KRG - NYSE

Good day, and thank you for standing by. Welcome to the Kite Realty Group Trust Fourth Quarter 2025 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Bryan McCarthy, Senior Vice President, Corporate Marketing and Communications. Please go ahead.

Thank you, and good morning, everyone. Welcome to Kite Realty Group Trust's fourth 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 risks and uncertainties. Actual results may differ materially from these statements. 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-Ks. Today's remarks also include certain non-GAAP financial measures. Please refer to today's earnings press release available on our website for reconciliation of these non-GAAP performance measures to our GAAP financial results. On the call with me today from Kite Realty Group Trust are Chairman and Chief Executive Officer, John Kite; President and Chief Operating Officer, Thomas K. McGowan; Executive Vice President and Chief Financial Officer, Heath R. Fear; and Senior Vice President, Capital Markets and Investor Relations, Tyler Henshaw. Given the number of participants on the call, we kindly ask that you limit yourself to one question and one follow-up. If you have additional questions, we ask that you please rejoin the queue. I will now turn the call over to John.

Okay. Thanks, Bryan, and thanks, everyone, for joining us today. The fourth quarter concluded a year of outstanding execution by the KRG team. The following highlights underscore the depth and impact of our operational and transactional accomplishments. Leased nearly 5,000,000 square feet of space, and our new leasing volume marked the highest annual volume in the company's history. We leveraged the strong demand for space in our high quality portfolio, to improve our lease structures, embed higher rent escalators, and optimize our merchandising mix. We entered into two joint ventures with GIC totaling approximately $1,000,000,000 of gross asset value. We sold approximately $6,222,000,000 of noncore assets which reduced our percentage of ABR coming from power centers by 400 basis points compared to last year. And increased our exposure to neighborhood grocery, life and mixed use assets. Allocated a portion of the proceeds of these sales to $300,000,000 of stock buybacks at a significant discount to our consensus NAV. Most importantly, our total activity in the year was accretive on an annualized basis. And our net debt to EBITDA remains below our long term target range of five to 5.5 times.

We have a relentless team that will capitalize on this momentum and accomplish even more in 2026 and beyond. Turning to our results. Our leased rate increased by 120 basis points sequentially, driven by continued demand for space across our portfolio particularly with anchor tenants. We signed leases with nine anchor tenants in the fourth quarter and a total of 28 during 2025, representing approximately 645,000 square feet. The anchor leasing in 2025 was done at a 24% blended comparable cash spreads, 26% gross returns on capital, included names like Whole Foods, Trader Joe's, Crate and Barrel, Nordstrom Rack, Sierra, HomeSense, Ulta, and Barnes and Noble. While our box inventory is being absorbed, the anchor demand remains unabated, which allows us to drive better lease terms such as reducing the number of fixed options, limiting use restrictions, and incorporating more favorable cotenancy clauses. Our small shop lease rate increased 50 basis points sequentially and 110 basis points year over year. We have been on a steady upward trajectory over the last five years, and over the course of 2026, we intend to drive our shop lease rate to new heights. Our focus continues to be on higher long term organic growth, an effort that will pay dividends long after our sizable signed-not-open pipeline normalizes. The embedded rent bumps for the portfolio are 180 basis points, a nearly 25 basis point increase from 2024. By shedding lower growth assets and negotiating better annual bumps, we are well on our way to hitting our goal of 200 basis points of embedded escalators in the portfolio. Turning to development. Our activities at One Loudoun—it is important to appreciate that this is not a run-of-the-mill expansion project. We are adding 86,000 square feet of retail space, 33,000 square feet of highly amenitized office space, 169 full-service hotel rooms, and 429 additional luxury multifamily units to a premier mixed-use asset located in the wealthiest county in the country. The retail portion of the expansion is currently 65% leased to names like Arhaus, Williams-Sonoma, Pottery Barn, Tatte, and Alo Yoga. In 2025, we took a series of critical steps to transform our portfolio and refine our investment thesis. Together with a world-class partner, we acquired a landmark property in Legacy West and contributed three larger-format, well-located assets to a second joint venture. Legacy West has been outperforming our original underwriting, and since our acquisition last April, we have signed or opened names like Watches of Switzerland, Ralph Lauren, The Henry, Buck Mason, Seventh Avenue, and Adidas. As one of the elite open-air assets in the country, Legacy West has opened the door to a new tier of luxury tenant relationships and we see a clear opportunity to replicate that success across select assets in our portfolio. We sold 13 properties and two land parcels in 2025 for approximately $622,000,000. The disposition pool was primarily composed of larger-format assets with embedded rent escalators significantly below our portfolio average. The sales also allowed us to shed a total of 21 watchlist anchor boxes representing approximately 578,000 square feet of space. At the beginning of 2025, we indicated there would be an acceleration in our capital recycling activities and that is exactly what happened. In totality, we were a significant net seller in 2025. Based on where our stock has traded, we leaned into the capital allocation cues by selling larger-format, lower-growth assets into the private market at yields well inside of our implied cap rate, redeployed the majority of the proceeds into $300,000,000 of share repurchases at a 9% core FFO yield. In summary, we took advantage of a clear yield arbitrage opportunity while at the same time derisking our cash flows and enhancing the growth rate of our portfolio. Looking into 2026, the midpoint of our guidance has limited transaction activity that Heath will address in a moment. As for any transactional activity beyond that, we have previously discussed a possible second round of larger-format noncore dispositions to further elevate the quality of our portfolio. Any such recycling would be pursued opportunistically so long as it is minimally disruptive to earnings and otherwise consistent with the objective of last year's dispositions. As always, I want to thank the KRG team for their continued dedication and considerable efforts to deliver strong results and execute on our strategy. I will now turn the call over to Heath to discuss the details of Q4 and 2026 guidance.

