00:04 Thank you for standing by, and welcome to Kite Realty Group Trust Fourth Quarter Earnings Conference Call. At this time, all participants are a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instruction] Please be advised that today’s conference maybe recorded. [Operator Instruction]. 00:30 I would now like to hand the conference over to host, Senior Vice President Corporate Marketing and Communication, Bryan McCarthy. Please go ahead.

00:39 Thank you, and good morning, everyone. Welcome to Kite Realty Group'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 company’s results, please see our SEC filings, including our most recent 10-K. 01:06 Today’s remarks also include certain non-GAAP financial measures. Please refer to yesterday’s earnings press release available on our website for reconciliation of these non-GAAP performance measures to our GAAP financial results. 01:21 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, Jason Colton. 01:47 I will now turn the call over to John.

01:50 Thanks, Brian. And thank you everyone for joining us today. While we've certainly been looking forward to this call today for quite some time, today is our first opportunity to truly quantify and articulate the benefits of our highly accretive merger. We closed on the transaction in late October, and since then have been working tirelessly to complete the integration and implement KRG’s culture and operating philosophy across the combined organization. 02:21 The timing of the merger was impeccable and KRG was positioned perfectly to take advantage of the opportunity. It's now become clear that the merger is even better than we anticipated. 02:34 Today, I'm going to speak about 3 horizons of opportunity for KRG. Those opportunities that are immediately in front of us, those that will cultivate over the next 19 to 24 months, and those that will materialize over the long term. The most immediate benefit of the merger, of course, is the significant earnings accretion. As set forth in our press release, we are providing 2022 full year FFO as adjusted guidance of $1.69 to $1.75. Heath will give additional color as to the underlying assumptions. 03:13 As mentioned in our press release the midpoint of our guidance represents a 33% increase over KRG’s full year 2020 FFO per share. While we've only own the legacy RPAI assets since October 22nd, we quickly jumped head first into attacking operational efficiencies with an intense focus, as always, on our leasing efforts. 03:42 Against the backdrop of strong demand from a deep and diverse set of retailers, KRG is experiencing significant leasing momentum across all of our open air product types. In fact, we're noticing that national retailers are now looking more intently for space across the open air spectrum which dovetails nicely with our high quality…

11:17 Thanks, John, and good morning, everyone. I want to echo John's excitement and confidence in the past that lies ahead. The opportunity in front of us is absolutely energizing. On the integration front, our substantial efforts to date have enabled the combined organization to operate at a high level and truly embraced our internal model of one team one focus. 11:39 Before I discuss KRG’s fourth quarter results, please keep in mind that they're are a bit clunky by virtue of the fact that we closed the merger in October 22nd. All the results are from the combined portfolios, we only have 2 months and 9 days of contributions from the legacy RPAI assets. 11:57 For the fourth quarter, KRG generated $0.43 per share FFO per share as compared to NAREIT, our as adjusted FFO results add back in the $76 million of merger related costs and deduct the $400,000 dollars of net prior period activity. For the full year, KRG generated $1.50 of FFO per share as compared to NAREIT our as adjusted FFO adds back in the $87 million of merger related costs and deduct the $3.7 million of prior period activities. 12:30 Our same property growth for the fourth quarter and full year is 7.2% and 6.1%, respectively. These results are primarily driven by a reduction in bad debt as compared to the prior year periods. Absent the net contribution from prior period activities, the fourth quarter and the full-year same property NOI growth is 6.8% and 4.3%, respectively. These metric -- these metrics and a host of others are set forth on the new summary page in our revised supplemental. We hope you like the changes. 13:01 Our balance sheet and liquidity profile not only remains solid, but continued to improve. Our net debt to…

16:14 [Operator Instructions] Our first question comes from the line of Floris Van Dijkum of Compass Point. Your line is open.

16:32 Thanks guys for taking my question. Heath, I just wanted to delve into this $0.06 below market lease adjustments a bit more. How should the market think about that? Is that just -- is that a one off event? Is that just mean that you guys bought these things, the RPAI asset cheaply? Or how should investors think about that adjustment in your view?

17:02 I think you should really look at the upside here. Right? We're getting a positive mark based on the below market rents from the leases and we're getting a positive mark based on the above market debt. That means that we've got embedded growth pursuant to an independent third party that looked at our leases and that we should be able to borrow money at rates that are tighter than the debt that we assume. So I think, yes, it's $0.06, but I think ultimately at the end of the day these are two very, very positive things that show you -- again, it's one of the positive benefits of the merger. We got a great portfolio with great upside.

