KITE REALTY GROUP TRUST - Quarter Report: 2021 September (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	September 30, 2021

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

☒

Kite Realty Group, L.P.

Yes

☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).

Kite Realty Group Trust

Yes

☒

Kite Realty Group, L.P.

Yes

☒

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

Accelerated filer

Non-accelerated filer

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

Accelerated filer

Non-accelerated filer

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

☐

Kite Realty Group, L.P.

Yes

☐

The number of Common Shares of Kite Realty Group Trust outstanding as of November 3, 2021 was 219,017,936 ($.01 par value).

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2021 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, and the Parent Company conducts substantially all of its activities through the Operating Partnership and its wholly-owned subsidiaries. The Parent Company is the sole general partner of the Operating Partnership and as of September 30, 2021 owned approximately 97.2% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.8% 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 September 30, 2021

TABLE OF CONTENTS


		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)

Kite Realty Group Trust:

	Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	4

	Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2021 and 2020	5

	Consolidated Statements of Shareholders' Equity for the Three and Nine Months Ended September 30, 2021 and 2020	6

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	8

Kite Realty Group, L.P. and subsidiaries:

	Consolidated Balance Sheets as of September 30, 2021 and December 31, 2020	9

	Consolidated Statements of Operations and Comprehensive (Loss) Income for the Three and Nine Months Ended September 30, 2021 and 2020	10

	Consolidated Statements of Partners' Equity for the Three and Nine Months Ended September 30, 2021 and 2020	11

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2021 and 2020	13

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

	Notes to Consolidated Financial Statements	14

Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	27

	Cautionary Note About Forward-Looking Statements	27

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	44

Item 4.	Controls and Procedures	44

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	46

Item 1A.	Risk Factors	46

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50

Item 3.	Defaults upon Senior Securities	50

Item 4.	Mine Safety Disclosures	50

Item 5.	Other Information	50

Item 6.	Exhibits	51

SIGNATURES		57

Part I. FINANCIAL INFORMATION

Item 1.

Kite Realty Group Trust

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)


	September 30, 2021		December 31, 2020
Assets:
Investment properties at cost:	$	3,124,987	$	3,143,961
Less: accumulated depreciation	(816,993)		(755,100)
	2,307,994		2,388,861

Cash and cash equivalents	99,514		43,648
Tenant and other receivables, including accrued straight-line rent of $25,143 and $24,783, respectively	45,873		57,154
Restricted cash and escrow deposits	4,285		2,938
Deferred costs, net	54,231		63,171
Short-term deposits	125,000		—
Prepaid and other assets	39,165		39,975
Investments in unconsolidated subsidiaries	12,956		12,792
Assets held for sale	19,866		—
Total Assets	$	2,708,884	$	2,608,539

Liabilities and Shareholders' Equity:
Mortgage and other indebtedness, net	$	1,288,994	$	1,170,794
Accounts payable and accrued expenses	85,721		77,469
Deferred revenue and other liabilities	81,344		85,649
Total Liabilities	1,456,059		1,333,912
Commitments and contingencies
Limited Partners' interests in Operating Partnership and other	53,281		43,275
Equity:
Kite Realty Group Trust Shareholders' Equity:
Common Shares, $0.01 par value, 225,000,000 shares authorized, 84,575,441 and 84,187,999 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively	846		842
Additional paid in capital	2,069,983		2,085,003
Accumulated other comprehensive loss	(22,476)		(30,885)
Accumulated deficit	(849,507)		(824,306)
Total Kite Realty Group Trust Shareholders' Equity	1,198,846		1,230,654
Noncontrolling Interest	698		698
Total Equity	1,199,544		1,231,352
Total Liabilities and Shareholders' Equity	$	2,708,884	$	2,608,539

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

Kite Realty Group Trust

Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Revenue:
Rental income	$	70,216	$	64,293	$	206,097	$	191,359
Other property related revenue	1,054		670		3,133		6,626
Fee income	195		104		1,144		299
Total revenue	71,465		65,067		210,374		198,284
Expenses:
Property operating	10,482		10,330		30,978		30,450
Real estate taxes	8,624		9,362		26,574		26,551
General, administrative, and other	8,241		6,482		23,676		19,986
Merger and acquisition costs	9,198		—		9,958		—
Depreciation and amortization	30,193		33,953		90,625		96,830

Total expenses	66,738		60,127		181,811		173,817
Gain on sale of properties, net	1,260		3,226		27,517		4,893
Operating income	5,987		8,166		56,080		29,360
Interest expense	(12,878)		(12,550)		(37,386)		(38,115)
Income tax benefit of taxable REIT subsidiary	91		190		308		496

Equity in loss of unconsolidated subsidiaries	(196)		(417)		(758)		(1,256)
Other income, net	168		(16)		189		234
Net (loss) income	(6,828)		(4,627)		18,433		(9,281)
Net (income) loss attributable to noncontrolling interests	(132)		40		(1,058)		(148)
Net (loss) income attributable to Kite Realty Group Trust common shareholders	$	(6,960)	$	(4,587)	$	17,375	$	(9,429)

Net (loss) income per common share - basic	$	(0.08)	$	(0.05)	$	0.21	$	(0.11)
Net (loss) income per common share - diluted	$	(0.08)	$	(0.05)	$	0.20	$	(0.11)

Weighted average common shares outstanding - basic	84,556,689		84,194,268		84,468,519		84,125,219
Weighted average common shares outstanding - diluted	84,556,689		84,194,268		85,383,849		84,125,219

Dividends per common share	$	0.1800	$	0.0520	$	0.5000	$	0.3695

Consolidated net (loss) income	$	(6,828)	$	(4,627)	$	18,433	$	(9,281)
Change in fair value of derivatives	1,919		1,081		8,653		(17,112)
Total comprehensive (loss) income	(4,909)		(3,546)		27,086		(26,393)
Comprehensive (income) loss attributable to noncontrolling interests	(173)		12		(1,302)		270
Comprehensive (loss) income attributable to Kite Realty Group Trust	$	(5,082)	$	(3,534)	$	25,784	$	(26,123)

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
Balances, December 31, 2020	84,187,999	$	842	$	2,085,003	$	(30,885)	$	(824,306)	$	1,230,654
Stock compensation activity	182,486	2		1,464		—		—		1,466
Other comprehensive income attributable to Kite Realty Group Trust	—			—		6,537		—		6,537
Distributions to common shareholders	—	—		—		—		(12,992)		(12,992)
Net income attributable to Kite Realty Group Trust	—	—		—		—		24,577		24,577
Purchase of capped calls	—	—		(9,800)		—		—		(9,800)
Exchange of redeemable noncontrolling interests for common shares	115,697	1		2,061		—		—		2,062
Adjustment to redeemable noncontrolling interests	—	—		(10,633)		—		—		(10,633)
Balances, March 31, 2021	84,486,182	845		2,068,095		(24,348)		(812,721)		1,231,871
Stock compensation activity	35,467	—		1,977		—		—		1,977
Other comprehensive loss attributable to Kite Realty Group Trust	—			—		(6)		—		(6)
Distributions to common shareholders	—	—		—		—		(14,363)		(14,363)
Net loss attributable to Kite Realty Group Trust	—	—		—		—		(242)		(242)
Exchange of redeemable noncontrolling interests for common shares	25,000	—		530		—		—		530
Adjustment to redeemable noncontrolling interests	—	—		(6,292)		—		—		(6,292)
Balances, June 30, 2021	84,546,649	845		2,064,310		(24,354)		(827,326)		1,213,475
Stock compensation activity	2,254	—		1,989		—		—		1,989
Other comprehensive income attributable to Kite Realty Group Trust	—			—		1,878		—		1,878
Distributions to common shareholders	—	—		—		—		(15,221)		(15,221)
Net loss attributable to Kite Realty Group Trust	—	—		—		—		(6,960)		(6,960)
Exchange of redeemable noncontrolling interests for common shares	26,538	1		536		—		—		537
Adjustment to redeemable noncontrolling interests	—	—		3,148		—		—		3,148
Balances, September 30, 2021	84,575,441	846		2,069,983		(22,476)		(849,507)		1,198,846


	Common Shares			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total
	Shares	Amount
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 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
Stock compensation activity	1,695	—		1,813		—		—		1,813
Other comprehensive income attributable to Kite Realty Group Trust	—	—		—		1,053		—		1,053
Distributions to common shareholders	—	—		—		—		(4,380)		(4,380)
Net loss attributable to Kite Realty Group Trust	—	—		—		—		(4,587)		(4,587)
Adjustment to redeemable noncontrolling interests for common shares	—	—		(47)		—		—		(47)
Balances, September 30, 2020	84,195,963	842		2,084,978		(32,977)		(810,776)		1,242,067

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

Kite Realty Group Trust

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2021		2020
Cash flow from operating activities:
Consolidated net income (loss)	$	18,433	$	(9,281)
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Straight-line rent	(1,215)		3,271
Depreciation and amortization	92,587		98,471
Gain on sale of operating properties	(27,517)		(4,893)

Compensation expense for equity awards	5,667		4,175
Amortization of debt fair value adjustment	(333)		(333)

Amortization of in-place lease liabilities	(1,432)		(1,922)
Changes in assets and liabilities:
Tenant receivables	8,449		(3,188)
Deferred costs and other assets	(1,951)		(4,967)
Accounts payable, accrued expenses, deferred revenue, and other liabilities	11,143		4,430
Net cash provided by operating activities	103,831		85,763
Cash flow from investing activities:

Capital expenditures	(36,935)		(30,622)
Net proceeds from sales of land	47,706		5,490
Net proceeds from sales of properties	2,484		13,888
Investment in short-term deposits	(125,000)		—
Small business loan repayments (funding)	541		(2,139)
Change in construction payables	2,141		(2,550)
Net cash used in investing activities	(109,063)		(15,933)
Cash flow from financing activities:
Proceeds from issuance of common shares, net	31		57
Repurchases of common shares upon the vesting of restricted shares	(458)		(999)
Purchase of capped calls	(9,800)		—
Debt and equity issuance costs	(6,017)		—
Loan proceeds	175,000		300,000

Loan payments	(52,096)		(251,770)
Distributions paid – common shareholders	(42,576)		(31,392)
Distributions paid – redeemable noncontrolling interests	(1,639)		(1,222)
Net cash provided by financing activities	62,445		14,674
Net change in cash, cash equivalents, and restricted cash	57,213		84,504
Cash, cash equivalents, and restricted cash beginning of period	46,586		52,813
Cash, cash equivalents, and restricted cash end of period	$	103,799	$	137,317

Non-cash investing and financing activities
Exchange of redeemable noncontrolling interests for common shares	$	3,129	$	—
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)


