change #139: The balance of the year, and we'll see where it shakes out.

Speaker Change #140: I appreciate it that's all for me.

Speaker Change #140: Thanks.

Speaker Change #141: Thank you one moment for our next question.

Speaker Change #142: And our next question comes from the line of <unk> from Bank of America. Your question. Please.

Speaker Change #143: Hi, everyone.

Elizabeth Yang Doykan: I was hoping to get more color on the leasing spread on option renewals in the quarter, which looks like. [inaudible] and maybe why is this proportion not coming down? You know, maybe are you signing renewals with fewer options? Now, so so well, first of all, we're not having a lot of discussions on an option renewal, because the tenant is just hitting an option. So let's start there. And if you have a particular quarter, where you have multiple anchor options, you know, anchors hitting options, generally speaking, those aren't those are lower.

Speaker Change #144: Was hoping to get more color on that.

Speaker Change #145: The leasing spread on option renewals in the quarter, which looks like.

Speaker Change #146: That compressed for the third straight quarter.

Speaker Change #147: And when I'm looking at the past four quarters, it looks like option renewals made up over 60% of the comparable space that's been executed.

Speaker Change #148: So just wanted to see.

Speaker Change #148: What's going on there.

What's sort of been happening and the renewal discussions youre, having with tenants.

Speaker Change #148: And maybe why is this proportion.

Speaker Change #148: Not coming down.

Speaker Change #148: Maybe are you signing renewals with fewer options.

Elizabeth Yang Doykan: So I think a lot of it's timing. And over the last couple quarters, I think we've probably had more anchors. I'm not looking at the data in front of me. But it really comes down to mix, what is the mix per, you know, per quarter? It's kind of why we talk about non-option renewals. And, you know, when I look, you know, over the past, I think, two and a half years, the non-option renewals have been 12%.

Speaker Change #149: No. So so well first of all we're not having a lot of discussions on an option renewal because the tenant is just hitting an option.

Speaker Change #149: So.

Speaker Change #149: Let's start there and if you have a particular quarter, where you have multiple anchor options anchors hitting options generally speaking those arent those are lower so I think a lot of its timing and over the last couple of quarters. I think we've probably had more anchors I'm not looking at the data in front of me.

Speaker Change #149: But it really comes down to mix what is the mix per per quarter, it's kind of why we talk about non option renewals.

Speaker Change #149: And.

Speaker Change #149: When I look over the past I think two and a half years, the non option renewals have been 12%.

Elizabeth Yang Doykan: Um, so our goal is to have less options. I mean, you know, it's part of our strategy around new leasing and, you know, containing the options. And if the options do exist, that we have to get the appropriate rental increases in those options. But it would be pretty focused on the anchor side.

Speaker Change #149: So our goal is to have less options I mean, it's part of our strategy around new leasing and <unk>.

Speaker Change #149: Containing the options and if the options do exist that we have to get the appropriate rental increases in those options.

Speaker Change #149: But it would be pretty focused on the anchor side.

Speaker Change #150: And that's it.

John A. Kite: And that's it. Okay, thanks. And then back to Heath's comments on the 500 to 600 basis points of occupancy bill that's expected over the next, [inaudible] Well, I'm sorry, in terms of the it's probably going to be basically what our revenue is 50-50, right? 50% of our revenue comes from shops, 50% from anchors. Timing-wise, Heath, do you want to?

Speaker Change #151: Okay. Thanks.

Speaker Change #151: And then back to Keith's comments on the five to 600 basis points of occupancy build that's expected over the next.

Speaker Change #151: Two to three years.

Speaker Change #151: Just curious on how much you think that would be weighted towards anchors versus small shop and then maybe.

Speaker Change #151: Is there thoughts around the cadence over which that would happen.

Speaker Change #151: Whether thats the most weighted in the back half of 'twenty four versus 2025 2026.

Speaker Change #152: Oh I'm sorry in terms of its probably going to be basically what our revenue is $50 50 right 50%.

Speaker Change #152: <unk> of our revenue comes from shops, 50% from anchors timing Wise Heath do you want to listen we are looking out to our model I think I'll stick with the two to three years is the timing.

Heath R. Fear: No, listen, looking out to our model, I think I'll stick with the two to three years as a timing timetable. Again, it's getting us to sort of pre-COVID levels. But you know, based on the velocity of the leasing activities happening now, based on what we're seeing in this quarter as well, I feel better about that being closer to the two-year mark than the three-year mark, but I'll leave it at that in terms of the timing of that. Okay, and just one more from me.