Thank you, and good morning. 2025 was an extremely productive year, and we are taking that same drive and conviction straight into 2026. As a team, we are focused on converting momentum into results by further optimizing and derisking the portfolio, upgrading our operating platform, embracing technological change, and staying ahead of emerging trends. Turning to our results, KRG earned $0.52 of NAREIT FFO per share and $0.51 of core FFO per share in the fourth quarter. For the full year, KRG earned $2.10 of NAREIT FFO per share and $2.60 of core FFO per share. Our core FFO per share grew 3.5% year over year, and as a reminder, core FFO focuses on the fundamental operating results and serves to eliminate the non-cash noise. For the full year, same property NOI growth was 2.9%. Take note that our full year 2025 same property NOI result is 100 basis points above our original guidance. Over the past four years, our same property NOI growth has averaged 4%. When accounting for our disposition activity in the fourth quarter, our signed-not-open pipeline grew $4,000,000 sequentially to $37,000,000 of NOI, and the gap between leased and occupied space widened to 340 basis points. During the quarter, we executed 61 new leases that added approximately $14,000,000 of NOI, which more than offset the 61 tenant openings representing approximately $10,000,000 of NOI. Importantly, about 70% of that signed-not-open NOI is expected to come online in 2026. For 2026, we are establishing our NAREIT and core FFO per share guidance ranges between $2.06 and $2.12. Included at the midpoint of our guidance are the following assumptions: same property NOI growth of 2.75%, a bad debt reserve of 100 basis points of total revenues, and interest expense net of interest income of $121,000,000. The midpoint of our guidance also assumes approximately $110,000,000 of 1031 acquisitions in the first half of the year, offset by approximately $115,000,000 of noncore asset sales later in 2026. I encourage all of you to review page five of our investor presentation which bridges 2025 NAREIT and core FFO results to the midpoint of our 2026 guidance. Our same property NOI cadence for 2026 will be the opposite of 2025. We anticipate lower growth in the first half followed by an acceleration in the back half of the year and into 2027. The cadence is primarily due to bankruptcy rents we collected in 2025 and the impact of our signed-not-open pipeline in 2026. Interest expense will be roughly a $0.03 tailwind into 2026 driven by lower line of credit balances following last year's transactional activity and higher capitalized interest as we accelerate development activities at One Loudoun. Our recurring but unpredictable items are serving as a $0.04 headwind in the 2026 guidance. Termination fees were a historical outlier in 2025. Our philosophy with establishing guidance is always to set expectations based on things we have clear visibility to while maintaining a pathway to outperformance. While our 2025 allocation activity is expected to be accretive on a full year basis, the timing of dispositions and associated deployment of proceeds are acting as a $0.02 headwind into 2026. You will note that our NAREIT and core FFO per share guidance is the same for 2026. This reflects the continued wind down of non-cash items stemming from our 2021 merger, including straight-line rent, lease intangibles, and debt marks, resulting in a more balanced noncash profile for the year. We have consistently emphasized that the strength of our balance sheet provides us tremendous flexibility in how we allocate capital. The recent dispositions and share repurchase activity are clear examples of that flexibility in action. Our balance sheet remains one of the strongest in the sector with over $1,000,000,000 in liquidity, a net debt to EBITDA of 4.9 times, giving us the capacity to pursue opportunities that enhance shareholder value while maintaining our financial discipline. We remain firmly committed to our long term leverage target of low to mid five times net debt to EBITDA which continues to position us well for both stability and growth. Thank you to our team for their relentless effort to deliver strong results and create long term value for all our stakeholders. We look forward to seeing many of you over the next several weeks in much warmer weather. Operator, this concludes our prepared remarks. Please open the line for questions.