	September 30, 2021		December 31, 2020
Assets:
Investment properties at cost:	$	3,124,987	$	3,143,961
Less: accumulated depreciation	(816,993)		(755,100)
	2,307,994		2,388,861

Cash and cash equivalents	99,514		43,648
Tenant and other receivables, including accrued straight-line rent of 25,143 and 24,783, respectively	45,873		57,154
Restricted cash and escrow deposits	4,285		2,938
Deferred costs, net	54,231		63,171
Short-term deposits	125,000		—
Prepaid and other assets	39,165		39,975
Investments in unconsolidated subsidiaries	12,956		12,792
Assets held for sale	19,866		—
Total Assets	$	2,708,884	$	2,608,539

Liabilities and Equity:
Mortgage and other indebtedness, net	$	1,288,994	$	1,170,794
Accounts payable and accrued expenses	85,721		77,469
Deferred revenue and other liabilities	81,344		85,649
Total Liabilities	1,456,059		1,333,912
Commitments and contingencies
Limited Partners' interests in Operating Partnership and other	53,281		43,275
Partners' Equity:
Parent Company:
Common equity, 84,575,441 and 84,187,999 units issued and outstanding at September 30, 2021 and December 31, 2020, respectively	1,221,322		1,261,539
Accumulated other comprehensive loss	(22,476)		(30,885)
Total Partners' Equity	1,198,846		1,230,654
Noncontrolling Interests	698		698
Total Equity	1,199,544		1,231,352
Total Liabilities and Equity	$	2,708,884	$	2,608,539

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 (Loss)

(Unaudited)

(in thousands, except unit and per unit data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020

Revenue:
Rental income	$	70,216	$	64,293	$	206,097	$	191,359
Other property related revenue	1,054		670		3,133		6,626
Fee income	195		104		1,144		299
Total revenue	71,465		65,067		210,374		198,284
Expenses:
Property operating	10,482		10,330		30,978		30,450
Real estate taxes	8,624		9,362		26,574		26,551
General, administrative, and other	8,241		6,482		23,676		19,986
Merger and acquisition costs	9,198		—		9,958		—
Depreciation and amortization	30,193		33,953		90,625		96,830

Total expenses	66,738		60,127		181,811		173,817
Gain on sale of operating properties, net	1,260		3,226		27,517		4,893
Operating income	5,987		8,166		56,080		29,360
Interest expense	(12,878)		(12,550)		(37,386)		(38,115)
Income tax benefit of taxable REIT subsidiary	91		190		308		496

Equity in loss of unconsolidated subsidiaries	(196)		(417)		(758)		(1,256)
Other expense, net	168		(16)		189		234
Net (loss) income	(6,828)		(4,627)		18,433		(9,281)
Net income attributable to noncontrolling interests	(132)		(132)		(396)		(396)
Net (loss) income attributable to common unitholders	$	(6,960)	$	(4,759)	$	18,037	$	(9,677)

Allocation of net (loss) income:
Limited Partners	$	—	$	(172)	$	662	$	(248)
Parent Company	(6,960)		(4,587)		17,375		(9,429)
	$	(6,960)	$	(4,759)	$	18,037	$	(9,677)



Net (loss) income per common unit - basic & diluted	$	(0.08)	$	(0.05)	$	0.21	$	(0.11)

Weighted average common units outstanding - basic	87,003,784		86,429,259		86,924,446		86,341,057
Weighted average common units outstanding - diluted	87,003,748		86,429,259		87,780,899		86,341,057

Distributions per common unit	$	0.1800	$	0.0520	$	0.5000	$	0.3695

Consolidated net (loss) income	$	(6,828)	$	(4,627)	$	18,433	$	(9,281)
Change in fair value of derivatives	1,919		1,081		8,653		(17,112)
Total comprehensive (loss) income	(4,909)		(3,546)		27,086		(26,393)
Comprehensive income attributable to noncontrolling interests	(132)		(132)		(396)		(396)
Comprehensive (loss) income attributable to common unitholders	$	(5,041)	$	(3,678)	$	26,690	$	(26,789)

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
Balances, December 31, 2020	$	1,261,539	$	(30,885)	$	1,230,654
Stock compensation activity	1,466		—		1,466
Other comprehensive income attributable to Parent Company	—		6,537		6,537
Distributions to Parent Company	(12,992)		—		(12,992)
Net income	24,577		—		24,577
Purchase of capped calls	(9,800)		—		(9,800)
Conversion of Limited Partner Units to shares of the Parent Company	2,062		—		2,062
Adjustment to redeemable noncontrolling interests	(10,633)		—		(10,633)
Balances March 31, 2021	1,256,219		(24,348)		1,231,871
Stock compensation activity	1,977		—		1,977
Other comprehensive loss attributable to Parent Company	—		(6)		(6)
Distributions to Parent Company	(14,363)		—		(14,363)
Net loss	(242)		—		(242)
Conversion of Limited Partner Units to shares of the Parent Company	530		—		530
Adjustment to redeemable noncontrolling interests	(6,292)		—		(6,292)
Balances, June 30, 2021	1,237,829		(24,354)		1,213,475
Stock compensation activity	1,989		0		1,989
Other comprehensive income attributable to Parent Company	—		1,878		1,878
Distributions to Parent Company	(15,221)		—		(15,221)
Net loss	(6,960)		—		(6,960)
Conversion of Limited Partner Units to shares of the Parent Company	537		—		537
Adjustment to redeemable noncontrolling interests	3,148		—		3,148
Balances, September 30, 2021	1,221,322		(22,476)		1,198,846


	General Partner				Total
	Common Equity		Accumulated Other Comprehensive Loss
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 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
Stock compensation activity	1,813		—		1,813
Other comprehensive income attributable to Parent Company	—		1,053		1,053
Distributions to Parent Company	(4,380)		—		(4,380)
Net income	(4,587)		—		(4,587)
Adjustment to redeemable noncontrolling interests	(47)		—		(47)
Balances, September 30, 2020	1,275,044		(32,977)		1,242,067

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)


	Nine Months Ended September 30,
	2021		2020
Cash flow from operating activities:
Consolidated net income (loss)	$	18,433	$	(9,281)
Adjustments to reconcile consolidated net income to net cash provided by operating activities:
Straight-line rent	(1,215)		3,271
Depreciation and amortization	92,587		98,471
Gain on sales of operating properties	(27,517)		(4,893)

Compensation expense for equity awards	5,667		4,175
Amortization of debt fair value adjustment	(333)		(333)

Amortization of in-place lease liabilities	(1,432)		(1,922)
Changes in assets and liabilities:
Tenant receivables	8,449		(3,188)
Deferred costs and other assets	(1,951)		(4,967)
Accounts payable, accrued expenses, deferred revenue, and other liabilities	11,143		4,430
Net cash provided by operating activities	103,831		85,763
Cash flow from investing activities:

Capital expenditures	(36,935)		(30,622)
Net proceeds from sales of land	47,706		5,490
Net proceeds from sales of properties	2,484		13,888
Investment in short-term deposits	(125,000)		—
Small business loan repayments (funding)	541		(2,139)
Change in construction payables	2,141		(2,550)
Net cash used in investing activities	(109,063)		(15,933)
Cash flow from financing activities:
Contributions from the General Partner	31		57
Repurchases of common shares upon the vesting of restricted shares	(458)		(999)
Purchase of capped calls	(9,800)		—
Debt and equity issuance costs	(6,017)		—
Loan proceeds	175,000		300,000

Loan payments	(52,096)		(251,770)
Distributions paid – common unitholders	(42,576)		(31,392)
Distributions paid – redeemable noncontrolling interests	(1,639)		(1,222)
Net cash provided by financing activities	62,445		14,674
Net change in cash, cash equivalents, and restricted cash	57,213		84,504
Cash, cash equivalents, and restricted cash beginning of period	46,586		52,813
Cash, cash equivalents, and restricted cash end of period	$	103,799	$	137,317

Non-cash investing and financing activities
Conversion of Limited Partner Units to shares of the Parent Company	$	3,129	$	—
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

September 30, 2021

(Unaudited)

(in thousands, except share, per share, unit and per unit amounts)

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 in certain 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.

At September 30, 2021, we owned interests in 87 operating properties totaling approximately 16.8 million square feet. We also owned six development and redevelopment projects as of this date.

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 September 30, 2021 owned approximately 97.2% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.8% 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.

On October 22, 2021, we completed a merger with Retail Properties of America, Inc. (“RPAI”), in which RPAI merged with and into a wholly-owned subsidiary of ours in a stock-for-stock exchange with a transaction value of approximately $4.7 billion, including the assumption of approximately $1.9 billion of debt. See Note 11 for additional details. The retail portfolio we acquired through the merger with RPAI was comprised of 102 operating properties along with multiple parcels of entitled land for future value creation.

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 September 30, 2021 and for the three and nine months ended September 30, 2021 and 2020 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, 2020.

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 September 30, 2021 and December 31, 2020 was as follows:


	Balance at
	September 30, 2021		December 31, 2020
Investment properties, at cost:
Land, buildings and improvements	$	3,094,966	$	3,109,122
Furniture, equipment and other	7,374		6,979
Construction in progress	22,647		27,860
	$	3,124,987	$	3,143,961

Components of Rental Income including Allowance for Uncollectible Accounts

The Company recognized the following lease rental income for the three and nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Fixed Contractual Lease Payments - Operating Leases	$	54,894	$	54,301	$	164,095	$	164,219
Variable Lease Payments - Operating Leases	12,461		12,824		38,540		38,244
Bad Debt Recovery (Reserve)	1,709		(3,136)		338		(9,760)
Straight-Line Rent Adjustment	585		256		1,109		1,001
Straight-Line Rent Recovery (Reserve) for Uncollectability	39		(507)		587		(4,264)
Amortization of In-Place Lease Liabilities, net	528		555		1,428		1,919
Total	$	70,216	$	64,293	$	206,097	$	191,359

The Company must make estimates as to the collectability 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.

Short-Term Deposits

The Company has a short-term deposit held in a custody account at Bank of New York Mellon. The primary objective of management's short-term deposit activity is to preserve capital for the purpose of funding debt maturities in 2022. The deposit balance approximates fair value and earns interest at a rate of the Federal Funds Rate plus 43 basis points with a maturity date of April 7, 2022. Interest income on the deposit is recorded within other income, net on the statement of operations. The deposit is backed by a pool of marketable securities and a guarantee of principal by Goldman Sachs Group, Inc.

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 September 30, 2021, we owned investments in two consolidated 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 consolidated VIEs had total debt of $29.2 million, which were secured by assets of the VIEs totaling $117.1 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.

