KITE REALTY GROUP TRUST - Quarter Report: 2020 June (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

	For the quarterly period ended	June 30, 2020

OR

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number:	001-32268	Kite Realty Group Trust
Commission File Number:	333-202666-01	Kite Realty Group, L.P.

Kite Realty Group Trust
Kite Realty Group, L.P.
(Exact Name of Registrant as Specified in its Charter)



Maryland		(Kite Realty Group Trust)		11-3715772
Delaware		(Kite Realty Group, L.P.)		20-1453863
(State or other jurisdiction of incorporation or organization)				(IRS Employer Identification No.)

30 S. Meridian Street	Suite 1100	Indianapolis	Indiana	46204
(Address of principal executive offices)				(Zip code)

Telephone:	317	577-5600
(Registrant’s telephone number, including area code)



Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Trading Symbol	Name of each exchange on which registered
Common stock, $0.01 par value per share	KRG	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.



Kite Realty Group Trust	Yes	☒	No	o	Kite Realty Group, L.P.	Yes	☒	No	o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).



Kite Realty Group Trust	Yes	☒	No	o	Kite Realty Group, L.P.	Yes	☒	No	o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Kite Realty Group Trust:



Large accelerated filer	x	Accelerated filer	o	Non-accelerated filer	o	Smaller reporting company	☐
						Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Kite Realty Group, L.P.:



Large accelerated filer	o	Accelerated filer	o	Non-accelerated filer	x	Smaller reporting company	☐
						Emerging growth company	☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Kite Realty Group Trust	Yes	☐	No	x	Kite Realty Group, L.P.	Yes	☐	No	x

The number of Common Shares of Kite Realty Group Trust outstanding as of August 3, 2020 was 84,215,585 ($.01 par value).

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended June 30, 2020 of Kite Realty Group Trust, Kite Realty Group, L.P. and its subsidiaries. Unless stated otherwise or the context otherwise requires, references to "Kite Realty Group Trust" or the "Parent Company" mean Kite Realty Group Trust, and references to the "Operating Partnership" mean Kite Realty Group, L.P. and its consolidated subsidiaries. The terms "Company," "we," "us," and "our" refer to the Parent Company and the Operating Partnership, collectively, and those entities owned or controlled by the Parent Company and/or the Operating Partnership.

The Operating Partnership is engaged in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States. The Parent Company is the sole general partner of the Operating Partnership and as of June 30, 2020 owned approximately 97.4% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.6% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) were owned by the limited partners.

We believe combining the quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report benefits investors by:


•	enhancing investors' understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;


•	eliminating duplicative disclosure and providing a more streamlined and readable presentation of information because a substantial portion of the Company's disclosure applies to both the Parent Company and the Operating Partnership; and


•	creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

We believe it is important to understand the few differences between the Parent Company and the Operating Partnership in the context of how we operate as an interrelated consolidated company. The Parent Company has no material assets or liabilities other than its investment in the Operating Partnership. The Parent Company issues public equity from time to time but does not have any indebtedness as all debt is incurred by the Operating Partnership. In addition, the Parent Company currently does not nor does it intend to guarantee any debt of the Operating Partnership. The Operating Partnership has numerous wholly-owned subsidiaries, and it also owns interests in certain joint ventures. These subsidiaries and joint ventures own and operate retail shopping centers and other real estate assets. The Operating Partnership is structured as a partnership with no publicly-traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for General Partner Units, the Operating Partnership generates the capital required by the business through its operations, its placement of indebtedness and the issuance of Limited Partner Units to third parties.

Shareholders' equity and partners' capital are the main areas of difference between the consolidated financial statements of the Parent Company and those of the Operating Partnership. In order to highlight this and other differences between the Parent Company and the Operating Partnership, there are separate sections in this report, as applicable, that separately discuss the Parent Company and the Operating Partnership, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the Parent Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the collective Company.

KITE REALTY GROUP TRUST AND KITE REALTY GROUP, L.P. AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED June 30, 2020

TABLE OF CONTENTS



		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)

Kite Realty Group Trust:

	Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	4

	Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	5

	Consolidated Statements of Shareholders' Equity for the Three and Six Months Ended June 30, 2020 and 2019	6

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	7

Kite Realty Group, L.P. and subsidiaries:

	Consolidated Balance Sheets as of June 30, 2020 and December 31, 2019	8

	Consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2020 and 2019	9

	Consolidated Statements of Partners' Equity for the Three and Six Months Ended June 30, 2020 and 2019	10

	Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2020 and 2019	11

Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries:

	Notes to Consolidated Financial Statements	12

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	24

	Cautionary Note About Forward-Looking Statements	26

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	41

Item 4.	Controls and Procedures	41

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	42

Item 1A.	Risk Factors	42

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43

Item 3.	Defaults upon Senior Securities	43

Item 4.	Mine Safety Disclosures	43

Item 5.	Other Information	43

Item 6.	Exhibits	43

SIGNATURES		46

Part I. FINANCIAL INFORMATION

Item 1.

Kite Realty Group Trust

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)



	June 30, 2020			December 31, 2019
Assets:
Investment properties at cost:	$	3,092,082		$	3,087,391
Less: accumulated depreciation	(711,594		)	(666,952		)
	2,380,488			2,420,439

Cash and cash equivalents	229,975			31,336
Tenant and other receivables, including accrued straight-line rent of $24,808 and $27,256, respectively	61,598			55,286
Restricted cash and escrow deposits	21,835			21,477
Deferred costs, net	66,471			73,157
Prepaid and other assets	38,178			34,548
Investments in unconsolidated subsidiaries	13,241			12,644
Total Assets	$	2,811,786		$	2,648,887

Liabilities and Equity:
Mortgage and other indebtedness, net	$	1,346,255		$	1,146,580
Accounts payable and accrued expenses	85,700			69,817
Deferred revenue and other liabilities	86,289			90,180
Total Liabilities	1,518,244			1,306,577
Commitments and contingencies
Limited Partners' interests in Operating Partnership and other	44,629			52,574
Equity:
Kite Realty Group Trust Shareholders' Equity:
Common Shares, $.01 par value, 225,000,000 shares authorized, 84,194,268 and 83,963,369 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively	842			840
Additional paid in capital	2,083,212			2,074,436
Accumulated other comprehensive loss	(34,030		)	(16,283		)
Accumulated deficit	(801,809		)	(769,955		)
Total Kite Realty Group Trust Shareholders' Equity	1,248,215			1,289,038
Noncontrolling Interest	698			698
Total Equity	1,248,913			1,289,736
Total Liabilities and Shareholders' Equity	$	2,811,786		$	2,648,887

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except share and per share data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019

Revenue:
Rental income	$	61,538		$	79,795		$	127,066		$	162,152
Other property related revenue	1,676			1,594			5,956			2,649
Fee income	91			91			195			194
Total revenue	63,305			81,480			133,217			164,995
Expenses:
Property operating	9,319			11,468			20,120			22,898
Real estate taxes	8,254			9,929			17,188			20,135
General, administrative, and other	6,578			7,037			13,504			13,814
Depreciation and amortization	31,409			34,713			62,877			69,348
Impairment charges	—			25,107			—			29,184
Total expenses	55,560			88,254			113,689			155,379
Gain on sale of operating properties, net	623			24,092			1,666			30,679
Operating income	8,368			17,318			21,194			40,295
Interest expense	(13,271		)	(16,124		)	(25,564		)	(32,582		)
Income tax benefit of taxable REIT subsidiary	202			66			306			148
Loss on debt extinguishment	—			(2,577		)	—			(2,577		)
Equity in loss of unconsolidated subsidiaries	(436		)	(238		)	(839		)	(665		)
Other income (expense), net	351			(142		)	249			(328		)
Net (loss) income	(4,786		)	(1,697		)	(4,654		)	4,291
Net loss (income) attributable to noncontrolling interests	17			(99		)	(188		)	(372		)
Net (loss) income attributable to Kite Realty Group Trust	$	(4,769	)	$	(1,796	)	$	(4,842	)	$	3,919

Net (loss) income per common share – basic & diluted	$	(0.06	)	$	(0.02	)	$	(0.06	)	$	0.05

Weighted average common shares outstanding - basic	84,157,541			83,938,961			84,090,316			83,891,584
Weighted average common shares outstanding - diluted	84,157,541			83,938,961			84,090,316			84,017,762

Cash dividends declared per common share	$	0.0000		$	0.3175		$	0.3175		$	0.6350

Consolidated net income	$	(4,786	)	$	(1,697	)	$	(4,654	)	$	4,291
Change in fair value of derivatives	(1,622		)	(7,653		)	(18,193		)	(12,710		)
Total comprehensive (loss)	(6,408		)	(9,350		)	(22,847		)	(8,419		)
Comprehensive loss (income) attributable to noncontrolling interests	59			89			258			(57		)
Comprehensive loss attributable to Kite Realty Group Trust	$	(6,349	)	$	(9,261	)	$	(22,589	)	$	(8,476	)

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust

Consolidated Statements of Shareholders’ Equity

(Unaudited)

(in thousands, except share data)



	Common Shares			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balances, December 31, 2019	83,963,369	$	840	$	2,074,436		$	(16,283	)	$	(769,955	)	$	1,289,038
Stock compensation activity	151,335	1		266			—			—			267
Other comprehensive loss attributable to Kite Realty Group Trust	—			—			(16,167		)	—			(16,167		)
Distributions declared to common shareholders	—	—		—			—			(27,011		)	(27,011		)
Net loss attributable to Kite Realty Group Trust	—	—		—			—			(74		)	(74		)
Adjustment to redeemable noncontrolling interests	—	—		6,778			—			—			6,778
Balances, March 31, 2020	84,114,704	841		2,081,480			(32,450		)	(797,040		)	1,252,831
Stock compensation activity	79,564	1		1,785			—			—			1,786
Other comprehensive loss attributable to Kite Realty Group Trust	—			—			(1,580		)	—			(1,580		)
Net loss attributable to Kite Realty Group Trust	—	—		—			—			(4,769		)	(4,769		)
Adjustment to redeemable noncontrolling interests	—	—		(53		)	—			—			(53		)
Balances, June 30, 2020	84,194,268	842		2,083,212			(34,030		)	(801,809		)	1,248,215



	Common Shares			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balances, December 31, 2018	83,800,886	$	838	$	2,078,099		$	(3,497	)	$	(662,735	)	$	1,412,705
Stock compensation activity	102,022	1		1,160			—			—			1,161
Other comprehensive loss attributable to Kite Realty Group Trust	—	—		—			(4,930		)	—			(4,930		)
Distributions declared to common shareholders	—	—		—			—			(26,672		)	(26,672		)
Net income attributable to Kite Realty Group Trust	—	—		—			—			5,715			5,715
Exchange of redeemable noncontrolling interests for common shares	7,500	—		127			—			—			127
Adjustment to redeemable noncontrolling interests	—	—		(1,282		)	—			—			(1,282		)
Balances, March 31, 2019	83,910,408	839		2,078,104			(8,427		)	(683,692		)	1,386,824
Stock compensation activity	49,938	1		1,816			—			—			1,817
Other comprehensive loss attributable to Kite Realty Group Trust	—	—		—			(7,465		)	—			(7,465		)
Distributions declared to common shareholders	—	—		—			—			(26,665		)	(26,665		)
Net loss attributable to Kite Realty Group Trust	—	—		—			—			(1,796		)	(1,796		)
Adjustment to redeemable noncontrolling interests	—	—		(52		)	—			—			(52		)
Balances, June 30, 2019	83,960,346	840		2,079,868			(15,892		)	(712,153		)	1,352,663

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



	Six Months Ended June 30,
	2020			2019
Cash flow from operating activities:
Consolidated net (loss) income	$	(4,654	)	$	4,291
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Straight-line rent	3,091			(1,610		)
Depreciation and amortization	64,051			70,861
Gain on sale of operating properties	(1,666		)	(30,679		)
Impairment charge	—			29,184
Compensation expense for equity awards	2,586			2,705
Amortization of debt fair value adjustment	(222		)	(1,047		)
Loss on debt extinguishment	—			2,577
Amortization of in-place lease liabilities	(1,365		)	(2,154		)
Changes in assets and liabilities:
Tenant receivables	(7,562		)	7,108
Deferred costs and other assets	(3,147		)	(6,250		)
Accounts payable, accrued expenses, deferred revenue, and other liabilities	(1,274		)	(5,328		)
Net cash provided by operating activities	49,838			69,658
Cash flow from investing activities:
Acquisitions of interests in properties	—			(29,286		)
Capital expenditures	(22,390		)	(25,239		)
Net proceeds from sales of land	5,490			—
Net proceeds from sales of operating properties	—			254,206
Small business loan funding	(2,139		)	—
Change in construction payables	(1,579		)	(2,773		)
Net cash (used in) provided by investing activities	(20,618		)	196,908
Cash flow from financing activities:
Proceeds from issuance of common shares, net	39			115
Repurchases of common shares upon the vesting of restricted shares	(1,002		)	(460		)
Loan proceeds	300,000			75,000
Debt extinguishment costs	—			(4,280		)
Loan payments	(101,276		)	(240,753		)
Distributions paid – common shareholders	(27,010		)	(79,927		)
Distributions paid – redeemable noncontrolling interests	(974		)	(2,233		)
Net cash provided by (used in) financing activities	169,777			(252,538		)
Net change in cash, cash equivalents, and restricted cash	198,997			14,028
Cash, cash equivalents, and restricted cash beginning of period	52,813			45,506
Cash, cash equivalents, and restricted cash end of period	$	251,810		$	59,534