17:36 Great. Maybe if I just follow-up. And maybe John, if I can get your views on this as well. Obviously, we estimated the yield that -- at the time of the transaction was 6.8%, your stock prices fall a little bit, so close to the time of the completion it was probably risen almost 100 basis points to 7.8%, cap rates have clearly come down in the market. What would you estimate this portfolio would trade at in today's markets in light of the [indiscernible] portfolio transaction rumor deals and some of the other things? And maybe if you can comment a little bit on your own implied cap rates, which presumably will go up as a result of this transaction, the fact that you're riding these leases to market means your NOI goes up below your AFFOs little bit lower. Clearly, that has an impact on your share pricing and your value. If you could -- John, if you could maybe comment a little bit on the evolution of cap rates, and particularly when it relates to KRG?

18:52 Hi, Floris. I'm going to unpack that question. It's a heavy suitcase you just laid out there. But look, bottom line, first of all, it's great to be on the call. It's great to get the opportunity to finally be able to really show people how great of a transaction this really was. And we've been doing this for really long time. And it's one of the best transactions I've ever seen. So that's pretty simple. 19:21 In terms of your question about cap rates and cap rate compression between when we first started working on this deal and now. You got to remember that that's almost a year when we first engaged in conversations in April of last year, cap rates have easily compressed 100 basis points to 200 basis points across the spectrum. If we were doing this deal today, that would just be a whole different ball game. I think the cap rate would obviously be significantly lower, that goes without question. 19:56 You mentioned, you've been on top of a lot of these trades. I mean, everything we're looking at, everything that's happening in the market with the wall of capital that is really pressing in the retail right now across the board. I mean multiple, multiple transactions are trading in the force, it's pretty hard to get something that you like that's north of 5. Even just thinking about buying something out 5 used to be okay. I could buy anything I wanted, you can't. So the reality is, we've met what we said when we said our timing was impeccable, but it wasn't by accident. 20:38 We said, when you go back to the beginning of COVID, I believe it is the first quarter call during -- that we had during the COVID,…

22:04 Thanks, John. I will -- maybe if I can talk about the -- I know that you -- obviously you laid out your guidance for 2022, but it appears that -- that's based on relatively muted NOI growth? Or are you steeling a page of David Simon’s book and coming out with numbers that you think you could surpass later on this year?

22:37 Well, I try not to steal from David. I make a habit of not doing that. But I would say, I feel like our guidance that we put out is conservative. I think it's appropriately conservative in the beginning of a year. Although we're feeling pretty robust right now about our views and COVID still exists, so we have the reason that you used the 1.5% bad debt kind of number is -- that's smart to do in the beginning of the year. Historically, pre-COVID that number would range between 75 bps and 1, so we believe that's conservative, but reasonable, because we never know what's around the quarter right now in the beginning of the year. So, yes, when I look at the guidance that we laid out and how he laid it out on the call, I look at the levers that we have as a large organization, I would be disappointed if we weren't at the top end or better.

23:35 Hi Floris, I'll just add. When you said muted 2% NOI growth, two things. Number one, our signed but not open NOI, it comes on as John said in the back half of the year. So we are really setting up tremendously well for 2023. So -- and also again, when you are thinking about our same store guidance, you got to think about it in terms of the bad debt assumption, right? That's 1.5% in a normal year, prior to pre COVID we are running 15 to 100. So, again, we added in what we thought was an appropriate amount. Again, COVID has not gone, so we feel like this is a pretty conservative guidance and we aim to outperform it

24:17 Thanks guys.

24:18 Thank you.

24:20 Thank you. Our next question comes from Todd Thomas of KeyBanc Capital Markets. Your line is open.

24:28 Hi, thanks. John, you commented in your prepared remarks that it's clear that the RPAI merger is better than expected. Can you just talk a little bit about what specifically has trended better than expected? How the RPAI portfolio is tracking versus plan? And maybe put some context around that comment and some detail around either occupancy gains or leasing activity? Or whether it's sort of -- some of the added benefits you mentioned around discussions with retailers, vendors, etcetera?