Thank you. Star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Cooper R. Clark with Wells Fargo. Your line is now open.

Great. Thanks for taking the questions. I just wanted to touch on some of the noncore dispositions assumed in guidance. Just curious if you could provide expectations on pricing there and whether it or not it is fair to assume that is mostly comprised of power centers?

Yeah. I mean, I think you can assume that it is similar to what we have done in 2025. And we, you know, it obviously has not happened yet, so we are not, you know, we are not going to give too much color on where we assume the cap rates to be. But I think overall, the market continues to be very healthy, you know, and there is a strong demand for that type of product.

Great. Thanks. Then on the 1031 acquisitions, just curious what type of product you are looking at today and how we should be thinking about the buy box on different types of assets you are looking in the market?

Yeah. I think, again, in general, in terms of what we are looking to on, we continue to want to execute on this idea of moving away from the larger format centers and into more of the neighborhood grocery and lifestyle mixed use. Again, with a focus on, you know, embedded rent growth. But, also, some of this activity is based on, you know, activity that we had at the '25 relative to, you know, gains and losses. Right? So we have to be focused on this idea of trying to harvest some losses to offset some gains. So it is not simply just about product type. There is a little bit of that going on as well. But in general, you know, the theme is that we want to continue to move the portfolio in a direction that will grow our embedded rent growth, you know, and as, you know, getting up to growing it by 25 basis points in a year up to almost 1.8%. You know, we are closing in on this goal of 2% embedded rent growth. That is just a significant driver for us in the future. So it is kind of a combination of all those things. Keith, you got anything?

Yeah. I would just add, Cooper, that the acquisitions and the dispositions are really accomplishing the same thing. So the 1031 acquisitions are really just shielding gains from last year. The $115,000,000 of assets have embedded losses. Again, achieving the same thing, which is managing through our taxes and at the same time derisking the portfolio and improving the overall quality. So both different sides of the same coin, so to speak.

Great. Thank you. Thanks.

Our next question comes from the line of Andrew Reale with Bank of America. Your line is now open.

Good morning. Thanks for taking my questions. First, I was just hoping maybe you could speak to some of the key swing factors that would drive you towards the higher or lower ends of the guidance range? And then specifically for the S&O pipeline, how much of that timing is ahead.

I am sorry. Can you ask your question?

Sure. Just with the S&O pipeline, how much of that timing is within your control, and what levers could you pull to potentially accelerate some of that commencement?

So I will answer the first question which is what is going to put you to the high and the low end of your range. So listen, on the same store side, it is the typical suspects. It is lower bad debt, RCDs, rent commencement dates, retention, higher overage. Those are your typical same store things that put you in the higher or lower end of your range. And then below same store, as we talked about, there is recurring and unpredictable items. Term fees, land sales, fee income, etcetera. We mentioned that is a $0.04 drag into this year, but we would only put into guidance things that we have visibility on so that number could grow over the course of the year. Timing of the transactional activity that we just mentioned could also impact the higher or lower end of the range. That is, again, deployment of the sale proceeds, when we are going to get those 1031 done, when do we sell the other $115,000,000. And finally, as John mentioned on the call, are we doing the second pot of dispositions. Again, that is TBD. But those are all sort of the main broad factors that really sort of bring us high or low on the range. And then Tom, do you want to discuss what we can control on the RCDs?

Yeah. From an RCD standpoint, I think one of the most important factors is once we are at a comfortable state of moving forward, getting drawings started, doing everything we can from a permit standpoint, or if situations require multiple permits, we consolidate those to avoid delays. So we have four or five tools that we can take off on to improve those and we are in the midst of really tackling those right now.

Okay.

That is helpful. Thanks. And then if I could just follow-up on the recurring but unpredictable items. I know you mentioned the $0.04 headwind this year. But could you just quantify what is currently baked into the assumption as it relates to term fees or any land sale gains or anything else?