Speaker Change #152: Again, it's getting us to sort of pre COVID-19 levels.

Speaker Change #152: But based on the velocity of the leasing activity is happening now based on what we're seeing in this quarter as well feeling better about that being closer to the two year marked in the three year, Mark but I'll leave it at that in terms of in terms of the timing of that.

Elizabeth Yang Doykan: It looks like you guys pulled down your interest in Glendale apartments. I think that was the only transaction made in the quarter. It seems pretty quiet.

Speaker Change #153: Okay, and just one more from me.

Speaker Change #154: It looks like you guys slow down your interest in Glendale apartments, I think that was the only.

John A. Kite: Other than that, just seeing what the rationale was there and if there were any other opportunities to make note of when it comes to disposition. Yeah, pretty simple.

Speaker Change #154: Transaction made in the quarter it seemed pretty quiet other than that just seeing what the rationale was there and if there's any other opportunities to make note of when it comes to dispositions.

John A. Kite: You know, that was a great deal. First of all, it was a fabulous deal, where we took a parking lot, contributed the parking lot into a partnership, got a 12% interest, and made a couple million bucks. So we'll keep doing that as long as we can keep doing that. You know, and I think our partner, who is obviously the primary partner, the multifamily developer, thought that the timing was right to monetize, and we agreed. So I think we will continue to look at that. We'll look at those opportunities as we move forward. Meanwhile, the multifamily side of our mix of NOI continues to grow. It's small, but it's growing.

Speaker Change #154: Yes.

Speaker Change #155: Pretty simple.

Speaker Change #156: It was a great deal first of all is a fabulous deal.

Speaker Change #156: Where we took a parking lot contributed the parking lot into a partnership got a 12% interest and made a couple of million Bucks. So we'll keep doing that as long as we can keep doing that.

I think the our partner who is obviously the primary partner the multifamily developer thought that the timing was right to monetize and we agreed. So I think we will continue to look at those opportunities as we move forward the multifamily side of our mix of NOI continues to grow its small but its.

John A. Kite: You know, we have a, pre the sale of this asset, we have a, we have an equity interest in around 1700 units. And, you know, we're obviously doing more. And I like the way that we go about it in terms of trying to limit our capital into each deal. But yet, you know, thinking about IRR, obviously, it was a tremendous IRR, tremendous return. So I think we'll continue to do that. We have a couple projects that we're working on.

Speaker Change #156: Growing.

Speaker Change #156: We have a pre.

Speaker Change #156: The sale of this asset we have a we have an equity interest in around 700 units and we're obviously doing more and I like the way that we go about it in terms of trying to limit our capital.

Speaker Change #156: Into each deal but yet.

Speaker Change #156: About IRR, obviously this was a tremendous IRR tremendous return.

Speaker Change #156: So I think we'll continue to do that we have a couple of projects that we're working on and generally speaking, we're going to probably Max out around 50% ownership, but it will depend on each individual deal, but just put some numbers. The IRR was 22% return on equity multiple is one eight times and Thats before the <unk>.

John A. Kite: And generally speaking, you know, we're going to probably max out around 50% ownership, but it'll depend on each individual deal. Just to put some numbers, the IRR was 22%. The return on equity multiple was 1.8 times. And that's before the benefit of a $7 million TIF, which Kite was a sole beneficiary of.

Speaker Change #156: A $7 million test, which was the sole beneficiary of so again, if we can find more of those we're ready to go.

Speaker Change #156: Grand Slam is an understatement for that particular deal not to drone on about it but it is another example that I want people to think about as it relates to our particular space and what you can do with retail real estate, which is very very different than a lot of these other sectors that.

John A. Kite: So again, if we can find more of those, you know, we're ready to go. It was a grand slam is an understatement for that particular deal, space, and what you can do with retail real estate, which is very, very different than a lot of these other sectors that seem to be very crowded trades, where all this money goes, but yet, the reuse of the real estate is extremely limited, right? It is a very specific piece of real estate, data, industrial, whatever.

Speaker Change #156: Seem to be very crowded trades, where all this money goes but yet the reuse of the of the real estate is extremely limited right. It is a very specific piece of real estate data industrial whatever our real estate is so it's so fungible is there. So it's got so much flexibility.

John A. Kite: Our real estate, it's so fungible, it's got so much flexibility, and when you're sitting on a piece of property that's an unused parking lot that can, you know, can be a 22% IRR, that should tell you that the stuff that we own, you know, probably in the sector, but particularly to kite, is really, really attractive. So good, good small example that I think people should think about.