Non-cash investing activities
Net investment in sales-type lease	$	4,665		$	—

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Balance Sheets

(unaudited)

(in thousands, except unit data)



	June 30, 2020			December 31, 2019
Assets:
Investment properties at cost:	$	3,092,082		$	3,087,391
Less: accumulated depreciation	(711,594		)	(666,952		)
	2,380,488			2,420,439

Cash and cash equivalents	229,975			31,336
Tenant and other receivables, including accrued straight-line rent of $24,808 and $27,256, respectively	61,598			55,286
Restricted cash and escrow deposits	21,835			21,477
Deferred costs, net	66,471			73,157
Prepaid and other assets	38,178			34,548
Investments in unconsolidated subsidiaries	13,241			12,644
Total Assets	$	2,811,786		$	2,648,887

Liabilities and Equity:
Mortgage and other indebtedness, net	$	1,346,255		$	1,146,580
Accounts payable and accrued expenses	85,700			69,817
Deferred revenue and other liabilities	86,289			90,180
Total Liabilities	1,518,244			1,306,577
Commitments and contingencies
Limited Partners' interests in Operating Partnership and other	44,629			52,574
Partners Equity:
Parent Company:
Common equity, 84,194,268 and 83,963,369 units issued and outstanding at June 30, 2020 and December 31, 2019, respectively	1,282,245			1,305,321
Accumulated other comprehensive loss	(34,030		)	(16,283		)
Total Partners Equity	1,248,215			1,289,038
Noncontrolling Interests	698			698
Total Equity	1,248,913			1,289,736
Total Liabilities and Equity	$	2,811,786		$	2,648,887

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except unit and per unit data)



	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019

Revenue:
Rental income	$	61,538		$	79,795		$	127,066		$	162,152
Other property related revenue	1,676			1,594			5,956			2,649
Fee income	91			91			195			194
Total revenue	63,305			81,480			133,217			164,995
Expenses:
Property operating	9,319			11,468			20,120			22,898
Real estate taxes	8,254			9,929			17,188			20,135
General, administrative, and other	6,578			7,037			13,504			13,814
Depreciation and amortization	31,409			34,713			62,877			69,348
Impairment charge	—			25,107			—			29,184
Total expenses	55,560			88,254			113,689			155,379
Gain on sale of operating properties, net	623			24,092			1,666			30,679
Operating income	8,368			17,318			21,194			40,295
Interest expense	(13,271		)	(16,124		)	(25,564		)	(32,582		)
Income tax benefit of taxable REIT subsidiary	202			66			306			148
Loss on debt extinguishment	—			(2,577		)	—			(2,577		)
Equity in loss of unconsolidated subsidiaries	(436		)	(238		)	(839		)	(665		)
Other income (expense), net	351			(142		)	249			(328		)
Net income	(4,786		)	(1,697		)	(4,654		)	4,291
Net income attributable to noncontrolling interests	(132		)	(132		)	(266		)	(264		)
Net (loss) income attributable to common unitholders	$	(4,918	)	$	(1,829	)	$	(4,920	)	$	4,027

Allocation of net (loss) income:
Limited Partners	$	(149	)	$	(33	)	$	(78	)	$	108
Parent Company	(4,769		)	(1,796		)	(4,842		)	3,919
	$	(4,918	)	$	(1,829	)	$	(4,920	)	$	4,027


Net (loss) income attributable to common unitholders	$	(0.06	)	$	(0.02	)	$	(0.06	)	$	0.05

Weighted average common units outstanding - basic	86,392,532			86,051,797			86,296,471			85,982,324
Weighted average common units outstanding - diluted	86,392,532			86,051,797			86,296,471			86,108,502

Distributions declared per common unit	$	0.0000		$	0.3175		$	0.3175		$	0.6350

Consolidated net income	$	(4,786	)	$	(1,697	)	$	(4,654	)	$	4,291
Change in fair value of derivatives	(1,622		)	(7,653		)	(18,193		)	(12,710		)
Total comprehensive (loss) income	(6,408		)	(9,350		)	(22,847		)	(8,419		)
Comprehensive income attributable to noncontrolling interests	(132		)	(132		)	(266		)	(264		)
Comprehensive (loss) income attributable to common unitholders	$	(6,540	)	$	(9,482	)	$	(23,113	)	$	(8,683	)

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Statements of Partners’ Equity

(Unaudited)

(in thousands)



	General Partner						Total
	Common Equity			Accumulated Other Comprehensive Loss			Total
Balances, December 31, 2019	$	1,305,321		$	(16,283	)	$	1,289,038
Stock compensation activity	267			—			267
Other comprehensive loss attributable to Parent Company	—			(16,167		)	(16,167		)
Distributions declared to Parent Company	(27,011		)	—			(27,011		)
Net loss	(74		)	—			(74		)
Adjustment to redeemable noncontrolling interests	6,778			—			6,778
Balances March 31, 2020	1,285,281			(32,450		)	1,252,831
Stock compensation activity	1,786			—			1,786
Other comprehensive loss attributable to Parent Company	—			(1,580		)	(1,580		)
Net loss	(4,769		)	—			(4,769		)
Adjustment to redeemable noncontrolling interests	(53		)	—			(53		)
Balances, June 30, 2020	1,282,245			(34,030		)	1,248,215



	General Partner						Total
	Common Equity			Accumulated Other Comprehensive Loss			Total
Balances, December 31, 2018	$	1,416,202		$	(3,497	)	$	1,412,705
Stock compensation activity	1,161			—			1,161
Other comprehensive loss attributable to Parent Company	—			(4,930		)	(4,930		)
Distributions declared to Parent Company	(26,672		)	—			(26,672		)
Net income	5,715			—			5,715
Conversion of Limited Partner Units to shares of the Parent Company	127			—			127
Adjustment to redeemable noncontrolling interests	(1,282		)	—			(1,282		)
Balances, March 31, 2019	1,395,251			(8,427		)	1,386,824
Stock compensation activity	1,817			—			1,817
Other comprehensive loss attributable to Parent Company	—			(7,465		)	(7,465		)
Distributions declared to Parent Company	(26,665		)	—			(26,665		)
Net loss	(1,796		)	—			(1,796		)
Adjustment to redeemable noncontrolling interests	(52		)	—			(52		)
Balances, June 30, 2019	1,368,555			(15,892		)	1,352,663

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)



	Six Months Ended June 30,
	2020			2019
Cash flow from operating activities:
Consolidated net (loss) income	$	(4,654	)	$	4,291
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Straight-line rent	3,091			(1,610		)
Depreciation and amortization	64,051			70,861
Gain on sales of operating properties	(1,666		)	(30,679		)
Impairment charge	—			29,184
Compensation expense for equity awards	2,586			2,705
Amortization of debt fair value adjustment	(222		)	(1,047		)
Loss on debt extinguishment	—			2,577
Amortization of in-place lease liabilities	(1,365		)	(2,154		)
Changes in assets and liabilities:
Tenant receivables	(7,562		)	7,108
Deferred costs and other assets	(3,147		)	(6,250		)
Accounts payable, accrued expenses, deferred revenue, and other liabilities	(1,274		)	(5,328		)
Net cash provided by operating activities	49,838			69,658
Cash flow from investing activities:
Acquisitions of interests in properties	—			(29,286		)
Capital expenditures	(22,390		)	(25,239		)
Net proceeds from sales of land	5,490			—
Net proceeds from sales of operating properties	—			254,206
Small business loan funding	(2,139		)	—
Change in construction payables	(1,579		)	(2,773		)
Net cash (used in) provided by investing activities	(20,618		)	196,908
Cash flow from financing activities:
Contributions from the General Partner	39			115
Repurchases of common shares upon the vesting of restricted shares	(1,002		)	(460		)
Loan proceeds	300,000			75,000
Debt extinguishment costs	—			(4,280		)
Loan payments	(101,276		)	(240,753		)
Distributions paid – common unitholders	(27,010		)	(79,927		)
Distributions paid – redeemable noncontrolling interests	(974		)	(2,233		)
Net cash provided by (used in) financing activities	169,777			(252,538		)
Net change in cash, cash equivalents, and restricted cash	198,997			14,028
Cash, cash equivalents, and restricted cash beginning of period	52,813			45,506
Cash, cash equivalents, and restricted cash end of period	$	251,810		$	59,534

Non-cash investing activities
Net investment in sales-type lease	$	4,665		$	—

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries

Notes to Consolidated Financial Statements

June 30, 2020

(Unaudited)

(in thousands, except share and per share data)

Note 1. Organization

Kite Realty Group Trust (the "Parent Company"), through its majority-owned subsidiary, Kite Realty Group, L.P. (the “Operating Partnership”), owns interests in various operating subsidiaries and joint ventures engaged in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers and other real estate assets in select markets in the United States. The terms "Company," "we," "us," and "our" refer to the Parent Company and the Operating Partnership, collectively, and those entities owned or controlled by the Parent Company and/or the Operating Partnership.

The Operating Partnership was formed on August 16, 2004, when the Parent Company contributed properties and the net proceeds from an initial public offering of shares of its common stock to the Operating Partnership. The Parent Company was organized in Maryland in 2004 to succeed in the development, acquisition, construction and real estate businesses of its predecessor. We believe the Company qualifies as a real estate investment trust (a “REIT”) under provisions of the Internal Revenue Code of 1986, as amended.

The Parent Company is the sole general partner of the Operating Partnership, and as of June 30, 2020 owned approximately 97.4% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.6% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) were owned by the limited partners. As the sole general partner of the Operating Partnership, the Parent Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership. The Parent Company and the Operating Partnership are operated as one enterprise. The management of the Parent Company consists of the same members as the management of the Operating Partnership. As the sole general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have any significant assets other than its investment in the Operating Partnership.

At June 30, 2020, we owned interests in 90 operating and redevelopment properties totaling approximately 17.6 million square feet. We also owned two development projects under construction as of this date.

Note 2. Basis of Presentation, Consolidation, Investments in Joint Ventures, and Noncontrolling Interests

We have prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) may have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the presentation not misleading. The unaudited financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 include all adjustments, consisting of normal recurring adjustments, necessary in the opinion of management to present fairly the financial information set forth therein. The consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the combined Annual Report on Form 10-K of the Parent Company and the Operating Partnership for the year ended December 31, 2019.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reported period. Actual results could differ from these estimates. The results of operations for the interim periods are not necessarily indicative of the results that may be expected on an annual basis.

Components of Investment Properties

The composition of the Company’s investment properties as of June 30, 2020 and December 31, 2019 was as follows:



	Balance at
	June 30, 2020		December 31, 2019
Investment properties, at cost:
Land, buildings and improvements	$	3,050,725	$	3,038,412
Furniture, equipment and other	7,932		7,775
Construction in progress	33,425		41,204
	$	3,092,082	$	3,087,391

Components of Rental Income including Allowance for Uncollectible Accounts

The Company recognized the following lease rental income for the three and six months ended June 30, 2020 and 2019:



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Fixed Contractual Lease Payments - Operating Leases	54,574		63,654		109,918		129,193
Variable Lease Payments - Operating Leases	12,437		14,779		25,388		30,640
Bad Debt Reserve	(5,746	)	(695	)	(6,593	)	(1,446	)
Straight-Line Rent Adjustment	387		947		745		1,610
Straight-Line Rent Reserve for Uncollectibility	(881	)	—		(3,757	)	—
Amortization of In-Place Lease Liabilities, net	767		1,110		1,365		2,155
Total	61,538		79,795		127,066		162,152

The Company must make estimates as to the collectibility of its accounts receivable. In making these estimates, the Company reviews a variety of qualitative and quantitative data to make a subjective determination. An allowance for uncollectible accounts, including future credit losses of the accrued straight-line rent receivables, is maintained for estimated losses resulting from the inability of certain tenants to meet contractual obligations under their lease agreements.

Consolidation and Investments in Joint Ventures

The accompanying financial statements are presented on a consolidated basis and include all accounts of the Parent Company, the Operating Partnership, the taxable REIT subsidiary of the Operating Partnership, subsidiaries of the Operating Partnership that are controlled and any variable interest entities (“VIEs”) in which the Operating Partnership is the primary beneficiary. In general, a VIE is a corporation, partnership, trust or any other legal structure used for business purposes that either (a) has equity investors that do not provide sufficient financial resources for the entity to support its activities, (b) does not have equity investors with voting rights or (c) has equity investors whose votes are disproportionate from their economics and substantially all of the activities are conducted on behalf of the investor with disproportionately fewer voting rights.

