Kite Realty Group Trust (KRG) Q4 2025 earnings call transcript

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 the company's results, please see our SEC filings, including our most recent Form 10-K. Today's remarks also include certain non-GAAP financial measures. Please refer to 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 are Chairman and Chief Executive Officer John Kite, President and Chief Operating Officer Tom McGowan, Executive Vice President and Chief Financial Officer Keith Feer, 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 Brian, 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. We leased nearly 5 million 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, We entered into two joint ventures with GIC, totaling approximately $1 billion of gross asset value. We sold approximately $622 million of non-core 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, lifestyle, and mixed-use assets. We allocated a portion of the proceeds of these sales to $300 million 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 5 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 lease 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, and included names like Whole Foods, Trader Joe's, Crate & Barrel, Nordstrom Rack, Sierra, HomeSense, Ulta, and Barnes & 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 co-tenancy 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 sign-not-open pipeline normalizes. The embedded rent bonds for the portfolio are 180 basis points, a nearly 25 basis point increase from the first quarter of 2024. By shedding lower growth assets and negotiating better annual bumps, we're well on our way to hitting our goal of 200 basis points of embedded escalators in the portfolio.

Turning to development, our activities at Warn Loudon, it's 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 multi-family 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 Our House, Williams-Sonoma, Pottery Barn, Tate, and Aloe 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've signed or opened names like Watches of Switzerland, Ralph Lauren, the Henry Buck Mason, 7th 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 million. 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 watch list 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's exactly what happened. In totality, we were a significant net seller in 2025. Based on where our stock is traded, we leaned into the capital allocution queues by selling larger format, lower growth assets into the private market at yields well inside of our implied cap rate. We redeployed the majority of the proceeds into $300 million 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 de-risking 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 non-core dispositions to further elevate the quality of our portfolio. Any such recycling would be pursued opportunistically, so long as it's 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'll now turn the call over to Heath to discuss the details of Q4 and 2026 guidance.

Thank you and good morning. Second, 2025 was an extremely productive year, and we're taking that same drive and conviction straight into 2026. As a team, we are focused on converting momentum into results by further optimizing and de-risking the portfolio, upgrading our operating platform, embracing technological change, and staying ahead of emerging trends.

Turning to our results, KRG earned $0.52 of NARIT FFO per share and $0.51 of core FFO per share in the fourth quarter. For the full year, CARIG earned $2.10 of NAIRED FFO per share and $2.06 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 115 basis points above our original guidance, and over the past four years, our same property NOI growth has averaged 4%. When accounting for our disposition activity in the fourth quarter, our sign-out open pipeline grew $4 million sequentially to $37 million of NOI, and the gap between lease and occupied space widened to 340 basis points.

During the quarter, we executed 61 new leases that added approximately $14 million of NOI, which more than offset the 61 tenant openings represented approximately $10 million of NOI. Importantly, about 70% of that sign-out open NOI is expected to come online in 2026. For 2026, we are establishing our NAIREIT and core FFO for shared 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 million. The midpoint of our guidance also assumes approximately $110 million of 1031 acquisitions in the first half of the year, offset by approximately $115 million of non-core asset sales later in 2026.

I encourage all of you to review page 5 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, and we anticipate lower growth in the first half, followed by acceleration in the back half of the year and into 2027. The cadence is primarily due to bankruptcy rents we collected in the first two quarters of 2025 and the impact of our signed non-open pipeline in the second half of 2026. Interest expense will be roughly 3 cent 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 Lundlouden.

Our recurring but unpredictable items are serving as a 4 cent headwind into 2026 guidance. Termination fees were a historical outlier in the first two quarters of 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 two-cent headwind into 2026. You will note that our NARIT 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 non-cash profile for the year.