25:05 I think it's all the above, Todd. I mean, let's start with NOIs higher than we thought it was going to be. So that's a good place to be. So revenue is higher, expenses are where we kind of thought they would be, which creates a better NOI picture. And again, I think we've been reasonably conservative as we pointed out already. 25:26 When you look at the fourth quarter and you look at our leasing spreads, sector leading spreads at basically 13%. That's the combined company from October 22nd on. I think there was people -- there may have been some concern around that particular topic that we have shown was an unnecessary concern. Quality of the assets, we talked about that early on, but you look at the metrics that the combined company has compared to the top 5 peers. And it's another way to triangulate why we should be trading at a much higher price than we are right now. 26:09 So, I think the metrics, Todd, in terms of -- you look at demographics, you look at SuperZip’s, you look at ABR, you just look at the quality that is -- you can kind of discern from a metric, it's all there. The leasing activity as we mentioned when you look at the combined leasing activity, if you would have had both companies for the years, a tremendous number, over 2.5 million square feet. And just everything that we're looking at is better than we originally underwrote. I don't know how else to say that.

26:46 Yeah. The only one I would add, Todd, is the active development pipeline. I think when we got into this, we obviously didn't understand what all was contained and how it would be dealt with. But this active development pipeline is very manageable. When you go through each one of these properties and you look at $105 million that is yet to be spent, we have our arms around it already. We understand the execution. So we feel comfortable there and look forward to the up side of that component as well.

27:24 Okay. That's helpful. And then, Kite, you had focused previously on increasing exposure to leases with Fixed CAM over the years that help drive your NOI margins higher. Expense recoveries -- the expense recovery ratios came in a little bit with the integration of the RPAI portfolio this quarter. Are there plans to roll out Fixed CAM across the RPAI portfolio? And are there opportunities you see relative to the roughly 72% NOI margin today to get back to a higher level? And how much upside do you think there could be over time? And what's the timeframe to do that?

28:09 Yeah. First of all, there is no RPAI portfolio, it's just one portfolio, right, that we've talked about. One team, one focus, it means a lot to us. But yes, obviously, bringing in the new properties, none of them had -- were on Fixed CAM. So when you look at the combination, obviously, it's going to reduce our exposure to Fixed CAM. It takes time, Todd. It took five years probably for that Fixed CAM initiative to really get to the point where it was north of 50% of our portfolio and began to really pay benefits, we will do the same thing here. And we are doing the same thing as of this -- every real estate committee meeting that we have right now. 28:53 There was obviously deals that were in progress pre-closing that were done, that would be not Fixed CAM, but outside that, it would be an aberration to not have Fixed CAM. And I would say that, when you look at our margins and our recovery ratios, we were just way above the peer set. I mean we're still now even in the combined numbers at the top end of the peer set, but we'll drive that home. I mean, that's one of the things that we talked about that we do. That's a grind. We grind that out. We push hard to get that done. So it’ll take some time, but we definitely feel good about the ability to improve that over the next few years.

29:33 And Todd, I’ll just put some numbers around that. Every 25 basis point improvement in NOI margin is one share of FFO. So, again, as John said, as we see what happened to our margins, we view this as a long term opportunity.

29:46 Okay. And Heath, just for you on the balance sheet. The mortgage debt maturing through the balance of 2022, I guess, really looks like April of 2023, should we assume like my own that they're mostly repaid at maturity with cash on hand? Or are you looking to refinance any of those?

30:07 Yeah. Todd, as you remember, we did that exchange deal last year with the goal of paying off the 2022 mortgages. And the reason why we didn't pay them off right away was because the open par period is 90 days before the maturity date. So we're actually giving a yield maintenance savings by paying them off 90 days ahead. So when you're modeling the payoff of the 2022 mortgages, just assume we're paying them all off at par 90 days ahead of their maturity.

30:32 Okay, got it. And that's cash on hand and the $125 million in the short term deposits.

30:39 Correct, correct.

30:40 Okay. Got it. All right. Thank you.

30:44 Thank you.

30:46 Thank you. Our next question comes from Alexander Goldfarb of Piper Sandler. Your question, please.

30:53 Hey. Good morning out there. So just a question going back to sort of the guidance, and you referenced the $0.06 from accounting benefit. How much has market rent growth impacted the number? So when you look back sort of 6 months ago when you are canceling the deal versus now, how much benefit is from the overall market growing? I mean, obviously it's a good thing, right? But just sort of curious for how much change has happened subsequent to you underwriting this deal, both in actual market rent growth versus also what you found as you went through the RPAI and we're busy combining it with legacy KRF.