Income Taxes and REIT Compliance

Parent Company

The Parent Company, which is considered a corporation for U.S. federal income tax purposes, has been organized and operated and intends to continue to operate in a manner that will enable it to maintain its qualification as a REIT for U.S. federal income tax purposes. As a result, it generally will not be subject to U.S. 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 U.S. 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 U.S. 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 U.S. federal, state and local taxes on our income and property and to U.S. 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 nine months ended September 30, 2021 and 2020 were as follows:


	2021		2020
Noncontrolling interests balance January 1	$	698	$	698
Net income allocable to noncontrolling interests, excluding redeemable noncontrolling interests	—		—
Noncontrolling interests balance at September 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 September 30, 2021 and December 31, 2020, the redemption value of the redeemable noncontrolling interests exceeded the historical book value, and the balances were 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 nine months ended September 30, 2021 and 2020, the weighted average interests of the Parent Company and the limited partners in the Operating Partnership were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Parent Company’s weighted average interest in Operating Partnership	97.2	%	97.4	%	97.1	%	97.4	%
Limited partners' weighted average interests in Operating Partnership	2.8	%	2.6	%	2.9	%	2.6	%

At September 30, 2021, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.2% and 2.8%. At December 31, 2020, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.1% and 2.9%.

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 2,429,315 and 2,532,861 Limited Partner Units outstanding as of September 30, 2021 and December 31, 2020, respectively. The decrease in Limited Partner Units outstanding from December 31, 2020 is due to conversions offset by 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 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 a certain subsidiary 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 this subsidiary 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 September 30, 2021 and December 31, 2020, 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 nine months ended September 30, 2021 and 2020 were as follows:


	2021		2020
Redeemable noncontrolling interests balance January 1	$	43,275	$	52,574
Net income allocable to redeemable noncontrolling interests	1,058		148
Distributions declared to redeemable noncontrolling interests	(1,639)		(1,222)
Other, net including adjustments to redemption value	10,587		(7,060)
Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at September 30	$	53,281	$	44,440


Limited partners' interests in Operating Partnership	$	43,211	$	34,370
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 September 30	$	53,281	$	44,440

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

In the first quarter of 2020, the Financial Accounting Standards Board ("FASB") 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.

In August 2020, the FASB issued ASU 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40), which, among other things, simplifies the accounting for convertible instruments by eliminating the requirement to separate conversion features from the host contract. Consequently, a convertible debt instrument will be accounted for as a single liability measured as its amortized cost. The new guidance eliminates the beneficial conversion and cash conversion accounting models for convertible instruments. Early adoption is permitted for fiscal years beginning after December 31, 2020, including interim periods. The Company early adopted ASU 2020-06 on January 1, 2021. As such, the exchangeable notes issued in March 2021 are recorded as a single liability with no portion of the proceeds from the issuance of the exchangeable debt instrument recorded as attributable to the conversion feature.

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 nine months ended September 30, 2021 and 2020 were 2.4 million, 2.5 million, 2.2 million, and 2.2 million, respectively.

Due to the net loss allocable to common shareholders and Common Unit holders for the three months ended September 30, 2021 and 2020, and nine months ended September 30, 2020, no securities had a dilutive impact for this period.

Note 4. Mortgage and Other Indebtedness

Mortgage and other indebtedness consisted of the following as of September 30, 2021 and December 31, 2020:


	As of September 30, 2021
	Principal		Unamortized Net Premiums		Unamortized Debt Issuance Costs		Total
Senior unsecured notes—fixed rate	$	550,000	$	—	$	(3,556)	$	546,444
Exchangeable senior notes - fixed rate	175,000		—		(5,052)		169,948
Unsecured revolving credit facility	—		—		(1,253)		(1,253)
Unsecured term loan	250,000		—		(1,488)		248,512
Mortgage notes payable—fixed rate	294,787		1,400		(14)		296,173
Mortgage note payable—variable rate	29,193		—		(23)		29,170
Total mortgage and other indebtedness	$	1,298,980	$	1,400	$	(11,386)	$	1,288,994


	As of December 31, 2020
	Principal		Unamortized Net Premiums		Unamortized Debt Issuance Costs		Total
Senior unsecured notes - fixed rate	$	550,000	$	—	$	(3,595)	$	546,405
Unsecured revolving credit facility	25,000		—		(1,672)		23,328
Unsecured term loans	250,000		—		(1,647)		248,353
Mortgage notes payable - fixed rate	295,966		1,732		(25)		297,673
Mortgage notes payable - variable rate	55,110		—		(75)		55,035
Total mortgage and other indebtedness	$	1,176,076	$	1,732	$	(7,014)	$	1,170,794

Consolidated indebtedness, including weighted average maturities and weighted average interest rates as of September 30, 2021, 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	$	1,114,787	86	%	3.78	%	4.3
Variable Rate Debt 2	184,193		14	%	3.48	%	4.2
Net Debt Premiums and Issuance Costs, Net	(9,986)		N/A		N/A		N/A
Total	$	1,288,994	100	%	3.74	%	4.3


____________________
1			Fixed rate debt includes, and variable rate debt excludes, the portion of such debt that has been hedged by interest rate derivatives. As of September 30, 2021, $250 million in variable rate debt is hedged to a fixed rate for a weighted average of 4.1 years.
2			Variable rate debt includes, and fixed rate debt excludes, the portion of such debt that has been hedged to a floating rate. As of September 30, 2021, $155 million in fixed rate debt is hedged to floating rate for a weighted average of 3.9 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 September 30, 2021, the one-month LIBOR interest rate was 0.13%. 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:


	Nine Months Ended September 30,
	2021		2020
Amortization of debt issuance costs	$	1,963	$	1,640

Unsecured Revolving Credit Facility and Unsecured Term Loans

As of September 30, 2021, 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 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 each 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.

As of September 30, 2021, there was zero 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 September 30, 2021.

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 September 30, 2021, 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 $416.7 million available under our Credit Facility for future borrowings as of September 30, 2021.

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 September 30, 2021, we were in compliance with all such covenants.

Exchangeable Senior Notes

In March 2021, the Operating Partnership issued $175.0 million aggregate principal amount of 0.75% Exchangeable Senior Notes maturing in April 2027 (the "Exchangeable Notes"). The Exchangeable Notes are governed by an indenture between the Operating Partnership, the Company and U.S. Bank National Association, as trustee. The Exchangeable Notes were sold in the United States only to accredited investors pursuant to an exemption from the Securities Act of 1933, as amended (the “Securities Act”), and subsequently resold to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The net proceeds from the offering of the Exchangeable Notes were approximately $169.7 million after deducting the underwriting fees and other expenses paid by the Company.

The Exchangeable Notes bear interest at a rate of 0.75% per annum, payable semi-annually in arrears. The Exchangeable Notes will mature on April 1, 2027. The interest expense recognized for the Exchangeable Notes was approximately $0.5 million and $1.1 million for the three and nine months ended September 30, 2021, respectively.

Prior to January 1, 2027, the Exchangeable Notes will be exchangeable into cash up to the principal amount of the Exchangeable Notes exchanged and, if applicable, cash or common shares or a combination thereof, only upon certain circumstances and during certain periods. On or after January 1, 2027, the Exchangeable Notes will be exchangeable into cash up to the principal amount of the Exchangeable Notes exchanged and, if applicable, cash or common shares or a combination thereof at the option of the holders at any time prior to the close of business on the second scheduled trading day preceding the Maturity Date. The exchange rate will initially equal 39.6628 common shares per $1,000 principal amount of Exchangeable Notes (equivalent to an exchange price of approximately $25.21 per common share and an exchange premium of approximately 25% based on the closing price of $20.17 per common share on March 17, 2021). The exchange rate will be subject to adjustment upon the occurrence of certain events, but will not be adjusted for any accrued and unpaid interest.

The Operating Partnership may redeem the Exchangeable Notes, at its option, in whole or in part, on any business day on or after April 5, 2025, if the last reported sale price of the common shares has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Issuer provides notice of redemption at a redemption price equal to 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

In connection with the Exchangeable Notes, the Operating Partnership entered into privately negotiated capped call transactions (the "Capped Call Transactions") with certain of the initial purchasers of the Exchangeable Notes or their respective affiliates. The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Exchangeable Notes, the number of common shares underlying the Exchangeable Notes. The Capped Call Transactions are expected generally to reduce the potential dilution to holders of common shares upon exchange of the Exchangeable Notes. The cap price of the Capped Call Transactions was initially approximately $30.26, which represents a premium of approximately 50% over the last reported sale price of common shares on March 17, 2021, and is subject to anti-dilution adjustments under the terms of the Capped Call Transactions. The cost of the Capped Call Transactions was $9.8 million and was recorded within additional paid-in capital.

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 September 30, 2021, we were in compliance with all such covenants.

Fair Value of Fixed and Variable Rate Debt

As of September 30, 2021, the estimated fair value of our fixed rate debt was $1.1 billion compared to the book value of $1.0 billion. 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 2.78% to 3.87%. As of September 30, 2021, the fair value of variable rate debt was $279.0 million compared to the book value of $279.2 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 2.77% to 3.52%.

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 September 30, 2021, we were party to various cash flow derivative agreements with notional amounts totaling $250.0 million that fix the interest rate on variable rate debt. 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 5.09%.

As of September 30, 2021, we were also party to two interest rate swap contracts with notional amounts totaling $155.0 million. The derivative agreements swap a blended fixed rate of 4.52% for a blended floating rate of LIBOR + 3.70% with an expiration date of September 10, 2025.

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 September 30, 2021 and December 31, 2020, 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 September 30, 2021, the estimated fair value of our interest rate derivatives represented a net liability of $24.2 million, including accrued interest payable of $0.6 million. As of September 30, 2021, this was reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheets. At December 31, 2020, the estimated fair value of our interest rate hedges was a liability of $32.1 million, including accrued interest of $0.4 million. As of December 31, 2020, 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 $1.7 million and $1.3 million were reclassified as a decrease to earnings for the three months ended September 30, 2021 and 2020, respectively. Approximately $4.1 million and $2.7 million were reclassified as a decrease to earnings during each of the nine months ended September 30, 2021 and 2020. As the interest payments on our hedges are made over the next 12 months, we estimate the increase to interest expense to be $7.5 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 $0.18 for the third quarter of 2021 to common shareholders and Common Unit holders of record as of October 1, 2021. The distribution was paid on October 8, 2021.

At-The-Market Offering Program

On February 23, 2021, the Company and the Operating Partnership entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with each of BofA Securities, Inc., Citigroup Global Markets Inc., KeyBanc Capital Markets Inc. and Raymond James & Associates, Inc., pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $150 million of its common shares of beneficial interest, $0.01 par value per share under an at-the-market offering program (the “ATM Program”). As of September 30, 2021, the Company had not sold any common shares under the ATM Program. The Operating Partnership intends to use the net proceeds, if any, to repay borrowings under its unsecured revolving credit facility, to repay other indebtedness and for working capital and other general corporate purposes. The Operating Partnership may also use net proceeds for acquisitions of operating properties and the development or redevelopment of properties, although there are currently no understandings, commitments or agreements to do so.