We have consistently emphasized that the strength of our balance sheet provides us with tremendous flexibility in how we allocate capital. The recent dispositions and share repriechers activity are clear examples of that flexibility in action. Our balance sheet remains one of the strongest in the sectors with over billion in liquidity and a net debt of 4 times giving us the capacity to pursue opportunities that enhance shoulder value while maintaining our financial We will now turn the call over to management for the KITE REALTY GROUP TRUST earnings Operator, this concludes our prepared remarks.

Yeah, I mean, I think you can assume that it's similar to what we've done in 2025. And, you know, it obviously hasn't happened yet, so we're 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's a strong demand for that type of product. Great, thanks. And then on the 1031 acquisitions, just curious what type of product you're looking at today and how we should be thinking about the buy docs on different types of assets you're looking in the market? Yeah, I think, again, in general, in terms of what we're looking to execute 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 end of 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's not simply just about product type. There's a little bit of that going on as well. But in general, the theme is that we want to continue to move the portfolio in a direction that will grow our embedded rent growth.

And as you know, growing it by 25 basis points in a year up to almost 1.8%, we're closing in on this goal of 2% embedded rent growth. That's just a significant driver for us in the future. So it's kind of a combination of all those things. Keith, you've got anything to add?

Yeah, I would just add, Cooper, that the acquisitions and the business decisions are really accomplishing the same thing. So the 1031 acquisitions are really just shielding gains from last year, and the $115 million of assets, they have embedded losses. Again, achieving the same thing, which is managing through our taxes, and also at the same time de-risking the portfolio and improving the overall quality. So, different sides of the same coin, so to speak.

Thanks.

I'm sorry, I'll answer your question.

So, I'll answer the first question, which is what's going to put you to the high and low and the year range. So, listen, on the same-store side, it's the typical suspects. It's low or 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 year range.

And then below same-store, as we talked about, there's recurring and unpredictable items, you know, current fees, land sales, fee income, et cetera. As we mentioned, that's a force that dragged this year, but we 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.

You know, that's, again, the deployment of those sale proceeds, when we're going to get those 1031 acquisitions done, When do we sell the other $115 million? And finally, as John mentioned on the call, are we doing the second pot of dispositions? Again, that's 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 are once we're at a comfortable state of moving forward, getting drawings started, doing everything we can from a permitting standpoint, or 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're in the midst of really tackling those right now.

Yeah, just to put context, we had around $21.5 million of recurring but unpredictables last year, and we're just under $13 million this year, and it's spread across typical suspects, term fees, land sale gains, and development fees. So again, that's 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're 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 runner rate. So if you look at between 23, 24, and 25, it's running around $13 million a year, so that's kind of a midpoint, I think.

So we'll see. Again, it's a lot of time in front of us. Thank you. Thank you.

Yeah, so great question, Todd. So on the $115 million we're selling, all of it's in process. As you know, we were forced to remarket City Center as we were cleaning up some tenant issues. So that was still actively in the process. And on the weighted average, transactional date for that group of assets is August, so it's going to be later in the year. Then in terms of how we're applying the proceeds, if you looked at our balance sheet, Todd, you'll see that we had $440 million in restricted cash. That was all sitting in 1031 escrows, but that's obviously not all earmarked for 1031s. So going through it, we've paid about $30 million for that special dividend at the beginning of the year.

We got another $50 million of stock back in January. We paid down $85 million on the line of credit, so now the line of credit is sitting at zero. It was $85 million at the end of the year. And then there's 1031 acquisitions, and then the balance of it's going to be a combination of debt reduction and share repurchases. So that's how we intend on deploying the full proceeds.

Yeah, Todd, as you know, I mean, I think that the market is definitely active. There's 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're actively underwriting deals right now. As he said, we do intend on, you know, executing on at least $110 million 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 that we feel good about that execution. I 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, de-risking exposure to certain large anchor tenants that we just want to de-risk our exposure to. So this isn't a one-year thing. It's a multi-year process that we're moving towards. And I think we're off to a fabulous start, and I think we can continue to do that. But we have to be smart, and we have to be agile.

