UNITED STATES
 
SECURITIES AND EXCHANGE COMMISSION
 
Washington, D.C. 20549
 
FORM 10-K
 

(Mark One)
   
x
Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
For the fiscal year ended December 31, 2014
o
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
(Exact name of registrant as specified in its charter)

Maryland
11-3715772
(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)
 
(317) 577-5600
(Registrant’s telephone number, including area code)
   
Title of each class
 
Name of each exchange on which registered
Common Shares, $0.01 par value
 
New York Stock Exchange
8.25% Series A Cumulative Redeemable Perpetual Preferred Shares
 
New York Stock Exchange
 
Securities registered pursuant to Section 12(g) of the Act:  None
 
 
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes   x No   o
 
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes   o No   x
 
 
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. Yes   x No   o
 
 
Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes   x No   o
 
 
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x
 
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
 
 
Large accelerated filer
x
 
Accelerated filer
o
 Non-accelerated filer
o
 
Smaller reporting company
o
 
           
(do not check if a smaller reporting company)
       
 
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes   o No   x
 
 
The aggregate market value of the voting and non-voting common shares held by non-affiliates of the Registrant as the last business day of the Registrant’s most recently completed second quarter was $808 million based upon the closing price of $24.56 per share on the New York Stock Exchange on such date.
 
 
The number of Common Shares outstanding as of February 23, 2015 was 83,506,246 ($.01 par value).
 
 
Documents Incorporated by Reference
 
Portions of the definitive Proxy Statement relating to the Registrant’s Annual Meeting of Shareholders, scheduled to be held on May 21, 2015, to be filed with the Securities and Exchange Commission, are incorporated by reference into Part III, Items 10-14 of this Annual Report on Form 10-K as indicated herein.
 

 
 
 



 
KITE REALTY GROUP TRUST
Annual Report on Form 10-K
For the Fiscal Year Ended
December 31, 2014
 
 
TABLE OF CONTENTS
 
     
Page
       
       
Item No.
   
     
Part I
   
       
 
1.
3
 
1A.
10
 
1B.
28
 
2.
29
 
3.
42
 
4.
42
     
Part II
   
       
 
5.
43
 
6.
46
 
7.
47
 
7A.
71
 
8.
71
 
9.
71
 
9A.
71
 
9B.
74
     
Part III
   
       
 
10.
74
 
11.
74
 
12.
74
 
13.
74
 
14.
74
     
Part IV
   
       
 
15.
75
       
Signatures
76


 
 
 

 
Forward-Looking Statements
 
 
This Annual Report on Form 10-K, together with other statements and information publicly disseminated by Kite Realty Group Trust (the “Company”), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). 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. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not limited to:
 
 
·  
national and local economic, business, real estate and other market conditions, particularly in light of low growth in the U.S. economy as well as uncertainty added to the economic forecast due to the sharp drop in oil and energy prices in late 2014;
 
·  
financing risks, including the availability of and costs associated with sources of liquidity;
 
·  
our ability to refinance, or extend the maturity dates of, our indebtedness;
 
·  
the level and volatility of interest rates;
 
·  
the financial stability of tenants, including their ability to pay rent and the risk of tenant bankruptcies;
 
·  
the competitive environment in which we operate;
 
·  
acquisition, disposition, development and joint venture risks;
 
·  
property ownership and management risks;
 
·  
our ability to maintain our status as a real estate investment trust (“REIT”) for federal income tax purposes;
 
·  
potential environmental and other liabilities;
 
·  
impairment in the value of real estate property we own;
 
·  
risks related to the geographical concentration of our properties in Florida, Indiana, and Texas;
 
·  
insurance costs and coverage;
 
·  
other factors affecting the real estate industry generally; and
 
·  
other risks identified in this Annual Report on Form 10-K 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.
 
 
We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.
 

 
2
 


 
PART I
 
 
ITEM 1. BUSINESS
 
 
Unless the context suggests otherwise, references to “we,” “us,” “our” or the “Company” refer to Kite Realty Group Trust and our business and operations conducted through our directly or indirectly owned subsidiaries, including Kite Realty Group, L.P., our operating partnership (the “Operating Partnership”).
 
 
Overview
 
 
Kite Realty Group Trust is a full-service, vertically integrated real estate company engaged in the ownership and operation, acquisition, development, and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States.
 
 
The Company was formed in Maryland in 2004 as a REIT.  We conduct all of our business through our Operating Partnership, of which we are the sole general partner. As of December 31, 2014, we held a 98.1% interest in our Operating Partnership with limited partners owning the remaining 1.9%.
 
 
On July 1, 2014, we completed a merger with Inland Diversified Real Estate Trust, Inc. (“Inland Diversified”), in which Inland Diversified merged with and into a wholly-owned subsidiary of ours in a stock-for-stock exchange with a transaction value of approximately $2.1 billion, including the assumption of approximately $0.9 billion of debt.
 
 
As of December 31, 2014, we owned interests in 118 retail operating properties totaling approximately 23.9 million square feet of gross leasable area (including approximately 7.7 million square feet of non-owned anchor space) located in 26 states.  Our retail operating portfolio was 94.8% leased to a diversified retail tenant base, with no single retail tenant accounting for more than 3.4% of our total annualized base rent. In the aggregate, our largest 25 tenants accounted for 34.9% of our annualized base rent.  See Item 2, “Properties” for a list of our top 25 tenants by annualized base rent.
 
 
We also owned interests in one office operating property and an associated parking garage, as well as the office components at Eddy Street Commons and Traditions Village, totaling approximately 0.4 million square feet of net rentable area. The leased percentage of our office operating properties was 93.3% as of December 31, 2014.
 
 
As of December 31, 2014, we also had an interest in four development projects under construction. Upon completion, these projects are anticipated to have approximately 0.9 million square feet of gross leasable area (including approximately 0.2 million square feet of non-owned anchor space).
 
 
In addition to our development projects, as of December 31, 2014, we had one redevelopment project under construction, which is expected to contain 0.2 million square feet of gross leasable area upon completion and two redevelopment projects pending commencement of construction, which are expected to contain 0.2 million square feet of total gross leasable area upon completion.
 
 
In addition, as of December 31, 2014, we owned interests in various land parcels totaling approximately 105 acres. These parcels are expected to be used for future expansion of existing properties, development of new retail or office properties or sold to third parties.
 
 
Significant 2014 Activities
 
 
Merger with Inland Diversified
 
 
We successfully completed on schedule the previously announced merger with Inland Diversified (“the Merger”) on July 1, 2014.   Under the terms of the Merger agreement, Inland Diversified shareholders received 1.707 newly issued common shares of the Company for each outstanding common share of Inland Diversified, resulting in a total issuance of approximately 201.1 million of our common shares with a value of approximately $1.2 billion based on the closing price of our common shares on the day preceding the Merger.  The terms were prior to the one for four reverse share split completed in August 2014.
 
 
 
3
 
 
The Merger enabled us to acquire a high-quality portfolio of retail properties comprised of 60 properties in 23 states.  The properties are located in a number of our existing markets and provided entrances into desirable new markets including Westchester, New York; Bayonne, New Jersey; Las Vegas, Nevada; Virginia Beach, Virginia; and Salt Lake City, Utah.
 
 
The Merger enabled us to accelerate and achieve many of our strategic goals including:
 
 
·  
Improving our operating cash flow and funds available for distribution, enabling us to increase our dividend by 13% over the last twelve months;
 
·  
Delevering the balance sheet significantly by reducing our ratio of net debt to EBITDA to approximately 6.5 times as of December 31, 2014;
 
·  
Achieving investment grade credit ratings of Baa3 from Moody’s Investors Service and BBB- from Standard and Poor’s Ratings Services, both with a stable outlook;
 
·  
Enhancing our capital flexibility by expanding our unencumbered property pool;
 
·  
Growing adjusted funds from operations (AFFO) per share by 19% from the prior year; and
 
·  
Utilizing our scalable operating platform and our existing tenant relationships to continue to drive leasing and asset management results.
 
 
Operating Activities
 
 
Along with completing the Merger, we also continued to drive strong operating results from our legacy portfolio and the properties acquired as part of the Merger including as follows:
 
 
·  
Same Property Net Operating Income increased 4.7% for 2014 compared to 2013
 
·  
We entered into new and renewal leases for approximately 1.1 million square feet of retail space in 2014
 
·  
Our retail recovery ratio reached at an all-time high of 89.6% in the fourth quarter of 2014 due to enhanced expense control
 
·  
Our portfolio annual base rent per square foot as of December 31, 2014, improved to $15.15, a 15% increase from the end of the prior year
 
 
Portfolio Recycling
 
 
On September 16, 2014, we entered into a Purchase and Sale Agreement with Inland Real Estate Income Trust, Inc. (“Inland Real Estate”), which provided for the sale of 15 of our operating properties (the “Portfolio”) to Inland Real Estate. The 15 operating properties were acquired in conjunction with the Merger.  The sale of the first tranche of eight properties closed in November and December 2014 and generated gross proceeds of $151 million and net proceeds of $75 million after assumption of mortgage debt.  The second tranche of seven properties, which is scheduled to close in March 2015, is expected to generate gross proceeds of $167 million and net proceeds of $103 million after assumption of mortgage indebtedness.
 
 
In addition, throughout the year, we sold an additional four properties for gross proceeds of $41 million and net proceeds of $32 million after retiring indebtedness secured by mortgages on the properties.
 
 
Development, Redevelopment, and Acquisition Activities
 
 
During 2014, we initiated and completed a number of development, redevelopment, and acquisition activities, including the following:
 
 
·  
Parkside Town Commons near Raleigh, North Carolina – We substantially completed construction on Phase I of this 570,000 square foot development.  Phase I of this project is 90% leased and is anchored by Harris Teeter, Petco and a non-owned Target.  Phase II of this project is 68% leased.  Field & Stream and Golf Galaxy opened in September 2014 and will be joined by Frank Theatres in the first half of 2015.
 
 
 
4
 
 
 
·  
Delray Marketplace in Delray Beach, Florida – We substantially completed construction on this 260,000 square foot development in the first quarter of 2014 and transitioned the project to the operating portfolio.  This center is anchored by Publix, Frank Theatres, Burt & Max’s Grille, Carl’s Patio, Charming Charlie, Chico’s, White House | Black Market, Ann Taylor Loft, and Jos. A. Bank.
 
·  
Holly Springs Towne Center – Phase II near Raleigh, North Carolina – We commenced construction on Phase II of this 154,000 square foot development in the third quarter of 2014.  This phase will be anchored by Carmike Theatres, DSW and Bed Bath & Beyond.
 
·  
Tamiami Crossing in Naples, Florida – We commenced site work on this 140,000 square foot development in the fourth quarter of 2014.  This center will be anchored by Stein Mart and a planned five additional junior anchors.
 
·  
King’s Lake Square in Naples, Florida – We substantially completed construction on this redevelopment and transitioned this project to the operating portfolio in the second quarter of 2014.  This center is anchored by a newly rebuilt Publix Supermarkets which opened in April of 2014.
 
·  
Bolton Plaza in Jacksonville, Florida – We substantially completed construction on this 156,000 square foot redevelopment project and transitioned this project to the operating portfolio in the third quarter of 2014.    The center is anchored by Academy Sports and Outdoors, LA Fitness, and Panera Bread.
 
·  
Rampart Commons – In December 2014, we acquired this 81,300 square foot shopping center in the Summerlin area of Las Vegas, Nevada, for a purchase price of $32.3 million.  In connection with the acquisition, we assumed a $12.4 million fixed rate mortgage.  Anchor tenants for this center include Williams Sonoma, Pottery Barn, Ann Taylor, Chico’s, Francesca’s Collection, and Banana Republic.
 
 
Financing and Capital Raising Activities.
 
 
As discussed in more detail below in “Business Objectives and Strategies,” our primary business objectives are to generate increasing cash flow, achieve long-term growth and maximize shareholder value primarily through the operation, acquisition, development and redevelopment of well-located community and neighborhood shopping centers.  In 2014, we were able to significantly strengthen our balance sheet and improve our financial flexibility and liquidity to fund future growth.  The Merger significantly improved our liquidity and operating cash flows and lowered our leverage.  We ended the year with approximately $377 million of combined cash and borrowing capacity on our unsecured revolving credit facility.  In addition, our unencumbered assets could provide approximately $120 million of additional borrowing capacity under our amended facility if the expansion feature was exercised .  Significant activities included:
 
 
·  
On July 1, 2014, in conjunction with the Merger, we amended the terms of our unsecured revolving credit facility (the “amended facility”) and increased the total borrowing capacity from $200 million to $500 million.  The amended terms also include an extension of the maturity date to July 1, 2018, which may be further extended at our option for up to two additional periods of six months, subject to certain conditions, and a reduction in the interest rate to LIBOR plus 140 to 200 basis points, depending on our leverage, from LIBOR plus 165 to 250 basis points.  The amended facility has a fee ranging from 15 to 25 basis points on unused borrowings.  We may increase our borrowings under the amended facility to $750 million, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the amended facility, to provide such increased amounts.
 
 
·  
On July 1, 2014, we also amended the terms of our $230 million Term Loan (the “amended Term Loan”).   The amended Term Loan has a maturity date of July 1, 2019, which may be extended for an additional six months at the Company’s option subject to certain conditions.  The interest rate applicable to the amended Term Loan was reduced to LIBOR plus 135 to 190 basis points, depending on the Company’s leverage, a decrease of between 10 and 55 basis points across the leverage grid.  The amended Term Loan also provides for an increase in total borrowing of up to an additional $170 million ($400 million in total), subject to certain conditions, including obtaining commitments from any one or more lenders.
 
 
2014 Cash Distributions
 
 
In 2014, we declared total cash distributions of $1.02 per common share and $2.0625 per share of our 8.250% Series A Cumulative Redeemable Perpetual Preferred Share (“Series A Preferred Shares”).  On February 5, 2015, our Board of Trustees approved a quarterly common share distribution of $0.2725 per common share for the first quarter of 2015, which represents a 4.8% increase over our previous quarterly distribution.
 
 
 
5
 
 
Business Objectives and Strategies
 
 
Our primary business objectives are to increase the cash flow and build or realize capital appreciation of our properties, achieve sustainable long-term growth and maximize shareholder value primarily through the operation, acquisition, development, and redevelopment of well-located community and neighborhood shopping centers.  We invest in properties with well-located real estate and strong demographics and we use our effective leasing and management strategies to improve the long-term values and economic returns of our properties.  We believe that certain of our properties represent opportunities for future renovation and expansion.
 
 
We seek to implement our business objectives through the following strategies, each of which is more completely described in the sections that follow:
 
 
·  
Operating Strategy : Maximizing the internal growth in revenue from our operating properties by leasing and re-leasing those properties to a diverse group of retail tenants at increasing rental rates, when possible , and redeveloping or renovating certain properties to make them more attractive to existing and prospective tenants and consumers;
 
·  
Growth Strategy : Using debt and equity capital prudently to selectively   acquire additional retail properties, redevelop or renovate our existing properties, and develop shopping centers on land parcels that we currently own or newly acquired land where we believe that investment returns would meet or exceed internal benchmarks; and
 
·  
Financing and Capital Preservation Strategy : Maintaining a strong balance sheet with sufficient flexibility to fund our operating and investment activities.  Funding sources include the public equity and debt market, our existing revolving credit facility, new secured debt, internally generated funds, and proceeds from selling land and properties that no longer fit our strategy, and potential strategic joint ventures. We continuously monitor the capital markets and may consider raising additional capital when appropriate.
 
 
Operating Strategy. Our primary operating strategy is to maximize rental rates and occupancy levels by attracting and retaining a strong and diverse tenant base. Most of our properties are located in regional and neighborhood trade areas with attractive demographics, which allows us to maintain and, in many cases, increase occupancy and rental rates. We seek to implement our operating strategy by, among other things:
 
 
·  
increasing rental rates upon the renewal of expiring leases or re-leasing space to new tenants while minimizing vacancy to the extent possible;
 
·  
maximizing the occupancy of our operating portfolio;
 
·  
minimizing tenant turnover;
 
·  
maintaining leasing and property management strategies that maximize rent growth and cost recovery;
 
·  
maintaining a diverse tenant mix in an effort to limit our exposure to the financial condition of any one tenant or any category of tenants;
 
·  
maintaining the physical appearance, condition, and design of our properties and other improvements located on our properties to maximize our ability to attract customers;
 
·  
actively managing costs to minimize overhead and operating costs;
 
·  
maintaining strong tenant and retailer relationships in order to avoid rent interruptions and reduce marketing, leasing and tenant improvement costs that result from re-tenanting space; and
 
·  
taking advantage of under-utilized land or existing square footage, reconfiguring properties for better use, or adding ancillary income areas to existing facilities.
 
 
We successfully executed our operating strategy in 2014 in a number of ways, including improving our same property net operating income by 4.7%, generating positive cash leasing spreads of 15.1% in 2014, and improving annual base rent per square foot by 15% over the prior year.  We have also been successful in maintaining a diverse retail tenant mix with no tenant accounting for more than 3.4% of our annualized base rent. See Item 2, “Properties” for a list of our top tenants by gross leasable area and annualized base rent.
 

 
6
 
 
Growth Strategy. Our growth strategy includes the selective deployment of resources to projects that are expected to generate investment returns that meet or exceed our internal benchmarks. We continue to implement our growth strategy in a number of ways, including:
 
 
·  
selectively pursuing the acquisition of retail operating properties, portfolios and companies in markets with strong demographics;
 
·  
continually evaluating our operating properties for redevelopment and renovation opportunities that we believe will make them more attractive for leasing to new tenants, right sizing anchor space while increasing rental rates, or re-leasing to existing tenants at increased rental rates; and
 
·  
disposing of selected assets that no longer meet our long-term investment criteria and recycling the net proceeds into assets that provide maximum returns and rent growth potential in targeted markets.
 
 
In evaluating opportunities for potential acquisition, development, redevelopment and disposition, we consider a number of factors, including:
 
 
·  
the expected returns and related risks associated with the investments relative to our combined cost of capital to make such investments;
 
·  
the current and projected cash flow and market value of the property, and the potential to increase cash flow and market value if the property were to be successfully re-leased or redeveloped;
 
·  
the price being offered for the property, the current and projected operating performance of the property, and the tax consequences of the sale as well as other related factors;
 
·  
the current tenant mix at the property and the potential future tenant mix that the demographics of the property could support, including the presence of one or more additional anchors (for example, value retailers, grocers, soft goods stores, office supply stores, or sporting goods retailers), as well as an overall diverse tenant mix that includes restaurants, shoe and clothing retailers, specialty shops and service retailers such as banks, dry cleaners and hair salons, some of which provide staple goods to the community and offer a high level of convenience;
 
·  
the configuration of the property, including ease of access, abundance of parking, maximum visibility, and the demographics of the surrounding area; and
 
·  
the level of success of existing properties in the same or nearby markets.
 
 
In 2014, we were successful in completing and integrating the acquisition of 60 high-quality retail properties through the Merger that enabled us to expand our presence in our core markets.  In addition, we delivered three very strong development and redevelopment projects to the operating portfolio and we expect to deliver several more projects in 2015.
 
 
Financing and Capital Markets Strategy. We finance our acquisition, development, and redevelopment activities seeking to use the most advantageous sources of capital available to us at the time.  These sources may include the sale of common or preferred shares through public offerings or private placements, the reinvestment of proceeds from the disposition of assets, the incurrence of additional indebtedness through secured or unsecured borrowings, and entering into real estate joint ventures.
 
 
Our primary financing and capital preservation strategy is to maintain a strong balance sheet and enhance our flexibility to fund operating and investment activities in the most cost-effective way. We consider a number of factors when evaluating our level and type of indebtedness and when making decisions regarding additional borrowings.  Among these factors are the construction costs or purchase prices of properties to be developed or acquired, the estimated market value of our properties and the Company as a whole upon consummation of the financing, and the ability of particular properties to generate cash flow to cover expected debt service.
 
 
Our efforts to strengthen our balance sheet are important.  We achieved an investment grade credit rating in 2014.  We expect that will enable us to opportunistically access the unsecured bond market at some point, and otherwise will allow us to lower our cost of capital and provide greater flexibility in managing the acquisition and disposition of assets in our operating portfolio.
 
 
We intend to continue implementing our financing and capital strategies in a number of ways, including:
 
 
·  
prudently managing our balance sheet, including maintaining sufficient capacity under our unsecured revolving credit facility so that we have additional capacity available to fund our development and redevelopment projects and pay down maturing debt if refinancing that debt is not feasible;
 
 
7
 
 
·  
raising additional capital through the issuance of common shares, preferred shares or other securities;
 
·  
extending the maturity dates of and/or refinancing of our near-term mortgage, construction and other indebtedness;
 
·  
expanding our unencumbered asset pool;
 
·  
entering into construction loans prior to commencement of vertical construction to fund our larger developments and redevelopments;
 
·  
managing our exposure to interest rate increases on our variable-rate debt through the use of fixed rate hedging transactions, issuing unsecured bonds in the public markets,  and securing property specific long-term nonrecourse financing; and
 
·  
entering into joint venture arrangements in order to access less expensive capital and to mitigate risk.
 
 
Competition
 
 
The United States commercial real estate market continues to be highly competitive. We face competition from other REITs and other owner-operators engaged in the ownership, leasing, acquisition, and development of shopping centers as well as from numerous local, regional and national real estate developers and owners in each of our markets.  Some of these competitors may have greater capital resources than we do; although we do not believe that any single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that market.
 
 
We face significant competition in our efforts to lease available space to prospective tenants at our operating, development and redevelopment properties. The nature of the competition for tenants varies based on the characteristics of each local market in which we own properties. We believe that the principal competitive factors in attracting tenants in our market areas are location, demographics, rental rates, the presence of anchor stores, competitor shopping centers in the same geographic area and the maintenance, appearance, access and traffic patterns of our properties.  There can be no assurance in the future that we will be able to compete successfully with our competitors in our development, acquisition and leasing activities.
 
 
Government Regulation
 
 
We and our properties are subject to a variety of federal, state, and local environmental, health, safety and similar laws including:
 
 
Americans with Disabilities Act. Our properties must comply with Title III of the Americans with Disabilities Act, or ADA, to the extent that such properties are public accommodations as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. We believe our properties are in substantial compliance with the ADA and that we will not be required to make substantial capital expenditures to address the requirements of the ADA. However, noncompliance with the ADA could result in the imposition of fines or an award of damages to private litigants. The obligation to make readily accessible accommodations is an ongoing one, and we will continue to assess our properties and make alterations as appropriate in this respect.
 
 
Environmental Regulations. Some properties in our portfolio contain, may have contained or are adjacent to or near other properties that have contained or currently contain underground storage tanks for petroleum products or other hazardous or toxic substances. These operations may have released, or have the potential to release, such substances into the environment.
 
 
In addition, some of our properties have tenants which may use hazardous or toxic substances in the routine course of their businesses. In general, these tenants have covenanted in their leases with us to use these substances, if any, in compliance with all environmental laws and have agreed to indemnify us for any damages we may suffer as a result of their use of such substances. However, these lease provisions may not fully protect us in the event that a tenant becomes insolvent. Finally, one of our properties has contained asbestos-containing building materials, or ACBM, and another property may have contained such materials based on the date of its construction. Environmental laws require that ACBM be properly managed and maintained, and fines and penalties may be imposed on building owners or operators for failure to comply with these requirements. The laws also may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.
 
 
 
8
 
 
Neither existing environmental, health, safety and similar laws nor the costs of our compliance with these laws has had a material adverse effect on our financial condition or results operations, and management does not believe they will in the future.   In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental contamination at properties we currently own or have owned in the past. However, we cannot predict the impact of new or changed laws or regulations on properties we currently own or may acquire in the future.
 
 
With environmental sustainability becoming a national priority, we have continued to demonstrate our strong commitment to be a responsible corporate citizen through resource reduction and employee training that have resulted in reductions of energy consumption, waste and improved maintenance cycles.
 
 
Insurance
 
 
We carry comprehensive liability, fire, extended coverage, and rental loss insurance that covers all properties in our portfolio. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, the cost of the coverage, and industry practice. Certain risks such as loss from riots, war or acts of God, and, in some cases, flooding are not insurable; and therefore, we do not carry insurance for these losses. Some of our policies, such as those covering losses due to terrorism and floods, are insured subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses.
 
 
Offices
 
 
Our principal executive office is located at 30 S. Meridian Street, Suite 1100, Indianapolis, IN 46204. Our telephone number is (317) 577-5600.
 
 
Employees
 
 
As of December 31, 2014, we had 141 full-time employees. The majority of these employees were based at our Indianapolis, Indiana headquarters.
 
 
Segment Reporting
 
 
Our primary business is the ownership and operation of neighborhood and community shopping centers. We do not distinguish or group our operations on a geographical basis, or any other basis, when measuring performance. Accordingly, we aggregate all of our properties into a single reporting segment for disclosure purposes in accordance with GAAP.
 
 
Available Information
 
 
Our Internet website address is www.kiterealty.com . You can obtain on our website, free of charge, a copy of our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such reports or amendments with, or furnish them to, the SEC. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
 
 
Also available on our website, free of charge, are copies of our Code of Business Conduct and Ethics, our Code of Ethics for Principal Executive Officer and Senior Financial Officers, our Corporate Governance Guidelines, and the charters for each of the committees of our Board of Trustees—the Audit Committee, the Corporate Governance and Nominating Committee, and the Compensation Committee. Copies of our Code of Business Conduct and Ethics, our Code of Ethics for Principal Executive Officer and Senior Financial Officers, our Corporate Governance Guidelines, and our committee charters are also available from us in print and free of charge to any shareholder upon request. Any person wishing to obtain such copies in print should contact our Investor Relations department by mail at our principal executive office.
 
 
 
9
 
 
 
ITEM 1A. RISK FACTORS
 
 
The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by our management from time to time. These factors, among others, may have a material adverse effect on our business, financial condition, operating results and cash flows, and you should carefully consider them. It is not possible to predict or identify all such factors. You should not consider this list to be a complete statement of all potential risks or uncertainties. Past performance should not be considered an indication of future performance.
 
 
We have separated the risks into three categories:
 
 
·  
risks related to our operations;
 
 
·  
risks related to our organization and structure; and
 
 
·  
risks related to tax matters.
 
 
RISKS RELATED TO OUR OPERATIONS
 
 
Because of our geographical concentration in Florida, Indiana and Texas, a prolonged economic downturn in these states could materially and adversely affect our financial condition and results of operations.
 
 
The United States economy is recovering from the recent recession in an uneven fashion.  Similarly, the specific markets in which we operate may face challenging economic conditions that could persist into the future.  In particular, as of December 31, 2014, 26% of our owned square footage and 25% of our total annualized base rent was located in Florida, 16% of our owned square footage and 15% of our total annualized base rent was located in Indiana, and 12% of our owned square footage and 11% of our total annualized base rent was located in Texas.  This level of concentration could expose us to greater economic risks than if we owned properties in numerous geographic regions. Many states continue to deal with state fiscal budget shortfalls and high unemployment rates. Adverse economic or real estate trends in Florida, Indiana, Texas, or the surrounding regions, or any decrease in demand for retail space resulting from the local regulatory environment, business climate or fiscal problems in these states, could materially and adversely affect our financial condition, results of operations, cash flow, the trading price of our common shares and our ability to satisfy our debt service obligations and to pay distributions to our shareholders.
 
 
Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms, or at all, and have other material adverse effects on our business.
 
 
Disruptions in the credit markets generally, or relating to the real estate industry specifically, may adversely affect our ability to obtain debt financing at favorable rates or at all.  These disruptions could impact the overall amount of debt financing available, lower loan to value ratios, cause a tightening of lender underwriting standards and terms and higher interest rate spreads. As a result, we may be unable to refinance or extend our existing indebtedness or the terms of any refinancing may not be as favorable as the terms of our existing indebtedness. For example, as of December 31, 2014, we had approximately $113 million and $251 million of debt maturing in 2015 and 2016, respectively. If we are not successful in refinancing our outstanding debt when it becomes due, we may be forced to dispose of properties on disadvantageous terms, which might adversely affect our ability to service other debt and to meet our other obligations.
 
 
If economic conditions deteriorate in any of our markets, we may be forced to seek alternative sources of potentially less attractive financing, and have to adjust our business plan accordingly. In addition, we may be unable to obtain permanent financing on development projects we temporarily financed with construction loans.  Our inability to obtain such permanent financing on favorable terms, if at all, could delay the completion of our development projects and/or cause us to incur additional capital costs in connection with completing such projects, either of which could have a material adverse effect on our business and our ability to execute our business strategy. These events also may make it more difficult or costly for us to raise capital through the issuance of our common shares or preferred shares. The disruptions in the financial markets have had and may continue to have a material adverse effect on the market value of our common shares and other adverse effects on our business.
 
 
 
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If our tenants are unable to secure financing necessary to continue to operate and grow their businesses and pay us rent, we could be materially and adversely affected.
 
 
Many of our tenants rely on external sources of financing to operate and grow their businesses.  Disruptions in credit markets, as discussed above, may adversely affect our tenants’ ability to obtain debt financing at favorable rates or at all.  If our tenants are unable to secure financing necessary to continue to operate their businesses, they may be unable to meet their rent obligations to us or enter into new leases with us or be forced to declare bankruptcy and reject our leases, which could materially and adversely affect us.
 
 
Ongoing challenging conditions in the United States and global economy, and the challenges facing our retail tenants and non-owned anchor tenants may have a material adverse effect on our financial condition and results of operations.
 
 
Certain sectors of the United States economy are still experiencing weakness.  This structural weakness has resulted in continuing high levels of unemployment, the bankruptcy or weakened financial condition of a number of retailers, decreased consumer spending, increased home foreclosures, low consumer confidence, and reduced demand and rental rates for certain retail space. Market conditions remain challenging as higher than historical levels of unemployment and lower consumer confidence have persisted.  There can be no assurance that the recovery will continue. General economic factors that are beyond our control, including, but not limited to, economic recessions, decreases in consumer confidence, reductions in consumer credit availability, increasing consumer debt levels, rising energy costs, higher tax rates, continued business layoffs, downsizing and industry slowdowns, and/or rising inflation, could have a negative impact on the business of our retail tenants.  In turn, this could have a material adverse effect on our business because current or prospective tenants may, among other things, (i) have difficulty paying their rent obligations as they struggle to sell goods and services to consumers, (ii) be unwilling to enter into or renew leases with us on favorable terms or at all, (iii) seek to terminate their existing leases with us or request rental concessions on such leases, or (iv) be forced to curtail operations or declare bankruptcy.  We are also susceptible to other developments that, while not directly tied to the economy, could have a material adverse effect on our business. These developments include relocations of businesses, changing demographics, increased Internet shopping, infrastructure quality, federal, state, and local budgetary constraints and priorities, increases in real estate and other taxes, costs of complying with government regulations or increased regulation, decreasing valuations of real estate, and other factors.
 
 
Further, we continually monitor events and changes in circumstances that could indicate that the carrying value of our real estate assets may not be recoverable.  The ongoing challenging market conditions could require us to recognize an impairment charge, with respect to one or more of our properties, or a loss on disposition of one or more of our properties. 
 
 
Our real estate assets may be subject to impairment charges, which may negatively affect our net income.
 
 
Our long-lived assets, primarily real estate held for investment, are carried at cost unless circumstances indicate that the carrying value of the assets may not be recoverable. We evaluate whether there are any indicators, including property operating performance and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may not be recoverable. Through the evaluation, we compare the current carrying value of the asset to the estimated undiscounted cash flows that are directly associated with the use and ultimate disposition of the asset. Our estimated cash flows are based on several key assumptions, including rental rates, costs of tenant improvements, leasing commissions, anticipated hold periods, and assumptions regarding the residual value upon disposition, including the exit capitalization rate. These key assumptions are subjective in nature and could differ materially from actual results. Changes in our disposition strategy or changes in the marketplace may alter the hold period of an asset or asset group, which may result in an impairment loss and such loss could be material to our financial condition or operating performance. To the extent that the carrying value of the asset exceeds the estimated undiscounted cash flows, an impairment loss is recognized equal to the excess of carrying value over fair value. If such indicators, as described above, are not identified, management will not assess the recoverability of a property's carrying value.
 
 
The fair value of real estate assets is highly subjective and is determined through comparable sales information and other market data if available, or through use of an income approach such as the direct capitalization method or the traditional discounted cash flow approach. Such cash flow projections consider factors, including expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors, and therefore are subject to a significant degree of management judgment. Changes in those factors could impact the determination of fair value. In estimating the fair value of undeveloped land, we generally use market data and comparable sales information.
 
 
 
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These subjective assessments have a direct impact on our net income because recording an impairment charge results in an immediate negative adjustment to net income. There can be no assurance that we will not take additional charges in the future related to the impairment of our assets. Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken.

 
Our business is significantly influenced by demand for retail space generally, and a decrease in such demand may have a greater adverse effect on our business than if we owned a more diversified real estate portfolio.
 
 
Because our portfolio of properties consists primarily of community and neighborhood shopping centers, a decrease in the demand for retail space, due to the economic factors discussed above or otherwise, may have a greater adverse effect on our business and financial condition than if we owned a more diversified real estate portfolio. The market for retail space has been, and could continue to be, adversely affected by weakness in the national, regional and local economies, the adverse financial condition of some large retailing companies, the ongoing consolidation in the retail sector, the excess amount of retail space in a number of markets, and increasing consumer purchases through the Internet. To the extent that any of these conditions occur, they are likely to negatively affect market rents for retail space and could materially and adversely affect our financial condition, results of operations, cash flow, the trading price of our common shares and our ability to satisfy our debt service obligations and to pay distributions to our shareholders.
 
 
The termination of any leases by any non-owned anchor tenant or major tenant with leases in multiple locations, because of a deterioration of its financial condition or otherwise, could have a material adverse effect on our results of operations.
 
 
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. Our leases generally do not contain provisions designed to ensure the creditworthiness of our tenants. At any time, our tenants may experience a downturn in their business that may significantly weaken their financial condition, particularly during periods of economic uncertainty.  In the event of a prolonged or severe economic downturn, our tenants may delay lease commencements, decline to extend or renew leases upon expiration, fail to make rental payments when due, close a number of stores or declare bankruptcy. Any of these actions could result in the termination of the tenant’s leases and the loss of rental income attributable to the terminated leases. Lease terminations or failure of a major tenant or non-owned anchor to occupy the premises could result in lease terminations or reductions in rent by other tenants in the same shopping centers because of contractual co-tenancy termination or rent reduction rights under the terms of some leases.  In that event, we may be unable to re-lease the vacated space at attractive rents or at all.  Additionally, in the event our tenants are involved in mergers with or acquisitions by third parties, such tenants may choose to terminate their leases, vacate the leased premises or not renew their leases if they consolidate, downsize or relocate their operations as a result of the transaction. For example, our tenant Office Depot recently announced its agreement to merge with Staples. In connection with the merger, Office Depot and Staples may choose to close or relocate a number of their stores, which may be stores at premises they lease from us.  In that event, we may experience periods where multiple locations are not leased as we seek new tenants, which would negatively affect our net rental revenues in the near term.  The occurrence of any of the situations described above, particularly if it involves a substantial tenant or a non-owned anchor with ground leases in multiple locations, could have a material adverse effect on our results of operations. As of December 31, 2014, the five largest tenants in our operating portfolio in terms of annualized base rent were Publix, PetSmart, TJX Companies, Dick’s Sporting Goods, and Office Depot/Office Max,  representing 3.4%, 2.5%, 2.3%, 2.2%, and 2.1%, respectively, of our total annualized base rent.
 
 
We face potential material adverse effects from tenant bankruptcies, and we may be unable to collect balances due from any tenant in bankruptcy or replace the tenant at current rates, or at all.
 
 
Tenant bankruptcies may increase during periods of difficult economic conditions. We cannot make any assurance that a tenant that files for bankruptcy protection will continue to pay its rent obligations. A bankruptcy filing by or relating to one of our tenants or a lease guarantor would legally bar our efforts to collect pre-bankruptcy debts from that tenant or the lease guarantor, unless we receive an order permitting us to do so from the bankruptcy court. A tenant or lease guarantor bankruptcy could delay our efforts to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums. If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages including pre-bankruptcy balances. Any unsecured claim we hold may be paid only to the extent that funds are available and only in the same percentage as is paid to all other holders of unsecured claims, and there are restrictions under bankruptcy laws that limit the amount of the claim we can make if a lease is rejected. As a result, it is likely that we will recover substantially less than the full value of any unsecured claims we hold from a tenant in bankruptcy, which would result in a reduction in our cash flow and in the amount of cash available for distribution to our shareholders.
 
 
 
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Moreover, we are continually re-leasing vacant spaces resulting from tenant lease terminations. The bankruptcy of a tenant, particularly an anchor tenant, may make it more difficult to lease the remainder of the affected properties. Future tenant bankruptcies could materially adversely affect our properties or impact our ability to successfully execute our re-leasing strategy.
 
 
We had $1.6 billion of consolidated indebtedness outstanding as of December 31, 2014, which may have a material adverse effect on our financial condition and results of operations and reduce our ability to incur additional indebtedness to fund our growth.
 
 
Required repayments of debt and related interest may materially adversely affect our operating performance. We had $1.6 billion of consolidated outstanding indebtedness as of December 31, 2014, of which $112.7 million is scheduled to mature in 2015, and $251.4 million is scheduled to mature in 2016.  At December 31, 2014, $715.2 million of our debt bore interest at variable rates ($341.9 million when reduced by our $373.3 million of fixed interest rate swaps). Interest rates are currently low relative to historical levels and may increase significantly in the future. If our interest expense increased significantly, it could materially adversely affect our results of operations. For example, if market rates of interest on our variable rate debt outstanding, net of cash flow hedges, as of December 31, 2014 increased by 1%, the increase in interest expense on our unhedged variable rate debt would decrease future cash flows by $3.4 million annually.
 
 
We also intend to incur additional debt in connection with various development and redevelopment projects, and may incur additional debt with acquisitions of properties. Our organizational documents do not limit the amount of indebtedness that we may incur. We may borrow new funds to develop or acquire properties. In addition, we may incur or increase our mortgage debt by obtaining loans secured by some or all of the real estate properties we develop or acquire. We also may borrow funds if necessary to satisfy the requirement that we distribute to shareholders at least 90% of our annual “REIT taxable income” (determined before the deduction of dividends paid and excluding net capital gains), or otherwise as is necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes or otherwise avoid paying taxes that can be eliminated through distributions to our shareholders.
 
 
Our substantial debt could materially and adversely affect our business in other ways, including by, among other things:
 
·   
requiring us to use a substantial portion of our funds from operations to pay principal and interest, which reduces the amount available for distributions;
 
·   
placing us at a competitive disadvantage compared to our competitors that have less debt;
 
·   
making us more vulnerable to economic and industry downturns and reducing our flexibility in responding to changing business and economic conditions; and
 
·   
limiting our ability to borrow more money for operating or capital needs or to finance development and acquisitions in the future.
 
 
Agreements with lenders supporting our unsecured revolving credit facility and various other loan agreements contain default provisions which, among other things, could result in the acceleration of principal and interest payments or the termination of the facilities.
 
 
Our unsecured revolving credit facility and various other debt agreements contain certain Events of Default which include, but are not limited to, failure to make principal or interest payments when due, failure to perform or observe any term in the agreement, covenant or condition contained in the agreements, failure to maintain certain financial and operating ratios and other criteria, misrepresentations and bankruptcy proceedings.  In the event of a default under any of these agreements, the lender would have various rights including, but not limited to, the ability to require the acceleration of the payment of all principal and interest due and/or to terminate the agreements , and to foreclose on the properties.  The declaration of a default and/or the acceleration of the amount due under any such credit agreement could have a material adverse effect on our business, limit our ability to make distributions to our shareholders, prevent us from obtaining additional funds needed to address cash shortfalls or pursue growth opportunities.
 
 
 
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Certain of our fixed-rate and variable-rate loans contain cross-default provisions which provide that a violation by the Company of any financial covenant set forth in our unsecured revolving credit facility agreement will constitute an event of default under the loans.  Our unsecured revolving credit facility agreement contains a similar provision providing that an “Event of Default” under our Term Loan will constitute an “Event of Default” under our unsecured revolving credit facility agreement.  These provisions could allow the lending institutions to accelerate the amount due under the loans.   If payment is accelerated, our assets may not be sufficient to repay such debt in full and, as a result, such an event may have a material adverse effect on our cash flow, financial condition and results of operations.   We were in compliance with all applicable covenants under the unsecured revolving credit facility and Term Loan as of December 31, 2014, although there can be no assurance that we will continue to remain in compliance.
 
 
Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our investment in a property or group of properties subject to mortgage debt.
 
 
A significant amount of our indebtedness is secured by our real estate assets. If a property or group of properties is mortgaged to secure payment of debt and we are unable to meet mortgage payments, the holder of the mortgage or lender could foreclose on the property, resulting in the loss of our investment. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but we would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Internal Revenue Code.   If any of our properties are foreclosed on due to a default, our ability to pay cash distributions to our shareholders and our earnings will be limited.   In addition, as a result of cross-collateralization or cross-default provisions contained in certain of our mortgage loans, a default under one mortgage loan could result in a default on other indebtedness and cause us to lose other better performing properties, which could materially and adversely affect our financial condition and results of operations.
 
 
We are subject to risks associated with hedging agreements.
 
We use a combination of interest rate protection agreements, including interest rate swaps, to manage risk associated with interest rate volatility. This may expose us to additional risks, including a risk that the counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Further, should we choose to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our initial obligation under the hedging agreement.
 
 
Our performance and value are subject to risks associated with real estate assets and with the real estate industry.
 
 
Our ability to make expected distributions to our shareholders depends on our being able to generate substantial revenues from our properties. Periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases. Such events would materially and adversely affect our financial condition, results of operations, cash flow, per share trading price of our common shares and our ability to satisfy debt service obligations and to make distributions to shareholders.
 
 
In addition, other events and conditions generally applicable to owners and operators of real property that are beyond our control may decrease cash available for distribution and the value of our properties. These events include but are not limited to:
 
 
·  
adverse changes in the national, regional and local economic climate, particularly in: Florida, where 26% of our owned square footage and 25% of our total annualized base rent is located; Indiana, where 16% of our owned square footage and 15% of our total annualized base rent is located; and Texas, where 12% of our owned square footage and 11% of our total annualized base rent is located;
 
·  
tenant bankruptcies;
 
·  
local oversupply of rental space, increased competition or reduction in demand for rentable space;
 
·  
inability to collect rent from tenants, or having to provide significant rent concessions to tenants;
 
 
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·  
vacancies or our inability to rent space on favorable terms;
 
·  
changes in market rental rates;
 
·  
inability to finance property development, tenant improvements and acquisitions on favorable terms;
 
·  
increased operating costs, including costs incurred for maintenance, insurance premiums, utilities and real estate taxes;
 
·  
the need to periodically fund the costs to repair, renovate and re-lease space;
 
·  
decreased attractiveness of our properties to tenants;
 
·  
weather conditions that may increase or decrease energy costs and other weather-related expenses (such as snow removal costs);
 
·  
costs of complying with changes in governmental regulations, including those governing health, safety, usage, zoning, the environment and taxes;
 
·  
civil unrest, acts of terrorism, earthquakes, hurricanes and other national disasters or acts of God that may result in underinsured or uninsured losses;
 
·  
the relative illiquidity of real estate investments;
 
·  
changing demographics; and
 
·  
changing customer traffic patterns.
 
 
Our financial covenants may restrict our operating and acquisition activities.
 
 
Our unsecured revolving credit facility contains certain financial and operating covenants, including, among other things, certain coverage ratios, as well as limitations on our ability to incur debt, make dividend payments, sell all or substantially all of our assets and engage in mergers and consolidations and certain acquisitions. These covenants may restrict our ability to pursue certain business initiatives or certain acquisition transactions. In addition, certain of our mortgages contain customary covenants which, among other things, limit our ability, without the prior consent of the lender, to further mortgage the property, to enter into new leases or materially modify existing leases, and to discontinue insurance coverage.  Failure to meet any of the financial covenants could cause an event of default under and/or accelerate some or all of our indebtedness, which could have a material adverse effect on us.
 
 
Our current and future joint venture investments could be adversely affected by our lack of sole decision-making authority, our reliance on joint venture partners’ financial condition, any disputes that may arise between us and our joint venture partners and our exposure to potential losses from the actions of our joint venture partners.
 
 
     As of December 31, 2014, we owned 14 of our operating properties through consolidated joint ventures and one through an unconsolidated joint venture. As of December 31, 2014, the 14 properties represented 17.5% of the annualized base rent of the portfolio. In addition, we currently own land held for development through one joint venture.  Our joint ventures may involve risks not present with respect to our wholly owned properties, including the following:

 
·  
we may share decision-making authority with our joint venture partners regarding certain major decisions affecting the ownership or operation of the joint venture and the joint venture property, such as the sale of the property or the making of additional capital contributions for the benefit of the property, which may prevent us from taking actions that are opposed by our joint venture partners;
 
·  
prior consent of our joint venture partners may be required for a sale or transfer to a third party of our interests in the joint venture, which restricts our ability to dispose of our interest in the joint venture;
 
·  
our joint venture partners might become bankrupt or fail to fund their share of required capital contributions, which may delay construction or development of a property or increase our financial commitment to the joint venture;
 
·  
our joint venture partners may have business interests or goals with respect to the property that conflict with our business interests and goals, which could increase the likelihood of disputes regarding the ownership, management or disposition of the property;
 
·  
disputes may develop with our joint venture partners over decisions affecting the property or the joint venture, which may result in litigation or arbitration that would increase our expenses and distract our officers and/or trustees from focusing their time and effort on our business, and possibly disrupt the day-to-day operations of the property such as by delaying the implementation of important decisions until the conflict or dispute is resolved; and
 
 
 
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·  
we may suffer losses as a result of the actions of our joint venture partners with respect to our joint venture investments and the activities of a joint venture could adversely affect our ability to qualify as a REIT, even though we may not control the joint venture.
 
 
In the future, we may seek to co-invest with third parties through joint ventures that may involve similar or additional risks.
 
 
We face significant competition, which may impede our ability to renew leases or re-lease space as leases expire or require us to undertake unbudgeted capital improvements.
 
 
We compete with numerous developers, owners and operators of retail shopping centers for tenants. These competitors include institutional investors, other REITs and other owner-operators of community and neighborhood shopping centers, some of which own or may in the future own properties similar to ours in the same markets in which our properties are located, but which have greater capital resources. As of December 31, 2014, leases representing 6.7% of our owned gross leasable area (GLA) were scheduled to expire in 2015.  If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may be unable to lease on satisfactory terms to potential tenants and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our leases with them expire. We also may be required to offer more substantial rent abatements, tenant improvements and early termination rights or accommodate requests for renovations, build-to-suit remodeling and other improvements than we have historically.  As a result, our financial condition, results of operations, cash flow, trading price of our common shares and ability to satisfy our debt service obligations and to pay distributions to our shareholders may be materially adversely affected. In addition, increased competition for tenants may require us to make capital improvements to properties that we would not have otherwise planned to make. Any capital improvements we undertake may reduce cash available for distributions to shareholders.
 
 
Our future developments and acquisitions may not yield the returns we expect or may result in dilution in shareholder value.
 
 
We have five development and redevelopment projects under construction and two development and redevelopment projects pending commencement of construction. New development projects and property acquisitions are subject to a number of risks, including, but not limited to:
 
 
·  
abandonment of development activities after expending resources to determine feasibility;
 
·  
construction delays or cost overruns that may increase project costs;
 
·  
our investigation of a property or building prior to our acquisition, and any representations we may receive from the seller, may fail to reveal various liabilities or defects or identify necessary repairs until after the property is acquired, which could reduce the cash flow from the property or increase our acquisition costs;
 
·  
as a result of competition for attractive development and acquisition opportunities, we may be unable to acquire assets as we desire or the purchase price may be significantly elevated, which may impede our growth;
 
·  
difficulty obtaining financing on acceptable terms or paying operating expenses and debt service costs associated with redevelopment properties prior to sufficient occupancy;
 
·  
the failure to meet anticipated occupancy or rent levels within the projected time frame, if at all;
 
·  
inability to operate successfully in new markets where new properties are located;
 
·  
inability to successfully integrate new properties into existing operations;
 
·  
exposure to fluctuations in the general economy due to the significant time lag between commencement and completion of redevelopment projects;
 
·  
failure to receive required zoning, occupancy, land use and other governmental permits and authorizations and changes in applicable zoning and land use laws; and
 
·  
the consent of third parties such as tenants, mortgage lenders and joint venture partners may be required, and those consents may be difficult to obtain or could be withheld.
 
 
 
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In addition, if a project is delayed or if we are unable to lease designated space to anchor tenants, certain tenants may have the right to terminate their leases. If any of these situations occur, development costs for a project may increase, which may result in reduced returns, or even losses, from such investments. In deciding whether to acquire or develop a particular property, we make certain assumptions regarding the expected future performance of that property. If these new properties do not perform as expected, our financial performance may be materially and adversely affected or an impairment charge could occur. In addition, the issuance of equity securities as consideration for any acquisitions could be dilutive to our shareholders.
 
 
We may not be successful in pursuing suitable acquisitions, for which we face significant competition, or identifying development and redevelopment projects that meet our investment criteria, which may impede our growth.
 
 
Part of our business strategy is expansion through acquisitions and development and redevelopment projects, which requires us to identify suitable development or acquisition candidates or investment opportunities that meet our criteria and are compatible with our growth strategy. We continue to evaluate the market for available properties and may acquire properties when we believe strategic opportunities exist. However, we may be unable to acquire a desired property because of competition from other real estate investors with substantial capital, including from other REITs and institutional investment funds. Even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchase price. Additionally, we may not be successful in identifying suitable real estate properties or other assets that meet our development or redevelopment criteria, or we may fail to complete developments, redevelopments, acquisitions or investments on satisfactory terms. Failure to identify or complete developments, redevelopments or acquisitions could slow our growth, which could in turn materially adversely affect our operations.
 
 
Development and redevelopment activities may be delayed or otherwise may not perform as expected and, in the case of an unsuccessful redevelopment project, our entire investment could be at risk for loss.
 
 
We currently have four development projects under construction, one redevelopment project under construction, and two redevelopment projects pending commencement of construction. We expect to redevelop certain of our other properties in the future. In connection with any development or redevelopment of our properties, we will bear certain risks, including the risk of construction delays or cost overruns that may increase project costs and make a project uneconomical, the risk that occupancy or rental rates at a completed project will not be sufficient to enable us to pay operating expenses or earn the targeted rate of return on investment, and the risk of incurrence of predevelopment costs in connection with projects that are not pursued to completion. In addition, various tenants may have the right to withdraw from a property if a development and/or redevelopment project is not completed on time. In the case of a redevelopment project, consents may be required from various tenants in order to redevelop a center. In the case of an unsuccessful redevelopment project, our entire investment could be at risk for loss or an impairment charge could occur.
 
 
We may not be able to sell properties when appropriate and could, under certain circumstances, be required to pay certain tax indemnities related to the properties we sell.
 
 
Real estate property investments generally cannot be sold quickly. Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers of our properties, and we cannot predict the various market conditions affecting real estate investments that will exist at any particular time in the future.  In addition, in connection with our formation at the time of our initial public offering (“IPO”), we entered into an agreement that restricts our ability, prior to December 31, 2016, to dispose of six of our properties in taxable transactions and limits the amount of gain we can trigger with respect to certain other properties without incurring reimbursement obligations owed to certain limited partners of our Operating Partnership. We have agreed that if we dispose of any interest in six specified properties in a taxable transaction before December 31, 2016, we will indemnify the contributors of those properties for their tax liabilities attributable to the built-in gain that exists with respect to such property interest as of the time of our IPO (and tax liabilities incurred as a result of the reimbursement payment). The six properties to which our tax indemnity obligations relate represented 6.8% of our annualized base rent in the aggregate as of December 31, 2014. These six properties are International Speedway Square, Shops at Eagle Creek, Whitehall Pike, Portofino Shopping Center, Thirty South and Market Street Village. We also agreed to limit the aggregate gain certain limited partners of our Operating Partnership would recognize, with respect to certain other contributed properties through December 31, 2016, to not more than $48 million in total, with certain annual limits, unless we reimburse them for the taxes attributable to the excess gain (and any taxes imposed on the reimbursement payments), and take certain other steps to help them avoid incurring taxes that were deferred in connection with the formation transactions.
 
 
 
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The agreement described above is extremely complicated and imposes a number of procedural requirements on us, which makes it more difficult for us to ensure that we comply with all of the various terms of the agreement and therefore creates a greater risk that we may be required to make an indemnity payment. The complicated nature of this agreement also might adversely impact our ability to pursue other transactions, including certain kinds of strategic transactions and reorganizations.
 
 
Also, the tax laws applicable to REITs require that we hold our properties for investment, rather than primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties that otherwise would be in our best interest. Therefore, we may be unable to adjust our portfolio mix promptly in response to market conditions, which may adversely affect our financial position. In addition, we will be subject to income taxes on gains from the sale of any properties owned by any taxable REIT subsidiary.
 
 
Uninsured losses or losses in excess of insurance coverage could materially and adversely affect our cash flow, financial condition and results of operations .
 
 
We do not carry insurance for generally uninsurable losses such as loss from riots, war or acts of God, and, in some cases, flooding. Some of our policies, such as those covering losses due to terrorism and floods, are insured subject to limitations involving large deductibles or co-payments and policy limits that may not be sufficient to cover all losses.   In addition, tenants generally are required to indemnify and hold us harmless from liabilities resulting from injury to persons or damage to personal or real property, on the premises, due to activities conducted by tenants or their agents on the properties (including without limitation any environmental contamination), and at the tenant’s expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies. However, tenants may not properly maintain their insurance policies or have the ability to pay the deductibles associated with such policies.   If we experience a loss that is uninsured or that exceeds policy limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows from those properties. Inflation, changes in building codes and ordinances, environmental considerations, and other factors also might make it impractical or undesirable to use insurance proceeds to replace a property after it has been damaged or destroyed. In addition, if the damaged properties are subject to recourse indebtedness, we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.
 
 
Insurance coverage on our properties may be expensive or difficult to obtain, exposing us to potential risk of loss.
 
 
         In the future, we may be unable to renew or duplicate our current insurance coverage at adequate levels or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts, environmental liabilities, or other catastrophic events including hurricanes and floods, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property after a covered period of time, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Events such as these could adversely affect our results of operations and our ability to meet our obligations.
 
 
Rising operating expenses could reduce our cash flow and funds available for future distributions, particularly if such expenses are not offset by corresponding revenues.
 
 
Our existing properties and any properties we develop or acquire in the future are and will be subject to operating risks common to real estate in general, any or all of which may negatively affect us. The expenses of owning and operating properties generally do not decrease, and may increase, when circumstances such as market factors and competition cause a reduction in income from the properties. As a result, if any property is not fully occupied or if rents are being paid in an amount that is insufficient to cover operating expenses, we could be required to expend funds for that property’s operating expenses. Our properties continue to be subject to increases in real estate and other tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses, regardless of such properties’ occupancy rates. Therefore, rising operating expenses could reduce our cash flow and funds available for future distributions, particularly if such expenses are not offset by corresponding revenues.
 
 
 
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We could incur significant costs related to environmental matters.
 
 
Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at a property and may be held liable to a governmental entity or to third parties for property damage and for investigation and clean-up costs incurred by such parties in connection with contamination. The cost of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent such property or to borrow using such property as collateral. In connection with the ownership, operation and management of real properties, we are potentially liable for removal or remediation costs, as well as certain other related costs, including governmental fines and injuries to persons and property.  We may also be liable to third parties for damage and injuries resulting from environmental contamination emanating from the real estate.  Environmental laws also may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination.  Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which that property may be used or how businesses may be operated on that property.
 
 
Some of the properties in our portfolio contain, may have contained or are adjacent to or near other properties that have contained or currently contain underground storage tanks for petroleum products or other hazardous or toxic substances. These operations may have released, or have the potential to release, such substances into the environment. In addition, some of our properties have tenants that may use hazardous or toxic substances in the routine course of their businesses. In general, these tenants have covenanted in their leases with us to use these substances, if any, in compliance with all environmental laws and have agreed to indemnify us for any damages that we may suffer as a result of their use of such substances. However, these lease provisions may not fully protect us in the event that a tenant becomes insolvent. Finally, one of our properties has contained asbestos-containing building materials, or ACBM, and another property may have contained such materials based on the date of its construction. Environmental laws require that ACBM be properly managed and maintained, and may impose fines and penalties on building owners or operators for failure to comply with these requirements. The laws also may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.
 
 
Our efforts to identify environmental liabilities may not be successful.
 
 
We test our properties for compliance with applicable environmental laws on a limited basis. We cannot give assurance that:
 
·  
existing environmental studies with respect to our properties reveal all potential environmental liabilities;
 
·  
any previous owner, occupant or tenant of one of our properties did not create any material environmental condition not known to us;
 
·  
the current environmental condition of our properties will not be affected by tenants and occupants, by the condition of nearby properties, or by other unrelated third parties; or
 
·  
future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations or the interpretation thereof) will not result in environmental liabilities.
 

Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make expenditures that adversely affect our cash flows.
 
 
Our properties must comply with Title III of the Americans with Disabilities Act, or ADA, to the extent that such properties are public accommodations as defined by the ADA. The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas of our properties where such removal is readily achievable. Noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants and the incurrence of additional costs associated with bringing the properties into compliance. Although we believe the properties in our portfolio substantially comply with present requirements of the ADA, we have not conducted an audit or investigation of all of our properties to determine our compliance. While the tenants to whom our properties are leased are obligated by law to comply with the ADA provisions, and typically under tenant leases are obligated to cover costs associated with compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these tenants to cover costs could be adversely affected. As a result, we could be required to expend funds to comply with the provisions of the ADA, which could adversely affect our results of operations and financial condition. In addition, we are required to operate the properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the properties. We may be required to make substantial capital expenditures to comply with, and we may be restricted in our ability to renovate the properties subject to, those requirements. The resulting expenditures and restrictions could have a material adverse effect on our ability to meet our financial obligations.
 
 
 
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Inflation may adversely affect our financial condition and results of operations.
 
 
Most of our leases contain provisions requiring the tenant to pay a share of operating expenses, including common area maintenance, real estate taxes and insurance.  However, increased inflation could have a more pronounced negative impact on our mortgage and debt interest and general and administrative expenses, as these costs could increase at a rate higher than our rents. Also, inflation may adversely affect tenant leases with stated rent increases or limits on such tenant’s obligation to pay its share of operating expenses, which could be lower than the increase in inflation at any given time.  It may also limit our ability to recover all of our operating expenses. Inflation could also have an adverse effect on consumer spending, which could impact our tenants’ sales and, in turn, our average rents, and in some cases, our percentage rents, where applicable.  In addition, renewals of leases or future leases may not be negotiated on current terms, in which event we may recover a smaller percentage of our operating expenses.
 
 
We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions .

We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts organized by very sophisticated hacking organizations. We employ a number of measures to prevent, detect and mitigate these threats, which include password protection, frequent password change events, firewall detection systems, frequent backups, a redundant data system for core applications and penetration testing; however, there is no guarantee such efforts will be successful in preventing a cyber-attack. A cybersecurity attack could compromise the confidential information of our employees, tenants and vendors. A successful attack could disrupt and affect our business operations, which may negatively affect our results of operations.
 
 
RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE
 
 
Our organizational documents contain provisions that generally would prohibit any person (other than members of the Kite family who, as a group, are currently allowed to own up to 21.5% of our outstanding common shares) from beneficially owning more than 7% of our outstanding common shares (or up to 9.8% in the case of certain designated investment entities, as defined in our declaration of trust), which may discourage third parties from conducting a tender offer or seeking other change of control transactions that could involve a premium price for our shares or otherwise benefit our shareholders.
 
 
Our organizational documents contain provisions that may have an anti-takeover effect and inhibit a change in our management.
 
 
(1)   There are ownership limits and restrictions on transferability in our declaration of trust. In order for us to qualify as a REIT, no more than 50% of the value of our outstanding shares may be owned, actually or constructively, by five or fewer individuals at any time during the last half of each taxable year. To make sure that we will not fail to satisfy this requirement and for anti-takeover reasons, our declaration of trust generally prohibits any shareholder (other than an excepted holder or certain designated investment entities, as defined in our declaration of trust) from owning (actually, constructively or by attribution), more than 7% of the value or number of our outstanding common shares. Our declaration of trust provides an excepted holder limit that allows members of the Kite family (Al Kite, John Kite and Paul Kite, their family members and certain entities controlled by one or more of the Kites), as a group, to own more than 7% of our outstanding common shares, so long as, under the applicable tax attribution rules, no one excepted holder treated as an individual would hold more than 21.5% of our common shares, no two excepted holders treated as individuals would own more than 28.5% of our common shares, no three excepted holders treated as individuals would own more than 35.5% of our common shares, no four excepted holders treated as individuals would own more than 42.5% of our common shares, and no five excepted holders treated as individuals would own more than 49.5% of our common shares. Currently, one of the excepted holders would be attributed all of the common shares owned by each other excepted holder and, accordingly, the excepted holders as a group would not be allowed to own in excess of 21.5% of our common shares. If at a later time, there were not one excepted holder that would be attributed all of the shares owned by the excepted holders as a group, the excepted holder limit would not permit each excepted holder to own 21.5% of our common shares. Rather, the excepted holder limit would prevent two or more excepted holders who are treated as individuals under the applicable tax attribution rules from owning a higher percentage of our common shares than the maximum amount of common shares that could be owned by any one excepted holder (21.5%), plus the maximum amount of common shares that could be owned by any one or more other individual common shareholders who are not excepted holders (7%). Certain entities that are defined as designated investment entities in our declaration of trust, which generally includes pension funds, mutual funds, and certain investment management companies, are permitted to own up to 9.8% of our outstanding common shares, so long as each beneficial owner of the shares owned by such designated investment entity would satisfy the 7% ownership limit if those beneficial owners owned directly their proportionate share of the common shares owned by the designated investment entity. Our Board of Trustees may waive, and has waived in the past, the 7% ownership limit or the 9.8% designated investment entity limit for a shareholder that is not an individual if such shareholder provides information and makes representations to the board that are satisfactory to the board, in its reasonable discretion, to establish that such person’s ownership in excess of the 7% limit or the 9.8% limit, as applicable, would not jeopardize our qualification as a REIT. In addition, our declaration of trust contains certain other ownership restrictions intended to prevent us from earning income from related parties if such income would cause us to fail to comply with the REIT gross income requirements. The various ownership restrictions may:
 
 
 
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·  
discourage a tender offer or other transactions or a change in management or control that might involve a premium price for our shares or otherwise be in the best interests of our shareholders; or
 
·  
compel a shareholder who has acquired our shares in excess of these ownership limitations to dispose of the additional shares and, as a result, to forfeit the benefits of owning the additional shares. Any acquisition of our common shares in violation of these ownership restrictions will be void ab initio and will result in automatic transfers of our common shares to a charitable trust, which will be responsible for selling the common shares to permitted transferees and distributing at least a portion of the proceeds to the prohibited transferees.
 