Speaker Change #156: And when you're sitting on a piece of property, that's an unused parking lot they can.

Speaker Change #156: Can be a 22% IRR that should tell you that the stuff that we own.

Speaker Change #156: Probably in the sector, but particularly to kite is really really attractive.

So good good small example that I think people should think about.

Honglian Cheng: Great, thank you. Thank you. One moment for our next question, and our next question comes from the line of Honglian Cheng from J.P. Morgan. Your question, please? Yeah, hey, guys, I guess it looks like small shop occupancy declined slightly in the first quarter compared to the fourth quarter. Was there anything specific that drove that? Or is that, it's really seasonal. I mean, the same thing happened last year in the first quarter.

Speaker Change #157: Great. Thank you.

Thank you one moment for our next question.

Speaker Change #158: And our next question comes from the line of hung Dionne Cheung from Jpmorgan. Your question. Please.

Dionne Cheung: Yes, Hey, guys.

Dionne Cheung: It looks like small shop occupancy declined slightly in the first quarter compared to the fourth quarter was there anything specific that drove that or is that just seasonal friction.

John A. Kite: It was almost the exact same as a 30 or 40 basis points last year. So it's really timing. You know, when we look at our pace, our pace is good. And look, I think we did make a we're trying to make a pretty significant statement around the type of shop leasing that we're getting is a little different than everybody else, maybe. You know, I don't hear a lot of other people talking about 4% bumps.

Speaker Change #160: It's really seasonal I mean, the same thing happened last year in the first quarter.

Dionne Cheung: Almost the exact same as in the 30 or 40 basis points last year, so its really timing.

Dionne Cheung: When we look at our pace our pace is good and look I think we did make a we're trying to make a pretty significant statement around the type of shop leasing that we're getting is a little different than everybody else maybe.

Dionne Cheung: I don't hear a lot of other people talking about 4% bumps so yes.

I think it's timing.

John A. Kite: So, you know, I think it's timing. Got it. And when you and when you talk about occupancy going back to pre COVID levels in the next two, three years, is that on a lease basis or an economic? It's a lease basis, but it would be both.

Speaker Change #161: Got it and when you talk about occupancy going back to pre Covid levels. In next two three years is that on a lease basis or an economic basis.

Speaker Change #161: It's a lease basis, but it would be both I mean, ultimately it flows through the economic occupancy as well and.

John A. Kite: I mean, ultimately, it flows through the economic occupancy as well. And, you know, from my personal perspective, three years is probably a long time frame, but I would say within that. But yeah, we're very focused on maximizing the portfolio, but a little less focused on the timing of that. Got you.

Speaker Change #161: From my personal perspective.

Speaker Change #161: Three years is probably a long timeframe, but.

Speaker Change #161: I would say within that but yes, I mean, we're very focused on maximizing the portfolio, but a little less focus on the timing of that.

Speaker Change #162: Yes. Thank you.

Speaker Change #162: Thanks.

Honglian Cheng: Thank you. Thanks. Thank you. One moment for our next question. And our next question comes from the line of Anthony Powell from Barclays Capital. Your question, please. Hi, good afternoon.

Speaker Change #163: Thank you one moment for our next question.

Speaker Change #163: And our next question comes from the line of Anthony Powell from Barclays Capital. Your question. Please.

Anthony Franklin Powell: Just one for me, a question on some of the coastal gateway exposure you bought in an archive deal, Seattle, DC, New York, I know there's some discussion about whether you keep those long term, maybe talk about how those are performed and where you see them kind of in your portfolio over the long, Sure. Look, I think I think we've been clear that we think we have a unique kind of footprint, and we like the footprint. Obviously, the great majority of our revenue comes from the Sunbelt.

Anthony Franklin Powell: Hi, good afternoon, just one.

Anthony Franklin Powell: One for me a question on some of the coastal Gateway exposure you bought an archived deal Seattle DC, New York I know there was some discussion about whether you keep those long term.

Anthony Franklin Powell: Can you talk about how those performed and where you see them kind of getting our portfolio over the long run.

John A. Kite: But we think that the kind of gateway markets that we're operating in, particularly New York, DC, and Seattle, are very attractive markets that our retailers want to, you know, grow and expand in. That being said, you know, we're always analyzing whether it makes sense to operate in a particular market. And certainly, you know, the coastal markets have their challenges as it relates to the things that we talked about around, you know, the tax status of each individual state and the business friendliness of each individual state, right?