We have to be looking all over the place, and we're doing that. We're in great markets, so we can add to the markets that we're already in, which is generally what we're 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 difficult it is to try to make numbers work. But that's our job, and that's what we'll do.

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 don't have a separate anchor reserve. So we decided that 100 basis points was an appropriate level, mostly probably due to the container storage. So we'll see how that shakes out. But we're having that one. So we're starting at a little bit of a higher level. Last year, our general reserve was 85 basis points. Rather than separating it out, we just said 100 basis points general reserve for 2026.

Yeah, Craig, I mean, it's like every time at this time of year, I think we get this question every year at this call. It's just so early. There's so many variables. We feel like 100 at the midpoint is a nice place to start. Let's see how we go through the year. There's 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 I've seen people write about retailers that were previously on watch lists that are not on watch lists and things like that.

So I think we feel good about it, but this is a good place to start, and I think it's prudent.

Yeah, I mean, I think there's 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 don't like to hear that. We're in a great business that is going to get stronger, and we're positioning the portfolio to take advantage of that and actually, you know, in the future be in a better growth profile. So that's 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, but yet they don't 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're growing cash flow per share. We're very focused on that. So, I think over time, these things will come together, and there's still more work to be done.

There's a lot of wood to be chopped, and 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 all of it ultimately was accretive without the time associated with the redeployment. So I think I understand what you are saying and the idea of taking leverage up.

We have been around a long time. We have seen a lot of different cycles. And running a business lower leverage is a smart thing to do. Obviously, we're 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'll be a better situation for us to deploy capital more accretively just in straight-up acquisitions. But right now, that's more challenging. So I think we'll continue. That's 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've done in the past.

And so I think you'll see us take advantage of that great balance sheet, but right now we're positioning ourselves to do that.

You know what I'd also like, Craig, if you think about it, on a relative basis, you know, why did we underperform in terms of growth? Well, a lot of it was because of the credit watch list and the credit losses. And so, you know, the exercise we're doing, we're addressing the fundamental building blocks of growth, which is de-risking the cash flow, which means making sure that we don't have fallout in a disproportionate way, and also improving our embedded bumps by shedding assets that have lower bumps. So while, yes, we could lever up and we could create growth that way, I think it's addressing the fundamental issue first and getting the portfolio in a position where we can outperform growth.

And as John said, it's not about this year or next year. It's about the next five years. We're 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's going to stabilize. And we'd like to be in a position, as John said, that we have 200 basis points of embedded escalators. We're starting at a place ahead of many of our peers. So that's the whole point of the exercise. It is growth.

Yeah, I think the two big items that are limiting the flow through are really the recurring but unpredictables. Again, that's a four-cent headwind into this year. And as I mentioned before, we're starting with a number. That number could grow over the course of the year. And then the second thing, and good news about this one's really going to diminish, is the three and a half cents of non-cash. Still, that's that merger burn-off of non-cash items. And, you know, illustrative is the fact that our core and our NAIRED FFO are on top of each other this year. It just shows you that that's now normalizing. So that's been a consistent theme, you know, over the last three years.

In fact, a total of 13.5 cents cumulatively over the past three years has really impacted our earnings growth. So those are the two drivers of why it's not flowing through onto the FFO line.

Yeah, I mean, there's 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're clearly well below consensus NAV. You know, a lot has to do with, you know, what is the source of that buyback in terms of the core yield on that. If there's more asset sales that would be funding that. As he said, we still have some deployment of the $400-plus 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're 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's 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's really what this is all about. It's not a one-dimensional exercise. There's a lot going on here, and we have a really strong belief, a real conviction.

$3.6 million signed, not open, NOI that we sold. If you heard my remarks, I said that we actually increased it by $4 million once you take those dispositions into account. So it was a really healthy growth. And as we mentioned, we expect the snow pipelines to remain elevated. We expect the gap between our lease and occupied rates 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've got to analyze each individual deal, the quality of the asset. 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.

Tom, you want to hit that?