 
(2)    Our declaration of trust permits our Board of Trustees to issue preferred shares with terms that may discourage a third party from acquiring us. Our declaration of trust permits our Board of Trustees to issue up to 40,000,000 preferred shares, having those preferences, conversion or other rights, voting powers, restrictions, limitations as to distributions, qualifications, or terms or conditions of redemption as determined by our Board. Thus, our Board could authorize the issuance of additional preferred shares with terms and conditions that could have the effect of discouraging a takeover or other transaction in which holders of some or a majority of our shares might receive a premium for their shares over the then-prevailing market price of our shares. In addition, any additional preferred shares that we issue likely would, like our Series A Preferred Shares, rank senior to our common shares with respect to payment of distributions, in which case we could not pay any distributions on our common shares until full distributions were paid with respect to such preferred shares.
 
 
(3)    Our declaration of trust and bylaws contain other possible anti-takeover provisions. Our declaration of trust and bylaws contain other provisions that may have the effect of delaying, deferring or preventing a change in control of our company or the removal of existing management and, as a result, could prevent our shareholders from being paid a premium for their common shares over the then-prevailing market prices. These provisions include advance notice requirements for shareholder proposals and our Board of Trustees’ power to reclassify shares and issue additional common shares or preferred shares and the absence of cumulative voting rights.  Furthermore, o ur Board of Trustees has the sole power to amend our bylaws and may amend our bylaws in a way that may have the effect of delaying, deferring or preventing a change in control of our company or the removal of existing management or may otherwise be detrimental to your interests.
 
 
Certain provisions of Maryland law could inhibit changes in control.
 
 
Certain provisions of Maryland law may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of our common shares with the opportunity to realize a premium over the then-prevailing market price of such shares, including:
 
 
 
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·  
“business combination moratorium/fair price” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter imposes stringent fair price and super-majority shareholder voting requirements on these combinations; and
 
·  
“control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares” from a party other than the issuer) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two thirds of all the votes entitled to be cast on the matter, excluding all interested shares, and are subject to redemption in certain circumstances.
 
 
We have opted out of these provisions of Maryland law. However, our Board of Trustees may opt to make these provisions applicable to us at any time.
 
 
A substantial number of common shares eligible for future issuance or sale could cause our common share price to decline significantly and may be dilutive to current shareholders.
 
 
Our declaration of trust authorizes our Board of Trustees to, among other things, issue additional common shares without shareholder approval. The issuance of substantial numbers of our common shares in the public market or the perception that such issuances might occur, could adversely affect the per share trading price of our common shares. In addition, any such issuance could dilute our existing shareholders' interests in our company. Furthermore, if our shareholders sell, or the market perceives that our shareholders intend to sell, substantial amounts of our common shares in the public market, the market price of our common shares could decline significantly. These sales also might make it more difficult for us to sell equity or equity-related securities in the future at a time and price that we deem appropriate. As of December 31, 2014, we had outstanding 83,490,663 common shares, and substantially all of these shares are freely tradable.  In addition, 1,639,443 units of our Operating Partnership were owned by our executive officers and other individuals as of December 31, 2014, and are redeemable by the holder for cash or, at our election, common shares. Pursuant to registration rights of certain of our executive officers and other individuals, we filed a registration statement with the SEC to register common shares issued (or issuable upon redemption of units in our Operating Partnership) in our formation transactions. As units are redeemed for common shares, the market price of our common shares could drop significantly if the holders of such shares sell them or are perceived by the market as intending to sell them.
 
 
Certain officers and trustees may have interests that conflict with the interests of shareholders.
 
 
Certain of our officers own limited partner units in our Operating Partnership. These individuals may have personal interests that conflict with the interests of our shareholders with respect to business decisions affecting us and our Operating Partnership, such as interests in the timing and pricing of property sales or refinancings in order to obtain favorable tax treatment. As a result, the effect of certain transactions on these unit holders may influence our decisions affecting these properties.
 
 
Departure or loss of our key officers could have an adverse effect on us.
 
 
Our future success depends, to a significant extent, upon the continued services of our existing executive officers.  Our executive officers’ experience in real estate acquisition, development and finance are critical elements of our future success. We have employment agreements with each of our executive officers.  The term of each employment agreement is for three years from July 1, 2014, with automatic one-year renewals each July 1 st thereafter unless either we or the officer elects not to renew them.  If one or more of our key executives were to die, become disabled or otherwise leave the company's employ, we may not be able to replace this person with an executive officer of equal skill, ability, and industry expertise within a reasonable timeframe. Until suitable replacements could be identified and hired, our operations and financial condition could be impaired.
 

 
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We depend on external capital to fund our capital needs.
 
 
To qualify as a REIT, we are required to distribute to our shareholders each year at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains). In order to eliminate federal income tax, we are required to distribute annually 100% of our net taxable income, including capital gains. Partly because of these distribution requirements, we may not be able to fund all future capital needs, including capital for property development and acquisitions, with income from operations. We therefore will have to rely on third-party sources of capital, which may or may not be available on favorable terms, if at all.  Any additional debt we incur will increase our leverage, expose us to the risk of default and may impose operating restrictions on us, and any additional equity we raise could be dilutive to existing shareholders.  Our access to third-party sources of capital depends on a number of things, including:
 
 
·   
general market conditions;
 
·   
the market’s perception of our growth potential;
 
·   
our current debt levels;
 
·   
our current and potential future earnings;
 
·   
our cash flow and cash distributions;
 
·   
our ability to qualify as a REIT for federal income tax purposes; and
 
·   
the market price of our common shares.
 
 
If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, satisfy our principal and interest obligations or make distributions to our shareholders.
 
 
Our rights and the rights of our shareholders to take action against our trustees and officers are limited.
 
 
Maryland law provides that a director or officer has limited liability in that capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests that an ordinarily prudent person in a like position would use under similar circumstances. Our declaration of trust and bylaws require us to indemnify our trustees and officers for actions taken by them in those capacities to the extent permitted by Maryland law.
 
 
Our shareholders have limited ability to prevent us from making any changes to our policies that they believe could harm our business, prospects, operating results or share price.
 
 
Our investment, financing, borrowing and dividend policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, will be determined by our management and, in certain cases, approved by our Board of Trustees. These policies may be amended or revised from time to time at the discretion of our Board of Trustees without a vote of our shareholders. This means that our shareholders will have limited control over changes in our policies. Such changes in our policies intended to improve, expand or diversify our business may not have the anticipated effects and consequently may adversely affect our business and prospects, results of operations and share price.
 
 
Our share price could be volatile and could decline, resulting in a substantial or complete loss of our shareholders’ investment.
 
 
The stock markets (including The New York Stock Exchange, or the “NYSE,” on which we list our common and preferred shares) have experienced significant price and volume fluctuations. The market price of our common and preferred shares could be similarly volatile, and investors in our shares may experience a decrease in the value of their shares, including decreases unrelated to our operating performance or prospects. Among the market conditions that may affect the market price of our publicly traded securities are the following:
 
 
·  
our financial condition and operating performance and the performance of other similar companies;
 
·  
actual or anticipated differences in our quarterly operating results;
 
 
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·  
changes in our revenues or earnings estimates or recommendations by securities analysts;
 
·  
publication by securities analysts of research reports about us or our industry;
 
·  
additions and departures of key personnel;
 
·  
strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures, strategic investments or changes in business strategy;
 
·  
the reputation of REITs generally and the reputation of REITs with portfolios similar to ours;
 
·  
the attractiveness of the securities of REITs in comparison to securities issued by other entities (including securities issued by other real estate companies);
 
·  
an increase in market interest rates, which may lead prospective investors to demand a higher distribution rate in relation to the price paid for our shares;
 
·  
the passage of legislation or other regulatory developments that adversely affect us or our industry including tax reform;
 
·  
speculation in the press or investment community;
 
·  
actions by institutional shareholders or hedge funds;
 
·  
increase or decrease in dividends;
 
·  
changes in accounting principles;
 
·  
terrorist acts; and
 
·  
general market conditions, including factors unrelated to our performance.
 
 
Moreover, an active trading market on the NYSE for our Series A Preferred Shares may not exist or, if it does exist, may not last, in which case the trading price of our Series A Preferred Shares could be adversely affected.  In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.
 
 
Holders of our Series A Preferred Shares have extremely limited voting rights.
 
 
Holders of our Series A Preferred Shares have extremely limited voting rights. Our common shares are the only class of our equity securities carrying full voting rights. Voting rights for holders of Series A Preferred Shares exist primarily with respect to the ability to appoint additional trustees to our Board of Trustees in the event that six quarterly dividends (whether or not consecutive) payable on our Series A Preferred Shares are in arrears, and with respect to voting on amendments to our declaration of trust or our Series A Preferred Shares Articles Supplementary that materially and adversely affect the rights of Series A Preferred Shares holders or create additional classes or series of preferred shares that are senior to our Series A Preferred Shares. Other than in very limited circumstances, holders of our Series A Preferred Shares will not have voting rights.
 
 
The cash available for distribution to shareholders may not be sufficient to pay distributions at expected levels, nor can we assure you of our ability to make distributions in the future. We may use borrowed funds to make distributions.
 
 
If cash available for distribution generated by our assets decreases in future periods from expected levels, our inability to make expected distributions could result in a decrease in the market price of our common shares.  All distributions will be made at the discretion of our Board of Trustees and will depend on our earnings, our financial condition, maintenance of our REIT qualification and other factors as our Board of Trustees may deem relevant from time to time. We may not be able to make distributions in the future. In addition, some of our distributions may include a return of capital. To the extent that we decide to make distributions in excess of our current and accumulated earnings and profits, such distributions would generally be considered a return of capital for federal income tax purposes to the extent of the holder’s adjusted tax basis in their shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in its investment. To the extent that distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such shares. If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been.
 
 
 
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Future offerings of debt securities, which would be senior to our common and preferred shares, may adversely affect the market prices of our common and preferred shares.
 
 
In the future, we may attempt to increase our capital resources by making offerings of debt securities, including unsecured notes, medium term notes, senior or subordinated notes. Debt securities will generally be entitled to receive interest payments, both current and in connection with any liquidation or sale, prior to the holders of our common shares are entitled to receive distributions. Future offerings of debt securities, or the perception that such offerings may occur, may reduce the market prices of our common and preferred shares and/or the distributions that we pay with respect to our common shares. Because we may generally issue any such debt securities in the future without obtaining the consent of our shareholders, our shareholders will bear the risk of our future offerings reducing the market prices of our common and preferred shares.
 
 
If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common shares, our share price and trading volume could decline.
 
 
The trading market for our shares is influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrades our common shares or publishes inaccurate or unfavorable research about our business, our share price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common share price or trading volume to decline and our shares to be less liquid. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire additional properties or other businesses by using our shares as consideration, which in turn could materially adversely affect our business. In addition, the stock market in general, and the NYSE and REITs in particular, have recently experienced extreme price and volume fluctuations. These broad market and industry factors may decrease the market price of our shares, regardless of our actual operating performance. For these reasons, among others, the market price of our shares may decline substantially and quickly.
 
 
TAX RISKS
 
 
Failure of our company to qualify as a REIT would have serious adverse consequences to us and our shareholders.
 
 
We believe that we have qualified for taxation as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2004.  We intend to continue to meet the requirements for qualification and taxation as a REIT, but we cannot assure shareholders that we will qualify as a REIT. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT, and the statements in this Annual Report on Form 10-K are not binding on the IRS or any court. As a REIT, we generally will not be subject to federal income tax on our income that we distribute currently to our shareholders. Many of the REIT requirements, however, are highly technical and complex. The determination that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from specific passive sources, such as rent, that are itemized in the REIT tax laws. In addition, to qualify as a REIT, we cannot own specified amounts of debt and equity securities of some issuers. We also are required to distribute to our shareholders with respect to each year at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains). The fact that we hold substantially all of our assets through our Operating Partnership and its subsidiaries and joint ventures further complicates the application of the REIT requirements for us. Even a technical or inadvertent mistake could jeopardize our REIT status and, given the highly complex nature of the rules governing REITs and the ongoing importance of factual determinations, we cannot provide any assurance that we will continue to qualify as a REIT. Furthermore, Congress and the IRS might make changes to the tax laws and regulations, and the courts might issue new rulings, that make it more difficult, or impossible, for us to remain qualified as a REIT.
 
 
If we fail to qualify as a REIT for federal income tax purposes, and are unable to avail ourselves of certain savings provisions set forth in the Internal Revenue Code, we would be subject to federal income tax at regular corporate rates. As a taxable corporation, we would not be allowed to take a deduction for distributions to shareholders in computing our taxable income or pass through long term capital gains to individual shareholders at favorable rates. We also could be subject to the federal alternative minimum tax and possibly increased state and local taxes. We would not be able to elect to be taxed as a REIT for four years following the year we first failed to qualify unless the IRS were to grant us relief under certain statutory provisions. Since we were the successor to Inland Diversified for federal income tax purposes as a result of the Merger, the rule against re-electing REIT status following a loss of such status also would apply to us if Inland Diversified failed to qualify as a REIT in any of its 2011 through 2014 tax years.  Although Inland Diversified believed that it was organized and operated in conformity with the requirements for qualification and taxation as a REIT for each of its taxable years prior to the Merger with us, Inland Diversified did not request a ruling from the IRS that it qualified as a REIT and thus no assurance can be given that it qualified as a REIT.
 
 
 
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If we failed to qualify as a REIT, we would have to pay significant income taxes, which would reduce our net earnings available for investment or distribution to our shareholders. If we fail to qualify as a REIT, such failure would cause an event of default under our unsecured revolving credit facility and may adversely affect our ability to raise capital and to service our debt.  This likely would have a significant adverse effect on our earnings and the value of our securities. In addition, we would no longer be required to pay any distributions to shareholders. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless be required to pay penalty taxes of $50,000 or more for each such failure.  If Inland Diversified failed to qualify as a REIT for a taxable year before the Merger or that includes the Merger and no relief is available, in connection with the Merger we would succeed to any earnings and profits accumulated by Inland Diversified 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 significant interest payments to the IRS) to eliminate such earnings and profits.
 
 
We will pay some taxes even if we qualify as a REIT.
 
 
Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal, state and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income (including capital gains). Additionally, we will be subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. While we will undertake sales of assets if those assets become inconsistent with our long-term strategic or return objectives, we do not believe that those sales should be considered prohibited transactions, but there can be no assurance that the IRS would not contend otherwise. The need to avoid prohibited transactions could cause us to forego or defer sales of properties that might otherwise be in our best interest to sell.
 
 
In addition, any net taxable income earned directly by our taxable REIT subsidiaries, or through entities that are disregarded for federal income tax purposes as entities separate from our taxable REIT subsidiaries, will be subject to federal and possibly state corporate income tax. We have elected to treat Kite Realty Holdings, LLC as a taxable REIT subsidiary, and we may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For example, a taxable REIT subsidiary is limited in its ability to deduct interest payments made to an affiliated REIT. In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions taken by the taxable REIT subsidiaries if the economic arrangements between the REIT, the REIT’s tenants, and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to federal income tax on that income because not all states and localities treat REITs the same way they are treated for federal income tax purposes. To the extent that we and our affiliates are required to pay federal, state and local taxes, we will have less cash available for distributions to our shareholders.
 
 
If Inland Diversified failed to qualify as a REIT for a taxable year before the Merger or that includes the Merger and no relief is available, as a result of the Merger (a) we would inherit any corporate income tax liabilities of Inland Diversified for Inland Diversified’s open tax years (generally three years or Inland Diversified’s 2011 through 2014 tax years but possibly extending back six years or Inland Diversified’s initial 2009 tax year through its 2014 tax year), including penalties and interest, and (b) we would be subject to tax on the built-in gain on each asset of Inland Diversified existing at the time of the Merger if we were to dispose of the Inland Diversified asset within ten years following the Merger (i.e. before  July 1, 2024).
 
 
REIT distribution requirements may increase our indebtedness.
 
 
We may be required from time to time, under certain circumstances, to accrue income for tax purposes that has not yet been received. In such event, or upon our repayment of principal on debt, we could have taxable income without sufficient cash to enable us to meet the distribution requirements of a REIT. Accordingly, we could be required to borrow funds or liquidate investments on adverse terms in order to meet these distribution requirements.
 
 
 
26
 
 
Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities.
 
 
The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets or manages the risk of certain currency fluctuations, and such instrument is properly identified under applicable Treasury Regulations. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a taxable REIT subsidiary. This could increase the cost of our hedging activities because our taxable REIT subsidiary would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our taxable REIT subsidiary will generally not provide any tax benefit, except for being carried back or forward against past or future taxable income in the taxable REIT subsidiary.
 
 
Complying with the REIT requirements may cause us to forgo and/or liquidate otherwise attractive investments.
 
 
To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts that we distribute to our shareholders and the ownership of our shares. To meet these tests, we may be required to take or forgo taking actions that we would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forgo investments that we otherwise would make. Furthermore, we may be required to liquidate from our portfolio otherwise attractive investments. In addition, we may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. These actions could reduce our income and amounts available for distribution to our shareholders. Thus, compliance with the REIT requirements may hinder our investment performance.
 
 
Dividends paid by REITs generally do not qualify for reduced tax rates.
 
 
The maximum rate applicable to “qualified dividend income” paid by regular “C” corporations to U.S. shareholders that are individuals, trusts and estates generally is 20%.  Dividends payable by REITs, however, generally are not eligible for the current reduced rate, except to the extent that certain holding requirements have been met and a REIT’s dividends are attributable to dividends received by a REIT from taxable corporations (such as a REIT’s taxable REIT subsidiaries), to income that was subject to tax at the REIT/corporate level, or to dividends properly designated by the REIT as “capital gains dividends.” Although the reduced rates applicable to dividend income from regular “C” corporations do not adversely affect the taxation of REITs or dividends payable by REITs, it could cause investors who are non-corporate taxpayers to perceive investments in REITs to be relatively less attractive than investments in the shares of regular “C” corporations that pay dividends, which could adversely affect the value of our common shares.
 
 
If the Operating Partnership fails to qualify as a partnership for U.S. federal income tax purposes, we could fail to qualify as a REIT and suffer other adverse consequences .
 
 
We believe that our Operating Partnership is organized and operated in a manner so as to be treated as a partnership and not an association or a publicly traded partnership taxable as a corporation, for U.S. federal income tax purposes. As a partnership, our Operating Partnership is not subject to U.S. federal income tax on its income. Instead, each of the partners is allocated its share of our Operating Partnership’s income. No assurance can be provided, however, that the IRS will not challenge our Operating Partnership’s status as a partnership for U.S. federal income tax purposes, or that a court would not sustain such a challenge. If the IRS were successful in treating our Operating Partnership as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT. Also, the failure of the Operating Partnership to qualify as a partnership would cause it to become subject to U.S. federal corporate income tax, which would reduce significantly the amount of its cash available for distribution to its partners, including us.
 
 
 
27
 
 
ITEM 1B. UNRESOLVED STAFF COMMENTS
 
 
None
 

 
28
 

 
ITEM 2. PROPERTIES
 
 
Retail Operating Properties
 
 
As of December 31, 2014, we owned interests in a portfolio of 118 retail operating properties totaling 23.9 million square feet of total Gross Leasable Area (“GLA”) (including non-owned anchor space of 7,702,685 square feet).  The following tables set forth more specific information with respect to the Company’s retail operating properties as of December 31, 2014:
 

   
Year
Owned GLA 2
Leased
     
Major
Property 1
MSA
Built/
Renovated
Total
Anchors
Shops
Total
Anchors
Shops
 
ABR
per SqFt
Major Owned Tenants
Non-owned Tenants
Alabama
                       
Clay Marketplace
Birmingham
1966/2003
66,165
44,840
21,325
93.1%
100.0%
78.7%
$ 
12.50
Publix
 
Eastside Junction**
Athens
2008
79,700
45,600
34,100
91.0%
100.0%
79.0%
 
12.02
Publix
 
Prattville Town Center**
Prattville
2007
168,842
112,042
56,800
98.9%
100.0%
96.8%
 
14.61
Books A Million, Office Depot, PetSmart, Ross Dress for Less,
TJ Maxx
Target, Home Depot
Trussville Promenade
Birmingham
1999
446,484
354,010
92,474
95.7%
100.0%
79.4%
 
9.26
Wal-Mart, Regal Cinemas, Marshalls, Big Lots, PetSmart, Dollar Tree
Kohl's, Sam's Club
Arizona
                       
The Corner
Tucson
2008
79,902
55,883
24,019
100.0%
100.0%
100.0%
 
28.05
Nordstrom Rack, Total Wine & More
Home Depot
Arkansas
                       
Fairgrounds Crossing**
Hot Springs
2011
151,927
126,613
25,314
98.7%
100.0%
91.9%
 
12.85
Bed Bath & Beyond, Best Buy, Dick's Sporting Goods, Michaels, PetSmart
Sam’s Club
Connecticut
                       
Crossing at Killingly Commons
Worcester
MA-CT
2010
208,929
148,250
60,679
97.0%
100.0%
89.5%
 
16.00
Bed Bath & Beyond, Lowe's Home Improvement, Michaels, Petco, Staples, Stop
& Shop Supermarket, TJ Maxx
Target
Florida
                       
12th Street Plaza
Vero Beach
1978/2003
138,268
121,376
16,892
99.0%
100.0%
91.7%
 
9.82
Publix, Stein Mart, Tuesday Morning, Sunshine Furniture, Planet Fitness
 
Bayport Commons
Tampa
2008
97,193
71,540
25,653
91.6%
100.0%
68.1%
 
16.08
Gander Mountain, PetSmart, Michaels
Target
Bolton Plaza
Jacksonville
1986/2014
155,705
114,195
41,510
87.5%
100.0%
53.0%
 
9.12
LA Fitness, Academy Sports
 
Burnt Store Promenade
Punta Gorda
1989
94,223
42,112
52,111
74.9%
100.0%
54.6%
 
9.04
Publix
Home Depot
Centre Point Commons
Bradenton
2007
119,275
93,574
25,701
100.0%
100.0%
100.0%
 
16.88
Best Buy, Dick's Sporting
Goods, Office Depot
Lowe’s Home Improvement
Cobblestone Plaza
Ft Lauderdale
2011
133,213
68,169
65,044
99.2%
100.0%
98.3%
 
25.79
Whole Foods, Party City, All Pets Emporium
 
Colonial Square
Fort Myers
2010
182,354
146,283
36,071
92.2%
100.0%
60.6%
 
15.06
Around the Clock Fitness,
Dollar Tree, Hobby Lobby, PetSmart, Sports Authority
Kohl’s
Cove Center
Stuart
1984/2008
155,053
130,915
24,138
96.2%
100.0%
75.5%
 
9.12
Publix, Bealls, Ace Hardware
 
Delray Marketplace
Delray
2013
260,255
118,136
142,119
90.4%
100.0%
82.4%
 
24.08
Frank Theatres, Publix, Jos. A. Bank, Carl’s Patio, Chico’s, Charming Charlie, Ann Taylor
 
Estero Town Commons
Naples
2006
2006
-
25,631
46.8%
0.0%
46.8%
 
18.67
Lowe's Home Improvement
 
Hunter's Creek Promenade
Orlando
1994
119,729
55,999
63,730
98.4%
100.0%
97.0%
 
13.35
Publix
 
Indian River Square
Vero Beach
1997/2004
142,706
109,000
33,706
95.9%
100.0%
82.8%
 
10.88
Bealls, Office Depot, Dollar Tree
Target
International Speedway Square
Daytona
1999/2013
233,495
203,457
30,038
99.5%
100.0%
96.0%
 
10.97
Bed Bath & Beyond, Stein Mart, Old Navy, Staples, Michaels, Dick’s Sporting Goods, Total Wine & More, Shoe Carnival
 
King's Lake Square
Naples
1986/2014
87,073
55,610
31,463
88.8%
100.0%
69.1%
 
17.34
Publix, Royal Fitness
 
Lake City Commons
Lake City
2008
66,510
45,600
20,910
90.7%
100.0%
70.4%
 
13.60
Publix
 
Lake City Commons - Phase II
Lake City
2011
16,291
12,131
4,160
100.0%
100.0%
100.0%
 
14.86
PetSmart
 
Lake Mary Plaza
Orlando
2009
21,370
14,880
6,490
91.4%
100.0%
71.6%
 
37.82
Walgreens
 
Lakewood Promenade
Jacksonville
1948/1998
196,820
77,840
118,980
86.3%
100.0%
77.3%
 
11.43
Stein Mart, Winn Dixie
 
Lithia Crossing
Tampa
2003/2013
90,499
53,547
36,952
91.2%
100.0%
78.6%
 
14.14
Stein Mart, The Fresh Market
 
Miramar Square
Fort Lauderdale
2008
238,334
137,505
100,829
84.9%
85.5%
84.2%
 
18.30
Kohl's, Miami Children's
Hospital, Dollar General
 
Northdale Promenade
Tampa
1985/2002
175,925
118,269
57,656
93.6%
100.0%
80.5%
 
11.51
TJ Maxx, Bealls, Crunch Fitness
Winn Dixie
Palm Coast Landing
Palm Coast
2010
168,297
106,292
62,005
94.3%
94.9%
93.5%
 
18.20
Michaels, PetSmart, Ross Dress for Less, TJ Maxx, Ulta Salon
Target
Pine Ridge Crossing
Naples
1993
105,867
66,351
39,516
98.0%
100.0%
94.5%
 
16.30
Publix, Party City
Bealls, Target

 
 
29
 

 
Retail Operating Properties (continued)
 

   
Year
Owned GLA 2
Leased      
Major
Property 1
MSA
Built/
Renovated
Total
Anchors
Shops
Total
Anchors
Shops
 
ABR
per Sq. ft.
Major Owned Tenants
Non-owned Tenants
Pleasant Hill Commons
Orlando
2008
70,642
45,600
25,042
95.2%
100.0%
86.4%
$ 
14.22
Publix
 
Publix at St. Cloud
St. Cloud
2003
78,820
54,379
24,441
92.7%
100.0%
76.5%
 
12.42
Publix
 
Riverchase Plaza
Naples
1991/2001
78,291
48,890
29,401
98.5%
100.0%
95.9%
 
15.29
Publix
 
Saxon Crossing
Orange City
2009
119,894
95,304
24,590
100.0%
100.0%
100.0%
 
14.71
Hobby Lobby, LA Fitness
Lowe's Home Improvement
Shops at Eagle Creek
Naples
1983/2013
70,755
50,187
20,568
91.4%
100.0%
70.4%
 
14.99
Staples, The Fresh Market
Lowe's Home Improvement
Shops of Eastwood
Orlando
1997
69,037
51,512
17,525
98.1%
100.0%
92.6%
 
12.74
Publix
 
Shops at Julington Creek
Jacksonville
2011
40,207
21,038
19,169
96.4%
100.0%
92.5%
 
18.27
The Fresh Market
 
Tarpon Bay Plaza
Naples
2007
82,547
60,151
22,396
90.8%
100.0%
66.1%
 
21.60
World Market, Staples
Target
Temple Terrace
Temple Terrace
2012
90,377
58,798
31,579
100.0%
100.0%
100.0%
 
10.41
Sweetbay, United Parcel Service
 
The Landings at Tradition
Port St Lucie
2007
359,758
272,944
86,814
90.4%
100.0%
60.1%
 
15.19
Babies “R” Us, Bed Bath & Beyond, LA Fitness, Michaels, Office Max, Old Navy, PetSmart, Pier 1, Sports Authority, TJ Maxx, Ulta Salon
Target
Tradition Village Square
Port St Lucie
2006
93,210
45,600
47,610
85.9%
100.0%
72.3%
 
16.08
Publix
 
Village Walk
Fort Myers
2009
78,533
54,340
24,193
90.0%
100.0%
67.5%
 
15.88
Publix
 
Waterford Lakes Village
Orlando
1997
77,948
51,703
26,245
96.7%
100.0%
90.1%
 
12.39
Winn-Dixie
 
Georgia
                       
Beechwood Promenade
Athens
1961/2009
342,217
247,011
95,206
94.2%
100.0%
79.0%
 
11.42
TJ Maxx, Georgia Theatre, CVS, BodyPlex, Stein Mart, Tuesday Morning, The Fresh Market, Jos A.
Bank, Ann Taylor, Talbots, USPS, Buffalos
 
Mullins Crossing
Evans
2005
251,712
205,716
45,996
100.0%
100.0%
100.0%
 
11.94
Babies “R” Us, Kohl’s, La-Z Boy, Marshalls, Office Max, Ross
Dress for Less, Petco
Target
Publix at Acworth
Atlanta
1996
69,628
37,888
31,740
96.6%
100.0%
92.4%
 
11.94
Publix
 
The Centre at Panola
Atlanta
2001
73,079
51,674
21,405
100.0%
100.0%
100.0%
 
12.21
Publix
 
Illinois
                       
Fox Lake Crossing
Chicago
2002
99,072
65,977
33,095
90.0%
100.0%
69.9%
 
13.50
Dominick's Finer Foods, Dollar Tree
 
Naperville Marketplace
Chicago
2008
83,793
61,683
22,110
100.0%
100.0%
100.0%
 
13.42
TJ Maxx, PetSmart
Caputo's
South Elgin Commons
Chicago
2011
128,000
128,000
-
100.0%
100.0%
0.0%
 
14.50
LA Fitness, Ross Dress for Less, Toy “R” Us
Target
Indiana
                       
54th & College 2
Indianapolis
2008
-
-
-
0.0%
0.0%
0.0%
 
-
The Fresh Market (ground lease)
 
Beacon Hill
Crown Point
2006
57,191
11,043
46,148
84.0%
100.0%
80.1%
 
15.09
Anytime Fitness
Strack & Van Til, Walgreens
Bell Oaks Center
Newburgh
2008
94,811
74,122
20,689
98.5%
100.0%
93.0%
 
11.61
Archie & Clyde's Restaurant, Schnuck’s Markets
 
Boulevard Crossing
Kokomo
2004
124,631
74,440
50,191
95.4%
100.0%
88.6%
 
14.24
Petco, TJ Maxx, Ulta Salon, Shoe Carnival
Kohl's
Bridgewater Marketplace
Indianapolis
2008
25,975
-
25,975
68.2%
0.0%
68.2%
 
17.68
 
Walgreens
Castleton Crossing
Indianapolis
1975/2012
277,812
247,710
30,102
100.0%
100.0%
100.0%
 
10.75
K&G Menswear, Value City, TJ Maxx/Home Goods, Shoe Carnival, Dollar Tree, Burlington Coat Factory
 
Cool Creek Commons
Indianapolis
2005
124,646
53,600
71,046
95.6%
100.0%
92.2%
 
17.22
The Fresh Market, Stein Mart
 
Depauw University Bookstore and Café
Greencastle
2012
11,974
-
11,974
100.0%
0.0%
100.0%
 
8.36
Folletts, Starbucks
 
Eddy Street Commons
South Bend
2009
88,093
20,154
67,939
92.7%
100.0%
90.6%
 
23.28
Hammes Bookstore, Urban Outfitters
 
Fishers Station
Indianapolis
1989/2009
116,943
72,212
44,731
96.6%
100.0%
91.2%
 
11.75
Marsh Supermarkets, Goodwill, Dollar Tree
 
Geist Pavilion
Indianapolis
2006
64,102
29,700
34,402
95.9%
100.0%
92.3%
 
16.25
Goodwill, Ace Hardware
 
Glendale Town Center
Indianapolis
1958/2008
393,002
329,546
63,456
98.8%
100.0%
92.7%
 
6.99
Macy’s, Landmark Theaters,
Staples, Indianapolis Library,
Nexus Academy of Indianapolis
Lowe's Home Improvement, Target, Walgreens
 
 
30
 
 
Retail Operating Properties (continued)
 
 
   
Year
Owned GLA 2
Leased      
Major
Property 1
MSA
Built/
Renovated
Total
Anchors
Shops
Total
Anchors
Shops
 
ABR
per Sqft
Major Owned Tenants
Non-owned Tenants
Greyhound Commons 2
Indianapolis
2005
-
-
-
0.0%
0.0%
0.0%
$ 
-
 
Lowe's Home Improvement Center
Lima Marketplace
Fort Wayne
2008
93,135
71,521
21,614
98.5%
100.0%
93.5%
 
13.97
Aldi, Dollar Tree, Office Depot, PetSmart
Wal-mart
Rangeline Crossing
Indianapolis
1986/2013
99,311
47,962
51,349
91.8%
100.0%
84.1%
 
21.57
Earth Fare, Walgreens
 
Rivers Edge
Indianapolis
2011
149,209
117,890
31,319
100.0%
100.0%
100.0%
 
19.68
Buy Buy Baby, Nordstrom Rack, The Container Store, Arhaus Furniture, Bicycle Garage of Indy
 
Stoney Creek Commons
Indianapolis
2000/2013
84,330
84,330
-
100.0%
100.0%
0.0%
 
12.39
HH Gregg, Goodwill,
LA Fitness
Lowe's Home Improvement
The Corner
Indianapolis
1984/2013
42,494
12,200
30,294
65.1%
0.0%
91.3%
 
18.71
   
Traders Point
Indianapolis
2005
279,684
238,721
40,963
97.5%
100.0%
82.7%
 
14.59
Dick's Sporting Goods, AMC Theatres, Marsh Supermarkets, Bed, Bath & Beyond, Michaels, Old Navy, PetSmart, Books-A-Million
 
Traders Point II
Indianapolis
2005
46,099
-
46,099
88.7%
0.0%
88.7%
 
25.33
   
Whitehall Pike
Bloomington
1999
128,997
128,997
-
100.0%
100.0%
0.0%
 
7.86
Lowe's Home Improvement Center
 
Louisiana
                       
Regal Court**
Shreveport
2008
151,719
89,649
62,070
79.5%
77.7%
82.1%
 
19.77
Dick's Sporting Goods, DSW,
Ulta Salon, JC Penney, Kohl’s
 
Missouri
                       
Shops at Hawk Ridge**
Lake St Louis
2008
75,951
66,081
9,870
100.0%
100.0%
100.0%
 
12.15
Sports Authority, TJ Maxx
Lowe's Home Improvement, Wal-Mart
Nebraska
                       
Whispering Ridge**
Omaha
2008
69,676
69,676
-
100.0%
100.0%
0.0%
 
14.24
PetSmart, Sports Authority
 
Nevada
                       
Cannery Corner
Las Vegas
2008
30,745
-
30,745
88.3%
0.0%
88.3%
 
34.38
   
Centennial Center
Las Vegas
2002
334,705
158,335
176,370
92.5%
100.0%
85.7%
 
22.58
Big Lots, Famous Footwear, Michaels, Office Max, Party City, Petco, Rhapsodielle, Ross Dress for Less, Home Depot, Sam's Club, Wal-Mart
 
Centennial Gateway
Las Vegas
2005
192,999
139,861
53,138
96.7%
100.0%
88.2%
 
23.59
24 Hour Fitness, Fresh & Easy Neighborhood Market, Sportsman's Warehouse, Walgreens
 
Eastern Beltway Center
Las Vegas
1998/2006
162,444
83,982
78,462
97.4%
100.0%
94.6%
 
23.05
Home Consignment Center, Office Max, Petco, Ross Dress for Less, Sam's Club, Wal-mart
Home Depot
Eastgate
Las Vegas
2002
96,589
53,030
43,559
88.5%
100.0%
74.4%
 
21.71
99 Cent Only Store, Office Depot, Party City
Wal-mart
Lowe's Plaza
Las Vegas
2007
30,208
-
30,208
44.4%
0.0%
44.4%
 
30.48
 
Sam’s Club, Lowe’s Home Improvement
Rampart Commons
Las Vegas
2002
81,292
29,265
52,027
100.0%
100.0%
100.0%
 
26.79
Ann Taylor, Chico’s, Francesca’s Collection, Banana Republic, Pottery Barn, Williams Sonoma
 
New Hampshire
                       
Merrimack Village Center
Merrimack
2007
78,892
54,000
24,892
100.0%
100.0%
100.0%
 
12.29
Supervalu
 
New Jersey
                       
Bayonne Crossing
Bayonne
2011
106,383
52,219
54,164
95.8%
100.0%
91.8%
 
28.25
Michaels, New York Sports Club, Lowe's Home Improvement, Wal-mart
 
New York
                       
City Center at White Plains
White Plains
2004
365,905
329,360
36,545
96.0%
100.0%
60.3%
 
26.01
Barnes & Noble, National Amusement, New York Sports Club, Nordstrom Rack, Shop Rite, Toys “R” Us/Babies “R” Us
Target
North Carolina
                       
Holly Springs Towne Center
Holly Springs
2013
207,631
109,233
98,398
92.3%
100.0%
83.7%
 
15.93
Dick's Sporting Goods, Marshalls, Petco, Ulta Salon
Target
Memorial Commons
Goldsboro
2008
111,271
73,876
37,395
91.0%
100.0%
73.1%
 
12.00
Harris Teeter, Office Depot
 
 
 
 
31
 
 
Retail Operating Properties (continued)
 
   
Year
Owned GLA 2
Leased      
Major
Property 1
MSA
Built/
Renovated
Total
Anchors
Shops
Total
Anchors
Shops
 
ABR
per Sqft
Major Owned Tenants
Non-owned Tenants
Northcrest Shopping Center
Charlotte
2008
133,674
76,053
57,621
95.7%
100.0%
89.9%
$ 
21.40
David's Bridal, Dollar Tree, Old Navy, REI, Shoe Carnival
Target
Oleander Place
Wilmington
2012
45,530
30,144
15,386
100.0%
100.0%
100.0%
 
16.06
Whole Foods
 
Perimeter Woods
Charlotte
2008
126,143
105,262
20,881
99.2%
100.0%
95.2%
 
20.60
Best Buy, Off Broadway Shoes, Office Max, PetSmart, Lowe's Home Improvement
 
Toringdon Market
Charlotte
2004
60,539
26,072
34,467
100.0%
100.0%
100.0%
 
19.63
Earth Fare
 
Walgreens Plaza**
Jacksonville
2010
42,219
27,779
14,440
91.1%
100.0%
74.0%
 
22.11
L-3 Communications, Walgreens
 
Ohio
                       
Eastgate Pavilion
Cincinnati
1995
236,230
231,730
4,500
100.0%
100.0%
100.0%
 
8.73
Best Buy, Dick's Sporting Goods, Value City Furniture, PetSmart, DSW, Bed Bath & Beyond
 
Oklahoma
                       
Shops at Moore
Moore
2010
259,692
187,916
71,776
99.5%
100.0%
98.3%
 
12.03
Bed Bath and Beyond, Best Buy, Dustee's Fashion Accessories, Hobby Lobby, Office Depot, PetSmart, Ross Dress for Less
JC Penney
Silver Springs Pointe
Oklahoma City
2001
48,444
20,515
27,929
73.0%
100.0%
53.1%
 
15.02
Kohl’s, Office Depot
Walmart,
Sam’s Club, Home Depot
University Town Center
Norman
2009
158,516
77,097
81,419
95.6%
100.0%
91.5%
 
17.43
Office Depot, Petco, TJ Maxx, Ulta Salon
Target
University Town Center Phase II
Norman
2012
190,494
133,546
56,948
95.4%
100.0%
84.5%
 
12.07
Academy Sports, DSW, Home Goods, Michaels, Kohl’s
 
Oregon
                       
Cornelius Gateway
Portland
2006
21,326
-
21,326
70.8%
0.0%
70.8%
 
21.10
Fedex/Kinkos
Fred Meyer
Shops at Otty
Portland
2004
9,845
-
9,845
84.7%
0.0%
84.7%
 
28.19
 
Wal-Mart
South Carolina
                       
Hitchcock Plaza
Aiken
2006
252,370
214,480
37,890
100.0%
100.0%
100.0%
 
9.29
Academy Sports, Achieve Fitness, Bed Bath and Beyond, Farmers Home Furniture, Old Navy, Ross Dress for Less, TJ Maxx
 
Shoppes at Plaza Green
Greenville
2000
196,307
172,136
24,171
94.0%
94.1%
93.8%
 
12.67
Bed Bath & Beyond, Christmas Tree Shops, Sears, Party City, Shoe Carnival, AC Moore, Old Navy
 
Publix at Woodruff
Greenville
1997
68,055
47,955
20,100
97.4%
100.0%
91.0%
 
10.40
Publix
 
Tennessee
                       
Cool Springs Market
Nashville
1995
223,912
165,712
58,200
86.8%
87.9%
83.7%
 
14.95
Jo-Ann Fabric, Dicks Sporting Goods, Staples, Marshalls
Kroger
Hamilton Crossing –
Phases II & III
Alcoa
2008
175,464
135,737
39,727
100.0%
100.0%
100.0%
 
14.63
Dicks Sporting Goods, Michaels, Old Navy, PetSmart, Ross Dress for Less
 
Texas
                       
Burlington Coat Factory
San Antonio
1992/2000
107,400
107,400
-
100.0%
100.0%
0.0%
 
5.00
Burlington Coat Factory
 
Kingwood Commons
Houston
1999
164,366
74,836
89,530
99.7%
100.0%
99.4%
 
18.82
Randall's Food and Drug, Petco, Chico's, Talbots, Ann Taylor, Jos. A. Bank
 
Market Street Village
Dallas
1970/2011
156,625
136,746
19,879
100.0%
100.0%
100.0%
 
11.61
Jo-Ann Fabric, Ross Dress for
Less, Office Depot, Buy Buy Baby
 
Plaza at Cedar Hill
Dallas
2000/2010
303,458
244,065
59,393
99.2%
100.0%
95.7%
 
12.52
Hobby Lobby, Office Max, Ross
Dress for Less, Marshalls, Sprouts Farmers Market, Toys “R” Us/Babies “R” Us, DSW
 
Plaza Volente
Austin
2004
156,333
105,000
51,333
94.2%
100.0%
82.4%
 
16.75
H-E-B Grocery
 
Portofino Shopping Center
Houston
1999/2010
371,990
211,858
160,132
86.6%
89.4%
83.0%
 
17.27
DSW, Michaels, Sports Authority, Lifeway Christian Store, Stein
Mart, PetSmart, Old Navy
Sam’s Club
Sunland Towne Centre
El Paso
1996/2014
306,437
265,037
41,400
98.9%
100.0%
91.7%
 
11.36
PetSmart, Ross Dress for Less, Kmart, Bed Bath & Beyond, Specs Fine Wines, Sprouts Farmers Market
 

 

 
32
 
 
Retail Operating Properties (continued)

 
   
Year
Owned GLA 2
Leased       Major
Property 1
MSA
Built/
Renovated
Total
Anchors
Shops
Total
Anchors
Shops
 
ABR
per Sqft
Major Owned Tenants
Non-owned Tenants
Waxahachie Crossing
Waxahachie
2010
97,127
72,191
24,936
98.8% 100.0% 95.2% $ 
14.13
Best Buy, PetSmart, Ross Dress for Less Home Depot,
JC Penney
Westside Market
Dallas
2013
93,377
70,000
23,377
97.4%   89.4%  
15.83
Randall's Tom Thumb
 
Wheatland Town Crossing
Dallas
2012
194,727
142,302
52,425
100.0%   100.0%  
12.89
Conn's, Dollar Tree, Office Depot, Party City, PetSmart, Ross Dress for Less, Shoe Carnival
Target, Aldi
Utah
                     
Draper Crossing
Draper
2012
164,098
115,916
48,182
97.9% 100.0% 92.8%  
14.54
Dollar Tree, Downeast Home, Smiths, TJ Maxx  
Draper Peaks
Draper
2012
220,594
101,464
119,130
96.6% 100.0% 93.7%  
17.93
Michaels, Office Depot, Petco, Quilted Bear, Ross Dress for Less
Kohl’s
Virginia
                       
Landstown Commons
Virginia Beach
2007
399,047
217,466
181,581
94.4%
100.0%
87.7%
 
18.72
AC Moore, Bed Bath & Beyond, Best Buy, Books-A-Million, Office Max, PetSmart, Ross Dress for Less, Shoe Carnival, Walgreens
Kohl’s
Washington
                       
Four Corner Square
Seattle
1985/2013
107,998
68,046
39,952
90.7%
100.0%
74.8%
 
21.36
Walgreens, Grocery Outlet, Johnsons Do-It Center
 
Wisconsin
                       
Village at Bay Park
Green Bay
2005
82,254
23,878
58,376
88.1%
100.0%
83.2%
 
14.67
DSW, JC Penney
 
                       
Total
   
16,156,995
11,089,468
5,067,527
94.8%
99.0%
85.7%
$ 
15.15
     

 
____________________
   
1
All properties are wholly owned, except as indicated. Unless otherwise noted, each property is owned in fee simple by the Company.
   
2
Percentage of Owned GLA Leased reflects Owned GLA/NRA leased as of December 31, 2014, except for Greyhound Commons and 54 th & College.
   
**
This property is under a definitive agreement to be sold.

 
 
33
 
 

Operating Office Properties
 
 
As of December 31, 2014, we owned interests in one office operating property and an associated parking garage totaling 0.4 million square feet of net rentable area (“NRA”).  The following sets forth more specific information with respect to the Company’s office properties as of December 31, 2014:
 
 
O PERATING O FFICE P ROPERTIES
 
 
MSA
Year Built/
Renovated
Acquired,
Redeveloped
or Developed
Owned
NRA
Percentage
Of Owned
NRA
Leased
Annualized
Base Rent 1
Percentage
of
Annualized
Office
Base Rent
Base Rent
Per Leased
Sq. Ft.
 
Major Tenants
Office properties
                   
Thirty South Meridian 2
Indianapolis
1905/2002
Redeveloped
287,928
94.8%
$
4,918,074
80.0%
$
18.01
 
Indiana Supreme Court, City Securities, Kite Realty Group, Lumina Foundation
Union Station Parking Garage 3
Indianapolis
1986
Acquired
N/A
N/A
 
N/A
N/A
 
N/A
 
Denison Parking
                         
Stand-alone office components of retail projects                        
Eddy Street Office (part of Eddy Street Commons) 4
South Bend
2009
Developed
81,628
100.0%
$
1,156,546
18.8%
$
14.17
 
University of Notre Dame Offices
Tradition Village Office (part of Tradition Village Square)
Port St. Lucie
2006
Acquired
19,211
41.2%
 
74,061
1.2%
 
9.36
   
Total
     
388,767
93.3%
$
6,148,681
100.0%
$
16.96
   

____________________
1
Annualized Base Rent represents the monthly contractual rent for December 2014 for each applicable property, multiplied by 12. Excludes tenant reimbursements.
   
2
Annualized Base Rent includes $723,216 from the Company and subsidiaries as of December 31, 2014.
   
3
The garage is managed by a third party.
   
4
The Company also owns Eddy Street Commons in South Bend, Indiana along with a parking garage that serves a hotel and the office and retail components of the property.


 
34
 

 
Development Projects
 
 
In addition to our operating retail properties and office properties, as of December 31, 2014, we owned interests in four development projects currently under construction.  The following sets forth more specific information with respect to the Company’s retail development properties as of December 31, 2014:

 
Under Construction:                      
                       
Project
Company
Ownership %
MSA
Actual/
Projected  Opening
Date 1
Projected
Owned
GLA 2
Projected
Total
GLA 3
Percent
of Owned
GLA
Occupied 4
Percent
of Owned
GLA
Pre-Leased/
Committed 5
Total
Estimated
Project
Cost 7
Cost
Incurred
as of
Dec. 31, 2014 6
 
Major Tenants and
Non-owned Anchors
Holly Springs Towne Center, NC - Phase II
100%
Raleigh
Q3 2015
122,143
154,143
0.0%
77.6%
$47,500
$18,226
 
Target (non-owned), Carmike Cinemas,  Bed Bath & Beyond, DSW
Parkside Town Commons, NC – Phase I 8
100%
Raleigh
Q2 2014
104,978
245,573
82.2%
90.2%
39,000
38,804
 
Target (non-owned), Harris Teeter (ground lease), Petco
Parkside Town Commons, NC – Phase II
100%
Raleigh
Q3 2014
281,427
324,260
30.2%
67.8%
70,000
68,345
 
Frank Theatres, Golf Galaxy, Field & Stream
Tamiami Crossing, FL
100%
Naples
Q2 2016
118,773
138,773
0.0%
85.5%
44,000
20,185
 
Stein Mart, 4 national junior anchors
Total
 
627,321
862,749
27.3%
76.8%
$200,500
$145,560
   
 
Cost incurred as of December 31, 2014 and included in Investment properties on balance sheet
   
$81,953
   
 
 
 
____________________
1
Opening Date is defined as the first date a tenant is open for business or a ground lease payment is made. Stabilization (i.e., 85% occupied) typically occurs within six to twelve months after the opening date.
   
2
Projected Owned GLA represents gross leasable area we project we will own. It excludes square footage that we project will be attributable to non-owned outlot structures on land owned by us and expected to be ground leased to tenants. It also excludes non-owned anchor space.
   
3
Projected Total GLA includes Projected Owned GLA, projected square footage attributable to non-owned outlot structures on land that we own, and non-owned anchor space that currently exists or is under construction.
   
4
Includes tenants that have taken possession of their space or have begun paying rent.
   
5
Excludes outlot land parcels owned by the Company and ground leased to tenants. Includes leases under negotiation for approximately 80,385 square feet for which the Company has signed non-binding letters of intent.
   
6
Dollars in thousands.
   
7
Dollars in thousands. Cost incurred is reclassified to fixed assets on the consolidated balance sheet on a pro-rata basis as portions of the asset are placed in service.
   
8
The owned GLA for Parkside Town Commons Phase I includes a 53,000 square foot ground lease with Harris Teeter Supermarket.

 
35
 

 
Redevelopment Projects
 
 
In addition to our development projects, as displayed in the table above, we have interests in one redevelopment project under construction and two redevelopment projects pending commencement of construction.  As of December 31, 2014, these three projects are expected to contain 0.4 million square feet.
 

 Under Construction:
                     
                       
Project
Company Ownership %
MSA
Actual/
Projected  Opening
Date 1
Projected
Total
GLA 3
Projected
Owned
GLA 2
Percent
of Owned
GLA
Occupied 4
Percent
of Owned
GLA
Pre-Leased/
Committed 5
Total
Estimated
Project
Cost 7
Cost
Incurred
as of Dec. 31, 2014 6
 
Major Tenants and
Non-owned Anchors
Gainesville Plaza, FL
100%
Gainesville
Q2 2015
164,665
162,693
66.3%
81.6%
14,300
$7,677
 
Burlington Coat Factory, Ross Dress for Less
                       
Total
     
164,665
162,693
66.3%
81.6%
$14,300
$7,677
   
 
Cost incurred as of December 31, 2014 and included in Investment properties on balance sheet
 
$4,535
   


Pending Commencement of Construction:                  
                   
Project
Company Ownership %
MSA
Actual/
Projected  Opening
Date 1
Projected
Total
GLA 3
Projected
Owned
GLA 2
Total
Estimated
Project
Cost 7
Cost
Incurred
as of Dec. 31, 2014 6
 
Major Tenants and
Non-owned Anchors
Hamilton Crossing Centre, IN
100%
Indianapolis
TBD
77,296
69,596
TBD
$149
 
TBD
Courthouse Shadows, FL
100%
Naples
TBD
134,867
134,867
TBD
580
 
TBD
Total
 
212,163
204,463
TBD
$729
   
 
Cost incurred as of December 31, 2014 and included in Investment properties on balance sheet
 
$729
   
 

Summary of Construction In Progress included in Investment Properties on Consolidated Balance Sheet ($ in thousands):
Cost incurred for development projects under construction
  $ 81,953
Cost incurred for redevelopment projects under construction
    4,535
Deerwood apartments
    15,656
Cost incurred for development projects pending construction
    729
Holly Springs Towne Center – Phase III
    4,372
Miscellaneous tenant improvements and small projects
    18,638
Construction In Progress included in Investment Properties on Consolidated Balance Sheet
  $ 125,883
 
 
See prior page for footnotes.

 
36
 


Land Held for Future Development
 
 
As of December 31, 2014, we owned interests in land parcels comprising 105 acres that are expected to be used for future expansion of existing properties, development of new retail or office properties or sold to third parties.
 
 
Tenant Diversification
 
 
No individual retail or office tenant accounted for more than 3.4% of the portfolio’s annualized base rent for the year ended December 31, 2014. The following table sets forth certain information for the largest 10 tenants and non-owned anchor tenants (based on total GLA) open for business or for which ground lease payments are being made at the Company’s retail properties based on minimum rents in place as of December 31, 2014:
 
 
T OP 10 R ETAIL T ENANTS BY G ROSS L EASABLE A REA
 

Tenant
 
Number of
Stores
 
Total GLA
 
Number of
Leases
 
Company
Owned GLA 1
 
Number of Anchor
Owned Locations
 
Anchor
Owned GLA 2
Target
 
18
 
2,599,993
 
0
 
0
 
18
 
2,599,993
Wal-Mart
 
15
 
1,762,447
 
6
 
203,742
 
9
 
1,558,705
Lowe’s Home Improvement 3
 
15
 
1,627,998
 
5
 
128,997
 
10
 
1,499,001
Publix
 
19
 
913,822
 
19
 
913,822
 
0
 
0
Kohl’s
 
11
 
634,644
 
6
 
184,516
 
5
 
450,128
TJX Companies 4
 
20
 
612,257
 
20
 
612,257
 
0
 
0
Dick's Sporting Goods
 
11
 
525,622
 
11
 
525,622
 
0
 
0
Ross Dress for Less
 
16
 
460,580
 
16
 
460,580
 
0
 
0
PetSmart
 
21
 
434,349
 
21
 
434,349
 
0
 
0
Office Depot/Office Max 5
 
20
 
412,204
 
20
 
412,204
 
0
 
0
Total
 
166
 
9,983,916
 
124
 
3,876,089
 
42
 
6,107,827
 

 
____________________
1
Excludes the estimated size of the structures located on land owned by the Company and ground leased to tenants.
   
2
Includes the estimated size of the structures located on land owned by the Company and ground leased to tenants.
   
3
The Company has entered into four ground leases with Lowe’s Home Improvement for a total of 645,161 square feet, which is included in Anchor Owned GLA.
   
4
Includes TJ Maxx, Home Goods and Marshalls, which are owned by the same parent company.
   
5
On February 4, 2015, Staples announced it has entered into an agreement to acquire Office Depot.  This transaction is subject to customary closing conditions, including regulatory approval.

 
37
 

 
The following table sets forth certain information for the largest 25 tenants open for business at the Company’s retail and office properties based on minimum rents in place as of December 31, 2014:
 
 
T OP 25 T ENANTS BY A NNUALIZED B ASE R ENT
 
Tenant
 
Number
of
Stores
 
Leased GLA/NRA 2
 
% of Owned
GLA/NRA
of the
Portfolio
 
Annualized
Base Rent 1
 
Annualized
Base Rent
per Sq. Ft.
 
% of Total
Portfolio
Annualized
Base Rent
Publix
 
19
 
913,822
 
5.6%
 
$
8,869,767
 
$
9.71
 
3.4%
PetSmart
 
21
 
434,349
 
2.7%
   
6,413,497
   
14.77
 
2.5%
TJX Companies 4
 
20
 
612,257
 
3.7%
   
5,876,975
   
9.60
 
2.3%
Dick's Sporting Goods
 
11
 
525,622
 
3.2%
   
5,631,941
   
10.71
 
2.2%
Office Depot/Office Max 6
 
20
 
412,204
 
2.5%
   
5,348,762
   
12.98
 
2.1%
Lowe’s Home Improvement 5
 
5
 
128,997
 
0.8%
   
5,039,000
   
6.51
 
1.9%
Ross Dress for Less
 
16
 
460,580
 
2.8%
   
4,917,367
   
10.68
 
1.9%
Bed Bath & Beyond 3
 
15
 
408,053
 
2.5%
   
4,335,980
   
10.63
 
1.7%
Michaels
 
14
 
299,275
 
1.8%
   
3,882,782
   
12.97
 
1.5%
Wal-Mart 5
 
6
 
203,742
 
1.2%
   
3,655,238
   
3.60
 
1.4%
LA Fitness
 
5
 
208,209
 
1.3%
   
3,447,473
   
16.56
 
1.3%
Best Buy
 
7
 
243,429
 
1.5%
   
3,383,090
   
13.90
 
1.3%
Kohl’s 5
 
6
 
184,516
 
1.1%
   
3,302,074
   
6.37
 
1.3%
Walgreens
 
6
 
96,852
 
0.6%
   
3,113,766
   
33.84
 
1.2%
Sports Authority
 
5
 
211,739
 
1.3%
   
2,944,606
   
13.91
 
1.1%
National Amusements
 
1
 
80,000
 
0.5%
   
2,882,650
   
36.03
 
1.1%
Toys “R” Us/Babies “R” Us 5
 
5
 
179,316
 
1.1%
   
2,765,780
   
15.42
 
1.1%
Petco
 
10
 
140,957
 
0.9%
   
2,326,271
   
16.50
 
0.9%
Nordstrom
 
3
 
103,904
 
0.6%
   
2,043,976
   
19.67
 
0.8%
New York Sports Club
 
2
 
86,717
 
0.5%
   
1,815,540
   
20.94
 
0.7%
Burlington Coat Factory
 
3
 
247,400
 
1.5%
   
1,791,800
   
7.24
 
0.7%
Mattress Firm
 
17
 
69,258
 
0.4%
   
1,755,457
   
25.35
 
0.7%
Staples 6
 
6
 
116,362
 
0.7%
   
1,747,821
   
15.02
 
0.7%
Randalls Food & Drugs
 
3
 
133,990
 
0.8%
   
1,732,196
   
12.93
 
0.7%
Hobby Lobby
 
4
 
221,254
 
1.4%
   
1,692,018
   
7.65
 
0.7%
TOTAL
 
230
 
6,722,804
 
41.1%
 
$
90,715,826
 
$
10.60
 
34.9%

____________________
1
Annualized base rent represents the monthly contractual rent for the month of December 2014 for each applicable tenant multiplied by 12. Annualized base rent does not include tenant reimbursements.
   
2
Excludes the estimated size of the structures located on land owned by the Company and ground leased to tenants.
   
3
Includes Buy Buy Baby, Christmas Tree Shops and Cost Plus, which are owned by the same parent company.
   
4
Includes TJ Maxx, Marshalls and HomeGoods.
   
5
Annualized base rent and percent of total portfolio includes ground lease rent.
   
6
On February 4, 2015, Staples announced it has entered into an agreement to acquire Office Depot.  This transaction is subject to customary closing conditions, including regulatory approval.

 
38
 

Geographic Information
 
 
The Company owns 118 operating retail properties, totaling approximately 16.2 million of owned square feet in 26 states. As of December 31, 2014, the Company owned interests in one office operating property and an associated parking garage, totaling approximately 0.4 million square feet of NRA. Both of these office properties are located in the state of Indiana. The following table summarizes the Company’s operating properties by state as of December 31, 2014:
 

 
Number of Operating Properties 1
 
Owned  
GLA/NRA 2
 
Percent of
Owned
GLA/NRA
 
Total
Number of
Leases
 
Annualized
Base Rent 3
 
Percent of
Annualized
Base Rent
 
Annualized
Base Rent per
Leased Sq. Ft.
Alabama
4
 
761,191
 
4.6%
 
76
  $
8,042,976
 
3.4%
  $
11.04
Arizona
1
 
79,902
 
0.5%
 
10
   
2,241,241
 
0.9%
   
28.05
Arkansas
1
 
151,927
 
0.9%
 
14
   
1,926,306
 
0.8%
   
12.85
Connecticut
1
 
208,929
 
1.3%
 
24
   
3,241,084
 
1.4%
   
16.00
Florida
36
 
4,353,316
 
26.3%
 
621
   
60,158,585
 
25.2%
   
14.95
Georgia
4
 
736,636
 
4.5%
 
88
   
8,381,113
 
3.5%
   
11.73
Illinois
3
 
310,865
 
1.9%
 
23
   
4,183,945
 
1.8%
   
13.90
Indiana – Retail Properties
21
 
2,302,439
 
13.9%
 
254
   
29,671,651
 
12.5%
   
13.38
Indiana – Office Properties
2
 
369,556
 
2.2%
 
17
   
6,074,620
 
2.5%
   
17.13
Louisiana
1
 
151,719
 
0.9%
 
23
   
2,384,349
 
1.0%
   
19.77
Missouri
1
 
75,951
 
0.5%
 
6
   
922,461
 
0.4%
   
12.15
Nebraska
1
 
69,676
 
0.4%
 
2
   
992,226
 
0.4%
   
14.24
Nevada
7
 
928,982
 
5.6%
 
181
   
20,414,409
 
8.6%
   
23.69
New Hampshire
1
 
78,892
 
0.5%
 
14
   
969,452
 
0.4%
   
12.29
New Jersey
1
 
106,383
 
0.6%
 
26
   
2,880,205
 
1.2%
   
28.25
New York
1
 
365,905
 
2.2%
 
12
   
9,141,058
 
3.8%
   
26.01
North Carolina
7
 
727,007
 
4.4%
 
113
   
12,351,054
 
5.2%
   
17.89
Ohio
1
 
236,230
 
1.4%
 
7
   
2,062,668
 
0.9%
   
8.73
Oklahoma
4
 
657,146
 
4.0%
 
79
   
8,475,793
 
3.6%
   
13.52
Oregon
2
 
31,171
 
0.2%
 
13
   
553,894
 
0.2%
   
23.63
South Carolina
3
 
516,732
 
3.1%
 
41
   
5,371,276
 
2.3%
   
10.67
Tennessee
2
 
399,376
 
2.4%
 
34
   
5,473,938
 
2.3%
   
14.80
Texas
10
 
1,951,840
 
11.8%
 
202
   
25,986,912
 
10.9%
   
13.80
Utah
2
 
384,692
 
2.3%
 
74
   
6,156,037
 
2.6%
   
16.47
Virginia
1
 
399,047
 
2.4%
 
59
   
7,052,329
 
3.0%
   
18.72
Washington
1
 
107,998
 
0.7%
 
24
   
2,092,039
 
0.9%
   
21.36
Wisconsin
1
 
82,254
 
0.5%
 
15
   
1,062,753
 
0.4%
   
14.67
Total
120
 
16,545,762
 
100.0%
 
                   2,052
  $
238,264,375
 
100.0%
  $
15.19

____________________
1
This table includes operating retail properties, operating office properties, and ground lease tenants who commenced paying rent as of December 31, 2014 and excludes four retail properties under redevelopment.
   
2
Owned GLA/NRA represents gross leasable area or net leasable area owned by the Company.  It also excludes the square footage of Union Station Parking Garage.
   
3
Annualized base rent excludes $17,923,979 in annualized ground lease revenue attributable to parcels and outlots owned by the Company and ground leased to tenants.

