Good day ladies and gentlemen, and welcome to the Q4 2014 Kite Realty Group Trust Earnings Conference Call. My name is Tia, and I’ll be the operator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session towards end of this conference. [Operator Instructions] I will now like to turn the call over to your host for today, Maggie Kofkoff with Investor Relations. Please proceed.

Thank you and good morning everyone. Welcome to Kite Realty Group’s Fourth Quarter 2014 Earnings Call. The Company’s remarks today will include certain forward-looking statements that are not historical facts and may constitute forward-looking statements within the meanings of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company to differ materially from historical results or from any results expressed or implied by such forward-looking statements. The Company refers you to the documents filed by the Company from time-to-time with the SEC, which discuss these and other factors that could adversely affect the Company’s results. On the call with me today from the Company are Chief Executive Officer, John Kite; Chief Operating Officer, Tom McGowan; and Chief Financial Officer, Dan Sink. Now I would like to turn the call over to John.

Thanks Maggie. And good afternoon everyone. Welcome to our fourth quarter earnings call. We appreciate you spending the time with us today as we are excited about the performance of our business during 2014 and the milestones that we have accomplished. We are very positive about our prospects for 2015 which is reflected in the nearly 5% dividend increase we are announcing today in conjunction with the earnings. This March, the second event increase we have made in the last year and underscores how energized and bullish we are about the future of our company. We said it before 2014 was an incredibly productive and transformative year for Kite. We successfully executed on a number of strategic and balance sheet initiatives. We closed and fully integrated the $2.1 billion merger we then diversified and achieved the $17 million synergies we estimated at the time of the transaction. We exceeded the midpoint of our initial FFO guidance of decreasing the net debt to EBITDA by nearly a full term to 6.5 times. Over the last 12 months we have increased the dividend by over 13%. We grew AFFO per share year-over-year by nearly 19% to $1.77 per share. While expanding the portfolio and growing FFO, AFFO and free cash flow, we continue to strengthen our balance sheet which was recognized this fall when both Moody's and Standard & Poor's awarded us investment grade ratings. We regionalized our leasing and asset management efforts by adding five regional offices across the country as we further enhanced our market intelligence in key markets and hired several talented employees to help maximize this effort. We acted swiftly and efficiently when we announced plans to shed 15 non-core assets of which the second tranche is on track to close near the end of the first quarter.…

[Operator Instructions] The first question comes from the line of Christy McElroy with Citi. Please proceed.

Good afternoon, guys. So with regards to the 80 million of acquisitions embedded in your guidance those are identified today as you said, you have some visibility there. Can you discuss sort of expected timing and pricing and do you have anything under contract today?

Well, Christy in terms of the timing and everything I mean as of today we are negotiating on a couple of deals, so I wouldn’t say that we’re completely on a contract, but we feel confident enough about those -- that was why we’re willing to put that in guidance. And so I can’t really give you the timing of that although you know obviously its February today, so we’ve kind of layered that in throughout the year, which is part of guidance. And in terms of pricing, I mean the market is extremely competitive. Most of the things we are looking at, we feel like we have some growth opportunity, but to I can’t be very specific yet, because we haven’t finished -- we haven’t finalized it but suffice to say it's why we are very conservative as it relates to the guidance.

On Rampart Commons, specifically what was the cap rate on that acquisition, and what role did the debt piece possibly playing the pricing of that deal?

The debt played a bit of a role although I think we were comfortable that it wasn't that long, so we can deal with that I think next year, but you know in terms of -- I take that back, actually it is longer-term debt and so we just felt like that it wasn’t high enough that it curved from asset, in terms of the amount of debt it was very low leverage. But yes, I think it’s a fact why we were able to pick it up as where we did. It was an off-market transaction. So that helped us but in terms of the pricing now you’re talking about that comes below six range, but again you're talking it’s an extremely high quality asset in the Summerlin area, very-very good demographics. We have some redevelopment potential that we think is in the very near term, but I think it was a little over $30 million acquisition and the debt was around $12 million, so it wasn’t one that bigger factor.

And then just lastly with regard to your same-store NOI guidance for 2015, you talked about the OXIF portfolio entering the pool but when did the Inland asset enter the same-store pool and if they are sort of -- is there any difference at all in sort of the expected growth rate as the pool stands today versus when Inland properties are contributed.