Share Repurchase Plan

In February 2021, the Company’s Board of Trustees approved a share repurchase program, authorizing share repurchases up to an aggregate of $150 million (the “Share Repurchase Program”). The Share Repurchase Program will end in February 2022 if not terminated earlier. As of September 30, 2021, the Company has not repurchased any shares under its Share Repurchase Program. The Company intends to fund any future repurchases under the Share Purchase Program with cash on hand or availability under its unsecured credit facility subject to any applicable restrictions under the Company’s unsecured credit facility. The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors.

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 September 30, 2021 and December 31, 2020, deferred costs consisted of the following:


	September 30, 2021		December 31, 2020
Acquired lease intangible assets	$	48,816	$	55,352
Deferred leasing costs and other	54,571		57,481
	103,387		112,833
Less—accumulated amortization	(47,489)		(49,662)
Subtotal	55,898		63,171
Less - assets held for sale	(1,667)		—
Total	$	54,231	$	63,171

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:


	Nine Months Ended September 30,
	2021		2020
Amortization of deferred leasing costs, lease intangibles and other	$	8,005	$	10,464
Amortization of above market lease intangibles	700		725

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, tenant rent payments received in advance of the month in which they are due, and lease liabilities recorded upon adoption of ASU 2016-02. 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 September 30, 2021 and December 31, 2020, deferred revenue, intangibles, net and other liabilities consisted of the following:


	September 30, 2021		December 31, 2020
Unamortized in-place lease liabilities	$	43,101	$	45,479
Retainages payable and other	3,505		1,943
Tenant rents received in advance	8,513		11,716
Lease liabilities	26,225		26,511
Total	$	81,344	$	85,649

The amortization of below market lease intangibles is included as a component of minimum rent in the accompanying consolidated statements and was $2.1 million and $2.6 million for the nine months ended September 30, 2021 and 2020, respectively.

Note 9. Commitments and Contingencies

Other Commitments and Contingencies

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). Our portion of the repayment guaranty is limited to $5.9 million. The guaranty's term is through the July 1, 2024 maturity date of the loan. The outstanding loan balance as of September 30, 2021 is $33.6 million and our share is $11.8 million. The loan is secured by the hotel.

As of September 30, 2021, we had outstanding letters of credit totaling $1.2 million. At that date, there were no amounts advanced against these instruments.

Legal Proceedings

We are not subject to any litigation that management considers material nor, to management’s knowledge, is any litigation that management considers material 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.

As previously disclosed in our joint proxy statement/prospectus, beginning on August 27, 2021, two purported RPAI stockholders filed substantially similar complaints against RPAI and the members of the RPAI board of directors (the “RPAI Board”) in the United States District Court for the Southern District of New York. One of these complaints also names Kite Realty and Merger Sub as defendants. The complaints are captioned as follows: Wang v. Retail Properties of America, Inc. et al., No. 1:21-cv-07237 (S.D.N.Y. filed August 27, 2021); and Hopkins v. Retail Properties of America, Inc. et al., No. 1:21-cv-07324 (S.D.N.Y. filed August 31, 2021). The complaints variously assert, among other things, claims under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder against RPAI and the members of the RPAI Board and claims under Section 20(a) of the Exchange Act against the members of the RPAI Board (and, in one case, Kite Realty and Merger Sub) for allegedly causing a materially incomplete and misleading registration statement on Form S-4 to be filed on August 23, 2021 with the SEC. Four additional lawsuits were filed against RPAI and the members of the RPAI Board between September 14, 2021 and October 8, 2021 under the captions Callebs v. Retail Properties of America, Inc. et al., No. 1:21-cv-07593 (S.D.N.Y. filed September 10, 2021); Sheridan v. Retail Properties of America, Inc., et al., No. 1:21-cv-04066-SCJ (N.D.Ga. filed October 1, 2021); Whitfield v. Retail Properties of America, Inc. et al., No. 2:21-cv-04390 (E.D.Pa. filed October 6, 2021); and Reinhardt v Retail Properties of America, Inc. et al., No. 1:21-cv-04187 (N.D. Ga. filed October 8, 2021), which are substantially similar to the other two complaints. Also, on September 15, 2021, a purported Kite Realty shareholder filed a complaint against Kite Realty and the members of the Kite Realty board of trustees in the United States District Court for the Eastern District of New York, captioned as follows: Gentry v. Kite Realty Group Trust et al., No. 1:21-cv-05142 (E.D.N.Y. filed September 15, 2021). The complaint asserts substantially similar claims under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 as the other complaints against RPAI and the RPAI Board.

Plaintiffs sought, among other things, to enjoin or rescind the merger, an award of damages in the event the merger is consummated, and an award of costs and attorneys’ fees. We believe that these claims are without merit and intend to vigorously defend against them.

Note 10. Disposals of Properties and Assets Held for Sale

During the nine months ended September 30, 2021, the Company sold seventeen ground leases for gross proceeds of $42 million and a net gain of $27.6 million. A portion of the proceeds was utilized to pay down our Credit Facility.

There were no operating properties sold during the nine months ended September 30, 2021.

As of September 30, 2021, the Company has classified its Westside Market operating property as held for sale. The property was sold in October 2021 at a sales price that exceeds its carrying value.

Note 11. Subsequent Events

On October 22, 2021, we completed the previously announced merger with RPAI. The transaction value was approximately $4.7 billion, including approximately $2.8 billion market value of common shares issued in the Merger and the assumption of approximately $1.9 billion of debt.

The retail portfolio we acquired through the merger with RPAI is comprised of 102 operating properties along with multiple parcels of entitled land for future value creation.

Under the terms of the Merger Agreement, each outstanding share of RPAI's common stock was converted into the right to receive 0.623 common shares of the Company plus cash in lieu of fractional Company shares.

The Merger will be accounted for by using the business combination accounting rules, which require the application of a screen test to evaluate if substantially all of the fair value of the assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets to determine whether a transaction is accounted for as an asset acquisition or business combination.

We recorded merger expense of $9.2 million and $10.0 million of merger costs for the three and nine months ended September 30, 2021, respectively, which are included in "Merger and acquisition costs" in the accompanying consolidated statements of operations. These costs primarily consist of fairness opinion, legal, professional, and data migration costs. We anticipate the total merger related costs to be approximately $105 million.

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 ("COVID-19"), including possible resurgences, variants and mutations, 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 and may continue to cause many of our tenants to close stores, reduce hours or significantly limit service, making it difficult for them to meet their rent obligations, and therefore has and will continue to impact us significantly for the foreseeable future. COVID-19 has impacted us significantly, and the extent to which it will continue to impact 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 continued speed of the vaccine distribution, the efficacy of vaccines, including against variants of COVID-19, acceptance and availability of vaccines, 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, 2020 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:

•risks associated with the Company’s merger with Retail Properties of America ("RPAI"), including the integration of the businesses of the combined company, the ability to achieve expected synergies or cost savings and potential disruptions to the Company's plans and operations;

•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 or request rent concessions and the risk of tenant insolvency and bankruptcies;

•the competitive environment in which we operate, including potential oversupplies and reduction in demand for rental space;

•acquisition, disposition, development and joint venture risks;

•property ownership and management risks, including the relative illiquidity of real estate investments, periodic costs to repair, renovate and re-lease space, operating costs and expenses, vacancies or the inability to rent space on favorable terms or at all;

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

•potential environmental and other liabilities;

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

•the attractiveness of our properties to tenants, the actual and perceived impact of e-commerce on the value of shopping center assets and changing demographic and customer traffic patterns;

•risks related to our current geographical concentration of our properties in Texas, Florida, New York, Maryland, Virginia, 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, including such events or conditions that may result in underinsured or uninsured losses or other increases in costs and expenses;

•changes in laws and government regulations including governmental orders affecting the use of our properties or the ability of our tenants to operate, and the costs of complying with such changed laws and government regulations;

•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, 2020.

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.

The retail portfolio we acquired through the merger with RPAI was comprised of 102 operating properties along with multiple parcels of entitled land for future value creation.

At September 30, 2021, we owned interests in 87 operating properties totaling approximately 16.8 million square feet. We also owned six development and redevelopment projects as of this date.

At September 30, 2020, we owned interests in 89 operating and redevelopment properties totaling approximately 17.4 million square feet. We also owned three development and redevelopment projects 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 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, if there will be a slowing or potential rollback of "reopenings" in certain states 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 uncertainty, lead us to believe that our operating results could continue to be significantly affected by COVID-19:

•As of September 30, 2021, substantially all of our tenants have reopened.

•As of November 6, 2021, we have collected approximately 98% of rent billings for three months ended September 30, 2021.

•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.

In 2020, the effects of COVID-19 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, the duration of the COVID-19 pandemic, including possible resurgences, variants and mutations, the success of efforts to contain it, the continued speed of the vaccine distribution, the efficacy of vaccines, including against variants of COVID-19, acceptance and availability of vaccines and the impact of actions taken in response to the pandemic. These uncertainties make it difficult to predict operating results for our business. Therefore, there can be no assurances that we will not experience further declines in revenues, net income, FFO, or other operating metrics, which could be material.

We have sought to take advantage of opportunities caused by the COVID-19 pandemic. During this quarter, we executed 82 new and renewal leases representing over 584,800 square feet. In addition, we are actively negotiating with multiple tenants to lease the vacant anchor boxes that were caused by the disruption from the COVID-19 pandemic. Building upon our previous results, we have leased 12 of the vacant anchor boxes since COVID-19 began and are in active lease negotiations for multiple other spaces.

In addition, we continue to focus also on maintaining a strong balance sheet with significant liquidity. In March 2021, we issued $175.0 million of Exchangeable Notes with a 0.75% coupon to proactively fund our 2022 debt maturities. In addition, we have closed on the sale of 17 ground leases during the nine months ended September 30, 2021 for gross proceeds of $42.0 million. As of September 30, 2021, we have over $600.0 million of liquidity, limited capital commitments, and manageable debt maturities.

Recent Activities

Acquisition and Plan of Merger with RPAI

On October 22, 2021, we completed the previously announced merger with Retail Properties of America, Inc. ("RPAI"), in accordance with the Agreement and Plan of Merger dated July 18, 2021 (the "Merger Agreement"), by and among the Company, its wholly owned subsidiary KRG Oak, LLC ("Merger Sub") and RPAI, pursuant to which RPAI merged with and into Merger Sub (the "Merger"). The transaction value was approximately $4.7 billion, including approximately $2.8 billion market value of common shares issued in the Merger and the assumption of approximately $1.9 billion of debt. See Note 11 for additional details. The retail portfolio we acquired through the merger with RPAI was comprised of 102 operating properties along with multiple parcels of entitled land for future value creation.