31:41 Yes, Alex. I mean, I do think that's a factor in the sense that -- I mean, just look at our spreads, right? You look at a 13% blended spread in Q4, which is the combined company, that would tell you right there that as you have said previously that people underestimated lack of supply, right? We're talking about the demand equation, but we forget about equilibrium and how that plays a factor in all of economics. 32:11 And so the supply side was low, so we're able to most often drive pretty strong rents. And that's the other reason that we pointed to over 10% spreads on a cash basis in our non-option renewals. Right? And as you know, the non-option renewals are the opportunity for a tenant to say, look, I can just walk away from this lease, I don't have an option and the flip side is true for us. We can just say walk away. And in that case, we've gotten a 10% cash spread plus with almost no TI associated with that. So that's huge margin. 32:52 So, I think it's just a -- it's a play out of what the big picture looks like right now, which is that, we're in the right business at the right time.

33:01 But, John, can you give some sort of perspective on how much market rent has grown in the past six months?

33:09 Yes, I mean, beyond the spreads, Alex, it's hard for me to -- I can tell you the spreads, you can see them, you can see that the leases we signed in terms of new leases in Q4 were over $25 a square foot. So I mean, look, I can't give you more than that outside of our own portfolio, because I'm not sure what people are doing outside of our portfolio. But if we can – I mean, look, if we're growing rents on a cash basis north of 10% like we have been for a while, it’s pretty damn environment Alex.

33:46 And outside of other indicator, I'd say another indicator where the market rents are going is, I can't remember being on real estate committee and having more deals where we had multiple options for a space. So when you're in a situation, obviously, you can pick the player and you can drive rents. It's something we haven't seen for a very long time.

34:04 And again, to the beginning of your question, that's why there was a positive mark to market on RPAI rents, right? And again, I think when we announced the deal, not sure people would have guessed that one.

34:18 Then it leads to the follow-up, which is on the supply side. Obviously, in the -- basically since probably ‘04 we haven't really had any new supply and the stuff before that was driven either by roof tops or massive retailer rollouts. Do you see anything in the inkling that would either for board supply or even if the rent pencil to make supply work or where we stand now, there's not enough retailer demand, in addition, there's not enough of a spread between construction cost and what the rents would have to be to even contemplate supply in a meaningful way?

34:58 I mean, look, I think all those factors are part of what's kept new supply in a reasonable place. You also have to remember, you talked about ‘04, but I would say, Alex, when you went from ’04 -- probably ‘01 to ’08 -- ‘01 to ’07, six years of a lot of construction and a lot of stuff that shouldn't have been built in the first place. It takes a long time for that to go away and that's what has been playing out. This isn't an obviously a very long time. 35:32 But you also have a lot of people that were in that merchant building kind of retail business that are just gone. And so people like us that have been doing this for a really long time, we expect to get high returns for this stuff, as Tom said in what we underwrote. So I think the dynamics are there that would keep a lid on this for a while. It doesn't mean that at some point, someone who's whatever, 28 years old doesn't know what to hell I'm talking about and build [indiscernible]. I mean it happens, but it's very limited. No offense to the 28 year old. I didn’t mean that way. I mean [Multiple Speakers]

36:14 You got to think outside the box and if you look at -- if you look at a handful of our properties, we are out getting tax [indiscernible] financing and lowering basis and properties and being creative working with municipalities to get the returns that we had. So, we know whatever we're going to do, we're going to have to look outside the box, be creative to make things work.

36:38 That's a good point. And John, to your point, we were all 28 at the time. So the experience [indiscernible]. Thank you.

36:51 Thank you.

36:53 Thank you. Our next question comes from Katy McConnell of Citi. Please go ahead.

37:00 Thanks. Good morning, everyone. I just wanted to follow-up on some of the non-core drivers within your guidance to better understand where you are coming in relative to expectations. So just wondering if you can comment on what you're assuming for total straight-line rent and size in 2022? And then on G&A, should we look to 4Q as a good run rate? Or are you expecting further synergies from the merger to benefit 1Q?