Yeah. Excuse me. So, the entitlement process is well underway. It is lengthy for us. It's a process that will take us into 27, 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're moving in the right direction, but it is a very timely process.

And then in terms of the California asset, same thing, Caroline. We're pursuing the sale of that land. It is what it is. These things take time. Obviously, there's 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 a good source for us.

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

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

One last thing as John mentioned on an annualized basis all this stuff is accreted but if you look at our bridge you see that based on the timing of when we sold it and when we deploying the proceeds it was a two drag into 2026 That drag obviously will disappear in 2027 as the results are annualized Okay, that's helpful.

I mean, I think it's more, you know, complicated than that. I think each individual company has their own goals and expectations. You know, I think what we've said is we clearly want to reduce the total exposure to that larger power center portfolio. We didn't say we wanted to eliminate it. So we're reducing that percentage and growing the percentage in grocery lifestyle mixed use, and it is paying dividends in terms of our cash flow growth for doing that.

It doesn't mean that a large format center can't be a great center. It all comes down to 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're very focused in 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's it, Alex. It's really, it isn't, and as you know, you've been around us long enough. We're real estate people. Great real estate will overcome, right? Great real estate will overcome whatever potential mistake you made on top of it. So it's 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.

Well, so, yeah, we bought back $300 million, $250 million in 2025, and then $50 million in 2026. We also utilized the line in 2025, which added some interest expense. And also, there's more proceeds to deploy. As we discussed, there's another $110 million with 1031 acquisitions, which is not going to happen until the middle of the year. So when you put all that into the blender, RJ, timing-wise, it's just dilutive going into 2026. And if you think about it, you know, we had the disposition NOI for almost all of 2025, but that's immediately being taken out.

So it's not there at all for 2026. And so backfilling that is the accretion from the CERB IVAX, but we also have to get these 1031s done.

Sure, RJ. I mean, obviously, it's 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 relative to the acquisition disposition, you know, kind of plans. As I mentioned in my prepared remarks, we have been clear that there's a possibility that we would look at another larger transaction in terms of selling larger format centers at what we think are very attractive yields and redeploying that capital in an accretive or very minimally dilutive way as we did this year. It would need to fall 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 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's too early to say what 27 looks like, but those are the components of what we're looking at.

It does include city center, and it's mid-50s.

No, I think that what we're saying is we're studying the potential of something similar to what we did last year, not necessarily in magnitude of total size, more so in the type of product that we would be looking to sell. And again, as he said, we're still going through some of the tax harvesting of losses that we want to get against what we've already done. So I think it's going to depend on how this plays out. But obviously, 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 we'll look at that.

And also, 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, you know, if you're looking at the capital allocation cues, and John mentioned this in his comments, you know, we're viewing this as an opportunity to upgrade the quality of the portfolio while doing minimal, you know, either accretive or minimally dilutive to earnings. So it's almost incumbent upon us to consider this again this year. So again, we'll see how it pans out, but we'll let you know more as the year progresses.

Yeah. Hey, Wes, I think what we're saying is overall, you know, we're in a position of strength, and we're doing everything we can to improve a myriad of different deal terms. You know, you don't eliminate all these things overnight. For example, we didn't say we were eliminating co-tenancy. We're saying we're improving it. We're improving our rent growth. We're improving the terms in terms of obviously looking to limit future fixed options, which we've 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 to close to 1.8%, I think that tells the story for the future. And that's 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's 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 that's why you've 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, this isn't occurring by sending a redraft of a lease to a company saying, hey, we would want this or this. What we're trying to do is take it directly to the companies and having open conversations about, hey, here's 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, So here is what KITE needs, and here is the best way for us to get it and make it also work for you.

I mean, I think we said we feel like we're very close to this, you know, in the near term getting to 2%. You know, if you just look, if you look at our investor presentation, you'll see that, you know, in 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're working towards. So I think, Wes, that that is absolutely in our sights and 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's part of this as well, is that eventually as we pivot this portfolio into this direction, people will recognize that.

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 weeks. Thank you.