 
39
 

Lease Expirations
 
 
In 2015, leases representing 6.7% of total annualized base rent and 6.7% of total GLA/NRA expire. The following tables show scheduled lease expirations for retail and office tenants and in-process development property tenants open for business as of December 31, 2014, assuming none of the tenants exercise renewal options.
 
 
L EASE E XPIRATION T ABLE – O PERATING P ORTFOLIO
 

   
Number of Expiring Leases 1
 
Expiring GLA/NRA 2
 
% of Total GLA/NRA Expiring
 
Expiring Annualized Base Rent 3
 
% of Total Annualized Base Rent
 
Expiring Annualized Base Rent per Sq. Ft.
 
Expiring Ground Lease Revenue
2015
 
232
 
1,070,912
 
6.7%
 
$
16,213,136
 
6.7%
 
$
15.14
 
$
277,296
2016
 
267
 
1,504,117
 
9.4%
   
20,384,310
 
8.4%
   
13.55
   
159,000
2017
 
293
 
1,817,224
 
11.4%
   
28,793,332
 
11.9%
   
15.84
   
512,556
2018
 
345
 
2,218,200
 
13.9%
   
35,947,219
 
14.8%
   
16.21
   
1,037,875
2019
 
258
 
1,658,871
 
10.4%
   
26,928,164
 
11.1%
   
16.23
   
651,970
2020
 
143
 
1,815,447
 
11.3%
   
21,781,548
 
9.0%
   
12.00
   
1,492,445
2021
 
93
 
862,111
 
5.4%
   
12,550,543
 
5.2%
   
14.56
   
468,525
2022
 
90
 
876,639
 
5.5%
   
14,383,982
 
5.9%
   
16.41
   
1,185,782
2023
 
112
 
979,919
 
6.1%
   
15,624,199
 
6.4%
   
15.94
   
359,523
2024
 
92
 
901,209
 
5.6%
   
17,969,693
 
7.4%
   
19.94
   
381,004
Beyond
 
95
 
2,301,846
 
14.4%
   
32,062,078
 
13.2%
   
13.93
   
11,398,003
   
2,020
 
16,006,495
 
100.0%
 
$
242,638,205
 
100.0%
 
$
15.16
 
$
17,923,979
 
____________________
1
Lease expiration table reflects rents in place as of December 31, 2014 and does not include option periods; 2015 expirations include 42 month-to-month tenants. This column also excludes ground leases.
   
2
Expiring GLA excludes estimated square footage attributable to non-owned structures on land owned by the Company and ground leased to tenants.
   
3
Annualized base rent represents the monthly contractual rent for the month of December 2014 for each applicable tenant multiplied by 12. Excludes tenant reimbursements and ground lease revenue.
   

 
L EASE E XPIRATION T ABLE – R ETAIL A NCHOR T ENANTS
 
   
Number of Expiring Leases 2
 
Expiring GLA/NRA 3
 
% of Total GLA/NRA Expiring
 
Expiring Annualized Base Rent 4
 
% of Total Annualized Base Rent
 
Expiring Annualized Base Rent per Sq. Ft.
 
Expiring Ground Lease Revenue
2015
 
19
 
521,005
 
3.3%
 
$
4,879,766
 
2.0%
 
$
9.37
 
$
0
2016
 
29
 
901,466
 
5.6%
   
7,772,418
 
3.2%
   
8.62
   
159,000
2017
 
45
 
1,123,378
 
7.0%
   
13,346,582
 
5.5%
   
11.88
   
0
2018
 
53
 
1,436,700
 
9.0%
   
16,964,964
 
6.9%
   
11.81
   
644,149
2019
 
39
 
1,081,636
 
6.8%
   
13,289,345
 
5.5%
   
12.29
   
0
2020
 
40
 
1,524,582
 
9.5%
   
15,352,823
 
6.3%
   
10.07
   
1,110,883
2021
 
24
 
645,258
 
4.0%
   
7,059,460
 
2.9%
   
10.94
   
0
2022
 
26
 
616,349
 
3.9%
   
8,346,496
 
3.4%
   
13.54
   
744,622
2023
 
25
 
654,829
 
4.1%
   
7,895,351
 
3.2%
   
12.06
   
260,000
2024
 
19
 
667,044
 
4.2%
   
12,222,225
 
5.0%
   
18.32
   
260,004
Beyond
 
48
 
2,039,951
 
12.8%
   
25,922,435
 
10.6%
   
12.71
   
7,505,194
   
367
 
11,212,198
 
70.0%
 
$
133,051,864
 
54.8%
 
$
11.87
 
$
10,683,851

 
40
 

L EASE E XPIRATION T ABLE – R ETAIL A NCHOR T ENANTS (continued)
 
____________________
1
Retail anchor tenants are defined as tenants that occupy 10,000 square feet or more.
   
2
Lease expiration table reflects rents in place as of December 31, 2014 and does not include option periods; 2015 expirations include one month-to-month tenant. This column also excludes ground leases.
   
3
Expiring GLA excludes square footage for non-owned ground lease structures on land we own and ground leased to tenants.
   
4
Annualized base rent represents the monthly contractual rent for the month of December 2014 for each applicable property multiplied by 12. Excludes tenant reimbursements and ground lease revenue.
 
 
L EASE E XPIRATION T ABLE – R ETAIL S HOPS
 

   
Number of Expiring Leases 1
 
Expiring
GLA/NRA 1,2
 
% of Total GLA/NRA Expiring
 
Expiring Annualized Base Rent 3
 
% of Total Annualized Base Rent
 
Expiring Annualized Base Rent per Sq. Ft.
 
Expiring Ground
Lease Revenue
2015
 
210
 
503,929
 
3.2%
 
$
10,536,093
 
4.4%
 
$
20.91
 
$
277,296
2016
 
238
 
602,651
 
3.8%
   
12,611,893
 
5.2%
   
20.93
   
0
2017
 
246
 
610,736
 
3.8%
   
13,950,903
 
5.8%
   
22.84
   
512,556
2018
 
290
 
763,663
 
4.8%
   
18,598,683
 
7.7%
   
24.35
   
393,727
2019
 
218
 
571,982
 
3.6%
   
13,537,699
 
5.6%
   
23.67
   
651,970
2020
 
102
 
277,554
 
1.7%
   
6,185,790
 
2.6%
   
22.29
   
381,562
2021
 
68
 
210,691
 
1.3%
   
5,349,352
 
2.2%
   
25.39
   
468,525
2022
 
61
 
209,244
 
1.3%
   
5,163,867
 
2.1%
   
24.68
   
441,160
2023
 
85
 
292,102
 
1.8%
   
7,060,660
 
2.9%
   
24.17
   
99,522
2024
 
72
 
206,881
 
1.3%
   
5,439,841
 
2.2%
   
26.29
   
121,000
Beyond
 
44
 
182,255
 
1.1%
   
5,002,881
 
2.2%
   
27.45
   
3,892,810
   
1,634
 
4,431,688
 
27.7%
 
$
103,437,660
 
42.6%
 
$
23.34
 
$
7,240,128


____________________
1
Lease expiration table reflects rents in place as of December 31, 2014, and does not include option periods; 2015 expirations include 39 month-to-month tenants.  This column also excludes ground leases.
   
2
Expiring GLA excludes estimated square footage to non-owned structures on land we own and ground leased to tenants.
   
3
Annualized base rent represents the monthly contractual rent for the month of December 2014 for each applicable property multiplied by 12. Excludes tenant reimbursements and ground lease revenue.
 
 
L EASE E XPIRATION T ABLE – O FFICE T ENANTS
 
 
   
Number of Expiring Leases 1
 
Expiring NLA 1
 
% of Total NRA Expiring
 
Expiring
Annualized Base Rent 2
 
% of Total Annualized Base Rent
 
Expiring Annualized Base Rent per Sq. Ft.
2015
 
3
 
45,978
 
0.3%
 
$
797,277
 
0.3%
 
$
17.34
2016
 
0
 
0
 
0.0%
   
0
 
0.0%
   
0.00
2017
 
2
 
83,110
 
0.5%
   
1,495,847
 
0.6%
   
18.00
2018
 
2
 
17,837
 
0.1%
   
383,572
 
0.2%
   
21.50
2019
 
1
 
5,253
 
0.0%
   
101,120
 
0.0%
   
19.25
2020
 
1
 
13,311
 
0.1%
   
242,935
 
0.1%
   
18.25
2021
 
1
 
6,162
 
0.0%
   
141,732
 
0.1%
   
23.00
2022
 
3
 
51,046
 
0.3%
   
873,619
 
0.4%
   
17.11
2023
 
2
 
32,988
 
0.2%
   
668,189
 
0.3%
   
20.26
2024
 
1
 
27,284
 
0.2%
   
307,627
 
0.1%
   
11.28
Beyond
 
3
 
79,640
 
0.5%
   
1,136,762
 
0.5%
   
14.27
   
19
 
362,609
 
2.3%
 
$
6,148,681
 
2.5%
 
$
16.96

 
41
 

 
L EASE E XPIRATION T ABLE – O FFICE T ENANTS (continued)
 

____________________
1
Lease expiration table reflects rents in place at 30 South as of December 31, 2014 and does not include option periods. This column also excludes ground leases. 2015 expirations include two month-to-month tenants.
   
2
Annualized base rent represents the monthly contractual rent for the month of December 2014 for each applicable property multiplied by 12. Excludes tenant reimbursements.
 
 
Lease Activity – New and Renewal
 
 
In 2014, the Company executed 186 new and renewal leases totaling 1,070,800 square feet.  New leases were signed with 64 tenants for 299,200 square feet of GLA while renewal leases were signed with 122 tenants for 771,600 square feet of GLA.  The following table contains additional information about 2014 leasing activity.
 
   
Number of Leases Signed
   
Square Footage Signed
   
Average Rental Rate per square foot
New
    64       299,200     $ 17.24
Renewal
    122       771,600       14.48
Total
    186       1,070,800     $ 15.25

 
 
 
We are a party to various legal proceedings, which arise in the ordinary course of business. We are not currently involved in any litigation nor, to our knowledge, is any litigation threatened against us where the outcome would, in our judgment based on information currently available to us, have a material adverse effect on our consolidated financial position or consolidated results of operations.
 
 
 
 
Not applicable.
 

 
42
 

 
PART II
 
 
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
 
 
Market Information
 
 
Our common shares are currently listed and traded on the New York Stock Exchange (“NYSE”) under the symbol “KRG”.  On February 23, 2015, the last reported sales price of our common shares on the NYSE was $28.98.
 
 
The following table sets forth, for the periods indicated, the high and low prices for our common shares:
 
 
      High 1       Low 1
Quarter Ended December 31, 2014
  $ 29.68     $ 23.71
Quarter Ended September 30, 2014
  $ 26.70     $ 22.92
Quarter Ended June 30, 2014
  $ 25.72     $ 22.92
Quarter Ended March 31, 2014
  $ 26.28     $ 23.20
Quarter Ended December 31, 2013
  $ 27.48     $ 23.52
Quarter Ended September 30, 2013
  $ 24.76     $ 22.08
Quarter Ended June 30, 2013
  $ 27.48     $ 21.08
Quarter Ended March 31, 2013
  $ 27.64     $ 21.88
 

____________________
1
Per share information has been restated for the effects of the Company’s one-for-four reverse common share split in August 2014.
 
 
Holders
 
 
The number of registered holders of record of our common shares was 2,068 as of February 23, 2015.  This total excludes beneficial or non-registered holders that held their shares through various brokerage firms.  This figure does not represent the actual number of beneficial owners of our common shares because our common shares are frequently held in “street name” by securities dealers and others for the benefit of beneficial owners who may vote the shares.
 
 
Distributions
 
Our Board of Trustees declared the following cash distributions per share to our common shareholders for the periods indicated:
 
 
Quarter
 
Record Date
 
Distribution
Per Share 1
 
Payment Date
4 th 2014
   
January 6, 2015
 
$
0.26
   
January 13, 2015
3 rd 2014
   
October 6, 2014
 
$
0.26
   
October 13, 2014
2 nd 2014
   
June 24, 2014
 
$
0.26
   
July 1, 2014
1 st 2014
   
April 7, 2014
 
$
0.26
   
April 14, 2014
4 th 2013
   
January 6, 2014
 
$
0.24
   
January 13, 2014
3 rd 2013
   
October 4, 2013
 
$
0.24
   
October 11, 2013
2 nd 2013
   
July 5, 2013
 
$
0.24
   
July 12, 2013
1 st 2013
   
April 5, 2013
 
$
0.24
   
April 12, 2013

 
____________________
1
Per share information has been restated for the effects of the Company’s one-for-four reverse common share split in August 2014.
 
 
Our management and Board of Trustees will continue to evaluate our distribution policy on a quarterly basis as they monitor the capital markets and the impact of the economy on our operations.  In April 2014, our Board of Trustees approved an increase to our common dividend to $0.26 per share from $0.24 per share, which represents an 8.3% increase.  On February 5, 2015, our Board of Trustees approved an increase to our common dividend to $0.2725 per share that will be paid on or about April 13, 2015 to shareholders of record as of April 6, 2015, which represents a 4.8% increase.
 

 
43
 

 
Future distributions will be declared and paid at the discretion of our Board of Trustees, and will depend upon a number of factors, including cash generated by operating activities, our financial condition, capital requirements, annual distribution requirements under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as our Board of Trustees deem relevant.
 
 
Distributions by us to the extent of our current and accumulated earnings and profits for federal income tax purposes will be taxable to shareholders as either ordinary dividend income or capital gain income if so declared by us.  Distributions in excess of taxable earnings and profits generally will be treated as a non-taxable return of capital.  These distributions, to the extent that they do not exceed the shareholder’s adjusted tax basis in its common shares, have the effect of deferring taxation until the sale of a shareholder’s common shares.  To the extent that distributions are both in excess of taxable earnings and profits and in excess of the shareholder’s adjusted tax basis in its common shares, the distribution will be treated as gain from the sale of common shares.  In order to maintain our qualification as a REIT, we must make annual distributions to shareholders of at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) and we must make distributions to shareholders equal to 100% of our net taxable income to eliminate federal income tax liability.  Under certain circumstances, we could be required to make distributions in excess of cash available for distributions in order to meet such requirements.  For the taxable year ended December 31, 2014, approximately 28% of our distributions to shareholders constituted a return of capital, approximately 72% constituted taxable ordinary income dividends and approximately 0% constituted taxable capital gains.
 
 
Under our unsecured revolving credit facility, we are permitted to make distributions to our shareholders that do not exceed 95% of our Funds From Operations (“FFO”) provided that no event of default exists. If an event of default exists, we may only make distributions sufficient to maintain our REIT status.  However, we may not make any distributions if any event of default resulting from nonpayment or bankruptcy exists, or if our obligations under the unsecured revolving credit facility are accelerated.
 
 
Issuer Repurchases; Unregistered Sales of Securities
 
 
During the year ended December 31, 2014, certain of our employees surrendered common shares owned by them to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common shares of beneficial interest issued under our 2013 Equity Incentive Plan, or the 2013 Plan.
 
 
The following table summarizes all of these repurchases during the year ended December 31, 2014:
 

 
                   
Period
Total number
of shares
purchased
   
Average price
paid per share
 
Total number of
shares purchased
as part of publicly
announced plans
or programs
 
Maximum number
of shares that may
yet be purchased
under the plans or
programs
January 1 - January 31
—
   
—
 
N/A
 
N/A
February 1 - February 28
43,600
 
(1)
$
24.06
 
—
 
N/A
March 1 - March 31
—
     
—
 
N/A
 
N/A
April 1 - April 30
—
   
—
 
N/A
 
N/A
May 1 - May 31
17,161
 
(1)
$
23.43
 
—
 
N/A
June 1 - June 30
—
     
—
 
N/A
 
N/A
July 1 - July 31, 2014
—
   
—
 
N/A
 
N/A
August 1 - August 31
—
     
—
 
N/A
 
N/A
September 1 - September 30
—
     
—
 
N/A
 
N/A
October 1 - October 31
—
   
—
 
N/A
 
N/A
November 1 - November 30
—
     
—
 
N/A
 
N/A
December 1 - December 31
—
     
—
 
N/A
 
N/A
Total
60,761
             

 
____________________
1
The number of shares purchased represents common shares surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common shares of beneficial interest issued under our 2013 Plan. With respect to these shares, the price paid per share is based on the closing price of our common shares as of the date of the determination of the statutory minimum federal and state tax obligations.

 
 
44
 
 
Issuances Under Equity Compensation Plans
 
 
For information regarding the securities authorized for issuance under our equity compensation plans, see Item 12 of this Annual Report on Form 10-K.
 
 
Performan ce Graph
 
 
Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act or the Exchange Act that might incorporate SEC filings, in whole or in part, the following performance graph will not be incorporated by reference into any such filings.
 
 
The following graph compares the cumulative total shareholder return of our common shares for the period from December 31, 2009 to December 31, 2014, to the S & P 500 Index and to the published NAREIT All Equity REIT Index over the same period .   The graph assumes that the value of the investment in our common shares and each index was $ 100 at December 31, 2009 and that all cash distributions were reinvested .   The shareholder return shown on the graph below is not indicative of future performance.
STOCK PERFORMANCE GRAPH
 
 
      12/09       6/10       12/10       6/11       12/11       6/12       12/12       6/13       12/13       6/14       12/14
                                                                                       
Kite Realty Group Trust
    100.00       105.46       140.43       132.15       123.03       139.48       159.82       176.04       195.65       188.55       223.04
S&P 500
    100.00       93.35       115.06       122.00       117.49       128.64       136.30       155.14       180.44       193.32       205.14
FTSE NAREIT Equity REITs
    100.00       105.56       127.96       141.01       138.57       159.23       163.60       174.22       167.63       197.23       218.16

 
45
 


ITEM 6. SELECTED FINANCIAL DATA
 
 
The following tables set forth, on a historical basis, selected financial and operating information. The financial information has been derived from our consolidated balance sheets and statements of operations.  The share and per share information has been restated for the effects of our one-for-four reverse share split that occurred in August 2014.  This information should be read in conjunction with our audited consolidated financial statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K.
 
 
 
Year Ended December 31
    2014 1     2013 2     2012 3     2011 4     2010
Operating Data:
                           
Total rental related revenue
$
259,528
 
$
129,488
 
$ 
96,539
 
$ 
89,116
 
$ 
83,243
Expenses:
                           
Property operating
 
38,703
   
21,729
   
16,756
   
16,830
   
16,181
Real estate taxes
 
29,947
   
15,263
   
12,858
   
12,448
   
10,681
General, administrative, and other
 
13,043
   
8,211
   
7,117
   
6,274
   
5,361
Merger and acquisition costs
 
27,508
   
2,214
   
364  
   
—  
   
—  
Litigation charge, net
 
— 
   
—  
   
1,007 
   
—  
   
—  
Depreciation and amortization
 
120,998
   
54,479
   
38,835
   
33,114
   
36,063
Total expenses                                                     
 
230,199
   
101,896
   
76,937
   
68,666
   
68,286
Operating income
 
29,329
   
27,592
   
19,602
   
20,450
   
14,957
Interest expense
 
(45,513
)
 
(27,994
) 
 
(23,392
) 
 
(21,625
) 
 
(24,831
Income tax (expense) benefit of taxable REIT subsidiary
 
(24
)
 
(262
)
 
106
   
1
   
(266
Gain on sale of unconsolidated property
 
—   
   
—  
   
—  
   
4,320  
   
—  
Remeasurement loss on consolidation of Parkside Town Commons, net
 
—   
   
—  
   
(7,980 )
   
—  
   
—  
Other (expense) income, net
 
(244
)
 
(62)
)))
 
209
   
607
   
884
(Loss) income from continuing operations
 
(16,452
)
 
(726
)
 
(11,455
)
 
3,753
   
(9,256
Discontinued operations:
                           
Income from operations, excluding impairment charge
 
           —  
    
834
   
656
   
1,630
   
70
Impairment charge
 
—  
   
(5,372
)
 
—  
   
—  
   
          —  
Gain on debt extinguishment
 
—  
   
1,242 
   
—  
   
—  
   
—  
Gain (loss) on sale of operating properties
 
3,198
   
487
   
7,094
   
(398
)
 
—  
Income from discontinued operations
 
3,198
   
(2,809
)
 
7,750
   
1,232
   
70
Loss before gain on sale of operating properties
 
(13,254
)
 
(3,535
)
 
(3,705
)
 
4,985
   
(9,186
Gain on sale of operating properties, net
 
8,578
   
—
   
—
   
—
   
—
Consolidated net (loss) income
 
(4,676
)
 
(3,535
)
 
(3,705
)
 
4,985
   
(9,186
Net (income) loss attributable to noncontrolling interests:
 
(1,025
)
 
685
   
(629
)
 
(4
)
 
915
Net (loss) income attributable to Kite Realty Group Trust:
 
(5,701
)
 
(2,850
)
 
(4,334
)
 
4,981
   
(8,271
Dividends on preferred shares:
 
         (8,456
)
 
(8,456
)
 
(7,920
)
 
(5,775
)
 
(377
Net loss attributable to common shareholders
$
(14,157
)
$
(11,306
)
$
(12,254
)
$
(794
)
$
(8,648
Loss per common share – basic and diluted:
                           
Loss from continuing operations attributable to Kite Realty Group Trust common shareholders
$
(0.29
) 
$
(0.37
)
$
(1.04
)
$
(0.12
)
$
(0.56
(Loss) income from discontinued operations attributable to Kite Realty Group Trust common shareholders
 
0.05
   
(0.11
)
 
0.32
   
0.08
   
0.00
Net loss attributable to Kite Realty Group Trust common shareholders
$
(0.24
)
$
(0.48
) 
$
(0.72
)
$
(0.04
)
$
(0.56
                             
Weighted average Common Shares outstanding – basic and diluted
 
58,353,448
   
23,535,434
   
16,721,315
   
15,889,331
   
15,810,119
Distributions declared per Common Share
$
1.02
 
$
0.96
 
$
0.96
 
$
0.96
 
$
0.96
                             
Net loss attributable to Kite Realty Group Trust common shareholders:
                           
Loss from continuing operations 5
$
(17,268
)
$
(8,686
)
$
(17,571
)
$
(1,891
)
$
(8,706
Discontinued operations
 
3,111
   
(2,620
)
 
5,317
   
1,097
   
58
Net loss attributable to Kite Realty Group Trust common shareholders
$
(14,157
)
$
(11,306
)
$
(12,254
)
$
(794
)
$
(8,648
                             
 
 
 
1
In 2014, we disposed of multiple operating properties.  Of our 2014 disposals, the only property’s operations reflected as discontinued operations for each of the years presented is 50 th and 12 th , as the other disposals individually or in the aggregate did not represent a strategic shift that has or will have a major effect on our operations and financial results.  Further, the 50th and 12th operating property is included in discontinued operations, as the property was classified as held for sale as of December 31, 2013.
   
2
In 2013, we disposed of the following properties: Cedar Hill Village and Kedron Village.  The operations of these properties are reflected as discontinued operations for each of the years presented above.
   
3
In 2012, we sold the following operating properties:  Pen Products, Indiana State Motor Pool, Sandifur Plaza, Preston Commons, Zionsville Place, Coral Springs Plaza, 50 South Morton, South Elgin Commons, and Gateway Shopping Center.  The operations of these properties are reflected as discontinued operations for each of the years presented above.
   
4
In December 2011, we sold our Martinsville Shops operating property.  The operations of this property are reflected as discontinued operations for each of the years presented above.
   
5
Includes gain on sale of operating properties and preferred dividends.
   
   

 
46
 

   
As of December 31
   
        2014
 
        2013
   
        2012
   
        2011
   
2010
 
Balance Sheet Data:
                             
Investment properties, net
  $ 3,417,655     $ 1,644,478     $ 1,200,336     $ 1,095,721     $ 1,047,849  
Cash and cash equivalents
    43,826       18,134       12,483       10,042       15,395  
Assets held for sale
    179,642       —       —       —       —  
Total assets
    3,874,216       1,763,927       1,288,657       1,193,266       1,132,783  
Mortgage and other indebtedness
    1,554,263       857,144       699,909       689,123       610,927  
Liabilities held for sale
    81,164       —       —       —       —  
Total liabilities
    1,846,986       962,894       774,365       737,807       658,689  
Redeemable noncontrolling interests in the Operating Partnership and other redeemable noncontrolling interests
    125,082       43,928       37,670       41,836       44,115  
Kite Realty Group Trust shareholders’ equity
    1,898,784       753,557       473,086       409,372       423,065  
Noncontrolling interests
    3,364       3,548       3,536       4,251       6,914  
Total liabilities and equity
    3,874,216       1,763,927       1,288,657       1,193,266       1,132,783  

 
 
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
 
The following discussion should be read in conjunction with the accompanying audited consolidated financial statements and related notes thereto and Item 1A, “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K. In this discussion, unless the context suggests otherwise, references to the “Company,” “we,” “us” and “our” mean Kite Realty Group Trust and its subsidiaries.
 
 
Overview
 
 
In the following overview, we discuss, among other things, the status of our business and properties, the effect that current United States economic conditions is having on our retail tenants and us, and the current state of the financial markets and how it impacts our financing strategy.
 
 
Our Business and Properties
 
 
Kite Realty Group Trust, through its majority-owned subsidiary, Kite Realty Group, L.P., is engaged in the ownership, operation, acquisition, development, and redevelopment of neighborhood and community shopping centers in selected markets in the United States. We derive revenues primarily from rents and reimbursement payments received from tenants under existing leases at each of our properties. Our operating results therefore depend materially on the ability of our tenants to make required rental payments, conditions in the United States retail sector and overall real estate market conditions.
 
 
As of December 31, 2014, we owned interests in 118 retail operating properties totaling approximately 23.9 million square feet of gross leasable area (including approximately 7.7 million square feet of non-owned anchor space) located in 26 states.  We also own interests in one office operating property and an associated parking garage, as well as the office components at Eddy Street Commons and Traditions Village, totaling approximately 0.4 million square feet of net rentable area.
 
 
As of December 31, 2014, we also had an interest in four development projects under construction. Upon completion, these projects are anticipated to have approximately 0.9 million square feet of gross leasable area.
 

 
47
 

 
Additionally, as of December 31, 2014, we owned interests in various land parcels totaling approximately 105 acres.  These parcels are classified as “Land held for development” in investment properties in the accompanying consolidated balance sheets and are expected to be used for future expansion of existing properties, development of new retail or office properties or sold to third parties.
 
 
Portfolio Update
 
 
In evaluating acquisition, development, and redevelopment opportunities, we focus on strong sub-markets where median household income is above the median for the market.  We also focus on locations with population density, high traffic counts, and strong daytime work force populations.  Household incomes in our largest markets are significantly higher than the median for the market.
 
 
2014 was a strong year for the shopping center industry as landlords continued to take advantage of historically low new shopping center supply.  This has provided landlords the opportunity to optimize the tenant mix at properties and upgrade shop space.  Additionally, many existing retailers continue to grow by expanding into new markets and also expanding into new concepts such as Field & Stream by Dick’s Sporting Goods.  In addition, the continued investment by retailers in omni-channel operations to merge their brick and mortar and online operations is an opportunity for retailers with quality assets in strong locations to drive rent and occupancy growth.
 
 
In addition to targeting sub-markets with strong consumer demographics, we focus on having the appropriate tenant mix at each center.  Over 90% of our tenants are service oriented or have a notable online platform that has reduced the impact of the expansion of e-commerce on their operations.  We have aggressively targeted and executed leases with notable grocers including Publix, The Fresh Market, Earth Fare, and Sprout’s Farmers Market along with soft good retailers such as Dick’s Sporting Goods, TJX Companies, and Bed Bath and Beyond.  Additionally, we have identified cost-efficient ways to optimize space for junior anchors such as right-sizing office supply stores and backfilling the existing space with a tenant more suitable to the larger space.
 
 
Capital Activities
 
 
Our ability to obtain capital on satisfactory terms and to refinance borrowings as they mature is affected by the condition of the economy in general and by the financial strength of properties securing borrowings.
 
 
2014 was a transformative year for our capital structure as we significantly improved many key metrics.  The Merger increased the value of our unencumbered property pool and created additional liquidity.  In addition, the incremental cash flows enabled us to lower our debt to EBITDA ratio to 6.5 times as of December 31, 2014.  The lower leverage and higher operating cash flows led to us receiving investment grade ratings in 2014, which we believe will enhance our liquidity.  In addition, we disposed of multiple non-core properties and are under contract to sell seven additional properties in March 2015.  These sales provided us with an additional source of capital to reduce debt and potentially redeploy into core markets including the December 2014 acquisition of Rampart Commons in Las Vegas.
 
 
We also significantly increased our liquidity through amending the terms of our unsecured revolving credit facility (the “amended facility”) upon completion of the Merger and increased the total borrowing capacity from $200 million to $500 million.  The amended terms also include an extension of the maturity date to July 1, 2018, which may be further extended at our option for up to two additional periods of six months, subject to certain conditions.
 
 
On July 1, 2014, we also amended the terms of our $230 million Term Loan (the “amended Term Loan”).   The amended Term Loan has a maturity date of July 1, 2019, which may be extended for an additional six months at the Company’s option subject to certain conditions.
 
 
The amount that we may borrow under our amended facility is based on the value of assets in our unencumbered property pool.  As of December 31, 2014, the full amount of our amended facility, or $500 million, was available for draw based on the unencumbered property pool allocated to the facility.  Taking into account outstanding draws and letters of credit, as of December 31, 2014, we had $333.2 million available for future borrowings under our amended facility.  In addition, our unencumbered assets could provide approximately $120 million of additional borrowing capacity under our amended facility, if the expansion feature was exercised.  Finally, w e had $43.8 million in cash and cash equivalents as of December 31, 2014.
 
 
 
48
 

 
The amendment of our credit facilities and the achievement of investment grade ratings provide us with more flexibility for future capital activity.  Our investment grade credit ratings provide us with access to the unsecured public bond market which we may use in the future to finance acquisition activity, repay debt maturing in the near term and fix interest rates that are currently at historically low levels.
 
 
The ability to obtain new financing is also important to our business due to the capital needs of our existing and future development and redevelopment projects. As of December 31, 2014, the unfunded portion of the total estimated costs of our development and redevelopment projects under construction was approximately $62 million. While we believe we have access to sufficient funding through a combination of existing construction loans and uses of our available liquidity to be able to complete these projects, adverse market conditions may make it more costly and difficult to raise additional capital, if necessary.
 
 
Summary of Critical Accounting Policies and Estimates
 
 
Our significant accounting policies are more fully described in Note 2 to the accompanying consolidated financial statements.  As disclosed in Note 2, the preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.  Actual results could differ from those estimates.  We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the compilation of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments.
 
 
Valuation of Investment Properties
 
 
Management reviews both operational and development projects, land parcels and intangible assets for impairment on at least a quarterly basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  The review for possible impairment requires management to make certain assumptions and estimates and requires significant judgment.  Impairment losses for investment properties and intangible assets are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets.  Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset.  Our impairment review for land and development properties assumes we have the intent and the ability to complete the developments or projected uses for the land parcels.  If we determine those plans will not be completed or our assumptions with respect to operating assets are not realized, an impairment loss may be appropriate. Management does not believe any investment properties, development assets, or land parcels were impaired as of December 31, 2014.
 
 
Depreciation may be accelerated for a redevelopment project including partial demolition of existing structure after the asset is assessed for impairment.
 
 
Operating properties held for sale include only those properties available for immediate sale in their present condition and for which management believes it is probable that a sale of the property will be completed within one year, amongst other factors. Operating properties are carried at the lower of cost or fair value less estimated costs to sell. Depreciation and amortization are suspended during the held-for-sale period.  We have classified seven operating properties as held for sale as of December 31, 2014 (see Note 11).
 
 
Our operating properties have operations and cash flows that can be clearly distinguished from the rest of our activities. Historically, the operations reported in discontinued operations include those operating properties that were sold or were considered held-for-sale and for which operations and cash flows can be clearly distinguished.  The operations from these properties are eliminated from ongoing operations, and we will not have a continuing involvement after disposition.  In the first quarter of 2014, we adopted the provisions of ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity and as a result the operating properties sold during 2014, except for 50 th and 12 th and the seven operating properties that are classified as held for sale as of December 31, 2014 are not included in discontinued operations in the accompanying Statements of Operations as the disposals neither individually nor in the aggregate represent a strategic shift that has or will have a major effect on our operations or financial results.  The 50 th and 12 th operating property is included in discontinued operations for the years ended December 31, 2014, 2013 and 2012, as the property was classified as held for sale as of December 31, 2013 and is reported under the former rules.  In addition, the provisions of ASU 2014-08 were not required to be applied retroactively.
 
 
 
49
 
 
Acquisition of Real Estate Investments
 
 
Upon acquisition of real estate operating properties, we estimate the fair value of acquired identifiable tangible assets and identified intangible assets and liabilities, assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date.  Based on these estimates, we allocate the estimated fair value to the applicable assets and liabilities.  In making estimates of fair values for the purpose of allocating purchase price, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities.  In 2014, we utilized a third party valuation expert to assist in the allocation of the purchase price of the operating properties acquired as part of the Merger.
 
 
A portion of the purchase price is allocated to tangible assets and intangibles, including:
 
 
·  
the fair value of the building on an as-if-vacant basis and to land determined either by comparable market data, real estate tax assessments, independent appraisals or other relevant data;
 
·  
above-market and below-market in-place lease values for acquired properties are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over the remaining non-cancelable term of the leases.  Any below-market renewal options are also considered in the in-place lease values.  The capitalized above-market and below-market lease values are amortized as a reduction of or addition to rental income over the remaining non-cancelable terms of the respective leases.  Should a tenant vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income; and
 
·  
the value of leases acquired.  We utilize independent sources for our estimates to determine the respective in-place lease values.  Our estimates of value are made using methods similar to those used by independent appraisers.  Factors we consider in our analysis include an estimate of costs to execute similar leases including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant.  The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases.
 
·  
the fair value of any assumed financing that is determined to be above or below market terms.  We utilize third party and independent sources for our estimates to determine the respective fair value of each mortgage payable.  The fair market value of each mortgage payable is amortized to interest expense over the remaining initial terms of the respective loan.
 
 
We also consider whether a portion of the purchase price should be allocated to in-place leases that have a related customer relationship intangible value.  Characteristics we consider in allocating these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, among other factors.  To date, a tenant relationship has not been developed that is considered to have a current intangible value.
 
 
Certain properties we acquired from the Merger included earnout components to the purchase price, meaning the previous owner did not pay a portion of the purchase price of the property at closing, although they owned the entire property. We are not obligated to pay the contingent portion of the purchase prices unless space which was vacant at the time of acquisition is later leased by the seller within the time limits and parameters set forth in the acquisition agreements. The earnout payments are based on a predetermined formula applied to rental income received. The earnout agreements have an obligation period remaining of one year or less as of December 31, 2014. If at the end of the time period certain space has not been leased, occupied and rent producing, we will have no further obligation to pay additional purchase price consideration and will retain ownership of that entire property. Based on our best estimate, we have recorded a liability for the potential future earnout payments using estimated fair value measurements at the end of the period which include the lease-up periods, market rents and probability of occupancy. We have recorded this earnout amount as additional purchase price of the related properties and as a liability included in deferred revenue and intangibles, net and other liabilities on the accompanying consolidated balance sheets.
 
 
 
50
 
 
Revenue Recognition
 
 
As lessor, we retain substantially all of the risks and benefits of ownership of the investment properties and account for our leases as operating leases.
 
 
Minimum rent, percentage rent, and expense recoveries from tenants for common area maintenance costs, insurance and real estate taxes are our principal source of revenue.  Base minimum rents are recognized on a straight-line basis over the terms of the respective leases.  Certain lease agreements contain provisions that grant additional rents based on a tenant’s sales volume (contingent percentage rent). Overage rent is recognized when tenants achieve the specified targets as defined in their lease agreements.  Overage rent is included in other property related revenue in the accompanying statements of operations.  As a result of generating this revenue, we will routinely have accounts receivable due from tenants. We are subject to tenant defaults and bankruptcies that may affect the collection of outstanding receivables. To address the collectability of these receivables, we analyze historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts and straight line rent reserve. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.
 
 
Gains from sales of real estate are not recognized unless a sale has been consummated, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property, we have transferred to the buyer the usual risks and rewards of ownership, and we do not have a substantial continuing financial involvement in the property.   As part of our ongoing business strategy, we will, from time to time, sell land parcels and outlots, some of which are ground leased to tenants, on a case by case basis.
 
 
Fair Value Measurements
 
 
Fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.  The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs for identical instruments that are classified within Level 1 and observable inputs for similar instruments that are classified within Level 2) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3).
 
 
Note 3 to the accompanying consolidated financial statements includes a discussion of fair values recorded when we acquired a controlling interest in Parkside Town Commons development project.  Level 3 inputs to this transaction include our estimations of the fair value of the real estate and related assets acquired.
 
 
Note 5 to the accompanying consolidated financial statements includes a discussion of fair values recorded when we recorded an impairment charge on its Kedron Village property.  Level 3 inputs to this transaction include our estimations of market leasing rates, discount rates, holding period, and disposal values.
 
 
Note 10 to the accompanying consolidated financial statements includes a discussion of the fair values recorded in purchase accounting.  Level 3 inputs to these acquisitions include our estimations of market leasing rates, tenant-related costs, discount rates, and disposal values.
 
 
Income Taxes and REIT Compliance
 
 
We are considered a corporation for federal income tax purposes and we have been organized and we intend to continue to operate in a manner that will enable us to maintain our qualification as a REIT for federal income tax purposes. As a result, we generally will not be subject to federal income tax on the earnings that we distribute to the extent we distribute our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) to our shareholders and meet certain other requirements on a recurring basis.  To the extent that we satisfy this distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income.  REITs are subject to a number of organizational and operational requirements.  If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates for a period of four years following the year in which qualification was lost.  We may also be subject to certain federal, state and local taxes on our income and property and to federal income and excise taxes on our undistributed income even if we do qualify as a REIT.
 

 
51
 

 
Inflation
 
 
     Inflation has not had a significant impact on our results of operations because of relatively low inflation rates in recent years.  Additionally, most of our leases contain provisions designed to mitigate the adverse impact of inflation by requiring the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance, thereby reducing our exposure to increases in operating expenses resulting from inflation. Furthermore, many of our leases are for terms of less than ten years, which enables us to seek to increase rents upon re-rental at market rates if current rents are below the then existing market rates.
 
 
Results of Operations
 
 
At December 31, 2014, we owned interests in 123 properties (consisting of 118 retail operating properties, three retail redevelopment properties, and one office operating property and an associated parking garage).  Also, as of December 31, 2014, we had an interest in four retail development projects that were under construction.
 
 
At December 31, 2013, we owned interests in 72 properties (consisting of 66 retail operating properties, 4 retail redevelopment properties, and one office operating property and an associated parking garage).  Also, as of December 31, 2013, we had an interest in two development projects that were under construction and one development project that has not yet commenced construction.
 
 
At December 31, 2012, we owned interests in 60 properties (consisting of 54 retail operating properties, 4 retail redevelopment properties, and one office operating property and an associated parking garage).  Also, as of December 31, 2012, we had an interest in three development projects that were under construction and three development projects that had not yet commenced construction.
 
 
The comparability of results of operations is significantly affected by our merger with Inland Diversified on July 1, 2014 and by our development, redevelopment, and operating property acquisition and disposition activities in 2012 through 2014.  Therefore, we believe it is most useful to review the comparisons of our results of operations for these years (as set forth below under “Comparison of Operating Results for the Years Ended December 31, 2014 and 2013 ” and “Comparison of Operating Results for the Years Ended December 31, 2013 and 2012”) in conjunction with the discussion of these activities during those periods, which is set forth below.
 
 
Property Acquisition Activities
 
 
During 2014, 2013 and 2012, we acquired the properties below.
 
 
Property Name
 
MSA
 
Acquisition Date
 
Acquisition Cost (Millions)
 
Owned GLA
 
                   
Cove Center
 
Stuart, FL
 
June 2012
  $ 22.1     155,063  
12 th Street Plaza
 
Vero Beach, FL
 
July 2012
    15.2     138,268  
Publix at Woodruff
 
Greenville, SC
 
December 2012
    9.1     68,055  
Shoppes at Plaza Green
 
Greenville, SC
 
December 2012
    28.8     194,807  
Shoppes of Eastwood
 
Orlando, FL
 
January 2013
    11.6     69,037  
Cool Springs Market
 
Nashville, TN
 
April 2013
    37.6     223,912  
Castleton Crossing
 
Indianapolis, IN
 
May 2013
    39.0     277,812  
Toringdon Market
 
Charlotte, NC
 
August 2013
    15.9     60,464  
                       
Nine Property Portfolio
 
Various
 
November 2013
    304.0     1,977,711  
                       
Merger with Inland Diversified
 
Various
 
July 2014
    2,128.6     10,719,471  
                       
Rampart Commons
 
Las Vegas, NV
 
December 2014
    32.3     81,292  

 
52
 

Operating Property Disposition Activities
 
 
During 2014, 2013 and 2012, we sold or disposed of the operating properties listed in the table below.
 
 
Property Name
 
MSA
 
Disposition Date
 
Owned GLA
 
               
Gateway Shopping Center
 
Seattle, WA
 
February 2012
    99,444  
South Elgin Commons
 
Chicago, IL
 
June 2012
    128,000  
50 South Morton
 
Indianapolis, IN
 
July 2012
    2,000  
Coral Springs Plaza
 
Ft. Lauderdale, FL
 
September 2012
    46,079  
Pen Products
 
Indianapolis, IN
 
October 2012
    85,875  
Indiana State Motor Pool
 
Indianapolis, IN
 
October 2012
    115,000  
Sandifur Plaza
 
Pasco, WA
 
November 2012
    12,552  
Zionsville Place
 
Indianapolis, IN
 
November 2012
    12,400  
Preston Commons
 
Dallas, TX
 
December 2012
    27,539  
Kedron Village
 
Atlanta, GA
 
July 2013
    157,345  
Cedar Hill Village
 
Dallas, TX
 
September 2013
    44,214  
50 th and 12 th (Walgreens) 1
 
Seattle, WA
 
January 2014
    14,500  
Red Bank Commons
 
Evansville, IN
 
March 2014
    34,258  
Ridge Plaza
 
Oak Ridge, NJ
 
March 2014
    115,088  
Zionsville Walgreens
 
Zionsville, IN
 
September 2014
    14,550  
Tranche I of Portfolio Sale to Inland Real Estate
 
Various
 
November & December 2014
    805,644  
 

____________________
1
Operating property was classified as held for sale as of December 31, 2013.
 
 
Development Activities
 
 
During the years ended December 31, 2014, 2013 and 2012, the following significant development properties became operational or partially operational:
 
 
Property Name
 
MSA
 
Economic Occupancy Date 1
 
Owned GLA
 
               
Delray Marketplace
 
Delray Beach, FL
 
January 2013
    260,153  
Holly Springs Towne Center – Phase I
 
Raleigh, NC
 
March 2013
    207,589  
Parkside Town Commons – Phase I
 
Raleigh, NC
 
March 2014
    104,978  
Parkside Town Commons – Phase II
 
Raleigh, NC
 
September 2014
    275,432  

 
____________________
1
Represents the date on which we started receiving rental payments under tenant leases or ground leases at the property or the tenant took possession of the property, whichever was earlier.
 
 
Redevelopment Activities
 
 
During portions 2014, 2013 and 2012, the following redevelopment properties were under construction:
 
 
Property Name
 
MSA
 
Transition to
Redevelopment 1
 
Transition to Operations
 
Owned GLA
 
                   
Oleander Place
 
Wilmington, North Carolina
 
February 2011
 
December 2012
    45,530  
Rangeline Crossing
 
Carmel, Indiana
 
June 2012
 
June 2013
    97,511  
Four Corner Square
 
Seattle, Washington
 
September 2008
 
December 2013
    107,998  
King’s Lake Square
 
Naples, Florida
 
July 2013
 
April 2014
    88,153  
Bolton Plaza
 
Jacksonville, Florida
 
June 2008
 
September 2014
    155,637  
Gainesville Plaza 2
 
Gainesville, Florida
 
June 2013
 
Pending
    162,693  

 
53
 

____________________
1
Transition date represents the date the property was transferred from our operating portfolio into redevelopment status.
   
2
In March 2014, we signed leases with Ross Dress and Burlington Coat Factory to anchor the project.  Burlington Coat Factory opened in September 2014 and Ross Dress is expected to open in the first half of 2015.  The project is currently 81.6% leased or committed.


Anchor Tenant Openings
 
 
Included below is a list of anchor tenants that opened in 2014.
 
Tenant Name
 
Property Name
 
MSA
 
Owned GLA
 
               
LA Fitness
 
Bolton Plaza
 
Jacksonville, FL
    38,000  
Sprouts Farmers Market
 
Sunland Towne Center
 
El Paso, TX
    31,541  
Fresh Market
 
Lithia Crossing
 
Tampa Bay, FL
    18,091  
Walgreens
 
Rangeline Crossing
 
Indianapolis, IN
    15,300  
Publix
 
King’s Lake Square
 
Naples, FL
    88,153  
Target 1
 
Parkside Town Commons – Phase I
 
Raleigh, NC
 
─
 
Harris Teeter 2
 
Parkside Town Commons – Phase I
 
Raleigh, NC
    53,000  
Total Wine and More
 
International Speedway Square
 
Daytona, FL
    23,942  
Walgreens
 
Four Corner Square
 
Seattle, WA
    14,820  
Petco
 
Parkside Town Commons – Phase I
 
Raleigh, NC
    12,500  
Field and Stream
 
Parkside Town Commons – Phase II
 
Raleigh, NC
    50,000  
Golf Galaxy
 
Parkside Town Commons – Phase II
 
Raleigh, NC
    35,000  
Burlington Coat Factory
 
Gainesville Plaza
 
Gainesville, FL
    65,000  
 
 
____________________
1
Target is an anchor that owns its 135,300 square foot store.
   
2
Ground lease tenant.
 
 
Same Property Net Operating Income
 
 
 We believe that net operating income (“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 asset impairment, if any. We believe that NOI for our “same properties” (“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 periods presented, which eliminates disparities in net income due to the redevelopment, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent metric for the comparison of our properties. 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.
 
 
The following table reflects same property NOI (and reconciliation to net loss attributable to common shareholders) for the years ended December 31, 2014 and 2013:
 

 
54
 
 


   
Years Ended December 31,
       
($ in thousands)
 
2014
   
2013
   
% Change
 
Number of comparable properties at period end 1
    52       52        
                       
Leased percentage at period end
    96.1 %     96.4 %      
Economic Occupancy percentage at period end 2
    94.8 %     93.1 %      
                       
Net operating income – same properties (52 properties) 3
  $ 68,033     $ 65,005       4.7 %
                         
Reconciliation to Most Directly Comparable GAAP Measure: 
                       
                         
Net operating income - same properties
  $ 68,033     $ 65,005          
Net operating income - non-same activity
    122,845       27,491          
Other expense, net
    (268 )     (324 )        
General, administrative and other
    (13,043 )     (8,211 )        
Merger and acquisition costs
    (27,508 )     (2,214 )        
Impairment charge
    -       (5,372 )        
Depreciation expense
    (120,998 )     (54,479 )        
Interest expense
    (45,513 )     (27,994 )        
Discontinued operations
    -       2,563          
Gain on sales of operating properties, net
    11,776       —          
Net (income) loss attributable to noncontrolling interests
    (1,025 )     685          
Dividends on preferred shares
    (8,456 )     (8,456 )        
Net loss attributable to common shareholders
  $ (14,157 )   $ (11,306 )        


____________________
1
Same Property NOI analysis excludes operating properties in redevelopment.
   
2
Excludes leases that are signed but for which tenants have not commenced payment of cash rent.
   
3
Same Property NOI excludes net gains from outlot sales, straight-line rent revenue, bad debt expense and related recoveries, lease termination fees, amortization of lease intangibles and significant prior year expense recoveries and adjustments, if any.
   
 
 
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 in accordance with the best practices described in the April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (NAREIT) and related revisions, which we refer to as the White Paper. The White Paper defines FFO as consolidated net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales and impairments of depreciated property, less preferred dividends, plus depreciation and amortization, and after adjustments for third-party shares of appropriate items.
 
 
Given the nature of our business as a real estate owner and operator, we believe that FFO is helpful to investors as a starting point in measuring our operational performance because it excludes various items included in consolidated net income that do not relate to or are not indicative of our operating performance, such as gains (or losses) from sales and impairment 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 FFO adjusted for merger and acquisition costs, accelerated amortization of deferred financing fees in 2013 and 2012, a non-cash gain on debt extinguishment in 2013, and a litigation charge in 2012.  We believe this supplemental information provides a meaningful measure of our operating performance.  We believe that our presentation of adjusted FFO (“AFFO”) provides investors with another financial measure that may facilitate comparison of operating performance between periods and compared to our peers.  FFO should not be considered as an alternative to consolidated net income (loss) (determined in accordance with GAAP) as an indicator of our financial performance, is not an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and 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.
 

 
55
 


Our calculation of FFO 1 (and reconciliation to consolidated net loss, as applicable) for the years ended December 31, 2014, 2013 and 2012 (unaudited) is as follows:

 
   
Years Ended December 31,
 
(in thousands)
    2014       2013       2012  
Consolidated net loss
  $ (4,676 )   $ (3,535 )   $ (3,705 )
Less dividends on preferred shares
    (8,456 )     (8,456 )     (7,920 )
Less net income attributable to noncontrolling interests in properties
    (1,435 )     (121 )     (138 )
Less gain on sale of operating properties
    (11,776 )     (487 )     (7,094 )
Add remeasurement loss on consolidation of Parkside Town Commons, net
    —       —       7,980  
Add impairment charge
    —       5,372       —  
Add depreciation and amortization of consolidated entities, net of noncontrolling interests
    120,452       54,850       41,358  
Funds From Operations of the Operating Partnership
    94,109       47,623       30,481  
Less Limited Partners' interest in Funds From Operations
    (2,541 )     (3,195 )     (3,021 )
Funds From Operations allocable to the Company
  $ 91,568     $ 44,428     $ 27,460  
                         
Funds From Operations of the Operating Partnership
  $ 94,109     $ 47,623     $ 30,481  
Add write-off of loan fees on early repayment of debt
    —       488       500  
Add Merger and acquisition costs
    27,508       1,648       —  
Add ligitation charge, net
    —       —       1,007  
Less Gain on debt extinguishment
    —       (1,242 )     —  
Funds From Operations of the Kite Portfolio, as adjusted
  $ 121,617     $ 48,517     $ 31,988  
 
 
____________________
1
“Funds From Operations of the Kite Portfolio, as adjusted” measures 100% of the operating performance of the Operating Partnership’s real estate properties and construction and service subsidiaries in which the Company owns an interest. “Funds From Operations allocable to the Company” reflects a reduction for the redeemable noncontrolling weighted average diluted interest in the Operating Partnership.
 
 
Comparison of Operating Results for the Years Ended December 31, 2014 and 2013
 
 
The following table reflects income statement line items from our consolidated statements of operations for the years ended December 31, 2014 and 2013:
 

 
56
 

   
Years Ended December 31,
       
   
2014
   
2013
   
Net change 2013 to 2014
 
Revenue:
                 
  Rental income (including tenant reimbursements)
  $ 252,228     $ 118,059     $ 134,169  
  Other property related revenue
    7,300       11,429       (4,129 )
Total revenue
    259,528       129,488       130,040  
Expenses:
                       
  Property operating
    38,703       21,729       16,974  
  Real estate taxes
    29,947       15,263       14,684  
  General, administrative, and other
    13,043       8,211       4,832  
  Merger and acquisition costs
    27,508       2,214       25,294  
  Depreciation and amortization
    120,998       54,479       66,519  
Total expenses
    230,199       101,896       128,303  
Operating income
    29,329       27,592       1,737  
  Interest expense
    (45,513 )     (27,994 )     (17,519 )
  Income tax expense of taxable REIT subsidiary
    (24 )     (262 )     238  
  Other expense, net
    (244 )     (62 )     (182 )
Loss from continuing operations
    (16,452 )     (726 )     (15,726 )
Discontinued operations:
                       
  Discontinued operations
    -       834       (834 )
  Impairment Charge
    -       (5,372 )     5,372  
  Non-cash gain on debt extinguishment
    -       1,242       (1,242 )
  Gain on sale of operating properties
    3,198       487       2,711  
Gain (loss) from discontinued operations
    3,198       (2,809 )     6,007  
Loss before gain on sale of operating properties
    (13,254 )     (3,535 )     (9,719 )
Gain on sale of operating properties
    8,578       -       8,578  
Consolidated net loss
    (4,676 )     (3,535 )     (1,141 )
Add: Net (income) loss attributable to noncontrolling interests
    (1,025 )     685       (1,710 )
Net loss attributable to Kite Realty Group Trust
    (5,701 )     (2,850 )     (2,851 )
Dividends on preferred shares
    (8,456 )     (8,456 )     -  
Net loss attributable to Kite Realty Group Trust common shareholders
  $ (14,157 )   $ (11,306 )   $ (2,851 )
 
 
     Rental income (including tenant reimbursements) increased $134.2 million, or 113.6%, due to the following:
 

 
57
 


(in thousands)
 
Net change 2013 to 2014
 
Properties acquired through merger with Inland Diversified
  $ 85,310  
Properties acquired during 2013 and 2014
    32,816  
Development properties that became operational or were partially
  operational in 2013 and/or 2014
    4,775  
Properties sold during 2014
    (2,486 )
Properties sold to Inland Real Estate during 2014
    6,662  
Properties under redevelopment during 2013 and/or 2014
    2,025  
Properties fully operational during 2013 and 2014 and other
    5,067  
Total
  $ 134,169  
 
 
     The net increase of $5.1 million in rental income for fully operational properties is primarily attributable to anchor tenant openings at certain operating properties, improvement in small shop occupancy, and an improvement in expense recoveries from tenants.  For the total portfolio, the overall recovery ratio for reimbursable expenses improved to 84.7% for the year ended December 31, 2014 compared to 78.3% for the year ended December 31, 2013.  The improved ratio is mostly due to higher occupancy.
 
 
Other property related revenue primarily consists of parking revenues, overage rent, lease settlement income and gains related to land sales.  This revenue decreased by $4.1 million, primarily as a result of lower gains on land sales of $4.7 million partially offset by increases in overage rent income of $0.5 million.
 
 
Property operating expenses increased $17.0 million, or 78.1%, due to the following:
 

(in thousands)
 
Net change 2013 to 2014
 
Properties acquired through merger with Inland Diversified
  $ 8,022  
Properties acquired during 2013 and 2014
    5,714  
Development properties that became operational or were partially
  operational in 2013 and/or 2014
    1,063  
Properties sold during 2014
    (274 )
Properties sold to Inland Real Estate during 2014
    943  
Properties under redevelopment during 2013 and/or 2014
    497  
Properties fully operational during 2013 and 2014 and other
    1,009  
Total
  $ 16,974  

The net $1.0 million increase in property operating expenses at properties fully operational during 2013 and 2014 was due to higher maintenance, landscaping and insurance costs.
 
 
 
58
 
 
Real estate taxes increased $14.7 million, or 96.2%, due to the following:
 
 
(in thousands)
 
Net change 2013 to 2014
 
Properties acquired through merger with Inland Diversified
  $ 10,317  
Properties acquired during 2013 and 2014
    3,513  
Development properties that became operational or were partially
  operational in 2013 and/or 2014
    701  
Properties sold during 2014
    (258 )
Properties sold to Inland Real Estate during 2014
    682  
Properties under redevelopment during 2013 and/or 2014
    57  
Properties fully operational during 2013 and 2014 and other
    (328 )
Total
  $ 14,684  
 
 
The net $0.3 million decrease in real estate taxes at properties fully operational during 2013 and 2014 was due to successful appeals at certain properties.  The majority of changes in our real estate tax expense is recoverable from tenants and, therefore, reflected in tenant reimbursement revenue.
 
 
General, administrative and other expenses increased $4.8 million, or 58.8%, due primarily to higher public company and personnel costs largely associated with the Merger.  Specifically, our year-end employee base increased 48.4% from 95 employees in 2013 to 141 employees in 2014.
 
 
Merger and acquisition costs for the year ended December 31, 2014 related almost entirely to our merger with Inland Diversified and totaled $27.5 million compared to $2.2 million of costs for property acquisitions for the year ended December 31, 2013.  The majority of the $27.5 million related to investment banking, lender, due diligence, legal, and professional expenses.
 
 
Depreciation and amortization expense increased $66.5 million, or 122.1%, due to the following:
 

(in thousands)
 
Net change 2013 to 2014
 
Properties acquired through merger with Inland Diversified
  $ 41,851  
Properties acquired during 2013 and 2014
    20,794  
Development properties that became operational or were partially
  operational in 2013 and/or 2014
    4,424  
Properties sold during 2014
    (764 )
Properties sold to Inland Real Estate during 2014
    2,357  
Properties under redevelopment during 2013 and/or 2014
    (3,407 )
Properties fully operational during 2013 and 2014 and other
    1,264  
Total
  $ 66,519  

 
The net increase of $1.3 million in depreciation and amortization expense at properties fully operational during 2013 and 2014 was primarily due to an increase in anchor tenants openings.
 
 
Interest expense increased $17.5 million, or 62.6%.  The increase partially resulted from our assumption of $859.6 million of debt from the Merger.  The increase was also due to certain development and redevelopment projects, including Delray Marketplace, Holly Springs Towne Centre – Phase I, Rangeline Crossing, Four Corner Square, and Parkside Town Commons – Phase I becoming operational.  As a portion of the project becomes operational, we expense pro-rata amount of related interest expense.
 
 
We recorded an impairment charge of $5.4 million related to our Kedron Village operating property for the year ended December 31, 2013.   We also recognized a non-cash gain of $1.2 million resulting from the transfer of the Kedron Village assets to the lender in satisfaction of the debt.   See additional discussion in Note 5 to the consolidated financial statements.
 

 
59
 

 
We had a gain from discontinued operations of $3.2 million for the year ended December 31, 2014 compared to a loss of $0.5 million in the same period of 2013.  The current year gain from discontinued operations relates to the sale of the 50 th and 12 th operating property, which was classified as held for sale as of December 31, 2013 and 2012.  In the first quarter of 2014, we adopted the provisions of ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity .  The Red Bank Commons, Ridge Plaza, Zionsville Walgreens and Tranche I operating properties are not included in discontinued operations in the accompanying Statements of Operations for the year ended December 31, 2014 and 2013, as the disposals individually and in the aggregate did not represent a strategic shift that has or will have major effect on our operations and financial results.  
 
 
In addition, we recorded gains on the sales of our Red Bank Commons, Ridge Plaza, Zionsville Walgreens, and Tranche I operating properties we sold to Inland Real Estate totaling $8.6 million for the year ended December 31, 2014.  Disposal gains and losses in prior years were generally classified in discontinued operations prior to our adoption of ASU 2014-08.
 
 
The allocation to net income of noncontrolling interests increased due to allocations to joint venture partners in certain consolidated properties acquired as part of the Merger.  These partners are allocated income generally equal to the distribution received from the operations of the properties in which they hold an interest.
 
 
Comparison of Operating Results for the Years Ended December 31, 2013 and 2012
 
 
The following table reflects income statement line items from our consolidated statements of operations for the years ended December 31, 2013 and 2012:
 

   
Years Ended December 31,
       
   
2013
   
2012
   
Net change 2012 to 2013
 
Revenue:
                 
  Rental income (including tenant reimbursements)
  $ 118,059     $ 92,495     $ 25,564  
  Other property related revenue
    11,429       4,044       7,385  
Total revenue
    129,488       96,539       32,949  
Expenses:
                       
  Property operating
    21,729       16,756       4,973  
  Real estate taxes
    15,263       12,858       2,405  
  General, administrative, and other
    8,211       7,117       1,094  
  Acquisition costs
    2,214       364       1,850  
  Litigation charge, net
    -       1,007       (1,007 )
  Depreciation and amortization
    54,479       38,835       15,644  
Total expenses
    101,896       76,937       24,959  
Operating income
    27,592       19,602       7,990  
  Interest expense
    (27,994 )     (23,392 )     (4,602 )
  Income tax (expense) benefit of taxable REIT subsidiary
    (262 )     106       (368 )
  Remeasurement loss on consolidation of Parkside Town Commons, net
    -       (7,980 )     7,980  
  Other (expense) income, net
    (62 )     209       (271 )
Loss from continuing operations
    (726 )     (11,455 )     10,729  
Discontinued operations:
                       
  Discontinued operations
    834       656       178  
  Impairment Charge
    (5,372 )     -       (5,372 )
  Non-cash gain on debt extinguishment
    1,242       -       1,242  
  Gain on sale of operating properties
    487       7,094       (6,607 )
(Loss) gain from discontinued operations
    (2,809 )     7,750       (10,559 )
Consolidated net loss
    (3,535 )     (3,705 )     170  
Add: Net loss (income) attributable to noncontrolling interests
    685       (629 )     1,314  
Net loss attributable to Kite Realty Group Trust
    (2,850 )     (4,334 )     1,484  
Dividends on preferred shares
    (8,456 )     (7,920 )     (536 )
Net loss attributable to Kite Realty Group Trust common shareholders
  $ (11,306 )   $ (12,254 )   $ 948  

 
60
 

 
Rental income (including tenant reimbursements) increased by $25.6 million, or 27.6%, due to the following:
 

   
Net change 2012 to 2013
 
Development properties that became operational or were partially
  operational in 2012 and/or 2013
  $ 6,760  
Properties acquired during 2012 and 2013
    15,509  
Properties under redevelopment during 2012 and/or 2013
    966  
Properties fully operational during 2012 and 2013 & other
    2,329  
Total
  $ 25,564  
         

 
The net increase of $2.3 million in rental income for fully operational properties is primarily attributable to the improvement in base rental revenue due to improved occupancy levels at operating properties including anchor leases at our Cedar Hill Plaza, Rivers Edge, and Cobblestone Plaza operating properties along with improved rent spreads on new and renewal leases.  In addition, we had increased recovery income due to an increase in recoverable property operating expenses and real estate taxes of $1.5 million along with higher recovery rates due to improved occupancy levels.
 
 
For the total portfolio, the overall recovery ratio for reimbursable expenses improved to 78.3% for the year ended December 31, 2013 compared to 77.1% for the year ended December 31, 2012.
 
 
Other property related revenue primarily consists of gains from land sales, lease settlement income, parking revenues, and percentage rent. This revenue increased $7.4 million, or 183%, primarily as a result of higher gains from land sales of $5.5 million (including a pre-tax increase of $0.9 million related to sales of residential units at Eddy Street Commons) and higher lease termination fees of $1.8 million.  We also recorded a gain on an outlot sale at Cobblestone Plaza of $3.9 million in 2013.  The majority of the termination fee relates to a former anchor tenant at Bayport Commons where a replacement anchor commenced in November 2013.
 