Now the Inland assets will enter the pool in the third quarter. So as the guidance that we’ve given takes into account both OXIFs coming in and Inland coming in, in the third quarter and then the layering in of everything in the fourth quarter. So I don’t think that is really that big a part of it and then one of the things that we talked about last quarter was as a matter of fact we are tracking those leasing spreads in each of the portfolios. Now, again as I mentioned last quarter, we don’t think about it that way in the company because it’s all one company, one portfolio; but those spreads were pretty tight as it were meant, as it relates to renewals, just to be specific in the legacy KRG portfolio the renewal spreads were 5.8%. In the OXIF portfolio they were 5.6% and in the Inland portfolio they were actually the highest at 6.3%. So honestly that the biggest impact to our same-store guidance is the fact that we started off the year -- the previous year with the 330 basis points spread between leased and occupied which I think is down to a 130 basis points. So you’ve seen a significant compression from leased to occupied. And I think that’s the biggest thing, is that we’ve taken in most of that, so it really doesn’t have a lot to do with which portfolio we’re talking about and just that we’re leasing it up and there is less to do there.

Okay, thank you.

The next question comes from the line of Todd Thomas with KeyBanc. Please proceed.

Hi thanks, good afternoon. Back to acquisitions, I was curious now that you have a much more geographic diversified portfolio. Where should we think about new investments being located? Is there a market or a strategy just geographically that we should think about going forward here?

Sure, I mean when we look at what we are pursuing right now, we're talking about -- as I think about it we have got activity in assets in all of our markets but for the Midwest in terms of what we are pursuing right now, so couple of the assets we are looking at are in Texas, some in the Northeast, Southeast; so kind of across the board. We are not currently actively pursuing an asset in the Midwest but that can change. And again that's why we -- and I know that was a big impact to everyone's numbers, but that's why our guidance was what we feel to be very reasonably conservative in the acquisition side, it is that the market is so competitive; we didn't want to put a number out there and then feel like we had to chase down cap rate. And that's what I think some people have done. But in terms of the markets themselves we definitely see opportunity across the board and we are getting -- as a good example to Rampart acquisition in Las Vegas, that was sourced from our Las Vegas office directly and it was off market. And that's why we are hoping these regional offices will help us do even more. It's being a player locally which is always going to find us more deals.

Okay and then just in terms of leasing, it sounds like the junior anchor spaces are sort of where there is the most activity, where the most demand is today and you anchor space is 99% leased. What’s the environment like in your portfolio for smaller shop space, getting the higher rents, getting the smaller shop occupancy up a bit?

I think it’s good. A lot of -- we’ve talked about this before. I mean we have a goal of getting our small shop occupancy to 90% over the next couple of years. We’re still in that, close to 86% range. We are tough. I mean we don’t make it easy to get deals done internally. That’s why we’re getting 6% renewal spreads. That’s why we’re getting all of our new small shop deals grow at 3% a year or better. If we’d let down that guard and we were more accommodative on that side ultimately it would help us in the short run and it would hurt us in the long run. So I think the market is strong in the small shops, if you look at the number of deals that we did during the quarter. We did a lot of deals, we did a lot of shop deals and it’s a combination of national and local. So we feel good but when you’re driving the kind of rents that we’re driving and you're making sure that the leases are extremely favourable to us; that take some time. That’s kind of why we’re where are we are. Tom, you want to add?

A couple of points I guess. Number one is to the dispositions, we’ve obviously increased the quality of the portfolio, which will help us, number one. Number 2, John talked about the regional structure that we have throughout the country and the addition of quality leasing people. So we’re expecting those two factors to really propel us. We’re seeing the opportunities and at this point it is banging away and getting these deals done pursuant to budget. But we feel like we got the pieces in place to be successful.

Okay and then just a last quick one on the guidance may be for Dan. Just curious if you could tell us sort of what’s baked in for other property related revenue and income for the year, the overage rent bucket, some additional condo sales at Eddie Street, what’s the right sort of range to be thinking about for the year?

Yes, I think Todd when you look at other property related revenue; I think it’s going to be pretty consistent year-over-year when you look at the NOI page in our supplemental. It's typically ranges million to million, to a quarter in that range, similar to what we have done in the past, four or 5/4 as shown on that page. So, the Eddie Street Condo sales of residential sales, that there is only a few of those remaining, so that's not going to -- that's kind of needed for '15, will be finishing that up. And as far as overage rent, if you look this quarter we generated about $422,000 of overage rent. I think on an annual basis you'll probably see that number in the $750,000 to $1 million range from a guidance perspective.