Operating Activity

During the third quarter of 2021, we executed 82 new and renewal leases totaling 584,820 square feet. New leases were signed for 38 individual spaces for 239,157 square feet of gross leasable area ("GLA"), while renewal leases were signed on 44 individual spaces for 345,663 square feet of GLA.

For comparable new and renewal leases signed in the third quarter of 2021, 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 13.4% and a blended GAAP rent spread of 20.7%.

Results of Operations

The comparability of results of operations for the three and nine months ended September 30, 2021 and 2020 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.

Redevelopment Activities

The following properties were under active redevelopment at various times during the period from January 1, 2020 through September 30, 2021:

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

Courthouse Shadows 3

Naples, FL

June 2013

Sold

124,802


____________________
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.
3			This property was sold in July 2020.

Development Activities

The following properties were under active development at various times during the period from January 1, 2020 through September 30, 2021:

Property Name

MSA

Start Date

Anticipated Completion Date

Owned GLA

Glendale Town Center Apartments

Indianapolis, IN

Q2 2020

Q2 2022

207,000

Eddy Street Commons - Phase II

South Bend, IN

Q3 2017

Q4 2020

8,500

Eddy Street Commons - Phase III

South Bend, IN

Q3 2020

Q1 2022

18,600

The Landing at Tradition - Phase II

Port St. Lucie, FL

Q2 2022

Q2 2023

39,900

Acquisition Activities

The following properties were acquired at various times during the period from January 1, 2020 through September 30, 2021:

Property Name

MSA

Acquisition Quarter

Owned GLA

Eastgate Crossing

Raleigh, NC

Q4 2020

158,724

Comparison of Operating Results for the Three Months Ended September 30, 2021 to the Three Months Ended September 30, 2020

The following table reflects income statement line items from our consolidated statements of operations for the three months ended September 30, 2021 and 2020.


	Three Months Ended September 30,
($ in thousands)	2021			2020			Net change 2020 to 2021
Revenue:
Rental income	$	70,216		$	64,293		$	5,923
Other property related revenue	1,054			670			384
Fee income	195			104			91
Total revenue	71,465			65,067			6,398
Expenses:
Property operating	10,482			10,330			152
Real estate taxes	8,624			9,362			(738)
General, administrative, and other	8,241			6,482			1,759
Merger and acquisition costs	9,198			—			9,198
Depreciation and amortization	30,193			33,953			(3,760)

Total expenses	66,738			60,127			6,611
Gains on sale of operating properties, net	1,260			3,226			(1,966)
Operating income	5,987			8,166			(2,179)
Interest expense	(12,878)			(12,550)			(328)
Income tax benefit of taxable REIT subsidiary	91			190			(99)

Equity in loss of unconsolidated subsidiaries	(196)			(417)			221
Other expense, net	168			(16)			184
Net loss	(6,828)			(4,627)			(2,201)
Net income attributable to noncontrolling interests	(132)			40			(172)
Net loss attributable to Kite Realty Group Trust	$	(6,960)		$	(4,587)		$	(2,373)

Property operating expense to total revenue ratio	14.7		%	15.9		%

Rental income (including tenant reimbursements) increased $5.9 million, or 9.2%, due to the following:


	Net change 2020 to 2021
Properties or components of properties sold during 2020 or 2021	$	(573)
Properties under redevelopment or acquired during 2020 and/or 2021	1,317
Properties fully operational during 2020 and 2021 and other	5,179
Total	$	5,923

The net increase of $5.2 million in rental income for properties fully operational during 2020 and 2021 is primarily due to improved collection activity leading to a decrease in bad debt expense, which contributed a positive variance of $5.4 million. These positive variances were partially offset by lower base minimum rent of $0.6 million due to an increase in vacancy driven by 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 $0.4 million, due to improved parking revenue during 2021.

The Company generated fee income of $0.2 million and $0.1 million during the three months ended September 30, 2021 and 2020, respectively, from property management and development services provided to unconsolidated joint ventures.

Property operating expenses increased $0.2 million, or 1.5%, due to the following:


	Net change 2020 to 2021

Properties under redevelopment or acquired during 2020 and/or 2021	106
Properties fully operational during 2020 and 2021 and other	46
Total	$	152

The lack of significant change in property operating expenses for properties fully operational during the third quarter of 2020 and the third quarter of 2021 is primarily due to a continued focus on cost controls over certain operating expense spend. As a percentage of revenue, property operating expenses decreased from 15.9% to 14.7% due to the decrease in bad debt expense driven by improved collection efforts.

Real estate taxes decreased $0.7 million, or 7.9%, due to the following:


	Net change 2020 to 2021

Properties under redevelopment or acquired during 2020 and/or 2021	50
Properties fully operational during 2020 and 2021 and other	(788)
Total	$	(738)

The net $0.8 million decrease in real estate taxes for properties fully operational during 2020 and 2021 is primarily due to successful real estate tax appeals across the portfolio, most notably for our Texas properties. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected in rental income.

General, administrative and other expenses increased $1.8 million, or 27.1%. The increase is due to certain project-related consulting costs, higher share-based compensation expense, and an increase in certain employee-related costs.

The Company incurred $9.2 million of merger and acquisition costs related to our merger with RPAI. These costs primarily consist of fairness opinion, legal, professional, and data migration costs. We anticipate the total merger related costs to be approximately $105 million.

Depreciation and amortization expense decreased $3.8 million, or 11.1%, due to the following:


	Net change 2020 to 2021

Properties under redevelopment or acquired during 2020 and/or 2021	770
Properties fully operational during 2020 and 2021 and other	(4,530)
Total	$	(3,760)

The net decrease of $4.5 million in depreciation and amortization at properties fully operational during 2020 and 2021 is primarily due to accelerated depreciation and amortization for certain former tenants that occurred in 2020.

Interest expense increased $0.3 million or 2.6%. The increase is primarily due to interest costs related to the Exchangeable Notes that were issued in March 2021.

Comparison of Operating Results for the Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

The following table reflects income statement line items from our consolidated statements of operations for the nine months ended September 30, 2021 and 2020.


	Nine Months Ended September 30,
($ in thousands)	2021			2020			Net change 2020 to 2021
Revenue:
Rental income	$	206,097		$	191,359		$	14,738
Other property related revenue	3,133			6,626			(3,493)
Fee income	1,144			299			845
Total revenue	210,374			198,284			12,090
Expenses:
Property operating	30,978			30,450			528
Real estate taxes	26,574			26,551			23
General, administrative, and other	23,676			19,986			3,690
Merger and acquisition costs	9,958			—			9,958
Depreciation and amortization	90,625			96,830			(6,205)

Total expenses	181,811			173,817			7,994
Gains on sale of operating properties, net	27,517			4,893			22,624
Operating income	56,080			29,360			26,720
Interest expense	(37,386)			(38,115)			729
Income tax benefit of taxable REIT subsidiary	308			496			(188)

Equity in loss of unconsolidated subsidiaries	(758)			(1,256)			498
Other expense, net	189			234			(45)
Net income (loss)	18,433			(9,281)			27,714
Net income attributable to noncontrolling interests	(1,058)			(148)			(910)
Net income (loss) attributable to Kite Realty Group Trust	$	17,375		$	(9,429)		$	26,804

Property operating expense to total revenue ratio	14.7		%	15.4		%

Rental income (including tenant reimbursements) increased $14.7 million, or 7.7%, due to the following:


	Net change 2020 to 2021
Properties or components of properties sold during 2020 or 2021	$	(1,338)
Properties under redevelopment or acquired during 2020 and/or 2021	3,438
Properties fully operational during 2020 and 2021 and other	12,638
Total	$	14,738

The net increase of $12.6 million in rental income for properties fully operational during 2020 and 2021 is primarily due to improved collection activity leading to a decrease in bad debt expense, which contributed a positive variance of $13.3 million.

Other property related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity. This revenue decreased by $3.5 million, primarily due to lower gains on sale of land of $3.8 million over the comparable period slightly offset by improved parking revenue during 2021.

The Company generated fee income of $1.1 million and $0.3 million during the nine months ended September 30, 2021 and 2020, respectively, from property management and development services provided to unconsolidated joint ventures.

Property operating expenses increased $0.5 million, or 1.7%, due to the following:


	Net change 2020 to 2021

Properties under redevelopment or acquired during 2020 and/or 2021	501
Properties fully operational during 2020 and 2021 and other	27
Total	$	528

The lack of change in property operating expenses for properties fully operational during the first three quarters of 2021 compared to the same period in 2020 is primarily due to a halt to any non-critical spending in the second quarter of 2020 during the early stages of the COVID-19 pandemic. The Company has continued to focus on cost controls over certain operating expense spend, but the activity has returned to a more normalized state. As a percentage of revenue, property operating expenses decreased between periods from 15.4% to 14.7% due to these cost containment efforts and improved operating results.

Real estate taxes increased $23,000, or 0.1%, due to the following:


	Net change 2020 to 2021

Properties under redevelopment or acquired during 2020 and/or 2021	359
Properties fully operational during 2020 and 2021 and other	(336)
Total	$	23

The net $0.3 million decrease in real estate taxes for properties fully operational during 2020 and 2021 is primarily due to successful real estate tax appeals at certain properties in the portfolio in 2020. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected in rental income.

General, administrative and other expenses increased $3.7 million, or 18.5%. The increase is due to certain project-related consulting costs, higher share-based compensation expense, and an increase in certain employee-related costs.

The Company incurred $10.0 million of merger and acquisition costs related to our merger with RPAI. These costs primarily consist of fairness opinion, legal, professional, and data migration costs. We anticipate the total merger related costs to be approximately $105 million.

Depreciation and amortization expense decreased $6.2 million, or 6.4%, due to the following:


	Net change 2020 to 2021

Properties under redevelopment or acquired during 2020 and/or 2021	2,127
Properties fully operational during 2020 and 2021 and other	(8,332)
Total	$	(6,205)

The net decrease of $8.3 million in depreciation and amortization at properties fully operational during 2020 and 2021 is primarily due to accelerated depreciation and amortization for certain former tenants that occurred in 2020.

Interest expense decreased $0.7 million or 1.9%. The decrease is primarily due to interest costs incurred in the second quarter of 2020 associated with a precautionary $300 million draw on the Credit Facility that was paid back during the remainder of 2020 partially offset by interest costs associated with the Exchangeable Notes issued in March 2021.