Yeah. Just to put context, we had around $21,500,000 of recurring but unpredictables last year. We are just under $13,000,000 this year. And it is spread across typical suspects, term fees, land sale gains, and development fees. So again, that is what we have purview into right now. And we only put things in that we have really, really great visibility to. And to the extent we are able to get more of that over the course of the year, that will be a source of outperformance. I will observe, however, though, what we have in the model right now is pretty much a run rate. So if you look at between 2023, 2024, and 2025, it is running around $13,000,000 a year. So that is kind of a midpoint, I think. So we will see. Again, it is a lot of time in front of us. Thank you.

Thank you. Our next question comes from the line of Todd Michael Thomas with KeyBanc Capital Markets. Your line is now open. Todd Michael Thomas, your line is open. Please check your mute button.

Yeah. Hi. Thanks. Sorry about that. I just wanted to follow-up on capital recycling, some of the transaction commentary. Heath, in terms of the $115,000,000 of dispositions assumed in guidance and the 1031 you plan to make. Is there any update on progress to dispose of City Center that you can discuss? And how should we think about deploying the balance of the cash and restricted cash on the balance sheet?

Yeah. So great question, Todd. So on the $115,000,000 we are selling, all of it is in process. As you know, we were forced to remarket City Center as we were cleaning up some tenant issues. That one is still actively in the process. You know, the weighted average transactional date for that group of assets is August, so it is something later in the year. Then in terms of how we are applying the proceeds, if you look at our balance sheet, Todd, you will see that we had $440,000,000 sort of in restricted cash. That was all sitting in 1031 escrows, but that is obviously not all earmarked for 1031s. Going through it, you know, we paid about $30,000,000 for that special dividend at the beginning of the year. We got another $50,000,000 of stock back in January. We paid down $85,000,000 on the line of credit. So now the line of credit is sitting at zero. It was $85,000,000 at the end of the year. And then there is 1031 acquisitions. And then the balance of it is going to be a combination of debt reduction and share repurchases. So that is how we intend on deploying the full proceeds.

Okay. That is helpful. And then maybe, John, can you just maybe speak to the broader acquisition environment today in terms of the product that you are seeing. We have seen a lot of activity pick up, and I am curious how that sort of fits into the company’s strategy for acquisitions just moving forward here and what your appetite is like for new investments as we think about 2026–2027.

Yes. Todd, as you know, I mean, I think the market is definitely active. There is a strong bid for kind of retail across the board. Each component of retail, you know, has a strong bid actually. So it makes the job a little harder in terms of finding the things that we think match. That being said, we are actively underwriting deals right now. As Heath said, we do intend on, you know, executing on at least $110,000,000 of acquisitions. We have two or three, four opportunities that we are, you know, well on the way of underwriting and analyzing. So I think we feel good about that execution. Think we continue to want to find things that we think we can add value to, and things that have a better embedded rent growth profile. And, also, again, derisking exposure to certain large anchor tenants that we just want to derisk our exposure to. So this is not a one-year thing. It is a multiyear process that we are moving towards, and I think we are off to a fabulous start. And I think we can continue to do that. But we have to be smart, we have to be agile. We have to be looking all over the place, and we are doing that. We, you know, we are in great markets, so we can add to the markets that we are already in, which is generally what we are looking at. So, I feel very good about it. But, again, I mean, the more and more people that want to be in the space, the more, you know, difficult it is to try to make numbers work. But that is our job, and that is what we will do.

Okay. Thank you.

Our next question comes from the line of Craig Mailman with Citi. Your line is now open.

Hey. Good morning, guys. Just, Heath, on the 100 basis point of bad debt expectations, you know, I know John, I think you said with the dispose, you got rid of 21 watchlist spaces. I am just kind of curious. Did you guys kind of sell off the noncore. How much of that 100 basis points is kind of earmarked versus just a cushion, and kind of walk through maybe some of the watchlist tenants that may be on there.

Thanks for the question, Craig. So as you know, our typical run rate is somewhere between 75 and 100 basis points of revenue. And also this year, we do not have a separate anchor reserve. We decided that 100 basis points was an appropriate level mostly probably due to The Container Store. So we will see how that shakes out, but we are having that one. So we are starting at a little bit of a higher level. Last year our general reserve was 85 basis points. So rather than separating it out we just said 100 points general reserve for 2026.

Yeah, Craig. I mean, it is like every time at this time of year, I think we get this question every year at this call. It is just so early. There are so many variables. I feel like 100 at the midpoint is a nice place to start. Let us see how we go through the year. There are multiple, you know, retailers that have lots of things going on. So this is the right way to go about it. I do think, overall, we are trending in a good direction as it relates to our portfolio in particular, but also just the overall landscape where, you know, I have seen people write about, you know, retailers that were previously on watchlists that are not on watchlist and things like that. So I think we feel good about it, but this is a good place to start, and I think it is prudent.