[Operator Instructions] the next question comes from the line of Craig Schmidt with Bank of America, please proceed.

Will you guys be ramping up your redevelopment efforts to mitigate the slowing same property growth?

Craig, I think we are definitely focused on, and we use that word we kind of have the 3R's; redevelopment, repositioning, repurpose. And that's very important inside the walls year. Yes, we are ramping that up. We are looking for those opportunities. And I think that as it relates to the same-store slow down, I guess that's the right word -- I mean we were just at such a compression of, we are compressing that leased to occupied number over the last two years because we have a lot of boxed deliveries, and those are big numbers. I don't feel like we are slowing down in terms of what we are doing on the shop side, and that's where most of it is coming. We are actually growing the NOI there pretty favorably, and I think that's why we want to focus on, the fact that our renewal spreads are pretty darn strong. I mean when you can be a close to 6% on a renewal spread, that's pretty good. So I mean, yes we will be looking at these opportunities. They take time and that’s why we said, Craig, that over the next two years that we think will start a $100 million of projects across the board in terms of value creation and hopefully that pace will quicken or will accelerate, I should say, but we’re going to be smart about spending those dollars and make sure we get higher returns.

Great and then just, what is your RadioShack exposure right now?

I think we have like 13 RadioShacks. I mean remember these are only 12,00 sq.ft. spaces, so I think the total square footage comes down to like 30,000 sq. ft. So, it's really not a big impact probably. I mean obviously if every single store would’ve closed it. It’s not great. But frankly, of those 13, we're already engaged in 9 of them with activity. So it’s not like I mean this has been the worse kept secret since I don’t know when. So we’ve been working on this for well over a year. And quite frankly most of our leasing people are excited to get their space back and again with 9 of them active that shows you we’ve been getting calls from tenants. And I would guess a few of our stores will convert to the Sprint stores, so not a big issue.

And to add on to that the average rent on those are very attractive. So we really look at it from an upside perspective across the board.

Are you seeing in your small shop space more of a mom and pops and independence given the improved small business outlook?

Yes, I think Craig, we see a good balance. I think there is probably some of the mom and pops have gravitated to franchise businesses. So you see less, like say 5 years ago versus today or that’s bad example. Before the downturn versus today, I would say before the downturn there were probably more independent stores. A lot of that is we’ve prefer dealing with small shop players that have a franchise behind them. Because it brings business plans, it brings capital, it brings advertising. So I think we’ve gravitated to that. But the good thing is that we have options. In general when we have good spaces, we have multiple small shop players for that space and it also creates less downtime, really you can have turnover in this business but it feels like today there is a lot less downtime than there used to be. So, I think overall the environment is good in the small shop space.

The next question comes from the line of Andrew Schaffer with Sandler O'Neill. Please proceed

Going back to the acquisitions; are you guys looking at any of your current joint ventures as potential sources?

Yes. I think we are. We have a couple of opportunities within there, but as you know Andrew we’ll have ton of JV’s. So it’s not like a company that has a huge JV program but I think we are going to try to do some stuff on the margin there, probably a couple of buyouts. We are working on some buyouts that could be interesting. And that would obviously simplify, but we're not -- this is not a complicated company by any means. We're pretty straightforward that way. And I think just in terms of the acquisition themselves, I want to make some clear, I mean we intend on bidding, you know our acquisition guidance. But I'm not going to chase down the cap rate because I threw out the big $300 million guidance number. So I think that's what's happening here. It's that we're being very conservative. We're putting out the deals that we're actively engaged in tying up. And then we have got a whole year ahead of us to exceed that. And we obviously have a lot of capital. I mean you're talking about a company that's got a half billion of liquidity with constant two years of coverage on maturities. That's a strong business model. So I think we will do well there and I think we will find unique opportunities, and if you would look back probably 70% of what we bought over the last couple of years has been off market. That also makes it a little more challenging to predict. So that's part of that as well.

And then secondly, I know it's a little early in the process, but can you comment on the potential mark-to-market on your Staples and Office Depot exposure, and if that potentially creates a larger opportunity for redevelopment or development?