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, including merger and acquisition costs. 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 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 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 metric for the 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 September 30, 2021, the Company excluded three 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 nine months ended September 30, 2021 and 2020:


	Three Months Ended September 30,							Nine Months Ended September 30,
($ in thousands)	2021			2020			% Change	2021			2020			% Change
Number of properties for the period1	83			83

Leased percentage at period end	92.8		%	93.3		%		92.8		%	93.3		%
Economic Occupancy percentage2	89.3		%	92.0		%		89.1		%	92.5		%

Same Property NOI	$	49,426		$	44,596		10.8%	$	143,606		$	135,812		5.7%

Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure:
Net operating income - same properties	$	49,426		$	44,596			$	143,606		$	135,812
Net operating income - non-same activity3	2,738			675				8,072			5,172
Other income (expense), net	258			(139)				883			(227)
General, administrative and other	(8,241)			(6,482)				(23,676)			(19,986)
Merger and acquisition costs	(9,198)			—				(9,958)			—
Depreciation and amortization expense	(30,193)			(33,953)				(90,625)			(96,830)
Interest expense	(12,878)			(12,550)				(37,386)			(38,115)

Gain on sales of properties	1,260			3,226				27,517			4,893
Net (income) loss attributable to noncontrolling interests	(132)			40				(1,058)			(148)
Net (loss) income attributable to common shareholders	$	(6,960)		$	(4,587)			$	17,375		$	(9,429)


____________________
1			Same Property NOI excludes (i) The Corner, Glendale Town Center, and Hamilton Crossing redevelopments, (ii) Eddy Street Commons - Phases II and III, and The Landing at Tradition - Phase II developments, (iii) the recently acquired Eastgate Crossing, and (iv) 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 increased 10.8% for the three months ended September 30, 2021, compared to the same period of the prior year. This increase was primarily due to improved collection activity resulting in a significant reduction in bad debt expense in 2021 compared to 2020, which was more heavily impacted by the COVID-19 pandemic.

Liquidity and Capital Resources

Overview

As discussed above, the COVID-19 pandemic has had, and could 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 has been 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 enhance our liquidity since the pandemic began, including the issuance of $175 million of Exchangeable Notes in the first quarter of 2021 to proactively fund our 2022 debt maturities. In addition, we have closed on the sale of 17 ground leases during the nine months ended September 30, 2021 for gross proceeds of $42 million. As of September 30, 2021, we have approximately $99.5 million in cash on hand, $4.3 million in restricted cash and escrow deposits, $416.1 million of remaining availability under our revolving credit facility (based on the unencumbered property pool allocated thereto), $125.0 million of short-term deposits, 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 40. 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 September 30, 2021, we had approximately $416.1 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 $224.5 million in cash, cash equivalents, and short-term deposits as of September 30, 2021.

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 September 30, 2021.

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 for general corporate purposes, which may include acquisitions of additional properties, the repayment of outstanding indebtedness, capital

expenditures, the expansion, redevelopment, and/or improvement of properties in our portfolio, working capital and other general 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 that are no longer core components of our growth strategy. 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 has and could continue to 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 September 30, 2021, we had $108.1 million of secured debt scheduled to mature prior to September 30, 2022, excluding scheduled monthly principal payments and no debt maturing for the rest of 2021. We believe we have sufficient liquidity to repay this obligation from cash on hand.

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 August 2021, our Board of Trustees declared a cash distribution of $0.18 per common share and Common Unit for the third quarter of 2021. This distribution was paid on October 8, 2021 to common shareholders and Common Unit holders of record as of October 1, 2021. 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 nine months ended September 30, 2021, we incurred $0.8 million of costs for recurring capital expenditures on operating properties, $5.3 million of costs for tenant improvements and external leasing commissions, and $5.9 million to re-lease anchor space at our operating properties related to tenants open and operating as of September 30, 2021 (excluding development and redevelopment properties). We currently anticipate incurring approximately $18 million to $24 million of additional major tenant improvement costs related to executed leases for currently vacant space at a number of our operating properties over the next twelve months.

As of September 30, 2021, we had five development and redevelopment projects under construction. Our share of the total estimated costs of these projects is approximately $22.8 million, of which $8.4 million had been incurred as of September 30, 2021. We anticipate incurring the majority of the remaining $14.4 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.

Share Repurchase Plan

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 would be utilized for the redevelopment of 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 nine months ended September 30, 2021:


	Nine Months Ended
($ in thousands)	September 30, 2021
Active developments and redevelopment	$	13,440
Redevelopment opportunities	10
Recently completed projects and other	12,439
Anchor retenanting	5,933
Recurring operating capital expenditures (primarily tenant improvement payments)	5,113
Total	$	36,935

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 September 30, 2021.

Debt Maturities

The following table presents maturities of mortgage debt and corporate debt as of September 30, 2021 presented on a calendar year basis:


($ in thousands)	Scheduled Principal Payments		Term Maturity		Total
2021	$	583	$	—	$	583
2022	1,043		153,500		154,543
2023	806		256,517		257,323
2024	854		—		854
2025	904		330,000		330,904
Thereafter	4,673		550,100		554,773
	$	8,863	$	1,290,117	$	1,298,980
Unamortized net debt premiums and issuance costs, net					(9,986)
Total					$	1,288,994

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, 2020 for more information related to the risks associated with our indebtedness.

In conjunction with the Merger, the holders of $250 million of Senior Unsecured Notes have the ability to put their interests back to the Company at par. Such offer must be made to the holders of the Private Placement Notes within 10 business days following the consummation of the Merger. None of the holders have currently elected this option. If this were to occur, the Company would initially fund the redemption utilizing a draw on its unsecured revolving credit facility.

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 September 30, 2021.

Subsequent to September 30, 2021, we were assigned an investment grade credit rating from an additional nationally recognized credit rating agency.

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 September 30, 2021, we had cash, cash equivalents, and restricted cash on hand of $103.8 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 Nine Months Ended September 30, 2021 to the Nine Months Ended September 30, 2020

Cash provided by operating activities was $103.8 million for the nine months ended September 30, 2021 and $85.8 million for the nine months ended September 30, 2020. The cash flows were positively impacted due to improved collection activity including previously deferred rent from the COVID-19 pandemic.

Cash used in investing activities was $109.1 million for the nine months ended September 30, 2021, and $15.9 million in the same period of 2020. Highlights of significant cash sources and uses in investing activities are as follows:

•Net proceeds of $47.7 million related to the sale of seventeen ground leases in 2021 and other land parcels, compared to net proceeds over the same period in 2020 of $5.5 million related to the sales of land;

•Increase in capital expenditures of $6.3 million and an increase in construction payables of $4.7 million; and

•An investment in a short-term interest-bearing deposit of $125.0 million utilizing the proceeds from the March 2021 exchangeable senior notes issuance.

Cash provided by financing activities was $62.4 million for the nine months ended September 30, 2021, and $14.7 million in the same period of 2020. Highlights of significant cash sources and uses in financing activities during the first nine months of 2021 and 2020 are as follows:

•In 2021, we issued $175.0 million of exchangeable senior notes in a private placement offering to proactively fund our 2022 debt maturities. In connection with this issuance we incurred transaction costs of $6.0 million and purchased capped calls for $9.8 million;

•In March 2020, we borrowed $300.0 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 uncertainty in the global markets resulting from the COVID-19 pandemic. Through September 30, 2020, we had repaid $250.0 million of these borrowings;

•In 2021, we paid down debt by $52.1 million, utilizing a portion of the proceeds from the sale of seventeen ground leases in 2021 and proceeds from the exchangeable senior notes issuance; and

•We made distributions to common shareholders and Common Unit holders of $44.2 million for the nine months ended September 30, 2021 compared to distributions of $32.6 million for the nine months ended September 30, 2020.

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 excludes the gain on the sale of the ground lease portfolios as these sales were part of our capital strategy distinct from our ongoing operating strategy of selling individual land parcels, from time to time. 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.

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, merger and acquisition costs, the impact on earnings from employee severance, the excess of redemption value over carrying value of preferred stock redemption, and the impact of 2020 bad debt or 2020 accounts receivable ("2020 Collection Impact") which are not otherwise adjusted in the Company’s calculation of FFO.

Our calculations of FFO1 and reconciliation to consolidated net income and FFO, as adjusted, for the three and nine months ended September 30, 2021 and 2020 (unaudited) are as follows:


($ in thousands)	Three Months Ended September 30,				Nine Months Ended September 30,
	2021		2020		2021		2020
Consolidated net (loss) income	$	(6,828)	$	(4,627)	$	18,433	$	(9,281)
Less: net income attributable to noncontrolling interests in properties	(132)		(132)		(396)		(396)
Less: Gain on sales of properties	(1,260)		(3,226)		(27,517)		(4,893)

Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests	30,537		34,295		91,650		97,827
FFO of the Operating Partnership1	22,317		26,310		82,170		83,257
Less: Limited Partners' interests in FFO	(543)		(657)		(2,301)		(2,165)
FFO attributable to Kite Realty Group Trust common shareholders1	$	21,774	$	25,653	$	79,869	$	81,092

FFO of the Operating Partnership1	$	22,317	$	26,310	$	82,170	$	83,257
Add: merger and acquisition costs	9,198		—		9,958		—
Less: 2020 Collection Impact	(2,063)		—		(3,329)		—
FFO, as adjusted, of the Operating Partnership	$	29,452	$	26,310	$	88,799	$	83,257


____________________
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) merger and acquisition costs, (iv) other income and expense, (v) noncontrolling interest EBITDA and (vi) 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, Pro-Forma Adjusted EBITDA, Net Debt to Adjusted EBITDA, and Net Debt to Pro-Forma 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, Pro-Forma Adjusted EBITDA, and the ratios of Net Debt to Adjusted EBITDA and Net Debt to Pro-Forma 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, Annualized Adjusted EBITDA and Pro-Forma Adjusted EBITDA to consolidated net income (the most directly comparable GAAP measure) and a calculation of Net Debt to Adjusted EBITDA and Net Debt to Pro-Forma Adjusted EBITDA.


($ in thousands)	Three Months Ended September 30, 2021
Consolidated net loss	$	(6,828)
Adjustments to net income:
Depreciation and amortization	30,193
Interest expense	12,878
Income tax benefit of taxable REIT subsidiary	(91)
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)	36,152
Adjustments to EBITDA:
Unconsolidated EBITDA	403
Merger and acquisition costs	9,198
Gain on sales of operating properties	(1,260)
Other income and expense, net	28
Noncontrolling interest	(132)
Adjusted EBITDA	44,389

Annualized Adjusted EBITDA1	$	177,556

Company Share of Net Debt:
Mortgage and other indebtedness	1,288,994
Plus: Company share of unconsolidated joint venture debt	23,810
Plus: Debt premium and debt issuance costs	9,986
Less: Partner share of consolidated joint venture debt 2	(584)
Less: Cash, cash equivalents, restricted cash, and short-term deposits	(230,921)
Company Share of Net Debt	1,091,285
Net Debt to Adjusted EBITDA	6.1x


____________________
1			Represents Adjusted EBITDA for the three months ended September 30, 2021 (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.