The Operating Partnership accounts for properties that are owned by joint ventures in accordance with the consolidation guidance. The Operating Partnership evaluates each joint venture and determines first whether to follow the VIE or the voting interest entity ("VOE") model. Once the appropriate consolidation model is identified, the Operating Partnership then evaluates whether it should consolidate the joint venture. Under the VIE model, the Operating Partnership consolidates an entity when it has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the VOE model, the Operating Partnership consolidates an entity when (i) it controls the entity through ownership of a majority voting interest if the entity is not a limited partnership or (ii) it controls the entity through its ability to remove the other partners or owners in the entity, at its discretion, when the entity is a limited partnership.

In determining whether to consolidate a VIE with the Operating Partnership, we consider all relationships between the Operating Partnership and the applicable VIE, including development agreements, management agreements and other contractual arrangements, in determining whether we have the power to direct the activities of the VIE that most significantly affect the VIE's performance. As of June 30, 2020, we owned investments in two joint ventures that were VIEs in which the partners did not have

substantive participating rights and we were the primary beneficiary. As of this date, these VIEs had total debt of $55.5 million, which were secured by assets of the VIEs totaling $115.2 million. The Operating Partnership guarantees the debts of these VIEs.

The Operating Partnership is considered a VIE as the limited partners do not hold kick-out rights or substantive participating rights. The Parent Company consolidates the Operating Partnership as it is the primary beneficiary in accordance with the VIE model.

Glendale Multifamily Joint Venture

In May 2020, the Company formed a joint venture for the planned development of a multifamily project adjacent to our Glendale Town Center retail property. The Company contributed land to the joint venture valued at $1.6 million and retained a 12% interest in the joint venture. The Company's partner will serve as the operating member responsible for day-to-day management. Both members have substantive participating rights over major decisions that impact the economics and operations of the joint venture. The Company is accounting for the joint venture on the equity method as it has the ability to exercise influence but not control over operating and financial policies.

Income Taxes and REIT Compliance

Parent Company

The Parent Company, which is considered a corporation for federal income tax purposes, has been organized and intends to continue to operate in a manner that will enable it to maintain its qualification as a REIT for federal income tax purposes. As a result, it generally will not be subject to federal income tax on the earnings that it distributes to the extent it distributes its “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) to shareholders of the Parent Company and meets certain other requirements on a recurring basis. To the extent that it satisfies this distribution requirement, but distributes less than 100% of its taxable income, it will be subject to federal corporate income tax on its undistributed REIT taxable income. REITs are subject to a number of organizational and operational requirements. If the Parent Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate rates for a period of four years following the year in which qualification is lost. We may also be subject to certain federal, state and local taxes on our income and property and to federal income and excise taxes on our undistributed taxable income even if the Parent Company does qualify as a REIT. The Operating Partnership intends to continue to make distributions to the Parent Company in amounts sufficient to assist the Parent Company in adhering to REIT requirements and maintaining its REIT status.

We have elected to treat Kite Realty Holdings, LLC as a taxable REIT subsidiary of the Operating Partnership, and we may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. This election enables us to receive income and provide services that would otherwise be impermissible for a REIT. Deferred tax assets and liabilities are established for temporary differences between the financial reporting bases and the tax bases of assets and liabilities at the tax rates expected to be in effect when the temporary differences reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset will not be realized.

Operating Partnership

The allocated share of income and loss, other than the operations of our taxable REIT subsidiary, is included in the income tax returns of the Operating Partnership's partners. Accordingly, the only federal income taxes included in the accompanying consolidated financial statements are in connection with the Operating Partnership's taxable REIT subsidiary.

Noncontrolling Interests

We report the non-redeemable noncontrolling interests in subsidiaries as equity, and the amount of consolidated net income attributable to these noncontrolling interests is set forth separately in the consolidated financial statements. The non-redeemable noncontrolling interests in consolidated properties for the six months ended June 30, 2020 and 2019 were as follows:



	2020		2019
Noncontrolling interests balance January 1	$	698	$	698
Net income allocable to noncontrolling interests, excluding redeemable noncontrolling interests	—		—
Noncontrolling interests balance at June 30	$	698	$	698

Redeemable Noncontrolling Interests - Limited Partners

Limited Partner Units are redeemable noncontrolling interests in the Operating Partnership. We classify redeemable noncontrolling interests in the Operating Partnership in the accompanying consolidated balance sheets outside of permanent equity because we may be required to pay cash to holders of Limited Partner Units upon redemption of their interests in the Operating Partnership or deliver registered shares upon their conversion. The carrying amount of the redeemable noncontrolling interests in the Operating Partnership is reflected at the greater of historical book value or redemption value with a corresponding adjustment to additional paid-in capital. At June 30, 2020, the redemption value of the redeemable noncontrolling interests did not exceed the historical book value, and the balance was accordingly adjusted to historical book value. At December 31, 2019, the redemption value of the redeemable noncontrolling interests exceeded the historical book value, and the balance was accordingly adjusted to redemption value.

We allocate net operating results of the Operating Partnership after noncontrolling interests in the consolidated properties based on the partners’ respective weighted average ownership interest. We adjust the redeemable noncontrolling interests in the Operating Partnership at the end of each reporting period to reflect their interests in the Operating Partnership or redemption value. This adjustment is reflected in our shareholders’ and Parent Company's equity. For the three and six months ended June 30, 2020 and 2019, the weighted average interests of the Parent Company and the limited partners in the Operating Partnership were as follows:



	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019
Parent Company’s weighted average interest in Operating Partnership	97.4	%	97.6	%	97.4	%	97.6	%
Limited partners' weighted average interests in Operating Partnership	2.6	%	2.4	%	2.6	%	2.4	%

At June 30, 2020, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.4% and 2.6%. At December 31, 2019, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.5% and 2.5%.

Concurrent with the Parent Company’s initial public offering and related formation transactions, certain individuals received Limited Partner Units of the Operating Partnership in exchange for their interests in certain properties. The limited partners have the right to redeem Limited Partner Units for cash or, at the Parent Company's election, common shares of the Parent Company in an amount equal to the market value of an equivalent number of common shares of the Parent Company at the time of redemption. Such common shares must be registered, which is not fully in the Parent Company’s control. Therefore, the limited partners’ interest is not reflected in permanent equity. The Parent Company also has the right to redeem the Limited Partner Units directly from the limited partner in exchange for either cash in the amount specified above or a number of its common shares equal to the number of Limited Partner Units being redeemed.

There were 2,234,991 and 2,110,037 Limited Partner Units outstanding as of June 30, 2020 and December 31, 2019, respectively. The increase in Limited Partner Units outstanding from December 31, 2019 is due to non-cash compensation awards made to our executive officers in the form of Limited Partner Units.

Redeemable Noncontrolling Interests - Subsidiaries

Prior to the merger with Inland Diversified Real Estate Trust, Inc. ("Inland Diversified") in 2014, Inland Diversified formed joint ventures with the previous owners of certain properties and issued Class B units in three joint ventures that indirectly own those properties. The Class B units related to one of these three joint ventures remain outstanding and are accounted for as noncontrolling interests in the remaining venture. The remaining Class B units will become redeemable at the respective partner's election in October 2022 and the fulfillment of certain redemption criteria. Beginning in November 2022, the Class B units can be redeemed at the election of either of our partner or us for cash or Limited Partner Units in the Operating Partnership. The Class B units do not have a maturity date, and none are mandatorily redeemable unless either party has elected for the units to be

redeemed. We consolidate this joint venture because we control the decision making and our joint venture partner has limited protective rights.

We classify the redeemable noncontrolling interests in certain subsidiaries in the accompanying consolidated balance sheets outside of permanent equity because, under certain circumstances, we may be required to pay cash to Class B unitholders in specific subsidiaries upon redemption of their interests. The carrying amount of these redeemable noncontrolling interests is required to be reflected at the greater of initial book value or redemption value with a corresponding adjustment to additional paid-in capital. As of June 30, 2020 and December 31, 2019, the redemption amounts of these interests did not exceed their fair value, nor did they exceed the initial book value.

The redeemable noncontrolling interests in the Operating Partnership and subsidiaries for the six months ended June 30, 2020 and 2019 were as follows:



	2020			2019
Redeemable noncontrolling interests balance January 1	$	52,574		$	45,743
Net income allocable to redeemable noncontrolling interests	188			372
Distributions declared to redeemable noncontrolling interests	(974		)	(1,586		)
Other, net including adjustments to redemption value	(7,159		)	777
Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at June 30	$	44,629		$	45,306


Limited partners' interests in Operating Partnership	$	34,559		$	53,236
Other redeemable noncontrolling interests in certain subsidiaries	10,070			10,070
Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at June 30	$	44,629		$	63,306

Fair Value Measurements

We follow the framework established under accounting standard FASB ASC 820 for measuring fair value of non-financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis but only in certain circumstances, such as a business combination or upon determination of an impairment.

Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:


•	Level 1 fair value inputs are quoted prices in active markets for identical instruments to which we have access.


•	Level 2 fair value inputs are inputs other than quoted prices included in Level 1 that are observable for similar instruments, either directly or indirectly, and appropriately consider counterparty creditworthiness in the valuations.


•	Level 3 fair value inputs reflect our best estimate of inputs and assumptions market participants would use in pricing an instrument at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate.

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Recently Issued Accounting Pronouncements

Adoption of New Standards

In the first quarter of 2020, the Financial Accounting Standards Board issued ASU 2020-04, Reference Rate Reform (Topic 848). ASU 2020-04 contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, the Company has elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

On January 1, 2020, we adopted ASU 2016-13, "Financial Instruments - Credit Losses," which introduced new guidance for an approach based on expected losses to estimate credit losses on certain types of financial instruments. It also modified the impairment model for available-for-sale debt securities and provides a simplified accounting model for purchased financial assets with credit deterioration since their origination. Instruments in scope include loans, held-to-maturity debt securities, and net investments in leases as well as reinsurance and trade receivables. In November 2018, the FASB issued ASU 2018-19, which clarifies that operating lease receivables are outside the scope of the new standard. The adoption of this standard did not have a material impact on the Company's consolidated financial statements.

In April 2020, the FASB issued a question-and-answer document focused on the application of lease accounting guidance to lease concessions provided as a result of COVID-19. Under Topic 842, Leases, the Company would have to evaluate, on a lease by lease basis, if a lease concession was the result of a new arrangement reached with the tenant or if a lease concession was under the enforceable rights and obligations within the existing lease agreement. The FASB clarified that entities may elect to not evaluate whether lease-related relief that lessors provide to mitigate the economic effects of COVID-19 is a lease modification. The Company made this election to evaluate COVID-related lease modifications on a disaggregated basis, with such election applied consistently to leases with similar characteristics and similar circumstances.

The Company entered into rent deferral agreements during the three months ended June 30, 2020 that provided for legally due rent to be paid back over a period of time, typically twelve to eighteen months. The Company continues to negotiate with certain tenants and expects to enter into additional rent deferral agreements during the three months ended September 30, 2020. Through August 4, 2020, the Company has deferred the payment by tenants of $6.0 million of contractually due rental income.

The future impact of such modifications is dependent upon the extent of lease concessions granted to tenants as a result of COVID-19 in future periods and the elections made by the Company at the time of entering into such concessions. There was not a material amount of rent abatement provided to tenants as a result of COVID-19 during the second quarter.

Note 3. Earnings Per Share or Unit

Basic earnings per share or unit is calculated based on the weighted average number of common shares or units outstanding during the period. Diluted earnings per share or unit is determined based on the weighted average common number of shares or units outstanding during the period combined with the incremental average common shares or units that would have been outstanding assuming the conversion of all potentially dilutive common shares or units into common shares or units as of the earliest date possible.

Potentially dilutive securities include outstanding options to acquire common shares; Limited Partner Units, which may be exchanged for either cash or common shares, at the Parent Company’s option and under certain circumstances; and deferred common share units, which may be credited to the personal accounts of non-employee trustees in lieu of the payment of cash compensation or the issuance of common shares to such trustees. Limited Partner Units have been omitted from the Parent Company’s denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the denominator would have no dilutive impact. Weighted average Limited Partner Units outstanding for the three and six months ended June 30, 2020 and 2019 were 2.2 million and 2.1 million, respectively.

Less than 0.1 million outstanding options to acquire common shares were excluded from the computations of diluted earnings per share or unit for the six months ended June 30, 2019 because their impact was not dilutive. Due to the net loss allocable to common shareholders and Common Unit holders for the three months ended June 30, 2020 and 2019, and six months ended June 30, 2020, no securities had a dilutive impact for these periods.