37:25 Yeah. So on straight-line, if you look at what we have in our 2022 model and you deduct RPAI’s run rate straight-line and KRG’s run rates straight-line prior to the merger, the difference is around $0.02 positive. However, that upside is split between the merger accounting that you just discussed and also new leases coming online. So again, $0.02 split between those two items. And then – sorry, what was the second part of your question, Katy? Well, on G&A [Multiple Speakers] 37:55 Yeah. Is the fourth quarter a good run rate on the G&A? Listen, there's a lot of noise in the fourth quarter in the G&A there's temporary employees, etcetera, there's merger related expenses. So, I would say that's not a good run rate. I will tell you that the G&A savings that we articulated on the last call, those are still intact and the timing of those are still intact. I think going across the year, I think on a quarterly basis you'll see G&A, and again, this is going to be elevated by merger cost, etcetera. You are going to see G&A somewhere around $12 million to $13 million a quarter -- million a quarter.

38:32 Okay. Thanks. And then, now that you've broken out the office lease expiration separately, can you just speak to the 22% of ABR that expires this year? And how much of that space you could potentially get back? And just what the leasing environment looks like today?

38:47 Yes. We did have an outsized number in terms of percentage of ABR that would be expiring or coming due. I’ll say, they really come through two specific properties. One is [indiscernible] and one is [indiscernible] . And in terms of working with the team, we are going to be in a position at real estate committee next week to handle about 150,000 square feet of that, which is very positive. And then at [indiscernible] , we're continuing to work on it. So, we do not have any great concern even though there's no question that 22% range was the high number in terms of rolling leases. So we have our arms around it. We're leased up in our office components, not including active developments of close to 93%. So it's a big charge for us as we push forward and we're going to be paying a lot of attention to the office portfolio.

39:51 Only thing I would add to that Katy is, when you look at -- when you look at it in totality against our total NOI, it’s still a pretty small number. So, I mean I guess it's cleaner to have it broken out like that, but it's not a number that is particularly scary at all.

40:08 Makes sense. Okay. Thanks everyone.

40:10 Thank you.

40:13 Thank you. Our next question comes from Anthony Powell of Barclays. Your question please.

40:20 Hi, good morning. I think John, you mentioned that you're seeing increased retail interest across the open air spectrum. Maybe you could go into some more detail on that point? What are you seeing in the grocery-anchored, mix use power centers and what not?

40:33 Yes. Thank you. I mean, I think what we're seeing is that, you're seeing the retailers, obviously, they're doing well. So the backdrop of a lot of this is, they're doing well, they've come out of COVID with just a vigor and an excitement about the business. They've figured out their business from a margin perspective, they know that they are -- that the physical retail environment is the profitable outlet for them so they're trying to push as much of that into the stores as they can. And what I meant by that was, if you look at a tenant like like a LULU Lemon or you look at a tenant like Sephora or you look at a tenant like West Elm, you might think those are tenants that would be lifestyle type tenants only or maybe they would go and mixed use, but we're doing deals with those guys right now in grocery-anchored centers and community centers and power centers. A lot of the brands -- I mean, you look at Adidas, you look -- I mean, we could go on and on with the brands that are doing that. 41:36 But the great thing for us is that, we're well represented across these kind of 5 food groups and community centers and neighborhood centers, mixed use, power and lifestyle. That said, Anthony, we're still predominantly community and neighborhood, right? I mean, that's like almost 60% of our revenue is community and neighborhood. So the other stuff supplements it, which gets us in front of people, and then they realize, dam, I want to look at this whole portfolio. Right? I want an opportunity to sit down with KRG and look at the whole thing. So that's what I meant by that. And it's just great for our team right now.

42:18 Got it. Thanks. Maybe on a bad debt, the 1.5% for this year. Is that what we're actually seeing here in mid-February? Is that kind of what the actual number of kind of delinquent tenants in the portfolio right now?

42:29 No, I would tell you for the course of 2021, it was 1.5%. However, that was front weighted and then as the year improved into the fourth quarter, it was more like 75% to 100%. So that was not a run rate most recently, but again, we thought it was a conservative number. And again, we're not -- we don't have any reason to believe that we're going to suffer that kind of credit loss. Our watch list right now is small then it’s ever been. You saw a tremendous amount of wash out of the weaker tenants during COVID. 42:59 But as John mentioned, we're not out of this thing yet, right? So we put in a number that that we felt comfortable with and that we fully intend to, should the world not take a drastic term to outperform.