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 September 30, 2021, 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 40, 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, 2020.


Item 3.			Quantitative and Qualitative Disclosures About Market Risk

Market Risk Related to Fixed and Variable Rate Debt

We had $1.3 billion of outstanding consolidated indebtedness as of September 30, 2021 (exclusive of net premiums and issuance costs, net of $10.0 million on acquired indebtedness). As of this date, we were party to various consolidated interest rate hedge agreements totaling $95.0 million, with expiration dates through 2025. Reflecting these hedge agreements, our fixed and variable rate debt was $1.1 billion (86%) and $0.2 billion (14%), respectively, of our total consolidated indebtedness at September 30, 2021.

As of September 30, 2021, we had $108.1 million of 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 debt as the Company expects to retire these loans utilizing cash on hand. A 100 basis point change in interest rates on our unhedged variable rate debt as of September 30, 2021 would change our annual cash flow by $1.8 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 September 30, 2021 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 the Chief Executive Officer and Chief Financial Officer of Kite Realty Group Trust (the sole general partner of Kite Realty Group, L.P.), 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 September 30, 2021 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

As previously disclosed in our joint proxy statement/prospectus, beginning on August 27, 2021, two purported RPAI stockholders filed substantially similar complaints against RPAI and the members of the RPAI board of directors (the “RPAI Board”) in the United States District Court for the Southern District of New York. One of these complaints also names Kite Realty and Merger Sub as defendants. The complaints are captioned as follows: Wang v. Retail Properties of America, Inc. et al., No. 1:21-cv-07237 (S.D.N.Y. filed August 27, 2021); and Hopkins v. Retail Properties of America, Inc. et al., No. 1:21-cv-07324 (S.D.N.Y. filed August 31, 2021). The complaints variously assert, among other things, claims under Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Rule 14a-9 promulgated thereunder against RPAI and the members of the RPAI Board and claims under Section 20(a) of the Exchange Act against the members of the RPAI Board (and, in one case, Kite Realty and Merger Sub) for allegedly causing a materially incomplete and misleading registration statement on Form S-4 to be filed on August 23, 2021 with the SEC. Four additional lawsuits were filed against RPAI and the members of the RPAI Board between September 14, 2021 and October 8, 2021 under the captions Callebs v. Retail Properties of America, Inc. et al., No. 1:21-cv-07593 (S.D.N.Y. filed September 10, 2021); Sheridan v. Retail Properties of America, Inc., et al., No. 1:21-cv-04066-SCJ (N.D.Ga. filed October 1, 2021); Whitfield v. Retail Properties of America, Inc. et al., No. 2:21-cv-04390 (E.D.Pa. filed October 6, 2021); and Reinhardt v. Retail Properties of America, Inc. et al., No. 1:21-cv-04187 (N.D. Ga. filed October 8, 2021) , which are substantially similar to the other two complaints. Also, on September 15, 2021, a purported Kite Realty shareholder filed a complaint against Kite Realty and the members of the Kite Realty board of trustees in the United States District Court for the Eastern District of New York, captioned as follows: Gentry v. Kite Realty Group Trust et al., No. 1:21-cv-05142 (E.D.N.Y. filed September 15, 2021). The complaint asserts substantially similar claims under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 as the other complaints against RPAI and the RPAI Board.

Kite Realty believes that the disclosures set forth in the joint proxy statement/prospectus comply fully with all applicable laws, and denies the allegations in the pending actions described above and believes they are without merit. Plaintiffs sought, among other things, to enjoin or rescind the merger, an award of damages in the event the merger is consummated, and an award of costs and attorneys’ fees. We believe that these claims are without merit and intend to vigorously defend against them.


Item 1A.			Risk Factors

Other than as noted below, there have been no material changes from the risk factors previously disclosed in response to "Part I - Item 1A. Risk Factors" of our Annual Report on Form 10-K for the year ended December 31, 2020 filed on February 22, 2021.

Risks Related to the Company Following the Merger

We may incur substantial expenses related to the integration of us and RPAI.

We may incur substantial expenses in connection with integrating the business, operations, networks, systems, technologies, policies and procedures of the two companies. In addition, RPAI’s systems will need to be integrated into our systems, including accounting and finance, leasing and asset management. Although we have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond our control that could affect the total amount or the timing of the integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the integration expenses associated with the Merger could, particularly in the near term, exceed the savings that we expect to achieve from the elimination of duplicative expenses and the realizations of economies of scale and cost savings related to the integration of the businesses following the completion of the Merger.

We may be unable to integrate our business with RPAI’s business successfully or realize the anticipated synergies and related benefits of the Merger or do so within the anticipated timeframe.

The Merger effected the combination of two companies that previously operated as independent public companies. We will be required to devote significant management attention and resources to integrating the business practices and operations of us and RPAI. Potential difficulties we may encounter in the integration process include the following:

•the inability to combine our and RPAI’s businesses successfully in a manner that permits us to achieve the cost savings anticipated to result from the Merger, which would result in the anticipated benefits of the Merger not being realized in the timeframe currently anticipated or at all;

•the risk of not realizing all of the anticipated operational efficiencies or other anticipated strategic and financial benefits of the Merger within the expected timeframe or at all;

•the inability to realize the anticipated value from some of RPAI’s assets;

•the complexities associated with integrating personnel from the two companies;

•the additional complexities of combining two companies with different histories, cultures, regulatory restrictions, strategies, markets and tenant bases;

•the failure to retain key employees, including potential departures of employees of the combined company after the Merger;

•complexities associated with applying our standards, controls, procedures and policies over a significantly larger base of assets;

•potential unknown liabilities and unforeseen increased expenses or regulatory conditions associated with the Merger; and

•performance shortfalls as a result of the diversion of management’s attention caused by integrating the companies’ operations.

For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of our management, the disruption of our ongoing business or inconsistencies in our operations, services, standards, controls, procedures and policies, any of which could adversely affect our ability to maintain relationships with tenants, customers, vendors and employees or to achieve the anticipated benefits of the Merger, or could otherwise adversely affect our business and financial results.

Shareholder litigation could negatively affect our business and operations.

Securities class action lawsuits and derivative lawsuits are often brought against companies that have entered into merger agreements. As of the date of this Quarterly Report on Form 10-Q, seven putative stockholder class action lawsuits have been filed by purported Kite or RPAI shareholders challenging the disclosures made in our joint proxy statement/prospectus filed in connection with the Merger. The complaints each allege that the joint proxy statement/prospectus was a materially incomplete and misleading registration statement on Form S-4 filed in violation of Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 promulgated thereunder. The Company believes that the disclosures set forth in the joint proxy statement/prospectus comply fully with all applicable laws, and denies the allegations in the pending actions and believes they were without merit. Additional lawsuits arising out of the Merger may be filed in the future We cannot assure you as to the outcome of any lawsuit that has been or may be filed, including the amount of costs associated with defending claims or any other liabilities that may be incurred in connection with such litigation. Whether or not any plaintiff’s claim is successful, this type of litigation may result in significant costs and divert management’s attention and resources, which could adversely affect the operation of our business.

Our Bylaws provide that the Circuit Court for Baltimore City, Maryland will be the exclusive forum for any internal corporate claims and other matters, which could limit our shareholders’ ability to obtain a favorable judicial forum for disputes with us or our trustees, executive officers, employees or shareholders.

Our bylaws provide the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Northern Division, shall be the sole and exclusive forum for (i) any Internal Corporate Claim as defined under the Maryland General Corporation Law, as amended (the “MGCL”), (ii) any derivative action or proceeding brought in the right or on behalf of the Company, (iii) any action asserting a claim of breach of any duty owed by any trustee, officer, employee or agent of the Company to the Company or our shareholders, (iv) any action asserting a claim against the Company or any trustee, officer, employee or agent of the Company arising pursuant to any

provision of the MGCL, our Declaration of Trust or our bylaws or (v) any action asserting a claim against the Company or any trustee, officer, employee or agent of the Company that is governed by the internal affairs doctrine.

The federal district courts of the United States of America shall, to the fullest extent permitted by law, be the sole and exclusive forum for the resolution of any complaint asserting a cause of action arising under the Securities Act. Since Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all suits brought to enforce any duty or liability created by the Securities Act or the rules and regulations thereunder, there is uncertainty as to whether a court would enforce an exclusive forum provision for actions arising under the Securities Act. The provision may limit a shareholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our trustees, officers, employees or shareholders, which may discourage such lawsuits against us and our trustees, officers, employees or shareholders. Alternatively, if a court were to find the choice of forum provision contained in our bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect its business, financial condition and results of operations.

Risks Related to an Investment in the Company’s Common Shares following the Merger

The market price of our common shares following the Merger may be affected by factors different from those affecting the price of our common shares before the Merger.

Our results of operations, as well as the market price of our common shares after the Merger, may be affected by factors different from those that previously affected our or RPAI’s results of operations and the market prices of our common shares or RPAI common stock. These factors include:

•a greater number of our common shares outstanding as compared to the number of currently outstanding shares of our common shares or RPAI common stock;

•different shareholders in us after the Merger; and

•our owning different assets and maintaining different capitalizations.

Accordingly, the historical market prices and financial results of us and RPAI may not be indicative of these matters for us now that the Merger has been completed.

The market price of our common shares after the Merger may be volatile or decline as a result of the Merger.

The United States stock markets, including the NYSE, on which our common shares will continue to be listed under the symbol “KRG” after the Merger, have experienced significant price and volume fluctuations. As a result, the market price of our common shares is likely to be similarly volatile, and investors in our common shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. We cannot assure you that the market price of our common shares will not fluctuate or decline significantly in the future. For example, the market price of our common shares may decline as a result of the Merger if the combined company does not achieve the perceived benefits of the Merger or the effect of the Merger on our financial results is not consistent with the expectations of financial or industry analysts.

In addition, following consummation of the Merger, our shareholders and RPAI stockholders own interests in a combined company, which operates an expanded business with a different mix of properties, risks and liabilities. Our shareholders may not wish to continue to invest in us, or for other reasons may wish to dispose of some or all of their shares of our common shares. If significant amounts of our common shares are sold, the price of our common shares could decline.

We have a significant amount of indebtedness following the Merger and may need to incur more in the future.