Note 4. Mortgage and Other Indebtedness

Mortgage and other indebtedness consisted of the following as of June 30, 2020 and December 31, 2019:



	As of June 30, 2020
	Principal		Unamortized Net Premiums		Unamortized Debt Issuance Costs			Total
Senior unsecured notes—fixed rate	$	550,000	$	—	$	(3,838	)	$	546,162
Unsecured revolving credit facility	200,000		—		(2,165		)	197,835
Unsecured term loan	250,000		—		(1,753		)	248,247
Mortgage notes payable—fixed rate	296,728		1,955		(33		)	298,650
Mortgage note payable—variable rate	55,470		—		(109		)	55,361
Total mortgage and other indebtedness	$	1,352,198	$	1,955	$	(7,898	)	$	1,346,255



	As of December 31, 2019
	Principal		Unamortized Net Premiums		Unamortized Debt Issuance Costs			Total
Senior unsecured notes - fixed rate	$	550,000	$	—	$	(4,231	)	$	545,769
Unsecured revolving credit facility	—		—		(2,625		)	(2,625		)
Unsecured term loans	250,000		—		(1,859		)	248,141
Mortgage notes payable - fixed rate	297,472		2,176		(40		)	299,608
Mortgage notes payable - variable rate	55,830		—		(143		)	55,687
Total mortgage and other indebtedness	$	1,153,302	$	2,176	$	(8,898	)	$	1,146,580

Consolidated indebtedness, including weighted average maturities and weighted average interest rates as of June 30, 2020, considering the impact of interest rate swaps, is summarized below:



	Outstanding Amount			Ratio		Weighted Average Interest Rate		Weighted Average Maturity (in years)
Fixed Rate Debt ¹	$	1,096,729		81	%	4.17	%	5.5
Variable Rate Debt	255,470			19	%	1.41	%	2.2
Net Debt Premiums and Issuance Costs, Net	(5,944		)	N/A		N/A		N/A
Total	$	1,346,255		100	%	3.65	%	4.8



____________________
1	Fixed rate debt includes, and variable rate date excludes, the portion of such debt that has been hedged by interest rate derivatives. As of June 30, 2020, $250 million in variable rate debt is hedged for a weighted average of 2.7 years.

Mortgage indebtedness is collateralized by certain real estate properties and leases, and is generally due in monthly installments of interest and principal and matures over various terms through 2030.

Variable interest rates on mortgage indebtedness is based on LIBOR plus 160 basis points. At June 30, 2020, the one-month LIBOR interest rate was 0.16%. Fixed interest rates on mortgage indebtedness range from 3.78% to 5.73%.

Debt Issuance Costs

Debt issuance costs are amortized on a straight-line basis over the terms of the respective loan agreements.

The accompanying consolidated statements of operations include amortization of debt issuance costs as a component of interest expense as follows:



	Six Months Ended June 30,
	2020		2019
Amortization of debt issuance costs	$	1,172	$	1,514

Unsecured Revolving Credit Facility and Unsecured Term Loans

As of June 30, 2020, we had an unsecured revolving credit facility (the "Credit Facility") with a total commitment of $600 million that matures in April 2023 (inclusive of one twelve-month extension option).

The Operating Partnership has the option to increase the borrowing availability of the Credit Facility to $1.2 billion, subject to certain conditions, including obtaining commitments from lenders.

On October 25, 2018, the Operating Partnership entered into a Term Loan Agreement (the “Agreement”) with KeyBank National Association, as Administrative Agent (the “Agent”), and the other lenders party thereto, providing for an unsecured term loan facility of up to $250 million (the “Term Loan”). The Term Loan ranks pari passu with the Operating Partnership’s existing $600 million unsecured revolving credit facility documented in the Operating Partnership’s Fifth Amended and Restated Credit Agreement, dated as of July 28, 2016, as amended (the “Existing Credit Agreement”), and other unsecured indebtedness of the Operating Partnership.

The Term Loan has a scheduled maturity date of October 24, 2025, which maturity date may be extended for up to three additional periods of one year at the Operating Partnership’s option subject to certain conditions.

The Operating Partnership has the option to increase the Term Loan to $300 million, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the Agreement, to provide such increased amounts. The Operating Partnership is permitted to prepay the Term Loan in whole or in part, at any time, subject to a prepayment fee if prepaid on or before October 25, 2023.

In March 2020, we borrowed $300 million on the Credit Facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 pandemic. Proceeds from the Credit Facility borrowings may in the future be used for working capital, general corporate or other purposes permitted under the Credit Facility. In June 2020, we repaid $100 million on the Credit Facility. As of June 30, 2020, there was $200 million outstanding under the Credit Facility. Additionally, we had letters of credit outstanding which totaled $1.2 million, against which no amounts were advanced as of June 30, 2020.

The amount that we may borrow under our Credit Facility is limited by the value of the assets in our unencumbered asset pool. As of June 30, 2020, the value of the assets in our unencumbered asset pool, calculated pursuant to the Credit Facility agreement, was $1.4 billion. Considering outstanding borrowings on the line of credit, term loans, unsecured notes and letters of credit, we had $354.2 million available under our Credit Facility for future borrowings as of June 30, 2020.

Our ability to borrow under the Credit Facility is subject to our compliance with various restrictive and financial covenants, including with respect to liens, indebtedness, investments, dividends, mergers and asset sales. As of June 30, 2020, we were in compliance with all such covenants.

Senior Unsecured Notes

The Operating Partnership has $550 million of senior unsecured notes maturing at various dates through September 2027 (the "Notes"). The Notes contain a number of customary financial and restrictive covenants. As of June 30, 2020, we were in compliance with all such covenants.

Fair Value of Fixed and Variable Rate Debt

As of June 30, 2020, the estimated fair value of our fixed rate debt was $837.5 million compared to the book value of $846.7 million. The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments, which ranged from 3.49% to 4.07%. As of June 30, 2020, the fair value of variable rate debt was $487.2 million compared to the book value of $505.5 million. The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments, which ranged from 1.28% to 3.64%.

Note 5. Derivative Instruments, Hedging Activities and Other Comprehensive Income

In order to manage potential future variable interest rate risk, we enter into interest rate derivative agreements from time to time. All such agreements are designated as cash flow hedges. We do not use interest rate derivative agreements for trading or speculative purposes. The agreements with each of our derivative counterparties provide that, in the event of default on any of our indebtedness, we could also be declared in default on our derivative obligations.

As of June 30, 2020, we were party to various cash flow derivative agreements with notional amounts totaling $250.0 million. These derivative agreements effectively fix the interest rate underlying certain variable rate debt instruments over expiration dates through 2025. Utilizing a weighted average interest rate spread over LIBOR on all variable rate debt resulted in fixing the weighted average interest rate at 4.20%.

These interest rate derivative agreements are the only assets or liabilities that we record at fair value on a recurring basis. The valuation of these assets and liabilities is determined using widely accepted techniques including discounted cash flow analysis. These techniques consider the contractual terms of the derivatives (including the period to maturity) and use observable market-based inputs such as interest rate curves and implied volatilities. We also incorporate credit valuation adjustments into the fair value measurements to reflect nonperformance risk on both our part and that of the respective counterparties.

We determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. As of June 30, 2020 and December 31, 2019, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined the credit valuation adjustments were not significant to the overall valuation of our derivatives. As a result, we determined our derivative valuations were classified within Level 2 of the fair value hierarchy.

As of June 30, 2020, the estimated fair value of our interest rate derivatives represented a net liability of $35.4 million, including accrued interest payable of $0.4 million. As of June 30, 2020, this was reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheets. At December 31, 2019, the estimated fair value of our interest rate hedges was a liability of $16.8 million, including accrued interest of $0.1 million. As of December 31, 2019, this was reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheets.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to earnings over time as the hedged items are recognized in earnings. Approximately $1.1 million was reclassified as a decrease to earnings during the three months ended June 30, 2020, and $0.3 million was reclassified as an increase to earnings during the three months ended June 30, 2019. As the interest payments on our hedges are made over the next 12 months, we estimate the increase to interest expense to be $5.2 million, assuming the current LIBOR curve.

Unrealized gains and losses on our interest rate derivative agreements are the only components of the change in accumulated other comprehensive loss.

Note 6. Shareholders’ Equity

Distribution Payments

Our Board of Trustees declared a cash distribution of $0.052 for the second quarter of 2020 to common shareholders and Common Unit holders of record as of July 2, 2020. The distribution was paid on July 9, 2020.

Note 7. Deferred Costs and Intangibles, net

Deferred costs consist primarily of acquired lease intangible assets, broker fees and capitalized commissions incurred in connection with lease originations. Deferred leasing costs, lease intangibles and similar costs are amortized on a straight-line basis over the terms of the related leases. At June 30, 2020 and December 31, 2019, deferred costs consisted of the following:



	June 30, 2020			December 31, 2019
Acquired lease intangible assets	$	57,748		$	60,862
Deferred leasing costs and other	59,098			62,109
	116,846			122,971
Less—accumulated amortization	(50,375		)	(49,814		)
Total	$	66,471		$	73,157

Amortization of deferred leasing costs, leasing intangibles and other is included in depreciation and amortization expense in the accompanying consolidated statements of operations. The amortization of above market lease intangibles is included as a reduction to revenue. The amounts of such amortization included in the accompanying consolidated statements of operations are as follows:



	Six Months Ended June 30,
	2020		2019
Amortization of deferred leasing costs, lease intangibles and other	$	7,131	$	7,258
Amortization of above market lease intangibles	483		701

Note 8. Deferred Revenue, Intangibles, Net and Other Liabilities

Deferred revenue and other liabilities consist of the unamortized fair value of below market lease liabilities recorded in connection with purchase accounting, retainage payables for development and redevelopment projects, and tenant rent payments received in advance of the month in which they are due. The amortization of below market lease liabilities is recognized as revenue over the remaining life of the leases (including option periods for leases with below market renewal options) through 2046. Tenant rent payments received in advance are recognized as revenue in the period to which they apply, which is typically the month following their receipt.

At June 30, 2020 and December 31, 2019, deferred revenue, intangibles, net and other liabilities consisted of the following:



	June 30, 2020		December 31, 2019
Unamortized in-place lease liabilities	$	48,224	$	50,072
Retainages payable and other	2,716		2,254
Tenant rents received in advance	8,579		10,839
Lease liabilities	26,770		27,015
Total	$	86,289	$	90,180

The amortization of below market lease intangibles is included as a component of minimum rent in the accompanying consolidated statements and was $1.8 million and $2.9 million for the six months ended June 30, 2020 and 2019, respectively.

Note 9. Commitments and Contingencies

Other Commitments and Contingencies

We are not subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against us. We are parties to routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such matters will not have a material adverse impact on our consolidated financial condition, results of operations or cash flows taken as a whole.

We are obligated under various completion guarantees with certain lenders and lease agreements with tenants to complete all or portions of a development and tenant-specific space currently under construction. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through borrowings on the Credit Facility.

In connection with the joint venture that owns the Embassy Suites at Notre Dame, we provided a repayment guaranty on a $33.8 million construction loan, of which our share is $11.8 million (reflecting our 35% ownership interest in the hotel). The guaranty's term is through the July 1, 2024 maturity date of the loan. The outstanding loan balance as of June 30, 2020 is $33.6 million and our share is $11.8 million. The loan is secured by the hotel.

As of June 30, 2020, we had outstanding letters of credit totaling $1.2 million. At that date, there were no amounts advanced against these instruments.

Note 10. Disposals of Operating Properties and Impairment Charge

There were no operating properties sold during the six months ended June 30, 2020.

During the three months ended June 30, 2019, we sold eight operating properties for aggregate gross proceeds of $244.0 million and a net gain of $24.1 million.

During the three months ended March 31, 2019, we sold our Whitehall Pike operating property in Bloomington, Indiana for aggregate gross proceeds of $13.5 million and a net gain of $6.6 million.

As of June 30, 2019, in connection with the preparation and review of the financial statements, we evaluated five operating properties for impairment and recorded impairment charges totaling $25.1 million due to changes in facts and circumstances underlying the Company's expected future hold periods of these properties. A shortening of the expected future hold period is considered an impairment indicator under applicable accounting rules, and this indicator caused us to further evaluate the carrying value of the property. We concluded the estimated undiscounted cash flows over the expected holding periods did not exceed the carrying value of each asset, leading to the charges during the quarter. We estimated the fair value of each property, which aggregated $152.9 million, using the market approach by utilizing recent sales offers without adjustment.

As of March 31, 2019, in connection with the preparation and review of the financial statements, we evaluated an operating property for impairment and recorded a $4.1 million impairment charge due to changes in our estimate of the fair value for a property in which we had previously concluded that undiscounted cash flows were insufficient to recover the carrying value. We estimated the fair value of the property to be $10.0 million using the market approach by utilizing a recent sales offer without adjustment. We compared the estimated fair value to the carrying value, which resulted in the recording of a non-cash impairment charge of $4.1 million for the three months ended March 31, 2019. This property was sold in May 2019.

Note 11. Impact of COVID-19

Since first being reported in December 2019, the novel strain of coronavirus (COVID-19) has spread globally, including to every state in the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic, and subsequently, the United States declared a national emergency with respect to COVID-19.

The Company is closely monitoring the impact of the COVID-19 pandemic on all aspects of its business and how it may impact the Company's tenants and business partners. Certain segments of retailers and the Company experienced significant disruption during the three months ended June 30, 2020, and, going forward, the potential adverse effect of the COVID-19 pandemic on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market, global economy, and financial markets, and the extent of such effects, will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

The following operating trends, combined with macroeconomic trends such as a global economic slowdown or recession, reduced consumer spending and increased unemployment, lead us to believe that our operating results for the rest of 2020 and potentially beyond will continue to be significantly affected by COVID-19:


•	As of June 30, 2020, over 90% of our tenants have reopened. However, many of these retailers are operating in a lower capacity than normal due to COVID-19. Store closures or the inability to return to full capacity, particularly if for an extended period, increase the risk of business failures and lease defaults.


