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Text: 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 10-K.
Today's remarks also include certain non-GAAP financial measures.
Spring's here and we're feeling particularly optimistic and it really doesn't have anything to do with the improving weather.
For the first time in over a year, the news regarding COVID is predominantly positive.
As we sit here today, over 50% of adults in the U.S. have at least one vaccine shot and at the current pace there is potential for 90% of adults in the U.S. to be vaccinated by summer.
We realize that the global progress against the pandemic is uneven, but I am very encouraged on what we're experiencing here on the home front, especially in our target markets.
Our tenants are open and operating, our collections continue to be sector leading, up to 97% this quarter and the velocity of demand for our well-located centers is accelerating.
We had another very strong quarter of leasing, signing over 426,000 square feet of space at blended lease spreads of 12.2% and 6.4% on a GAAP basis and cash basis respectively.
Excluding a single strategic anchor renewal, we realized blended leasing spreads of 16.7% and 10.5% on a GAAP and cash basis respectively.
As we mentioned on our last call, the strong leasing will cause the spread between our leased and occupied rates to widen.
Our current signed, not open NOI is approximately $10 million, which will come online in late 2021 and early 2022.
Another impressive aspect of the new leases is the quality of tenants we are signing.
This quarter our portfolio gained another Total Wine & More at Cool Creek Commons in Indianapolis and another Aldi at our newly acquired Eastgate Crossing Community Center in Chapel Hill.
The latter addition makes Eastgate Crossing a very unique dual grocery anchored center, with all of these joining the existing Trader Joe's.
As we told you last quarter, we've got great expectations for Eastgate Crossing and all of our assets in Raleigh.
Speaking of Raleigh, as I'm sure you've all heard earlier in the week, Apple announced the creation of a $1 billion East Coast campus in the Research Triangle Park located in the Raleigh, Durham MSA.
KRG will be a direct beneficiary of this announcement as we own Parkside Town Commons, a 350,000 square foot Target in Harris Teeter anchored center that is adjacent to the future campus.
Assuming an average salary of $187,000, the 3,000 new employees will generate over $550 million of annual spending power.
Not only is this great news for Parkside Town Commons, it reinforces the migration to warmer and cheaper markets such as Texas, Florida and North Carolina.
We're even seeing this play out in the reallocation of congressional representatives with those same three states adding seats.
With the announcement of the Weingarten/Kimco merger, KRG is now the most compelling way to directly invest in Sun Belt open-air retail real estate.
78% of our ABR is located in the South and West.
Our next closest peer has less than 50% of their ABR in those same markets.
We're proud that our strategy is paying dividends, and we continue to prudently look to expand our exposure to these markets.
As we discussed on our fourth quarter call, we partially match funded our Eastgate acquisition by selling 17 ground leases for a combined $41.8 million.
One outparcel is awaiting final subdivision approval and should close next quarter.
This trade demonstrates our commitment to maintaining our low leverage while at the same time acquiring accretive opportunities.
In terms of our portfolio lease rates, we believe we're at or near the low watermark.
On the anchor front, we've already executed four leases and are negotiating multiple leases on the remaining 23 vacant boxes.
Anchor acceleration is off to a very strong start.
As we discussed last quarter, assuming the current ABR for our in-place anchors, there is a potential mark to market of nearly 20%.
To increase transparency, we've added Page 22 in the sup so you can track our progress as we lease up boxes.
The four leases signed to date have achieved a 12% lease spread and over a 40% return on capital.
These metrics also provide confirmation.
The KRG remains focused on return on capital, not buying up lease spreads.
As we've said before and I'll say again, we're very focused on maximizing total return to our stakeholders.
We believe the market does not fully appreciate the potential upside in our NOI given the robust current leasing environment.
Please keep in mind the while KRG has some of the highest occupancy dislocation in our sector, our revenue decline was one of the lowest.
This means that low paying often dying tenants have finally left our centers.
Not only should this enable us to outperform when it comes to NOI growth, but it allows us to create value by upgrading tenancy, which often results in cap rate compression for the property.
As shown on Page 4, we have the potential to increase our NOI by roughly 14% simply by leasing up vacant space to pre-COVID levels at current portfolio ABR.