We had outstanding indebtedness of approximately $3.1 billion as of November 5, 2021. The incurrence of new indebtedness could have adverse consequences on our business following the Merger, such as:

•requiring us to use a substantial portion of its cash flow from operations to service its indebtedness, which would reduce the available cash flow to fund working capital, capital expenditures, development projects, and other general corporate purposes and reduce cash for distributions;

•limiting our ability to obtain additional financing to fund its working capital needs, acquisitions, capital expenditures, or other debt service requirements or for other purposes;

•increasing our costs of incurring additional debt;

•increasing our exposure to floating interest rates;

•limiting our ability to compete with other companies that are not as highly leveraged, as we may be less capable of responding to adverse economic and industry conditions;

•restricting us from making strategic acquisitions, developing properties, or exploiting business opportunities;

•restricting the way in which we conduct our business because of financial and operating covenants in the agreements governing our existing and future indebtedness;

•exposing us to potential events of default (if not cured or waived) under covenants contained in its debt instruments that could have a material adverse effect on our business, financial condition, and operating results;

•increasing our vulnerability to a downturn in general economic conditions; and

•limiting our ability to react to changing market conditions in its industry.

The impact of any of these potential adverse consequences could have a material adverse effect on our results of operations, financial condition, and liquidity.

Risks Related to Tax Following the Merger

If the Merger does not qualify as a reorganization there may be adverse tax consequences.

The parties intend that the Merger will be treated as a reorganization within the meaning of Section 368(a) of the Code, and it was a condition to the Merger that we and RPAI received opinions from each party’s respective counsel to the effect that, for U.S. federal income tax purposes, the Merger constitutes a reorganization within the meaning of Section 368(a) of the Code. These tax opinions represent the legal judgment of counsel rendering the opinion and are not binding on the internal revenue service or the courts. If the Merger were to fail to qualify as a reorganization, U.S. holders of shares of RPAI common stock generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of the Company's common shares and cash in lieu of fractional common shares of the Company received by such holder in the Merger; and (ii) such holder's adjusted tax basis in its RPAI stock.

We may incur adverse tax consequences if we have failed or fail, or if RPAI has failed, to qualify as a REIT for U.S. federal income tax purposes.

We believe we have operated and believe RPAI has operated in a manner that has allowed each company to qualify and we intend to operate in a manner that we believe allows us to continue to qualify as a REIT for U.S. federal income tax purposes under the Code. Qualification as a REIT involves the application of highly technical and complex provisions of the Code for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable Treasury Regulations that have been promulgated under the Code is greater in the case of a REIT that holds its assets through a partnership (such as we do). The determination of various factual matters and circumstances not entirely within the control of the Company may affect our ability to qualify as a REIT. In order to qualify as a REIT, each of the Company and RPAI must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, excluding any net capital gains.

If we lose our REIT status, or are determined to have lost our REIT status in a prior year, we will face serious tax consequences that would substantially reduce our cash available for distribution, including cash available to pay dividends to our stockholders, because:

•we would be subject to U.S. federal income tax on our net income at regular corporate rates for the years we did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to shareholders in computing our taxable income);

•we could be subject to the federal alternative minimum tax and possibly increased state and local taxes for such periods;

•unless we are entitled to relief under applicable statutory provisions, neither the Company nor any "successor" corporation, trust or association could elect to be taxed as a REIT until the fifth taxable year following the year during which we were disqualified;

•if we were to re-elect REIT status, we would have to distribute all earnings and profits from non-REIT years before the end of the first new REIT taxable year; and

•for the five years following re-election of REIT status, upon a taxable disposition of an asset owned as of such re-election, we would be subject to corporate level tax with respect to any built-in gain inherent in such asset at the time of re-election.

Even if we retain our REIT status, if RPAI loses its REIT status for a taxable year before the Merger, we will face serious tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to our stockholders, because:

•unless we are entitled to relief under applicable statutory provisions, the Company, as the "successor" trust to RPAI, could not elect to be taxed as a REIT until the fifth taxable year following the year during which RPAI was disqualified;

•the Company, as the successor by merger to RPAI, would be subject to any corporate income tax liabilities of RPAI, including penalties and interest;

•assuming that we otherwise maintained our REIT qualification, we would be subject to tax on the built-in gain on each asset of RPAI existing at the time of the Merger if we were to dispose of the RPAI asset for up to five years following the Merger; and

•assuming that we otherwise maintained its REIT qualification, we would succeed to any earnings and profits accumulated by RPAI for taxable periods that it did not qualify as a REIT, and we would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including interest payments to the IRS) to eliminate such earnings and profits.

In addition, if there is an adjustment to RPAI’s taxable income or dividends paid deductions, we could elect to use the deficiency dividend procedure in order to maintain RPAI's REIT status. That deficiency dividend procedure could require us to make significant distributions to its shareholders and to pay significant interest to the IRS.

As a result of these factors, our failure (before or after the Merger), or RPAI's failure (before the Merger), to qualify as a REIT could impair our ability to expand our business and raise capital, and would materially adversely affect the value of our common shares.


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

None


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

2.1

Agreement and Plan of Merger, dated as of July 18, 2021, by and among Kite Realty Group Trust, KRG Oak, LLC, and Retail Properties of America, Inc.

Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 19, 2021

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

Articles Supplementary Reclassifying Preferred Shares of Kite Realty Group Trust, dated August 20, 2021

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 August 23, 2021

3.5

Amendment and Declaration of Trust for Kite Realty Group Trust, 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 October 22, 2021

3.6

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

3.7

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

3.8

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

3.9

Third Amendment to the Second Amended and Restated Bylaws of Kite Realty Group Trust, as 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 July 19, 2021

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

4.5

Indenture, dated as of March 22, 2021, among Kite Realty Group, L.P., as issuer, Kite Realty Group Trust, as REIT, 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 March 22, 2021

4.6

Form of Global Note representing the 0.75% Exchangeable Senior Notes due 2027 (included in Exhibit 4.5)

Incorporated by reference to Exhibit 4.1 and 4.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on March 22, 2021

4.7

Fourth Supplemental Indenture, dated as of October 22, 2021, between Kite Realty Group, L.P., as successor company, 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 October 22, 2021

10.1

First Amendment to Sixth Amended and Restated Credit Agreement, dated as of October 22, 2021, by and among Kite Realty Group, L.P., KeyBank National Association, as administrative agent, and the lenders party thereto

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.2

Springing Guaranty, dated as of October 22, 2021, by Kite Realty Group Trust

Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.3

Third Amendment to Term Loan Agreement, dated as of October 22, 2021, by and among Kite Realty Group, L.P., KeyBank National Association, as administrative agent, and the lenders party thereto

Incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.4

Springing Guaranty, dated as of October 22, 2021, by Kite Realty Group Trust

Incorporated by reference to Exhibit 10.4 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.5

Fourth Amendment to Term Loan Agreement, dated as of October 22, 2021, by and among Kite Realty Group, L.P., Kite Realty Group Trust, Capital One, National Association, as administrative agent, and the lenders party thereto

Incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.6

Springing Guaranty, dated as of October 22, 2021, by Kite Realty Group Trust

Incorporated by reference to Exhibit 10.6 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.7

Note Purchase Agreement dated as of May 16, 2014 among the Retail Properties of America, Inc. as issuer and certain institutions as purchasers (incorporated herein by reference to Exhibit 10.1 to Retail Properties of America, Inc.’s Current Report on Form 8-K filed on May 22, 2014)

Incorporated by reference to Exhibit 10.7 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.8

Assumption Agreement with respect to the 2014 Note Purchase Agreement, dated as of October 22, 2021, by Kite Realty Group, L.P.

Incorporated by reference to Exhibit 10.8 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.9

Springing Guaranty with respect to the 2014 Note Purchase Agreement, dated as of October 22, 2021, by Kite Realty Group Trust

Incorporated by reference to Exhibit 10.9 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.10

Note Purchase Agreement dated as of September 30, 2016, among Retail Properties of America, Inc. as issuer and certain institutions as purchasers (incorporated herein by reference to Exhibit 10.1 to Retail Properties of America, Inc.’s Current Report on Form 8-K filed on October 5, 2016)

Incorporated by reference to Exhibit 10.10 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.11

Assumption Agreement with respect to the 2016 Note Purchase Agreement, dated as of October 22, 2021, by Kite Realty Group, L.P.

Incorporated by reference to Exhibit 10.11 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.12

Springing Guaranty with respect to the 2016 Note Purchase Agreement, dated as of October 22, 2021, by Kite Realty Group Trust

Incorporated by reference to Exhibit 10.12 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.13

Note Purchase Agreement dated as of April 5, 2019 among Retail Properties of America, Inc. as issuer and certain institutions as purchasers (incorporated herein by reference to Exhibit 10.1 to Retail Properties of America, Inc.’s Current Report on Form 8-K filed on April 9, 2019)

Incorporated by reference to Exhibit 10.13 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.14

Assumption Agreement with respect to the 2019 Note Purchase Agreement, dated as of October 22, 2021, by Kite Realty Group, L.P.

Incorporated by reference to Exhibit 10.14 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.15

Springing Guaranty with respect to the 2019 Note Purchase Agreement, dated as of October 22, 2021, by Kite Realty Group Trust

Incorporated by reference to Exhibit 10.15 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.16

Indemnification Agreement, dated as of October 22, 2021, by and among Kite Realty Group Trust, Kite Realty Group, L.P. and Bonnie S. Biumi

Incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.17

Indemnification Agreement, dated as of October 22, 2021, by and among Kite Realty Group Trust, Kite Realty Group, L.P. and Gerald M. Gorski

Incorporated by reference to Exhibit 10.17 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.18

Indemnification Agreement, dated as of October 22, 2021, by and among Kite Realty Group Trust, Kite Realty Group, L.P. and Steven P. Grimes

Incorporated by reference to Exhibit 10.18 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

10.19

Indemnification Agreement, dated as of October 22, 2021, by and among Kite Realty Group Trust, Kite Realty Group, L.P. and Peter L. Lynch

Incorporated by reference to Exhibit 10.18 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 22, 2021

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

Inline 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

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

Inline 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 registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	KITE REALTY GROUP TRUST

November 5, 2021	By:	/s/ John A. Kite
(Date)		John A. Kite
		Chairman and Chief Executive Officer
		(Principal Executive Officer)


November 5, 2021	By:	/s/ Heath R. Fear
(Date)		Heath R. Fear
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)


	KITE REALTY GROUP, L.P.

	By: Kite Realty Group Trust, its sole general partner

November 5, 2021	By:	/s/ John A. Kite
(Date)		John A. Kite
		Chairman and Chief Executive Officer
		(Principal Executive Officer)


November 5, 2021	By:	/s/ Heath R. Fear
(Date)		Heath R. Fear
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)