First of all high-level in terms of the Staples Office Depot situation and a couple of things. One is we have been working on the Office Depot OfficeMax situation for a year and we already were well engaged in that with our 20 or 21 stores that we have there. The Staples really doesn’t add a lot to the element for us because we only have six Staples I think. So it’s really about total office supply picture from a mark-to-market perspective our rents are generally in line. That’s really more of a center-by-center thing. I think our total rent is around 13 box there. So, that’s above our current anchor average, but the reality is that’s where we’re doing deals today and we haven’t talked about that much. But when you look at the next two years both in our anchor expirations and our shop expirations we still have growth there. But mark-to-market I think it’s case by case, but definitely opportunity, because it’s the right size box. And that’s the -- this 20,000 sq. ft. range box is what -- there is a lot of demand for.

The next question comes from the line for Chris Lucas with Capital One.

A couple of questions on guidance, specific to the same store NOI growth. I just want to make sure should we be expecting essentially a fairly consistent same store NOI growth number s throughout, because the pool does change dramatically, just wanted to make sure I understand that pace?

I mean I think what you'll see is, as we begin the year it's going to be a little more weighted to where we ended the year, and then the middle quarter is just when stuff starts to change, right. The things are coming in online, so that probably compresses a little bit or comes down a little bit. But then as we end the year, we think we accelerate probably back up as we get opportunities with the new assets coming in which is where we are stepping in and making deals on a portfolio that previously someone else was making deals. So I think it's going to be one of these things which are kind of moderate a little bit and then comes up a little bit to the end.

And then maybe if I could dig down a little bit more on that. Do you have a sense as to the contribution of same store NOI as it relates to occupancy pickup, revenue growths in OpEx improvement?

I mean in this particular quarter we don't have those particular details for next year but in this quarter as far as rent bumps, like ancillary revenue such as additional out lots, new ground leases, et cetera, that was about 2% of 4.8 you leases, occupancy gains was about 1.7% and then as John mentioned on the call, on the script about 1.2% were increased tenant recoveries as we really focused our efforts, and Tom has got the operational group focused on maximizing, based on tenant leases and expense recoveries how can we maximize that margin. So that's what this quarter looks like. I think when you roll out to next year, I think the focus is going to be rent bumps and ancillary side of it. As John mentioned, the occupancy has closed the gap a little bit. A lot of the anchors that we were working on have taken possession of their space. So I think that's -- looking out to next year those are going to be the big, a couple of big drivers.

And then Dan, well I got you; on G&A, for our guidance for next year, is there -- can reuse fourth quarter as a good run rate? What should we be looking at?

I think as we put in the release, 16 million to 18 million, I think we've been pretty consistent since the merger, saying that number was going to be 4 million to 4.5 million a quarter which still drive to the 16 million to 18 million. I think you know obviously when we typically give a range and we land at the midpoint, so I think that would probably be a good thing to use in your model.

And then John, I know it's early and sort of the New Year, but as it relates to tenant fallout, are you seeing anything other than sort of the conversation about RadioShack or the Staples Office Depot circumstances. Is there anything you're seeing in sort of first five weeks of the year in terms of tenant fallout that concerns you?

No, I don't think so. I think as I said the RadioShack thing has been around for a long time. We will see what happens. The Staples merger, I mean that's still got to get done. But now, I think it remains generally pretty healthy. Certainly when we see small shop space come back to us, if it’s a local tenant as I mentioned we generally have people interested and -- it’s funny we get a lot of our leasing people get called constantly on centers that are full. So, at this point Chris it looks to be generally the same as last year, but it is early. I mean a lot of can happen.

Alright, and then last question from me, just on the development pipeline you added the new project this quarter starting to see some of your peers add new parcels, purchased parcels to sort of their development pipeline. Can you remind us sort of what the status is of the what I would call your legacy land and sort of what your thoughts are about new parcel acquisition for future ground-up development and where you guys are thinking about that in your business plan right now?

Sure. I mean when you look at it the project we’re doing now, Tamiami, was one of the kind of what I would say is the last larger parcels remaining that we could develop. We have another parcel in Raleigh. That is probably the next large parcel behind that that we’re actively pursuing some activity, that’s adjacent to the Super Walmart that we opened there a few years ago. And then after that we’ve got probably the project that has the most upside is the Pan Am parcel in downtown Indianapolis which will eventually be a large mixed use project. Outside of that we’re talking about smaller parcels, more like out parcels. So, we are getting to the point where we’ve pretty much worked through that, which is why we’re actively engaged in the repurposing of the existing assets.