Anthony Franklin Powell: Sure.

Speaker Change #164: Look I think I think we've been clear that we think we have a unique kind of footprint and we like the footprint. Obviously the great majority of our revenue comes from the Sun belt, but we think that the kind of the gateway markets that we're operating in particularly New York DC Seattle are very attractive mark.

Speaker Change #164: What's that our retailers want to grow and expand in that being said, we're always analyzing does it makes sense to operate in a particular market and certainly the coastal markets.

John A. Kite: So it is something that we're monitoring and talking about. And I would never take it off the table that we would look to make changes. But we're never going to make a change just to make a change.

Speaker Change #164: Have their challenges as it relates to the things that we talked about around the tax status of each individual state and.

Speaker Change #164: The business friendliness of each individual state rate. So it is something that we're monitoring and talking about and I'm not I would never take off the table. Then we would look to to make changes, but we're never going to make a change just to make a change it has to make sense economically.

Speaker Change #164: And right now we are happy with the footprint, but we're always analyzing it.

Speaker Change #165: Okay, great. Thank you.

Speaker Change #166: Thank you.

John A. Kite: It has to make sense economically. And right now, we're happy with the footprint, but you know, we're always analyzing it. Okay, great, thank you. Thank you. Thank you. One moment for our next question, and our next question comes from the line of Wes Golladay from Baird. Your question, please? Hey guys, looks like there's about a 4 million increase in leases opening this year, including the 6 million that opened in the first quarter.

Speaker Change #167: One moment for our next question.

Speaker Change #168: And our next question.

<unk>: It comes from the line of <unk>.

<unk>: Wes Golladay from Baird. Your question please.

Wesley Keith Golladay: Hey, guys.

Wesley Keith Golladay: It's about a $4 million increase in leases opening this year, including the 6 million that opened in the first quarter is the ethanol opening faster your point anything from 2025 or is it just the new leasing because signing this year that the opening later in the year that is driving that.

John A. Kite: Is the S&O opening faster you point anything from 2025? Or is it just the new leasing that you're signing this year that's opening later in the year that is, Yeah, Wes. So, I'm sorry, can you repeat the question again? You're a little muffled.

Yes.

Speaker Change #170: I'm sorry can you repeat the question that you're a little muffled.

Wesley Keith Golladay: Oh, yeah. So, you have about $4 million more in your S&O, including the leases that opened this year. Yeah, I'm just curious if that's, and the theater's obviously in there, it's going to be a small part of it, but I'm just wondering what is driving the $4 million increase in the F&O this year opening. Is it the F&O?

Yes, so you have about four.

Speaker Change #170: $4 million more in your ethanol, including the leases that opened this year I'm just curious if thats the theaters, obviously and there's going to be a small part of it but I'm just wondering what is driving the $4 million increase in the <unk> This year opening.

Sure.

Wesley Keith Golladay: That's all new leases, Wes. Okay, got it. So all the new leases... That's just new leases opening greater than the leases in the previous quarter. Okay, and then you also added some new disclosure in your AFFO, the amortization of debt discount premium and hedge instruments. Is the $3.8 million a good run rate going forward for this year? Hold on a second, I have that answer right here for the run rate. Yeah, it's directional.

Speaker Change #171: That's all new leases Wes.

Speaker Change #171: Okay.

Speaker Change #171: Okay.

Speaker Change #171: Although the new leases signed up yes, that's just new leases opening greater than correct. The leases that are in the previous quarter.

Speaker Change #171: Okay and then you also added some new disclosure in your <unk>, the amortization of debt discount premium and hedge instrument is the $3 8 million a good run rate going forward for this year.

Speaker Change #172: Hold on a second 12 I have that answer right here.

Speaker Change #172: For a run rate, yes, it's directional.

Wesley Keith Golladay: Okay, thanks a lot guys. Thank you. One moment for our next, And our next question comes from the line of Paulina Rojas from Green Street. Your question, please. Hello everyone.

Speaker Change #173: Okay. Thanks, a lot Matt.

Speaker Change #173: Yes.

Speaker Change #174: Thank you one moment for our next question.

Speaker Change #174: And our next question comes from the line of Paulino Rojas from Green Street. Your question. Please.

Speaker Change #174: Yes.

Paulina Alejandra Rojas: My question is about the transaction market. Treasury yields have rebounded. Have you seen any change in cap rates given the higher base? Any change in investors' appetite to transact, especially in the last month really? No, I don't think so, Paulina.