That is helpful. And then just second, just on the asset recycling, you know, capital deployment side of things, you guys were very active. It seems like selling stuff is much easier than buying things these days given the transaction environment out there. I am just kind of curious, you know, it just feels like there are diminishing returns on buybacks, and you guys are in probably better shape than other REITs that have tried, given your leverage levels. But I am just kind of curious, you guys have traded at a persistent discount to peers, and it feels like maybe the route is figure out a way to drive earnings growth that exceeds peers versus setting up the portfolio for longer term NAV. So I am just kind of curious the appetite here, you know, five times, you guys are below the low end of your debt to EBITDA range. But just pushing that leverage, and I am not saying to go to seven times, but, you know, maybe something a little bit more efficient from putting capital out the door and driving earnings. Rather than continue to run at low leverage and kind of putting yourself at a disadvantage relative to private peers who run at higher leverage. I do not know. Could that make it easier to buy things and drive earnings growth and differentiate yourselves that way versus kind of the shrink to grow down the road strategy you guys are doing now?

Yeah. I mean, I think there is a lot to unpack there, Craig. But bottom line, you know, when we started the year in 2025, we were very clear about the strategy. Right? And the strategy has a lot to do with not thinking about, you know, the next four or five quarters, but thinking about the next four or five years. Sometimes people do not like to hear that. We are in a great business that is going to get stronger and we are positioning the portfolio to take advantage of that and actually, you know, in the future be in a better growth profile. So that is kind of the work that we did, and we were able to do that. I mean, if you look at what we did in the year, you know, a lot of people talk about things that they might do or want to do and they complain about where their stock price is and where assets trade, and but yet, they do not really act on it. And, you know, I think the reality is we acted on something that was a very clear arbitrage. You know, buying back 6% of our stock at, you know, at numbers that, you know, the source was provided at yields that were very attractive relative to the yields that, as we said, the core FFO yield of the stock was at 9% at that time. So bottom line, I think we feel very good about how we executed that. Obviously, as we continue to move down the road, our goal is to grow. Our goal is to grow the portfolio, grow cash flow. And remember, we are growing cash flow per share. We are not, we are very focused on that. So I think over time, all these things will come together. And there is still more work to be done. There is a lot of wood to be chopped. And, you know, we continue to do that. We are extremely happy that we were able to do a massive amount of transactional activity and yet have a situation where, you know, all of it ultimately was accretive, you know, without the timing, you know, associated with the redeployment.

So I think we, I understand what you are saying, and the idea of taking leverage up. You know, we have been around a long time. We have seen a lot of different cycles. And running a business with lower leverage is a smart thing to do. Obviously, we are now at, as you said, below where we intend on running. And it also has a lot to do with where things can trade, where interest rates are. So over time, I think that will also come to us. I think there will be a better situation for us to deploy capital more accretively just in straight up acquisitions. But right now, that is more challenging. So I think we will continue. That is a long way of saying we love running a company with low leverage that gives us opportunities to take advantage of that down the road like we have done in the past. And so I think you will see us take advantage of that great balance sheet. But right now, we are positioning ourselves to do that. You know what I would also like, Craig, if you think about it on a relative basis, why did we underperform in terms of growth? Well, a lot of it was because of the credit watchlist and credit losses. And so the exercise we are doing, we are addressing the fundamental building blocks of growth, which is derisking the cash flow, which means making sure that we do not have fallout in a disproportionate way, and also improving our embedded bumps by shedding assets that have lower. So while, yes, we could lever up and we could create growth that way, I think it is addressing the fundamental issue first and getting the portfolio in a position where we can outperform growth. And the challenge is not about this year or next year or, you know, it is about the next five years. We are trying to make changes that are going to be sticky. Because at the end of the day, you know, all the occupancy growth at some point, everyone is going to stabilize. And we would like to be in a position, as John said, that we have 200 basis points of embedded escalators. We are starting at a place ahead of many of our peers. That is the whole point of the exercise. It is growth.

Great. Thank you.

Thank you. Our next question comes from the line of Michael Goldsmith with UBS. Your line is now open.

Good morning. Thanks a lot for taking my question. A question just about the flow through from same property NOI to the FFO growth. You know, it seems like you are not getting that good flow through here, and you are also getting a benefit of interest expense of $0.03. So can you just walk through the factors that are limiting the flow through, and then does that get better in the out years? Thanks.

