Our latest focus stock—with S&P Capital IQ’s highest 5-star buy rating—is a full-service real estate investment trust which owns, leases, and manages high-quality neighborhood and community shopping centers, notes Cathy Seifert in Standard & Poor’s The Outlook.

As of June 30, Kite Realty Group Trust (KRG) owned interests in a portfolio of 119 retail operating properties totaling about 23.9 million square feet.

Its properties are located in 22 states but concentrated in Indiana, Florida, and Texas.

Kite Realty considers location and the financial health and growth of its retail tenants as among the most important factors in the success of its portfolio.

Its tenants include many of the nation’s major retailers such as Publix, Petsmart (PETM), TJX Companies (TJX), Dick’s Sporting Goods (DKS), and Office Depot/Office Max (ODP).

Kite Realty’s primary business objectives are to generate increasing cash flow, achieve sustainable long-term growth, and maximize shareholder value.

It focuses on a dual growth strategy to grow its business. The first part of this strategy is to focus on increasing its internal growth by leveraging its tenant relationships.

The second part is to focus on achieving external growth through the expansion of its portfolio.

Kite Realty’s portfolio expansion strategy received a boost in July 2014 when it completed its merger with Inland Diversified REIT in a $2.1 billion stock transaction.

In 2013, Kite Realty acquired 13 shopping center assets for a total of about $408.1 million; in 2012 it acquired four properties for about $75 million.

We foresee double-digit revenue growth in both 2015 and 2016 and expect margins to be aided by a highly efficient and streamlined operating platform and by an occupancy rate that we expect will approach 96%.

Risks to our recommendation and target price include a sharp contraction in GDP and consumer spending and a surge in retailer bankruptcies.

Also, because Kite Realty (as a REIT) must distribute 90% of its taxable income to shareholders in the form of dividends, it relies on external sources of capital to fund growth. A sharp rise in interest rates could impair its ability to fund growth.

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