43:11 Got it. So assuming there's no, I guess, major COVID setbacks, it’s safe assume even though your guidance is 1.5%, you should probably exit the year closer to that normal range? Is that fair?

43:21 Yes, I mean, I would say we're entering the year feeling like that will be there. I think we guided to something at the midpoint that was conservative, because last summer we also felt the same way and things changed a little bit. I highly doubt we'll go down that path that we did last summer where it got worse after the fact, but that's why when you sit down at the beginning of the year and you're going through all your numbers, you do something like that, Anthony. But now we're entering in the year well below the 1.5%.

43:55 All right. Thank you.

43:57 Thank you.

44:00 Thank you. Our next question comes from Wes Golladay of Baird. Your line is open.

44:06 Hi, everyone. Can you talk about your expectations for leasing this year? Can you achieve the $5 million volume again? Are you going to pivot more to small shop? And then lastly, can you talk about what you've seen on the tenant short environment?

44:19 Well, let me start with that. And then Tom can get into it too. Look, when you look at 2022 Wes, when you look at 2022 and you look at 2023, that's what we are talking about. We still -- 2023 actually looks good as well. So I think entering the year, we still had this disproportional impact from the original [indiscernible] fallout in the boxes that we had. And so that's why our spread between leased and occupied is pretty significant, which is frankly just a lot of upside. 44:54 So we like to pick up, we don't guide to specific percentages on leasing, because of all the inputs and ebbs and flows. But I would say within the next 24 months we would anticipate that we'll be back very close to where we were on a lease percentage, which will put our FFO per share well above where we are today. So, I think it's really going in the right direction. Tom, you want to –

45:22 I'll talk about the boxes just real quickly, because they are obviously huge drivers of lease percentage. If you take a look at what we have accomplished in the last year, we executed 27 deals, 27 boxes with a spread of 12%, but more importantly, return on capital is 29%. The remaining 36 boxes that we have actually have a lower ABR at about 11.85%. So once again, we feel like there's great spread potential there. But more importantly, our pipeline to that 36%, we're planning on putting a significant dent in that number. 46:05 So, we're looking for a big year of leasing without question. We've got this new combined team and everyone's going to drive to the finish line. I can assure you that.

46:14 Hey, Wes. I'll add a little more thing. If you look at where our lease rate was at the end of 2019 and where it is at the end of 2021. We have one of the highest spreads, we have -- there's another 270 basis points of opportunity just to get us back to where we were in 2019. So in addition to my customers where I said, hey, listen our FFO per share is already 50% over where it was pre pandemic, we also have the largest upside in terms of leasing left in front of us.

46:43 Got it. And then I want to go back to that market commentary or questions. I guess was the original expectation for the RPAI portfolio to have a, I guess a -- maybe an above market rent when you acquired the assets and then just based on the S4, it look like there's going to be a headwind to earnings this year on the pro form and then it looks like maybe market rent got stronger or you've got a better handle on the assets you saw more upside in them. Is that what was going on?

47:10 No, I'm wouldn't say that we initially took a position that we thought that there was any above market rent. Maybe we just kind of assumed it would be neutral. But as we got into it, we looked at -- obviously, again, we got third party involved and we looked at it more deep, more granular and that's when you come up with the fact that you've got some positive rent march. But in terms of the S4, I'm guessing there were straight line rent involved in some of that as well. 47:46 And -- but bottom line is, as I said, Wes, when I was kind of given my overall comment to why we did this deal. We knew there was upside, right? We knew we had upside from a leasing perspective, from an operational perspective, from a people perspective, real estate, it's why I said what I said at the end. I mean, we saw this opportunity and again remember, it's pretty easy to look back right now and go, oh, well. Cheese, that was easy. That was a good deal. Well guess what, it was a little different last April when we first started talking about this, and we had positioned the company to be one of the few that could even do it, right? 48:30 So, I think people are going to look at their lens and kind of think back to what it was like and then maybe give us little credit or a little foresight on a hell of a deal.

48:39 Yeah. You definitely got the cap rate compression tailwind instance. So congratulations.

48:44 Yeah. Thank you.

48:49 Thank you. Our next question comes from Linda Tsai of Jefferies. Your line is open.

48:55 Hi. Good morning. On the same store guidance of 2%, the range of 1 to 3, what's the balance of revenue growth versus expense growth?