Yeah. I think the two big items that are limiting the flow through are really the recurring but unpredictable. Again, that is a $0.04 headwind into year. And as I mentioned before, we are starting with a number. That number could grow over the course of the year. And then the second thing, and the good news about this, one is really going to diminish, is the $0.35 of noncash. Still, that is that merger burn off of non-cash items. And illustrative is the fact that our core and our NAREIT FFO are on top of each other this year. It just shows you that that is now normalizing. So that has been a consistent theme over the last three years. In fact, a total of $1.35 cumulatively over the past three years has really impacted our earnings growth. So those are the two drivers of why it is not flowing through onto the FFO line.

Thanks for that, Heath. And then just to follow-up, you have been buying back stock at $23 in the fourth quarter and towards the end of the quarter closer to $24. Stock is now moving a bit higher. Like how are you thinking about share repurchases? You know, what is the right level? At what point do you move away from that into some other areas where there are other capital allocation options where there may be more accretive? Thanks.

Yeah. I mean, there is obviously a lot that goes into the analysis of the stock buybacks. You know, we still believe even wherever we are right this second, we are clearly well below consensus NAV. You know, a lot has to do with the, you know, what is the source of that buyback in terms of the core yield on that if there is more asset sales that would be funding that. As Heath said, you know, we still have some deployment of the $400+ million that we had at the end of the year that needs to be deployed. So I mean, we analyze it, you know, in multiple ways. And, again, we are trying to do all this and maintain a really healthy balance sheet and not have any material, you know, issues relative to earnings. So yeah, it is not a simple exercise, but I think we can execute on it. And, again, we still trade at a significant discount, you know, even as we sit here today. So I think, as we said, we want to take advantage of any arbitrage opportunities that we can to position the company to grow further in the future. So that is really what this is all about. It is not a one dimensional exercise. There is a lot going on here and we have a really strong belief, a real conviction, our portfolio will perform in the future.

Thank you very much. Good luck in 2026.

Thank you. Our next question comes from the line of Floris van Dijkum with Ladenburg. Your line is now open.

Hey. Good morning, guys. I am glad the capital allocation topic is being discussed widely. I am just curious. I note that you sold a bunch of assets in the fourth quarter, yet your S&O pipeline has not really moved. Maybe if you can talk a little bit about where that S&O is located and, you know, and how does that impact potential sales? Because presumably, you would not want to, you know, sell assets until the rents are in place.

Floris, so good question. For the assets we sold, there was about $1,600,000 of signed-not-open NOI that we sold. And if you heard my remarks, I said that we actually increased it by $4,000,000 once you take those dispositions into account. So it was a really healthy growth. And as we mentioned, we expect the SNO pipelines to remain elevated. We expect the gap between our leased and occupied rate to remain elevated throughout the course of the year as we continue to lease up.

Yeah. I think, Floris, in terms of this idea that, you know, would you not sell things that still had upside. I mean, you have got to analyze each individual deal, the quality of the deal. Do we want to spend the capital on a particular box deal? And what are the returns on that deal versus the returns that we generate by selling? So, you know, those are the things you look at as it relates to that.

Thanks, John. Maybe, you know, I note that you have not sold your two big land parcels yet, Carillon and Ontario. I know that Ontario is going through an entitlement process. Could you maybe update us on where that entitlement process stands today?

Sure. Tom, you want to hit that?

Yeah. Excuse me. So the entitlement process is well underway. It is lengthy for us. It is a process that will take us into 2027. But all things are moving in the right direction. We seem to have great backup from the county and the need for housing. So we are moving in the right direction, but it is a very timely process.

And then in terms of the—that is the California asset.

Same thing in Carillon. We are, you know, we are pursuing the sale of that land. Yes. It is what it is. I mean, these things take time. Obviously, there is no NOI associated with that. So, you know, we want to maximize the value as opposed to rush through it. But both of these things over time will happen, and, you know, they are large parcels of land that can generate some a good source for us.

Thanks, John. Lots of work to do within the counties for sure. Thanks, guys.

Thank you.

Our next question comes from the line of Alexander David Goldfarb with Piper Sandler. Your line is now open.

Hey, morning. Morning out there. John, when you were talking about the dispositions this year and presumably stock buybacks, you mentioned you want to focus on minimizing earnings disruption. Were those comments specifically on the actual earnings this year, or you were talking more on an annualized effect?

I mean, I think I am referring to both. I mean, it is what we did in 2025, and it is what we are, you know, thinking about in 2026 as we look at what we might do in 2026, Alex. So we are always analyzing that. And, you know, our goal is to, as I said, we want to have minimal disruption and then we want to have maximum future growth.