Paulina Alejandra Rojas: Hello, everyone. My question is about the transaction market.

Paulina Alejandra Rojas: Yields have rebounded.

Paulina Alejandra Rojas: Have you seen any change in cap rates.

Paulina Alejandra Rojas: Given the higher base any changing distressed appetite to transact, especially in the last months Sweeney.

Paulina Alejandra Rojas: Yes.

John A. Kite: I mean, I think look, the reality of, We're kind of in a place right now where the market is finding stability. So sure, the curve has changed a little bit in the last 30 days and the 10 years, you know, at $4.60, $4.70 versus $4.00. But the reality is, I think the majority of the investment community believes over time that that will stabilize lower. And when you look at the rent growth and the NOI growth that people are getting, particularly if something has upside associated with it, I think the IRRs are very comfortable. And my personal opinion is, as we move into next year, you probably see the 10-year begin to settle in the lower four range. This is just my personal opinion.

Sweeney: No I don't think so Pauline.

I think look the reality of.

Sweeney: We're kind of in a place right now where the market is finding stability.

Speaker Change #175: So sure.

Speaker Change #175: The curve has changed a little bit in the last 30 days in the 10 years.

Speaker Change #175: At $464 70 versus for but the reality is I think the majority of the investment community community believes over time that that will stabilize lower and when you look at the rent growth and the NOI growth that people are getting particularly if something has upside associated with it.

Speaker Change #175: The IRR is are very comfortable.

Speaker Change #175: And my personal opinion is as we move into next year, you probably see the 10 year begin to settle in the lower four range. This is just my personal opinion.

John A. Kite: And when you're, you know, when you can buy something at a six that has two, three percent growth embedded, has some upside, you know, that's a great return. So I think probably back half of this year, you'll probably see it accelerate even more. Again, this is all my personal opinion, but we haven't seen anything slow down because of the volatility over the last month. And quite frankly, the fact that we're tethered to that is unfortunate.

And when you are.

Speaker Change #175: When you can buy something at a six that has 2% to 3% growth embedded has some upside that's a great return so I think I think.

Speaker Change #175: Back half of this year Youll, probably see it accelerate even more again. This is all my personal opinion, but we haven't seen.

Speaker Change #175: Anything slowdown because of the volatility over the last month and quite frankly, the fact that we're tethered to that is unfortunate.

John A. Kite: And, you know, I wish people could look beyond that, and I particularly wish the Fed would think about a range of inflation versus one hard number that just doesn't make sense against an unemployment market at three and a half percent. So one of these days, maybe they'll take my advice, but I'm not really looking to bet on DraftKings, let's put it that way.

Speaker Change #175: I wish I wish people could look beyond that and.

Speaker Change #175: Im, particularly wished the fed would think about a range of inflation versus one hard number that just doesn't make sense.

Speaker Change #175: Against an unemployment market at three 5%. So one of these days, maybe they will take my advice, but not not not looking not looking really I'm not betting on draft King, let's put it that way.

Paulina Alejandra Rojas: Okay. And then you mentioned a drag on expenses, net of recoveries that had to do with the timing of some of the recovery. So overall, what's your expectation for this line item for the year? And I think the easiest way for me to see it is if you expect it to be a, Contributor to same property and like growth or not?

Speaker Change #176: Okay, and then you mentioned and Dragon and expenses net of recoveries that had to do with the timing of some of the recovery.

So overall, what's your expectation for the line item for the year and I think the easiest way for me to see if you expected TBA.

Speaker Change #176: <unk> and same property NOI growth or not.

Speaker Change #176: Yeah.

Heath R. Fear: So the expenses in the first quarter, Paulina, this is just timing, and so we have higher expenses, and you'll see a little bit of a dip in our recovery ratios because of the fixed CAM, but as the year goes on, we'll see that expense normalize. So again, it was just the timing of sort of front-loaded first quarter expenses. Yeah, in terms of – I mean, look, it's particularly around real estate taxes, so if we have previous years' experience in real estate taxes, it's probably a contributor, but we've got to wait and see when we get into the end of the year. Okay, thank you very much.

Speaker Change #176: So the expenses in the first quarter Paulina. There were again. This is just timing and so we had higher expenses and then youll see a little bit youll see a little bit of a dip in our recovery ratios because because of the fixed cam, but as the as the year goes on we will see that expense normalized. So again. It was just the timing of sort of Frontloaded first quarter expenses.