 
Property operating expenses increased by $5.0 million, or 29.7%, due to the following:
 

   
Net change 2012 to 2013
 
Development properties that became operational or were partially
  operational in 2012 and/or 2013
  $ 1,789  
Properties acquired during 2012 and 2013
    1,950  
Properties under redevelopment during 2012 and/or 2013
    31  
Properties fully operational during 2012 and 2013 & other
    1,203  
Total
  $ 4,973  

The net $1.2 million increase in property operating expenses at properties fully operational during 2012 and 2013 was primarily due to the following:
 
 
·  
$0.5 million net increase in repairs and maintenance at a number of our operating properties in 2013;
 
·  
$0.3 million increase in insurance due to higher costs at our Florida properties.  The majority of this increase is recoverable from tenants;
 
·  
$0.2 million increase in snow removal costs.  The majority of this increase is recoverable from tenants; and
 
·  
The changes in other categories of expense were not individually significant.
 
 
 
61
 
 
Real estate taxes increased $2.4 million, or 18.7%, due to the following:

 
   
Net change 2012 to 2013
 
Development properties that became operational or were partially
  operational in 2012 and/or 2013
  $ 244  
Properties acquired during 2012 and 2013
    1,927  
Properties under redevelopment during 2012 and/or 2013
    (84 )
Properties fully operational during 2012 and 2013 & other
    318  
Total
  $ 2,405  

 
The net $0.3 million increase in real estate taxes at properties fully operational during 2012 and 2013 was primarily due to increases in assessments at certain operating properties.  The majority of the increases and decreases in our real estate tax expense from increased assessments and subsequent appeals is recoverable from (or reimbursable to) tenants and, therefore, reflected in tenant reimbursement revenue.
 
 
General, administrative and other expenses increased $1.1 million, or 15.4%, due primarily to an increase in personnel-related expenses related to increase in the size of the portfolio along with an increase in other public company-related costs.
 
 
Acquisition costs increased $1.9 million due to the higher acquisition volume in 2013 compared to 2012.  We acquired thirteen properties in 2013 compared to four properties in 2012.
 
 
In 2012, we recorded a litigation charge, net of $1.0 million.  This relates to the damages and attorney’s fees related to a claim by a former tenant net of certain recoveries.  See additional discussion in Note 5 to the consolidated financial statements.
 
 
Depreciation and amortization expense increased $15.6 million, or 40.3%, due to the following:
 
 
   
Net change 2012 to 2013
 
Development properties that became operational or were partially
  operational in 2012 and/or 2013
  $ 2,720  
Properties acquired during 2012 and 2013
    9,542  
Properties under redevelopment during 2012 and/or 2013
    1,617  
Properties fully operational during 2012 and 2013 & other
    1,765  
Total
  $ 15,644  

 
The net increase of $1.8 million in depreciation and amortization expense at properties fully operational during 2012 and 2013 was due to additional assets placed in-service related to anchor retenanting at certain of our operating properties.
 
 
Interest expense increased $4.6 million, or 19.7%.  This increase was due to the transfer of substantial portions of assets at Delray Marketplace, Holly Springs Towne Center, Rangeline Crossing, and Four Corner Square from construction in progress to depreciable fixed assets based on the proportion of tenants opening for business, which resulted in a reduction in capitalized interest.
 
 
Income tax expense of our taxable REIT subsidiary was $0.3 million in 2013 compared to an income tax benefit of $0.1 million in 2012.  The expense in 2013 was due to higher taxable sales of residential units at Eddy Street Commons.
 
 
The 2012 $8.0 million remeasurement loss on consolidation of Parkside Town Commons, net relates to the acquisition of our partner’s interest in the Parkside Town Commons joint venture.  See additional discussion in Note 4 to the accompanying consolidated financial statements.
 
 
Within discontinued operations, we recorded an impairment charge of $5.4 million and a gain on debt extinguishment of $1.2 million related to the disposal of our Kedron Village property in 2013.  Excluding this activity, we had a loss related to discontinued operations of $0.8 million for the year ended December 31, 2013 compared to income of $0.7 million for the year ended December 31, 2012.  We sold multiple properties in 2012 for a net gain of $7.1 million compared to one property in 2013 for a net gain of $0.5 million.  See additional discussion of the Kedron Village transaction in Note 5 to the consolidated financial statements.
 

 
62
 

 
Liquidity and Capital Resources
 
 
Overview
 
 
Our primary finance and capital strategy is to maintain a strong balance sheet with sufficient flexibility to fund our operating and investment activities in a cost-effective manner. We consider a number of factors when evaluating our level of indebtedness and when making decisions regarding additional borrowings or equity offerings, including the estimated value of properties to be developed or acquired, the estimated market value of our properties and the Company as a whole upon placement of the borrowing or offering, and the ability of particular properties to generate cash flow to cover debt service.  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.
 
 
In 2014, we received investment grade credit ratings, which we believe will further enhance our liquidity.
 
 
Our Principal Capital Resources
 
 
For a discussion of cash generated from operations, see “Cash Flows,” beginning on page 66.  In addition to cash generated from operations, we discuss below our other principal capital resources.
 
 
     The Merger and subsequent activities substantially improved our liquidity position and cash flows from operations along with reducing our borrowing costs and extending our debt maturities.  The additional cash flows from operations allow us to maintain a balanced approach to growth in order to retain our financial flexibility.
 
 
On July 1, 2014, in conjunction with the Merger, we amended the terms of our unsecured revolving credit facility (the “amended facility”) and increased the total borrowing capacity from $200 million to $500 million.  The amended terms also include an extension of the maturity date to July 1, 2018, which may be further extended at our option for up to two additional periods of six months, subject to certain conditions, and a reduction in the interest rate to LIBOR plus 140 to 200 basis points, depending on our leverage, from LIBOR plus 165 to 250 basis points.  The amended facility has a fee of 15 to 25 basis points on unused borrowings.  We may increase our borrowings under the amended facility up to $750 million, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the amended facility, to provide such increased amounts.
 
 
On July 1, 2014, we also amended the terms of the $230 million Term Loan (the “amended Term Loan”).   The amended Term Loan has a maturity date of July 1, 2019, which may be extended for an additional six months at the Company’s option subject to certain conditions.  The interest rate applicable to the amended Term Loan was reduced to LIBOR plus 135 to 190 basis points, depending on the Company’s leverage, a decrease of between 10 and 55 basis points across the leverage grid.  The amended Term Loan also provides for an increase in total borrowing of up to an additional $170 million ($400 million in total), subject to certain conditions, including obtaining commitments from any one or more lenders.

 
As of December 31, 2014, we had approximately $333.2 million available for future borrowings under our unsecured revolving credit facility.  In addition, our unencumbered assets could provide approximately $120 million of additional borrowing capacity under the unsecured revolving credit facility, if the expansion feature was exercised.
 
 
We were in compliance with all applicable financial covenants under the unsecured revolving credit facility and the amended Term Loan as of December 31, 2014.
 
 
Finally, we had $43.8 million in cash and cash equivalents as of December 31, 2014.  This includes approximately $16.1 million of cash proceeds received from 2014 property sales to potentially be utilized for future acquisitions.

 
Among the benefits we expect to realize from the Merger is increased cash flow.  In the future, we may 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 will also continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities.
 
 
Sale of Real Estate Assets
 
 
     We may pursue opportunities to sell non-strategic real estate assets in order to generate additional liquidity.  Our ability to dispose of such properties is dependent on the availability of credit to potential buyers to purchase properties at prices that we consider acceptable.  Sales prices on such transactions may be less than our carrying value.
 

 
63
 


On September 16, 2014, we entered into a Purchase and Sale Agreement with Inland Real Estate, which provides for the sale of 15 of our operating properties (the “Portfolio”) to Inland Real Estate in two separate tranches with the option for the sale of a 16 th property, Village at Bay Park.  On December 14, 2014, we closed on the sale of the first tranche of eight retail operating properties for approximately $151 million or $75 million of net proceeds after the buyer’s assumption of mortgages.  The second tranche of seven properties is expected to close on or before March 16, 2015, subject to the satisfaction of customary closing conditions, for a gross sales price of approximately $167 million, or approximately $103 million of net proceeds after the buyer’s assumption of mortgages.
 
 
Our Principal Liquidity Needs
 
 
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 in uncertain economic times, the recent economic downturn adversely affected the ability of some of our tenants to meet their lease obligations .
 
 
Short-Term Liquidity Needs
 
 
Near-Term Debt Maturities . As of December 31, 2014, we have $113 million of debt scheduled to mature prior to December 31, 2015, excluding scheduled monthly principal payments.  We have sufficient liquidity to repay these obligations from current resources and capacity, but we are also pursuing financing alternatives to enable us to repay these loans.
 
 
Other Short-Term Liquidity Needs.   The nature of our business, coupled with the requirements for qualifying for REIT status and in order to receive 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, which will 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 and preferred shareholders and to persons who hold units in our Operating Partnership, and recurring capital expenditures. In December 2014, our Board declared a quarterly cash distribution of $0.26 per common share and common operating partnership unit (totaling $22.1 million) for the quarter ended December 31, 2014.  This distribution was paid on January 13, 2015 to common shareholders of record as of January 6, 2015.  In February 2015, our Board declared a quarterly preferred share cash distribution of $0.515625 per Series A Preferred Share covering the distribution period from December 2, 2014 to March 1, 2015 payable to shareholders of record as of February 17, 2015.  Also in February 2015, our Board declared a quarterly common share distribution of $0.2725 per common share for the quarter ended March 31, 2015 to shareholders of record as of April 6, 2015, which represents a 4.8% increase.
 
 
When we lease space to new tenants, or renew leases for existing tenants, we also incur expenditures for tenant improvements and leasing commissions. These amounts, as well as the amount of recurring capital expenditures that we incur, will vary from period to period.  During the year ended December 31, 2014, we incurred $2.1 million of costs for recurring capital expenditures on operating properties and also incurred $6.0 million of costs for tenant improvements and external leasing commissions (excluding first generation space and development and redevelopment properties). We currently anticipate incurring approximately $16 million to $20 million of additional major tenant improvements and renovation costs within the next twelve months at several of our operating properties.  As of December 31, 2014, we have not commenced any redevelopment opportunities in the properties acquired through the Merger; however, we believe we currently have sufficient financing in place to fund our investment in any existing or future projects through cash from operations and borrowings on our unsecured revolving credit facility.
 
 
     As of December 31, 2014, we had five development and redevelopment projects under construction.  The total estimated cost of these projects is approximately $214.8 million, of which $153.2 million had been incurred as of December 31, 2014.  We currently anticipate incurring the remaining $61.6 million of costs over the next eighteen months.  We believe we currently have sufficient financing in place to fund the projects and expect to do so primarily through existing or new construction loans or borrowings on our unsecured revolving credit facility.
 
 
As of December 31, 2014, six of our properties, which are properties acquired by Inland Diversified prior to the date of the Merger, have earnout components whereby we are required to pay the seller additional consideration based on subsequent leasing activity of vacant space. The maximum potential earnout payment was $9.7 million at December 31, 2014.  The expiration dates of the remaining earnouts range from January 31, 2015 through December 28, 2015.  We believe we currently have sufficient funds in place to pay these potential earnouts.
 

 
64
 


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

 
Redevelopment Properties Pending Commencement of Construction. As of December 31, 2014 two of our properties (Courthouse Shadows and Hamilton Crossing) were undergoing preparation for redevelopment and leasing activity.  We are currently evaluating our total incremental investment in these redevelopment projects of which $0.7 million had been incurred as of December 31, 2014.  Our anticipated total investment could change based upon negotiations with prospective tenants.  We believe we currently have sufficient financing in place to fund our investment in these projects through borrowings on our unsecured revolving credit facility.  In certain circumstances, we may seek to place specific construction financing on these redevelopment projects.
 
 
Selective Acquisitions, Developments and Joint Ventures . We may selectively pursue the acquisition and development of other properties, which would require additional capital.  We would have to satisfy these needs through additional borrowings, sales of common or preferred shares, cash generated through property dispositions and/or participation in potential 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, 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.
 
 
Capitalized Expenditures on Consolidated Properties
 
 
The following table summarizes cash basis capital expenditures for our development and redevelopment properties and capital expenditures for the year ended December 31, 2014 and on a cumulative basis since the project’s inception:
 
 
   
Year Ended December 31, 2014
(in thousands)
   
Cumulative Through December 31, 2014
(in thousands)
 
Under Construction Developments
  $ 47,969     $ 145,560  
Under Construction – Redevelopments
    7,625       7,677  
Pending Construction - Redevelopments
    370       729  
Total for Development Activity
    55,964       153,966  
Recently Completed Developments, net 1
    12,676       N/A  
Miscellaneous Other Activity, net
    19,061       N/A  
Recurring Operating Capital Expenditures (Primarily Tenant Improvement Payments)
    6,852       N/A  
Total
  $ 94,553     $ 153,966  


____________________
1
This classification includes Delray Marketplace, Holly Springs Towne Center – Phase I, Rangeline Crossing, Four Corner Square, Bolton Plaza, and King’s Lake Square.

 
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 activities, without a corresponding decrease in indirect project costs, we would have recorded additional expense for the year ended December 31, 2014 of $0.5 million.
 

 
65
 

Cash Flows
 
 
Comparison of the Year Ended December 31, 2014 to the Year Ended December 31, 2013
 
 
Cash provided by operating activities was $42.2 million for the year ended December 31, 2014, a decrease of $9.9 million from the same period of 2013.  The decrease was primarily due to outflows for our merger costs and costs incurred by Inland Diversified prior to the Merger that were paid by us subsequent to June 30, 2014.
 
 
Cash provided by investing activities was $186.9 million for the year ended December 31, 2014, as compared to cash used in investing activities of $514.9 million in the same period of 2013.  Highlights of significant cash sources and uses are as follows:
 
 
·  
Net proceeds of $191.1 million related to the sales of the Red Bank Commons, Ridge Plaza, 50 th and 12 th , Zionsville Walgreens and Tranche I operating properties in 2014 compared to net proceeds of $7.3 million in 2013;
 
·  
Net proceeds of $18.6 million related to the sale of marketable securities in 2014.  These securities were acquired as part of the Merger;
 
·  
Net cash acquired of $108.7 million upon completion of the Merger.  A portion of this cash was utilized to retire construction loans and other indebtedness while the remainder was retained for working capital including payment of Merger related costs;
 
·  
Net cash outflow of $407.2 million related to 2013 acquisitions compared to net cash outflows of $19.7 million in 2014;
 
·  
Net cash outflow of $2.8 million on seller earnouts in 2014, while there were no seller earnout payments in the same period of 2013;
 
·  
Decrease in capital expenditures of $18.0 million, offset by an increase in construction payables of $12.6 million as significant construction was ongoing at Gainesville Plaza, Parkside Town Commons – Phase I & II, Holly Springs Towne Center – Phase II and Tamiami Crossing in 2014.
 
 
Cash used in financing activities was $203.4 million for the year ended December 31, 2014, compared to cash provided by financing activities of $468.5 million in the same period of 2013.  Highlights of significant cash sources and uses in 2014 are as follows:
 
 
·  
In 2014, we drew $66.7 million on the unsecured revolving credit facility to fund the acquisition of Rampart Commons, redevelopment and tenant improvement costs;
 
·  
In 2014, we drew $50.8 million on construction loans related to development projects;
 
·  
In 2014, we paid down $51.7 million on the unsecured revolving credit facility utilizing a portion of proceeds from property sales and cash on hand;
 
·  
In July, we retired loans totaling $41.6 million that were secured by land at 951 and 41 in Naples, Florida, Four Corner Square, and Rangeline Crossing utilizing cash on hand obtained as part of the Merger;
 
·  
We retired loans totaling $8.6 million that were secured by the 50th and 12th and Zionsville Walgreens operating properties upon the sale of these properties;
 
·  
In December 2014, we retired the $15.8 million loan secured by our Eastgate Pavilion operating property, the $1.9 million loan secured by our Bridgewater Marketplace operating property, the $34.0 million loan secured by our Holly Springs – Phase I development property and the $15.2 million loan secured by Wheatland Town Crossing utilizing a portion of proceeds from property sales;
 
·  
In December 2014, we paid down $4.0 million on the loan secured by Delray Marketplace operating property;
 
·  
Distributions to common shareholders and operating partnership unit holders of $49.6 million; and
 
·  
Distributions to preferred shareholders of $8.5 million.
 
 
In addition to the cash activity above, in July 2014, as a result of the Merger, we assumed $859.6 million in debt secured by 41 properties.  As part of the purchase price allocation, a debt premium of $33.3 million was recorded.
 
 
In December 2014, in connection with the acquisition of Rampart Commons, we assumed a $12.4 million fixed rate mortgage.  As part of the purchase price allocation, a debt premium of $2.2 million was recorded.
 
 
 
66
 

 
In December 2014, in connection with the sale of Tranche I, Inland Real Estate assumed $75.8 million of our secured loans associated with Shoppes at Prairie Ridge, Fox Point, Harvest Square, Heritage Square, The Shoppes at Branson Hills and Copp’s Grocery.
 
 
Comparison of the Year Ended December 31, 2013 to the Year Ended December 31, 2012
 
 
     Cash provided by operating activities was $52.1 million for the year ended December 31, 2013, an increase of $28.8 million from 2012.  The increase was primarily due to increased gains on land sales of $5.5 million, increased lease termination fee income of $1.8 million, and increased net operating income from recent acquisitions and development properties of $22.7 million.  The increase was partially offset by higher acquisition costs of $1.9 million.
 
 
Cash used in our investing activities totaled $514.9 million in 2013, an increase of $443.3 million from 2012.  Highlights of significant cash sources and uses are as follows:
 
 
·  
2013 acquisitions for net cash outflows of $407.2 million compared to 2012 net cash outflows of $65.9 million.  The significant increase was due to higher acquisition volume in 2013;
 
·  
Net proceeds of $87.4 million related to 2012 sales compared to net proceeds of $7.3 million related to the sale of Cedar Hill Village in September 2013; and
 
·  
Increase in capital expenditures, net plus the decrease in construction payables of $21.7 million as construction was ongoing at Delray Marketplace, Holly Springs Towne Center, Parkside Town Commons, Four Corner Square, and Rangeline Crossing compared to lower expenditures at these properties in 2012.
 
 
 Cash provided by financing activities totaled $468.5 million during 2013, an increase of $417.7 million from 2012. Highlights of significant cash sources and uses in 2013 are as follows:
 
 
·  
In November 2013, 36,800,000 common shares were issued for net proceeds of $217 million.  A portion of these proceeds were used to fund a portion of the purchase price of the portfolio of nine unencumbered retail properties;
 
·  
In April and May of 2013, 15,525,000 common shares were issued for net proceeds of $97 million.  These proceeds were used to fund the purchase price of Cool Springs Market, Castleton Crossing, and Toringdon Market;
 
·  
In August 2013, proceeds of $105 million from the expansion of the amended unsecured term loan were received.  The Company utilized $102 million of the proceeds to pay down the unsecured revolving credit facility;
 
·  
Draws of $77.4 million were made on construction loans related to Delray Marketplace, Holly Springs Towne Center, Parkside Town Commons, Rangeline Crossing, and Four Corner Square;
 
·  
Distributions to common shareholders and operating partnership unitholders of $22.2 million; and
 
·  
Distributions to preferred shareholders of $8.5 million.
 
 
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.
 
 
We have guaranteed a loan in the amount of $26.6 million on behalf of LC White Plains Retail, LLC and LC White Plains Recreation, LLC (collectively, the “LC Partners”), who have minority ownerships in an entity that owns our City Center operating property.  Along with our guarantee of the loan the LC Partners pledged their Class B units in City Center as collateral for the loan.  If payment of the loan is required and the value of the Class B units does not fully service the loan, the Company will be required to retire the remaining amount.  On February 13, 2015, we acquired our partner’s redeemable interests in the City Center operating property for $34.4 million that was paid in a combination of cash and Operating Partnership units and the guarantee was terminated.  We funded the majority of the cash portion with a $30 million draw on our unsecured revolving credit facility.
 
 
 
67
 
 
As of December 31, 2014, we have outstanding letters of credit totaling $6.8 million and no amounts were advanced against these instruments.
 
 
Earnings before Interest, Tax, Depreciation, and Amortization
 
 
We define EBITDA, a non-GAAP financial measure, as net income before depreciation and amortization, interest expense, income tax expense of taxable REIT subsidiary, gains (losses) on sales of operating properties, other expenses. For informational purposes, we have also provided Adjusted EBITDA, which we define as EBITDA less (i) minority interest EBITDA and (ii) Merger costs.  Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four.  EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA, as calculated by us, are not comparable to EBITDA reported by other REITs that do not define EBITDA 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.
 
 
Given the nature of our business as a real estate owner and operator, we believe that EBITDA and Adjusted EBITDA are helpful to investors when measuring operating performance because they exclude various items included in net income or loss that do not relate to or are not indicative of operating performance, such as impairments of operating properties 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 in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.
 
 
A reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to net loss (the most directly comparable GAAP measure) is included in the below table.
 
       
   
Three Months Ended
December 31, 2014
 
       
Consolidated net income
  $ 8,029  
Adjustments to net income
       
  Depreciation and amortization
    39,438  
  Interest expense
    15,222  
  Merger and acquisition costs
    659  
  Income tax benefit of taxable REIT subsidiary
    (13 )
  Gain on sale of operating properties, net
    (2,242 )
  Other expense
    125  
Earnings Before Interest, Taxes, Depreciation and Amortization
    61,218  
—minority interest EBITDA
    (679 )
—EBITDA from properties sold in current quarter
    (2,140 )
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization
    58,399  
         
Annualized Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization (1)
  $ 233,596  
         
Ratio of Company share of net debt:
       
Mortgage and other indebtedness
    1,554,263  
Indebtedness of assets held for sale
    67,452  
Less: Partner share of consolidated joint venture debt
    (24,039 )
Less: Cash
    (43,826 )
Less: Debt Premium
    (31,408 )
         
Company Share of Net Debt
    1,522,442  
         
Ratio of Net Debt to Annualized Adjusted EBITDA
    6.5 x
 
 
____________________
1
Represents Adjusted EBITDA for the three months ended December 31, 2014 (as shown in the table above) multiplied by four.


 
68
 

Contractual Obligations
 
 
The following table summarizes our contractual obligations to third parties based on contracts executed as of December 31, 2014.
 
 
   
Development Activity and Tenant
Allowances 1
   
Operating
Leases
   
Consolidated
Long-term
Debt and Interest 2
   
Employment
Contracts 3
     
Total
 
2015
  $ 7,849     $ 543     $ 236,216     $ 1,870     $ 246,478
2016
    —       511       300,925       1,870       303,306
2017
    —       511       92,922       935       94,368
2018
    —       149       267,856       —       268,005
2019
    —       121       263,446       —       263,567
Thereafter
    —       7,893       697,382       —       705,275
Total
  $ 7,849     $ 9,728     $ 1,858,747     $ 4,675     $ 1,880,999


____________________
1
Tenant allowances include commitments made to tenants at our operating and under construction development and redevelopment properties.
   
2
Our long-term debt consists of both variable and fixed-rate debt and includes both principal and interest.  Interest expense for variable-rate debt was calculated using the interest rates as of December 31, 2014.
   
3
We have entered into employment agreements with certain members of senior management. The term of each employment agreement is three years from July 1, 2014, with automatic one-year renewals each July 1 st thereafter unless we or the individual elects not to renew the agreement.
 
 
In connection with our formation at the time of our IPO, we entered into an agreement that restricts our ability, prior to December 31, 2016, to dispose of six of our properties in taxable transactions and limits the amount of gain we can trigger with respect to certain other properties without incurring reimbursement obligations owed to certain limited partners. We have agreed that if we dispose of any interest in six specified properties in a taxable transaction before December 31, 2016, then we will indemnify the contributors of those properties for their tax liabilities attributable to their built-in gain that exists with respect to such property interest as of the time of our IPO (and tax liabilities incurred as a result of the reimbursement payment).  We do not intend to dispose of these properties prior to December 31, 2016 in a manner that would result in a taxable transaction.
 
 
The six properties to which our tax indemnity obligations relate represented 6.8% of our annualized base rent in the aggregate as of December 31, 2014. These six properties are International Speedway Square, Shops at Eagle Creek, Whitehall Pike, Portofino Shopping Center, Thirty South, and Market Street Village.
 
 
Obligations in Connection with Development and Redevelopment Projects Under Construction
 
 
We are obligated under various completion guarantees with lenders and lease agreements with tenants to complete all or portions of our in-process development and redevelopment projects. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through existing construction loans or draws on our unsecured facility.
 
 
Our share of estimated future costs for our in-process and future developments and redevelopments is further discussed on page 64 in the "Short and Long-Term Liquidity Needs" section.
 
 
 
69
 

Outstanding Indebtedness
 
 
The following table presents details of outstanding consolidated indebtedness as of December 31, 2014 and 2013 adjusted for hedges:
 
 
   
Balance at
   
December 31,
2014
   
December 31,
2013
Unsecured revolving credit facility
  $ 160,000     $ 145,000
Unsecured term loan
    230,000       230,000
Notes payable secured by properties under construction -
  variable rate
    119,347       144,389
Mortgage notes payable - fixed rate
    810,959       276,504
Mortgage notes payable - variable rate
    205,798       61,185
Net premiums on acquired debt
    28,159       66
Total mortgage and other indebtedness
    1,554,263       857,144
Mortgage notes - properties held for sale 1
    67,452       —
Total
  $ 1,621,715     $ 857,144
 
 
____________________
1
Includes net premiums on acquired debt of $3.2 million.
 
 
Consolidated indebtedness (excluding properties held for sale), including weighted average maturities and weighted average interest rates at December 31, 2014, is summarized below:
 
 
   
Amount
   
Weighted Average Maturity (Years)
   
Weighted Average Interest Rate
   
Percentage of Total
 
Fixed rate debt
  $ 810,959       5.5       5.07 %     53 %
Floating rate debt (hedged to fixed)
    373,275       3.9       3.39 %     24 %
  Total fixed rate debt, considering hedges
    1,184,234       5.0       4.54 %     77 %
Notes payable secured by properties under construction -  variable rate
    119,347       1.9       2.11 %     8 %
Other variable rate debt
    205,798       4.8       2.44 %     13 %
Corporate unsecured variable rate debt
    390,000       4.8       1.54 %     26 %
Floating rate debt (hedged to fixed)
    (373,275 )     -3.9       -1.89 %     -24 %
  Total variable rate debt, considering hedges
    341,870       4.8       1.89 %     23 %
Net premiums on acquired debt
    28,159       N/A       N/A       N/A  
  Total debt
  $ 1,554,263       5.0       3.95 %     100 %
 
 
M ortgage and construction loans are collateralized by certain real estate properties and leases.  Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2030.

 
Variable interest rates on mortgage and construction loans are based on LIBOR plus spreads ranging from 175 to 275 basis points.  At December 31, 2014, the one-month LIBOR interest rate was 0.17%.  Fixed interest rates on mortgage loans range from 3.81% to 6.78%.

 
70
 


 
 
Our future income, cash flows and fair values relevant to financial instruments depend upon prevailing interest rates. We are exposed to interest rate changes primarily through (1) our variable-rate unsecured credit facility and unsecured Term Loan, (2) property-specific variable-rate construction loans, and (3) other property-specific variable-rate mortgages. Our objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower its overall borrowing costs. To achieve these objectives, we may borrow at fixed rates and may enter into derivative financial instruments such as interest rate swaps, hedges, etc., in order to mitigate its interest rate risk on a related variable-rate financial instrument.  As a matter of policy, we do not utilize financial instruments for trading or speculative transactions.
 
 
We had $1.6 billion of outstanding consolidated indebtedness as of December 31, 2014 (inclusive of net premiums on acquired debt of $28.2 million and indebtedness of held for sale properties of $67.5 million). As of December 31, 2014, we were party to various consolidated interest rate hedge agreements for a total of $373.3 million, with maturities over various terms ranging from 2017 through 2020. Including the effects of these hedge agreements, our fixed and variable rate debt would have been $1.2 billion (77%) and $341.9 million (23%), respectively, of our total consolidated indebtedness at December 31, 2014.
 
 
We have $62.5 million of fixed rate debt maturing within the next twelve months.  A 100 basis point increase in market interest rates would not materially impact the annual cash flows associated with these loans.  A 100 basis point change in interest rates on our unhedged variable rate debt as of December 31, 2014 would change our annual cash flow by $3.4 million.  Based upon the terms of our variable rate debt, we are most vulnerable to change in short-term LIBOR interest rates.  The sensitivity analysis was estimated using cash flows discounted at current borrowing rates adjusted by 100 basis points.


 
 
The consolidated financial statements of the Company included in this Report are listed in Part IV, Item 15(a) of this report.
 
 
 
 
None.
 
 
 
 
Evaluation of Disclosure Controls and Procedures
 
 
An evaluation was performed under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report.  Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, our disclosure controls and procedures are effective in recording, processing, summarizing and reporting, on a timely basis, information required to be disclosed by us in the reports that it files or submits under the Exchange Act.
 
 
Changes in Internal Control Over Financial Reporting
 
 
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) identified in connection with the evaluation required by Rule 13a-15(b) under the Exchange Act of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of December 31, 2014 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 

 
71
 

Management Report on Internal Control Over Financial Reporting
 
 
Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company, as that term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision of and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.  Based on our evaluation under the framework in Internal Control – Integrated Framework, our management has concluded that our internal control over financial reporting was effective as of December 31, 2014.
 
 
Our independent auditors, Ernst & Young LLP, an independent registered public accounting firm, have issued a report on our internal control over financial reporting as stated in their report which is included herein.
 
 
Our internal control system was designed to provide reasonable assurance to our management and Board of Trustees regarding the preparation and fair presentation of published financial statements.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation.  

 
72
 


Report of Independent Registered Public Accounting Firm


The Board of Trustees and Shareholders of Kite Realty Group Trust:
 
 
We have audited Kite Realty Group Trust and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Kite Realty Group Trust and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.
 
 
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
 
 
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.
 
 
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
 
 
In our opinion, Kite Realty Group Trust and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2014, based on the COSO criteria.
 
 
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Kite Realty Group Trust and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2014 and the related financial statement schedule listed in the index at Item 15(a) as of December 31, 2014 of Kite Realty Group Trust and subsidiaries and our report dated February 27, 2015 expressed an unqualified opinion thereon.
 

 
/s/ Ernst & Yount LLP
 
Indianapolis, Indiana

February 27, 2015

 
 
 
73
 
 
 
 
None
 
 
PART III
 
 
 
 
The information required by this Item is hereby incorporated by reference to the material appearing in our 2015 Annual Meeting Proxy Statement (the “Proxy Statement”), which we intend to file within 120 days after our fiscal year-end in accordance with Regulation 14A.
 
 
 
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement.
 
 
 
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement.
 
 
 
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement.
 
 
 
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement.
 

 
74
 

 
PART IV
 
 
 
(a)
Documents filed as part of this report:
 
(1)
Financial Statements:
   
Consolidated financial statements for the Company listed on the index immediately preceding the financial statements at the end of this report.
 
(2)
Financial Statement Schedule:
   
Financial statement schedule for the Company listed on the index immediately preceding the financial statements at the end of this report.
 
(3)
Exhibits:
   
The Company files as part of this report the exhibits listed on the Exhibit Index.
     
(b)
Exhibits:
 
The Company files as part of this report the exhibits listed on the Exhibit Index.
     
(c)
Financial Statement Schedule:
 
The Company files as part of this report the financial statement schedule listed on the index immediately preceding the financial statements at the end of this report.


 
75
 

 
 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
 
KITE REALTY GROUP TRUST
   
(Registrant)
     
   
/s/ John A. Kite
   
John A. Kite
February 27, 2015
 
Chairman and Chief Executive Officer
       (Date)
 
(Principal Executive Officer)
     
     
   
/s/ Daniel R. Sink
   
Daniel R. Sink
February 27, 2015
 
Executive Vice President, Chief Financial Officer
       (Date)
 
(Principal Financial Officer)
 
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
Signature
 
Title
 
Date
         
/s/ John A. Kite
 
Chairman, Chief Executive Officer, and Trustee
(Principal Executive Officer)
 
February 27, 2015
(John A. Kite)
   
         
/s/ William E. Bindley
 
Trustee
 
February 27, 2015
(William E. Bindley)
       
         
/s/ Victor J. Coleman
 
Trustee
 
February 27, 2015
(Victor J. Coleman)
       
         
/s/ Christie B. Kelly
 
Trustee
 
February 27, 2015
(Christie B. Kelly)
       
         
/s/ David R. O’Reilly
 
Trustee
 
February 27, 2015
(David R. O’Reilly)
       
         
/s/ Barton R. Peterson
 
Trustee
 
February 27, 2015
(Barton R. Peterson)
       
         
/s/ Lee A. Daniels
 
Trustee
 
February 27, 2015
(Lee A. Daniels)
       
         
/s/ Gerald W. Grupe
 
Trustee
 
February 27, 2015
(Gerald W. Grupe)
       
         
/s/ Charles H. Wurtzebach
 
Trustee
 
February 27, 2015
(Charles H. Wurtzebach)
       
         
/s/ Daniel R. Sink
 
Executive Vice President, Chief Financial Officer (Principal Financial Officer)
 
February 27, 2015
(Daniel R. Sink)
   
         
/s/ Thomas R. Olinger
 
Senior Vice President, Chief Accounting Officer
 
 
February 27, 2015
(Thomas R. Olinger)
   

 
76
 


 
Kite Realty Group Trust
Index to Financial Statements
 
   
Page
Consolidated Financial Statements:
 
 
F-1
     
 
F-2
     
 
F-3
     
 
F-4
     
 
F-5
     
 
F-6
   
Financial Statement Schedule:
 
 
F-37
     
 
F-42
     
 
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
 


 
 
 


 
 
The Board of Trustees and Shareholders of Kite Realty Group Trust:
 
 
We have audited the accompanying consolidated balance sheets of Kite Realty Group Trust and subsidiaries as of December 31, 2014 and 2013, and the related consolidated statements of operations and comprehensive (loss) income, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2014.  Our audit also included the financial statement schedule listed in the index at item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
 
 
     We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.
 
 
     In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Kite Realty Group Trust and subsidiaries at December 31, 2014 and 2013, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2014, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.
 
 
As discussed in Note 2 to the consolidated financial statements, the Company changed its method for reporting discontinued operations as a result of the adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity , effective January 1, 2014.
 
 
     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Kite Realty Group Trust and subsidiaries’ internal control over financial reporting as of December 31, 2014, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 27, 2015 expressed an unqualified opinion thereon.
 
 
 
/s/ Ernst & Young LLP


Indianapolis, Indiana

February 27, 2015

 
F-1
 


Kite Realty Group Trust
(in thousands, except share data)
 
 
   
December 31,
2014
   
December 31,
2013
 
Assets:
           
             
 Investment properties, at cost
  $ 3,732,748     $ 1,877,058  
Less: accumulated depreciation
    (315,093 )      (232,580 ) 
      3,417,655       1,644,478  
                 
Cash and cash equivalents
    43,826       18,134  
Tenant and other receivables, including accrued straight-line rent of $18,630 and $14,490, respectively, net of allowance for uncollectible accounts
    48,097       29,334  
Restricted cash and escrow deposits
    16,171       11,046  
Deferred costs and intangibles, net
    159,978       56,388  
Prepaid and other assets
    8,847       4,547  
Assets held for sale (see Note 11)
    179,642       —  
Total Assets
  $ 3,874,216     $ 1,763,927  
                 
Liabilities and Equity:
               
Mortgage and other indebtedness
  $ 1,554,263     $ 857,144  
Accounts payable and accrued expenses
    75,150       61,437  
Deferred revenue and intangibles, net, and other liabilities
    136,409       44,313  
Liabilities held for sale (see Note 11)
    81,164       —  
Total Liabilities
    1,846,986       962,894  
Commitments and contingencies
               
Limited Partners’ interests in the Operating Partnership and other redeemable noncontrolling interests
    125,082       43,928  
Equity:
               
  Kite Realty Group Trust Shareholders’ Equity
               
    Preferred Shares, $.01 par value, 40,000,000 shares authorized, 4,100,000 shares issued and outstanding at December 31, 2014 and 2013, with a liquidation value of $102,500
    102,500       102,500  
    Common Shares, $.01 par value, 450,000,000 shares authorized, 83,490,663 shares and 32,706,554 shares issued and outstanding at December 31, 2014 and 2013, respectively
    835       327  
    Additional paid in capital and other
    2,044,425       822,507  
    Accumulated other comprehensive (loss) income
    (1,175 )     1,353  
    Accumulated deficit
    (247,801 )     (173,130 )
  Total Kite Realty Group Trust Shareholders’ Equity
    1,898,784       753,557  
  Noncontrolling Interests
    3,364       3,548  
Total Equity                                                                                                    
    1,902,148       757,105  
Total Liabilities and Equity
  $ 3,874,216     $ 1,763,927  
 
The accompanying notes are an integral part of these consolidated financial statements.
 


 
F-2
 

Kite Realty Group Trust
(in thousands, except share and per share data)
 

   
Year Ended December 31,
 
   
2014
   
2013
   
2012
 
Revenue:
                 
Minimum rent
  $ 199,455     $ 93,637     $ 73,000  
Tenant reimbursements
    52,773       24,422       19,495  
Other property related revenue
    7,300       11,429       4,044  
Total revenue
    259,528       129,488       96,539  
Expenses:
                       
Property operating
    38,703       21,729       16,756  
Real estate taxes
    29,947       15,263       12,858  
General, administrative, and other
    13,043       8,211       7,117  
Merger and acquisition costs
    27,508       2,214       364  
Litigation charge, net
    —       —       1,007  
Depreciation and amortization
    120,998       54,479       38,835  
Total expenses
    230,199       101,896       76,937  
Operating income
    29,329       27,592       19,602  
Interest expense
    (45,513 )     (27,994 )     (23,392 ) 
Income tax (expense) benefit of taxable REIT subsidiary
    (24 )     (262 )     106  
Remeasurement loss on consolidation of Parkside Town Commons, net
    —       —       (7,980 )
Other (expense) income, net
    (244 )     (62 )     209  
Loss from continuing operations
    (16,452 )     (726 )     (11,455 )
Discontinued operations:
                       
Operating income from discontinued operations
    —       834       656  
Impairment charge
    —       (5,372 )     —  
Non-cash gain on debt extinguishment
    —       1,242       —  
Gain on sales of operating properties, net
    3,198       487       7,094  
Income (loss) from discontinued operations
    3,198       (2,809 )     7,750  
(Loss) income before gain on sale of operating properties
    (13,254 )     (3,535 )     (3,705 )
Gain on sale of operating properties, net
    8,578       —       —  
Consolidated net loss
    (4,676 )     (3,535 )     (3,705 )
Net (income) loss attributable to noncontrolling interests
    (1,025 )     685       (629 )
Net loss attributable to Kite Realty Group Trust
    (5,701 )     (2,850 )     (4,334 )
Dividends on preferred shares
    (8,456 )     (8,456 )     (7,920 )
Net loss attributable to common shareholders
  $ (14,157 )   $ (11,306 )   $ (12,254 )
Net loss per common share – basic & diluted:
                       
Loss from continuing operations attributable to Kite Realty Group Trust common shareholders
  $ (0.29 )   $ (0.37 )   $ (1.04 )
(Loss) income from discontinued operations attributable to Kite Realty Group Trust common shareholders
    0.05       (0.11 )     0.32  
Net loss attributable to Kite Realty Group Trust common shareholders
  $ (0.24 )   $ (0.48 )   $ (0.72 )
                         
Weighted average common shares outstanding – basic and diluted
    58,353,448       23,535,434       16,721,315  
                         
Dividends declared per common share
  $ 1.02     $ 0.96     $ 0.96  
                         
Net loss attributable to Kite Realty Group Trust common shareholders:
                       
Loss from continuing operations
  $ (17,268 )   $ (8,686 )   $ (17,571 )
Income (loss) from discontinued operations
    3,111       (2,620 )     5,317  
Net loss attributable to Kite Realty Group Trust common shareholders
  $ (14,157 )   $ (11,306 )   $ (12,254 )
                         
Consolidated net (loss) income
  $ (4,676 )   $ (3,535 )   $ (3,705 )
Change in fair value of derivatives
    (2,621 )     7,136       (4,002 )
Total comprehensive (loss) income
    (7,297 )     3,601       (7,707 )
Comprehensive loss (income) attributable to noncontrolling interests
    (932 )     161       (361 )
Comprehensive (loss) income attributable to Kite Realty Group Trust
  $ (8,229 )   $ 3,762     $ (8,068 )
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
F-3
 
 
Kite Realty Group Trust
(in thousands, except share data)

 
Preferred Shares
 
Common Shares
Additional
Paid-in Capital
 
Accumulated Other
Comprehensive
Income (Loss)
 
Accumulated
Deficit
 
 
Total
     
        Shares
        Amount
 
Shares
Amount
           
                                         
Balances, December 31, 2011
2,800,000
$
70,000
 
15,904,255
$
159
$
450,745
 
$
(1,525
)
$
(109,504
)
$
409,875
   
Stock compensation activity
—
—
 
66,647
 
—  
 
982
   
—  
   
—  
   
982
     
Proceeds of preferred share offering, net
1,300,000
32,500
 
—  
 
—  
 
(1,180
)
 
—  
   
—  
   
31,320
     
Issuance of common shares, net
—
—
 
3,018,750
 
30
 
59,549
   
—  
   
—  
   
59,579
     
Issuance of common shares under at-the-market plan, net
—
—
 
165,397
 
2
 
3,182
   
—  
   
—  
   
3,184
     
Proceeds from employee share purchase plan
—
—
 
1,196
 
—  
 
23
   
—  
   
—  
   
23
     
Other comprehensive loss attributable to Kite Realty Group Trust
—
—
 
—  
 
—  
 
—  
   
(3,734
)
 
—  
   
(3,734
)
   
Distributions declared to common shareholders
—
—
 
—  
 
—  
 
—  
   
—  
   
(16,286
)
 
(16,286
)
   
Distributions to preferred shareholders
—
—
 
—  
 
—  
 
—  
   
—  
   
(7,920
)
 
(7,920
)
   
Net loss attributable to Kite Realty Group Trust
—
—
 
—  
 
—  
 
—  
   
—  
   
(4,334
)
 
(4,334
)
   
Exchange of redeemable noncontrolling interest for common stock
—
—
 
275,929
 
3
 
5,823
   
—  
   
—  
   
5,826
     
Adjustment to redeemable noncontrolling interests - Operating Partnership
—
 
—
 
—  
  —    
(5,031
 )   —       —      
(5,031
)   
Balances, December 31, 2012
4,100,000
$
102,500
 
19,432,174
$
194
$
514,093
 
$
(5,259
)
$
(138,044
)
$
473,484
   
Stock compensation activity
—
—
 
169,696
 
2
 
2,508
   
—  
   
—  
   
2,510
     
Issuance of common shares, net
—
—
 
13,081,250
 
131
 
313,767
   
—  
   
—  
   
313,898
     
Proceeds from employee share purchase plan
—
—
 
934
 
—  
 
22
   
—  
   
—  
   
22
     
Other comprehensive income attributable to Kite Realty Group Trust
—
—
 
—  
 
—  
 
—  
   
6,612
   
—  
   
6,612
     
Distributions declared to common shareholders
—
—
 
—  
 
—  
 
—  
   
—  
   
(23,780
)
 
(23,780
)
   
Distributions to preferred shareholders
—
—
 
—  
 
—  
 
—  
   
—  
   
(8,456
)
 
(8,456
)
   
Net loss attributable to Kite Realty Group Trust
—
—
 
—  
 
—  
 
—  
   
—  
   
(2,850
)
 
(2,850
)
   
Exchange of redeemable noncontrolling interest for common stock
—
—
 
22,500
 
—  
 
582
   
—  
   
—  
   
582
     
Adjustments to redeemable noncontrolling interests – Operating Partnership
—
 
—
 
—  
 
—  
 
(8,465
 )   —       —      
(8,465
)  
Balances, December 31, 2013
4,100,000
$
102,500
 
32,706,554
$
327
$
822,507
 
$
1,353
 
$
(173,130
)
$
753,557
   
Common shares issued under employee share purchase plan
—
 
—
 
1,812
 
—
 
46
   
—
   
—
   
46
   
Common shares issued as part of Merger, net of offering costs
—
 
—
 
50,272,308
 
503
 
1,232,684
   
—
   
—
   
1,233,187
   
Common shares retired in connection with reverse share split
—
 
—
 
(2,436)
 
—
 
(60
)
 
—
   
—
   
(60)
   
Stock compensation activity
—
 
—
 
490,425
 
5
 
3,294
   
—
   
—
   
3,299
   
Other comprehensive loss attributable to Kite Realty Group Trust
—
 
—
 
—
 
—
 
—
   
(2,528
)
 
—
   
(2,528)
   
Distributions declared to common shareholders
—
 
—
 
—
 
—
 
—
   
—
   
(60,514)
   
(60,514)
   
Distributions to preferred shareholders
—
 
—
 
—
 
—
 
—
   
—
   
(8,456)
   
(8,456)
   
Net loss attributable to Kite Realty Group Trust
—
 
—
 
—
 
—
 
—
   
—
   
(5,701)
   
(5,701)
   
Exchange of redeemable noncontrolling interests for common shares
—
 
—
 
22,000
 
—
 
567
   
—
   
—
   
567
   
Adjustment to redeemable noncontrolling interests
—
 
—
 
—
 
—
 
(14,613
)
 
—
   
—
   
(14,613)
   
Balances, December 31, 2014
4,100,000
$
102,500
 
83,490,663
$
835
$
2,044,425
 
$
(1,175
)
$
(247,801
)
$
1,898,784
   
 
The accompanying notes are an integral part of these consolidated financial statements.
 


 
F-4
 

 
Kite Realty Group Trust
(in thousands)

   
Year Ended December 31,
 
   
2014
   
2013
   
2012
 
Cash flow from operating activities:
                 
Consolidated net loss
  $ (4,676 )   $ (3,535 )   $ (3,705 )
Adjustments to reconcile consolidated net loss to net cash provided by operating activities:
                       
Remeasurement loss on consolidation of Parkside Town Commons, net
    —       —       7,980  
Gain on sale of operating properties, net of tax
    (11,776 )     (487 )     (7,094 )
Impairment charge
    —       5,372       —  
Gain on debt extinguishment
    —       (1,242 )     —  
Straight-line rent
    (4,744 )     (3,496 )     (2,362 )
Depreciation and amortization
    123,862       57,757       43,769  
Provision for credit losses, net of recoveries
    1,740       922       859  
Compensation expense for equity awards
    2,536       1,671       602  
Amortization of debt fair value adjustment
    (3,468 )     (127 )     (118 )
Amortization of in-place lease liabilities
    (4,521 )     (2,674 )     (1,986 )
Distributions of income from unconsolidated entities
    —       —       91  
Changes in assets and liabilities:
                       
        Tenant receivables
    (10,044 )     (1,690 )     (508 )
Deferred costs and other assets
    (5,355 )     (9,062 )     (7,066 )
Accounts payable, accrued expenses, deferred revenue, and other liabilities
    (41,375 )     8,688       (7,190 )
Net cash provided by operating activities
    42,179       52,097       23,272  
Cash flow from investing activities:
                       
        Acquisitions of interests in properties
    (19,744 )     (407,215 )     (65,909 )
Capital expenditures, net
    (94,553 )     (112,581 )     (114,153 )
Net proceeds from sales of operating properties
    191,126       7,293       87,385  
Net proceeds from sales of marketable securities acquired from Merger
    18,601       —       —  
Net cash received from Merger
    108,666       —       —  
Change in construction payables
    (14,950 )     (2,396 )     20,830  
Payment on seller earnouts
    (2,762 )     —       —  
Collection of note receivable
    542       —       —  
Contributions to unconsolidated entities
    —       —       (150 )
        Distributions of capital from unconsolidated entities
    —       —       372  
Net cash provided by (used in) investing activities
    186,926       (514,899 )     (71,625 )
Cash flow from financing activities:
                       
Common share issuance proceeds, net of costs
    (14 )     314,771       63,038  
Offering costs
    (1,966 )     —       —  
Preferred share issuance proceeds, net of costs
    —       —       31,320  
Loan proceeds
    146,495       528,590       308,955  
Loan transaction costs
    (4,256 )     (2,138 )     (2,234 )
Loan payments and related financing escrow
    (285,244 )     (342,033 )     (322,647 )
Distributions paid – common shareholders
    (46,656 )     (20,594 )     (15,440 )
Distributions paid – preferred shareholders
    (8,456 )     (8,456 )     (7,696 )
Distributions paid – redeemable noncontrolling interests
    (2,992 )     (1,579 )     (1,811 )
        Distributions to noncontrolling interests
    (324 )     (108 )     (2,692 )
Net cash (used in) provided by financing activities
    (203,413 )     468,453       50,793  
Increase in cash and cash equivalents
    25,692       5,651       2,440  
Cash and cash equivalents, beginning of year
    18,134       12,483       10,043  
Cash and cash equivalents, end of year
  $ 43,826     $ 18,134     $ 12,483  
                         
Supplemental disclosures
                       
Cash paid for interest, net of capitalized interest
  $ 48,526     $ 31,577     $ 24,789  
        Cash paid for taxes
  $ 87     $ 45     $ 150  
 
The accompanying notes are an integral part of these consolidated financial statements.
 

 
F-5
 


 
 
Kite Realty Group Trust
December 31, 2014
(in thousands, except share and per share data)
 
Note 1. Organization
 
 
Kite Realty Group Trust (the “Company” or “REIT”) was organized in Maryland in 2004 to succeed the development, acquisition, construction and real estate businesses of our predecessor.  The Company began operations in 2004 when it completed its initial public offering of common shares and concurrently consummated certain other formation transactions.
 
 
The Company, through Kite Realty Group, L.P. (“the Operating Partnership”), is engaged in the ownership, operation, acquisition, development and redevelopment of neighborhood and community shopping centers in select markets in the United States.
 
 
On July 1, 2014, we completed a merger with Inland Diversified Real Estate Trust, Inc. (“Inland Diversified”), in which Inland Diversified merged with and into a wholly-owned subsidiary of ours in a stock-for-stock exchange with a transaction value of approximately $2.1 billion, including the assumption of approximately $0.9 billion of debt.   See Note 10 for additional details.
 
 
The retail portfolio we acquired through the merger with Inland Diversified was comprised of 60 properties in 23 states.  The properties are located in a number of our existing markets and in various new markets including Westchester, New York; Bayonne, New Jersey; Las Vegas, Nevada; Virginia Beach, Virginia; and Salt Lake City, Utah.
 
 
Under the terms of the merger agreement, Inland Diversified shareholders received 1.707 newly issued common shares of the Company for each outstanding common share of Inland Diversified, resulting in a total issuance of approximately 201.1 million of our common shares.  The shares issued had a value of approximately $1.2 billion based on the closing price of our common shares on the day preceding the merger of $6.14.  The terms are prior to the one for four reverse share split completed in August 2014.  The terms were prior to the one for four reverse share split completed in August 2014.
 
 
At December 31, 2014, the Company owned interests in 120 operating properties, which seven were classified as held for sale, three redevelopment properties and four under-construction development projects.  In addition, as of December 31, 2014, we owned interests in other land parcels comprising 105 acres that are expected to be used for future expansion of existing properties or development of new retail or office properties.  We may also elect to sell such land to third parties under certain circumstances. These land parcels are classified as “Land held for development” in investment properties in the accompanying consolidated balance sheets.
 
 
At December 31, 2013, we owned interests in 72 operating and redevelopment properties, two under-construction development projects, and 131 acres of land held for development.
 
 
Note 2. Basis of Presentation and Summary of Significant Accounting Policies
 
 
The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).  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.
 
 
Components of Investment Properties
 
 
The Company’s investment properties, excluding properties held for sale, as of December 31, 2014 and December 31, 2013 were as follows:
 

 
F-6
 

   
Balance at
   
December 31,
2014
   
December 31,
2013
Investment properties, at cost:
         
Land
  $ 778,780     $ 333,458
Buildings and improvements
    2,785,780       1,351,642
Furniture, equipment and other
    6,398       4,970
Land held for development
    35,907       56,079
Construction in progress
    125,883       130,909
    $ 3,732,748     $ 1,877,058

 
Consolidation and Investments in Joint Ventures
 
 
The accompanying financial statements of the Company are presented on a consolidated basis and include all accounts of the Company, the Operating Partnership, the taxable REIT subsidiary of the Operating Partnership, subsidiaries of the Company or the Operating Partnership that are controlled and any variable interest entities (“VIEs”) in which the Company 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 Company consolidates properties that are wholly owned as well as properties it controls but in which it owns less than a 100% interest.  Control of a property is demonstrated by, among other factors:
 
 
 
·
our ability to refinance debt and sell the property without the consent of any other partner or owner;
 
 
·
the inability of any other partner or owner to replace the Company as manager of the property; or
 
 
·
being the primary beneficiary of a VIE. The primary beneficiary is defined as the entity that 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.
 
 
As of December 31, 2014, we had investments in two joint ventures that are VIEs in which we are the primary beneficiary.  As of this date, these VIEs had total debt of $62.0 million which is secured by assets of the VIEs totaling $115.3 million.  The Operating Partnership guarantees the debt of these VIEs.
 
 
We consider all relationships between the Company and the 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.  We also continuously reassess primary beneficiary status.  During the twelve months ended December 31, 2014, 2013 and 2012 there were no changes to our conclusions regarding whether an entity qualifies as a VIE or whether we are the primary beneficiary of any previously identified VIE.
 
 
Acquisition of Real Estate Properties
 
 
Upon acquisition of real estate operating properties, we estimate the fair value of acquired identifiable tangible assets and identified intangible assets and liabilities, assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date.  Based on these estimates, we allocate the estimated fair value to the applicable assets and liabilities.  In making estimates of fair values for the purpose of allocating purchase price, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities. The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs.
 
 
A portion of the purchase price is allocated to tangible assets and intangibles, including:
 
 
·  
the fair value of the building on an as-if-vacant basis and to land determined either by comparable market data, real estate tax assessments, independent appraisals or other relevant data;
 

 
F-7
 

·  
above-market and below-market in-place lease values for acquired properties are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over the remaining non-cancelable term of the leases.  Any below-market renewal options are also considered in the in-place lease values.  The capitalized above-market and below-market lease values are amortized as a reduction of or addition to rental income.  Should a tenant vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income; and
 
·  
the value of leases acquired.  We utilize independent and internal sources for our estimates to determine the respective in-place lease values.  Our estimates of value are made using methods similar to those used by independent appraisers.  Factors we consider in our analysis include an estimate of costs to execute similar leases including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant.  The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases.
 
·  
the fair value of any assumed financing that is determined to be above or below market terms.  We utilize third party and independent sources for our estimates to determine the respective fair value of each mortgage payable.  The fair market value of each mortgage payable is amortized to interest expense over the remaining initial terms of the respective loan.
 
 
We also consider whether a portion of the purchase price should be allocated to in-place leases that have a related customer relationship intangible value.  Characteristics the Company considers in allocating these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, among other factors.  To date, a tenant relationship has not been developed that is considered to have a current intangible value.
 
 
Certain properties we acquired from the Merger included earnout components to the purchase price, meaning the previous owner did not pay a portion of the purchase price of the property at closing, although they owned the entire property. We are not obligated to pay the contingent portion of the purchase prices unless space which was vacant at the time of acquisition is later leased by the seller within the time limits and parameters set forth in the acquisition agreements. The earnout payments are based on a predetermined formula applied to rental income received. The earnout agreements have an obligation period remaining of one year or less as of December 31, 2014. If at the end of the time period certain space has not been leased, occupied and rent producing, we will have no further obligation to pay additional purchase price consideration and will retain ownership of that entire property. Based on our best estimate, we have recorded a liability for the potential future earnout payments using estimated fair value measurements at the end of the period which include the lease-up periods, market rents and probability of occupancy. We have recorded this earnout amount as additional purchase price of the related properties and as a liability included in deferred revenue and intangibles, net and other liabilities on the accompanying consolidated balance sheets.
 
 
The Company determined that it was the acquirer for accounting purposes in the merger with Inland Diversified.  We considered the continuation of the Company’s existing management and a majority of the existing board members as the most significant considerations in our analysis.  Additionally, Inland Diversified had previously announced the transaction as a liquidation event and we believe this transaction was an acquisition of Inland Diversified by the Company.  See Note 10 for additional discussion.
 
 
Investment Properties
 
 
Capitalization and Depreciation
 
 
Investment properties are recorded at cost and include costs of land acquisition, development, pre-development, construction, certain allocated overhead, tenant allowances and improvements, and interest and real estate taxes incurred during construction.  Significant renovations and improvements are capitalized when they extend the useful life, increase capacity, or improve the efficiency of the asset.  If a tenant vacates a space prior to the lease expiration, terminates its lease, or otherwise notifies the Company of its intent to do so, any related unamortized tenant allowances are expensed over the shortened lease period.  Maintenance and repairs that do not extend the useful lives of the respective assets are reflected in property operating expense.
 
 
 
F-8
 
 
Pre-development costs are incurred prior to vertical construction and for certain land held for development acquisitions during the due diligence phase and include contract deposits, legal, engineering, cost of internal resources and other professional fees related to evaluating the feasibility of developing or redeveloping a shopping center or other project.  These pre-development costs are capitalized and included in construction in progress in the accompanying consolidated balance sheets.  If we determine that the completion of a development project is no longer probable, all previously incurred pre-development costs are immediately expensed.  Once construction commences on the land, it is transferred to construction in progress.
 
 
We also capitalize costs such as acquisition of land, construction of buildings, interest, real estate taxes, and the costs of personnel directly involved with the development of our properties.  As a portion of a development property becomes operational, we expense a pro rata amount of related costs.
 
 
Depreciation on buildings and improvements is provided utilizing the straight-line method over estimated original useful lives ranging from 10 to 35 years.  Depreciation on tenant allowances, tenant inducements, and tenant improvements are provided utilizing the straight-line method over the term of the related lease.  Depreciation on equipment and fixtures is provided utilizing the straight-line method over 5 to 10 years. Depreciation may be accelerated for a redevelopment project including partial demolition of existing structure after the asset is assessed for impairment.
 
 
Impairment
 
 
Management reviews operational properties, development properties, land parcels and intangible assets for impairment on at least a quarterly basis or whenever events or changes in circumstances indicate that the carrying value may not be recoverable.  The review for possible impairment requires management to make certain assumptions and estimates and requires significant judgment.  Impairment losses for investment properties and intangible assets are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets.  Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset.  If the Company decides to sell or otherwise dispose of an asset, its carrying value may differ from its sales price.
 
Held for Sale and Discontinued Operations
 
 
Operating properties held for sale include only those properties available for immediate sale in their present condition and for which management believes it is probable that a sale of the property will be completed within one year among other factors.  Operating properties held for sale are carried at the lower of cost or fair value less costs to sell.  Depreciation and amortization are suspended during the period during which the asset is held-for-sale.  We classified seven operating properties as held for sale and one operating property as held for sale as of December 31, 2014, and 2013, respectively.  Upon meeting the held-for-sale criteria, depreciation and amortization ceased for these operating properties.  The assets and liabilities associated with these properties are separately classified as held for sale in the consolidated balance sheets as of December 31, 2014.
 
 
Our operating properties have operations and cash flows that can be clearly distinguished from the rest of our activities. The operations reported in discontinued operations include those operating properties that were sold or were considered held-for-sale and for which operations and cash flows can be clearly distinguished.  The operations from these properties are eliminated from ongoing operations, and we will not have a continuing involvement after disposition.  In the first quarter of 2014, we adopted the provisions of ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity and as a result the seven operating properties that are classified as held for sale as of December 31, 2014 are not included in discontinued operations in the accompanying Statements of Operations as the disposals neither individually nor in the aggregate represent a strategic shift that has or will have a major effect on our operations or financial results.  However, the 50 th and 12 th operating property is included in discontinued operations for the year ended December 31, 2014 and 2013, as the property was classified as held for sale as of December 31, 2013 and is reported under the former rules.
 
 
Escrow Deposits
 
 
Escrow deposits consist of cash held for real estate taxes, property maintenance, insurance and other requirements at specific properties as required by lending institutions.
 
 
 
F-9
 
 
Cash and Cash Equivalents
 
 
We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents.  From time to time, such investments may temporarily be held in accounts that are in excess of FDIC and SIPC insurance limits; however the Company attempts to limit its exposure at any one time.  As of December 31, 2014, cash and cash equivalents included $16.1 million of funds set aside by the Company to affect a tax deferred purchase of real estate.  Such funds are not currently considered available for general corporate purposes.
 
 
Fair Value Measurements
 
 
Cash and cash equivalents, accounts receivable, escrows and deposits, and other working capital balances approximate fair value.
 
 
Fair value is a market-based measurement, not an entity-specific measurement.  Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability.  The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs for identical instruments that are classified within Level 1 and observable inputs for similar instruments that are classified within Level 2) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3).  As further discussed in Note 13, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy.
 
 
Note 3 includes a discussion of fair values recorded when we acquired a controlling interest in Parkside Town Commons development project.  Note 5 includes a discussion of fair values recorded when we transferred the Kedron Village property to the loan servicer. Note 10 includes a discussion of the fair values recorded in purchase accounting.  Level 3 inputs to these transactions include our estimations of market leasing rates, tenant-related costs, discount rates, and disposal values.
 
 
Derivative Financial Instruments
 
 
The Company accounts for its derivative financial instruments at fair value calculated in accordance with Topic 820—“Fair Value Measurements and Disclosures” in the ASC.  Gains or losses resulting from changes in the fair values of those derivatives are accounted for depending on the use of the derivative and whether it qualifies for hedge accounting.  We use derivative instruments such as interest rate swaps or rate locks to mitigate interest rate risk on related financial instruments.
 
 
Changes in the fair values of derivatives that qualify as cash flow hedges are recognized in other comprehensive income (“OCI”) while any ineffective portion of a derivative’s change in fair value is recognized immediately in earnings.  Upon settlement of the hedge, gains and losses associated with the transaction are recorded in OCI and amortized over the underlying term of the hedged transaction.  As of December 31, 2014 and 2013, all of our derivative instruments qualify for hedge accounting.
 
 
Revenue Recognition
 
 
As lessor, the Company retains substantially all of the risks and benefits of ownership of the investment properties and accounts for its leases as operating leases.
 
 
Minimum rent, percentage rent, and expense recoveries from tenants for common area maintenance costs, insurance and real estate taxes are our principal source of revenue.  Base minimum rents are recognized on a straight-line basis over the terms of the respective leases.  Certain lease agreements contain provisions that grant additional rents based on a tenant’s sales volume (contingent overage rent). Overage rent is recognized when tenants achieve the specified targets as defined in their lease agreements.  Overage rent is included in other property related revenue in the accompanying statements of operations.  As a result of generating this revenue, we will routinely have accounts receivable due from tenants. We are subject to tenant defaults and bankruptcies that may affect the collection of outstanding receivables. To address the collectability of these receivables, we analyze historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts and straight line rent reserve. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.
 