49:05 The balance of revenue growth, the data drivers, as I said in my comments were basically occupancy and rent bumps. So in terms of the expense growth, I think that's, again, where we're going to be trying to improve our margins over time, but I don't think you're going to see a huge pickup immediately over the course of the year. It's going to be heavily weighted toward the revenues.

49:26 And then, Linda, the other thing to remember there is, obviously, that includes the 1.5% bad debt. So that's your range really in the sense that if we were trending to more what we have been historically, it's probably closer to the 3% than it is the 2%.

49:44 Got it. And then why did economic occupancy decline 30 bps?

49:49 Yes. That was in the same store pool. So again, that's only the historical KRG portfolio, because we didn't have the RPAI portfolio in that. And honestly, that 30 basis points was one deal. It was the Burlington that has vacated at one of our assets, and listen that's one of the things of having very small denominator which we don't have anymore. Is that -- one deal can do some violence to your numbers. But you also saw that the least rate was up 30%. So, I think that's the number that we care more about. So -- and also that Burlington -- I'm sorry, it was office [indiscernible] that left, it’s now being backed over with the Burlington. So it's one anchor deal of 30,000 square feet moved the needle that much.

50:29 That's the right trade.

50:31 Yeah. We'll take that one.

50:35 And then just on the new cash spreads being so strong. Can you just talk about what's driving that? And to the extent that's repeatable?

50:43 Yes, I mean, look, Linda like we talked about, really it's just everything, it's the real estate, it's the environment, it's the fact that we're still backfilling old stein marks. It’s a chunk of that that we talked about last year, we had more exposure than anybody else to that particular tenant, but the positive of that was, that particular tenant paid single digit rents. So that's a factor. I mean, look, as I said, we're sector leading at 13% blended spreads, will that moderate over time when we fill up those boxes? I'm sure it comes down a little bit. But the reality is, as long as we're generating near or above these double digit spreads, we're in a very healthy environment with limited supply. So, I feel about -- I feel pretty good about our chances of being able to outperform.

51:40 Thanks.

51:42 Thank you.

51:44 [Operator Instructions] Our next question comes from Chris Lucas of Capital One. Please go ahead.

52:00 Hey, good morning everybody. Just kind of going back to the tenant retention question that was asked earlier. I guess, just kind of curious as to maybe how that would -- how you're seeing that this year compared to sort of pre COVID levels? And then sort of as an add on to that, are you seeing anchors come to you at a rate that is higher than we saw previously for early exercise of renewals?

52:25 Hey, Chris. Yes, I mean, I think where -- the retention is kind of back to where it was pre COVID in the sense that we’re a little over 80%, probably 83%. I don't have in front of me, a little over 80% on retention. And that's kind of where we like to be. I mean, remember some of this -- some of the retention that -- some of the loss is by our choice, right? In terms of rollover overs that we don't -- that if someone has a non-option renewal, we may not renew them, right? So little over 80% is a good place to be and it's where we were historically. 53:02 In terms of early renewals, yes, I mean, we definitely have those conversations. And again, with our more meaningful portfolio that we have today, more impactful to the retailer, I think that puts us in a position where we're going to hear a lot more from them on the front end.

53:27 A lot of that will just relate to where they sit in the market currently. We feel like we have a strong market rent and they want to come in and work with us on a 10 year deal versus a 5. We're always willing to listen to that, but it's going to come down to basic economics.

53:45 Okay, Thank you, guys. And then Heath, just on the same store guidance. You had mentioned I think in your prepared comments that, obviously, you guys had a different approach to bad debt and RPAI. How does that factor or is it all into your same store guidance? And if it doesn't, sort of where should we be thinking about that number coming in from prior periods for [indiscernible].

54:12 Yes. So in terms of prior period stuff and 2022, Chris, we don't have a lot. We have about $18 million dollars, I’d call that the good news bucket, about $7 million of that is the tenants that vacated. So those are just in various levels of collections and another $11 million are from tenants that haven't vacated. So, there may be some good news from prior periods, but we didn't have any of that in our guidance. 54:36 And in terms of how I'm thinking about the same store and the bad debt assumption. Like John said, if you were to go head back to historical bad debt run rate of 75 basis points to 100 basis points, that 2% number is really a 3% number. So again, it's a factor of really the conservatism and our assumption this year. So -- and also again, as I mentioned before, it's a factor of the $33 million coming online. It's very weighted to the back half of 2022. I think a lot of our peers are actually having that spread happening in the first half. Again, this is all setting us up so very nicely for 2023.