Okay. And then the also—yeah. One last thing I will add is, as John mentioned, on an annualized basis, all this stuff is accretive. But if you look at our bridge, you will see that based on the timing of when we sold it and when we are, you know, deploying the proceeds, it was a $0.02 drag into 2026. That drag obviously will disappear in 2027 as the results are annualized.

Okay. No, that is helpful. The second question is, I understand your rationale for selling the larger format centers. You said you want to reduce some of the certain anchor exposure. On the other hand, a number of your peers have been commenting that they have seen better acquisition opportunities in the larger format. So would you just say it is sort of the randomness, like the particular centers that you own that are on the larger side, those particular ones have issues that you want to sell but you are still amenable to buying larger format, or are you saying that, hey, we have owned a variety of different size centers, and, ultimately, we believe that the neighborhood and the lifestyle are the best. And even though others may be going for larger format, for the Kite portfolio, you do not see the larger format. I am trying to understand if it is a format or just the particular exposure of your tenancy that is driving the larger dispositions?

I mean, I think it is more, you know, complicated than that. I think each individual company has their own goals and expectations. You know, I think what we have said is we clearly want to reduce the total exposure to that larger power center portfolio. We did not say we wanted to eliminate it. So we are just reducing that percentage and growing the percentage in, you know, grocery lifestyle mixed use. And it is paying dividends in terms of our cash flow growth for doing that. It does not mean that a large format center cannot be a great center. It all comes down to, you know, what your cost of capital is and what your yield is and what your credit risk is because we discount the cash flow when we look at these things. So, again, each company has their own independent goals and objectives. In our particular case, we are very focused on this idea that if we get to, you know, 2% plus embedded rent growth in the portfolio, that is going to pay dividends for us in the future. Versus the assets that we sold, which were closer to 1.4% embedded growth and are exposed to a portfolio of tenants that have a higher degree of credit risk. That is it, Alex. It is really—it is, and as you know, you have been around us long enough. We are real estate people. Great real estate will overcome. Right? Great real estate will overcome whatever potential mistake you have made on top of it. So it is really about us owning great real estate and pivoted a bit in that other direction of, you know, where we think we can get higher growth.

Perfect. Thank you, John.

Thank you.

Our next question comes from the line of R.J. Milligan with Raymond James. Hey. Good morning, guys. One specific question, I was wondering if you could just sort of walk through the components of the timing of the net capital allocation activity of negative $0.02. I guess my question is if you bought back stock early this year, you are going to be buying more assets earlier in the year, selling assets later in the year, I would think that that would have a positive impact.

Also, yeah, we, you know, we bought back $300,000,000—$250,000,000 in 2025, and then $50,000,000 in 2026. We also utilized the line in 2025, which added some interest expense. And, also, there is more proceeds to deploy. As we discussed, there is another $110,000,000 of 1031 acquisitions, which is not to happen until the middle of the year. When you put all that into the blender, RJ, timing wise, it is just dilutive going into 2026. And if you think about it, we had the disposition NOI for almost all of 2025. And that is immediately being taken out. So it is not there at all for 2026. So backfilling that is the accretion from the share buybacks. But we also have to get these 1031s done.

Okay. And then just bigger picture, wanted to follow-up on—and I think within guidance, just over $100,000,000 of disposition activity, and it looks like just from where we stand today that 2027 is shaping up to be a pretty good year for actual earnings growth. You are going to remove the noncash headwinds. You probably, you know, have a more reasonable year-over-year comp for lease termination fee income. I am just curious if, you know, is there a possibility—like, one, what is the appetite to sell additional assets? You know, is there a possibility we get to the second half of the year and we see a larger bucket of dispositions that then would negatively impact earnings growth in '27?

Sure, RJ. I mean, obviously, it is—

It is too early for us to indicate what we think '27 is. That being said, I get your question. And, you know, we are going to have to see how the year plays out to the acquisition disposition, you know, kind of plans. There is, as we—as I mentioned in my prepared remarks, we have been clear that there is a possibility that we would look at another larger, you know, kind of transaction in terms of selling larger format centers at what we think are very attractive yields and redeploying that capital in a, you know, accretive—accretive or very minimally dilutive way as we did this year. It would need to fall in those kind of, you know, in that bucket. And, again, if we were to do something like that, it would be because we think that it is going to significantly increase our kind of cruising speed, as people like to say, relative to our embedded rent growth. Our desire is obviously to grow earnings and grow earnings with a better portfolio. And not necessarily just better, but one that is positioned to take advantage of the retail environment is a better way of saying that. So I think it is too early to say what '27 looks like, but, you know, those are the components of what we are looking at.