 
 
F-10
 
 
Gains from sales of real estate are recognized when a sale has been consummated, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the property, the Company has transferred to the buyer the usual risks and rewards of ownership, and the Company does not have a substantial continuing financial involvement in the property.  As part of the Company’s ongoing business strategy, it will, from time to time, sell land parcels and outlots, some of which are ground leased to tenants.  Net gains realized on such sales were $1.5 million, $6.2 million, and $0.8 million for the years ended December 31, 2014, 2013, and 2012, respectively, and are classified as other property related revenue in the accompanying consolidated statements of operations.
 
 
Tenant Receivables and Allowance for Doubtful Accounts
 
 
Tenant receivables consist primarily of billed minimum rent, accrued and billed tenant reimbursements, and accrued straight-line rent.  The Company generally does not require specific collateral other than corporate or personal guarantees from its tenants.
 
 
An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of certain tenants or others to meet contractual obligations under their lease or other agreements.  Accounts are written off when, in the opinion of management, the balance is uncollectible.
 
   
2014
   
2013
   
2012
 
Balance, beginning of year
  $ 1,328     $ 755     $ 1,335  
Provision for credit losses, net of recoveries
    1,740       922       858  
Accounts written off
    (635 )     (349 )     (1,438 )
Balance, end of year
  $ 2,433     $ 1,328     $ 755  
 
 
For the years ended December 31, 2014, 2013 and 2012, allowance for doubtful accounts represented 0.9%, 1.0% and 0.8% of total revenues, respectively.
 
 
Other Receivables
 
 
Other receivables consist primarily of receivables due from municipalities and from tenants for non-rental revenue related activities.
 
 
Concentration of Credit Risk
 
 
We may be subject to concentrations of credit risk with regards to our cash and cash equivalents.  We place cash and temporary cash investments with high-credit-quality financial institutions.  From time to time, such cash and investments may temporarily be in excess of insurance limits.  In addition, our accounts receivable from and leases with tenants potentially subjects us to a concentration of credit risk related to our accounts receivable and revenue.  At December 31, 2014, 28%, 23% and 12% of total billed receivables were due from tenants leasing space in the states of Florida, Indiana, and Texas, respectively, compared to 40%, 25%, and 13% in 2013.  For the year ended December 31, 2014, 19%, 25% and 13% of the Company’s revenue recognized was from tenants leasing space in the states of Florida, Indiana, and Texas, respectively, compared to 30%, 36%, and 14% in 2013.  There were no significant changes in the concentration percentages for the year ended December 31, 2012 compared to 2013.
 
 
Earnings Per Share
 
 
Basic earnings per share is calculated based on the weighted average number of shares outstanding during the period.  Diluted earnings per share is determined based on the weighted average number of shares outstanding combined with the incremental average shares that would have been outstanding assuming the conversion of all potentially dilutive shares into common shares as of the earliest date possible.
 
 
Potentially dilutive securities include outstanding options to acquire common shares, units in the Operating Partnership, which may be exchanged for either cash or common shares, at the Company’s option, under certain circumstances, units under our outperformance plan (see Note 6), potential settlement of redeemable noncontrolling interests in certain joint ventures, and deferred common share units, which may be credited to personal accounts of non-employee trustees in lieu of the payment of cash compensation or the issuance of common shares to such trustees.  Due in part to our net loss attributable to common shareholders for the years ended December 31, 2014, 2013 and 2012, the potentially dilutive securities were not dilutive for these periods.


 
F-11
 


Approximately 1.0 million, 1.5 million and 1.7 million outstanding options to acquire common shares were excluded from the computation of diluted earnings per share because their impact was not dilutive for the twelve months ended December 31, 2014, 2013 and 2012, respectively.
 
 
On August 11, 2014, we completed a one-for-four reverse share split of our common shares. As a result of the reverse share split, the number of outstanding common shares of the Company was reduced from approximately 332.7 million to approximately 83.2 million.  Unless otherwise noted, all common share and per share information contained herein has been restated to reflect the reverse share split as if it had occurred as of the beginning of the first period presented.
 
 
Income Taxes and REIT Compliance
 
 
The Company, which is considered a corporation for federal income tax purposes, has been organized and intends to continue to operate in a manner that will enable us to maintain our qualification as a REIT for federal income tax purposes.  As a result, we generally will not be subject to federal income tax on the earnings that we distribute to the extent we distribute our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) to shareholders and meet certain other requirements on a recurring basis.  To the extent that we satisfy this distribution requirement, but distribute less than 100% of our taxable income, we will be subject to federal corporate income tax on our undistributed REIT taxable income.  REITs are subject to a number of organizational and operational requirements.  If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates for a period of four years following the year in which qualification is lost.  We may also be subject to certain federal, state and local taxes on our income and property and to federal income and excise taxes on our undistributed taxable income even if we do qualify as a REIT.
 
 
We have elected to treat Kite Realty Holdings, LLC as a taxable REIT subsidiary, and we may elect to treat other  subsidiaries as taxable REIT subsidiaries in the future.  This enables us to receive income and provide services that would otherwise be impermissible for REITs.  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 enacted 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.
 
 
Income tax benefit for the year ended December 31, 2014 was $0.2 million.  For the year ended December 31, 2013 the income tax provision was $0.3 million and for the year ended December 31, 2012, there was an insignificant amount of income tax benefit recorded.
 
 
Other state and local income taxes were not significant in any of the periods presented.
 
 
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 noncontrolling interests in consolidated properties for the years ended December 31, 2014, 2013, and 2012 were as follows:


   
2014
   
2013
   
2012
 
Noncontrolling interests balance January 1
  $ 3,548     $ 3,535     $ 4,250  
Net income allocable to noncontrolling interests,
  excluding redeemable noncontrolling interests
    140       121       1,977  
Distributions to noncontrolling interests
    (324 )     (108 )     (2,692 )
Noncontrolling interests balance at December 31
  $ 3,364     $ 3,548     $ 3,535  

 
F-12
 

Redeemable Noncontrolling Interests – 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 unitholders upon redemption of their interests in the Operating Partnership under certain circumstances, such as the delivery of registered shares upon conversion.  The carrying amount of the redeemable noncontrolling interests in the Operating Partnership is required to be reflected at the greater of historical book value or redemption value with a corresponding adjustment to additional paid-in capital.  As of December 31, 2014 and 2013, the redemption value of the redeemable noncontrolling interests exceeded the historical book value, and the balance was accordingly adjusted to redemption value through additional paid in capital.
 
 
We allocate net operating results of the Operating Partnership after preferred dividends and noncontrolling interest 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 period to reflect their interests in the Operating Partnership.  This adjustment is reflected in our shareholders’ equity.  The Company’s and the redeemable noncontrolling weighted average interests in the Operating Partnership for the years ended December 31, 2014, 2013, and 2012 were as follows:
 
 
   
Year Ended December 31,
 
   
2014
   
2013
   
2012
 
Company’s weighted average basic interest in Operating Partnership
    97.2 %     93.3 %     90.1 %
Limited partner’s redeemable noncontrolling weighted average basic interests in Operating Partnership
    2.8 %     6.7 %     9.9 %
 
 
The Company’s and the redeemable noncontrolling ownership interests in the Operating Partnership at December 31, 2014 and 2013 were as follows:
 
 
 
December 31,
 
 
2014
   
2013
 
Company’s interest in Operating Partnership
    98.1 %     95.2 %
Redeemable noncontrolling interests in Operating Partnership
    1.9 %     4.8 %
 
 
Concurrent with the Company’s IPO and related formation transactions, certain individuals received units of the Operating Partnership in exchange for their interests in certain properties.  These limited partners were granted the right to redeem Operating Partnership units on or after August 16, 2005 for cash or, at our election, common shares in an amount equal to the market value of an equivalent number of common shares at the time of redemption.  Such common shares must be registered, which is not fully in the Company’s control.  Therefore, the redeemable noncontrolling interest is not reflected in permanent equity.  The Company also has the right to redeem the Operating Partnership units directly from the limited partner in exchange for either cash in the amount specified above or a number of common shares equal to the number of units being redeemed.  For the years ended December 31, 2014, 2013 and 2012, respectively, 22,000, 22,500, and 275,928 Operating Partnership units were exchanged for the same number of common shares.
 
 
Redeemable Noncontrolling Interests - Subsidiaries
 
 
Prior to the Merger, 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 remain outstanding subsequent to the Merger and are accounted for as noncontrolling interests in these properties.    The Class B units will become redeemable at our applicable partner’s election at future dates generally beginning in September 2015, March 2017 or October 2022 based on the applicable joint venture and the fulfillment of certain redemption criteria.  Beginning in June 2018, October 2022 and November 2022, with respect to our Territory, City Center and Crossing at Killingly joint ventures, respectively, the applicable Class B units can be redeemed at either our applicable partner’s or our election for cash or units in the Operating Partnership.  None of the issued units have a maturity date and none are mandatorily redeemable.
 
 
On February 13, 2015, we acquired our partner’s redeemable interests in the City Center operating property for $34.4 million that was paid in a combination of cash and Operating Partnership units.  We funded the majority of the cash portion with a $30 million draw on our unsecured revolving credit facility.
 
 
 
F-13
 
 
We consolidate each of these joint ventures because we control the decision making of each of the joint ventures and our joint venture partners have limited protective rights.
 
 
We classify redeemable noncontrolling interests in certain subsidiaries in the accompanying consolidated balance sheets outside of permanent equity because, under certain circumstances, we may be required to pay cash to Class B unitholders in specific subsidiaries upon redemption of their interests.  The carrying amount of these redeemable noncontrolling interests is required to be reflected at the greater of initial book value or redemption value with a corresponding adjustment to additional paid-in capital, because the fair value of the interests approximates the redemption value at December 31, 2014.  As of December 31, 2014, the redemption value of the redeemable noncontrolling interests exceeded the initial book value recorded upon our acquisition of Inland Diversified and as a result we have adjusted additional paid-in capital for the increase in redemption value.  As of December 31, 2014, the redemption amounts of these interests did not exceed the fair values of each interest.
 
 
The redeemable noncontrolling interests in the Operating Partnership and subsidiaries for the years ended December 31, 2014, 2013, and 2012 were as follows:
 
 
   
2014
   
2013
   
2012
 
Redeemable noncontrolling interests balance January 1
  $ 43,928     $ 37,670     $ 41,837  
Acquired redeemable noncontrolling interests from merger
    69,356       —       —  
Net income (loss) allocable to redeemable noncontrolling
  interests
    891       (806 )     (1,348 )
Distributions declared to redeemable noncontrolling interests
    (3,021 )     (1,587 )     (1,748 )
Other comprehensive (loss) income allocable to redeemable
  noncontrolling interests 1
    (93 )     525       (268 )
Exchange of redeemable noncontrolling interest for
  common stock
    (567 )     (584 )     (5,834 )
Adjustment to redeemable noncontrolling interests
    14,588       8,710       5,031  
Total Limited partners' interests in Operating Partnership
 and other redeemable noncontrolling interests balance at
 December 31
  $ 125,082     $ 43,928     $ 37,670  
                         
                         
Limited partners' interests in Operating Partnership
  $ 47,320     $ 43,928     $ 37,670  
Other redeemable noncontrolling interests in certain
 subsidiaries
    77,762       —       —  
Total limited partners' interests in Operating Partnership
 and other redeemable noncontrolling interests balance at
 December 31
  $ 125,082     $ 43,928     $ 37,670  
 

____________________
1
Represents the noncontrolling interests’ share of the changes in the fair value of derivative instruments accounted for as cash flow hedges (see Note 13).
   


The following sets forth accumulated other comprehensive income (loss) allocable to noncontrolling interests for the years ended December 31, 2014, 2013, and 2012:
 

   
2014
   
2013
   
2012
 
Accumulated comprehensive income (loss) balance at
  January 1
  $ 69     $ (456 )   $ (188 )
Other comprehensive (loss) income allocable to noncontrolling interests 1
    (93 )     525       (268 )
Accumulated comprehensive (loss) income balance at
  December 31
  $ (24 )   $ 69     $ (456 )

____________________
1
Represents the noncontrolling interests’ share of the changes in the fair value of derivative instruments accounted for as cash flow hedges (see Note 13).
 

 
F-14
 
 
Reclassifications
 
 
Certain amounts in the accompanying consolidated financial statements for 2013 and 2012 have been reclassified to conform to the 2014 consolidated financial statement presentation.  The reclassifications had no impact on net (loss) income previously reported.
 
 
Recently Issued Accounting Pronouncements
 
 
In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-08 , Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (the “Update”).  The Update changes the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity or assets that meet the criteria to be classified as held for sale and that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results.  The Update also requires expanded disclosures for discontinued operations and requires an entity to disclose the pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting in the period in which it is disposed of or is classified as held for sale and for all prior periods that are presented in the statement where net income is reported .  The Update is effective for annual periods beginning on or after December 15, 2014, with early adoption permitted for disposals of assets that were not held for sale as of December 31, 2013.  We adopted the Update in the first quarter of 2014.  In March 2014, the Company disposed of its 50 th and 12 th operating property which had been classified as held for sale at December 31, 2013.  Accordingly, the revenues and expenses of this property and the associated gain on sale have been classified in discontinued operations in the 2014 consolidated statements of operations.
 
 
In May 2014, the FASB issued ASU 2014-09,  Revenue from Contracts with Customers  (“ASU 2014-09”). ASU 2014-09 is a comprehensive revenue recognition standard that will supersede nearly all existing GAAP revenue recognition guidance as well as impact the existing GAAP guidance governing the sale of nonfinancial assets. The standard’s core principle is that a company will recognize revenue when it satisfies performance obligations, by transferring promised goods or services to customers, in an amount that reflects the consideration to which the company expects to be entitled in exchange for fulfilling those performance obligations. In doing so, companies will need to exercise more judgment and make more estimates than under existing GAAP guidance.
 
 
ASU 2014-09 will be effective for public entities for annual and interim reporting periods beginning after December 15, 2016 and early adoption is not permitted. ASU 2014-09 allows for either recognizing the cumulative effect of application (i) at the start of the earliest comparative period presented (with the option to use any or all of three practical expedients) or (ii) at the date of initial application, with no restatement of comparative periods presented.
 
 
We have not yet selected a transition method nor have we determined the effect of ASU 2014-09 on our ongoing financial reporting.
 
 
Note 3. Parkside Town Commons
 
 
     On December 31, 2012, we acquired a controlling interest in a development project called Parkside Town Commons (“Parkside”), which was historically accounted for under the equity method.  Parkside was owned in a joint venture with Prudential Real Estate Investors (“PREI”).
 
 
     We acquired PREI’s 60% interest in the project for $13.3 million, including assumption of PREI’s $8.7 million share of indebtedness on the project.  We recorded a non-cash remeasurement loss upon consolidation of Parkside of $8.0 million, net, consisting of a $14.9 million loss on remeasurement of our equity investment and a $6.9 million gain on the acquisition of PREI’s interest at a discount.
 

 
F-15
 

Upon consolidation, we measured the acquired assets and assumed liabilities at fair value.  The fair value of the real estate and related assets acquired were estimated primarily using the market approach with the assistance of a third party appraisal.  The most significant assumption in the fair value estimated was the comparable sales value.  The estimate of fair value was determined to have primarily relied upon Level 3 inputs, as previously defined.
 
 
In November 2013, we sold 12.8 acres of adjacent land for a sales price of approximately $5.3 million for no gain or loss.
 
 
Note 4. Litigation Charge
 
 
In 2012, we paid $1.3 million to settle a claim by a former tenant.  In the fourth quarter of 2012, we partially recovered costs associated with the claim.  The net amount is reflected in the consolidated statement of operations for the year ended December 31, 2012 and has been paid, releasing us from the claim.
 
 
Note 5. Kedron Village
 
 
     In July 2013, foreclosure proceedings were completed by the mortgage lender on the indebtedness secured by the Company’s Kedron Village operating property and the mortgage lender took title to the property in satisfaction of principal and interest due on the loan.
 
 
We reevaluated the Kedron Village property for impairment as of June 30, 2013 and determined that, based on the developments, the carrying value of the property was no longer fully recoverable considering the reduced holding period that considered the foreclosure proceedings.  Accordingly, we recorded a non-cash impairment charge of $5.4 million for the three months ended June 30, 2013 based upon the estimated fair value of the asset of $25.5 million using level 3 inputs.
 
 
During the year ended December 31, 2013, we recognized a non-cash gain of $1.2 million resulting from the transfer of the Kedron Village assets to the lender in satisfaction of the debt.  Also, in the third quarter, we reversed an accrual of unpaid interest (primarily default interest) of approximately $1.1 million.
 
 
The operations of Kedron Village were classified as discontinued operations in the consolidated statement of operations for the year ended December 31, 2013.
 
 
Note 6. Share-Based Compensation
 
 
Overview
 
 
The Company's 2013 Equity Incentive Plan (the "Plan") amended and restated the Company’s 2004 Equity Incentive Plan and authorized options and other share-based compensation awards to be granted to employees and trustees for up to an additional 1,500,000 common shares of the Company.  The Company accounts for its share-based compensation in accordance with the fair value recognition provisions provided under Topic 718—“Stock Compensation” in the ASC.
 
 
The total share-based compensation expense, net of amounts capitalized, included in general and administrative expenses for the years ended December 31, 2014, 2013, and 2012 was $2.9 million, $1.1 million, and $0.9 million, respectively.  Total share-based compensation cost capitalized for the years ended December 31, 2014, 2013, and 2012 was $0.8 million, $0.5 million, and $0.4 million, respectively, related to development and leasing activities.
 
 
As of December 31, 2014, there were 1,070,529 shares available for grant under the Plan.
 
 
Share Options
 
 
Pursuant to the Plan, the Company periodically grants options to purchase common shares at an exercise price equal to the grant date per-share fair value of the Company's common shares.  Granted options typically vest over a five year period and expire ten years from the grant date.  The Company issues new common shares upon the exercise of options.
 
 
 
F-16
 
 
For the Company's share option plan, the grant date fair value of each grant was estimated using the Black-Scholes option pricing model.  The Black-Scholes model utilizes assumptions related to the dividend yield, expected life and volatility of the Company’s common shares, and the risk-free interest rate.  The dividend yield is based on the Company's historical dividend rate.  The expected life of the grants is derived from expected employee duration, which is based on Company history, industry information, and other factors.  The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant.  Expected volatilities utilized in the model are based on the historical volatility of the Company's share price and other factors.
 
 
A summary of option activity under the Plan as of December 31, 2014, and changes during the year then ended, is presented below:
 
   
Options
   
Weighted-Average
Exercise Price
 
Outstanding at January 1, 2014
    386,803     $ 40.00  
Granted
    —       —  
Exercised
    (3,313 )     14.40  
Expired
    (134,287 )     52.00  
Forfeited
    (212 )     20.76  
Outstanding at December 31, 2014
    248,991     $ 33.88  
Exercisable at December 31, 2014
    243,686     $ 34.16  
Exercisable at December 31, 2013
    369,617     $ 41.00  
 
 
The fair value on the respective grant dates of the 1,250 options granted for the year ended December 31, 2012 was $20.08 per option. There were no options granted in 2013 and 2014.
 
 
The aggregate intrinsic value of the 3,313, 40,639, and 4,631 options exercised during the years ended December 31, 2014, 2013 and 2012 was $40,196, $445,346, and $16,112, respectively.
 
 
The aggregate intrinsic value and weighted average remaining contractual term of the outstanding and exercisable options at December 31, 2014 were as follows:
 
 
 
Options
 
Aggregate Intrinsic Value
 
Weighted-Average Remaining
Contractual Term (in years)
Outstanding at December 31, 2014
248,991
 
$
1,626,483
 
3.70
Exercisable at December 31, 2014
243,686
 
$
1,583,398
 
3.68
 
 
As of December 31, 2014 there was less than $0.1 million of total unrecognized compensation cost related to outstanding unvested share option awards.
 
 
Restricted Shares
 
 
In addition to share option grants, the Plan also authorizes the grant of share-based compensation awards in the form of restricted common shares.  Under the terms of the Plan, these restricted shares, which are considered to be outstanding shares from the date of grant, typically vest over a period ranging from one to five years.  In addition, the Company pays dividends on restricted shares that are charged directly to shareholders’ equity.
 
 
The following table summarizes all restricted share activity to employees and non-employee members of the Board of Trustees as of December 31, 2014 and changes during the year then ended:
 
 
   
Restricted
Shares
   
Weighted Average
Grant Date Fair
Value per share
 
Restricted shares outstanding at January 1, 2014
    181,397     $ 23.79  
Shares granted
    499,436       22.62  
Shares forfeited
    (2,388 )     22.82  
Shares vested
    (62,992 )     23.50  
Restricted shares outstanding at December 31, 2014
    615,453     $ 22.87  
 
 
 
F-17
 
 
During the years ended December 31, 2014, 2013, and 2012, the Company granted 499,436, 103,685, and 67,667 restricted shares to employees and non-employee members of the Board of Trustees with weighted average grant date fair values of $22.62, $25.80, and $21.44, respectively.  The total fair value of shares vested during the years ended December 31, 2014, 2013, and 2012 was $1.6 million, $1.1 million, and $0.6 million, respectively.
 
 
As of December 31, 2013, there was $11.9 million of total unrecognized compensation cost related to restricted shares granted under the Plan, which is expected to be recognized over a weighted-average period of 2.1 years.  We expect to incur $3.3 million of this expense in fiscal year 2015, $2.9 million in fiscal year 2016, $2.6 million in fiscal year 2017, $2.3 million in fiscal year 2018, and the remainder in fiscal year 2019.
 
 
Outperformance Plan
 
 
In July 2014, the Compensation Committee of the Board of Trustees adopted the Kite Realty Group Trust 2014 Outperformance Plan for members of executive management and certain other employees, pursuant to which grantees are eligible to earn units in the Operating Partnership based on the achievement of certain performance criteria of the Company’s common shares. Participants in the 2014 Outperformance Plan were awarded the right to earn, in the aggregate, up to $7.5 million of share-settled awards (the “bonus pool”) if, and only to the extent of which, based on our total shareholder return (“TSR”) performance measures are achieved for the three-year period beginning July 1, 2014 and ending June 30, 2017.  Awarded interests not earned based on the TSR measures are forfeited.
 
 
At the end of the three-year performance period, participants will receive their percentage interest in the bonus pool as units in the Operating Partnership that vest over an additional two-year service period.  The compensation cost of the 2014 Outperformance Plan is fixed as of the grant date and is recognized regardless of whether the units are ultimately earned if the required service is determined.
 
 
The 2014 Outperformance Plan was valued at an aggregate value of $2.4 million utilizing a Monte Carlo simulation.  The value of the awards will be amortized to expense through the final vesting date of June 30, 2019 based upon a graded vesting schedule.  We expect to incur $0.7 million of this expense in fiscal year 2015, $0.7 million in fiscal year 2016, $0.6 million in fiscal year 2017, $0.3 million in fiscal year 2018, $0.1 million in fiscal year 2019.
 
 
Note 7. Deferred Costs and Intangibles, net
 
 
Deferred costs and intangibles consist primarily of financing fees incurred to obtain long-term financing, acquired lease intangible assets, and broker fees and capitalized salaries and related benefits incurred in connection with lease originations.  Deferred financing costs are amortized on a straight-line basis over the terms of the respective loan agreements.  Deferred leasing costs, lease intangibles and similar costs are amortized on a straight-line basis over the terms of the related leases.  At December 31, 2014 and 2013, deferred costs consisted of the following:
 
 
   
2014
   
2013
 
Deferred financing costs
  $ 14,575     $ 11,293  
Acquired lease intangible assets
    142,823       24,930  
Deferred leasing costs and other
    48,149       41,626  
      205,547       77,849  
Less—accumulated amortization
    (36,583 )     (21,461 )
Total
    168,964       56,388  
Deferred costs, net – properties held for sale
    (8,986 )  
─
 
Total
  $ 159,978     $ 56,388  
 
 
 
F-18
 

The estimated aggregate amortization amounts from net unamortized acquired lease intangible assets for each of the next five years and thereafter are as follows:
 
 
2015
  $ 22,554
2016
    19,874
2017
    16,463
2018
    11,576
2019
    7,920
Thereafter
    41,255
Total (1)
  $ 119,642

____________________
1
Total excludes deferred costs and intangibles, net related to properties held for sale.
 
 
     The accompanying consolidated statements of operations include amortization expense as follows:
 
 
   
For the year ended December 31,
 
   
2014
   
2013
   
2012
 
Amortization of deferred financing costs
  $ 2,864     $ 2,434     $ 1,971  
Amortization of deferred leasing costs, lease intangibles and other, excluding amortization of above market leases
  $ 17,291     $ 5,605     $ 3,927  
 
 
Amortization of deferred leasing costs, leasing intangibles and other, excluding amortization of above market leases is included in depreciation and amortization expense, while the amortization of deferred financing costs is included in interest expense.
 
 
Note 8. Deferred Revenue, Intangibles, net and Other Liabilities
 
 
Deferred revenue, intangibles, net and other liabilities consist of unamortized fair value of in-place lease liabilities recorded in connection with purchase accounting, retainages payable for development and redevelopment projects, tenant rents received in advance and seller earnouts.  The amortization of in-place lease liabilities is recognized as revenue over the remaining life of the leases.  Tenant rents received in advance are recognized as revenue in the period to which they apply, usually the month following their receipt.
 
 
At December 31, 2014 and 2013, deferred revenue and other liabilities consisted of the following:
 
 
   
2014
   
2013
 
Unamortized in-place lease liabilities
  $ 125,336     $ 36,173  
Retainages payable and other
    2,852       2,983  
Seller earnout (Note 17)
    9,664    
─
 
Tenant rents received in advance
    10,841       5,158  
Total
    148,693       44,314  
Deferred revenue, intangibles, net and other liabilities –  liabilities held for sale
    (12,284 )  
─
 
Total
  $ 136,409     $ 44,314  
 
 
The estimated aggregate amortization of acquired lease intangibles (unamortized fair value of in-place lease liabilities) for each of the next five years and thereafter is as follows:
 
 
2015
  $ 8,212  
2016
    7,527  
2017
    6,838  
2018
    6,254  
2019
    5,796  
Thereafter
    78,784  
Total
  $ 113,411  

 
____________________
1
Total excludes deferred revenue, intangibles, net and other liabilities related to properties held for sale.
 
 
 
F-19
 
 
Note 9. Development and Redevelopment Activities
 
 
Development Activities
 
 
In the first quarter of 2014, we substantially completed construction on Delray Marketplace in Delray Beach, Florida and transitioned the project to the operating portfolio.  The project is anchored by Publix, Frank Theatres, Burt & Max’s Grille, Charming Charlie, Chico’s, White House | Black Market, Ann Taylor Loft, and Jos. A. Bank.
 
 
In 2014, we substantially completed construction on Parkside Town Commons – Phase I near Raleigh, North Carolina, which is anchored by Harris Teeter, Petco and a non-owned Target.  Parkside Town Commons – Phase II is under construction as of December 31, 2014.  Field & Stream and Golf Galaxy opened in September 2014 and will be joined by Frank Theatres in the first half of 2015.
 
 
Holly Springs Towne Center Phase II is located in Raleigh, North Carolina and is adjacent to Phase I of Holly Springs Towne Center.  Construction commenced on Phase II of the development in the third quarter of 2014.  We have signed leases with Carmike Theatres, DSW and Bed Bath & Beyond.
 
 
In the fourth quarter of 2014, we began site work on Tamiami Crossing in Naples, Florida.  We have a signed lease with Stein Mart and are negotiating leases with four national junior anchors for the development.
 
 
Redevelopment Activities
 
 
In the first quarter of 2014, we began redevelopment of Gainesville Plaza in Gainesville, Florida.  The project is anchored by Burlington Coat Factory which opened in September 2014 and Ross Dress for Less which is expected to open in March 2015.
 
 
In January 2013, we completed plans for a redevelopment project at Bolton Plaza and reduced the estimated useful lives of certain assets that were demolished as part of this project.  As a result of this change in estimate, $0.8 million of additional depreciation expense was recognized in 2013.  The center is anchored by Academy Sports and Outdoors, LA Fitness, and Panera Bread.  We transitioned this project back to the operating portfolio in the third quarter of 2014.
 
 
In July 2013, we completed plans for a redevelopment project at King’s Lake Square and reduced the estimated useful lives of certain assets that were demolished as part of this project.  As a result of this change in estimate, $2.5 million of additional depreciation expense was recognized in 2013.  This center is anchored by Publix Supermarkets which opened in April of 2014.  We transitioned this project back to the operating portfolio in the second quarter of 2014.
 
 
Note 10. Merger and Acquisition Activities
 
 
The results of operations for all acquired properties during the years ended December 31, 2014, 2013, and 2012, respectively, have been included in continuing operations within our consolidated financial statements since their respective dates of acquisition.
 
 
Acquisition costs include transactions costs for completed and prospective acquisitions, which are expensed as incurred. As part of the Merger, we incurred significant costs in 2014 related to investment banking, lender, due diligence, legal, and professional fees.  Merger and acquisition costs for the years ended December 31, 2014, 2013 and 2012 were $27.5 million, $2.2 million and $0.4 million, respectively.
 
 
Preliminary purchase price allocations were made at the date of acquisition, primarily to the fair value of tangible assets (land, building, and improvements) as well as to intangibles.  The estimated purchase price allocations for the 2014 acquisitions remain preliminary at December 31, 2014 and are subject to revision within the measurement period, not to exceed one year.
 
 
 
F-20
 

 
2014 Merger and Acquisition Activities
 
 
     In 2014, we acquired a total of 61 operating properties.  Upon completion of the Merger in July, we acquired 60 operating properties and in December we acquired an operating property in Las Vegas, Nevada.  The total merger purchase price was $2.4 billion.  As part of the Merger, we assumed $860 million of debt, maturing at various stages through March 2023.  In addition, we assumed a $12.4 million mortgage with a fixed interest rate of 5.73%, maturing in June 2030, as part of the Las Vegas acquisition.
 
 
The Company determined that it was the acquirer for accounting purposes in the Merger.  We considered the continuation of the Company’s existing management and a majority of the existing board members as the most significant considerations in our analysis.  Additionally, Inland Diversified had previously announced the transaction as a liquidation event and we believe this transaction was an acquisition of Inland Diversified by the Company.
 
 
The following is a summary of our 2014 operating property acquisitions.
 
 
Property Name
 
MSA
 
Acquisition Date
    Acquisition Cost (Millions)
               
Merger with Inland Diversified
 
Various
 
July 2014
  $ 
     2,128.6
               
Rampart Commons
 
Las Vegas, NV
 
December 2014
   
32.3
 
 
The fair value of the real estate and related assets acquired were primarily determined using the income approach.  The income approach required us to make assumptions about market leasing rates, tenant-related costs, discount rates, and disposal values.  The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs, as previously defined.  The ranges of the most significant Level 3 assumptions utilized in determining the value of the real estate and related assets of each building acquired during the Merger are as follows:
 
 
   
        Low
   
        High
 
Lease-up period (months)
    6       18  
Net rental rate per square foot – Anchor (greater than 10,000 square feet)
  $ 5.00     $ 30.00  
Net rental rate per square foot – Small Shops
  $ 11.00     $ 53.00  
Discount rate
    5.75 %     9.25 %
 
 
The following table summarizes the aggregate purchase price allocation for the properties acquired as part of the Merger as of July 1, 2014:
 
 
Assets:
     
Investment properties, net
  $ 2,095,567  
Deferred costs, net
    143,210  
Investments in marketable securities
    18,602  
Cash and cash equivalents
    108,666  
Accounts receivable, prepaid expenses, and other
    20,157  
Total assets
  $ 2,386,202  
         
Liabilities:
       
Mortgage and other indebtedness, including debt premium of $33,300
  $ 892,909  
Deferred revenue and other liabilities
    129,935  
Accounts payable and accrued expenses
    59,314  
Total Liabilities
    1,082,158  
         
Noncontrolling interests
    69,356  
Common stock issued
    1,234,688  
Total allocated purchase price
  $ 2,386,202  

 
F-21
 

     The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 5.8 years.
 
 
The Company allocated the purchase price for Rampart Commons to the fair value of tangible assets and intangibles.
 
 
The following table summarizes the revenue and earnings of the acquired properties since the respective acquisition dates, which are included in the consolidated statements of operations for the year ended December 31, 2014:
 
 
       
   
        Year ended December 31, 2014
 
Revenue
  $ 92,212  
Expenses:
       
Property operating
    14,262  
Real estate taxes and other
    11,254  
Depreciation and amortization
    43,257  
Interest expense
    14,845  
Total expenses
    83,618  
Gain on sale and other (1)
    2,153  
Net income impact from 2014 acquisitions prior to income allocable to noncontrolling interests
    10,747  
Income allocable to noncontrolling interests
    (1,284 )
Impact from 2014 acquisitions on income attributable to Kite Realty Trust
  $ 9,463  


____________________
1
We sold eight properties that were acquired through the Merger in November and December 2014.
 
 
The following table presents unaudited pro forma information for the year ended December 31, 2014 and 2013 as if the Merger and the 2013 and 2014 property acquisitions had been consummated on January 1, 2013.  The pro forma results have been calculated under our accounting policies and adjusted to reflect the results of Inland Diversified’s additional depreciation and amortization that would have been recorded assuming the allocation of the purchase price to investment properties, intangible assets and indebtedness had been applied on January 1, 2013.  The pro forma results exclude Merger costs and reflect the termination of management agreements with affiliates of Inland Diversified as neither are expected to have a continuing impact on the results of the operations following the Merger.  The results also reflect the pay down of certain debt, which was contemplated as part of the Merger.
 
 
     
Twelve Months Ended
December 31,
(unaudited)
     
2014
 
2013
Total revenue
   
$
355,716
 
$
357,506
Consolidated net income
     
26,911
   
2,219
 
 
2013 Acquisition Activities
 
 
In 2013, we acquired thirteen operating properties.  The following is a summary of our 2013 operating property acquisitions.
 

 
F-22
 


Property Name
 
MSA
 
Acquisition Date
    Contract Purchase Price (Millions)
               
Shoppes of Eastwood
 
Orlando, FL
 
January 2013
  $ 
          11.6
Cool Springs Market
 
Nashville, TN
 
April 2013
   
37.6
Castleton Crossing
 
Indianapolis, IN
 
May 2013
   
39.0
Toringdon Market
 
Charlotte, NC
 
August 2013
   
15.9
               
Nine Property Portfolio
 
Various
 
November 2013
   
        304.0
 
 
The fair value of the real estate and related assets acquired were primarily determined using the income approach.  The income approach required the Company to make assumptions about market leasing rates, tenant-related costs, discount rates, and disposal values.  The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs, as previously defined.
 
 
The following table summarizes our final allocation of the fair value of amounts recognized for each major class of asset and liability for these acquisitions:
 
 
   
Allocation to opening balance sheet
 
Investment properties, net
  $ 419,080  
Lease-related intangible assets
    19,537  
Other assets
    293  
Total acquired assets
    438,910  
         
Accounts payable and accrued expenses
    2,204  
Deferred revenue and other liabilities
    29,291  
Total assumed liabilities
    31,495  
         
Fair value of acquired net assets
  $ 407,415  
 
 
The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 4.6 years.
 
 
There were no material adjustments to the purchase price allocations for our 2013 acquisitions during the year ended December 31, 2014.
 
 
2012 Acquisition Activities
 
 
In 2012, we acquired four operating properties.  In connection with these acquisitions, the Company allocated the purchase price to the fair value of tangible assets (land, building, and improvements) as well as to intangibles.  The following is a summary of our 2012 operating property acquisitions.
 
 
Property Name
 
MSA
 
Acquisition Date
    Contract Purchase Price (Millions)
               
Cove Center
 
Stuart, FL
 
June 2012
  $ 
          22.1
12 th Street Plaza
 
Vero Beach, FL
 
July 2012
   
15.2
Plaza Green
 
Greenville, SC
 
December 2012
   
28.8
Publix at Woodruff
 
Greenville, SC
 
December 2012
   
9.1
 
 
The fair value of the real estate and related assets acquired were primarily determined using the income approach.  The income approach required the Company to make assumptions about market leasing rates, tenant-related costs, discount rates, and disposal values.  The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs, as previously defined.
 
 
 
F-23
 
 
The following table summarizes our final allocation of the fair value of amounts recognized for each major class of asset and liability for these acquisitions. This allocation does not differ materially from the initial allocation.
 
 
   
Allocation to opening balance sheet
 
Investment properties, net
  $ 76,531  
Lease-related intangible assets
    2,209  
Other assets
    8  
Total acquired assets
    78,748  
         
Secured debt
    8,086  
Deferred revenue and other liabilities
    4,952  
Total assumed liabilities
    13,038  
         
Fair value of acquired net assets
  $ 65,710  
 
 
Note 11. Disposals, Discontinued Operations and Investment Properties Held for Sale
 
 
During the first quarter of 2014, we sold our Red Bank Commons operating property in Evansville, Indiana, our Ridge Plaza operating property in Oak Ridge, New Jersey, and our 50 th and 12 th operating property in Seattle, Washington for aggregate proceeds of $35.2 million and a net gain of $6.7 million.
 
 
During the third quarter of 2014, we sold our Zionsville Walgreens operating property in Zionsville, Indiana for aggregate proceeds of $7.3 million and a net gain of $2.9 million.
 
 
During the fourth quarter of 2014, we completed the sale of the first tranche (“Tranche I”) to Inland Real Estate Income Trust, Inc. (“Inland Real Estate”) for aggregate proceeds of $151 million and a net gain of $1.4 million.  See below.
 
 
Further, we have $16.1 million classified as cash and cash equivalents that we received in connection with the sale of Tranche I for which we intend to utilize for future acquisitions.
 
 
Sale of Properties to Inland Real Estate Income Trust

 
On September 16, 2014, we entered into a Purchase and Sale Agreement with Inland Real Estate, which provides for the sale of 15 of our operating properties acquired in the Merger (the “Portfolio”) to Inland Real Estate with the option for the sale of a 16 th property, Village at Bay Park.

 
The Purchase and Sale Agreement provides that the Portfolio will be sold to Inland Real Estate in two separate tranches. The sale of Tranche I consisted of eight retail operating properties that were sold in November and December. The sale of the second tranche (“Tranche II”) will consist of seven retail operating properties to be sold for a sales price of approximately $167.4 million, including debt to be assumed of $64.2 million, and is expected to occur on or before March 16, 2015.  One of the Company’s trustees also serves as a director of Inland Real Estate, and therefore recused himself from any consideration by the Board of Trustees of the transaction.
 
 
 
F-24
 
 
     The operating properties sold in Tranche I and to be sold in Tranche II are as f ollows:
 
 
Property Name
MSA
   
Tranche I:
 
    Copps Grocery
Stevens Point, WI
    Fox Point
Neenah, WI
    Harvest Square
Harvest, AL
    Landing at Ocean Isle Beach
Ocean Isle Beach, NC
    Branson Hills Plaza
Branson, MO
    Shoppes at Branson Hills
Branson, MO
    Shoppes at Prairie Ridge
Pleasant Prairie, WI
    Heritage Square
Conyers, GA
   
Tranche II:
 
Eastside Junction 1
Athens, AL
Fairgrounds Crossing
Hot Springs, AR
Hawk Ridge
Saint Louis, MO
Prattville Town Center
Prattville, AL
Regal Court
Shreveport, LA
Whispering Ridge
Omaha, NE
Walgreens Plaza
Jacksonville, NC
 
 
____________________
1
The anchor tenant exercised its right of first offer to purchase the property. Subsequent to this exercise, the anchor tenant decided not to purchase the property and Inland Real Estate will instead acquire the property as part of Tranche II.
 
 
The operating properties listed above are not included in discontinued operations in the accompanying Statements of Operations as the disposals neither individually nor in the aggregate represent a strategic shift that has or will have a major effect on our operations or financial results (see Note 2).  The properties in Tranche II met the requirements to be presented as held for sale as of December 31, 2014.  The Village at Bay Park property does not meet the held for sale criteria as this property is subject only to Inland Real Estate’s option to purchase.  Upon meeting the held-for-sale criteria, depreciation and amortization ceased for these operating properties.  The assets and liabilities associated with these properties are separately classified as held for sale in the consolidated balance sheet as of December 31, 2014.
 
 
The following table presents the assets and liabilities associated with the held for sale properties:
 

   
December 31,
 
   
2014
 
Assets:
     
Investment properties, at cost
  $ 170,782  
      Less: accumulated depreciation
    (1,313 )
      169,469  
         
Accounts receivable, prepaids and other assets
    1,187  
Deferred costs and intangibles, net
    8,986  
Total assets held for sale
  $ 179,642  
         
Liabilities:
       
Mortgage and other indebtedness, including net premium
  $ 67,452  
Accounts payable and accrued expenses
    1,428  
Deferred revenue, intangibles and other liabilities
    12,284  
Total liabilities held for sale
  $ 81,164  

 
F-25
 

 
The results of operations for the investment properties that are classified as held for sale or sold as part of Tranche I are presented in the table below:


 
Six Months Ended
December 31,
 
2014
Revenue:
 
  Minimum rent 1
$ 11,320
  Tenant reimbursements
  2,279
Total revenue
  13,599
Expenses:
   
  Property operating
  1,958
  Real estate taxes
  1,372
  Depreciation and amortization
  2,365
Total expenses
  5,695
Operating income
  7,904
  Interest expense
  (2,703
Income from continuing operations
$ 5,201

 
____________________
1
Minimum rent includes $0.3 million of non-cash straight-line and market rent revenue.
 
 
Other Disposals
 
 
The Red Bank Commons, Ridge Plaza and Zionsville Walgreens operating properties are not included in discontinued operations in the accompanying Statements of Operations for the year ended December 31, 2014, 2013 and 2012, as the disposals individually and in the aggregate did not represent a strategic shift that has or will have a major effect on our operations and financial results (see Note 2).
 
 
The 50 th and 12 th operating property is included in discontinued operations for the years ended December 31, 2014, 2013 and 2012, as the property was classified as held for sale as of December 31, 2013.
 
 
In September 2013, the Company sold its Cedar Hill Village property in Dallas, Texas.  In July 2013, foreclosure proceedings were completed on the Kedron Village property and the mortgage lender took title to the property in satisfaction of principal and interest due on the mortgage (see Note 5).
 
 
In 2012, the Company sold the following properties for net proceeds of $87.4 million (inclusive of our partners’ share) and a net gain of $7.1 million:
 
 
·  
Gateway Shopping Center in Marysville, Washington in February 2012;
 
·  
South Elgin Commons in South Elgin, Illinois in June 2012;
 
·  
50 S. Morton near Indianapolis, Indiana in July 2012;
 
·  
Coral Springs Plaza in Fort Lauderdale, Florida in September 2012;
 
·  
Pen Products in Indianapolis, Indiana in October 2012;
 
·  
Indiana State Motor Pool in Indianapolis, Indiana in October 2012;
 
·  
Sandifur Plaza in Pasco, Washington in November 2012;
 
·  
Zionsville Shops near Indianapolis, Indiana in November 2012; and
 
·  
Preston Commons in Dallas, Texas in December 2012.
 
 
The activities of these properties sold in 2013 and 2012, and the 50 th & 12 th operating property sold in 2014, are reflected as discontinued operations in the accompanying consolidated statements of operations.
 
 
 
F-26
 
 
The results of the discontinued operations related to these properties were comprised of the following for the years ended December 31, 2014, 2013, and 2012:
 

   
Year ended December 31,
 
   
        2014
   
2013
   
2012
 
Revenue
  $ —     $ 2,565     $ 8,839  
Expenses:
                       
Property operating
    —       117       1,081  
Real estate taxes and other
    —       199       1,230  
Depreciation and amortization
    —       844       2,963  
Impairment charge
    —       5,372       —  
Total expenses
    —       6,532       5,274  
Operating income (loss)
    —       (3,967 )     3,565  
Interest expense
    —       (571 )     (2,909 ) 
Income (loss) from discontinued  operations
    —       (4,538 )     656  
Gain on debt extinguishment
    —       1,242       —  
Gain on sale of operating properties, net
    3,198       487       7,094  
Total income (loss) from discontinued operations
  $ 3,198     $ (2,809 )   $ 7,750  
                         
Income (loss) from discontinued operations attributable to Kite Realty Group Trust common shareholders
  $ 3,111     $ (2,620 )   $ 5,317  
Income (loss) from discontinued operations attributable to noncontrolling interests
    87       (189 )     2,433  
Total income (loss) from discontinued operations
  $ 3,198     $ (2,809 )   $ 7,750  


Note 12. Mortgage Loans and Other Indebtedness
 
 
Mortgage and other indebtedness, excluding mortgages related to assets held for sale (see Note 11), consist of the following at December 31, 2014 and 2013:
 
 
   
Balance at December 31,
 
Description
 
2014
   
2013
 
Unsecured Revolving Credit Facility
           
Matures July 2018 1 ; maximum borrowing level of $500 million and $200 million available at December 31, 2014 and 2013, respectively; interest at LIBOR + 1.40% 2 or 1.57% at December 31, 2014 and interest at LIBOR + 1.95% 2 or 2.12% at December 31, 2013
  $ 160,000     $ 145,000  
Unsecured Term Loan
               
Matures July 2019 3 ;  interest at LIBOR + 1.35% 2 or 1.52% at December 31, 2014 and interest at LIBOR + 1.80% 2 or 1.97% at December 31, 2013
    230,000       230,000  
Construction Loans—Variable Rate
               
Generally interest only; maturing at various dates through 2016; interest at LIBOR+1.75%-2.10%, ranging from 1.92% to 2.27% at December 31, 2014 and interest at LIBOR+2.00%- 2.50%, ranging from 2.17% to 2.67% at December 31, 2013
    119,347       144,389  
Mortgage Notes Payable—Fixed Rate
               
Generally due in monthly installments of principal and interest; maturing at various dates through 2030; interest rates ranging from 3.81% to 6.78% at December 31, 2014 and interest rates ranging from 5.42% to 6.78% at December 31, 2013
    810,959       276,504  
Mortgage Notes Payable—Variable Rate
               
Due in monthly installments of principal and interest; maturing at various dates through 2022; interest at LIBOR + 1.75%-2.75%, ranging from 1.92% to 2.92% at December 31, 2014 and interest at LIBOR + 1.25%-2.94%, ranging from 1.42 % to 3.11% at December 31, 2013
    205,798       61,186  
Net premium on acquired indebtedness
    28,159       65  
Total mortgage and other indebtedness
  $ 1,554,263     $ 857,144  

 
F-27
 


____________________
1
The maturity date may be extended at the Company’s option for up to two additional periods of six months each, subject to certain conditions.
   
2
The rate on our unsecured revolving credit facility and unsecured term loan varied at certain parts of the year due to provisions in the agreement and the amendment and restatement of the agreement.
   
3
The maturity date may be extended for an additional six months at the Company’s option subject to certain conditions.
   
 
 
The one month LIBOR interest rate was 0.17% as of December 31, 2014 and 2013.
 
 
Unsecured Revolving Credit Facility and Unsecured Term Loan
 
 
On July 1, 2014, in conjunction with the Merger, we amended the terms of our unsecured revolving credit facility (the “amended facility”) and increased the total borrowing capacity from $200 million to $500 million.  The amended terms also include an extension of the maturity date to July 1, 2018, which may be further extended at our option for up to two additional periods of six months each, subject to certain conditions, and a reduction in the interest rate to LIBOR plus 140 to 200 basis points, from LIBOR plus 165 to 250 basis points, depending on our leverage.  The amended facility has a fee of 15 to 25 basis points on unused borrowings.  We may increase our borrowings under the amended facility up to $750 million, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the amended facility, to provide such increased amounts.
 
 
On July 1, 2014, we also amended the terms of our $230 million Term Loan (the “amended Term Loan”).   The amended Term Loan has a maturity date of July 1, 2019, which may be extended for an additional six months at the Company’s option subject to certain conditions.  The interest rate applicable to the amended Term Loan was reduced to LIBOR plus 135 to 190 basis points, depending on our leverage, a decrease of between 10 and 55 basis points.  The amended Term Loan also provides for an increase in total borrowing of up to an additional $170 million ($400 million in total), subject to certain conditions, including obtaining commitments from any one or more lenders.
 
 
The amount that we may borrow under our amended facility is based on the value of assets in our unencumbered property pool.  As of December 31, 2014, the full amount of our amended facility, or $500 million, was available for draw based on the unencumbered property pool allocated to the facility.  Taking into account outstanding draws and letters of credit, as of December 31, 2014, we had $333.2 million available for future borrowings under our amended facility.  In addition, our unencumbered assets could provide approximately $120 million of additional borrowing capacity under our amended facility if the expansion feature was exercised.   As of December 31, 2014, we had 88 unencumbered properties, of which 80 were wholly-owned by subsidiaries which are guarantors under the amended facility and the amended Term Loan.
 
 
As of December 31, 2014, $160 million was outstanding under the amended facility and $230 million was outstanding under the amended Term Loan.  Additionally, we had letters of credit outstanding which totaled $6.8 million, against which no amounts were advanced as of December 31, 2014.
 
 
Our ability to borrow under the amended facility is subject to our compliance with various restrictive covenants, including with respect to liens, indebtedness, investments, dividends, mergers and asset sales.  The amended facility and the amended Term Loan also require us to satisfy certain financial covenants.  As of December 31, 2014, we were in compliance with all such covenants on the amended facility and the amended Term Loan.
 
 
For the year ended December 31, 2014, we had total loan borrowings of $146.5 million, total loan assumptions of $859.6 million and total loan repayments of $285.2 million.  The major components of this activity are as follows:
 
 
·  
In January 2014, we paid off the $4.0 million loan secured by the 50th and 12th operating property using a portion of the proceeds from the sale of the property (see Note 11);
 

 
F-28
 

 
·  
In March 2014, we refinanced the $6.9 million Beacon Hill variable rate loan and extended the maturity of the loan to April 2018;
 
·  
In July 2014, as a result of the Merger, we assumed $859.6 million in debt secured by 41 properties.  As part of the purchase price allocation, a debt premium of $33.3 million was recorded.  The variable interest rates on these mortgage loans are based on LIBOR plus spreads ranging from 175 to 275 basis points and mature over various terms through 2022.  The fixed interest rates on these mortgage loans range from 3.81% to 6.19% and mature over various terms through 2022;
 
·  
In July 2014, we retired the $17.7 million loan secured by our Rangeline Crossing operating property, the $18.9 million loan secured by our Four Corner Square operating property and the $5.0 million loan secured by land at 951 and 41 in Naples, Florida using cash acquired as part of the Merger;
 
·  
In September 2014, we retired the $4.5 million loan secured by the Zionsville Walgreens operating property upon the sale of the asset (see Note 11);
 
·  
In December 2014, in connection with the sale of Tranche I, Inland Real Estate assumed $75.8 million of our secured loans associated with Shoppes at Prairie Ridge, Fox Point, Harvest Square, Heritage Square, The Shoppes at Branson Hills and Copp’s Grocery;
 
·  
In December 2014, we paid down $4.0 million on the loan secured by Delray Marketplace operating property and refinanced the remaining $55.3 million variable rate loan and extended the maturity of the loan to November 2016;
 
·  
In December 2014, we retired the $15.8 million loan secured by our Eastgate Pavilion operating property, the $1.9 million loan secured by our Bridgewater Marketplace operating property, the $34.0 million loan secured by our Holly Springs – Phase I development property and the $15.2 million loan secured by Wheatland Town Crossing utilizing a portion of proceeds from property sales;
 
·  
In December 2014, in connection with the acquisition of Rampart Commons, we assumed a $12.4 million fixed rate mortgage.  As part of the purchase price allocation, a debt premium of $2.2 million was recorded;
 
·  
In 2014, we drew $66.7 million on the unsecured revolving credit facility to fund the acquisition of Rampart Commons, redevelopment and tenant improvement costs;
 
·  
In 2014, we paid down $51.7 million on the unsecured revolving credit facility utilizing a portion of proceeds from property sales and cash on hand;
 
·  
In 2014, we drew $50.8 million on construction loans related to development projects; and
 
·  
We made scheduled principal payments on indebtedness totaling $6.5 million.
 
 
Mortgage and Construction Loans
 
 
Mortgage and construction loans are secured by certain real estate, are generally due in monthly installments of interest and principal and mature over various terms through 2030.
 
 
The following table presents maturities of mortgage debt, corporate debt, and construction loans as of December 31, 2014:
 
 
 
Annual Principal Payments
   
Term Maturity
   
Total
2015
$
6,558
   
$
          112,347
   
$
       118,905
2016
 
5,708
     
          247,613
     
         253,321
2017
 
4,998
     
           50,026
     
           55,024
2018 1
 
5,060
     
            68,694
     
           73,754
2019 2
 
4,932
     
          160,000
     
         164,932
Thereafter  
16,678
       843,490        860,168
 
$
43,934
   
$
1,482,170
   
$
1,526,104
Unamortized Premiums
                 
28,159
Total
               
$
1,554,263

 
____________________
1
Includes our unsecured revolving credit facility. We have the option to extend the maturity date by one year to July 1, 2019, subject to certain conditions.
   
2
Includes our unsecured Term Loan. We have the option to extend the maturity date by six months to January 1, 2020, subject to certain conditions.
 
 
 
F-29
 
 
The amount of interest capitalized in 2014, 2013, and 2012 was $4.8 million, $5.1 million, and $7.4 million, respectively.
 
 
Fair Value of Fixed and Variable Rate Debt
 
 
As of December 31, 2014, the fair value of fixed rate debt, including properties held for sale, was $945.9 million compared to the book value of $875.3 million.  The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments which ranged from 3.81% to 6.78%.  As of December 31, 2014, the fair value of variable rate debt, including properties held for sale, was $751.5 million compared to the book value of $715.2 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 1.52% to 2.92%.
 
 
Note 13.  Derivative Instruments, Hedging Activities and Other Comprehensive Income
 
 
In order to manage volatility relating to variable interest rate risk, we enter into interest rate hedging agreements from time to time.  We do not use derivatives for trading or speculative purposes nor do we have any derivatives that are not designated as cash flow hedges.  We have agreements with each of our derivative counterparties that contain a provision that in the event of default on any of our indebtedness, we could also be declared in default on our derivative obligations.  As of December 31, 2014, we were party to various cash flow hedge agreements with notional amounts totaling $373.3 million.  These hedge agreements effectively fix the interest rate indices underlying certain variable rate debt instruments over terms ranging from 2017 through 2020.  Utilizing a weighted average interest rate spread over LIBOR on all variable rate debt resulted in fixing the weighted average interest rate at 3.39%.
 
 
These interest rate hedge 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.
 
 
In the Merger we assumed seven interest rate swaps.  The notional amount of the instruments was $163.3 million and the fair value was a net liability of $3.7 million on the Merger date.  Three of these swaps with a combined notional amount of $34.2 million were not designated as cash flow hedges.  The change in the fair value of those interest rate agreements of $0.2 million for the six months ending December 31, 2014 was shown as a reduction to interest expense.  These three swaps were assumed by Inland Real Estate as part of the sale of Tranche I.
 
 
As a basis for considering market participant assumptions in fair value measurements, accounting guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs for identical instruments that are classified within Level 1 and observable inputs for similar instruments that are classified within Level 2) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3).  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.
 
 
Although we have determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and our counterparties.   However, as of December 31, 2014 and 2013, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives.   As a result, we have determined that our derivative valuations are classified in Level 2 of the fair value hierarchy.
 

 
F-30
 


As of December 31, 2014 the fair value of our interest rate hedges was a net liability of $4.4 million, including accrued interest of $0.5 million.  As of December 31, 2014, $0.7 million is recorded in prepaid and other assets and $5.1 million is recorded in accounts payable and accrued expenses on the accompanying consolidated balance sheet.  At December 31, 2013 the net fair value of our interest rate hedge assets was $1.1 million, including accrued interest of $0.3 million.  As of December 31, 2013, $2.8 million is recorded in prepaid and other assets and $1.7 million is recorded in accounts payable and accrued expenses on the accompanying consolidated balance sheet.
 
 
We currently expect the impact to interest expense over the next 12 months as the hedged forecasted interest payments occur to be $4.4 million.  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.  During the years ended December 31, 2014, 2013 and 2012, $5.1 million, $2.8 million and $1.5 million, respectively, were reclassified as a reduction to earnings.
 
 
Our share of net unrealized gains and losses on our interest rate hedge agreements are the only components of the change in accumulated other comprehensive loss.  The following sets forth comprehensive loss allocable to us for the years ended December 31, 2014, 2013, and 2012:
 

   
Year ended December 31,
 
   
2014
 
2013
 
2012
 
Net loss attributable to Kite Realty Group Trust
  $ (5,701 )   $ (2,850 )   $ (4,334 )
Other comprehensive (loss) income allocable to Kite Realty Group Trust 1
    (2,528 )     6,612       (3,734 ) 
Comprehensive (loss) income attributable to Kite Realty Group Trust
  $ (8,229 )   $ 3,762     $ (8,068 )
 
 
____________________
1
Reflects our share of the net change in the fair value of derivative instruments accounted for as cash flow hedges.
 
 
Note 14. Lease Information
 
 
Tenant Leases
 
 
The Company receives rental income from the leasing of retail and office space under operating leases.  The leases generally provide for certain increases in base rent, reimbursement for certain operating expenses and may require tenants to pay contingent rentals to the extent their sales exceed a defined threshold.  The weighted average remaining term of the lease agreements is approximately 5.8 years.  During the periods ended December 31, 2014, 2013, and 2012, the Company earned overage rent of $1.1 million, $0.6 million, and $0.5 million, respectively.
 
 
As of December 31, 2014, future minimum rentals to be received under non-cancelable operating leases for each of the next five years and thereafter, excluding tenant reimbursements of operating expenses and percentage rent based on sales volume, are as follows:
 
 
2015
  $ 244,346  
2016
    227,745  
2017
    206,650  
2018
    172,285  
2019
    142,950  
Thereafter
    805,224  
Total
  $ 1,799,200  

 
F-31
 

Lease Commitments
 
 
As of December 31, 2014, we are obligated under six ground leases for approximately 20 acres of land with five landowners, all of which require fixed annual rent payments.  The expiration dates of the initial terms of these ground leases range from 2015 to 2083.  These leases have five to ten year extension options ranging in total from 20 to 50 years. Ground lease expense incurred by the Company on these operating leases for the years ended December 31, 2014, 2013 and 2012 was $0.7 million, $0.7 million, and $0.6 million, respectively.
 
 
We are obligated under a ground lease for one of our operating properties, Eddy Street Commons at the University of Notre Dame.  The Company makes ground lease payments to the University of Notre Dame for the land beneath the initial phase of the development.  This lease agreement is for a 75-year term at a fixed payment for the first two years, after which payments are based on a percentage of certain gross revenues.  Contingent amounts are not readily estimable and are not reflected in the table below for fiscal years 2015 and beyond.
 
 
Future minimum lease payments due under such leases for the next five years ending December 31 and thereafter are as follows:
 
 
2015
  $ 543  
2016
    511  
2017
    511  
2018
    149  
2019
    121  
Thereafter
    7,893  
Total
  $ 9,728  
 
 
Note 15. Shareholders’ Equity
 
 
Merger with Inland Diversified
 
 
In preparation for our merger with Inland Diversified and upon approval from shareholders, we filed an amendment to our Articles of Amendment and Restatement of Declaration of Trust, as amended, with the State of Maryland State Department of Assessments and Taxation to increase the total number of authorized common shares of beneficial interest from 200,000,000 to 450,000,000.
 
 
On July 1, 2014, we issued approximately 50.3 million of our common shares to the existing Inland Diversified stockholders as consideration in connection with the Merger.  For purposes of financial statement presentation, the shares were valued based on the closing price of our common shares immediately prior to the closing date.
 
 
Common Equity
 
 
In November 2013, we completed an equity offering of 9.2 million common shares at an offering price of $24.64 per share for net offering proceeds of $217 million.  We initially used the proceeds to repay borrowings under our unsecured revolving credit facility and subsequently redeployed the proceeds to fund a portion of the purchase price of the portfolio of nine unencumbered retail properties (see Note 10).
 
 
In April and May of 2013, we completed an equity offering of 3.9 million common shares at an offering price of $26.20 per share for net offering proceeds of $97 million.  We initially used the proceeds to repay borrowings under our unsecured revolving credit facility and subsequently redeployed the proceeds to acquire Cool Springs Market, Castleton Crossing, and Toringdon Market (see Note 10).
 
 
Accrued but unpaid distributions on common shares and units were $22.1 million and $8.2 million as of December 31, 2014 and 2013, respectively, and are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.  These distributions were paid in January of the following year.
 

 
F-32
 
 

Reverse Share Split
 
 
On August 11, 2014, we completed a reverse share split of our common shares at a ratio of one new share for each four shares then outstanding.  As a result of the reverse share split, the number of outstanding common shares was reduced from approximately 332.7 million shares to approximately 83.2 million shares.  In addition, the reverse share split had the same impact on the number of outstanding operating partnership units.
 
 
Preferred Equity
 
 
Accrued but unpaid distributions on the Series A preferred shares were $0.7 million as of December 31, 2014 and 2013, respectively and are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets.  
 
 
Dividend Reinvestment and Share Purchase Plan
 
 
We maintain a Dividend Reinvestment and Share Purchase Plan (the “Dividend Reinvestment Plan”) which offers investors a dividend reinvestment component to invest all or a portion of the dividends on their common shares, or cash distributions on their units in the Operating Partnership, in additional common shares.  In addition, the direct share purchase component permits Dividend Reinvestment Plan participants and new investors to purchase common shares by making optional cash investments with certain restrictions.
 
 
Note 16. Quarterly Financial Data (Unaudited)
 
 
Presented below is a summary of the consolidated quarterly financial data for the years ended December 31, 2014 and 2013.
 