[Operator Instructions] The next question comes from the line of Tammy Feak with Wells Fargo. Please proceed.

I was just curious, as you think about potentially doing more acquisitions than the $80 million outlined, is your plan to match fund dispositions with acquisitions and then do you have sort of a portfolio properties that are you’ve identified already that you’d potentially sell?

Well, I mean I think we started Tammy, with the fact that when the second tranche closes, we’ll have a 116 million in cash. So, if we were to pursue deals leverage neutral, obviously we would do almost double that. So I think what we’re going to do is see what comes our way, in terms of those acquisitions as we talked about. We mentioned that we’ve done a lot of work with the balance sheet and we feel very-very comfortable that our balance sheet is strong. That said, to bring the leverage down another couple of turns, notches I’ll say, not full turns but notches. It’s important to us because again one of these days, it’s going to be more about the balance sheet that will come again and we want to be in that position to take advantage of those opportunities. That’s why we are still focussed on having the liquidity that we have. But all that being said, yes, I think we’ll first use that cash to extent we find the deals that we like, and then it’s all about where we want to end up in our capital structure and where we want our leverage to be; and once we achieve that point where we think we’re at a long run leverage position, then deals would be done essentially leverage neutral.

Okay. So do you have -- so you’re saying you do not have properties today that you have identified or are in marketing for sale?

No, I mean, yes. We are not -- we don’t have a portfolio stuff on the market. We definitely have properties identified that we think that if we had a good use of fund, good use for proceeds, then we would consider selling. I mean it’s all – it’s part of the reason why we did what we did at the end of last year, which was to advantage of the environment, which again is short-term dilutive, long-term accretive and so, I think we would try to plan it such that we had an immediate use of proceeds. Because we’re now down to a position where we sold what we thought like we needed to sell right -- in terms of assets that did not meet our criteria. So now when going forward it’ll be -- it will probably be more on the margin of what we’re doing.

Okay great. And then may be just one more. Where do you think, Dan that you would price on an unsecured bond today?

Really low. I think when you look at overall, when you look at the transactions that have been done and where we sit, I would say in the low 4’s, or better. This is the chance --

That’s the hope. Okay. Thank you so much.

There you need to be real competitive, if they want us to hold the trigger.

The next question comes from the line of Colin Ming with Raymond James. Please proceed.

One of my questions have already been answered, but just real quick, just given the drop in oil prices and overall concerns about the Texas economy, can you may be update us on what you’re hearing from your tenants on the ground there. And then you mentioned that you’re looking at a couple of assets potentially in Texas. Have you seen any impact as far as the transaction market or influence on cap rates just given some of the concerns about the state’s economy?

In terms of what we do on the retail side, quite frankly at this point we have seen no impact from a cap rate perspective. If anything, the deals we’re looking at in Texas, the cap rates are lower today than they were six months ago when oil was higher. So it’s really more about scarcity of high quality product than it is about I think oil in the short run. Obviously, Houston is more impacted than the other markets. It’s more impacted than Dallas and Austin and San Antonio. But even in Houston, I mean the deals that we’ve seen trade there have been at a very aggressive prices, but again remember that we made a big deal out of the fact that our portfolio is now really strong and we have a group of assets that would -- based on what I’m seeing today in cap rates what we own would be hard to buy what we own with a six in front of that, I can tell you. It's gotten to be very challenging in that regard. The deals that we're looking at happened not to be in Houston right now, but we would absolutely do I deal in Houston if we found the right one. But now I think it's early in that game, and when you look at the state as in totality, they've done a great job of really diversifying away. But you know, look, the reality is a factor, but certainly hasn't come into play in cap rates at this point.

There are no more questions in queue at this time. I would now like to turn the call back over to John Kite for closing remarks.

Okay, again I wanted to just kind of close on the fact that we had what we felt like an outstanding year. The company is in a great position from a liquidity perspective. And we are absolutely excited about what we see in front of us, and look forward to continuing to grow the business, and thank you for your support. Bye-bye.

Ladies and gentlemen, thank you for your participation in today's conference. That concludes the presentation. You may now disconnect. Have a great day.