55:11 Okay. Thank you guys.

55:13 Thank you, buddy.

55:17 Thank you. Our next question comes from Craig Schmidt of Bank of America. Please go ahead.

55:23 Thank you. Regarding leasing volumes, do you anticipate that Kite can maintain above average leasing volumes in 2022? And where do you think that total leasing volume might come out at?

55:40 Well, again, Craig, we're not guiding to the specific leasing volumes, but I do -- obviously, we do think that it's going to continue not just in 2022, but in 2023 as Heath pointed out a second ago, with deals that we're working on in terms of -- as we pointed out in our investor presentation, we've got the development pipeline that's leasing up that Tom talked about and then getting back to where we were pre COVID. I think the pipeline is definitely going to remain strong. I think our spreads will remain strong. So leasing volume is a reflection of the quality and the quantity of deals that are out there right now. So, yes, I think it will continue.

56:25 And the only other thing I'll add, Craig, is you have two teams now that have been put together, and there's a lot of energy behind these groups. And we set them up to be successful. So, we're already seeing the benefits of that. And this new focus tying in the Kite culture, we are expecting big things as we keep pushing forward.

56:46 The only thing I'd add to that, Craig is, I wouldn't really focus on quarterly volumes, it happens over a year. I know people write about our quarterly leasing number. It's just kind of a meaningless number amongst what we're really doing. This plays out over longer time.

57:05 Is this just a change in approach from the retailers that they want more bricks and mortar locations? I mean to have such an elevated period of leasing, at least in your mind, for 3 years, it would seem that you need to have a fee change in terms of your approach to the business?

57:28 Look, I think it's what we all talk about and what all the companies have been talking about for a little while now, which is that, there's one profitable way to sell retail product is in a physical store. The other stuff is market. It just doesn't make money. Now I will say buy online pickup and store change the game. And curbside pickup change the game. You see all of our big retailers for the most part are involved in that spectrum, and they know that they want to drive people to the store because the margins are much higher than if they ship it from a warehouse to [indiscernible], which in today's world is very expensive to do. So, I think it's a realization and it's a rebirth of the market. And again, open air retail has really been a huge beneficiary of those changes. 58:26 And then again, going back to why we did the deal that we did, right? We did the deal that we did because we knew that was happening, we knew this was awesome real estate, and we knew there was a lot of upside. And now we just laid that out today for everyone to see. And we're just getting started with that.

58:46 Great. And then what do you think your estimated annual redevelopment spend will be? I think you have $105 million in current active, but what is maybe an annual target?

58:59 Yes, we're not really putting out those annual targets. It's really more -- that's really more internal discipline. If we put out targets, people chase them. So we don't want to do deals just because we put out a target. We do deals because we get high adjusted risk adjusted returns. Tom was talking about the $105 million, that's actually -- that's the active development pipeline that includes a little bit of redevelopment, a little bit of new development, $100 million of spend for company with a balance sheet that’s almost $8 billion. I mean, it's pretty small. 59:36 So we will be opportunistic there, Craig. We're going to find opportunistic deals that throw off the returns that experienced players like us need to justify doing a deal versus allocating capital somewhere else. So, we'll do it, we mentioned that we had that $105 million. We also mentioned that we have an embedded land bank and it's truly that, a bank we might monetize that in one or two or three different forms. And that's why we laid out the examples that we put in our investor presentation of the different ways of doing development, which lower risk and increased terms vis-a-vis joint ventures, sales, 100% ownership, it just depends on the deal. And again, we've been doing this for a long time and have seen lots of cycles, have seen lots of things that go right and lots of things that go wrong. So I think we're the right stewards for that particular pipeline.

60:42 Great. Thank you.

60:45 Thank you.

60:46 Thank you. At this time, I'd like to turn the call back over to CEO, John Kite for closing remarks. Sir.

60:53 Okay. Thank you very much to everyone for joining today. I hope you can hear, if not, see our enthusiasm that we have going forward for the next several years for this great company. And we will see a lot of you in the next couple of weeks in person, really looking forward the opportunity to further discuss. Thanks and everybody have a great day.

61:19 This concludes today's conference call. Thank you for participating. You may now disconnect.