•	As of August 5, 2020, we have collected approximately 80% of rent billings for the three months ended June 30, 2020 and 87% of July rent billings.


•	Many of our tenants have taken on additional debt as a result of COVID-19, including loans administered by the Small Business Administration. To the extent this debt is not forgiven, the increased debt load may hamper their ability to continue to operate and to pay rent, which could cause the Company to realize decreased cash flow and increased vacancies at its properties

Starting in March and continuing through July 2020, the Company received rent relief requests from a significant proportion of its tenants. Some tenants have asserted various legal arguments that they allege relieve them of the obligation to pay rent during the pandemic; the Company and its legal advisers generally disagree with these legal arguments. The Company has evaluated and will continue to evaluate tenant requests for rent relief based on many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, the Company's assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors.

As a result of this evaluation, the Company has agreed to defer rent for approximately 300 of its tenants subject to certain conditions. As of August 4, 2020, the Company had deferred the collection of $6.0 million of rental income. To the extent the Company agrees to defer rent or is otherwise unable to collect rent for certain periods, the Company will realize decreased cash flow, which could significantly decrease the cash available for the Company's operating and capital uses.

Note 12. Subsequent Events

Courthouse Shadows

On July 30, 2020, the Company sold its Courthouse Shadows redevelopment property for gross proceeds of approximately $14.0 million. As of June 30, 2020, total assets and liabilities for this property were approximately $10.8 million and $0.1 million, respectively.

Credit Facility

On August 4, 2020, the Company repaid $100 million on its Credit Facility. Subsequent to the pay down, there was $100 million outstanding under the Credit Facility.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in connection with the accompanying historical financial statements and related notes thereto. In this discussion, unless the context suggests otherwise, references to “our Company,” “we,” “us,” and “our” mean Kite Realty Group Trust and its direct and indirect subsidiaries, including Kite Realty Group, L.P.

Cautionary Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by us, contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated. Future events and actual results, performance, transactions or achievements, financial or otherwise, may differ materially from the results, performance, transactions or achievements, financial or otherwise, expressed or implied by the forward-looking statements.

Currently, one of the most significant factors that could cause actual outcomes to differ significantly from our forward-looking statements is the potential adverse effect of the current pandemic of the novel coronavirus, or COVID-19, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets. The effects of COVID-19 have caused many of our tenants to close stores, reduce hours or significantly limit service, which could make it difficult for them to meet their rent obligations, and therefore potentially have a significant impact on us for the remainder of 2020 and potentially beyond. The extent to which the COVID-19 pandemic impacts us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, investors are cautioned to interpret many of the risks identified under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.

Additional risks, uncertainties and other factors that might cause such differences, some of which could be material, include but are not limited to:


•	national and local economic, business, real estate and other market conditions, particularly in connection with low or negative growth in the U.S. economy as well as economic uncertainty;


•	financing risks, including the availability of, and costs associated with, sources of liquidity;


•	our ability to refinance, or extend the maturity dates of, our indebtedness;


•	the level and volatility of interest rates;


•	the financial stability of tenants, including their ability to pay rent and the risk of tenant insolvency and bankruptcy;


•	the competitive environment in which we operate;


•	acquisition, disposition, development and joint venture risks;


•	property ownership and management risks;


•	our ability to maintain our status as a real estate investment trust for federal income tax purposes;


•	potential environmental and other liabilities;


•	impairment in the value of real estate property we own;


•	the actual and perceived impact of e-commerce on the value of shopping center assets;


•	risks related to the geographical concentration of our properties in Florida, Indiana, Texas, Nevada and North Carolina;


•	civil unrest, acts of terrorism or war, acts of God, climate change, epidemics, pandemics (including COVID-19), natural disasters and severe weather conditions such as hurricanes, tropical storms, tornadoes, earthquakes, droughts, floods and fires, that may result in underinsured or uninsured losses;


•	changes in laws and government regulations;


•	governmental orders affecting the use of our properties or the ability of our tenants to operate;


•	possible short-term or long-term changes in consumer behavior due to COVID-19 and the fear of future pandemics;


•	insurance costs and coverage;


•	risks associated with cybersecurity attacks and the loss of confidential information and other business disruptions;


•	other factors affecting the real estate industry generally; and


•	other risks identified in this Quarterly Report on Form 10-Q and, from time to time, in other reports we file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate, including, in particular, the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.

We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Our Business and Properties

Kite Realty Group Trust is a publicly-held real estate investment trust which, through its majority-owned subsidiary, Kite Realty Group, L.P., owns interests in various operating subsidiaries and joint ventures engaged in the ownership, operation, acquisition, development, and redevelopment of high-quality neighborhood and community shopping centers and other real estate assets in select markets in the United States. We derive revenues primarily from activities associated with the collection of contractual rents and reimbursement payments from tenants at our properties. Our operating results therefore depend materially on, among other things, the ability of our tenants to make required lease payments, the health and resilience of the United States retail sector, interest rate volatility, job growth and real estate market and overall economic conditions.

At June 30, 2020, we owned interests in 90 operating and redevelopment properties totaling approximately 17.6 million square feet. We also owned two development project under construction as of this date.

At June 30, 2019, we owned interests in 103 operating and redevelopment properties totaling approximately 19.9 million square feet. We also owned one development project under construction as of this date.

Impacts on Business from COVID-19

The current pandemic of the novel coronavirus, or COVID-19, and the public health measures that have been undertaken in response have had a significant adverse impact on many of our tenants and on our business. The effects of COVID-19, including related government restrictions, mandatory quarantines, “shelter in place” orders, border closures, “social distancing” practices and other travel and gathering restrictions and practices, have caused many of our tenants to close stores, reduce hours or significantly limit service, and have resulted in a dramatic increase in national unemployment that may create headwinds for our tenants even after the current restrictions are lifted. Because we cannot estimate when the COVID-19 pandemic and the containment measures will end or what short-term or long-term impact the pandemic may have on consumer behavior, we cannot estimate the ultimate operational and financial impact of COVID-19 on our business. However, the following operating trends, combined with macroeconomic trends such as a global economic slowdown or recession, reduced consumer spending and increased unemployment, lead us to believe that our operating results for the remainder of 2020 and beyond will continue to be more significantly affected by COVID-19:


•	As of June 30, 2020, over 90% of our tenants have reopened. However, many of these retailers are operating in a lower capacity than normal due to COVID-19. Store closures or the inability to return to full capacity, particularly if for an extended period, increase the risk of business failures and lease defaults.


•	As of August 5, 2020, we have collected approximately 80% of rent billings for three months ended June 30, 2020, and 87% of July rent billings.

•

We have received rent relief requests from many tenants as a result of COVID-19. Some tenants have asserted various legal arguments that they allege relieve them of the obligation to pay rent during the pandemic; the Company and its legal advisers generally disagree with these legal arguments. The Company has evaluated and will continue to evaluate tenant requests for rent relief based on many factors, including the tenant’s financial strength, the tenant’s operating history, potential co-tenancy impacts, the tenant’s contribution to the shopping center in which it operates, the Company’s assessment of the tenant’s long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors. As a result of this evaluation, the Company has agreed to defer rent for many of its tenants, primarily small-shop tenants, subject to certain conditions. To the extent the Company agrees to defer rent or is otherwise unable to collect rent for certain periods, it could significantly decrease the cash available for the Company’s operating and capital uses.


•	Many of our tenants have taken on additional debt as a result of COVID-19, including loans administered by the Small Business Administration. To the extent this debt is not forgiven, the increased debt load may hamper their ability to continue to operate and to pay rent, which could cause the Company to realize decreased cash flow and increased vacancies at its properties

We have taken various steps to mitigate the impact of COVID-19 on our liquidity, including deferrals of certain planned capital expenditures for 2020 and aggregate outstanding borrowings of $200 million on our revolving credit facility as a precautionary measure to increase liquidity. As of the date of this report, we have approximately $232 million in cash on hand, $354.2 million of remaining availability under our revolving credit facility (based on the unencumbered pool allocated thereto) and no debt maturities until 2022. In addition in April 2020, we launched a program to provide an aggregate of up to $5 million in expedited, low-interest loans to select small-business tenants of the Company to help navigate the current environment. To date, we have loaned approximately $2.1 million under this program.

The effects of COVID-19 have triggered a global and domestic economic recession, and if the recession continues well beyond the lifting of government restrictions related to COVID-19, many of our tenants could face financial distress. Historically, economic indicators such as GDP growth, consumer confidence and employment are correlated with demand for certain of our tenants’ products and services. These conditions could increase the number of our tenants that are unable to meet their lease obligations to us and could limit the demand for our space from new tenants.

We expect the significance of the COVID-19 pandemic, including the extent of its effects on our business, financial performance and condition, operating results and cash flows and the economic slowdown, to be dictated by, among other things, its duration, the success of efforts to contain it, the success of efforts to find effective drugs or vaccines and the impact of actions taken in response. These uncertainties make it difficult to predict operating results for our business for the remainder of 2020. Therefore, there can be no assurances that we will not experience further declines in revenues, net income or FFO, which could be material. For more information, see “Part II - Item 1A. Risk Factors” included elsewhere in this Quarterly Report on Form 10-Q.

Recent Activities

Operating Activity

During the second quarter of 2020, we executed 35 new and renewal leases totaling 302,411 square feet. New leases were signed for 5 individual spaces for 44,650 square feet of gross leasable area ("GLA"), while renewal leases were signed on 30 individual spaces for 257,761 square feet of GLA. Year to date, we executed 77 new and renewal leases totaling 558,524 square feet. New leases were signed for 20 individual spaces for 168,885 square feet of GLA, while renewal leases were signed on 57 individual spaces for 389,639 square feet of GLA.

For comparable new and renewal leases signed in the second quarter of 2020, which are defined as those for which the space was occupied by a tenant within the last 12 months, we achieved a blended cash rent spread of 19.9% and a blended GAAP rent spread of 29.3%.

Results of Operations

The comparability of results of operations for the three and six months ended June 30, 2020 and 2019 is affected by our redevelopment activities, acquisition activities and operating property dispositions during these periods. Therefore, we believe it is useful to review the comparisons of our results of operations for these periods in conjunction with the discussion of our activities during those periods, which is set forth below.

Property Dispositions

Since January 1, 2019, we sold the following operating properties, including as part of the "Project Focus" program undertaken by the Company in 2019 to dispose of certain non-core assets:



Property Name	MSA	Disposition Quarter	Owned GLA
Whitehall Pike	Bloomington, IN	Q1 2019	128,997
Beechwood Promenade	Athens, GA	Q2 2019	297,369
Village at Bay Park	Green Bay, WI	Q2 2019	82,254
Lakewood Promenade	Jacksonville, FL	Q2 2019	196,655
Palm Coast Landing	Palm Coast, FL	Q2 2019	168,352
Lowe's - Perimeter Woods ¹	Charlotte, NC	Q2 2019	N/A
Cannery Corner	Las Vegas, NC	Q2 2019	30,738
Temple Terrace	Tampa, FL	Q2 2019	90,328
University Town Center	Oklahoma City, OK	Q2 2019	348,877
Gainesville Plaza	Gainesville, FL	Q3 2019	162,189
Bolton Plaza	Jacksonville, FL	Q3 2019	154,555
Eastgate Plaza	Las Vegas, NV	Q3 2019	96,609
Burnt Store	Punta Gorda, FL	Q3 2019	95,625
Landstown Commons	Virginia Beach, VA	Q3 2019	398,149
Lima Marketplace	Fort Wayne, IN	Q3 2019	100,461
Hitchcock Plaza	Aiken, SC	Q3 2019	252,218
Merrimack Village Center	Manchester, NH	Q3 2019	78,892
Publix at Acworth	Atlanta, GA	Q4 2019	69,628
The Centre at Panola	Atlanta, GA	Q4 2019	73,075
Beacon Hill	Crown Point, IN	Q4 2019	56,820
Bell Oaks Centre	Evansville, IN	Q4 2019	94,985
Boulevard Crossing	Kokomo, IN	Q4 2019	124,634
South Elgin Commons	Chicago, IL	Q4 2019	128,000



____________________
1	The asset sold was a component of our Perimeter Woods property that was ground leased to Lowe's Home Improvement Center.

Redevelopment Activities

The following properties were under active redevelopment at various times during the period from January 1, 2019 through June 30, 2020:



Property Name	MSA	Transition to Redevelopment¹	Transition to Operations	Owned GLA
Hamilton Crossing Centre²	Indianapolis, IN	June 2014	Pending	92,283
The Corner²	Indianapolis, IN	December 2015	Pending	26,500
Glendale Town Center ²	Indianapolis, IN	March 2019	Pending	393,002



____________________
1	Transition date represents the date the property was transferred from our operating portfolio into redevelopment status.
2	This property has been identified as a redevelopment property and is not included in the operating portfolio or the same property pool.