   
  Quarter Ended
March 31,
2014
 
  Quarter Ended
June 30,
2014
 
  Quarter Ended
September 30,
2014
 
  Quarter Ended
December 31,
2014
 
Total revenue
 
$
42,660
 
$
40,843
 
$
88,576
 
$
87,448
 
Operating income
   
5,206
   
4,319
   
(1,316
)
 
21,120
 
(Loss) income from continuing operations
   
(2,217)
   
(3,196
)
 
(16,729
)
 
5,786
 
Income (loss) from discontinued operations
   
3,198
   
—
   
—
   
—
 
Gain on sale of operating properties, net
   
3,490
   
—
   
2,749
   
2,243
 
Consolidated net income (loss) 
   
4,471
   
(3,196
)
 
(13,980
)
 
8,029
 
Net income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders
   
4,332
   
(2,976
)
 
(14,284
)
 
7,227
 
Net income (loss) attributable to Kite Realty Group Trust common shareholders
   
2,218
   
(5,090
)
 
(16,398
)
 
5,113
 
Net (loss) income per common share – basic and diluted:
                         
Net (loss) income from continuing operations attributable to Kite Realty Group Trust common shareholders
   
(0.00
)
 
(0.16
)
 
(0.20
)
 
0.06
 
Net income (loss) attributable to Kite Realty Group Trust common shareholders
   
0.08
   
(0.16
)
 
(0.20
)
 
0.06
 
Weighted average Common Shares outstanding - basic
   
32,755,898
   
32,884,467
   
83,455,900
   
83,478,680
 
Weighted average Common Shares outstanding - diluted
   
32,755,898
   
32,884,467
   
83,455,900
   
83,727,400
 


 
F-33
 

   
  Quarter Ended
March 31,
2013
 
  Quarter Ended
June 30,
2 013
 
  Quarter Ended
September 30,
2013
 
  Quarter Ended
December 31,
2013
 
Total revenue
 
$
31,041
 
$
29,916
 
$
32,553
 
$
35,978
 
Operating income
   
8,727
   
204
   
5,738
   
7,551
 
(Loss) income from continuing operations
   
2,475
   
(6,883
)
 
(1,881
)
 
191
 
Income (loss) from discontinued operations
   
(418)
   
(371)
   
3,122
   
230
 
Gain on sale of operating properties, net
   
—
   
—
   
—
   
—
 
Consolidated net income (loss)
   
2,057
   
(7,254
)
 
1,241
   
421
 
Net income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders
   
2,032
   
(6,593
)
 
1,256
   
(34
)
Net income (loss) attributable to Kite Realty Group Trust common shareholders
   
(82
)
 
(8,707
)
 
(858
)
 
(1,659
)
Net loss (income) per common share – basic and diluted:
                         
Net loss (income) from continuing operations attributable to Kite Realty Group Trust common shareholders
   
(0.00
)
 
(0.36
)
 
(0.16
)
 
(0.07
)
Net income (loss) attributable to Kite Realty Group Trust common shareholders
   
(0.00
) 
 
(0.40
) 
 
(0.04
)
 
(0.06
)
Weighted average Common Shares outstanding - basic
   
19,458,125
   
22,766,704
   
23,450,974
   
28,368,568
 
Weighted average Common Shares outstanding - diluted
   
19,458,125
   
22,766,704
   
23,450,974
   
28,368,568
 

 
Note 17. Commitments and Contingencies
 
 
Other Commitments and Contingencies
 
 
We are not subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against us other than routine litigation, claims, and administrative proceedings arising in the ordinary course of business.  Management believes that such routine litigation, claims, and administrative proceedings will not have a material adverse impact on our consolidated financial statements.
 
 
We are obligated under various completion guarantees with certain lenders and lease agreements with tenants to complete all or portions of the development and redevelopment projects.  We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through existing construction loans.  In addition, if necessary, we may make draws on our unsecured revolving credit facility.
 
 
We have guaranteed a loan in the amount of $26.6 million on behalf of LC White Plains Retail, LLC and LC White Plains Recreation, LLC (collectively, the “LC Partners”) who own a noncontrolling interest in our City Center operating property.  Along with our guarantee of the loan the LC Partners pledged their Class B units in one of our consolidated joint ventures as collateral for the loan.  If payment of the loan is required and the value of the Class B units does not fully service the loan, we will be required to retire the remaining amount.   On February 13, 2015, we acquired our partner’s redeemable interests in the City Center operating property for $34.4 million that was paid in a combination of cash and Operating Partnership units.  As a result of this transaction the guarantee was terminated.
 
 
 
F-34
 
 
As of December 31, 2014, we had outstanding letters of credit totaling $6.8 million.  At that date, there were no amounts advanced against these instruments.
 
 
Earnout Liability
 
 
Six of our properties, which are properties acquired by Inland Diversified prior to the date of the Merger, have earnout components whereby we are required to pay the seller additional consideration based on subsequent leasing activity of vacant space. The maximum potential earnout payment was $9.7 million at December 31, 2014. The table below presents the change in our earnout liability for the six months ended December 31, 2014.
 
 
   
Six Months Ended
December 31, 2014
 
       
Earnout liability – beginning of period
  $ 16,593  
Decreases:
       
  Payments to settle earnouts
    (6,929 )
Earnout liability – end of period
  $ 9,664  
 
 
The expiration dates of the remaining earnouts range from January 31, 2015 through December 28, 2015.
 
 
Note 18. Supplemental Schedule of Non-Cash Investing/Financing Activities
 
 
The following schedule summarizes the non-cash investing and financing activities of the Company for the years ended December 31, 2014, 2013 and 2012:
 
   
Year Ended
December 31,
 
   
2014
   
2013
   
2012
 
Assumption of mortgages upon completion of Merger including debt premium of $33,298
  $ 892,909     $ —     $ —  
Properties and other assets acquired upon completion of Merger
    2,367,600       —       —  
Marketable securities acquired upon completion of Merger
    18,602       —       —  
Assumption of debt in connection with acquisition of Rampart Commons including debt premium of $2,221
    14,586       —       —  
Accrued distribution to preferred shareholders
    705       705       705  
Extinguishment of mortgages upon transfer of Tranche I operating properties
    75,800       —       —  
Payable due to PREI in connection with consolidation of Parkside Town Commons
    —       —       4,925  
Assumption of debt in connection with consolidation of Parkside Town Commons
    —       —       14,440  
Assumption of debt in connection with acquisition of 12 th Street Plaza
    —       —       8,086  
Extinguishment of mortgage upon transfer of Kedron Village operating property
    —       29,195       —  
Net assets of Kedron Village transferred to lender (excluding non-recourse debt)
    —       27,953       —  

 
 
F-35
 

 
Note 19. Related Parties
 
 
Subsidiaries of the Company provide certain management, construction management and other services to certain unconsolidated entities and to entities owned by certain members of the Company’s management.  During the years ended December 31, 2014, 2013 and 2012, we earned $65,000, $0, and $20,000, respectively from unconsolidated entities, and $20,000, $40,000 and $40,000, respectively from entities owned by certain members of management.
 
 
We reimburse an entity owned by certain members of our management for travel and related services.  During the years ended December 31, 2014, 2013 and 2012, amounts paid by the Company to this related entity were $0.3 million, $0.3 million, and $0.3 million, respectively.
 
 
Note 20. Subsequent Events
 
 
Dividend Declaration
 
 
Our Board of Trustees declared a cash distribution of $0.26 per common share for the fourth quarter of 2014.  This distribution was paid on January 13, 2015 to common shareholders and operating partnership unit holders of record as of January 6, 2015.
 
 
On February 5, 2015, the Board of Trustees declared a cash distribution of $0.2725 for the first quarter of 2015 to common shareholders and operating partnership unit holders of record as of April 6, 2015, which represents a 4.8% increase.
 
 
On February 5, 2015, the Board of Trustees declared a quarterly preferred share cash distribution of $0.515625 per Series A Preferred Share covering the distribution period from December 2, 2014 to March 1, 2015 payable to shareholders of record as of February 17, 2015.
 
 
City Center
 
 
     On February 13, 2015, we acquired our partner’s redeemable interests in the City Center operating property for $34.4 million that was paid in a combination of cash and Operating Partnership units.  We funded the majority of the cash portion with a $30 million draw on our unsecured revolving credit facility.

 
F-36
 


Kite Realty Group Trust
Consolidated Real Estate and Accumulated Depreciation
 

          Initial Cost    
Cost Capitalized
Subsequent to Acquisition/Development
   
Gross Carrying Amount
Close of Period
                         
               
Building &
         
Building &
         
Building &
         
Accumulated
   
Year Built /
   
Year
 
Name
 
Encumbrances
   
Land
   
Improvements
   
Land
   
Improvements
   
Land
   
Improvements
   
Total
   
Depreciation
   
Renovated
   
Acquired
 
                                                                   
  Operating Properties
                                                                 
                                                                   
12th Street Plaza *
  $ -     $ 2,624,000     $ 13,792,742     $ -     $ 156,305     $ 2,624,000     $ 13,949,047     $ 16,573,047     $ 1,769,519       1978/2003       2012  
54th & College  *
    -       2,671,501       -       -       -       2,671,501       -       2,671,501       -       2008    
NA
 
Bayonne Crossing
    45,000,000       47,809,419       44,297,012       -       -       47,809,419       44,297,012       92,106,431       971,800       2011       2014  
Bayport Commons
    12,543,013       7,868,354       21,904,423       -       1,325,220       7,868,354       23,229,643       31,097,997       4,215,310       2008    
NA
 
Beacon Hill Shopping Center
    6,691,350       3,293,393       13,528,339       -       500,121       3,293,393       14,028,460       17,321,853       2,755,575       2006    
NA
 
Beechwood Promenade *
    -       2,733,793       45,024,812       -       463,166       2,733,793       45,487,978       48,221,771       2,658,329       1961       2013  
Bell Oaks Centre
    6,547,500       1,230,349       12,746,077       -       -       1,230,349       12,746,077       13,976,426       323,659       2008       2014  
Bolton Plaza *
    -       3,733,426       18,994,585       -       -       3,733,426       18,994,585       22,728,011       5,598,193       1986/2014       N/A  
Boulevard Crossing
    13,028,887       4,385,525       9,733,163       -       1,860,882       4,385,525       11,594,045       15,979,570       3,802,071       2004    
NA
 
Bridgewater Marketplace *
    -       3,406,641       8,694,181       -       21,811       3,406,641       8,715,992       12,122,633       1,803,858       2008    
NA
 
Burlington Coat Factory *
    -       29,000       2,772,992       -       -       29,000       2,772,992       2,801,992       943,945       1992/2000       2000  
Burnt Store Promenade *
    -       5,112,244       6,242,900       -       34,508       5,112,244       6,277,408       11,389,652       671,798       1989       2013  
Cannery Corner
    -       6,266,907       10,558,916       -       -       6,266,907       10,558,916       16,825,823       264,218       2008       2014  
Castleton Crossing *
    -       9,750,000       29,399,817       10,951       70,039       9,760,951       29,469,856       39,230,807       2,893,638       1975       2013  
Centennial Center
    70,455,000       58,960,380       73,083,777       -       159,056       58,960,380       73,242,834       132,203,214       2,827,887       2002       2014  
Centennial Gateway
    29,975,000       5,305,419       49,401,592       -       -       5,305,419       49,401,592       54,707,011       1,363,228       2005       2014  
Centre at Panola  *
    2,608,165       1,985,975       8,203,018       -       108,126       1,985,975       8,311,144       10,297,119       2,839,757       2001       2004  
Centre Point Commons
    14,410,000       2,918,234       22,812,928       -       -       2,918,234       22,812,928       25,731,162       552,692       2007       2014  
City Center
    90,000,000       20,564,529       161,746,271       -       34,878       20,564,529       161,781,149       182,345,678       3,523,700       2004       2014  
Clay Marketplace *
    -       1,398,101       8,769,762       -       220       1,398,101       8,769,982       10,168,083       534,536       1966/2003       2013  
Cobblestone Plaza  *
    -       11,221,414       46,580,145       -       -       11,221,414       46,580,145       57,801,559       5,802,914       2011    
NA
 
Colonial Square
    18,140,000       11,743,004       31,584,200       -       -       11,743,004       31,584,200       43,327,204       629,951       2010       2014  
Cool Creek Commons
    16,625,704       6,062,351       14,830,282       -       850,965       6,062,351       15,681,247       21,743,598       5,198,510       2005    
NA
 
Cool Springs Market *
    -       12,684,400       23,694,836       -       141,569       12,684,400       23,836,405       36,520,805       3,051,082       1995       2013  
Cornelius Gateway
    -       1,249,447       3,655,222       -       -       1,249,447       3,655,222       4,904,669       773,032       2006    
NA
 
Cove Center  *
    -       2,035,770       19,884,204       -       419,658       2,035,770       20,303,862       22,339,632       5,230,117       1984/2008       2012  
Crossing at Killingly Commons
    33,000,000       21,999,344       35,264,186       -       -       21,999,344       35,264,186       57,263,530       876,522       2010       2014  
Delray Marketplace
    55,320,215       18,750,210       90,523,611       -       -       18,750,210       90,523,611       109,273,821       5,073,760       2013    
NA
 
DePauw University Bookstore & Café
    -       63,765       663,010       -       44,602       63,765       707,612       771,377       131,444       2012    
NA
 
Draper Crossing *
    -       9,054,258       28,542,019       -       -       9,054,258       28,542,019       37,596,277       864,216       2012       2014  
Draper Peaks
    23,905,106       11,998,150       48,933,199       -       -       11,998,150       48,933,199       60,931,349       1,245,576       2012       2014  
Eastern Beltway
    34,100,000       23,221,314       49,659,575       -       -       23,221,314       49,659,575       72,880,889       1,559,362       1998/2006       2014  
Eastgate
    14,410,000       4,073,392       21,362,521       -       -       4,073,392       21,362,521       25,435,913       695,391       2002       2014  
Eastgate Pavilion *
    -       8,122,283       19,806,778       -       656,751       8,122,283       20,463,529       28,585,812       6,974,254       1995       2004  
Eddy Street Commons
    24,339,621       1,900,000       38,029,845       -       216,883       1,900,000       38,246,728       40,146,728       6,301,727       2009    
NA
 
Estero Town Commons  *
    -       8,973,290       9,968,125       -       11,242       8,973,290       9,979,367       18,952,657       2,060,246       2006    
NA
 
Fishers Station
    7,456,520       3,735,807       11,822,475       -       488,515       3,735,807       12,310,990       16,046,797       5,522,347       1989       2004  

 
F-37
 



          Initial Cost    
Cost Capitalized
Subsequent to Acquisition/Development
   
Gross Carrying Amount
Close of Period
                         
               
Building &
         
Building &
         
Building &
         
Accumulated
   
Year Built /
   
Year
 
Name
 
Encumbrances
   
Land
   
Improvements
   
Land
   
Improvements
   
Land
   
Improvements
   
Total
   
Depreciation
   
Renovated
   
Acquired
 
                                                                   
  Operating Properties (continued)
                                                                 
                                                                   
Four Corner Square *
    -       8,599,045       34,161,996       -       -       8,599,045       34,161,996       42,761,041       5,090,074       1985/2013    
NA
 
Fox Lake Crossing  *
    -       5,684,724       9,324,308       -       239,828       5,684,724       9,564,136       15,248,860       2,895,305       2002       2005  
Geist Pavilion
    10,714,445       1,367,816       9,754,130       -       1,662,796       1,367,816       11,416,926       12,784,742       3,664,678       2006    
NA
 
Glendale Town Center *
    -       1,494,469       45,314,295       -       840,517       1,494,469       46,154,812       47,649,281       22,960,740       1958/2008       1999  
Greyhound Commons  *
    -       2,629,064       794,093       -       886,962       2,629,064       1,681,055       4,310,119       449,658       2005    
NA
 
Hamilton Crossing - Phase II & III *
    -       2,858,650       23,709,379       -       -       2,858,650       23,709,379       26,568,029       518,254       2008       2014  
Hitchcock Plaza *
    -       4,259,641       22,181,088       -       -       4,259,641       22,181,088       26,440,729       426,096       2006       2014  
Holly Springs Towne Center - Phase I *
    -       12,318,891       46,896,716       -       -       12,318,891       46,896,716       59,215,607       2,451,489       2013    
NA
 
Hunters Creek Promenade *
    -       8,335,007       12,880,296       -       327,379       8,335,007       13,207,675       21,542,682       614,335       1994       2013  
Indian River Square
    12,231,757       5,180,000       9,702,002       -       610,173       5,180,000       10,312,175       15,492,175       5,106,624       1997/2004       2005  
International Speedway Square *
    20,006,070       7,769,277       19,493,924       -       9,043,526       7,769,277       28,537,450       36,306,727       12,624,543       1999    
NA
 
King's Lake Square  *
    -       4,519,000       16,073,425       -       -       4,519,000       16,073,425       20,592,425       5,656,821       1986/2014       2003  
Kingwood Commons *
    -       5,715,450       31,035,180       -       -       5,715,450       31,035,180       36,750,630       1,841,705       1999       2013  
Lake City Commons
    5,200,000       4,692,804       12,491,009       -       -       4,692,804       12,491,009       17,183,813       309,892       2008       2014  
Lake Mary Plaza
    5,080,000       1,412,864       8,727,313       -       -       1,412,864       8,727,313       10,140,177       168,600       2009       2014  
Lakewood Promenade *
    -       1,783,240       25,804,668       -       192,099       1,783,240       25,996,767       27,780,007       1,824,600       1948/1998       2013  
Landstown Commons
    50,140,000       19,329,133       92,201,197       -       -       19,329,133       92,201,197       111,530,330       2,357,843       2007       2014  
Lima Marketplace
    8,383,000       4,702,753       15,737,999       -       -       4,702,753       15,737,999       20,440,752       402,365       2008       2014  
Lithia Crossing *
    -       3,064,698       10,074,676       -       4,860,083       3,064,698       14,934,759       17,999,457       2,195,618       1993/2003       2011  
Lowe's Plaza
    -       2,124,802       6,120,067       -       -       2,124,802       6,120,067       8,244,869       180,280       2007       2014  
Market Street Village  *
    -       9,764,381       18,745,417       -       2,031,839       9,764,381       20,777,256       30,541,637       6,933,912       1970/2004       2005  
Memorial Commons *
    -       1,567,816       14,656,445       -       -       1,567,816       14,656,445       16,224,261       281,065       2008       2014  
Merrimack Village Center
    5,445,000       1,921,079       12,798,403       -       -       1,921,079       12,798,403       14,719,482       324,353       2007       2014  
Miramar Square
    31,625,000       26,391,652       31,070,986       -       -       26,391,652       31,070,986       57,462,638       771,260       2008       2014  
Mullins Crossing
    20,917,206       10,582,161       42,410,267       -       -       10,582,161       42,410,267       52,992,428       1,469,274       2005       2014  
Naperville Marketplace
    9,163,148       5,364,101       12,187,580       -       -       5,364,101       12,187,580       17,551,681       2,711,342       2008    
NA
 
Northcrest Shopping Center
    15,780,000       4,043,847       34,060,143       -       -       4,043,847       34,060,143       38,103,990       667,603       2008       2014  
Northdale Promenade *
    -       1,718,254       23,155,139       -       133,548       1,718,254       23,288,687       25,006,941       1,902,783       1985/2002       2013  
Oleander Place *
    -       862,500       6,159,176       -       -       862,500       6,159,176       7,021,676       854,695       2012       2011  
Palm Coast Landing
    22,550,000       4,962,496       38,025,203       -       -       4,962,496       38,025,203       42,987,699       822,804       2010       2014  
Perimeter Woods
    33,330,000       35,793,431       27,292,148       -       -       35,793,431       27,292,148       63,085,579       560,097       2008       2014  
Pine Ridge Crossing
    16,872,920       5,639,675       17,209,720       -       962,058       5,639,675       18,171,778       23,811,453       4,328,935       1993       2006  
Plaza at Cedar Hill  *
    -       5,782,304       37,855,288       -       9,031,285       5,782,304       46,886,573       52,668,877       14,192,182       2000       2004  
Plaza Volente
    26,376,449       4,600,000       29,284,060       -       746,278       4,600,000       30,030,338       34,630,338       8,852,121       2004       2005  
Pleasant Hill Commons
    6,800,000       3,349,517       10,132,158       -       -       3,349,517       10,132,158       13,481,675       264,916       2008       2014  
Portofino Shopping Center *
    -       4,754,341       75,856,723       -       85,388       4,754,341       75,942,111       80,696,452       4,666,985       1999       2013  
Publix at Acworth
    6,776,903       1,356,601       8,240,778       38,778       1,080,514       1,395,379       9,321,292       10,716,671       2,772,544       1996       2004  

 
F-38
 


         
Initial Cost
    Cost Capitalized
Subsequent to Acquisition/Development
   
Gross Carrying Amount
Close of Period
                         
               
Building &
         
Building &
         
Building &
         
Accumulated
   
Year Built /
   
Year
 
Name
 
Encumbrances
   
Land
   
Improvements
   
Land
   
Improvements
   
Land
   
Improvements
   
Total
   
Depreciation
   
Renovated
   
Acquired
 
                                                                   
  Operating Properties (continued)
                                                                 
                                                                   
Publix at St. Cloud *
    -       2,734,813       11,826,104       -       -       2,734,813       11,826,104       14,560,917       382,600       2003       2014  
Publix at Woodruff  *
    -       1,783,100       7,344,028       -       151,724       1,783,100       7,495,752       9,278,852       1,659,870       1997       2012  
Rampart Commons
    12,323,789       1,136,133       31,574,624       -       -       1,136,133       31,574,624       32,710,757       189,052       1998       2014  
Rangeline Crossing *
    -       2,042,885       18,542,550       -       -       2,042,885       18,542,550       20,585,435       3,872,111       1986/2013    
NA
 
Riverchase
    10,123,752       3,888,945       11,821,085       -       1,197,296       3,888,945       13,018,381       16,907,326       3,175,556       1991/2001       2006  
Rivers Edge *
    -       5,646,522       31,572,937       -       -       5,646,522       31,572,937       37,219,459       4,466,040       2011       2008  
Saxon Crossing
    11,400,000       3,764,455       16,832,833       -       -       3,764,455       16,832,833       20,597,288       407,450       2009       2014  
Shoppes at Plaza Green  *
    -       3,748,801       24,934,758       -       105,126       3,748,801       25,039,884       28,788,685       3,044,024       2000       2012  
Shoppes of Eastwood *
    -       1,687,734       10,797,276       -       2,850       1,687,734       10,800,126       12,487,860       1,670,446       1997       2013  
Shops at Eagle Creek
    -       2,802,426       8,016,208       200,087       4,696,325       3,002,513       12,712,533       15,715,046       3,042,020       1998       2003  
Shops at Julington Creek
    4,785,000       2,371,633       8,022,651       -       -       2,371,633       8,022,651       10,394,284       217,868       2011       2014  
Shops at Moore
    21,300,000       8,030,227       33,547,186       -       -       8,030,227       33,547,186       41,577,413       1,044,278       2010       2014  
Silver Springs Pointe
    8,800,000       9,685,265       7,768,253       -       -       9,685,265       7,768,253       17,453,518       363,507       2001       2014  
South Elgin Commons *
    -       3,916,059       22,139,837       -       -       3,916,059       22,139,837       26,055,896       518,429       2011       2014  
Stoney Creek Commons  *
    -       627,964       4,599,186       -       5,789,740       627,964       10,388,926       11,016,890       1,706,975       2000    
NA
 
Sunland Towne Centre  *
    23,959,377       14,773,536       22,973,090       -       4,877,672       14,773,536       27,850,762       42,624,298       8,168,225       1996       2004  
Tarpon Bay Plaza  *
    -       4,273,217       24,483,027       -       162,780       4,273,217       24,645,807       28,919,024       5,556,819       2007    
NA
 
Temple Terrace *
    -       2,245,346       9,323,151       -       -       2,245,346       9,323,151       11,568,497       186,208       2012       2014  
The Corner
    14,750,000       3,772,219       24,641,588       -       -       3,772,219       24,641,588       28,413,807       483,812       2008       2014  
The Corner *
    -       303,916       3,926,794       -       1,485,456       303,916       5,412,250       5,716,166       3,144,277       1984/2003       1984  
The Landing at Tradition *
    -       18,504,693       46,412,092       -       -       18,504,693       46,412,092       64,916,785       1,365,733       2007       2014  
The Shops at Otty  *
    -       26,000       2,064,100       -       200,092       26,000       2,264,192       2,290,192       759,400       2004    
NA
 
Toringdon Market *
    -       5,448,400       9,749,864       -       16,220       5,448,400       9,766,084       15,214,484       770,591       2004       2013  
Traders Point
    43,560,181       9,443,449       37,312,837       -       532,207       9,443,449       37,845,044       47,288,493       11,646,613       2005    
NA
 
Traders Point II  *
    -       2,375,797       7,202,988       -       864,244       2,375,797       8,067,232       10,443,029       2,289,351       2005    
NA
 
Tradition Village Center *
    -       3,140,267       14,905,280       -       -       3,140,267       14,905,280       18,045,547       395,006       2006       2014  
Trussville Promenade *
    -       9,122,992       45,569,568       -       144,161       9,122,992       45,713,729       54,836,721       3,059,238       1999       2013  
University Town Center
    29,190,000       12,027,230       56,933,231       -       -       12,027,230       56,933,231       68,960,461       1,429,826       2009       2014  
Village at Bay Park
    9,183,298       8,247,510       11,053,037       -       -       8,247,510       11,053,037       19,300,547       435,581       2005       2014  
Village Walk
    6,860,000       2,554,140       12,435,511       -       -       2,554,140       12,435,511       14,989,651       244,898       2009       2014  
Waterford Lakes Village  *
    -       2,316,674       7,435,244       -       166,471       2,316,674       7,601,715       9,918,389       2,800,336       1997       2004  
Waxahachie Crossing
    7,750,000       1,411,007       16,344,635       -       -       1,411,007       16,344,635       17,755,642       393,439       2010       2014  
Westside Market *
    -       4,194,013       17,722,628       -       -       4,194,013       17,722,628       21,916,641       270,878       2013       2014  
Wheatland Towne Crossing *
    -       6,621,661       31,414,297       -       -       6,621,661       31,414,297       38,035,958       668,523       2012       2014  
Whitehall Pike
    6,256,979       3,688,857       6,109,115       -       120,742       3,688,857       6,229,857       9,918,714       3,998,607       1999    
NA
 
                                                                                         
   Total Operating Properties
    1,036,190,352       753,588,759       2,605,480,528       249,816       60,811,897       753,838,575       2,666,292,425       3,420,131,000       290,248,142                  

 
F-39
 

         
Initial Cost
    C ost Capitalized
Subsequent to Acquisition/Development
   
Gross Carrying Amount
Close of Period
                         
               
Building &
         
Building &
         
Building &
         
Accumulated
   
Year Built /
   
Year
 
Name
 
Encumbrances
   
Land
   
Improvements
   
Land
   
Improvements
   
Land
   
Improvements
   
Total
   
Depreciation
   
Renovated
   
Acquired
 
                                                                   
  Office Properties
                                                                 
                                                                   
Thirty South
    18,510,000       1,643,415       9,847,631       -       18,068,069       1,643,415       27,915,700       29,559,115       10,307,094       1905/2002       2001  
Union Station Parking Garage *
    -       903,627       2,649,798       -       611,974       903,627       3,261,772       4,165,399       1,301,017       1986       2001  
                                                                                         
   Total Office Properties
    18,510,000       2,547,042       12,497,429       -       18,680,043       2,547,042       31,177,472       33,724,514       11,608,111                  
                                                                                         
  Development and Redevelopment Properties
                                                                                 
                                                                                         
Courthouse Shadows  *
    -       4,998,974       14,543,800       -       1,020,151       4,998,974       15,563,951       20,562,925       3,605,028    
NA
   
NA
 
Gainesville Plaza  *
    -       5,437,373       18,236,531       -       5,778       5,437,373       18,242,309       23,679,682       2,864,432    
NA
   
NA
 
Hamilton Crossing
    12,456,141       5,672,477       9,381,772       -       839,563       5,672,477       10,221,335       15,893,812       3,240,104    
NA
   
NA
 
Holly Springs - Phase II  *
    -       10,567,043       7,315,162       -       -       10,567,043       7,315,162       17,882,205       -    
NA
   
NA
 
Parkside Town Commons - Phase I
    17,962,145       2,567,764       39,719,903       -       -       2,567,764       39,719,903       42,287,667       487,470    
NA
   
NA
 
Parkside Town Commons - Phase II
    46,064,943       6,957,266       58,091,357       -       -       6,957,266       58,091,357       65,048,623       205,891    
NA
   
NA
 
Tamiami Crossing *
    -       16,014,064       4,350,065       -       -       16,014,064       4,350,065       20,364,129       -    
NA
   
NA
 
                                                                                         
   Total Development and Redevelopment Properties
    76,483,229       52,214,961       151,638,590       -       1,865,492       52,214,961       153,504,082       205,719,043       10,402,925                  
                                                                                         
  Other **
                                                                                       
                                                                                         
Beacon Hill Shopping Center
    -       3,657,515       -       -       -       3,657,515       -       3,657,515       -    
NA
   
NA
 
Bridgewater Marketplace
    -       1,971,211       -       -       -       1,971,211       -       1,971,211       -    
NA
   
NA
 
Deerwood Lake *
    -       -       15,656,487       -       -       -       15,656,487       15,656,487       -    
NA
   
NA
 
Eagle Creek IV  *
    -       2,105,444       -       -       -       2,105,444       -       2,105,444       -    
NA
   
NA
 
Eddy Street Commons  *
    -       2,403,713       -       -       -       2,403,713       -       2,403,713       -    
NA
   
NA
 
Fox Lake Crossing II
    -       3,458,414       -       -       -       3,458,414       -       3,458,414       -    
NA
   
NA
 
KRG Development
    -       -       609,207       -       -       -       609,207       609,207       -    
NA
   
NA
 
KRG New Hill  *
    -       5,593,657       -       -       -       5,593,657       -       5,593,657       -    
NA
   
NA
 
KR Peakway
    -       6,032,552       -       -       -       6,032,552       -       6,032,552       -    
NA
   
NA
 
KRG Peakway
    -       16,321,834       -       -       -       16,321,834       -       16,321,834       -    
NA
   
NA
 
Pan Am Plaza
    -       8,901,806       -       -       -       8,901,806       -       8,901,806       -    
NA
   
NA
 
Parkside Town Commons - Phase III
    -       46,920       -       -       -       46,920       -       46,920       -    
NA
   
NA
 
                                                                                         
   Total Other
    -       50,493,066       16,265,694       -       -       50,493,066       16,265,694       66,758,760       -                  

 
F-40
 

 
         
Initial Cost
   
Cost Capitalized
Subsequent to Acquisition/Development
   
G ross Carrying Amount
Close of Period
                         
               
Building &
         
Building &
         
Building &
         
Accumulated
   
Year Built /
   
Year
 
Name
 
Encumbrances
   
Land
   
Improvements
   
Land
   
Improvements
   
Land
   
Improvements
   
Total
   
Depreciation
   
Renovated
   
Acquired
 
                                                                   
  Held for Sale Properties
                                                                 
                                                                   
Eastside Junction
    6,270,000       2,042,196       11,943,001       -       -       2,042,196       11,943,001       13,985,197       124,266       2008       2014  
Fairgrounds Crossing
    13,453,000       6,450,613       23,770,721       -       -       6,450,613       23,770,721       30,221,334       250,076       2011       2014  
Hawk Ridge *
    -       1,212,022       11,634,576       -       -       1,212,022       11,634,576       12,846,598       134,843       2008       2014  
Prattville Town Center
    15,930,000       4,068,900       29,000,302       -       -       4,068,900       29,000,302       33,069,202       271,597       2007       2014  
Regal Court
    23,900,000       21,103,656       29,331,584       -       -       21,103,656       29,331,584       50,435,240       305,858       2008       2014  
Walgreens Plaza
    4,650,000       1,517,283       13,516,751       -       -       1,517,283       13,516,751       15,034,034       77,926       2010       2014  
Whispering Ridge
    5,000,000       2,827,498       12,378,794       -       -       2,827,498       12,378,794       15,206,292       100,363       2008       2014  
                                                                                         
   Total Held for Sale Properties
    69,203,000       39,222,168       131,575,729       -       -       39,222,168       131,575,729       170,797,897       1,264,929                  
                                                                                         
Line of credit/Term Loan *
    390,000,000       -       -       -       -       -       -       -       -    
NA
   
NA
 
                                                                                         
   Grand Total
  $ 1,590,386,581     $ 898,065,997     $ 2,917,457,970     $ 249,816     $ 81,357,432     $ 898,315,812     $ 2,998,815,402     $ 3,897,131,214     $ 313,524,107                  


____________________
*
This property or a portion of the property is included as an Unencumbered Pool Property used in calculating the Company’s line of credit borrowing base.
   
**
This category generally includes land held for development.  We also have certain additional land parcels at our development and operating properties, which amounts are included elsewhere in this table.

 
F-41
 


 
Kite Realty Group Trust
Notes to Schedule III
Consolidated Real Estate and Accumulated Depreciation
(in thousands)
 
Note 1. Reconciliation of Investment Properties
 
 
The changes in investment properties of the Company for the years ended December 31, 2014, 2013, and 2012 are as follows:
 
 
   
2014
   
2013
   
2012
 
Balance, beginning of year
  $ 1,872,088     $ 1,390,213     $ 1,268,254  
Merger and Acquisitions
    2,128,278       419,080       76,531  
Consolidation of subsidiary
    —       —       33,701  
Improvements
    103,688       111,968       106,307  
Disposals
    (206,923 )     (49,173 )     (94,580 )
Balance, end of year
  $ 3,897,131     $ 1,872,088     $ 1,390,213  
 
 
The unaudited aggregate cost of investment properties for federal tax purposes as of December 31, 2014 was $2.9 billion.
 
 
Note 2. Reconciliation of Accumulated Depreciation
 
 
The changes in accumulated depreciation of the Company for the years ended December 31, 2014, 2013, and 2012 are as follows:
 
 
   
2014
   
2013
   
2012
 
Balance, beginning of year
  $ 229,286     $ 190,972     $ 174,167  
Depreciation expense
    103,155       49,392       37,429  
Disposals
    (18,917 )     (11,078 )     (20,624 )
Balance, end of year
  $ 313,524     $ 229,286     $ 190,972  
 
 
Depreciation of investment properties reflected in the statements of operations is calculated over the estimated original lives of the assets as follows:
 
 
Buildings
20-35 years
Building improvements
10-35 years
Tenant improvements
Term of related lease
Furniture and Fixtures
5-10 years

 
     All other schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the consolidated financial statements or notes thereto.

 
F-42
 

 

EXHIBIT INDEX
 

Exhibit No.
 
Description
 
Location
2.1
 
Agreement and Plan of Merger by and among Kite Realty Group Trust, KRG Magellan, LLC and Inland Diversified Real Estate Trust, Inc., dated February 9, 2014
 
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 February 11, 2014
         
3.1
 
Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended
 
Filed herewith
         
3.2
 
Second Amended and Restated Bylaws of the Company, as amended
 
Filed herewith
         
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
 
Form of share certificate evidencing the 8.250% Series A Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, per value $0.01 per share
 
Incorporate by reference to Exhibit 4.1 to Kite Realty Group Trust’s registration statement on Form 8-A filed on December 7, 2010
         
10.1
 
Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P., dated as of August 16, 2004
 
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 August  20, 2004
         
10.2
 
Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P., dated as of December 7, 2010
 
Incorporate by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on December 13, 2010
         
10.3
 
Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P.
 
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 March 12, 2012
         
         
10.4
 
Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P.
 
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 July 29, 2014
         
10.5
 
Executive Employment Agreement, dated as of July 28, 2014, by and between the Company and John A. Kite*
 
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 July 29, 2014
         
10.6
 
Executive Employment Agreement, dated as of July 28, 2014, by and between the Company and Thomas K. McGowan*
 
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 July 29, 2014
         
10.7
 
Executive Employment Agreement, dated as of July 28, 2014, by and between the Company and Daniel R. Sink*
 
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 July 29, 2014
         
10.8
 
Executive Employment Agreement, dated as of August 6, 2014, by and between the Company and Scott E. Murray*
 
Incorporated by reference to Exhibit 10.8 the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended September 30, 2014.
         
10.9
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Alvin E. Kite*
 
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 August  20, 2004

 
F-43
 


10.10
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and John A. Kite*
 
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 August  20, 2004
10.11
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Thomas K. McGowan*
 
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 August  20, 2004
         
10.12
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Daniel R. Sink*
 
Incorporated by reference to Exhibit 10.19 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.13
 
Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Scott E. Murray *
 
Filed herewith
         
10.14
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and William E. Bindley*
 
Incorporated by reference to Exhibit 10.20 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.15
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Michael L. Smith*
 
Incorporated by reference to Exhibit 10.21 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.16
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Eugene Golub*
 
Incorporated by reference to Exhibit 10.22 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.17
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Richard A. Cosier*
 
Incorporated by reference to Exhibit 10.23 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.18
 
Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Gerald L. Moss*
 
Incorporated by reference to Exhibit 10.24 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.19
 
Indemnification Agreement, dated as of November 3, 2008, by and between Kite Realty Group, L.P. and Darell E. Zink, Jr.*
 
Incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended September 30, 2008
         
10.20
 
Indemnification Agreement, dated as of March 8, 2013, by and between Kite Realty Group, L.P. and Victor J. Coleman *
 
Incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of Kite Realty Group Trust for the period ended December 31, 2013
         
10.21
 
Indemnification Agreement, dated as of March7, 2014, by and between Kite Realty Group, L.P. and Christie B. Kelly *
 
Incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Kite Realty Group Trust for the year ended December 31, 2014
         
10.22
 
Indemnification Agreement, dated as of March 7, 2014, by and between Kite Realty Group, L.P. and David R. O’Reilly *
 
Incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K of Kite Realty Group Trust for the year ended December 31, 2014
         
10.23
 
Indemnification Agreement, dated as of March 7, 2014, by and between Kite Realty Group, L.P. and Barton R. Peterson *
 
Incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of Kite Realty Group Trust for the year ended December 31, 2014

 
F-44
 

10.24
 
Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Lee A. Daniels *
 
Filed herewith
         
10.25
 
Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Gerald W. Grupe *
 
Filed herewith
         
10.26
 
Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Charles H. Wurtzebach *
 
Filed herewith
         
10.27
 
Kite Realty Group Trust Equity Incentive Plan, as amended*
 
Incorporated by reference to the Kite Realty Group Trust  definitive Proxy Statement, filed with the SEC on April 10, 2009
         
10.28
 
Kite Realty Group Trust Executive Bonus Plan*
 
Incorporated by reference to Exhibit 10.27 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.29
 
Kite Realty Group Trust 2008 Employee Share Purchase Plan*
 
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 May 12, 2008
         
10.30
 
Registration Rights Agreement, dated as of August 16, 2004, by and among the Company, Alvin E. Kite, Jr., John A. Kite, Paul W. Kite, Thomas K. McGowan, Daniel R. Sink, George F. McMannis, Mark Jenkins, C. Kenneth Kite, David Grieve and KMI Holdings, LLC
 
Incorporated by reference to Exhibit 10.32 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August  20, 2004
         
10.31
 
Amendment No. 1 to Registration Rights Agreement, dated August 29, 2005, by and among the Company and the other parties listed on the signature page thereto
 
Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended September 30, 2005
         
10.32
 
Tax Protection Agreement, dated August 16, 2004, by and among the Company, Kite Realty Group, L.P., Alvin E. Kite, Jr., John A. Kite, Paul W. Kite, Thomas K. McGowan and C. Kenneth Kite
 
Incorporated by reference to Exhibit 10.33 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 20, 2004
         
10.33
 
Form of 2014 Outperformance LTIP Unit Award Agreement
 
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 July 29, 2014
         
10.34
 
Form of Nonqualified Share Option Agreement under 2013 Equity Incentive Plan*
 
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 May 14, 2013
         
10.35
 
Form of Restricted Share Agreement under 2013 Equity Incentive Plan*
 
Incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 14, 2013
         
10.36
 
Schedule of Non-Employee Trustee Fees and Other Compensation*
 
Incorporated by reference to Exhibit 10.11 of the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended September 30, 2014

 
F-45
 


10.37
 
Kite Realty Group Trust Trustee Deferred Compensation Plan*
 
Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended June 30, 2006
         
10.38
 
Fourth Amended and Restated Credit Agreement, dated as of July 1, 2014, by and among the Operating Partnership, KeyBank National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent with respect to the Revolving Facility, Wells Fargo Bank, National Association, as Syndication Agent with respect to the Term Loan, Wells Fargo Bank, National Association and U.S. Bank National Association, as Co-Documentation Agents with respect to the Revolving Facility, JPMorgan Chase Bank, N.A., Bank of America, N.A. and U.S. Bank National Association, as Co-Documentation Agents with respect to the Term Loan, KeyBanc Capital Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Lead Arrangers with respect to the Revolving Facility, KeyBanc Capital Markets Inc. and Wells Fargo Securities, LLC, as Co-Lead Arrangers with respect to the Term Loan, and the other 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 July 8, 2014
         
10.39
 
Third Amended and Restated Guaranty, dated as of July 1, 2014, by KRG Magellan, LLC and certain subsidiaries of the Operating Partnership 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 July 8, 2014
         
10.40
 
Springing Guaranty, dated as of July 1, 2014, by the Company
 
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 July 8, 2014
         
10.41
 
Term Loan Agreement, dated as of April 30, 2012, by and among the Operating Partnership, the Company, KeyBank National Association, as Administrative Agent, Wells Fargo Bank, National Association, as Syndication Agent, the Huntington National Bank, as Documentation Agent, Keybanc Capital Markets and Wells Fargo Securities, LLC, as Joint Bookrunners and Joint Lead Arrangers, and the other 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 May 4, 2012
         
10.42
 
First Amendment to Term Loan Agreement, dated as of February 26, 2013, by and among the Operating Partnership, the Company, certain subsidiaries of the Operating Partnership party thereto, KeyBank National Association, as a lender and as Administrative Agent, and the other 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 March 4, 2013
         
10.43
 
Second Amendment to Term Loan Agreement, dated as of August 21, 2013, by and among the Operating Partnership, the Company, certain subsidiaries of the Operating Partnership party thereto, KeyBank National Association, as a lender and as Administrative Agent, and the other 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 August 27, 2013
         
10.44
 
Guaranty, dated as of April 30, 2012, by the Company and certain subsidiaries of the Operating Partnership party thereto
 
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 May 4, 2012

 
F-46
 

10.45
 
Purchase and Sale Agreement, dated September 16, 2014, by and among Inland Real Estate Income Trust, Inc. and the subsidiaries of Kite Realty Group Trust 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 September 22, 2014
         
12.1
 
Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends
 
Filed herewith
         
21.1
 
List of Subsidiaries
 
Filed herewith
         
23.1
 
Consent of Ernst & Young LLP
 
Filed herewith
         
31.1
 
Certification of principal executive officer 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 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 pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
Filed herewith
         
101.INS
 
XBRL Instance Document
 
Filed herewith
         
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
Filed herewith
         
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
Filed herewith
         
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
Filed herewith
         
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
Filed herewith
         
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
Filed herewith
         


____________________
* Denotes a management contract or compensatory, plan contract or arrangement.

 
F-47
 

 


 
 
Exhibit 3.1
 
KITE REALTY GROUP TRUST
 
ARTICLES OF AMENDMENT AND RESTATEMENT OF
DECLARATION OF TRUST

 
Kite Realty Group Trust, a Maryland real estate investment trust (the “Trust”) under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (“Title 8”), desires to amend and restate its Declaration of Trust (as so amended and restated, the “Declaration of Trust”).  The amendment to and restatement of the Declaration of Trust of the Trust as herein set forth has been duly approved and advised by the Board of Trustees by majority vote thereof and approved by the sole shareholder of the Trust as required by law.  The following provisions are all the provisions of the Declaration of Trust as hereby amended and restated:
 
ARTICLE I
FORMATION
 
The Trust is a real estate investment trust within the meaning of Title 8.  The Trust shall not be deemed to be a general partnership, limited partnership, joint venture, joint stock company or a corporation (but nothing herein shall preclude the Trust from being treated for tax purposes as an association under the Internal Revenue Code of 1986, as amended (the “Code”)).
 
ARTICLE II
NAME
 
The name of the Trust is:  Kite Realty Group Trust.
 
The Board of Trustees of the Trust (the “Board of Trustees” or “Board”) may change the name of the Trust without approval of the shareholders.
 
ARTICLE III
PURPOSES AND POWERS
 
Section 3.1   Purposes .  The purposes for which the Trust is formed are to engage in any lawful act or activity, including, without limitation or obligation, to invest in and to acquire, hold, manage, administer, control and dispose of property (including mortgages) including, without limitation or obligation, engaging in business as a real estate investment trust (“REIT”) under the Code.
 
Section 3.2   Powers .  The Trust shall have all of the powers granted to real estate investment trusts by Title 8 and all other powers set forth in the Declaration of Trust that are not inconsistent with law and are appropriate to promote and attain the purposes set forth in the Declaration of Trust.
 

 
ARTICLE IV
PRINCIPAL OFFICE IN STATE AND RESIDENT AGENT
 
The address of the principal office of the Trust in the State of Maryland is c/o CSC Lawyers Incorporating Service Company, 11 E. Chase Street, Baltimore, Maryland 21202.  The Trust may have such offices or places of business within or outside the State of Maryland as the Board of Trustees may from time to time determine.
 
 
 
 
 
 
The name of the resident agent of the Trust in the State of Maryland is CSC Lawyers Incorporating Service Company, whose post office address is 11 E. Chase Street, Baltimore, Maryland 21202.  The resident agent is a citizen of and resides in the State of Maryland.
 
ARTICLE V
BOARD OF TRUSTEES
 
Section 5.1   Powers .  Subject to any express limitations contained in the Declaration of Trust or in the Bylaws, (a) the business and affairs of the Trust shall be managed under the direction of the Board of Trustees and (b) the Board shall have full, exclusive and absolute power, control and authority over any and all property of the Trust.  The Board may take any action as in its sole judgment and discretion is necessary or appropriate to conduct the business and affairs of the Trust.  The Declaration of Trust shall be construed with the presumption in favor of the grant of power and authority to the Board.  Any construction of the Declaration of Trust or determination made in good faith by the Board concerning its powers and authority hereunder shall be conclusive.  The enumeration and definition of particular powers of the Trustees included in the Declaration of Trust or in the Bylaws shall in no way be limited or restricted by reference to or inference from the terms of this or any other provision of the Declaration of Trust or the Bylaws or construed or deemed by inference or otherwise in any manner to exclude or limit the powers conferred upon the Board or the Trustees under the general laws of the State of Maryland or any other applicable laws.
 
The Board shall have the authority to cause the Trust to elect to qualify for federal income tax treatment as a REIT.  Following such election, if the Board determines that it is no longer in the best interests of the Trust to continue to be qualified as a REIT, the Board may revoke or otherwise terminate the Trust’s REIT election pursuant to Section 856(g) of the Code.
 
The Board, without any action by the shareholders of the Trust, shall have and may exercise, on behalf of the Trust, without limitation, the power to determine that compliance with any restriction or limitations on ownership and transfers of shares of the Trust’s beneficial interest set forth in Article VII of the Declaration of Trust is no longer required in order for the Trust to qualify as a REIT; to adopt Bylaws of the Trust, which may thereafter be amended or repealed as provided therein; to elect officers in the manner prescribed in the Bylaws; to solicit proxies from holders of shares of beneficial interest of the Trust; and to do any other acts and deliver any other documents necessary or appropriate to the foregoing powers.
 
Section 5.2   Number .  The number of Trustees (hereinafter the “Trustees”) shall initially be two (2), and may thereafter be increased to a maximum of thirteen (13) or decreased to not more than one (1).   Notwithstanding the foregoing, if for any reason any or all of the Trustees cease to be Trustees, such event shall not terminate the Trust or affect the Declaration of Trust or the powers of the remaining Trustees.  The names and addresses of the initial two Trustees, who shall serve until the first annual meeting of shareholders and until their successors are duly elected and qualify, or until such later time as determined by the Board of Trustees as hereinafter provided, are:
 
Name                                                  Address

Alvin E. Kite, Jr.                                  c/o 30 S. Meridian Street
Suite 1100
Indianapolis, IN 46204

John A. Kite                                         c/o 30 S. Meridian Street
Suite 1100
Indianapolis, IN 46204
 
 
 
 
 
 
      The Trustees may increase the number of Trustees and fill any vacancy, whether resulting from an increase in the number of Trustees or otherwise, on the Board of Trustees.  Election of Trustees by shareholders shall require the vote and be in accordance with the procedures set forth in the Bylaws.
 
It shall not be necessary to list in the Declaration of Trust the names and addresses of any Trustees hereinafter elected.
 
Section 5.3   Resignation, Removal or Death .  Any Trustee may resign by written notice to the Board, effective upon execution and delivery to the Trust of such written notice or upon any future date specified in the notice.  Subject to the rights of holders of one or more classes or series of Preferred Shares, as hereinafter defined, to elect one or more Trustees, a Trustee may be removed at any time, but only with cause, at a meeting of the shareholders, by the affirmative vote of the holders of not less than two thirds of the Shares then outstanding and entitled to vote generally in the election of Trustees.
 
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
 
Section 6.1   Authorized Shares .  The beneficial interest of the Trust shall be divided into shares of beneficial interest (the “Shares”).  The Trust has authority to issue 200,000,000 common shares of beneficial interest, $0.01 par value per share (“Common Shares”),   and 40,000,000 preferred shares of beneficial interest, $0.01 par value per share (“Preferred Shares”).
 
Section 6.2   Common Shares .  Subject to the provisions of Article VII, each Common Share shall entitle the holder thereof to one vote on each matter upon which holders of Common Shares are entitled to vote.  The Board of Trustees may reclassify any unissued Common Shares from time to time in one or more classes or series of common shares or preferred shares.
 
Section 6.3   Preferred Shares .  The Board of Trustees may classify any unissued Preferred Shares and reclassify any previously classified but unissued Preferred Shares of any series from time to time, in one or more series of common shares or preferred shares.
 
Section 6.4   Classified or Reclassified Shares .  Prior to issuance of classified or reclassified Shares of any class or series, the Board of Trustees by resolution shall: (a) designate that class or series to distinguish it from all other classes and series of Shares; (b) specify the number of Shares to be included in the class or series; (c) set, subject to the provisions of Article VII and subject to the express terms of any class or series of Shares outstanding at the time, the preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms and conditions of redemption for each class or series; and (d) cause the Trust to file articles supplementary with the Maryland State Department of Assessments and Taxation (the “SDAT”).  Any of the terms of any class or series of Shares set pursuant to clause (c) of this Section 6.4 may be made dependent upon facts ascertainable outside the Declaration of Trust (including the occurrence of any event, including a determination or action by the Trust or any other person or body) and may vary among holders thereof, provided that the manner in which such facts or variations shall operate upon the terms of such class or series of Shares is clearly and expressly set forth in the articles supplementary filed with the SDAT.
 
 
 
 
 
Section 6.5   Authorization by Board of Share Issuance .  The Board of Trustees may authorize, without approval of any shareholder, the issuance from time to time of Shares of any class or series, whether now or hereafter authorized, or securities or rights convertible into Shares of any class or series, whether now or hereafter authorized, for such consideration (whether in cash, property, past or future services, obligation for future payment or otherwise) as the Board of Trustees may deem advisable or in the case of a share dividend or share split, subject to such restrictions or limitations, if any, as may be set forth in the Declaration of Trust or the Bylaws.
 
Section 6.6   Dividends and Distributions .  The Board of Trustees may from time to time authorize and declare to shareholders such dividends or distributions in cash or other assets of the Trust or in securities of the Trust or from any other source as the Board of Trustees in its discretion shall determine.  The Board of Trustees shall endeavor to declare and pay such dividends and distributions as shall be necessary for the Trust to qualify as a REIT under the Code; however, shareholders shall have no right to any dividend or distribution unless and until authorized, declared and publicly disclosed by the Board.  The exercise of the powers and rights of the Board of Trustees pursuant to this Section 6.6 shall be subject to the provisions of any class or series of Shares at the time outstanding.
 
Section 6.7   Transferable Shares; Preferential Dividends . Notwithstanding any other provision in the Declaration of Trust, no determination shall be made by the Board of Trustees nor shall any transaction be entered into by the Trust that would cause any Shares or other beneficial interest in the Trust not to constitute “transferable shares” or “transferable certificates of beneficial interest” under Section 856(a)(2) of the Code or that would cause any distribution to constitute a preferential dividend as described in Section 562(c) of the Code.
 
Section 6.8   General Nature of Shares .  All Shares shall be personal property entitling the shareholders only to those rights provided in the Declaration of Trust.  The shareholders shall have no interest in the property of the Trust and shall have no right to compel any partition, division, dividend or distribution of the Trust or of the property of the Trust.  The death of a shareholder shall not terminate the Trust.  The Trust is entitled to treat as shareholders only those persons in whose names Shares are registered as holders of Shares on the share ledger of the Trust.
 
Section 6.9   Fractional Shares .  The Trust may, without the consent or approval of any shareholder, issue fractional Shares, eliminate a fraction of a Share by rounding up or down to a full Share, arrange for the disposition of a fraction of a Share by the person entitled to it, or pay cash for the fair value of a fraction of a Share.
 
Section 6.10   Divisions and Combinations of Shares .  Subject to an express provision to the contrary in the terms of any class or series of beneficial interest hereafter authorized, the Board of Trustees shall have the power to divide or combine the outstanding shares of any class or series of beneficial interest, without a vote of shareholders.
 
Section 6.11   Declaration of Trust and Bylaws .  All persons who shall acquire a Share shall acquire the same subject to the provisions of the Declaration of Trust and the Bylaws.
 
ARTICLE VII
RESTRICTION ON TRANSFER AND OWNERSHIP OF SHARES
 
Section 7.1   Definitions .  For the purpose of this Article VII, the following terms shall have the following meanings:
 
 
 
 
 
Beneficial Ownership .  The term “Beneficial Ownership” shall mean ownership of Shares by a Person, whether the interest in Shares is held directly or indirectly (including by a nominee), and shall include interests that would be treated as owned through the application of Section 544 of the Code, as modified by Sections 856(h)(1)(B) and 856(h)(3) of the Code.  The terms “Beneficial Owner,” “Beneficially Owns” and “Beneficially Owned” shall have the correlative meanings.
 
Business Day .  The term “Business Day” shall mean any day, other than a Saturday or Sunday, that is neither a legal holiday nor a day on which banking institutions in New York, New York are authorized or required by law, regulation or executive order to close.
 
Charitable Beneficiary .  The term “Charitable Beneficiary” shall mean one or more beneficiaries of the Charitable Trust as determined pursuant to Section 7.3.7, provided that each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) and 170(c)(2) of the Code.
 
Charitable Trust .  The term “Charitable Trust” shall mean any trust provided for in Section 7.2.1(b)(i) and Section 7.3.1.
 
Charitable Trustee .  The term “Charitable Trustee” shall mean the Person unaffiliated with the Trust and a Prohibited Owner, that is appointed by the Trust to serve as trustee of the Charitable Trust.
 
Code .  The term “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.
 
Constructive Ownership.   The term “Constructive Ownership” shall mean ownership of Shares by a Person who is or would be treated as an owner of such Shares either actually or constructively through the application of Section 318 of the Code, as modified by Section 856(d)(5) of the Code. The terms “Constructive Owner,” “Constructively Own,” “Constructively Owns” and “Constructively Owned” shall have the correlative meanings.
 
Declaration of Trust .  The term “Declaration of Trust” shall mean this Amended and Restated Declaration of Trust as filed for record with the SDAT, and any amendments and supplements thereto.
 
Designated Investment Entity .  The term “Designated Investment Entity” shall mean either (i) a pension trust that qualifies for look-through treatment under Section 856(h) of the Code, (ii) an entity that qualifies as a regulated investment company under Section 851 of the Code,  or (iii) a Qualified Investment Manager;   provided that each beneficial owner of such entity (or beneficial owner of the Shares held by such entity) would satisfy the Ownership Limit if such beneficial owner owned directly its proportionate share of the Shares that are held by such Designated Investment Entity.
 
Designated Investment Entity Limit . The term “Designated Investment Entity Limit” shall mean with respect to the Common Shares, 9.8% (in value or number of shares, whichever is more restrictive) of the outstanding Common Shares of the Trust.
 
Excepted Holder .  The term “Excepted Holder” shall mean Alvin E. Kite, Jr., John A. Kite, Paul W. Kite and any Person who is or would be a Beneficial Owner or Constructive Owner of Common Shares as a result of the Beneficial Ownership or Constructive Ownership of Common Shares by any of Alvin E. Kite, Jr., John A. Kite or Paul W. Kite (collectively, the “Excepted Holders”).
 
 
 
 
 
 
Excepted Holder Limit .  The term “Excepted Holder Limit” shall mean as follows:  no Excepted Holder, or any Person whose ownership of Common Shares would cause an Excepted Holder to be considered to Beneficially Own such Common Shares, nor any Person who would be considered to Beneficially Own Shares Beneficially Owned by an Excepted Holder shall be permitted to Beneficially Own Shares if, as a result of such Beneficial Ownership, (A) any single Excepted Holder who is considered an individual for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than 21.5% (by number or value whichever is more restrictive) of the outstanding Common Shares (as determined for purposes of Section 542(a)(2) and Section 856(a) of the Code), (B) any two Excepted Holders who are considered individuals for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than 28.5% (by number or value whichever is more restrictive) of the outstanding Common Shares (as determined for purposes of Section 542(a)(2) and Section 856(a)(6) of the Code), (C) any three Excepted Holders who are considered individuals for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than 35.5% (by number or value whichever is more restrictive) of the outstanding Common Shares (as determined for purposes of Section 542(a)(2) and Section 856(a)(6) of the Code), (D) any four Excepted Holders who are considered individuals for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than 42.5% (by number or value whichever is more restrictive) of the outstanding Common Shares (as determined for purposes of Section 542(a)(2) and Section 856(a)(6) of the Code), or (E) any five Excepted Holders who are considered individuals for purposes of Section 542(a)(2) of the Code would be considered to Beneficially Own more than 49.5% (by number or value whichever is more restrictive) of the outstanding Common Shares (as determined for purposes of Section 542(a)(2) and Section 856(a)(6) of the Code).
 
Initial Date .  The term “Initial Date” shall mean the date of the consummation of the initial public offering of the Trust (but only, with respect to such date, from and after such consummation).
 
Market Price .  The term “Market Price” on any date shall mean, with respect to any class or series of outstanding Shares, the Closing Price for such Shares on such date.  The “Closing Price” on any date shall mean the last sale price for such Shares, regular way, or, in case no such sale takes place on such day, the average of the closing bid and asked prices, regular way, for such Shares, in either case as reported in the principal consolidated transaction reporting system with respect to securities listed or admitted to trading on the NYSE or, if such Shares are not listed or admitted to trading on the NYSE, as reported on the principal consolidated transaction reporting system with respect to securities listed on the principal national securities exchange on which such Shares are listed or admitted to trading or, if such Shares are not listed or admitted to trading on any national securities exchange, the last quoted price, or, if not so quoted, the average of the high bid and low asked prices in the over-the-counter market, as reported by the National Association of Securities Dealers, Inc. Automated Quotation System or, if such system is no longer in use, the principal other automated quotation system that may then be in use or, if such Shares are not quoted by any such organization, the average of the closing bid and asked prices as furnished by a professional market maker making a market in such Shares selected by the Board of Trustees or, in the event that no trading price is available for such Shares, the fair market value of Shares, as determined in good faith by the Board of Trustees.
 
NYSE .  The term “NYSE” shall mean The New York Stock Exchange.
 
Ownership Limit .  The term “Ownership Limit” shall mean (i) with respect to the Common Shares, 7% (in value or number of shares, whichever is more restrictive) of the outstanding Common Shares of the Trust; and (ii) with respect to any class or series of Preferred Shares, 9.8% (in value or number of Shares, whichever is more restrictive) of the outstanding shares of such class or series of Preferred Shares of the Trust.
 
 
 
 
 
 
Person .  The term “Person” shall mean an individual, corporation, partnership, estate, trust (including a trust qualified under Sections 401(a) or 501(c)(17) of the Code), a portion of a trust permanently set aside for or to be used exclusively for the purposes described in Section 642(c) of the Code, association, private foundation within the meaning of Section 509(a) of the Code, joint stock company or other entity and also includes a group as that term is used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
 
Prohibited Owner .  The term “Prohibited Owner” shall mean, with respect to any purported Transfer, any Person who, but for the provisions of Section 7.2.1, would Beneficially Own Shares, and if appropriate in the context, shall also mean any Person who would have been the record owner of Shares that the Prohibited Owner would have so owned.
 
Qualified Investment Manager .  The term “Qualified Investment Manager” shall mean an entity  (i) who for compensation engages in the business of advising others as to the value of securities or as to the advisability of investing in, purchasing, or selling securities; (ii) who purchases securities in the ordinary course of its business and not with the purpose or effect of changing or influencing control of the Trust, nor in connection with or as a participant in any transaction having such purpose or effect, including any transaction subject to Rule 13d-3(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”); and (iii) who has or shares voting power and investment power within the meaning of Rule 13d-3(a) under the Exchange Act.  A Qualified Investment Manager shall be deemed to beneficially own all Common Shares beneficially owned by each of its affiliates, after application of the beneficial ownership rules under Section 13(d)(3) of the Exchange Act; provided such affiliate meets the requirements set forth in the preceding clause (ii).
 
REIT .  The term “REIT” shall mean a real estate investment trust within the meaning of Section 856 of the Code.
 
Restriction Termination Date .  The term “Restriction Termination Date” shall mean the first day after the Initial Date on which the Board of Trustees determines that it is no longer in the best interests of the Trust to attempt to, or continue to, qualify as a REIT or that compliance with the restrictions and limitations on Beneficial Ownership and Transfers of Shares set forth herein is no longer required in order for the Trust to qualify as a REIT.
 
SDAT .  The term “SDAT” shall mean the State Department of Assessments and Taxation of Maryland.
 
Transfer .  The term “Transfer” shall mean any issuance, sale, transfer, gift, assignment, devise or other disposition, as well as any other event that causes any Person to acquire Beneficial Ownership or any agreement to take any such actions or cause any such events, of Shares or the right to vote or receive dividends or distributions on Shares, including (a) a change in the capital structure of the Trust, (b) a change in the relationship between two or more Persons which causes a change in ownership of Shares by application of Section 544 of the Code, as modified by Section 856(h) of the Code, (c) the granting or exercise of any option or warrant (or any disposition of any option or warrant), pledge, security interest, or similar right to acquire Shares, (d) any disposition of any securities or rights convertible into or exchangeable for Shares or any interest in Shares or any exercise of any such conversion or exchange right and (e) Transfers of interests in other entities that result in changes in Beneficial Ownership of Shares; in each case, whether voluntary or involuntary, whether owned of record, Beneficially Owned and whether by operation of law or otherwise.  The terms “Transferring” and “Transferred” shall have the correlative meanings.
 
 
 
 
 
 
Section 7.2   Shares .
 
Section 7.2.1   Ownership Limitations .  During the period commencing on the Initial Date and prior to the Restriction Termination Date:
 
(a)            Basic Restrictions .
 
(i)           (1)  No Person shall Beneficially Own or Constructively Own Common Shares in excess of the Ownership Limit, other than (A) an Excepted Holder, which shall not Beneficially Own or Constructively Own Common Shares in excess of the Excepted Holder Limit for such Excepted Holder, and (B) a Designated Investment Entity, which shall not Beneficially Own or Constructively Own Common Shares in excess of the Designated Investment Entity Limit; and
 
(2)  no Person shall Beneficially Own or Constructively Own Preferred Shares in excess of the Ownership Limit.
 