Please note we aren't saying that's a guaranteed outcome or providing any sort of forward guidance.
We're simply doing the math using information from our supplement to show investors what's possible.
The strength of our operations is impossible without them.
There are very good times ahead for KRG and I cannot wait to see what the future holds for us.
I want to echo John's enthusiasm for the momentum we are seeing in our industry especially as it relates to leasing.
I'm equally enthusiastic about some of the structural changes we see coming out of COVID.
Many retailers have a renewed appreciation for the value of brick and mortar locations, realizing the importance of these distribution channels as they reimagine their supply chains.
Another pleasant surprise we are experiencing as we emerge from the pandemic is a change in the national narrative.
Over the course of the decade, we have steadfastly maintained that the relentless reports regarding the depth of retail were greatly exaggerated.
Turning to our first quarter results, we generated $0.34 of NAREIT FFO and we also generated $0.34 of FFO as adjusted.
As a reminder, last quarter, we guided to 2021 FFO on an as-adjusted basis, so as to reduce the noise associated with 2020 receivables and 2020 bad debt.
By way of example, to the extent we are unable to collect any of the 2020 accounts receivable, it will become a bad debt expense in 2021, but it will be excluded from our FFO as adjusted.
The same holds true in the reverse.
As we continue to collect 2020 bad debt, we will recognize that as revenue, but it will also be excluded from our FFO as adjusted.
As set forth on Page 17 of our supplemental, the net 2020 collection impact in the first quarter was de minimis with the collection of $2.2 million of prior bad debt, offset by $1.9 million of accounts receivable we've now deemed to be on the collectables.
There are other several notable items on Page 17 of the supplemental that demonstrate our improving fundamentals on a sequential basis.
Total bad debt to this quarter was $1.6 million as compared to $2.6 million for the fourth quarter of 2020.
Our first quarter recurring revenue has ticked up compared to fourth quarter of 2020.
As for accounts receivable, we collected $5.8 million that was outstanding at year end, including deferred rents.
Today, total outstanding deferred rent stands at $3.5 million, down from $6.1 million at year end, with only $30,000 delinquent to date.
With respect to our small business loan program, the total balance is down to $1.4 million and not a single tenant is delinquent.
Needless to say, these are all encouraging signs regarding the health of our tenants.
Last quarter, we did not give same property NOI guidance as we don't feel like this is a meaningful metric in light of the pandemic impacted 2020 results.
Our same-store NOI growth this quarter is negative 2.9% as a result of COVID-related vacancies.
This includes the benefit of approximately $800,000 of previously written-off debt that we collected in the first quarter.
Excluding those amounts, our same-store NOI would be negative 4.5%.
At 160 basis point difference, it's just noise from 2020 and is precisely why we didn't provide guidance on this metric.
While we are committed to reporting this number, it is best taken with a grain of salt.
Our balance sheet and liquidity profile remains solid.
Our net debt to EBITDA, pro forma for the ground lease dispositions, was 6.6 times, down from 6.8 times last quarter.
During the first quarter, we issued $175 million of exchangeable notes due in 2027.
These notes have an interest coupon of 0.75%.
In conjunction with these notes offerings, we entered into a capped call transaction to increase the conversion price of the notes to $30.26.
The proceeds of this transaction will remain in the balance sheet to retire the 2022 mortgages as they become due next year.
Excluding future lease-up costs, we have only $15 million of outstanding capital commitments and have roughly $420 million of liquidity.
We are extremely pleased with the execution and the added flexibility this delivers to our balance sheet.
We are raising our 2021 guidance of FFO as adjusted to be between $1.26 and $1.34 per share.
This guidance assumes full year bad debt of approximately $7.6 million and no additional material transactional activity.
We are in the early stages of the recovery and while we have put some points on the board, we still have room to run.
We have an envious balance sheet, a best-in-class platform, a strong portfolio of assets and a market strategy that continues to pay dividends.

user
compname reports trust q1 ffo per share of $0.34.
q1 ffo per share $0.34.
raising 2021 guidance for ffo, as adjusted, to $1.26 to $1.34 per share.

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