Speaker Change #176: In terms of I mean look it's particularly around real estate taxes. So if you if we have previous years' experience in real estate taxes, Thats, probably a contributor but we got to wait and see when we get into the end of the year.

Speaker Change #177: Okay. Thank you very much.

Speaker Change #178: Thank you.

Paulina Alejandra Rojas: Thank you. Thank you one moment for our next question. And our next question comes from the line of Dori Kesten from Wells Fargo. Your question, please. Thanks. Good afternoon. Heath, can you talk about how the Moody's upgrade may benefit your interest costs going forward and just when you may look to address your 25? Um, yeah, listen, I don't know I can put an exact, you know, spread differential on it.

Speaker Change #179: Thank you one moment for our next question.

Speaker Change #179: Yeah.

Speaker Change #179: And our next question comes from the line of Dori Kesten from Wells Fargo. Your question. Please.

Dori Lynn Kesten: Thanks, Good afternoon.

Dori Lynn Kesten: Keith can you talk about how the Moody's upgrade may benefit your interest costs going forward and just when you may look to address your 25.

Yes, listen I don't know I can put them in exact <unk>.

Dori Lynn Kesten: Spread differential onto that certainly helped.

Dori Lynn Kesten: It certainly helped. You know, we had two great things happen to us. One, Moody's upgraded us, Fitch put us on positive, so we're hopeful that they'll move to triple B+. And then S&P, you know, they put us on a positive outlook as well. And again, we're hopeful we'll mature into a pure triple V rating over the next couple of quarters. So all those things combined will certainly help compress it. Listen, you know, we issued back in January when, you know, the 10-year was around 390, and the spread was 170 over. Current indicatives have us somewhere between 140 and 150.

Dori Lynn Kesten: We had two great things average was one Moody's upgraded us Fitch put us on positive. So we're hopeful that they'll move to triple B plus.

Dori Lynn Kesten: Soon and then S&P.

Dori Lynn Kesten: They put us to a positive outlook as well and again, we're hopeful mature into a pure triple B rating over the next couple of quarters. So all those things combined will certainly help compress it listen we issued back in January when the tenure was around 390 and the spread was 170 over current indicative as have us somewhere between 100.

Dori Lynn Kesten: <unk> 50, so were certainly see some compression and then as we go into the market more often in our bonds become more liquid we only see that getting better and better and better. So in terms of timing of when we're going to address the 20 fives listen we're going to be opportunistic I think we've been really good at sort of looking at the macro environment of picking our spots I think now.

Heath R. Fear: As we go into the market more often and our bonds become more liquid, we only see that getting better and better and better. So, you know, in terms of timing of when we're going to address the 25s, listen, we're going to be opportunistic. I think we've been really good at sort of looking at the macro environment and picking our spots. I think now, you know, in hindsight, when we picked that day to trade in January is a really good time.

Dori Lynn Kesten: In hindsight, when we pick that data to trade in January is a really good time as before the 10 year started two to gap out again, and so we're going to do our best to sort of read the macro cues and picked a good spot. When we think we can also do another nice print. So I would say late 'twenty for early 'twenty five is when we'd look to be looking for.

Heath R. Fear: It was before the 10-year started to gap out again. And so we're going to, you know, do our best to sort of read the macro cues and pick a good spot where we think we can also do another nice print. So I would say, you know, late 24, early 25 is when we'd look to be looking to address those maturities.

Address those maturities.

Speaker Change #180: Okay. Thank you.

Speaker Change #180: Thanks.

Heath R. Fear: Okay, thank you. Thanks. This does conclude the question and answer session of today's program. I'd like to hand the program back to John Kite for any further remarks.

Speaker Change #180: This does conclude the question and answer session of today's program I'd like to hand, the program back to John Kite for any further remarks.

John A. Kite: Just want to say thank you to everybody for tuning in today. And thanks for the interest in the company. Really looking forward to hopefully seeing a lot of you in Dallas in a couple weeks at our foreign 24 where we're going to see some really awesome properties.

John A. Kite: Just wanted to say, thank you to everybody for tuning in today and thanks for the interest in the company.

John A. Kite: We're really looking forward to hopefully seeing a lot of you in Dallas in a couple of weeks at our 424, where we're going to see some.

And I would also say please take a look at the stock because it is incredible value. Thank you very much. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

John A. Kite: Really awesome properties.

John A. Kite: <unk>.

John A. Kite: I would also say please take a look at the stock because it has incredible value. Thank you very much.

Speaker Change #181: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.