(ii)           No Person shall Beneficially Own or Constructively Own Shares to the extent that (1) such Beneficial Ownership of Shares would result in the Trust being “closely held” within the meaning of Section 856(h) of the Code (without regard to whether the ownership interest is held during the last half of a taxable year), (2) such Beneficial Ownership or Constructive Ownership of Shares would result in the Trust owning (directly or indirectly) an interest in a tenant that is described in Section 856(d)(2)(B) of the Code if the income derived by the Trust (either directly or indirectly through one or more partnerships or limited liability companies) from such tenant for the taxable year of the Trust during which such determination is being made would reasonably be expected to equal or exceed the lesser of (a) one percent (1%) of  the Trust’s gross income (as determined for purposes of Section 856(c) of the Code), or (b) an amount that would cause the Trust to fail to satisfy any of the gross income requirements of Section 856(c) of the Code), or (3) such Beneficial Ownership or Constructive Ownership of Shares would result in the Trust otherwise failing to qualify as a REIT.
 
 (iii)           No Person shall Transfer any Shares if, as a result of the Transfer, the Shares would be beneficially owned by less than 100 Persons (determined without reference to the rules of attribution under Section 544 of the Code).  Subject to Section 7.4 and notwithstanding any other provisions contained herein, any Transfer of Shares (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) that, if effective, would result in Shares being beneficially owned by less than 100 Persons (determined under the principles of Section 856(a)(5) of the Code) shall be void ab initio , and the intended transferee shall acquire no rights in such Shares.
 
(b)            Transfer in Trust .  If any Transfer of Shares (whether or not such Transfer is the result of a transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system) occurs which, if effective, would result in any Person Beneficially Owning or Constructively Owning Shares in violation of Section 7.2.1(a)(i) or (ii),
 
(i)           then that number of Shares the Beneficial Ownership or Constructive Ownership of which otherwise would cause such Person to violate Section 7.2.1(a)(i) or (ii) (rounded up to the nearest whole Share) shall be automatically transferred to a Charitable Trust for the benefit of a Charitable Beneficiary, as described in Section 7.3, effective as of the close of business on the Business Day prior to the date of such Transfer, and such Person shall acquire no rights in such Shares; or
 
 
 
 
 
 
(ii)           if the transfer to the Charitable Trust described in clause (i) of this sentence would not be effective for any reason to prevent the violation of Section 7.2.1(a)(i) or (ii), then the Transfer of that number of Shares that otherwise would cause any Person to violate Section 7.2.1(a)(i) or (ii) shall be void ab initio , and the intended transferee shall acquire no rights in such Shares.
 
Section 7.2.2   Remedies for Breach .  If the Board of Trustees or any duly authorized committee thereof shall at any time determine in good faith that a Transfer or other event has taken place that results in a violation of Section 7.2.1 or that a Person intends to acquire or has attempted to acquire Beneficial Ownership of any Shares in violation of Section 7.2.1 (whether or not such violation is intended), the Board of Trustees or a committee thereof shall take such action as it deems advisable to refuse to give effect to or to prevent such Transfer or other event, including, without limitation, causing the Trust to redeem Shares, refusing to give effect to such Transfer on the books of the Trust or instituting proceedings to enjoin such Transfer or other event; provided , however , that any Transfer or attempted Transfer or other event in violation of Section 7.2.1 shall automatically result in the transfer to the Charitable Trust described above, and, where applicable, such Transfer (or other event) shall be void ab initio as provided above irrespective of any action (or non-action) by the Board of Trustees or a committee thereof.
 
Section 7.2.3   Notice of Restricted Transfer .  Any Person who acquires or attempts or intends to acquire Beneficial or Constructive Ownership of Shares that will or may violate Section 7.2.1(a), or any Person who would have owned Shares that resulted in a transfer to the Charitable Trust pursuant to the provisions of Section 7.2.1(b), shall immediately give written notice to the Trust of such event, or in the case of such a proposed or attempted transaction, shall give at least 15 days prior written notice, and shall provide to the Trust such other information as the Trust may request in order to determine the effect, if any, of such acquisition or ownership on the Trust’s status as a REIT.
 
Section 7.2.4   Owners Required To Provide Information .  From the Initial Date and prior to the Restriction Termination Date:
 
(a)           every owner of more than five percent (or such lower percentage as required by the Code or the Treasury Regulations promulgated thereunder) of the outstanding Shares, within 30 days after the end of each taxable year, shall give written notice to the Trust stating the name and address of such owner, the number of Shares Beneficially Owned and a description of the manner in which such Shares are held; provided, that a shareholder of record who holds outstanding Shares as nominee for another Person, which other Person is required to include in gross income the dividends or distributions received on such Shares (an “Actual Owner”), shall give written notice to the Trust stating the name and address of such Actual Owner and the number of Shares of such Actual Owner with respect to which the shareholder of record is nominee.  Each owner shall provide to the Trust such additional information as the Trust may request in order to determine the effect, if any, of such Beneficial Ownership on the Trust’s status as a REIT and to ensure compliance with the Ownership Limit, Excepted Holder Limit or Designated Investment Entity Limit applicable to such owner; and
 
(b)           each Person who is a Beneficial Owner of Shares and each Person (including the shareholder of record) who is holding Shares for a Beneficial Owner shall provide to the Trust such information as the Trust may request, in good faith, in order to determine the Trust’s status as a REIT and to comply with requirements of any taxing authority or governmental authority or to determine such compliance.
 
Section 7.2.5   Remedies Not Limited .  Subject to Sections 5.1 and 7.4 of the Declaration of Trust, nothing contained in this Section 7.2 shall limit the authority of the Board of Trustees to take such other action as it deems necessary or advisable to protect the Trust and the interests of its shareholders in preserving the Trust’s status as a REIT.
 
 
 
 
 
 
Section 7.2.6   Ambiguity .  In the case of an ambiguity in the application of any of the provisions of this Section 7.2, Section 7.3 or any definition contained in Section 7.1, the Board of Trustees shall have the power to determine the application of the provisions of this Section 7.2 or Section 7.3 with respect to any situation based on the facts known to it.  If Section 7.2 or 7.3 requires an action by the Board of Trustees and the Declaration of Trust fails to provide specific guidance with respect to such action, the Board of Trustees shall have the power to determine the action to be taken so long as such action is not contrary to the provisions of Sections 7.1, 7.2 or 7.3.
 
Section 7.2.7   Exemptions from the Ownership Limit .
 
(a)           The Board may exempt a Person from the Ownership Limit or Designated Investment Entity Limit if:  (i) such Person submits to the Board information satisfactory to the Board, in its reasonable discretion, demonstrating that such Person is not an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code); (ii) such Person submits to the Board information satisfactory to the Board, in its reasonable discretion, demonstrating that no Person who is an individual for purposes of Section 542(a)(2) of the Code (determined taking into account Section 856(h)(3)(A) of the Code) would be considered to Beneficially Own Shares in excess of the Ownership Limit or Designated Investment Entity Limit by reason of such Person’s ownership of Shares in excess of the Ownership Limit or Designated Investment Entity Limit pursuant to the exemption granted under this subparagraph (a); (iii) such Person submits to the Board information satisfactory to the Board, in its reasonable discretion, demonstrating that clauses (2) and (3) of subparagraph (a)(ii) of Section 7.2.1 will not be violated by reason of such Person’s ownership of Shares in excess of the Ownership Limit or Designated Investment Entity Limit pursuant to the exemption granted under this subparagraph (a); and (iv) such Person provides to the Board such representations and undertakings, if any, as the Board may, in its reasonable discretion, require to ensure that the conditions in clauses (i), (ii) and (iii) hereof are satisfied and will continue to be satisfied throughout the period during which such Person owns Shares in excess of the Ownership Limit or Designated Investment Entity Limit pursuant to any exemption thereto granted under this subparagraph (a), and such Person agrees that any violation of such representations and undertakings or any attempted violation thereof will result in the application of the remedies set forth in Section 7.2 with respect to Shares held in excess of the Ownership Limit or Designated Investment Entity Limit with respect to such Person (determined without regard to the exemption granted such Person under this subparagraph (a)).
 
(b)           Prior to granting any exemption pursuant to subparagraph (a), the Board, in its sole and absolute discretion, may require a ruling from the IRS or an opinion of counsel, in either case in form and substance satisfactory to the Board, in its sole and absolute discretion as it may deem necessary or advisable in order to determine or ensure the Trust’s status as a REIT; provided , however , that the Board shall not be obligated to require obtaining a favorable ruling or opinion in order to grant an exception hereunder.
 
(c)           Subject to Section 7.2.1(a)(ii), an underwriter that participates in a public offering or a private placement of Shares (or securities convertible into or exchangeable for Shares) may Beneficially Own or Constructively Own Shares (or securities convertible into or exchangeable for Shares) in excess of the Ownership Limit or Designated Investment Entity Limit, but only to the extent necessary to facilitate such public offering or private placement.
 
 
 
 
 
 
(d)           The Board of Trustees may only reduce the Excepted Holder Limit for an Excepted Holder with the prior written consent of such Excepted Holder.  No Excepted Holder Limit shall be reduced to a percentage that is less than the Ownership Limit or Designated Investment Entity Limit.
 
Section 7.2.8   Increase in Ownership Limit or Designated Investment Entity Limit .  The Board of Trustees may increase the Ownership Limit or Designated Investment Entity Limit subject to the limitations provided in this Section 7.2.8.
 
(a)           The Ownership Limit or Designated Investment Entity Limit may not be increased if, after giving effect to such increase, five Persons who are considered individuals pursuant to Section 542 of the Code, as modified by Section 856(h)(3) of the Code (taking into account all of the Excepted Holders), could Beneficially Own, in the aggregate, more than 49.5% of the value of the outstanding Shares.
 
(b)           Prior to the modification of the Ownership Limit or Designated Investment Entity Limit pursuant to this Section 7.2.8, the Board, in its sole and absolute discretion, may require such opinions of counsel, affidavits, undertakings or agreements as it may deem necessary or advisable in order to determine or ensure the Trust’s status as a REIT if the modification in the Ownership Limit or Designated Investment Entity Limit were to be made.
 
Section 7.2.9   Legend .  Each certificate for Shares shall bear substantially the following legend:
 
The shares represented by this certificate are subject to restrictions on Beneficial Ownership, Constructive Ownership and Transfer.  Subject to certain further restrictions and except as expressly provided in the Trust’s Declaration of Trust, (i) no Person may Beneficially Own or Constructively Own Common Shares of the Trust in excess of 7 percent (in value or number of shares) of the outstanding Common Shares, other than (A) an Excepted Holder, or (B) a Designated Investment Entity; (ii) no Person may Beneficially Own or Constructively Own Preferred Shares of the Trust in excess of 9.8 percent (in value or number of shares) of the outstanding shares of such class or series of Preferred Shares of the Trust; (iii) no Excepted Holder may Beneficially Own or Constructively Own Common Shares in excess of the Excepted Holder Limit for such Excepted Holder, as set forth in the Trust’s Declaration of Trust; (iv) no Designated Investment Entity may Beneficially Own or Constructively Own Common Shares of the Trust in excess of 9.8 percent (in value or number of shares) of the outstanding Common Shares of the Trust; (v) no Person may Beneficially Own Shares that would result in the Trust being “closely held” under Section 856(h) of the Internal Revenue Code of 1986 (the “Code”) or otherwise cause the Trust to fail to qualify as a real estate investment trust under the Code; and (vi) no Person may Transfer Shares if such Transfer would result in Shares of the Trust being owned by fewer than 100 Persons.  Any Person who Beneficially Owns or Constructively Owns or attempts to Beneficially Own or Constructively Own Shares which cause or will cause a Person to Beneficially Own or Constructively Own Shares in excess or in violation of the limitations set forth in the Trust’s Declaration of Trust must immediately notify the Trust.  If any of the restrictions on transfer or ownership are violated, the Shares represented hereby will be automatically transferred to a Charitable Trustee of a Charitable Trust for the benefit of one or more Charitable Beneficiaries.  In addition, upon the occurrence of certain events, attempted Transfers in violation of the restrictions described above may be void ab initio .  A Person who attempts to Beneficially Own or Constructively Own Shares in violation of the ownership limitations described above shall have no claim, cause of action, or any recourse whatsoever against a transferor of such Shares.  All capitalized terms in this legend have the meanings defined in the Trust’s Declaration of Trust, as the same may be amended from time to time, a copy of which, including the restrictions on transfer and ownership, will be furnished to each holder of Shares of the Trust on request and without charge.
 
 
 
 
 
 
Instead of the foregoing legend, the certificate may state that the Trust will furnish a full statement about certain restrictions on transferability to a shareholder on request and without charge.
 
Section 7.3   Transfer of Shares in Trust .
 
Section 7.3.1   Ownership in Trust .  Upon any purported Transfer or other event described in Section 7.2.1(b) that would result in a transfer of Shares to a Charitable Trust, such Shares shall be deemed to have been transferred to the Charitable Trustee as trustee of a Charitable Trust for the exclusive benefit of one or more Charitable Beneficiaries.  Such transfer to the Charitable Trustee shall be deemed to be effective as of the close of business on the Business Day prior to the purported Transfer or other event that results in the transfer to the Charitable Trust pursuant to Section 7.2.1(b).  The Charitable Trustee shall be appointed by the Trust and shall be a Person unaffiliated with the Trust and any Prohibited Owner.  Each Charitable Beneficiary shall be designated by the Trust as provided in Section 7.3.7.
 
Section 7.3.2   Status of Shares Held by the Charitable Trustee . Shares held by the Charitable Trustee shall be issued and outstanding Shares of the Trust.  The Prohibited Owner shall have no rights in the Shares held by the Charitable Trustee.  The Prohibited Owner shall not benefit economically from ownership of any Shares held in trust by the Charitable Trustee, shall have no rights to dividends or other distributions and shall not possess any rights to vote or other rights attributable to the Shares held in the Charitable Trust.  The Prohibited Owner shall have no claim, cause of action, or any other recourse whatsoever against the purported transferor of such Shares.
 
Section 7.3.3   Dividend and Voting Rights .  The Charitable Trustee shall have all voting rights and rights to dividends or other distributions with respect to Shares held in the Charitable Trust, which rights shall be exercised for the exclusive benefit of the Charitable Beneficiary.  Any dividend or other distribution paid prior to the discovery by the Trust that Shares have been transferred to the Charitable Trustee shall be paid with respect to such Shares to the Charitable Trustee upon demand and any dividend or other distribution authorized but unpaid shall be paid when due to the Charitable Trustee.  Any dividends or distributions so paid over to the Charitable Trustee shall be held in trust for the Charitable Beneficiary.  The Prohibited Owner shall have no voting rights with respect to Shares held in the Charitable Trust and, subject to Maryland law, effective as of the date that Shares have been transferred to the Charitable Trustee, the Charitable Trustee shall have the authority (at the Charitable Trustee’s sole discretion) (i) to rescind as void any vote cast by a Prohibited Owner prior to the discovery by the Trust that Shares have been transferred to the Charitable Trustee and (ii) to recast such vote in accordance with the desires of the Charitable Trustee acting for the benefit of the Charitable Beneficiary; provided , however , that if the Trust has already taken irreversible action, then the Charitable Trustee shall not have the power to rescind and recast such vote.  Notwithstanding the provisions of this Article VII, until the Trust has received notification that Shares have been transferred into a Charitable Trust, the Trust shall be entitled to rely on its share transfer and other shareholder records for purposes of preparing lists of shareholders entitled to vote at meetings, determining the validity and authority of proxies and otherwise conducting votes of shareholders.
 
 
 
 
 
 
Section 7.3.4   Rights Upon Liquidation .  Upon any voluntary or involuntary liquidation, dissolution or winding up of or any distribution of the assets of the Trust, the Charitable Trustee shall be entitled to receive, ratably with each other holder of Shares of the class or series of Shares that is held in the Charitable Trust, that portion of the assets of the Trust available for distribution to the holders of such class or series (determined based upon the ratio that the number of Shares or such class or series of Shares held by the Charitable Trustee bears to the total number of Shares of such class or series of Shares then outstanding).  The Charitable Trustee shall distribute any such assets received in respect of the Shares held in the Charitable Trust in any liquidation, dissolution or winding up of, or distribution of the assets of the Trust, in accordance with Section 7.3.5.
 
Section 7.3.5   Sale of Shares by Charitable Trustee .  Within 20 days of receiving notice from the Trust that Shares have been transferred to the Charitable Trust, the Charitable Trustee of the Charitable Trust shall sell the Shares held in the Charitable Trust to a person, designated by the Charitable Trustee, whose ownership of the Shares will not violate the ownership limitations set forth in Section 7.2.1(a).  Upon such sale, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner and to the Charitable Beneficiary as provided in this Section 7.3.5.  The Prohibited Owner shall receive the lesser of (1) the price paid by the Prohibited Owner for the Shares or, if the Prohibited Owner did not give value for the Shares in connection with the event causing the Shares to be held in the Charitable Trust ( e.g. , in the case of a gift, devise or other such transaction), the Market Price of the Shares on the day of the event causing the Shares to be held in the Charitable Trust and (2) the price per share received by the Charitable Trustee from the sale or other disposition of the Shares held in the Charitable Trust.  Any net sales proceeds in excess of the amount payable to the Prohibited Owner shall be immediately paid to the Charitable Beneficiary.  If, prior to the discovery by the Trust that Shares have been transferred to the Charitable Trustee, such Shares are sold by a Prohibited Owner, then (i) such Shares shall be deemed to have been sold on behalf of the Charitable Trust and (ii) to the extent that the Prohibited Owner received an amount for such Shares that exceeds the amount that such Prohibited Owner was entitled to receive pursuant to this Section 7.3.5, such excess shall be paid to the Charitable Trustee upon demand.  The Charitable Trustee shall have the right and power (but not the obligation) to offer any Share held in trust for sale to the Trust on such terms and conditions as the Charitable Trustee shall deem appropriate.
 
Section 7.3.6   Purchase Right in Shares Transferred to the Charitable Trustee .  Shares transferred to the Charitable Trustee shall be deemed to have been offered for sale to the Trust, or its designee, at a price per share equal to the lesser of (i) the price per share in the transaction that resulted in such transfer to the Charitable Trust (or, in the case of a devise or gift, the Market Price at the time of such devise or gift) and (ii) the Market Price on the date the Trust, or its designee, accepts such offer.  The Trust shall have the right to accept such offer until the Charitable Trustee has sold the Shares held in the Charitable Trust pursuant to Section 7.3.5.  Upon such a sale to the Trust, the interest of the Charitable Beneficiary in the Shares sold shall terminate and the Charitable Trustee shall distribute the net proceeds of the sale to the Prohibited Owner.
 
Section 7.3.7   Designation of Charitable Beneficiaries .  By written notice to the Charitable Trustee, the Trust shall designate one or more nonprofit organizations to be the Charitable Beneficiary of the interest in the Charitable Trust such that (i) Shares held in the Charitable Trust would not violate the restrictions set forth in Section 7.2.1(a) in the hands of such Charitable Beneficiary and (ii) each such organization must be described in Sections 501(c)(3), 170(b)(1)(A) or 170(c)(2) of the Code.
 
 
 
 
 
 
Section 7.4   NYSE Transactions .  Nothing in this Article VII shall preclude the settlement of any transaction entered into through the facilities of the NYSE or any other national securities exchange or automated inter-dealer quotation system.  The fact that the settlement of any transaction takes place shall not negate the effect of any other provision of this Article VII and any transferee in such a transaction shall be subject to all of the provisions and limitations set forth in this Article VII.
 
Section 7.5   Enforcement .  The Trust is authorized specifically to seek equitable relief, including injunctive relief, to enforce the provisions of this Article VII.
 
Section 7.6   Non-Waiver .  No delay or failure on the part of the Trust or the Board of Trustees in exercising any right hereunder shall operate as a waiver of any right of the Trust or the Board of Trustees, as the case may be, except to the extent specifically waived in writing.
 
ARTICLE VIII
SHAREHOLDERS
 
Section 8.1   Meetings .  There shall be an annual meeting of the shareholders, to be held on proper notice at such time and convenient location as shall be determined by or in the manner prescribed in the Bylaws, for the election of the Trustees, if required, and for the transaction of any other business within the powers of the Trust. Except as otherwise provided in the Declaration of Trust, special meetings of shareholders may be called in the manner provided in the Bylaws.  If there are no Trustees, the officers of the Trust shall promptly call a special meeting of the shareholders entitled to vote for the election of successor Trustees.  Any meeting may be adjourned and reconvened as the Trustees determine or as provided in the Bylaws.
 
Section 8.2   Voting Rights .  Subject to the provisions of any class or series of Shares then outstanding or as otherwise required by law, the shareholders shall be entitled to vote only on the following matters: (a) election of Trustees as provided in Section 5.2 and the removal of Trustees as provided in Section 5.3; (b) amendment of the Declaration of Trust as provided in Article X; (c) termination of the Trust as provided in Section 12.2; (d) merger or consolidation of the Trust, or the sale or disposition of substantially all of the property of the Trust , as provided in Article XI; (e) such other matters with respect to which the Board of Trustees has adopted a resolution declaring that a proposed action is advisable and directing that the matter be submitted to the shareholders for approval or ratification; and (f) such other matters as may be properly brought before a meeting by a shareholder pursuant to the Bylaws.  Except with respect to the foregoing matters, no action taken by the shareholders at any meeting shall in any way bind the Board of Trustees.
 
Section 8.3   Preemptive and Appraisal Rights .  Except as may be provided by the Board of Trustees in setting the terms of classified or reclassified Shares pursuant to Section 6.4, no holder of Shares shall, as such holder, (a) have any preemptive right to purchase or subscribe for any additional Shares of the Trust or any other security of the Trust which it may issue or sell or (b), except as expressly required by Title 8, have any right to require the Trust to pay him the fair value of his Shares in an appraisal or similar proceeding.
 
Section 8.4   Board Approval .  The submission of any action to the shareholders for their consideration shall first be recommended or approved by the Board of Trustees.
 
 
 
 
 
 
Section 8.5   Action by Shareholders without a Meeting .  No action required or permitted to be taken by the shareholders may be taken without a meeting by less than unanimous written consent of the shareholders of the Trust.
 
ARTICLE IX
LIABILITY LIMITATION, INDEMNIFICATION
AND TRANSACTIONS WITH THE TRUST
 
Section 9.1   Limitation of Shareholder Liability .  No shareholder shall be liable for any debt, claim, demand, judgment or obligation of any kind of, against or with respect to the Trust by reason of his being a shareholder, nor shall any shareholder be subject to any personal liability whatsoever, in tort, contract or otherwise, to any person in connection with the property or the affairs of the Trust by reason of his being a shareholder.
 
Section 9.2   Limitation of Trustee and Officer Liability .  To the maximum extent that Maryland law in effect from time to time permits limitation of the liability of trustees and officers of a Maryland real estate investment trust or directors or officers of a Maryland corporation, no Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages.  Neither the amendment nor repeal of this Section 9.2, nor the adoption or amendment of any other provision of the Declaration of Trust inconsistent with this Section 9.2, shall apply to or affect in any respect the applicability of the preceding sentence with respect to any act or failure to act that occurred prior to such amendment, repeal or adoption.  In the absence of any Maryland statute limiting the liability of trustees and officers of a Maryland real estate investment trust for money damages in a suit by or on behalf of the Trust or by any shareholder, no Trustee or officer of the Trust shall be liable to the Trust or to any shareholder for money damages except to the extent that (a) the Trustee or officer actually received an improper benefit or profit in money, property or services, for the amount of the benefit or profit in money, property, or services actually received; or (b) a judgment or other final adjudication adverse to the Trustee or officer is entered in a proceeding based on a finding in the proceeding that the Trustee’s or officer’s action or failure to act was the result of active and deliberate dishonesty and was material to the cause of action adjudicated in the proceeding.
 
Section 9.3   Indemnification .  To the maximum extent permitted by Maryland law in effect from time to time, and in accordance with applicable provisions of the Bylaws, the Trust shall indemnify (a) any present or former Trustee or officer (including any individual who, at the request of the Trust, serves or has served as a director, officer, partner, trustee, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise) against any claim or liability to which he or she may become subject by reason of service in such capacity, and (b) any Trustee or officer who has been successful in the defense of a proceeding to which he or she was made a party by reason of service in such capacity, against reasonable expenses incurred by the Trustee or officer in connection with the proceeding and shall pay or reimburse, in advance of final disposition of the proceeding, such reasonable expenses.  The Trust may, with the approval of its Board of Trustees, provide such indemnification or advancement of expenses to any present or former Trustee or officer who served a predecessor of the Trust, and to any employee or agent of the Trust or a predecessor of the Trust.  Any amendment of this section shall be prospective only and shall not affect the applicability of this section with respect to any act or failure to act that occurred prior to such amendment.
 
Section 9.4   Transactions Between the Trust and its Trustees, Officers, Employees and Agents .  Subject to any express restrictions in the Declaration of Trust or adopted by the Trustees in the Bylaws or by resolution, the Trust may enter into any contract or transaction of any kind with any person, including any Trustee, officer, employee or agent of the Trust or any person affiliated with a Trustee, officer, employee or agent of the Trust, whether or not any of them has a financial interest in such transaction, provided, however, that in the case of any contract or transaction in which any Trustee, officer, employee or agent of the Trust (or any person affiliated with such person) has a material financial interest in such transaction, then: (a) the fact of the interest shall be disclosed or known to: (i) the Board of Trustees, and the Board of Trustees shall approve or ratify the contract or transaction by the affirmative vote of a majority of disinterested Trustees, even if the disinterested Trustees constitute less than a quorum, or (ii) the shareholders entitled to vote, and the contract or transaction shall be authorized, approved or ratified by a majority of the votes cast by the shareholders entitled to vote other than the votes of shares owned of record or beneficially by the interested party; or (b) the contract or transaction is fair and reasonable to the Trust.
 
 
 
 
 
 
Section 9.5   Express Exculpatory Clauses in Instruments .  The Board of Trustees may cause to be inserted in every written agreement, undertaking or obligation made or issued on behalf of the Trust, an appropriate provision to the effect that neither the shareholders nor the Trustees, officers, employees or agents of the Trust shall be liable under any written instrument creating an obligation of the Trust, and all Persons shall look solely to the property of the Trust for the payment of any claim under or for the performance of that instrument.  The omission of the foregoing exculpatory language from any instrument shall not affect the validity or enforceability of such instrument and shall not render any shareholder, Trustee, officer, employee or agent liable thereunder to any third party nor shall the Trustees or any officer, employee or agent of the Trust be liable to anyone for such omission.
 
ARTICLE X
AMENDMENTS
 
Section 10.1   General .  The Trust reserves the right from time to time to make any amendment to the Declaration of Trust, now or hereafter authorized by law, including, without limitation, any amendment altering the terms or contract rights, as expressly set forth in the Declaration of Trust, of any Shares.  All rights and powers conferred by the Declaration of Trust on shareholders, Trustees and officers are granted subject to this reservation.  The Trust shall file Articles of Amendment as required by Maryland law.  All references to the Declaration of Trust shall include all amendments thereto.
 
Section 10.2   By Trustees .  The Trustees may amend the Declaration of Trust from time to time, without any action by the shareholders: (i) in any manner provided by Title 8, (ii) to qualify as a real estate investment trust under the Code or under Title 8, (iii) in the manner in which the charter of a Maryland corporation may be amended, without shareholder approval, in accordance with Section 2-605 of the Maryland General Corporation Law, and (iv) as otherwise provided in the Declaration of Trust.

Section 10.3   By Shareholders .  Except as otherwise provided in this Declaration of Trust, any amendment to the Declaration of Trust shall be valid only if recommended by the Board of Trustees and approved by the affirmative vote of two thirds of all votes entitled to be cast on the matter.

Section 10.4   Bylaws .  The Board of Trustees shall have the exclusive power to adopt, alter or repeal any provision of the Bylaws of the Trust and to make new Bylaws.
 
ARTICLE XI
MERGER, CONSOLIDATION OR SALE OF TRUST PROPERTY

Subject to the provisions of any class or series of Shares at the time outstanding, the Trust may (a) merge the Trust with or into another entity or merge another entity into the Trust, (b) consolidate the Trust with one or more other entities into a new entity or (c) sell, lease, exchange or otherwise transfer all or substantially all of the property of the Trust.  Any such action must be approved by the Board of Trustees and, after notice to all shareholders entitled to vote on the matter, affirmative vote of two thirds of all the votes entitled to be cast on the matter.
 
 
 
 
 

 
A vote of the shareholders shall not be required for the merger into the Trust of any entity in which the Trust owns 90% or more of the entire equity interests in such entity, subject to the conditions and rights set forth in Section 8-501.1(c)(4) of Title 8.

A vote of the shareholders shall not be required if the merger does not reclassify or change the outstanding Shares of the Trust immediately before the merger becomes effective or otherwise amend the Declaration of Trust and the number of Shares to be issued or delivered in the merger is not more than twenty percent (20%) of the number of Shares of the same class or series outstanding immediately before the merger becomes effective.



ARTICLE XII
DURATION AND TERMINATION OF TRUST
 
Section 12.1   Duration .  The Trust shall continue perpetually unless terminated pursuant to Section 12.2 or pursuant to any applicable provision of Title 8.
 
Section 12.2   Termination .
 
(a)           Subject to the provisions of any class or series of Shares at the time outstanding, adoption of a resolution by the Board of Trustees declaring that the termination of the Trust is advisable and submission of the matter by the Board of Trustees to the shareholders for approval, the Trust may be terminated at any meeting of shareholders, by the affirmative vote of two thirds of all the votes entitled to be cast on the matter.   Upon the termination of the Trust:
 
(i)           The Trust shall carry on no business except for the purpose of winding up its affairs.
 
(ii)           The Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under the Declaration of Trust shall continue, including the powers to fulfill or discharge the Trust’s contracts, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining property of the Trust to one or more persons at public or private sale for consideration which may consist in whole or in part of cash, securities or other property of any kind, discharge or pay its liabilities and do all other acts appropriate to liquidate its business.
 
(iii)           After paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and agreements as they deem necessary for their protection, the Trust may distribute the remaining property of the Trust among the shareholders so that after payment in full or the setting apart for payment of such preferential amounts, if any, to which the holders of any Shares at the time outstanding shall be entitled, the remaining property of the Trust shall, subject to any participating or similar rights of Shares at the time outstanding, be distributed ratably among the holders of Common Shares at the time outstanding.
 
(b)           After termination of the Trust, the liquidation of its business and the distribution to the shareholders as herein provided, a majority of the Trustees shall execute and file with the Trust’s records a document certifying that the Trust has been duly terminated, and the Trustees shall be discharged from all liabilities and duties hereunder, and the rights and interests of all shareholders shall cease.
 
 
 
 
 
 
ARTICLE XIII
MISCELLANEOUS
 
Section 13.1   Governing Law .  The Declaration of Trust is executed by the undersigned Trustees and delivered in the State of Maryland with reference to the laws thereof, and the rights of all parties and the validity, construction and effect of every provision hereof shall be subject to and construed in accordance with the laws of the State of Maryland without regard to conflicts of laws provisions thereof.
 
Section 13.2   Reliance by Third Parties .  Any certificate shall be final and conclusive as to any person dealing with the Trust if executed by the Secretary or an Assistant Secretary of the Trust or a Trustee, and if certifying to: (a) the number or identity of Trustees, officers of the Trust or shareholders; (b) the due authorization of the execution of any document; (c) the action or vote taken, and the existence of a quorum, at a meeting of the Board of Trustees or shareholders; (d) a copy of the Declaration of Trust or of the Bylaws as a true and complete copy as then in force; (e) an amendment to the Declaration of Trust; (f) the termination of the Trust; or (g) the existence of any fact relating to the affairs of the Trust.  No purchaser, lender, transfer agent or other person shall be bound to make any inquiry concerning the validity of any transaction purporting to be made by the Trust on its behalf or by any officer, employee or agent of the Trust.
 
Section 13.3   Severability .
 
(a)           The provisions of the Declaration of Trust are severable, and if the Board of Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the “Conflicting Provisions”) are in conflict with the Code, Title 8 or other applicable federal or state laws, the Conflicting Provisions, to the extent of the conflict, shall be deemed never to have constituted a part of the Declaration of Trust, even without any amendment of the Declaration of Trust pursuant to Article X and without affecting or impairing any of the remaining provisions of the Declaration of Trust or rendering invalid or improper any action taken or omitted prior to such determination.  No Trustee shall be liable for making or failing to make such a determination.  In the event of any such determination by the Board of Trustees, the Board shall amend the Declaration of Trust in the manner provided in Section 10.2.
 
(b)           If any provision of the Declaration of Trust shall be held invalid or unenforceable in any jurisdiction, such holding shall apply only to the extent of any such invalidity or unenforceability and shall not in any manner affect, impair or render invalid or unenforceable such provision in any other jurisdiction or any other provision of the Declaration of Trust in any jurisdiction.
 
Section 13.4   Construction .  In the Declaration of Trust, unless the context otherwise requires, words used in the singular or in the plural include both the plural and singular and words denoting any gender include all genders.  The title and headings of different parts are inserted for convenience and shall not affect the meaning, construction or effect of the Declaration of Trust.  In defining or interpreting the powers and duties of the Trust and its Trustees and officers, reference may be made by the Trustees or officers, to the extent appropriate and not inconsistent with the Code or Title 8, to Titles 1 through 3 of the Corporations and Associations Article of the Annotated Code of Maryland.  In furtherance and not in limitation of the foregoing, in accordance with the provisions of Title 3, Subtitles 6 and 7, of the Corporations and Associations Article of the Annotated Code of Maryland, the Trust shall be included within the definition of “corporation” for purposes of such provisions.
 
 
 
 
 
 
Section 13.5   Recordation .  The Declaration of Trust and any articles of amendment hereto or articles supplementary hereto shall be filed for record with the SDAT and may also be filed or recorded in such other places as the Trustees deem appropriate, but failure to file for record the Declaration of Trust or any articles of amendment hereto in any office other than in the State of Maryland shall not affect or impair the validity or effectiveness of the Declaration of Trust or any amendment hereto.  A restated Declaration of Trust shall, upon filing, be conclusive evidence of all amendments contained therein and may thereafter be referred to in lieu of the original Declaration of Trust and the various articles of amendments thereto.
 
*           *           *           *           *
 
The total number of shares of beneficial interest that the Trust had authority to issue immediately prior to this amendment and restatement was 120,000,000, consisting of 100,000,000 common shares of beneficial interest, $0.01 par value per share, and 20,000,000 preferred shares of beneficial interest.  The aggregate par value of all authorized shares of beneficial interest having par value was $1,200,000.  The total number of shares of beneficial interest that the Trust has authority to issue immediately upon this amendment and restatement is 200,000,000 common shares of beneficial interest, $0.01 par value per share, and 40,000,000 preferred shares of beneficial interest, $0.01 par value per share.  The aggregate par value of all authorized common shares of beneficial interest having par value is $2,000,000, and the aggregate par value of all authorized preferred shares of beneficial interest having par value is $400,000.

 
 
 

IN WITNESS WHEREOF, these Articles of Amendment and Restatement of Declaration of Trust have been signed on this 12 th day of August, 2004 by the undersigned President of the Trust and witnessed by the undersigned Secretary of the Trust, each of whom acknowledges that this document is his free act and deed, and that to the best of his knowledge, information, and belief, the matters and facts set forth herein are true in all material respects and that the statement is made under the penalties for perjury.

ATTEST:                                                              KITE REALTY GROUP TRUST

   /s/ DAME PROUT              (SEAL)                  /s/ JOHN A. KITE                                                                          
Dame Prout, Secretary                                        John A. Kite, President

 
 
 

KITE REALTY GROUP TRUST

ARTICLES SUPPLEMENTARY ESTABLISHING AND FIXING THE RIGHTS AND
PREFERENCES OF A SERIES OF PREFERRED SHARES

Kite Realty Group Trust, a Maryland real estate investment trust (the “Trust”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “SDAT”) that:

FIRST : Under the authority contained in the Articles of Amendment and Restatement of Declaration of Trust of the Trust (the “Declaration of Trust”), and pursuant to authority vested by the Board of Trustees of the Trust (the “Board”) in the Pricing Committee of the Board (the “Pricing Committee”) at a meeting of the Board held on November 2, 2010, the Pricing Committee, by resolution approved at a meeting held on November 30, 2010, has classified and designated 2,990,000 Preferred Shares of the Trust (the “Shares”), par value $0.01 per share, as 8.250% Series A Cumulative Redeemable Perpetual Preferred Shares, with the following preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption, which upon any restatement of the Declaration of Trust, shall be deemed to be part of Article VI of the Declaration of Trust, with any necessary or appropriate changes to the enumeration of sections or subsections hereof. Capitalized terms used and not otherwise defined herein have the meanings set forth in the Declaration of Trust.

8.250% Series A Cumulative Redeemable Perpetual Preferred Shares

(1)            Designation and Number . A series of preferred shares, designated as the “8.250% Series A Cumulative Redeemable Perpetual Preferred Shares” (the “Series A Preferred Shares”), is hereby established. The par value of the Series A Preferred Shares is $0.01 per share. The number of Series A Preferred Shares shall be 2,990,000.

(2)            Ranking . The Series A Preferred Shares will, with respect to rights to receive dividends and to participate in distributions or payments upon liquidation, dissolution or winding up of the Trust, rank (a) senior to the Common Shares (as defined in the Declaration of Trust) and any other capital shares of the Trust, now or hereafter issued and outstanding, the terms of which provide that such capital shares rank, as to dividends and upon liquidation, dissolution or winding up of the Trust, junior to such Series A Preferred Shares (“Junior Shares”), (b) on a parity with any other capital shares of the Trust, now or hereafter issued and outstanding, other than the capital shares referred to in clauses (a) and (c) (“Parity Shares”); and (c) junior to all capital shares of the Trust the terms of which specifically provide that such capital shares rank senior to the Series A Preferred Shares.

(3)            Dividends .

(a)           Holders of the then outstanding Series A Preferred Shares shall be entitled to receive, when, as and if authorized by the Board and declared by the Trust, out of funds legally available for payment of dividends, cumulative cash dividends at the rate of 8.250% per annum of the $25 liquidation preference of each Series A Preferred Share (equivalent to $2.0625 per annum per share); provided, however, that if following a “Change of Control” (as hereinafter defined), either the Series A Preferred Shares (or any preferred shares of the surviving entity that are issued in exchange for the Series A Preferred Shares) or the common shares of the surviving entity, as applicable, are not listed on the NYSE or quoted on the NASDAQ Stock Market (“NASDAQ”) (or listed or quoted on a successor exchange or quotation system), holders of the then outstanding Series A Preferred Shares will be entitled to receive, when, as and if authorized by the Board and declared by the Trust, out of funds legally available for the payment of dividends, cumulative cash dividends from, and including, the first date on which both the Change of Control has occurred and either the Series A Preferred Shares (or any preferred shares of the surviving entity that are issued in exchange for the Series A Preferred Shares) or the common shares of the surviving entity, as applicable, are not so listed or quoted, at the rate of 12.250% per annum of the $25 liquidation preference of each Series A Preferred Share (equivalent to $3.0625 per annum per share), for as long as either the Series A Preferred Shares (or any preferred shares of the surviving entity that are issued in exchange for the Series A Preferred Shares) or the common shares of the surviving entity, as applicable, are not so listed on the NYSE or quoted on NASDAQ Stock Market (or listed or quoted on a successor exchange or quotation system) (the “Special Dividend Rate”).

 
 
 
 
 
(b)           Dividends on each outstanding Series A Preferred Share shall be cumulative from and including the date of original issuance or, with respect to the Special Dividend Rate, from, and including, the first date on which both a Change of Control has occurred and either the Series A Preferred Shares (or any preferred shares of the surviving entity that are issued in exchange for the Series A Preferred Shares) or the common shares of the surviving entity, as applicable, are not listed on the NYSE or quoted on NASDAQ (or listed or quoted on a successor exchange or quotation system), and shall be payable (i) for the period from December 7, 2010 to March 1, 2011 on March 1, 2011, and (ii) for each quarterly distribution period thereafter, quarterly in equal amounts in arrears on the 1st of each March, June, September and December, commencing on June 1, 2011 (each such day being hereinafter called a “Series A Dividend Payment Date”) at the then applicable annual rate; provided, however, that if any Series A Dividend Payment Date falls on any day other than a Business Day (as hereinafter defined), the dividend which would otherwise have been payable on such Series A Dividend Payment Date may be paid on the next succeeding Business Day with the same force and effect as if paid on such Series A Dividend Payment Date, and no interest or other sums shall accrue on the amount so payable from such Series A Dividend Payment Date to such next succeeding Business Day. Each dividend is payable to holders of record as they appear on the share records of the Trust at the close of business on the record date, not exceeding 30 days preceding the applicable Series A Dividend Payment Date, as shall be fixed by the Board. Dividends shall accumulate from the most recent Series A Dividend Payment Date to which dividends have been paid, whether or not there shall be funds legally available for the payment of such dividends, whether the Trust has earnings or whether such dividends are authorized. No interest, or sum of money in lieu of interest, shall be payable in respect of any dividend payment or payments on the Series A Preferred Shares that may be in arrears. Holders of the Series A Preferred Shares shall not be entitled to any dividends, whether payable in cash, property or shares, in excess of full cumulative dividends, as herein provided, on the Series A Preferred Shares. Dividends payable on the Series A Preferred Shares for any period greater or less than a full dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months. Dividends payable on the Series A Preferred Shares for each full dividend period will be computed by dividing the applicable annual dividend rate by four. After full cumulative distributions on the Series A Preferred Shares have been paid or declared and funds therefor set aside for payment with respect to a dividend period, the holders of Series A Preferred Shares will not be entitled to any further distributions with respect to that dividend period.

(c)           No dividends on the Series A Preferred Shares shall be authorized and declared by the Board or paid or set apart for payment by the Trust at such time as the terms and provisions of any agreement of the Trust, including any agreement relating to its indebtedness, prohibits such declaration, payment or setting apart for payment or provides that such declaration, payment or setting apart for payment would constitute a breach thereof, or a default thereunder, or if such declaration or payment shall be restricted or prohibited by law.
 
 
 
 
 

 
(d)           So long as any Series A Preferred Shares are outstanding, no dividends, except as described in the immediately following sentence, shall be authorized and declared or paid or set apart for payment on any series or class or classes of Parity Shares for any period unless full cumulative dividends have been declared and paid or are contemporaneously declared and paid or declared and a sum sufficient for the payment thereof set apart for such payment on the Series A Preferred Shares for all prior dividend periods. When dividends are not paid in full or a sum sufficient for such payment is not set apart, as aforesaid, all dividends authorized and declared upon the Series A Preferred Shares and all dividends authorized and declared upon any other series or class or classes of Parity Shares shall be authorized and declared ratably in proportion to the respective amounts of dividends accumulated and unpaid on the Series A Preferred Shares and such Parity Shares.

(e)           So long as any Series A Preferred Shares are outstanding, no dividends (other than dividends or distributions paid solely in Junior Shares of, or in options, warrants or rights to subscribe for or purchase, Junior Shares) shall be authorized and declared or paid or set apart for payment or other distribution authorized and declared or made upon Junior Shares, nor shall any Junior Shares be redeemed, purchased or otherwise acquired (other than a redemption, purchase or other acquisition of Common Shares made for purposes of and in compliance with requirements of an employee incentive or benefit plan of the Trust or any subsidiary, or a conversion into or exchange for Junior Shares or redemptions for the purpose of preserving the Trust’s qualification as a REIT (as defined in the Declaration of Trust)), for any consideration (or any monies to be paid to or made available for a sinking fund for the redemption of any such shares) by the Trust, directly or indirectly (except by conversion into or exchange for Junior Shares), unless in each case full cumulative dividends on all outstanding Series A Preferred Shares and any Parity Shares at the time such dividends are payable shall have been paid or set apart for payment for all past dividend periods with respect to the Series A Preferred Shares and all past dividend periods with respect to such Parity Shares.

(f)           Any dividend payment made on the Series A Preferred Shares shall first be credited against the earliest accrued but unpaid dividend due with respect to such shares which remains payable.

(g)           Except as provided herein, the Series A Preferred Shares shall not be entitled to participate in the earnings or assets of the Trust.

(h)           With respect to the Series A Preferred Shares, a “Change of Control” shall be deemed to have occurred at such time as (i) the date a “person” or “group” (within the meaning of Sections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)) becomes the ultimate “beneficial owner” (as defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a person or group shall be deemed to have beneficial ownership of all voting shares that such person or group has the right to acquire regardless of when such right is first exercisable), directly or indirectly, of voting shares representing more than 50% of the total voting power of the Trust’s total voting shares; (ii) the date the Trust sells, transfers or otherwise disposes of all or substantially all of its assets; or (iii) the date of the consummation of a merger or share exchange of the Trust with another entity where (A) the Trust’s shareholders immediately prior to the merger or share exchange would not beneficially own, immediately after the merger or share exchange, shares representing 50% or more of all votes (without consideration of the rights of any class of shares to elect trustees by a separate group vote) to which all shareholders of the corporation issuing cash or securities in the merger or share exchange would be entitled in the election of trustees, or where (B) members of the Board immediately prior to the merger or share exchange would not immediately after the merger or share exchange constitute a majority of the board of the corporation issuing cash or securities in the merger or share exchange.
 
 
 
 
 

 
As used herein, the term “dividend” does not include dividends payable solely in Junior Shares on Junior Shares, or in options, warrants or rights to holders of Junior Shares to subscribe for or purchase any Junior Shares.

As used herein, the term “voting shares” shall mean shares of any class or kind having the power to vote generally in the election of trustees.

(4)            Liquidation Preference .

(a)           In the event of any liquidation, dissolution or winding up of the Trust, whether voluntary or involuntary, before any payment or distribution of the assets of the Trust shall be made to or set apart for the holders of Junior Shares, the holders of the Series A Preferred Shares shall be entitled to receive $25 per share (the “Liquidation Preference”) plus an amount per share equal to all dividends (whether or not earned or declared) accumulated and unpaid thereon to, but not including, the date of final distribution to such holders; but such holders of the Series A Preferred Shares shall not be entitled to any further payment. If, upon any such liquidation, dissolution or winding up of the Trust, the assets of the Trust, or proceeds thereof, distributable among the holders of the Series A Preferred Shares shall be insufficient to pay in full the preferential amount aforesaid and liquidating payments on any other Parity Shares, then such assets, or the proceeds thereof, shall be distributed among the holders of such Series A Preferred Shares and any such other Parity Shares ratably in accordance with the respective amounts that would be payable on such Series A Preferred Shares and any such other Parity Shares if all amounts payable thereon were paid in full. For the purposes of this Section 4, none of (i) a consolidation or merger of the Trust with one or more entities, (ii) a statutory share exchange or (iii) a sale or transfer of all or substantially all of the Trust’s assets shall be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary, of the Trust.

(b)           Subject to the rights of the holders of Parity Shares, upon any liquidation, dissolution or winding up of the Trust, after payment shall have been made in full to the holders of the Series A Preferred Shares, as provided in this Section 4, any series or class or classes of Junior Shares shall, subject to any respective terms and provisions applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series A Preferred Shares shall not be entitled to share therein.

(5)            Optional Redemption .

(a)           Except as otherwise permitted by the Declaration of Trust and paragraph (b) below, the Series A Preferred Shares shall not be redeemable by the Trust prior to December 7, 2015. On and after December 7, 2015, the Trust, at its option, upon giving notice as provided below, may redeem the Series A Preferred Shares, in whole or in part, at any time and from time to time, for cash at a redemption price of $25 per share, plus any accumulated and unpaid dividends on the Series A Preferred Shares (whether or not declared), to, but not including, the redemption date (the “Regular Redemption Right”).
 
 
 
 
 

 
(b)           If at any time following a Change of Control (as defined in Section 3(h) above), either the Series A Preferred Shares (or any preferred shares of the surviving entity that are issued in exchange for the Series A Preferred Shares) or the common shares of the surviving entity, as applicable, are not listed on the NYSE or quoted on NASDAQ (or listed or quoted on a successor exchange or quotation system), the Trust will have the option, upon giving notice as provided below, to redeem the Series A Preferred Shares, in whole but not in part, within 90 days after the first date on which both the Change of Control has occurred and either the Series A Preferred Shares (or any preferred shares of the surviving entity that are issued in exchange for the Series A Preferred Shares) or the common shares of the surviving entity, as applicable, are not so listed or quoted, for cash at a redemption price of $25 per share, plus any accumulated and unpaid dividends on the Series A Preferred Shares (whether or not declared), to, but not including, the redemption date (the “Special Redemption Right”).

(c)           The following provisions set forth the procedures for redemption pursuant to the Regular Redemption Right.

(i)           A notice of redemption (which may be contingent upon the occurrence of a future event) shall be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series A Preferred Shares at their addresses as they appear on the Trust’s share transfer records. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the redemption of any Series A Preferred Shares except as to the holder to whom notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series A Preferred Shares may be listed or admitted to trading, each notice shall state: (i) the redemption date; (ii) the redemption price; (iii) the number of Series A Preferred Shares to be redeemed and, if fewer than all the Series A Preferred Shares held by such holder are to be redeemed, the number of such Series A Preferred Shares to be redeemed from such holder; (iv) the place or places where the certificates evidencing the Series A Preferred Shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date except as otherwise provided herein.

(ii)           At its election, the Trust, prior to a redemption date, may irrevocably deposit the redemption price (including accumulated and unpaid dividends to the redemption date) of the Series A Preferred Shares so called for redemption in trust for the holders thereof with a bank or trust company, in which case the redemption notice to holders of the Series A Preferred Shares to be redeemed shall (A) state the date of such deposit, (B) specify the office of such bank or trust company as the place of payment of the redemption price and (C) require such holders to surrender the certificates evidencing such shares at such place on or about the date fixed in such redemption notice (which may not be later than the redemption date) against payment of the redemption price (including all accumulated and unpaid dividends to the redemption date). Subject to applicable escheat laws, any monies so deposited which remain unclaimed by the holders of the Series A Preferred Shares at the end of two years after the redemption date shall be returned by such bank or trust company to the Trust.

(iii)           If fewer than all the outstanding Series A Preferred Shares are to be redeemed, the shares to be redeemed shall be selected by lot or pro rata (as nearly as practicable without creating fractional shares) or by any other equitable method the Trust may choose.
 
 
 
 
 

 
(iv)           Upon any redemption of Series A Preferred Shares, the Trust shall pay any accumulated and unpaid dividends in arrears for any dividend period ending on or prior to the redemption date. If a redemption date falls after a record date for a Series A Preferred Shares dividend payment and prior to the corresponding Series A Dividend Payment Date, then each holder of the Series A Preferred Shares at the close of business on such record date shall be entitled to the dividend payable on such Series A Preferred Shares on the corresponding Series A Dividend Payment Date notwithstanding the redemption of such Series A Preferred Shares before such Series A Dividend Payment Date. Except as provided above, the Trust shall make no payment or allowance for unpaid dividends, whether or not in arrears, on any Series A Preferred Shares called for redemption.

(v)           If full cumulative dividends on the Series A Preferred Shares and any other series or class or classes of Parity Shares have not been paid or declared and set apart for payment, except as otherwise permitted under the Declaration of Trust, the Trust may not purchase, redeem or otherwise acquire Series A Preferred Shares or any Parity Shares other than in exchange for Junior Shares.

(vi)           On and after the date fixed for redemption, provided that the Trust has made available at the office of the registrar and transfer agent a sufficient amount of cash to effect the redemption, dividends will cease to accumulate on the Series A Preferred Shares called for redemption (except that, in the case of a redemption date after a dividend payment record date and prior to the related Series A Dividend Payment Date, holders of Series A Preferred Shares on the applicable record date will be entitled on such Series A Dividend Payment Date to receive the dividend payable on such shares on the corresponding Series A Dividend Payment Date), such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series A Preferred Shares shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.

(d)           The following provisions set forth the procedures for redemption pursuant to the Special Redemption Right.

(i)           A notice of redemption shall be mailed, postage prepaid, not less than 30 nor more than 60 days prior to the redemption date, addressed to the holders of record of the Series A Preferred Shares at their addresses as they appear on the Trust’s share transfer records. A failure to give such notice or any defect in the notice or in its mailing shall not affect the validity of the proceedings for the redemption of any Series A Preferred Shares except as to the holder to whom notice was defective or not given. In addition to any information required by law or by the applicable rules of any exchange upon which the Series A Preferred Shares may be listed or admitted to trading, each notice shall state: (i) the redemption date; (ii) the redemption price; (iii) the place or places where the certificates evidencing the Series A Preferred Shares are to be surrendered for payment of the redemption price; and (v) that dividends on the shares to be redeemed will cease to accrue on such redemption date except as otherwise provided herein.
 
 
 
 
 
 
(ii)           At its election, the Trust, prior to a redemption date, may irrevocably deposit the redemption price (including accumulated and unpaid dividends to the redemption date) of the Series A Preferred Shares so called for redemption in trust for the holders thereof with a bank or trust company, in which case the redemption notice to holders of the Series A Preferred Shares to be redeemed shall (A) state the date of such deposit, (B) specify the office of such bank or trust company as the place of payment of the redemption price and (C) require such holders to surrender the certificates evidencing such shares at such place on or about the date fixed in such redemption notice (which may not be later than the redemption date) against payment of the redemption price (including all accumulated and unpaid dividends to the redemption date). Subject to applicable escheat laws, any monies so deposited which remain unclaimed by the holders of the Series A Preferred Shares at the end of two years after the redemption date shall be returned by such bank or trust company to the Trust.

(iii)           Upon the redemption of Series A Preferred Shares, the Trust shall pay any accumulated and unpaid dividends in arrears for any dividend period ending on or prior to the redemption date. If the redemption date falls after a record date for a Series A Preferred Shares dividend payment and prior to the corresponding Series A Dividend Payment Date, then each holder of the Series A Preferred Shares at the close of business on such record date shall be entitled to the dividend payable on such Series A Preferred Shares on the corresponding Series A Dividend Payment Date notwithstanding the redemption of such Series A Preferred Shares before such Series A Dividend Payment Date. Except as provided above, the Trust shall make no payment or allowance for unpaid dividends, whether or not in arrears, on any Series A Preferred Shares called for redemption.

(iv)           If full cumulative dividends on the Series A Preferred Shares and any other series or class or classes of Parity Shares have not been paid or declared and set apart for payment, except as otherwise permitted under the Declaration of Trust, the Trust may not purchase, redeem or otherwise acquire Series A Preferred Shares or any Parity Shares other than in exchange for Junior Shares.

(v)           On and after the date fixed for redemption, provided that the Trust has made available at the office of the registrar and transfer agent a sufficient amount of cash to effect the redemption, dividends will cease to accumulate on the Series A Preferred Shares called for redemption (except that, in the case of a redemption date after a dividend payment record date and prior to the related Series A Dividend Payment Date, holders of Series A Preferred Shares on the applicable record date will be entitled on such Series A Dividend Payment Date to receive the dividend payable on such shares on the corresponding Series A Dividend Payment Date), such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as holders of Series A Preferred Shares shall cease except the right to receive the cash payable upon such redemption, without interest from the date of such redemption.

(e)           Any Series A Preferred Shares that shall at any time have been redeemed shall, after such redemption, have the status of authorized but unissued Preferred Shares, without designation as to series until such shares are once more designated as part of a particular series by the Board.
 
 
 
 
 

 
(6)            Voting Rights . Except as otherwise set forth herein, the Series A Preferred Shares shall not have any relative, participating, optional or other voting rights or powers, and the consent of the holders thereof shall not be required for the taking of any corporate action. In any matter in which the holders of Series A Preferred Shares are entitled to vote, each such holder shall have the right to one vote for each Series A Preferred Share held by such holder.

(a)           If and whenever six quarterly dividends (whether or not consecutive) payable on the Series A Preferred Shares are in arrears, whether or not earned or declared, the number of members then constituting the Board will be increased by two and the holders of Series A Preferred Shares, voting together as a class with the holders of any other series of Parity Shares upon which like voting rights have been conferred and are exercisable (any such other series, the “Voting Preferred Shares”), will have the right to elect two additional board members at an annual meeting of shareholders or a properly called special meeting of the holders of the Series A Preferred Shares and such Voting Preferred Shares and at each subsequent annual meeting of shareholders until all such dividends and dividends for the then current quarterly period on the Series A Preferred Shares and such other Voting Preferred Shares have been paid or declared and set aside for payment. Whenever all arrears in dividends on the Series A Preferred Shares and the Voting Preferred Shares then outstanding have been paid and full dividends on the Series A Preferred Shares and the Voting Preferred Shares for the then current quarterly dividend period have been paid in full or declared and set apart for payment in full, then the right of the holders of the Series A Preferred Shares and the Voting Preferred Shares to elect two additional board members will cease, the terms of office of the board members will forthwith terminate and the number of members of the Board will be reduced accordingly; provided, however, the right of the holders of the Series A Preferred Shares and the Voting Preferred Shares to elect the additional board members will again vest if and whenever six quarterly dividends are in arrears, as described above. In no event shall the holders of Series A Preferred Shares be entitled pursuant to these voting rights to elect a trustee that would cause the Trust to fail to satisfy a requirement relating to trustee independence of any national securities exchange on which any class or series of the Trust’s shares are listed. In class votes with other Voting Preferred Shares, preferred shares of different series shall vote in proportion to the liquidation preference of the preferred shares.

(b)           So long as any Series A Preferred Shares are outstanding, the approval of two-thirds of the votes entitled to be cast by the holders of outstanding Series A Preferred Shares, voting separately as a class, either at a meeting of shareholders or by written consent, is required (i) to amend, alter or repeal any provisions of the Declaration of Trust (including these Articles Supplementary), whether by merger, consolidation or otherwise, to affect materially and adversely the voting powers, rights or preferences of the holders of the Series A Preferred Shares, unless in connection with any such amendment, alteration or repeal, the Series A Preferred Shares remain outstanding without the terms thereof being materially changed in any respect adverse to the holders thereof or is converted into or exchanged for preferred shares of the surviving entity having preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption thereof that are substantially similar to those of the Series A Preferred Shares, or (ii) to authorize, create, or increase the authorized amount of any class or series of capital shares having rights senior to the Series A Preferred Shares with respect to the payment of dividends or amounts upon liquidation, dissolution or winding up (provided that if such amendment affects materially and adversely the rights, preferences, privileges or voting powers of one or more but not all of the other series of Voting Preferred Shares, the consent of the holders of at least two-thirds of the outstanding shares of each such series so affected is required). However, the Trust may create additional classes of Parity Shares and Junior Shares, amend the Declaration of Trust and these Articles Supplementary to increase the authorized number of Parity Shares (including the Series A Preferred Shares) and Junior Shares and issue additional series of Parity Shares and Junior Shares without the consent of any holder of Series A Preferred Shares.
 
 
 
 
 

 
(c)           The foregoing voting provisions shall not apply if, at or prior to the time when the act with respect to which such vote would otherwise be required shall be effected, all outstanding Series A Preferred Shares shall have been redeemed or called for redemption upon proper notice and sufficient funds shall have been deposited in trust to effect such redemption.

(7)            Information Rights . During any period in which the Trust is not subject to Section 13 or 15(d) of the Exchange Act, and any Series A Preferred Shares are outstanding, the Trust will (i) transmit by mail (or other permissible means under the Exchange Act) to all holders of Series A Preferred Shares, as their names and addresses appear in the record books of the Trust and without cost to such holders, copies of the annual reports and quarterly reports that the Trust would have been required to file with the Securities and Exchange Commission pursuant to Section 13 or 15(d) of the Exchange Act if the Corporation were subject thereto (other than any exhibits that would have been required) and (ii) promptly, upon request, supply copies of such reports to any prospective holder of Series A Preferred Shares. The Trust will mail (or otherwise provide) the information to the holders of Series A Preferred Shares within 15 days after the respective dates by which a periodic report on Form 10-K or Form 10-Q, as the case may be, in respect of such information would have been required to be filed with the SEC, if the Trust were subject to Section 13 or 15(d) of the Exchange Act of 1934, as amended.

(8)            No Right of Conversion . The Series A Preferred Shares are not convertible into or exchangeable for any other property or securities of the Trust.

(9)            Other Limitations; Ownership and Transfer . The Series A Preferred Shares constitutes Shares (as defined in the Declaration of Trust) of the Trust and is governed by and issued subject to all the limitations, terms and conditions of the Declaration of Trust applicable to Shares generally, including but not limited to the terms and conditions (including exceptions and exemptions) of Article VII of the Declaration of Trust applicable to Shares. The foregoing sentence shall not be construed to limit the applicability to the Series A Preferred Shares of any other term or provision of the Declaration of Trust.

(10)            Record Holders . The Trust and the transfer agent for the Series A Preferred Shares may deem and treat the record holder of any Series A Preferred Shares as the true and lawful owner thereof for all purposes, and neither the Trust nor the transfer agent shall be affected by any notice to the contrary.

SECOND : The Shares have been classified and designated by the Pricing Committee under the authority granted by the Board pursuant to the powers of the Board as contained in the Declaration of Trust. These Articles Supplementary have been approved by the Pricing Committee in accordance with the power delegated to the Pricing Committee by the Board in the manner and by the vote required by law.

THIRD : These Articles Supplementary shall become effective at 9:00 a.m. (Eastern Time) on December 7, 2010.

FOURTH : The undersigned Chief Executive Officer of the Trust acknowledges these Articles Supplementary to be the corporate act of the Trust and, as to all matters or facts required to be verified under oath, the undersigned Chief Executive Officer of the Trust acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.


 
 
 

IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Executive Officer and attested to by its Secretary on this 6th day of December, 2010.


Kite Realty Group Trust
By:
/s/ John A. Kite
 
John A. Kite
 
Chief Executive Officer

ATTEST:
By:
/s/ Thomas R. Olinger
 
Thomas R. Olinger
 
Senior Vice President and Secretary


 
 
 

KITE REALTY GROUP TRUST
 
ARTICLES SUPPLEMENTARY ESTABLISHING ADDITIONAL SHARES OF 8.250% SERIES A CUMULATIVE REDEEMABLE PERPETUAL PREFERRED SHARES
 
Kite Realty Group Trust, a Maryland real estate investment trust (the “Trust”), hereby certifies to the State Department of Assessments and Taxation of Maryland (the “SDAT”) that:
 
FIRST : Under the authority contained in the Articles of Amendment and Restatement of Declaration of Trust of the Trust (the “Declaration of Trust”), and pursuant to authority vested by the Board of Trustees of the Trust (the “Board”) in a pricing committee of the Board at a meeting of the Board held on November 2, 2010, such pricing committee, by resolution approved at a meeting held on November 30, 2010, previously classified and designated 2,990,000 Preferred Shares (as defined in the Declaration of Trust), par value $0.01 per share, as 8.250% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”), having the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption as set forth in the “Articles Supplementary Establishing and Fixing the Rights and Preferences of a Series of Preferred Shares” filed by the Trust with the State Department of Assessments and Taxation of Maryland on December 6, 2010, effective December 7, 2010 (the “Series A Articles Supplementary”).
 