Acquisition Activities

The following properties were acquired at various times during the period from January 1, 2019 through June 30, 2020:



Property Name	MSA	Acquisition Quarter	Owned GLA
Pan Am Plaza Parking Garage	Indianapolis, IN	Q1 2019	N/A
Nora Plaza	Indianapolis, IN	Q3 2019	139,743

Comparison of Operating Results for the Three Months Ended June 30, 2020 to the Three Months Ended June 30, 2019

The following table reflects income statement line items from our consolidated statements of operations for the three months ended June 30, 2020 and 2019.



	Three Months Ended June 30,
($ in thousands)	2020			2019			Net change 2019 to 2020
Revenue:
Rental income	$	61,538		$	79,795		$	(18,257	)
Other property related revenue	1,676			1,594			82
Fee income	91			91			—
Total revenue	63,305			81,480			(18,175		)
Expenses:
Property operating	9,319			11,468			(2,149		)
Real estate taxes	8,254			9,929			(1,675		)
General, administrative, and other	6,578			7,037			(459		)
Depreciation and amortization	31,409			34,713			(3,304		)
Impairment charge	—			25,107			(25,107		)
Total expenses	55,560			88,254			(32,694		)
Gains on sale of operating properties, net	623			24,092			(23,469		)
Operating income	8,368			17,318			(8,950		)
Interest expense	(13,271		)	(16,124		)	2,853
Income tax benefit of taxable REIT subsidiary	202			66			136
Loss on debt extinguishment	—			(2,577		)	2,577
Equity in loss of unconsolidated subsidiaries	(436		)	(238		)	(198		)
Other income (expense), net	351			(142		)	493
Consolidated net income	(4,786		)	(1,697		)	(3,089		)
Net income attributable to noncontrolling interests	17			(99		)	116
Net (loss) income attributable to Kite Realty Group Trust	$	(4,769	)	$	(1,796	)	$	(2,973	)

Property operating expense to total revenue ratio	14.7		%	14.1		%

Rental income (including tenant reimbursements) decreased $18.3 million, or 22.9%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	$	(10,995	)
Properties under redevelopment or acquired during 2019 and/or 2020	177
Properties fully operational during 2019 and 2020 and other	(7,439		)
Total	$	(18,257	)

The net decrease of $7.4 million in rental income for properties fully operational during 2019 and 2020 is primarily due to a reserve of approximately $6.6 million for certain non-cash straight-line rent and billed rent receivables related to industries that are financially distressed due to the COVID-19 pandemic.

Other property related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity. This revenue increased by $0.1 million, due to gains on the sale of one parcel of land peripheral to an operating property mainly offset by lower parking revenue during 2020.

The Company generated fee income of $0.1 million during the three months ended June 30, 2020 and 2019, respectively, from property management services provided to unconsolidated joint ventures.

Property operating expenses decreased $2.1 million, or 18.7%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	$	(1,665	)
Properties under redevelopment or acquired during 2019 and/or 2020	71
Properties fully operational during 2019 and 2020 and other	(555		)
Total	$	(2,149	)

The net decrease of $0.6 million in property operating expenses for properties fully operational during 2019 and 2020 is primarily due to a deliberate reduction in certain operating expense spend in 2020 while certain retailers were closed. These provided savings of $0.9 million that were partially offset by an increase in insurance expense of $0.3 million. As a percentage of revenue, property operating expenses increased between periods from 14.1% to 14.7%. This increase is mainly driven by the $5.0 million reserve for non-cash straight line rent and billed receivables recorded for the three months ended June 30, 2020.

Real estate taxes decreased $1.7 million, or 16.9%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	(1,200		)
Properties under redevelopment or acquired during 2019 and/or 2020	(34		)
Properties fully operational during 2019 and 2020 and other	(441		)
Total	$	(1,675	)

The net $0.4 million decrease in real estate taxes for properties fully operational during 2019 and 2020 is primarily due to lower assessments at certain properties in the portfolio and with successful appeals at certain properties located in Texas. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected in rental income.

General, administrative and other expenses decreased $0.5 million, or 6.5%. The decrease is due to reduced leasing-related travel and conference costs due to the COVID-19 pandemic.

Depreciation and amortization expense decreased $3.3 million, or 9.5%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	$	(4,378	)
Properties under redevelopment or acquired during 2019 and/or 2020	401
Properties fully operational during 2019 and 2020 and other	673
Total	$	(3,304	)

The net increase of $0.7 million in depreciation and amortization at properties fully operational during 2019 and 2020 is primarily due to accelerated depreciation for certain tenants that vacated during the quarter.

As of June 30, 2019, in connection with the preparation and review of the financial statements, we evaluated five operating properties for impairment and recorded $25.1 million impairment charges due to changes in facts and circumstances underlying the Company's expected future hold period for these properties. A shortening of the expected future hold period is considered an impairment indicator under applicable accounting rules, and this indicator caused us to further evaluate the carrying value of the property. We concluded the estimated undiscounted cash flows over the expected holding periods did not exceed the carrying value of each asset, leading to the charges during the quarter. We estimated the fair value of each property, which aggregated to be $152.9 million using the market approach by utilizing a recent sales offer without adjustment.

Interest expense decreased $2.9 million or 17.7%. The decrease is primarily due to a reduction in outstanding borrowings using proceeds from our property sales partially offset by interest costs associated with the $300 million line draw that was made in March 2020.

Comparison of Operating Results for the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019

The following table reflects income statement line items from our consolidated statements of operations for the six months ended June 30, 2020 and 2019.



	Six Months Ended June 30,
($ in thousands)	2020			2019			Net change 2019 to 2020
Revenue:
Rental income	$	127,066		$	162,152		$	(35,086	)
Other property related revenue	5,956			2,649			3,307
Fee income	195			194			1
Total revenue	133,217			164,995			(31,778		)
Expenses:
Property operating	20,120			22,898			(2,778		)
Real estate taxes	17,188			20,135			(2,947		)
General, administrative, and other	13,504			13,814			(310		)
Depreciation and amortization	62,877			69,348			(6,471		)
Impairment charge	—			29,184			(29,184		)
Total expenses	113,689			155,379			(41,690		)
Gains on sale of operating properties, net	1,666			30,679			(29,013		)
Operating income	21,194			40,295			(19,101		)
Interest expense	(25,564		)	(32,582		)	7,018
Income tax benefit of taxable REIT subsidiary	306			148			158
Loss on debt extinguishment	—			(2,577		)	2,577
Equity in loss of unconsolidated subsidiaries	(839		)	(665		)	(174		)
Other income (expense), net	249			(328		)	577
Consolidated net income	(4,654		)	4,291			(8,945		)
Net income attributable to noncontrolling interests	(188		)	(372		)	184
Net (loss) income attributable to Kite Realty Group Trust	$	(4,842	)	$	3,919		$	(8,761	)

Property operating expense to total revenue ratio	15.1		%	13.9		%

Rental income (including tenant reimbursements) decreased $35.1 million, or 21.6%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	$	(25,626	)
Properties under redevelopment or acquired during 2019 and/or 2020	625
Properties fully operational during 2019 and 2020 and other	(10,085		)
Total	$	(35,086	)

The net decrease of $10.1 million in rental income for properties fully operational during 2019 and 2020 is primarily due to a reserve of approximately $10.4 million for certain non-cash straight-line rent and billed rent receivables related to industries that are financially distressed due to the COVID-19 pandemic.

Other property related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity. This revenue increased by $3.3 million, due to gains on the sale of three parcels of land peripheral to an operating property mainly offset by lower parking revenue during 2020.

The Company generated fee income of $0.2 million during the six months ended June 30, 2020 and 2019, respectively, from property management services provided to unconsolidated joint ventures.

Property operating expenses decreased $2.8 million, or 12.1%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	$	(3,499	)
Properties under redevelopment or acquired during 2019 and/or 2020	160
Properties fully operational during 2019 and 2020 and other	561
Total	$	(2,778	)

The net increase of $0.6 million in property operating expenses for properties fully operational during 2019 and 2020 is primarily due to an increase in insurance expense of $0.7 million partially offset by a deliberate reduction in certain operating expense spend starting in March 2020 while certain retailers were closed. As a percentage of revenue, property operating expenses increased between periods from 13.9% to 15.1%. This increase is mainly driven by the $10.4 million reserve for non-cash straight line rent and billed receivables recorded for the six months ended June 30, 2020.

Real estate taxes decreased $2.9 million, or 14.6%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	(2,848		)
Properties under redevelopment or acquired during 2019 and/or 2020	129
Properties fully operational during 2019 and 2020 and other	(228		)
Total	$	(2,947	)

The net $0.2 million decrease in real estate taxes for properties fully operational during 2019 and 2020 is primarily due to lower assessments at certain properties in the portfolio and with successful appeals at certain properties located in Texas. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected in rental income.

General, administrative and other expenses decreased $0.3 million, or 2.2%. The decrease is due to reduced leasing-related travel and conference costs due to the COVID-19 pandemic.

Depreciation and amortization expense decreased $6.5 million, or 9.3%, due to the following:



	Net change 2019 to 2020
Properties sold during 2019	$	(10,307	)
Properties under redevelopment or acquired during 2019 and/or 2020	733
Properties fully operational during 2019 and 2020 and other	3,103
Total	$	(6,471	)

The net increase of $3.1 million in depreciation and amortization at properties fully operational during 2019 and 2020 is primarily due to accelerated depreciation for certain tenants that vacated during 2020 along with depreciation related to assets placed in service related to recent anchor commencements.

During the six months ended June 30, 2019, in connection with the preparation and review of the financial statements, we evaluated six operating properties for impairment and recorded $29.2 million impairment charges due to changes in facts and circumstances underlying the Company's expected future hold period for these properties. A shortening of the expected future hold period is considered an impairment indicator under applicable accounting rules, and this indicator caused us to further evaluate the carrying value of the property. We concluded the estimated undiscounted cash flows over the expected holding periods did not exceed the carrying value of each asset, leading to the charges during the six months ended June 30, 2019.

Interest expense decreased $7.0 million or 21.5%. The decrease is primarily due to a reduction in outstanding borrowings using proceeds from our property sales partially offset by interest costs associated with the $300 million line draw that was made in March 2020.

Net Operating Income and Same Property Net Operating Income

We use property net operating income (“NOI”), a non-GAAP financial measure, to evaluate the performance of our properties. We define NOI as income from our real estate, including lease termination fees received from tenants, less our property operating expenses. NOI excludes amortization of capitalized tenant improvement costs and leasing commissions and certain corporate level expenses. We believe that NOI is helpful to investors as a measure of our operating performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance, such as depreciation and amortization, interest expense, and impairment, if any.

The Company also uses same property NOI ("Same Property NOI"), a non-GAAP financial measure, to evaluate the performance of our properties. Same Property NOI excludes properties that have not been owned for the full period presented. It also excludes net gains from outlot sales, straight-line rent revenue, lease termination income in excess of lost rent, amortization of lease intangibles and significant prior period expense recoveries and adjustments, if any. When the Company receives payments in excess of any accounts receivable in exchange for terminating a lease, Same Property NOI will include such excess payments as monthly rent until the earlier of the following: the expiration of 12 months or the start date of a replacement tenant. The Company believes that Same Property NOI is helpful to investors as a measure of our operating performance because it includes only the NOI of properties that have been owned and fully operational for the full quarters presented. The Company believes such presentation eliminates disparities in net income due to the acquisition or disposition of properties during the particular periods presented and thus provides a more consistent comparison of our properties. Same Property NOI includes the results of properties that have been owned for the entire current and prior year reporting periods.

NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indicators of our financial performance. Our computation of NOI and Same Property NOI may differ from the methodology used by other REITs, and therefore may not be comparable to such other REITs.

When evaluating the properties that are included in the same property pool, the Company has established specific criteria for determining the inclusion of properties acquired or those recently under development. An acquired property is included in the same property pool when there is a full quarter of operations in both years subsequent to the acquisition date. Development and redevelopment properties are included in the same property pool four full quarters after the properties have been transferred to the operating portfolio. A redevelopment property is first excluded from the same property pool when the execution of a redevelopment plan is likely and the Company a) begins recapturing space from tenants or b) the contemplated plan significantly impacts the operations of the property. For the quarter ended June 30, 2020, the Company excluded four redevelopment properties from the same property pool that met these criteria and were owned in both comparable periods. In addition, the Company excluded one recently acquired property from the same property pool.