Great. I appreciate it. Thanks, guys.

Thank you.

Our next question comes from the line of Hongliang

Yes. Hey, guys. I guess I just want to clarify. In the $115,000,000 of noncore assets you expect to sell later this year, does that include City Center? And if so, what is the—could you remind us what the—what the rough dollar amount you expect to get from the disposition?

It does include City Center, and it is mid fifties.

Mid fifties. Got it. And then I guess you talked about the potential of selling a second bucket of dispositions. Is there any color you could provide about just the magnitude compared to the dispositions you have already sold last year?

No. I do not think that what we are saying is—we are studying the potential of something similar that we did last year, not necessarily in terms of total size, more so in the type of product that we would be looking to sell. And again, as Heath said, we are still, you know, going through some of the, you know, tax kind of harvesting of losses that we want to get for against what we have already done. So I think it is going to depend on how this plays out. But, obviously, if, you know, if the opportunity arises for us to do something similar in a similar fashion that can ultimately be accretive to the value of the business, then, you know, we will look at that.

Also, Adam, if you think about it, our current FFO yield even at the price where it is now is still 8%, which is going to be wide of where we can sell assets. So if you are looking at the capital allocation cues, and John mentioned this in his comments, we are viewing this as an opportunity to upgrade the quality of the portfolio while doing minimal—either accretive or minimally dilutive to earnings. So it is almost incumbent upon us to consider this again this year. So again, we will see how it pans out. But, you know, we will—you will know more as the year progresses.

Got it. Thank you.

Thank you. Our next question comes from the line of Wesley Golladay with Baird. Your line is now open.

Want to go back to the comment you had, John, about, you know, getting better terms on the anchor leasing, but you are also, you know, that is rate, but also you are getting, you know, no cotenancy. And I am just wondering if that is going to kick off any redevelopment for you on the retail side?

Yeah. Hey, Wes. I think what we are saying is overall, you know, we are in a position of strength and we are doing everything we can to improve a myriad of different deal terms. You know, you do not eliminate all these things overnight. For example, we did not say we are eliminating cotenancy. We are saying we are improving it. We are improving our rent growth. We are improving the terms in terms of, you know, obviously looking to limit future fixed options which we have been doing. But if you just look at what we did in one year relative to the peer group, to grow our embedded rent growth, you know, to close to 1.8%. I think that tells the story for the future. And that is really what this is all about. The fact that we were able to do that and buy back 6% of our shares at a significant discount to value. We had a hell of a productive year and we laid out a business plan in the beginning of last year which we were very clear with the street, and we executed on that plan. And that is what we intend to keep doing. You know? So I think—and, again, the backdrop of the business is strong. So you have to take advantage of these things because things move around, things change. And when you have—that is why you have got a balance sheet like ours. So that you can ebb and flow with those changes. So we feel very good about that.

And then one other thing to add on better terms—you know, this is not occurring by sending a redraft of a lease to a company saying, hey, we would want this or this. What we are trying to do is take it directly to the companies and having open conversations about, hey, here is the direction that we have to move in, and that has been helping us. Because it needs to be a very blunt and candid conversation about here is what KRG needs and here is the best way for us to get it and make it also work for you.

Thanks for that. And then, you know, going back to the comment about improving the cruising speed, it looks like you added 24 basis points over the last two years. I imagine you touched about maybe half the leases. Would that be a good extrapolation for maybe increasing it another almost 25 bps the next two years?

I mean, I think we said we feel like we are very close to this, you know, in the near term getting to 2%. You know, if you look at our investor presentation, you will see that, you know, on the small— for example, on the small shop side, you know, 62% of our deals in 2025—62% were at 4% or better. I have not heard that stat from anybody else anywhere near that. So I think, you know, yes, we continue to push that. It reflects the growing quality of the portfolio as well and the mixture of the portfolio that we are working towards. So I think, Wes, that is absolutely in our sights. And we will continue to get there. And then if you look at the others that are at two or better, I would tell you they trade at a significant multiple premium than we do. So that is part of this as well is that eventually as we pivot this portfolio into this direction, people will recognize that.

Thanks for the time.

Thank you.

Thank you. And I am currently showing no further questions at this time. I would now like to hand the call back over to John Kite for closing remarks.

Well, great. Really appreciate the time spent today and the great questions.

And we will probably be seeing a lot of you in the next couple of—