The following table reflects Same Property NOI and a reconciliation to net income attributable to common shareholders for the three and six months ended June 30, 2020 and 2019:



	Three Months Ended June 30,							Six Months Ended June 30,
($ in thousands)	2020			2019			% Change	2020			2019			% Change
Number of properties for the quarter¹	82			82

Leased percentage at period end	94.0		%	95.9		%		94.0		%	95.9		%
Economic Occupancy percentage²	92.1		%	92.5		%		93.0		%	92.3		%

Same Property NOI	$	42,887		$	47,536		(9.8)%	$	90,734		$	94,935		(4.4)%

Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure:
Net operating income - same properties	$	42,887		$	47,536			$	90,734		$	94,935
Net operating income - non-same activity³	2,845			12,547				5,175			27,027
Other income (expense), net	117			(314		)		(284		)	(845		)
General, administrative and other	(6,578		)	(7,037		)		(13,504		)	(13,814		)
Impairment charges	—			(25,107		)		—			(29,184		)
Depreciation and amortization expense	(31,409		)	(34,713		)		(62,877		)	(69,348		)
Interest expense	(13,271		)	(16,124		)		(25,564		)	(32,582		)
Loss on debt extinguishment	—			(2,577		)		—			(2,577		)
Gain on sales of operating properties	623			24,092				1,666			30,679
Net loss (income) attributable to noncontrolling interests	17			(99		)		(188		)	(372		)
Net (loss) income attributable to common shareholders	$	(4,769	)	$	(1,796	)		$	(4,842	)	$	3,919



____________________
1	Same Property NOI excludes (i) The Corner, Courthouse Shadows, Glendale Town Center, and Hamilton Crossing redevelopments, (ii) the recently acquired Nora Plaza, and (iii) office properties.
2	Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent. Calculated as a weighted average based on the timing of cash rent commencement and expiration during the period.
3	Includes non-cash activity across the portfolio as well as net operating income from properties not included in the same property pool including properties sold during both periods.

Our Same Property NOI decreased 9.8% and 4.4% for the three and six months ended June 30, 2020, compared to the same period of the prior year, respectively. These decreases were primarily due to bad debt expense of $5.5 million and $6.2 million for the three and six months ended June 30, 2020, respectively, related to certain tenants that were impacted by the COVID-19 pandemic.

Liquidity and Capital Resources

Overview

As discussed above, the COVID-19 pandemic has had, and we expect will continue to have, an adverse impact on our liquidity and capital resources. Future decreases in cash flow from operations resulting from tenant defaults, rent deferrals or decreases in our rents or occupancy, would decrease the cash available for the capital uses described below, including payment of dividends. There have been severe disruptions or instability in the global or domestic financial markets, and we could face difficulty in accessing debt and equity capital on attractive terms, or at all. In addition, a significant decline in our operating performance in the future, including as a result of tenant delinquencies, could result in us not satisfying the financial covenants applicable to our debt, which could result in us not being able to incur additional debt, including the remaining capacity on our revolving credit facility, or result in a default.

We have taken various steps to mitigate the impact of COVID-19 on our liquidity, including deferrals of certain planned capital expenditures for 2020 and aggregate outstanding borrowings of $200 million on our revolving credit facility as a precautionary measure to increase liquidity. As of June 30, 2020, we have approximately $232 million in cash on hand, $354.2 million of remaining availability under our revolving credit facility (based on the unencumbered property pool allocated thereto) and no debt maturities until 2022. However, because we do not know the ultimate severity and length of the COVID-19 pandemic or the short-term or long-term impact it may have on consumer behavior, and thus cannot predict the impact it will have on our tenants and on the debt and equity capital markets, we cannot estimate the ultimate impact it will have on our liquidity and capital resources.

Our Principal Capital Resources

For a discussion of cash generated from operations, see “Cash Flows,” beginning on page 37. In addition to cash generated from operations, we discuss below our other principal capital resources.

We continue to focus on a balanced approach to growth, enhancing our liquidity positions, reducing our borrowing costs and staggering debt maturities in order to retain our financial flexibility.

As of June 30, 2020, we had approximately $354.2 million available under our unsecured revolving credit facility for future borrowings based on the unencumbered property pool allocated to the unsecured revolving credit facility. We also had $230.0 million in cash and cash equivalents as of June 30, 2020.

We were in compliance with all applicable financial covenants under our unsecured revolving credit facility, our unsecured term loans and our senior unsecured notes as of June 30, 2020.

We have on file with the SEC a shelf registration statement on Form S-3 relating to the offer and sale, from time to time, of an indeterminate amount of equity and debt securities. Equity securities may be offered and sold by the Parent Company, and the net proceeds of any such offerings would be contributed to the Operating Partnership in exchange for additional General Partner Units. Debt securities may be offered and sold by the Operating Partnership with the Operating Partnership receiving the proceeds. From time to time, we may issue securities under this shelf registration statement to fund the repayment of long-term debt upon maturity and for other general corporate purposes.

In the future, we will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. We may also raise capital by disposing of properties, land parcels or other assets. The sale price may differ from our carrying value at the time of sale.

We derive the majority of our revenue from tenants who lease space from us at our properties. Therefore, our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our tenants. While we believe that the nature of the properties in which we typically invest—primarily neighborhood and community shopping centers—provides a relatively stable revenue flow, an economic downturn could adversely affect the ability of some of our tenants to meet their lease obligations.

Our Principal Liquidity Needs

Short-Term Liquidity Needs

Near-Term Debt Maturities. As of June 30, 2020, we did not have any debt scheduled to mature prior to December 31, 2021, excluding scheduled monthly principal payments.

Other Short-Term Liquidity Needs. The requirements for qualifying as a REIT and for a tax deduction for some or all of the dividends paid to shareholders necessitate that we distribute at least 90% of our taxable income on an annual basis. Such requirements cause us to have substantial liquidity needs over both the short term and the long term. Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, interest expense and scheduled principal payments on our debt, expected dividend payments to our common shareholders and to Common Unit holders, and recurring capital expenditures.

In June 2020, our Board of Trustees declared a cash distribution of $0.052 per common share and Common Unit for the second quarter of 2020. This distribution was paid on July 9, 2020 to common shareholders and Common Unit holders of record as of July 2, 2020. Future distributions, if any, are at the discretion of the Board of Trustees, which will continue to evaluate our

sources and uses of capital, liquidity position, operating fundamentals, maintenance of our REIT qualification and other factors our Board of Trustees may deem relevant.

Other short-term liquidity needs include expenditures for tenant improvements, external leasing commissions and recurring capital expenditures. During the six months ended June 30, 2020, we incurred $1.0 million of costs for recurring capital expenditures on operating properties and also incurred $3.8 million of costs for tenant improvements and external leasing commissions (excluding development and redevelopment properties). Where appropriate, we also have deferred certain planned capital expenditures for 2020.

As of June 30, 2020, we had two development projects under construction. Our share of the total estimated costs of these projects is approximately $11.2 million, of which $6.8 million had been incurred as of June 30, 2020. We anticipate incurring the majority of the remaining $4.4 million of costs over the next 24 months. We believe we have sufficient financing in place to fund these projects and expect to do so through cash flow from operations or borrowings on our unsecured revolving credit facility.

Long-Term Liquidity Needs

Our long-term liquidity needs consist primarily of funds necessary to pay for any new development projects, redevelopment of existing properties, non-recurring capital expenditures, acquisitions of properties, and payment of indebtedness at maturity.

Potential Redevelopment Opportunities. In light of the COVID-19 pandemic, we are currently evaluating, and are likely to limit for the foreseeable future, the amount of capital that is needed for the redevelopment of several other operating properties.

Selective Acquisitions, Developments and Joint Ventures. We may selectively pursue the acquisition and development of other properties, which would require additional capital. It is unlikely that we would have sufficient funds on hand to meet these long-term capital requirements. We would have to satisfy these needs through additional borrowings, sales of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions or future property acquisitions and/or participation in joint venture arrangements. We cannot be certain that we would have access to these sources of capital on satisfactory terms, if at all, to fund our long-term liquidity requirements. We evaluate all future opportunities against pre-established criteria including, but not limited to, location, demographics, expected return, tenant credit quality, tenant relationships, and amount of existing retail space. Our ability to access the capital markets will be dependent on a number of factors, including general capital market conditions.

Potential Debt Repurchase. We may from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to repurchase our senior unsecured notes maturing at various dates through September 2027 in open market transactions, privately negotiated transactions, by tender offer or otherwise, as market conditions warrant.

Capital Expenditures on Consolidated Properties

The following table summarizes cash capital expenditures for our development and redevelopment properties and other capital expenditures for the six months ended June 30, 2020:



	Six Months Ended
($ in thousands)	June 30, 2020
Developments	$	760
Redevelopment Opportunities	188
Recently completed redevelopments and other	4,066
Big Box Surge activity	12,946
Recurring operating capital expenditures (primarily tenant improvement payments)	4,430
Total	$	22,390

We capitalize certain indirect costs such as interest, payroll, and other general and administrative costs related to these development activities. If we were to experience a 10% reduction in development and redevelopment activities, without a corresponding decrease in indirect project costs, we would have recorded additional expense of less than $0.1 million for the three months ended June 30, 2020 and $0.1 million for the six months ended June 30, 2020.

Debt Maturities

The following table presents maturities of mortgage debt and corporate debt as of June 30, 2020:



($ in thousands)	Scheduled Principal Payments		Term Maturity		Total
2020	$	1,123	$	—	$	1,123
2021	2,303		—		2,303
2022	1,043		378,877		379,920
2023	806		256,517		257,323
2024	854		—		854
Thereafter	5,576		705,100		710,676
	$	11,705	$	1,340,494	$	1,352,199
Unamortized net debt premiums and issuance costs, net					(5,944		)
Total					$	1,346,255

Failure to comply with our obligations under our indebtedness agreements (including our payment obligations) could cause an event of default under such debt, which, among other things, could result in the loss of title to assets securing such debt, the acceleration of principal and interest payments or the termination of the debt facilities, or exposure to the risk of foreclosure. In addition, certain of our variable rate loans contain cross-default provisions which provide that a violation by us of any financial covenant set forth in our unsecured revolving credit facility agreement will constitute an event of default under the loans, which could allow the lenders to accelerate the amounts due under our indebtedness agreements if we fail to satisfy these financial covenants. See “Item 1.A Risk Factors – Risks Related to Our Operations” in Kite Realty Group Trust's Annual Report on Form 10-K for the year ended December 31, 2019 for more information related to the risks associated with our indebtedness.

Impact of Changes in Credit Ratings on Our Liquidity

We have been assigned investment grade corporate credit ratings from two nationally recognized credit rating agencies. These ratings remain unchanged as of June 30, 2020.

In the future, the ratings could change based upon, among other things, the impact that prevailing economic conditions may have on our results of operations and financial condition, including as a result of the impact of the COVID-19 pandemic. Credit rating reductions by one or more rating agencies could also adversely affect our access to funding sources, the cost and other terms of obtaining funding, as well as our overall financial condition, operating results and cash flow.

Cash Flows

As of June 30, 2020, we had cash, cash equivalents, and restricted cash on hand of $251.8 million. We may be subject to concentrations of credit risk with regard to our cash and cash equivalents. We place our cash and short-term cash investments with highly rated financial institutions. While we attempt to limit our exposure at any point in time, occasionally, such cash and investments may temporarily be in excess of FDIC and SIPC insurance limits.

Comparison of the Six Months Ended June 30, 2020 to the Six Months Ended June 30, 2019

Cash provided by operating activities was $49.8 million for the six months ended June 30, 2020 and $69.7 million for the six months ended June 30, 2019. The cash flows were negatively impacted due to the significant property sales activity throughout 2019 and reduced collection activity due to the COVID-19 pandemic.

Cash used in investing activities was $20.6 million for the six months ended June 30, 2020, as compared to cash provided by investing activities of $196.9 million in the same period of 2019. Highlights of significant cash sources and uses in investing activities are as follows:


•	Net proceeds of $254.2 million related to the sale of nine operating properties in 2019, compared to net proceeds over the same period in 2020 of $5.5 million related to the sales of land;


•	Decrease in capital expenditures of $2.8 million and an increase in construction payables of $1.2 million as we substantially completed multiple anchor retenanting projects over the last twelve months; and


•	In 2019, we acquired the Pan Am Plaza Garage for a use of cash of $29.3 million; while, there was no such activity in 2020.

Cash provided by financing activities was $169.8 million for the six months ended June 30, 2020, compared to cash used in financing activities of $252.5 million in the same period of 2019. Highlights of significant cash sources and uses in financing activities during the first six months of 2020 are as follows:


•	We borrowed $200.0 million, net, on the Credit Facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of the current uncertainty in the global markets resulting from the COVID-19 pandemic; and


•	We made distributions to common shareholders and Common Unit holders of $28.0 million.

Funds From Operations

Funds from Operations ("FFO") is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance. We calculate FFO, a non-GAAP financial measure, in accordance with the best practices described in the April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts ("NAREIT"), as restated in 2018. The NAREIT white paper defines FFO as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

Considering the nature of our business as a real estate owner and operator, the Company believes that FFO is helpful to investors in measuring our operational performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. FFO (a) should not be considered as an alternative to net income (calculated in accordance with GAAP) for the purpose of measuring our financial performance, (b) is not an alternative to cash flow from operating activities (calculated in accordance with GAAP) as a measure of our liquidity, and (c) is not indicative of funds available to satisfy our cash needs, including our ability to make distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do. For informational purposes, we have also provided FFO adjusted for loss on debt extinguishment. A reconciliation of net income (calculated in accordance with GAAP) to FFO is included elsewhere in this Financial Supplement.

From time to time, the Company may report or provide guidance with respect to “NAREIT FFO as adjusted” which removes the impact of certain non-recurring and non-operating transactions or other items the Company does not consider to be representative of its core operating results including without limitation, gains or losses associated with the early extinguishment of debt, gains or losses associated with litigation involving the Company that is not in the normal course of business, the impact on earnings from executive separation, and the excess of redemption value over carrying value of preferred stock redemption, which are not otherwise adjusted in the Company’s calculation of FFO.

Our calculations of FFO¹ and reconciliation to consolidated net income for the three and six months ended June 30, 2020 and 2019 (unaudited) are as follows:



($ in thousands)	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Consolidated net (loss) income	$	(4,786	)	$	(1,697	)	$	(4,654	)	$	4,291
Less: net income attributable to noncontrolling interests in properties	(132		)	(132		)	(264		)	(264		)
Less: Gain on sales of operating properties	(623		)	(24,092		)	(1,666		)	(30,679		)
Add: impairment charges	—			25,107			—			29,184
Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests	31,744			34,954			63,531			69,853
FFO of the Operating Partnership¹	26,203			34,140			56,947			72,385
Less: Limited Partners' interests in FFO	(769		)	(819		)	(1,508		)	(1,737		)
FFO attributable to Kite Realty Group Trust common shareholders¹	$	25,434		$	33,321		$	55,439		$	70,648

FFO of the Operating Partnership¹	$	26,203		$	34,140		$	56,947		$	72,385
Add: loss on debt extinguishment	—			2,577			—			2,577
FFO, as adjusted, of the Operating Partnership	$	26,203		$	36,717		$	56,947		$	74,962



____________________
1	“FFO of the Operating Partnership" measures 100% of the operating performance of the Operating Partnership’s real estate properties. “FFO attributable to Kite Realty Group Trust common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest in the Operating Partnership.

Earnings before Interest, Tax, Depreciation, and Amortization

We define EBITDA, a non-GAAP financial measure, as net income before depreciation and amortization, interest expense and income tax expense of taxable REIT subsidiary. For informational purposes, we have also provided Adjusted EBITDA, which we define as EBITDA less (i) EBITDA from unconsolidated entities, (ii) gains on sales of operating properties or impairment charges, (iii) other income and expense, (iv) noncontrolling interest EBITDA and (v) other non-recurring activity or items impacting comparability from period to period. Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. Net Debt to Adjusted EBITDA is our share of net debt divided by Annualized Adjusted EBITDA. EBITDA, Adjusted EBITDA, Annualized Adjusted EBITDA and Net Debt to Adjusted EBITDA, as calculated by us, are not comparable to EBITDA and EBITDA-related measures reported by other REITs that do not define EBITDA and EBITDA-related measures exactly as we do. EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated from operating activities in accordance with GAAP, and should not be considered alternatives to net income as an indicator of performance or as alternatives to cash flows from operating activities as an indicator of liquidity.

Considering the nature of our business as a real estate owner and operator, we believe that EBITDA, Adjusted EBITDA and the ratio of Net Debt to Adjusted EBITDA are helpful to investors in measuring our operational performance because they exclude various items included in net income that do not relate to or are not indicative of our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we have also provided Annualized Adjusted EBITDA, adjusted as described above. We believe this supplemental information provides a meaningful measure of our operating performance. We believe presenting EBITDA and the related measures in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.

The following table presents a reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to consolidated net income (the most directly comparable GAAP measure) and a calculation of Net Debt to Adjusted EBITDA.



($ in thousands)	Three Months Ended June 30, 2020
Consolidated net loss	$	(4,786	)
Adjustments to net loss:
Depreciation and amortization	31,409
Interest expense	13,271
Income tax benefit of taxable REIT subsidiary	(202		)
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)	39,692
Adjustments to EBITDA:
Unconsolidated EBITDA	253
Gain on sales of operating properties	(623		)
Other income and expense, net	85
Noncontrolling interest	(132		)
Adjusted EBITDA	39,275

Annualized Adjusted EBITDA¹	$	157,103

Company Share of Net Debt:
Mortgage and other indebtedness	1,346,255
Plus: Company share of unconsolidated joint venture debt	22,148
Plus: Debt premium and debt issuance costs	5,944
Less: Partner share of consolidated joint venture debt ²	(1,109		)
Less: Cash, cash equivalents, and restricted cash	(252,358		)
Company Share of Net Debt	1,120,880
Net Debt to Adjusted EBITDA ³	7.1x



____________________
1	Represents Adjusted EBITDA for the three months ended June 30, 2020 (as shown in the table above) multiplied by four.
2	Partner share of consolidated joint venture debt is calculated based upon the partner's pro-rata ownership of the joint venture, multiplied by the related secured debt balance.
3	Excluding the straight-line rent and billed rent reserves taken for impacts of COVID-19, Net Debt to EBITDA would have been 6.2x.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements that in our opinion have, or are reasonably likely to have, a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. We do, however, have certain obligations related to some of the projects in our operating and development properties.

As of June 30, 2020, we had outstanding letters of credit totaling $1.2 million, against which no amounts were advanced.

Contractual Obligations

Except with respect to our debt maturities as discussed on page 37, there have been no significant changes to our contractual obligations disclosed in the Annual Report on Form 10-K for the year ended December 31, 2019.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Market Risk Related to Fixed and Variable Rate Debt

We had $1.4 billion of outstanding consolidated indebtedness as of June 30, 2020 (exclusive of net premiums and issuance costs, net of $5.9 million on acquired indebtedness). As of this date, we were party to various consolidated interest rate hedge agreements totaling $250.0 million, with expiration dates through 2025. Reflecting these hedge agreements, our fixed and variable rate debt was $1.1 billion (81%) and $255.5 million (19%), respectively, of our total consolidated indebtedness at June 30, 2020.

As of June 30, 2020, we did not have any fixed rate debt maturing within the next twelve months. A 100 basis point change in market interest rates would not materially impact the annual cash flows associated with this hedged debt. A 100 basis point change in interest rates on our unhedged variable rate debt as of June 30, 2020 would change our annual cash flow by $2.6 million.



Item 4.	Controls and Procedures

Kite Realty Group Trust

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Parent Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Parent Company's Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the Parent Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(b) under the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Kite Realty Group, L.P.

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Operating Partnership’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Operating Partnership's Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There has been no change in the Operating Partnership’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(b) under the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of June 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information



Item 1.	Legal Proceedings



Item 1A.	Risk Factors

RISKS RELATED TO OUR OPERATIONS

The pandemic of the novel coronavirus, or COVID-19, is currently having a significant adverse impact on our business, financial performance and condition, operating results and cash flows, and future outbreaks of highly infectious or contagious disease or other public health crises could have similar adverse effects on our business. Further, the COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and financial markets and could potentially create widespread business continuity issues of a magnitude and duration not yet known.

Since first being reported in December 2019, the novel strain of coronavirus ("COVID-19") has spread globally, including to every state in the United States. In March 2020, the World Health Organization declared COVID-19 a pandemic, and subsequently, the United States declared a national emergency with respect to COVID-19.

The COVID-19 pandemic has had, and a future outbreak of highly infectious or contagious disease or other public health crisis, could similarly have, significant repercussions across local, regional, national and global economies and financial markets. The global impact of the outbreak has been rapidly evolving and many countries, including the United States, have reacted by instituting a wide variety of control measures including states of emergency, mandatory quarantines, “shelter in place” orders, border closures, restrictions on types of businesses that may continue to operate, “social distancing” guidelines and other travel and gathering restrictions and practices that may significantly impact our business. As a result, the COVID-19 pandemic is negatively impacting almost every industry directly or indirectly, with a particularly adverse effect on many of our tenants. A number of our tenants have announced temporary closures of their stores and requested rent deferral or rent abatement during this pandemic. Many economists predict that the outbreak will trigger, or has already triggered, a period of United States and global economic slowdown or recession.

The COVID-19 pandemic has disrupted our business and has had a significant adverse effect, and could continue to significantly adversely impact and disrupt, our business, financial performance and condition, operating results and cash flows. The economic slowdown or recession could continue to significantly adversely affect our business, financial performance and condition even as some government restrictions related to COVID-19 are lifted or phased out and stores reopen. Additional factors that would negatively impact our ability to operate successfully during or following the COVID-19 pandemic or a similar event, or that could otherwise significantly adversely impact and disrupt our business, financial performance and condition, operating results and cash flows, include, among others:


•	the inability of our tenants to meet their lease obligations to us due to (a) continuing or increased closures of stores at our properties resulting from government or tenant actions related to the pandemic; or (b) local, regional or national economic conditions, including high unemployment and reduced consumer discretionary spending, caused by the pandemic;

•

liquidity issues resulting from (i) reduced cash flow from operations due to the pandemic, (ii) the impact that lower operating results could have on the financial covenants in our debt agreements, and (iii) difficulty in our accessing debt and equity capital on attractive terms, or at all, and severe disruptions or instability in the global financial markets or deteriorations in credit and financing conditions;


•	our increased indebtedness and decreased operating revenues, which could increase our risk of default on our loans;


•	an acceleration of changes in consumer behavior in favor of e-commerce over certain of our tenants’ stores due to responses to the pandemic and concerns about contracting COVID-19 or other highly infectious or contagious diseases;


•	business continuity disruptions and a deterioration in the ability of us or our tenants to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed for our or our tenants’ efficient operations;


•	issues related to personnel management and remote working, including increased cybersecurity risk and other technology and communication issues and increased costs and other disruptions in the event that our employees become unable to work as a result of health issues related to COVID-19;


•	the scaling back or delay of a significant amount of planned capital expenditures, including planned redevelopment projects, which could adversely affect the value of our properties;


•	reduction or elimination of quarterly dividends; and


•	continued volatility of our share price.

The significance, extent and duration of the impacts caused by the COVID-19 pandemic on our business, financial performance and condition, operating results and cash flows and those of our tenants, remains highly uncertain and dependent on future developments that cannot be accurately predicted at this time, such as the continued severity, duration, transmission rate and geographic spread of COVID-19 in the United States, the extent and effectiveness of the containment measures and other actions taken, the success of efforts to find drugs or vaccines and the responses of the overall economy, the financial markets and the population, particularly in areas in which we operate, once the current containment measures are lifted. Additional closures by our tenants of their stores, the continuing ability of our tenants to meet their lease obligations and/or the possibility of tenants filing for bankruptcy protection would reduce our cash flows, which would impact our ability to continue paying dividends to our shareholders at expected levels or at all. The rapid development and fluidity of this situation precludes any prediction as to the full adverse impact of the COVID-19 pandemic. As a result, we cannot provide an estimate of the overall impact of the COVID-19 pandemic on our business or when, or if, we will be able to resume normal operations. Nevertheless, the COVID-19 pandemic presents material uncertainty and risk with respect to our business, financial performance and condition, operating results and cash flows. Moreover, many of the risks identified under the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 should be interpreted as heightened risks as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic.



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Repurchases; Unregistered Sales of Securities

From time to time, employees surrender common shares to the Company to satisfy their tax withholding obligations in connection with the vesting of restricted shares. There were no common shares surrendered or repurchased during the three months ended June 30, 2020.



Item 3.	Defaults Upon Senior Securities

Not Applicable



Item 4.	Mine Safety Disclosures

Not Applicable



Item 5.	Other Information

Not Applicable



Item 6.	Exhibits



Exhibit No.	Description	Location
3.1	Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended	Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015




3.2	Articles of Amendment to the Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended	Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 28, 2015

3.3	Articles of Amendment to the Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended.	Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 20, 2020

3.4	Second Amended and Restated Bylaws of the Company, as amended	Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015

3.5	First Amendment to the Second Amended and Restated Bylaws of the Company, as amended	Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 28, 2015

3.6	Second Amendment to the Second Amended and Restated Bylaws of the Company, as amended	Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 20, 2020

4.1	Form of Common Share Certificate	Incorporated by reference to Exhibit 4.1 to Kite Realty Group Trust's registration statement on Form S-11 (File No. 333-114224) declared effective by the SEC on August 10, 2004

4.2	Indenture, dated September 26, 2016, between Kite Realty Group, L.P., as issuer, and U.S. Bank National Association, as trustee	Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016

4.3	First Supplemental Indenture, dated September 26, 2016, among Kite Realty Group, L.P., Kite Realty Group Trust, as possible future guarantor, and U.S. Bank National Association	Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016



4.4	Form of Global Note representing the Notes	Incorporated by reference to Exhibits 4.2 and 4.3 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016

31.1	Certification of principal executive officer of the Parent Company required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.2	Certification of principal financial officer of the Parent Company required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.3	Certification of principal executive officer of the Operating Partnership required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

31.4	Certification of principal financial officer of the Operating Partnership required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.1	Certification of Chief Executive Officer and Chief Financial Officer of the Parent Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

32.2	Certification of Chief Executive Officer and Chief Financial Officer of the Operating Partnership pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith

101.DEF	XBRL Taxonomy Extension Definition Linkbase Document	Filed herewith

101.LAB	XBRL Taxonomy Extension Label Linkbase Document	Filed herewith

101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document	Filed herewith

104	Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



	KITE REALTY GROUP TRUST

August 6, 2020	By:	/s/ John A. Kite
(Date)		John A. Kite
		Chairman and Chief Executive Officer
		(Principal Executive Officer)


August 6, 2020	By:	/s/ Heath R. Fear
(Date)		Heath R. Fear
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)