SECOND : Under the authority contained in the Declaration of Trust and pursuant to authority vested by the Board in the Pricing Committee of the Board (the “Pricing Committee”) by unanimous written consent of the Board, dated March 5, 2012, the Pricing Committee, by resolution approved at a meeting held on March 7, 2012, classified an additional 1,190,000 shares of Preferred Shares as Series A Preferred Shares, par value $0.01 per share, having the preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications, and terms and conditions of redemption as set forth in the Series A Articles Supplementary, with the result that the Trust shall now have authorized an aggregate of 4,180,000 Series A Preferred Shares, all of which shall constitute a single series of Preferred Shares.
 
THIRD : The additional shares of Series A Preferred Shares have been classified and designated Series A Preferred Shares by the Pricing Committee under the authority granted by the Board pursuant to the powers of the Board as contained in the Declaration of Trust. These Articles Supplementary have been approved by the Pricing Committee in accordance with the power delegated to the Pricing Committee by the Board in the manner and by the vote required by law.
 
FOURTH : These Articles Supplementary shall become effective at 8:30 a.m. (Eastern Time) on March 12, 2012.
 
FIFTH : The undersigned Chief Financial Officer of the Trust acknowledges these Articles Supplementary to be the corporate act of the Trust and, as to all matters or facts required to be verified under oath, the undersigned Chief Financial Officer of the Trust acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.
 

 
 
 

IN WITNESS WHEREOF, the Trust has caused these Articles Supplementary to be signed in its name and on its behalf by its Chief Financial Officer and attested to by its Secretary on this 9th day of March, 2012.
 
 
Kite Realty Group Trust
   
 
By:
/s/ Daniel R. Sink
   
Daniel R. Sink
   
Executive Vice President, Chief Financial Officer and Treasurer

 
ATTEST:
 
   
By:
/s/ Thomas R. Olinger
 
 
Thomas R. Olinger
 
 
Senior Vice President and Secretary
 

 
 
 

KITE REALTY GROUP TRUST
 
ARTICLES OF AMENDMENT
 
Kite Realty Group Trust, a Maryland real estate investment trust (the “Trust”) under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland, hereby certifies to the State Department of Assessments and Taxation of Maryland that:
 
FIRST : Section 6.1 of Article VI of the Articles of Amendment and Restatement of Declaration of Trust of the Trust, filed on August 12, 2004 (the “Declaration of Trust”), is hereby amended by deleting such Section 6.1 and replacing it in its entirety with the following:
 
*******
 
“Section 6.1 Authorized Shares . The beneficial interest of the Trust shall be divided into shares of beneficial interest (the “Shares”). The Trust has authority to issue 450,000,000 common shares of beneficial interest, $0.01 par value per share (“Common Shares”), and 40,000,000 preferred shares of beneficial interest, $0.01 par value per share (“Preferred Shares”).”
 
*******
 
SECOND : The amendment to the Declaration of Trust as set forth above has been duly approved and advised by the Board of Trustees of the Trust and approved by the shareholders of the Trust as required by law.
 
THIRD : The total number of shares of beneficial interest that the Trust had authority to issue immediately prior to the filing of these Articles of Amendment was 200,000,000 common shares of beneficial interest, $0.01 par value per share, and 40,000,000 preferred shares of beneficial interest, $0.01 par value per share. Immediately prior to the filing of these Articles of Amendment, the aggregate par value of all authorized common shares of beneficial interest having par value was $2,000,000, and the aggregate par value of all authorized preferred shares of beneficial interest having par value was $400,000.
 
FOURTH : The total number of shares of beneficial interest that the Trust has authority to issue immediately upon the filing of these Articles of Amendment is 450,000,000 common shares of beneficial interest, $0.01 par value per share, and 40,000,000 preferred shares of beneficial interest, $0.01 par value per share. Immediately upon the filing of these Articles of Amendment, the aggregate par value of all authorized common shares of beneficial interest having par value is $4,500,000, and the aggregate par value of all authorized preferred shares of beneficial interest having par value is $400,000.
 
FIFTH : The preferences, conversion and other rights, voting powers, restrictions, limitations as to dividends, qualifications and terms and conditions of redemption were not changed by the foregoing amendment.
 
SIXTH : The undersigned officer acknowledges these Articles of Amendment to be the corporate act of the Trust and as to all matters of facts required to be verified under oath, the undersigned officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.
 
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IN WITNESS WHEREOF , Kite Realty Group Trust has caused these Articles of Amendment to be executed under seal in its name and on its behalf by the undersigned officer, and attested to by its Secretary, on this 26th day of June , 2014.
 
 
KITE REALTY GROUP TRUST
   
   
 
By:
/s/ John A. Kite
   
John A. Kite
   
Chairman and Chief Executive Officer

 
Attest:
/s/ Thomas R. Olinger
 
 
Thomas R. Olinger
 
 
Secretary
 
 
Return Address:
 
Kite Realty Group Trust
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana 46204
 

 
 
 

KITE REALTY GROUP TRUST
 
ARTICLES OF AMENDMENT
 
Kite Realty Group Trust, a Maryland real estate investment trust (the “Trust”) under Title 8 of the Corporations and Associations Article of the Annotated Code of Maryland (the “Maryland REIT Law”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:
 
FIRST : The Articles of Amendment and Restatement of Declaration of Trust of the Trust, filed on August 12, 2004 (as amended, the “Declaration of Trust”), are hereby amended to provide that, upon the Effective Time (as defined below), each common share of beneficial interest, $0.01 par value per share, of the Trust that was issued and outstanding immediately prior to the Effective Time shall be reclassified into one-fourth of a common share of beneficial interest, $0.04 par value per share, with the aggregate par value of the outstanding common shares of beneficial interest remaining unchanged; provided that no fractional common shares of beneficial interest of the Trust will be or remain issued under such amendment and each shareholder otherwise entitled to a fractional share shall be entitled to receive in lieu thereof cash in an amount equal to such shareholder’s pro rata percentage of the amount received per share upon the sale in one or more open market transactions of the aggregate of all such fractional shares.
 
SECOND : The amendment to the Declaration of Trust as set forth in Article FIRST above has been duly approved and advised by the Board of Trustees of the Trust as required by law. Pursuant to Section 8-501(f)(3) of the Maryland REIT Law, no shareholder approval was required.
 
THIRD : The Declaration of Trust is hereby further amended, effective upon the Effective Time, to change the par value of the common shares of beneficial interest of the Trust issued and outstanding after giving effect to Article FIRST hereof from $0.04 per share to $0.01 per share, and in connection therewith, there shall be transferred from the Common Shares account on the Trust’s balance sheet to the Additional Paid In Capital and Other account on the Trust’s balance sheet $0.03 per common share of beneficial interest immediately outstanding after such change in par value per share.
 
FOURTH : The amendment to the Declaration of Trust as set forth in Article THIRD above has been duly approved and advised by the Board of Trustees of the Trust as required by law. The amendment set forth in Article THIRD above is limited to changes expressly authorized by Section 8-501(e)(2) of the Maryland REIT Law to be made without action by the shareholders of the Trust.
 
FIFTH : There has been no increase in the authorized shares of beneficial interest of the Trust effected by the amendments to the Declaration of Trust as set forth above.
 
SIXTH : These Articles of Amendment will become effective at 5:00 p.m. Eastern Time on August 11, 2014 (the “Effective Time”).
 
SEVENTH : The undersigned officer acknowledges these Articles of Amendment to be the corporate act of the Trust and as to all matters of facts required to be verified under oath, the undersigned officer acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties of perjury.
 
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IN WITNESS WHEREOF , Kite Realty Group Trust has caused these Articles of Amendment to be executed under seal in its name and on its behalf by the undersigned officer, and attested to by its Secretary, on this 11th day of August, 2014.
 
 
KITE REALTY GROUP TRUST
   
   
 
By:
/s/ John A. Kite
   
John A. Kite
   
Chairman and Chief Executive Officer
     
 
Attest:
/s/ Thomas R. Olinger
 
 
Thomas R. Olinger
 
 
Secretary
 
     
   
Return Address:
 
   
Kite Realty Group Trust
 
30 S. Meridian Street
 
Suite 1100
 
Indianapolis, Indiana 46204
 

 

 
 
 

 
Exhibit 3.2
 
 
KITE REALTY GROUP TRUST
 
 
SECOND AMENDED AND RESTATED BYLAWS
 
 
      Kite Realty Group Trust, a Maryland real estate investment trust (the “Trust”) hereby amends and restates the Bylaws of the Trust as follows:
 
 
ARTICLE I
 
 
OFFICES
 
 
      Section 1. PRINCIPAL OFFICE . The principal office of the Trust shall be located at such place or places as the Board of Trustees may designate.
 
 
      Section 2. ADDITIONAL OFFICES . The Trust may have additional offices at such places as the Board of Trustees may from time to time determine or the business of the Trust may require.
 
 
ARTICLE II
 
 
MEETINGS OF SHAREHOLDERS
 
 
      Section 1. PLACE . All meetings of shareholders shall be held at the principal office of the Trust or at such other place within the United States as shall be set by the Board of Trustees and stated in the notice of the meeting.
 
 
      Section 2. ANNUAL MEETING . An annual meeting of the shareholders for the election of Trustees and the transaction of any business within the powers of the Trust shall be held each year, after the delivery of the annual report referred to in Section 12 of this Article II, at a convenient location and on proper notice, on a date and at the time set by the Board of Trustees. Failure to hold an annual meeting does not invalidate the Trust’s existence or affect any otherwise valid acts of the Trust.
 
 
      Section 3. SPECIAL MEETINGS . The chairman of the board, the chief executive officer, the president or a majority of the Trustees may call special meetings of the shareholders. Special meetings of the shareholders shall be called by the chairman of the board upon the written request of shareholders entitled to cast at least a majority of all votes entitled to be cast at any such meeting. Such request shall state the purpose or purposes of the meeting and the matters proposed to be acted on thereat. Upon receipt of such request, the Trust shall inform such shareholders of the reasonably estimated cost of preparing and mailing a notice of the meeting and, upon payment of such costs to the Trust, the Trust notice to each shareholder entitled to notice of such meeting. No special meeting need be called upon the request of shareholders entitled to cast less than a majority of all votes entitled to be cast at such a meeting to consider any matter which is substantially the same as a matter voted on at any special meeting of shareholders held during the preceding 12 months. The Board of Trustees shall have the sole power to fix the record date for determining shareholders entitled to request a special meeting of shareholders and the date, time and place of the special meeting.
 
 
      Section 4. NOTICE . Not less than ten nor more than 90 days before each meeting of shareholders, the secretary shall give to each shareholder entitled to vote at such meeting and to each shareholder not entitled to vote who is entitled to notice of the meeting written or printed notice stating the time and place of the meeting and, in the case   of a special meeting or as otherwise may be required by any statute, the purpose for which the meeting is called, either by mail, by presenting it to such shareholder personally or by leaving it at his or her residence or usual place of business, or by transmitting it to such shareholder by electronic mail to any electronic mail address of such shareholder or by any other electronic means. If mailed, such notice shall be deemed to be given when deposited in the United States mail addressed to the shareholder at his or her post office address as it appears on the records of the Trust, with postage thereon prepaid.
 
 
 
 
 
 
 
      Section 5. SCOPE OF NOTICE . Any business of the Trust may be transacted at an annual meeting of shareholders without being specifically designated in the notice, except such business as is required by any statute to be stated in such notice. No business shall be transacted at a special meeting of shareholders except as specifically designated in the notice.
 
 
      Section 6. ORGANIZATION AND CONDUCT. At every meeting of the shareholders, the Chairman of the Board, if there be one, shall conduct the meeting or, in the case of vacancy in office or absence of the Chairman of the Board, one of the following officers present shall conduct the meeting in the order stated: the Vice Chairman of the Board, if there be one, the President, the Vice Presidents in their order of rank and seniority, or a Chairman chosen by the shareholders entitled to cast a majority of the votes which all shareholders present in person or by proxy are entitled to cast, shall act as Chairman, and the Secretary, or, in his or her absence, an assistant secretary, or in the absence of both the Secretary and assistant secretaries, a person appointed by the Chairman shall act as Secretary.
 
 
The order of business and all other matters of procedure at any meeting of shareholders shall be determined by the chairman of the meeting. The chairman of the meeting may prescribe such rules, regulations and procedures and take such action as, in the discretion of such chairman, are appropriate for the proper conduct of the meeting, including, without limitation, (a) restricting admission to the time set for the commencement of the meeting; (b) limiting attendance at the meeting to shareholders of record of the Trust, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (c) limiting participation at the meeting on any matter to shareholders of record of the Trust entitled to vote on such matter, their duly authorized proxies or other such persons as the chairman of the meeting may determine; (d) limiting the time allotted to questions or comments by participants; (e) maintaining order and security at the meeting; (f) removing any shareholder or any other person who refuses to comply with meeting procedures, rules or guidelines as set forth by the chairman of the meeting; and (g) recessing or adjourning the meeting to a later date and time and place announced at the meeting. Unless otherwise determined by the chairman of the meeting, meetings of shareholders shall not be required to be held in accordance with the rules of parliamentary procedure.
 
 
      Section 7. QUORUM . At any meeting of shareholders, the presence in person or by proxy of shareholders entitled to cast a majority of all the votes entitled to be cast at such meeting shall constitute a quorum; but this section shall not affect any requirement under any statute or the Declaration of Trust, as amended, restated or supplemented from time to time (the “Declaration of Trust”) for the vote necessary for the adoption of any measure. If, however, such quorum shall not be present at any meeting of the shareholders, the shareholders entitled to vote at such meeting, present in person or by proxy, shall have the power to adjourn the meeting from time to time to a date not more than 120 days after the original record date without a new record date and without notice other than announcement at the meeting. At such adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the meeting as originally notified.
 
 
      Section 8. VOTING . 1 At each annual meeting of shareholders, the Trustees to be elected at the meeting shall be chosen by the majority of the votes cast by the holders of shares entitled to vote in the election at the meeting, provided a quorum is present; provided, however, that if, as of the last day on which a shareholder could timely provide notice to the secretary of the Trust of its intent to nominate a person for election to the Board of Trustees at a meeting of shareholders pursuant to these Bylaws, the number of nominees exceeds the number of Trustees to be elected, then Trustees shall be elected by the vote of a plurality of the votes cast by the holders of shares entitled to vote, provided a quorum is present. Each share may be voted for as many individuals as there are Trustees to be elected and for whose election the share is entitled to be voted. For purposes of this Section 8, a “majority of votes cast” shall mean that the number of votes cast “for” a Trustee’s election exceeds the number of votes cast “against” that Trustee’s election.
 
 
 
 
 
 
A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any other matter that may properly come before the meeting, unless a higher vote is required herein or by statute or by the Declaration of Trust. Unless otherwise provided in the Declaration of Trust, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.”
 
 
      Section 9. PROXIES . A shareholder may cast the votes entitled to be cast by the shares owned of record by him or her either in person or by proxy executed in writing by the shareholder or by his or her duly authorized agent in any manner permitted by law. Such proxy shall be filed with the secretary of the Trust before or at the time of the meeting. No proxy shall be valid after eleven months from the date of its execution, unless otherwise provided in the proxy.
 
 
      Section 10. VOTING OF SHARES BY CERTAIN HOLDERS . Shares of the Trust registered in the name of a corporation, partnership, trust or other entity, if entitled to be voted, may be voted by the president or a vice president, a general partner or trustee thereof, as the case may be, or a proxy appointed by any of the foregoing individuals, unless some other person who has been appointed to vote such shares pursuant to a bylaw or a resolution of the governing board of such corporation or other entity or agreement of the partners of the partnership presents a certified copy of such bylaw, resolution or agreement, in which case such person may vote such shares. Any trustee or other fiduciary may vote shares registered in his or her name as such fiduciary, either in person or by proxy.
 
 
      Shares of the Trust directly or indirectly owned by it shall not be voted at any meeting and shall not be counted in determining the total number of outstanding shares entitled to be voted at any given time, unless they are held in a fiduciary capacity, in which case they may be voted and shall be counted in determining the total number of outstanding shares at any given time.
 
 
      The Board of Trustees may adopt by resolution a procedure by which a shareholder may certify in writing to the Trust that any shares registered in the name of the shareholder are held for the account of a specified person other than the shareholder. The resolution shall set forth the class of shareholders who may make the certification, the purpose for which the certification may be made, the form of certification and the information to be contained in it; if the certification is with respect to a record date or closing of the share transfer books, the time after the record date or closing of the share transfer books within which the certification must be received by the Trust; and any other provisions with respect to the procedure which the Board of Trustees considers necessary or desirable. On receipt of such certification, the person specified in the certification shall be regarded as, for the purposes set forth in the certification, the shareholder of record of the specified shares in place of the shareholder who makes the certification.
 
 
      Section 11. INSPECTORS . At any meeting of shareholders, the chairman of the meeting may, or upon the request of any shareholder shall, appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting based upon their determination of the validity and effect of proxies, count all votes, report the results and perform such other acts as are proper to conduct the election and voting with impartiality and fairness to all the shareholders. In case any person who may be appointed as an inspector fails to appear or act, the vacancy may be filled by appointment made by the Board of Trustees in advance of the meeting or at the meeting by the chairman of the meeting.
 
 
      Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there is more than one inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof.
 
 
 
 
 
 
 
      Section 12. REPORTS TO SHAREHOLDERS . The Board of Trustees shall submit to the shareholders at or before the annual meeting of shareholders a report of the business and operations of the Trust during such fiscal year, containing a balance sheet and a statement of income and surplus of the Trust, accompanied by the certification of an independent certified public accountant, and such further information as the Board of Trustees may determine is required pursuant to any law or regulation to which the Trust is subject. Within the earlier of 20 days after the annual meeting of shareholders or 120 days after the end of the fiscal year of the Trust, the Board of Trustees shall place the annual report on file at the principal office of the Trust and with any governmental agencies as may be required by law and as the Board of Trustees may deem appropriate.
 
 
     Section 13. ADVANCE NOTICE OF SHAREHOLDER NOMINEES FOR TRUSTEE AND OTHER PROPOSALS BY SHAREHOLDERS .
 
 
           (a) Annual Meetings of Shareholders.
 
 
                (1) Nominations of persons for election to the Board of Trustees and the proposal of business to be considered by the shareholders may be made at an annual meeting of shareholders only (i) pursuant to the Trust’s notice of meeting, (ii) by or at the direction of the Board of Trustees or (iii) by any shareholder of the Trust who was a shareholder of record both at the time of giving of notice provided for in this Section 13(a) and at the time of the annual meeting, who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 13(a).
 
 
               (2) For nominations for election to the Board of Trustees or other business to be properly brought before an annual meeting by a shareholder pursuant to clause (iii) of paragraph (a)(1) of this Section 13, the shareholder must have given timely notice thereof in writing to the secretary of the Trust and such other business must otherwise be a proper matter for action by shareholders. To be timely, a shareholder’s notice must be delivered to the secretary at the principal executive office of the Trust by not later than the close of business on the 90th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting nor earlier than the close of business on the 120th day prior to the first anniversary of the date of mailing of the notice for the preceding year’s annual meeting; provided, however, that in the event that the date of the mailing of the notice for the annual meeting is advanced or delayed by more than 30 days from the first anniversary of the date of the mailing of the notice for the preceding year’s annual meeting, notice by the shareholder to be timely must be so delivered not earlier than the close of business on the 120th day prior to the date of mailing of the notice for such annual meeting and not later than the close of business on the later of the 90th day prior to the date of mailing of the notice for such annual meeting or the 10th day following the day on which public announcement of the date of mailing of the notice for such meeting is first made by the Trust. In no event shall the public announcement of a postponement of an annual meeting to a later date or time commence a new time period for the giving of a shareholder’s notice as described above. Such shareholder’s notice shall set forth (i) as to each person whom the shareholder proposes to nominate for election or reelection as a trustee (A) the name, age, business address and residence address of such person, (B) the class and number of shares of beneficial interest of the Trust that are beneficially owned or owned of record by such person and (C) all other information relating to such person that is required to be disclosed in solicitations of proxies for election of Trustees in an election contest (even if an election contest is not involved), or is otherwise required, in each case pursuant to Regulation 14A (or any successor provision) under the Exchange Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a trustee if elected); (ii) as to any other business that the shareholder proposes to bring before the meeting, a description in reasonable detail of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such shareholder (including any anticipated benefit to the shareholder therefrom) and of each beneficial owner, if any, on whose behalf the proposal is made; and (iii) as to the shareholder giving the notice and each beneficial owner, if any, on whose behalf the nomination or proposal is made, (x) the name and address of such shareholder, as they appear on the Trust’s share ledger and current name and address, if different, of such beneficial owner, and (y) the class and number of shares of each class of beneficial interest of the Trust which are owned beneficially and of record by such shareholder and owned beneficially by such beneficial owner.
 
 
 
 
 
 
                (3) Notwithstanding anything in this subsection(a) of this Section 13 to the contrary, in the event that the number of Trustees to be elected to the Board of Trustees is increased and there is no public announcement by the Trust of such action or specifying the size of the increased Board of Trustees at least 100 days prior to the first anniversary of the date of mailing of the notice of the preceding year’s annual meeting, a shareholder’s notice required by this Section 13(a) shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if the notice is delivered to the secretary at the principal executive offices of the Trust not later than the close of business on the 10th day immediately following the day on which such public announcement is first made by the Trust.
 
 
           (b) Special Meetings of Shareholders. Only such business shall be conducted at a special meeting of shareholders as shall have been brought before the meeting pursuant to the Trust’s notice of meeting. Nominations of persons for election to the Board of Trustees may be made at a special meeting of shareholders at which Trustees are to be elected only (i) pursuant to the Trust’s notice of meeting, (ii) by or at the direction of the Board of Trustees or (iii) provided that the Board of Trustees has determined that Trustees shall be elected at such special meeting, by any shareholder of the Trust who is a shareholder of record both at the time of giving of notice provided for in this Section 13(b) and at the time of the special meeting, who is entitled to vote at the meeting and who has complied with the notice procedures set forth in this Section 13(b). In the event the Trust calls a special meeting of shareholders for the purpose of electing one or more Trustees to the Board of Trustees, any such shareholder may nominate a person or persons (as the case may be) for election as a Trustee as specified in the Trust’s notice of meeting, if the shareholder’s notice containing the information required by paragraph (a)(2) of this Section 13 shall be delivered to the secretary at the principal executive offices of the Trust not earlier than the close of business on the 120th day prior to such special meeting and not later than the close of business on the later of the 90th day prior to such special meeting or the 10th day following the day on which public announcement is first made of the date of the special meeting and the nominees proposed by the Board of Trustees to be elected at such meeting. In no event shall the public announcement of a postponement or adjournment of a special meeting to a later date or time commence a new time period for the giving of a shareholder’s notice as described above.
 
 
           (c) General.
 
 
                (1) Upon written request by the secretary or the Board of Trustees or any committee thereof, any shareholder proposing a nominee for election as a Trustee or any proposal for other business at a meeting of shareholders shall provide, within five business days of delivery of such request (or such other period as may be specified in such request), written verification, satisfactory to the secretary or the Board of Trustees or any committee thereof, in his, her or its sole discretion, of the accuracy of any information submitted by the shareholder pursuant to this Section 13. If a shareholder fails to provide such written verification within such period, the secretary or the Board of Trustees or any committee thereof may treat the information as to which written verification was requested as not having been provided in accordance with the procedures set forth in this Section 13.
 
 
                (2) Only such persons who are nominated in accordance with the procedures set forth in this Section 13 shall be eligible to serve as Trustees, and only such business shall be conducted at a meeting of shareholders as shall have been brought before the meeting in accordance with the procedures set forth in this Section 13. The chairman of the meeting shall have the power and duty to determine whether a nomination or any other business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 13 and, if any proposed nomination or other business is not in compliance with this Section 13, to declare that such defective nomination or proposal be disregarded.
 
 
                (3) For purposes of this Section 13, (a) the “date of mailing of the notice” shall mean the date of the proxy statement for the solicitation of proxies for election of Trustees and (b) “public announcement” shall mean disclosure (i) in a press release either transmitted to the principal securities exchange on which the Trust’s common shares are traded or reported by a recognized news service or (ii) in a document publicly filed by the Trust with the United States Securities and Exchange Commission.
 
 
 
 
 
 
                (4) Notwithstanding the foregoing provisions of this Section 13, a shareholder shall also comply with all applicable requirements of state law and of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this Section 13. Nothing in this Section 13 shall be deemed to affect any right of a shareholder to request inclusion of a proposal in, nor the right of the Trust to omit a proposal from, the Trust’s proxy statement pursuant to Rule 14a-8 (or any successor provision) under the Exchange Act.
 
 
      Section 14. INFORMAL ACTION BY SHAREHOLDERS . Any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting if a consent in writing, setting forth such action, is signed by each shareholder entitled to vote on the matter and any other shareholder entitled to notice of a meeting of shareholders (but not to vote thereat) has waived in writing any right to dissent from such action, and such consent and waiver are filed with the minutes of proceedings of the shareholders.
 
 
      Section 15. VOTING BY BALLOT . Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot.
 
 
      Section 16. CONTROL SHARE ACQUISITION ACT .   Notwithstanding any other provision of the Declaration of Trust of the Trust or these Bylaws, Title 3, Subtitle 7 of the Maryland General Corporation Law (or any successor statute) shall not apply to any acquisition by any person of shares of beneficial interest of the Trust. This section may be repealed, in whole or in part, at any time, whether before or after an acquisition of control shares and, upon such repeal, may, to the extent provided by any successor bylaw, apply to any prior or subsequent control share acquisition.
 
 
ARTICLE III
 
 
TRUSTEES
 
 
      Section 1. GENERAL POWERS; QUALIFICATIONS; TRUSTEES HOLDING OVER . The business and affairs of the Trust shall be managed under the direction of its Board of Trustees. A Trustee shall be an individual at least 21 years of age who is not under legal disability. In case of failure to elect Trustees at an annual meeting of the shareholders, the Trustees holding over shall continue to direct the management of the business and affairs of the Trust until their successors are elected and qualify.
 
 
      Section 2. NUMBER AND INDEPENDENCE . At any regular meeting or at any special meeting called for that purpose, a majority of the entire Board of Trustees may establish, increase or decrease the number of Trustees, subject to any limitations in the Declaration of Trust. At least a majority of the Board of Trustees shall be trustees whom the Board has determined are “independent” under the standards established by the Board of Trustees and in accordance with the then applicable requirements of the New York Stock Exchange. All nominations must be submitted through and approved by the Nominating and Corporate Governance Committee and follow the nominating process established by that committee for the nomination of trustees and must satisfy the standards for membership on the Board of Trustees approved by the Board of Trustees or that committee from time to time.
 
 
      Section 3. ANNUAL AND REGULAR MEETINGS . An annual meeting of the Board of Trustees shall be held immediately after and at the same place as the annual meeting of shareholders, no notice other than this Bylaw being necessary. The Board of Trustees may provide, by resolution, the time and place, either within or without the State of Maryland, for the holding of regular meetings of the Board of Trustees without other notice than such resolution.
 
 
      Section 4. SPECIAL MEETINGS . Special meetings of the Board of Trustees may be called by or at the request of the chairman of the board, the chief executive officer or the president or by a majority of the Trustees then in office. The person or persons authorized to call special meetings of the Board of Trustees may fix any place, either within or without the State of Maryland, as the place for holding any special meeting of the Board of Trustees called by them.
 
 
 
 
 
 
      Section 5. NOTICE . Notice of any special meeting shall be given by written notice delivered personally, telegraphed, electronically mailed, facsimile-transmitted or mailed or couriered to each Trustee at his or her business or residence address. Personally delivered or telegraphed notices shall be given at least two days prior to the meeting. Notice by mail shall be given at least five days prior to the meeting. Telephone, electronic mail or facsimile-transmission notice shall be given at least 24 hours prior to the meeting. If mailed, such notice shall be deemed to be given when deposited in the United States mail properly addressed, with postage thereon prepaid. If given by telegram, such notice shall be deemed to be given when the telegram is delivered to the telegraph company. Telephone notice shall be deemed given when the Trustee is personally given such notice in a telephone call to which he or she is a party. Electronic mail notice shall be deemed to be given upon transmission of the message to the electronic mail address given to the Trust by the Trustee. Facsimile-transmission notice shall be deemed given upon completion of the transmission of the message to the number given to the Trust by the Trustee and receipt of a completed answer-back indicating receipt. Notice by courier shall be deemed to be given when deposited with or delivered to a courier properly addressed. Neither the business to be transacted at, nor the purpose of, any annual, regular or special meeting of the Board of Trustees need be stated in the notice, unless specifically required by statute or these Bylaws.
 
 
      Section 6. QUORUM . A majority of the Board of Trustees shall constitute a quorum for transaction of business at any meeting of the Board of Trustees, provided that, if less than a majority of such Trustees are present at said meeting, a majority of the Trustees present may adjourn the meeting from time to time without further notice, and provided further that if, pursuant to the Declaration of Trust or these Bylaws, the vote of a majority of a particular group of Trustees is required for action, a quorum must also include a majority of such group.
 
 
      The Trustees present at a meeting which has been duly called and convened may continue to transact business until adjournment, notwithstanding the withdrawal of enough Trustees to leave less than a quorum.
 
 
      Section 7. VOTING . The action of the majority of the Trustees present at a meeting at which a quorum is present shall be the action of the Board of Trustees, unless the concurrence of a greater proportion is required for such action by applicable statute.
 
 
      Section 8. TELEPHONE MEETINGS . Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.
 
 
      Section 9. INFORMAL ACTION BY TRUSTEES . Any action required or permitted to be taken at any meeting of the Board of Trustees may be taken without a meeting, if a consent in writing or by electronic transmission to such action is signed or transmitted by each Trustee and such consent is filed in paper or electronic form with the minutes of proceedings of the Board of Trustees.
 
 
      Section 10. ORGANIZATION . At each meeting of the Board of Trustees, the chairman of the Board of Trustees or, in the absence of the chairman, the vice chairman, if any, of the Board of Trustees, if any, shall act as Chairman. In the absence of both the chairman and vice chairman of the Board of Trustees, the chief executive officer or in the absence of the chief executive officer, the president or in the absence of the president, a director chosen by a majority of the Trustees present, shall act as Chairman. The secretary or, in his or her absence, an assistant secretary of the Trust, or in the absence of the secretary and all assistant secretaries, a person appointed by the Chairman, shall act as Secretary of the meeting.
 
 
      Section 11. VACANCIES . If for any reason any or all the Trustees cease to be Trustees, such event shall not terminate the Trust, or affect these Bylaws or the powers of the remaining Trustees hereunder (even if fewer than a quorum of Trustees remain). Any vacancy (including a vacancy created by an increase in the number of Trustees) shall be filled, at any regular meeting or at any special meeting called for that purpose, by a majority of’ the Trustees, even if the remaining Trustees do not constitute a quorum. Any individual so elected as Trustee shall hold office for the unexpired term of the Trustee he or she is replacing and until a successor is elected and qualifies.
 
 
      Section 12. COMPENSATION . Trustees shall not receive any stated salary for their services as Trustees but, by resolution of the Board of Trustees or a duly authorized committee thereof, may receive compensation per year and/or per meeting and for any service or activity they performed or engaged in as Trustees. Trustees may be reimbursed for expenses of attendance, if any, at each annual, regular or special meeting of the Board of Trustees or of any committee thereof; and for their expenses, if any, in connection with any service or activity performed or engaged in as Trustees; but nothing herein contained shall be construed to preclude any Trustees from serving the Trust in any other capacity and receiving compensation therefor.
 
 
 
 
 
 
      Section 13. REMOVAL OF TRUSTEES . The shareholders may remove any Trustee in the manner provided in the Declaration of Trust.
 
 
      Section 14. RELIANCE . Each Trustee, officer, employee and agent of the Trust shall, in the performance of his or her duties with respect to the Trust, be fully justified and protected with regard to any act or failure to act in reliance in good faith upon the books of account or other records of the Trust, upon an opinion of counsel or upon reports made to the Trust by any of its officers or employees or by the adviser, accountants, appraisers or other experts or consultants selected by the Trustees or officers of the Trust, regardless of whether such counsel or expert may also be a Trustee.
 
 
      Section 15. INTERESTED TRUSTEE TRANSACTIONS . Section 2?419 of the Maryland General Corporation Law (the “MGCL”) shall be available for and apply to any contract or other transaction between the Trust and any of its Trustees or between the Trust and any other trust, corporation, firm or other entity in which any of its Trustees is a trustee or director or has a material financial interest.
 
 
ARTICLE IV
 
 
COMMITTEES
 
 
      Section 1. NUMBER, TENURE AND QUALIFICATIONS . The Board of Trustees may appoint from among its members an Audit Committee, a Compensation Committee, a Nominating and Corporate Governance Committee, and other committees, composed of one or more Trustees, to serve at the pleasure of the   Board of Trustees.
 
 
      Section 2. POWERS . The Board of Trustees may delegate to committees appointed under Section 1 of this Article any of the powers of the Trustees, except as prohibited by law.
 
 
      Section 3. MEETINGS .   In the absence of any member of any such committee, the members thereof present at any meeting, whether or not they constitute a quorum, may appoint another Trustee to act in the place of such absent member provided that such Trustee meets the requirements of such committee. Notice of committee meetings shall be given in the same manner as notice for special meetings of the Board of Trustees. Each committee shall keep minutes of its proceedings and shall report the same to the Board of Trustees at the next succeeding meeting, and any action by the committee shall be subject to revision and alteration by the Board of Trustees, provided that no rights of third persons shall be affected by any such revision or alteration.
 
 
      Section 4. QUORUM . A majority of the members of any committee shall constitute a quorum for the transaction of business at a committee meeting, and the act of a majority present shall be the act of such committee. The Board of Trustees, or the members of a committee to which such power has been duly delegated by the Board of Trustees, may designate a chairman of any committee, and such chairman or any two members of any committee may fix the time and place of its meetings unless the Board shall otherwise provide.
 
 
      Section 5. TELEPHONE MEETINGS . Members of a committee of the Board of Trustees may participate in a meeting by means of a conference telephone or similar communications equipment if all persons participating in the meeting can hear each other at the same time. Participation in a meeting by these means shall constitute presence in person at the meeting.
 
 
      Section 6. INFORMAL ACTION BY COMMITTEES . Any action required or permitted to be taken at any meeting of a committee of the Board of Trustees may be taken without a meeting, if a consent in writing or by electronic transmission to such action is signed or transmitted by each member of the committee and such consent is filed in paper or electronic form with the minutes of proceedings of such committee.
 
 
 
 
 
 
      Section 7. VACANCIES, REMOVAL AND DISSOLUTION . Subject to the provisions hereof, the Board of Trustees shall have the power at any time to change the membership of any committee, to fill all vacancies, to designate alternate members to replace any absent or disqualified member or to dissolve any such committee.
 
 
ARTICLE V
 
 
OFFICERS
 
 
      Section 1. GENERAL PROVISIONS . The officers of the Trust shall include a president, a secretary and a treasurer and may include a chairman of the board, a vice chairman of the board, a chief executive officer, a chief operating officer, a chief financial officer, one or more vice presidents, one or more assistant secretaries and one or more assistant treasurers. In addition, the Board of Trustees may from time to time appoint such other officers with such powers and duties as they shall deem necessary or desirable. The officers of the Trust shall be elected annually by the Board of Trustees at the first meeting of the Board of Trustees held after each annual meeting of shareholders, except that the president may appoint one or more vice presidents. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as may be convenient. Each officer shall hold office until his or her successor is elected and qualifies or until his or her death, resignation or removal in the manner hereinafter provided. Any two or more offices except president and vice president may be held by the same person. In their discretion, the Trustees may leave unfilled any office. Election of an officer or agent shall not of itself create contract rights between the Trust and such officer or agent.
 
 
      Section 2. REMOVAL AND RESIGNATION . Any officer or agent of the Trust may be removed by the Board of Trustees if in its judgment the best interests of the Trust would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. Any officer of the Trust may resign at any time by giving written notice of his or her resignation to the Trustees, the chairman of the board, the president or the secretary. Any resignation shall take effect at any time subsequent to the time specified therein or, if the time when it shall become effective is not specified therein, immediately upon its receipt. The acceptance of a resignation shall not be necessary to make it effective unless otherwise stated in the resignation. Such resignation shall be without prejudice to the contract rights, if any, of the Trust.
 
 
     Section 3. VACANCIES . A vacancy in any office may be filled by the Board of Trustees for the balance of the term.
 
 
     Section 4. CHIEF EXECUTIVE OFFICER . The Board of Trustees may designate a chief executive officer from among the elected officers. The chief executive officer shall have responsibility for implementation of the policies of the Trust, as determined by the Board of Trustees, and for the administration of the business affairs of the Trust. In the absence of the chairman of the board, the chief executive officer shall preside over the meetings of the board of Trustees and of the shareholders at which he or she shall be present.
 
 
     Section 5. CHIEF OPERATING OFFICER . The Board of Trustees may designate a chief operating officer from among the elected officers. Said officer will have the responsibilities and duties as set forth by the Board of Trustees or the chief executive officer.
 
 
     Section 6. CHIEF FINANCIAL OFFICER . The Board of Trustees may designate a chief financial officer from among the elected officers. Said officer will have the responsibilities and duties as set forth by the Board of Trustees or the chief executive officer.
 
 
     Section 7. CHAIRMAN OF THE BOARD . The chairman of the board shall preside over the meetings of the Board of Trustees and of the shareholders at which he or she shall be present and shall in general oversee all of the business and affairs of the Trust. The chairman of the board may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed. The chairman of the board shall perform such other duties as may be assigned to him or her or such other officer or agent of the Trust by the Board of Trustees.
 
 
 
 
 
 
     Section 8. PRESIDENT . In the absence of the chairman of the board and the chief executive officer, the president shall preside over the meetings of the Board of Trustees and of the shareholders at which he or she shall be present. In the absence of a designation of a chief executive officer by the Board of Trustees, the president shall be the chief executive officer. The president may execute any deed, mortgage, bond, contract or other instrument, except in cases where the execution thereof shall be expressly delegated by the Board of Trustees or by these Bylaws to some other officer or agent of the Trust or shall be required by law to be otherwise executed; and in general shall perform all duties incident to the office of president and such other duties as may be prescribed by the Board of Trustees from time to time.
 
 
     Section 9. VICE PRESIDENTS . In the absence of the president or in the event of a vacancy in such office, the vice president (or in the event there be more than one vice president, the vice presidents in the order designated at the time of their election or, in the absence of any designation, then in the order of their election) shall perform the duties of the president and when so acting shall have all the powers of and be subject to all the restrictions upon the president; and shall perform such other duties as from time to time may be assigned to him or her by the president or by the Board of Trustees. The Board of Trustees may designate one or more vice presidents as executive vice president, as senior vice president or as vice president for particular areas of responsibility. The president may designate one or more vice presidents as vice president for particular areas of responsibility.
 
 
     Section 10. SECRETARY . The secretary shall (a) keep the minutes of the proceedings of the shareholders, the Board of Trustees and committees of the Board of Trustees in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these Bylaws or as required by law; (c) be custodian of the trust records and of the seal of the Trust; (d) keep a register of the post office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) have general charge of the share transfer books of the Trust; and (f) in general perform such other duties as from time to time may be assigned to him or her by the chief executive officer, the president or by the Board of Trustees.
 
 
     Section 11. TREASURER . The treasurer shall have the custody of the funds and securities of the Trust and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Trust and shall deposit all moneys and other valuable effects in the name and to the credit of the Trust in such depositories as may be designated by the Board of Trustees.
 
 
     The treasurer shall disburse the funds of the Trust as may be ordered by the Board of Trustees, taking proper vouchers for such disbursements, and shall render to the president and Board of Trustees, at the regular meetings of the Board of Trustees or whenever they may require it, an account of all his or her transactions as treasurer and of the financial condition of the Trust.
 
 
     If required by the Board of Trustees, the treasurer shall give the Trust a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Trustees for the faithful performance of the duties of his or her office and for the restoration to the Trust, in case of his or her death, resignation, retirement or removal from office, of all books, papers, vouchers, moneys and other property of whatever kind in his or her possession or under his or her control belonging to the Trust.
 
 
     Section 12. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS . The assistant secretaries and assistant treasurers, in general, shall perform such duties as shall be assigned to them by the secretary or treasurer, respectively, or by the president, the chief executive officer or the Board of Trustees. The assistant treasurers shall, if required by the Board of Trustees, give bonds for the faithful performance of their duties in such sums and with such surety or sureties as shall be satisfactory to the Board of Trustees.
 
 
 
 
 
 
     Section 13. SALARIES . The salaries and other compensation of the officers shall be fixed from time to time by the Board of Trustees or the president and no officer shall be prevented from receiving such salary or other compensation by reason of the fact that he or she is also a Trustee.
 
 
ARTICLE VI
 
 
CONTRACTS, CHECKS AND DEPOSITS
 
 
     Section 1. CONTRACTS . The Board of Trustees or the president may authorize any officer or agent to enter into any contract or to execute and deliver any instrument in the name of and on behalf of the Trust and such authority may be general or confined to specific instances. Any agreement, deed, mortgage, lease or other document executed by one or more of the Trustees or by an authorized person shall be valid and binding upon the Board of Trustees and upon the Trust.
 
 
     Section 2. CHECKS AND DRAFTS . All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the Trust shall be signed by such officer or agent of the Trust in such manner as shall from time to time be determined by the Board of Trustees.
 
 
     Section 3. DEPOSITS . All funds of the Trust not otherwise employed shall be deposited from time to time to the credit of the Trust in such banks, trust companies or other depositories as the Board of Trustees may designate.
 
 
ARTICLE VII
 
 
SHARES
 
 
     Section 1. CERTIFICATES . In the event that the Trust issues shares of beneficial interest evidenced by certificates, each shareholder shall be entitled to a certificate or certificates which shall evidence and certify the number of shares of each class of beneficial interests held by him or her in the Trust. Each certificate shall be signed by the chairman of the board, the chief executive officer, the president or a vice president and countersigned by the secretary or an assistant secretary or the treasurer or an assistant treasurer and may be sealed with the seal, if any, of the Trust. The signatures may be either manual or facsimile. Certificates shall be consecutively numbered; and if the Trust shall, from time to time, issue several classes of shares, each class may have its own number series. A certificate is valid and may be issued whether or not an officer who signed it is still an officer when it is issued. Each certificate representing shares which are restricted as to their transferability or voting powers, which are preferred or limited as to their dividends or as to their allocable portion of the assets upon liquidation or which are redeemable at the option of the Trust, shall have a statement of such restriction, limitation, preference or redemption provision, or a summary thereof, plainly stated on the certificate. In lieu of such statement or summary, the Trust may set forth upon the face or back of the certificate a statement that the Trust will furnish to any shareholder, upon request and without charge, a full statement of such information.
 
 
     Section 2. TRANSFERS . Certificates shall be treated as negotiable and title thereto and to the shares they represent shall be transferred by delivery thereof to the same extent as those of a Maryland stock corporation. Upon surrender to the Trust or the transfer agent of the Trust of a share certificate duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, the Trust shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books.
 
 
     The Trust shall be entitled to treat the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Maryland.
 
 
     Notwithstanding the foregoing, transfers of shares of beneficial interest of the Trust will be subject in all respects to the Declaration of Trust and all of the terms and conditions contained therein.
 
 
 
 
 
 
     Section 3. REPLACEMENT CERTIFICATE . Any officer designated by the Board of Trustees may direct a new certificate to be issued in place of any certificate previously issued by the Trust alleged to have been lost, stolen or destroyed upon the making of an affidavit of that fact by the person claiming the certificate to be lost, stolen or destroyed. When authorizing the issuance of a new certificate, an officer designated by the Board of Trustees may, in his or her discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or the owner’s legal representative to advertise the same in such manner as he or she shall require and/or to give bond, with sufficient surety, to the Trust to indemnify it against any loss or claim which may arise as a result of the issuance of a new certificate.
 
 
     Section 4. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE . The Board of Trustees may set, in advance, a record date for the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or determining shareholders entitled to receive payment of any dividend or the allotment of any other rights, or in order to make a determination of shareholders for any other proper purpose. Such date, in any case, shall not be prior to the close of business on the day the record date is fixed and shall be not more than 90 days and, in the case of a meeting of shareholders not less than ten days, before the date on which the meeting or particular action requiring such determination of shareholders of record is to be held or taken.
 
 
     In lieu of fixing a record date, the Board of Trustees may provide that the share transfer books shall be closed for a stated period but not longer than 20 days. If the share transfer books are closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten days before the date of such meeting.
 
 
     If no record date is fixed and the share transfer books are not closed for the determination of shareholders, (a) the record date for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders shall be at the close of business on the day on which the notice of meeting is mailed or the 30th day before the meeting, whichever is the closer date to the meeting; and (b) the record date for the determination of shareholders entitled to receive payment of a dividend or an allotment of any other rights shall be the close of business on the day on which the resolution of the Board of Trustees, declaring the dividend or allotment of rights, is adopted.
 
 
     When a determination of shareholders entitled to vote at any meeting of shareholders has been made as provided in this section, such determination shall apply to any adjournment thereof, except when (i) the determination has been made through the closing of the transfer books and the stated period of closing has expired or (ii) the meeting is adjourned to a date more than 120 days after the record date fixed for the original meeting, in either of which case a new record date shall be determined as set forth herein.
 
 
     Section 5. SHARE LEDGER . The Trust shall maintain at its principal office or at the office of its counsel, accountants or transfer agent, an original or duplicate share ledger containing the name and address of each shareholder and the number of shares of each class held by such shareholder.
 
 
     Section 6. FRACTIONAL SHARES; ISSUANCE OF UNITS . The Board of Trustees may issue fractional shares or provide for the issuance of scrip, all on such terms and under such conditions as they may determine. Notwithstanding any other provision of the Declaration of Trust or these Bylaws, the Board of Trustees may issue units consisting of different securities of the Trust. Any security issued in a unit shall have the same characteristics as any identical securities issued by the Trust, except that the Board of Trustees may provide that for a specified period securities of the Trust issued in such unit may be transferred to the books of the Trust only in such unit.
 
 
ARTICLE VIII
 
 
ACCOUNTING YEAR
 
 
     The Board of Trustees shall have the power, from time to time, to fix the fiscal year of the Trust by a duly adopted resolution.
 
 
 
 
 
 
ARTICLE IX
 
 
DISTRIBUTIONS
 
 
     Section 1. AUTHORIZATION . Dividends and other distributions upon the shares of beneficial interest of the Trust may be authorized and declared by the Board of Trustees, subject to the provisions of law and the Declaration of Trust. Dividends and other distributions may be paid in cash, property or shares of the Trust, subject to the provisions of law and the Declaration of Trust.
 
 
     Section 2. CONTINGENCIES . Before payment of any dividends or other distributions, there may be set aside out of any funds of the Trust available for dividends or other distributions such sum or sums as the Board of Trustees may from time to time, in their absolute discretion, think proper as a reserve fund for contingencies, for equalizing dividends or other distributions, for repairing or maintaining any property of the Trust or for such other purpose as the Board of Trustees shall determine to be in the best interest of the Trust, and the Board of Trustees may modify or abolish any such reserve in the manner in which it was created.
 
 
ARTICLE X
 
 
SEAL
 
 
     Section 1. SEAL . The Board of Trustees may authorize the adoption of a seal by the Trust. The seal shall have inscribed thereon the name of the Trust and the year of its formation. The Trustees may authorize one or more duplicate seals and provide for the custody thereof.
 
 
     Section 2. AFFIXING SEAL . Whenever the Trust is permitted or required to affix its seal to a document, it shall be sufficient to meet the requirements of any law, rule or regulation relating to a seal to place the word “(SEAL)” adjacent to the signature of the person authorized to execute the document on behalf of the Trust.
 
 
ARTICLE XI
 
 
INDEMNIFICATION AND ADVANCE OF EXPENSES
 
 
     To the maximum extent permitted by Maryland law in effect from time to time, the Trust shall indemnify (a) any Trustee or officer (including among the foregoing, for all purposes of this Article XI and without limitation, any individual who, while a Trustee or officer and at the express request of the Trust, serves or has served another real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or any other enterprise as a director, officer, shareholder, partner or trustee of such real estate investment trust, corporation, partnership, joint venture, trust, employee benefit plan or other enterprise) who has been successful, on the merits or otherwise, in the defense of a proceeding to which he or she was made a party by reason of service in such capacity, against reasonable expenses incurred by him or her in connection with the proceeding, and (b) any Trustee or officer or any former Trustee or officer against any claim or liability to which he or she may become subject by reason of such status unless it is established that (i) his or her act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, (ii) he or she actually received an improper personal benefit in money, property or services or (iii) in the case of a criminal proceeding, he or she had reasonable cause to believe that his or her act or omission was unlawful. In addition, the Trust shall pay or reimburse, as incurred, in advance of final disposition of a proceeding, reasonable expenses incurred by a Trustee or officer or former Trustee or officer made a party to a proceeding by reason of such status, provided that the Trust shall have received (i) a written affirmation by the Trustee or officer of his or her good faith belief that he or she has met the applicable standard of conduct necessary for indemnification by the Trust as authorized by these Bylaws and (ii) a written undertaking by or on his or her behalf to repay the amount paid or reimbursed by the Trust if it shall ultimately be determined that the applicable standard of conduct was not met. The Trust may, with the approval of its Board of Trustees, provide such indemnification or payment or reimbursement of expenses to any Trustee, officer or shareholder or any former Trustee, officer or shareholder who served a predecessor of the Trust and to any employee or agent of the Trust or a predecessor of the Trust.
 
 
 
 
 
 
     Neither the amendment nor repeal of this Article, nor the adoption or amendment of any other provision of the Declaration of Trust or these Bylaws inconsistent with this Article, shall apply to or affect in any respect the applicability of this Article with respect to any act or failure to act which occurred prior to such amendment, repeal or adoption.
 
 
     Any indemnification or payment or reimbursement of the expenses permitted by these Bylaws shall be furnished in accordance with the procedures provided for indemnification or payment or reimbursement of expenses, as the case may be, under Section 2-418 of the MGCL for directors of Maryland corporations. The Trust may provide to Trustees, officers, employees, agents and shareholders such other and further indemnification or payment or reimbursement of expenses, as the case may be, to the fullest extent permitted by the MGCL, as in effect from time to time, for directors of Maryland corporations.
 
 
ARTICLE XII
 
 
WAIVER OF NOTICE
 
 
     Whenever any notice is required to be given pursuant to the Declaration of Trust or these Bylaws or pursuant to applicable law, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Neither the business to be transacted at nor the purpose of any meeting need be set forth in the waiver of notice, unless specifically required by statute. The attendance of any person at any meeting shall constitute a waiver of notice of such meeting, except where such person attends a meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened.
 
 
ARTICLE XIII
 
 
AMENDMENT OF BYLAWS
 
 
     The Board of Trustees shall have the exclusive power to adopt, alter or repeal any provision of these Bylaws and to make new Bylaws.
 
 
* * * *
 
 
     The foregoing Bylaws were adopted by the board of trustees on August 9, 2004. Section 2 of Article II and Section 1 of Article VII were amended on November 2, 2004.  Section 9 of Article III and Section 6 of Article IV were amended on May 9, 2012. Section 2 of Article II was amended on January 19, 2015. Section 8 of Article II was also amended on January 19, 2015, effective as of June 1, 2015.
 
 

 
1 NOTE : This Section 8, Article II was amended pursuant to an amendment adopted by the Board of Trustees on January 19, 2015, with such amendment being effective as of June 1, 2015. Until June 1, 2015, the following provision shall apply in place of the provision above:  A plurality of all the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to elect a Trustee. Each share may be voted for as many individuals as there are Trustees to be elected and for whose election the share is entitled to be voted. A majority of the votes cast at a meeting of shareholders duly called and at which a quorum is present shall be sufficient to approve any other matter which may properly come before the meeting, unless a higher vote is required herein or by statute or by the Declaration of Trust. Unless otherwise provided in the Declaration of Trust, each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders.

 
 
 


Exhibit 10.13

INDEMNIFICATION AGREEMENT
 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of February 27, 2015, by and among Kite Realty Group Trust, a Maryland real estate investment trust (the “Company”), Kite Realty Group, L.P., a Delaware limited partnership (the “Operating Partnership” and together with the Company, the “Indemnitors”), and Scott E. Murray (the “Indemnitee”). This Agreement shall be effective for all purposes as of August 18, 2014, the date on which the Indemnitee was first employed as an officer of the Company,

WHEREAS , the Indemnitee is an officer or a member of the Board of Trustees of the Company and in such capacity is performing a valuable service for the Company and the Operating Partnership;

WHEREAS , Maryland law permits the Company to enter into contracts with its officers or members of its Board of Trustees with respect to indemnification of, and advancement of expenses to, such persons;

WHEREAS, the Declaration of Trust of the Company (the “Declaration of Trust”) authorizes the Company to indemnify and advance expenses to its officers and trustees to the maximum extent permitted by Maryland law in effect from time to time;
 
WHEREAS , the Amended and Restated Bylaws of the Company, as amended (the “Bylaws”) provide that each officer and trustee of the Company shall be indemnified by the Company to the maximum extent permitted by Maryland law in effect from time to time and shall be entitled to advancement of expenses consistent with Maryland law;
 
WHEREAS , the Company is the general partner of, and conducts substantially all of its business through, the Operating Partnership;
 
WHEREAS, the Amended and Restated Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) provides for indemnification and advancement of expenses to the Company and its officers and trustees consistent with the applicable provisions of Maryland law, subject to the same limitations on indemnity and advancement of expenses that apply under Maryland law to indemnity and advancement of expenses by the Company of its officers and trustees;
 
WHEREAS , to induce the Indemnitee to provide services to the Company as an officer or a member of the Board of Trustees, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Declaration of Trust, the Bylaws or the Partnership Agreement, or any acquisition transaction relating to the Company, the Indemnitors desire to provide the Indemnitee with protection against personal liability as set forth herein;

NOW, THEREFORE , in consideration of the premises and the covenants contained herein, the Indemnitors and the Indemnitee hereby agree as follows:
 
 
 
 
 
 
1.            DEFINITIONS .

For purposes of this Agreement:

 
(A)
“Change in Control” shall mean

 
i.
the dissolution or liquidation of the Company;

 
ii.
the merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity or immediately following which the persons or entities who were beneficial owners (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of voting securities of the Company immediately prior thereto cease to beneficially own more than fifty percent (50%) of the voting securities of the surviving entity immediately thereafter;

 
iii.
a sale of all or substantially all of the assets of the Company to another person or entity;

 
iv.
any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) that results in any person or entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than persons who are shareholders or affiliates immediately prior to the transaction) owning thirty percent (30%) or more of the combined voting power of all classes of shares of the Company; or

 
v.
individuals who, as of the date hereof, constitute the Board of Trustees (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Trustees; provided, however, that any individual becoming a trustee subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for trustee, without written objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of trustees or other actual or threatened solicitation of proxies or contests by or on behalf of a person other than the Board of Trustees.

 
(B)
“Corporate Status” describes the status of a person who is or was a trustee or officer of the Company (or of any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's interest ceased upon consummation of the transaction) or is or was serving at the request of the Company (or any such predecessor entity) as a director, officer, partner (limited or general), member, trustee, employee or agent of any other foreign or domestic corporation, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan. The Company (and any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's existence ceased upon consummation of the transaction) shall be deemed to have requested the Indemnitee to serve an employee benefit plan where the performance of the Indemnitee's duties to the Company (or any such predecessor entity) also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan.
 
 
 
 
 
 
 
(C)
“Expenses” shall include all attorneys' and paralegals' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

 
(D)
“Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing, or any other proceeding, including appeals therefrom, whether civil, criminal, administrative, or investigative, except one initiated by the Indemnitee pursuant to paragraph 8 of this Agreement to enforce such Indemnitee's  rights under this Agreement.

       (E)  
“Special Legal Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, or in the past two years has been, retained to represent (i) the Indemnitors or the Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.

2.
INDEMNIFICATION

The Indemnitee shall be entitled to the rights of indemnification provided in this paragraph 2 and under applicable law, the Declaration of Trust, the Bylaws, the Partnership Agreement, any other agreement, a vote of shareholders or resolution of the Board of Trustees or otherwise if, by reason of such Indemnitee's Corporate Status, such Indemnitee is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding, including a Proceeding by or in the right of the Company or the Operating Partnership.  Unless prohibited by paragraph 13 hereof and subject to the other provisions of this Agreement, the Indemnitee shall be indemnified hereunder, to the maximum extent provided by Maryland law in effect from time to time, against judgments, penalties, fines, and settlements and reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with such Proceeding or any claim, issue or matter therein; provided, however, that if such Proceeding was one by or in the right of the Company or the Operating Partnership, indemnification may not be made in respect of such Proceeding if the Indemnitee shall have been adjudged to be liable to the Company or the Operating Partnership.  For purposes of this paragraph 2, excise taxes assessed on the Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines.
 
 
 
 
 

 
3.
EXPENSES OF A SUCCESSFUL PARTY

Without limiting the effect of any other provision of this Agreement and without regard to the provisions of paragraph 6 hereof, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding pursuant to a final non-appealable order, such Indemnitee shall be indemnified against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.  If the Indemnitee is not wholly successful in such Proceeding pursuant to a final non-appealable order but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such Proceeding pursuant to a final non-appealable order, the Indemnitors shall indemnify the Indemnitee against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with each successfully resolved claim, issue or matter.  For purposes of this paragraph and without limitation, the termination of any claim, issue or matter in such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

4.            ADVANCEMENT OF EXPENSES

The Indemnitors shall advance all reasonable Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding within 20 days after the receipt by the Indemnitors of a statement from the Indemnitee requesting such advance from time to time, whether prior to or after final disposition of such Proceeding.  Such statement shall reasonably evidence the Expenses incurred or to be incurred by the Indemnitee and shall include or be preceded or accompanied by (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Indemnitors as authorized by this Agreement has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the standard of conduct has not been met.  The undertaking required by clause (ii) of the immediately preceding sentence shall be an unlimited general obligation of the Indemnitee but need not be secured and may be accepted without reference to financial ability to make the repayment.

5.
WITNESS EXPENSES

Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a witness for any reason in any Proceeding to which such Indemnitee is not a named defendant or respondent, such Indemnitee shall be indemnified by the Indemnitors against all Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.
 
 
 
 
 

 
6.
DETERMINATION OF ENTITLEMENT TO AND AUTHORIZATION OF INDEMNIFICATION

 
(A)
To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitors a written request, including therewith such documentation and information reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification.
 
        (B)  
Indemnification under this Agreement may not be made unless authorized for a specific Proceeding after a determination has been made in accordance with this Section 6(B) that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the following standard of conduct: the Indemnitors shall indemnify the Indemnitee in accordance with the provisions of paragraph 2 hereof, unless   it is established that:  (a) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty; (b) the Indemnitee actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Upon receipt by the Indemnitors of the Indemnitee's written request for indemnification pursuant to subparagraph 6(A), a determination as to whether the applicable standard of conduct has been met shall be made within the period specified in paragraph 6(E):  (i) if a Change in Control shall have occurred, by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Indemnitee (unless the Indemnitee shall request that such determination be made by the person or persons and in the manner provided in clause (ii) of this paragraph 6(B), in which event the provisions of such clause (ii) shall apply) (If the Indemnitee selects Special Legal Counsel to make the determination under this clause (i), the Indemnitee shall give prompt written notice to the Indemnitors advising them of the identity of the Special Legal Counsel so selected); or (ii) if a Change in Control shall not have occurred, (A) by the Board of Trustees by a majority vote of a quorum consisting of trustees not, at the time, parties to the Proceeding, or, if such quorum cannot be obtained, then by a majority vote of a committee of the Board of Trustees consisting solely of two or more trustees not, at the time, parties to such Proceeding and who were duly designated to act in the matter by a majority vote of the full Board of Trustees in which the designated trustees who are parties may participate, (B) by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Board of Trustees or a committee of the Board of Trustees by vote as set forth in subparagraph (ii)(A) of this paragraph 6(B), or, if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established, by a majority of the full Board of Trustees in which trustees who are parties to the Proceeding may participate (If the Indemnitors select Special Legal Counsel to make the determination under this clause (ii), the Indemnitors shall give prompt written notice to the Indemnitee advising him or her of the identity of the Special Legal Counsel so selected) or (C) by the shareholders of the Company.  If it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within 10 days after such determination. Authorization of indemnification and determination as to reasonableness of Expenses shall be made in the same manner as the determination that indemnification is permissible.  However, if the determination that indemnification is permissible is made by Special Legal Counsel under clause (B) above, authorization of indemnification and determination as to reasonableness of Expenses shall be made in the manner specified under clause (B) above for the selection of such Special Legal Counsel.
 
 
 
 
 

 
 
(C)
The Indemnitee shall cooperate with the person or entity making such determination with respect to the Indemnitee's entitlement to indemnification, including providing upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any reasonable costs or expenses (including reasonable attorneys' fees and disbursements) incurred by the Indemnitee in so cooperating shall be borne by the Indemnitors (irrespective of the determination as to the Indemnitee's entitlement to indemnification) and the Indemnitors hereby indemnify and agree to hold the Indemnitee's harmless therefrom.

 
(D)
In the event the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) hereof, the Indemnitee, or the Indemnitors, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Indemnitors or to the Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the grounds that the Special Legal Counsel so selected does not meet the requirements of “Special Legal Counsel” as defined in paragraph 1 of this Agreement.  If such written objection is made, the Special Legal Counsel so selected may not serve as Special Legal Counsel until a court has determined that such objection is without merit.  If, within 20 days after submission by the Indemnitee of a written request for indemnification pursuant to paragraph 6(A) hereof, no Special Legal Counsel shall have been selected or, if selected, shall have been objected to, either the Indemnitors or the Indemnitee may petition a court for resolution of any objection which shall have been made by the Indemnitors or the Indemnitee to the other's selection of Special Legal Counsel and/or for the appointment as Special Legal Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Special Legal Counsel under paragraph 6(B) hereof.  The Indemnitors shall pay all reasonable fees and expenses of Special Legal Counsel incurred in connection with acting pursuant to paragraph 6(B) hereof, and all reasonable fees and expenses incident to the selection of such Special Legal Counsel pursuant to this paragraph 6(D).  In the event that a determination of entitlement to indemnification is to be made by Special Legal Counsel and such determination shall not have been made and delivered in a written opinion within ninety (90) days after the receipt by the Indemnitors of the Indemnitee's request in accordance with paragraph 6(A), upon the due commencement of any judicial proceeding in accordance with paragraph 8(A) of this Agreement, Special Legal Counsel shall be discharged and relieved of any further responsibility in such capacity.
 
 
 
 
 
 
 
(E)
If the person or entity making the determination whether the Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Indemnitors of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.  Such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or entity making said determination in good faith requires additional time for the obtaining or evaluating of documentation and/or information relating thereto.  The foregoing provisions of this paragraph 6(E) shall not apply:  (i) if the determination of entitlement to indemnification is to be made by the shareholders and if within 15 days after receipt by the Indemnitors of the request for such determination the Board of Trustees resolves to submit such determination to the shareholders for consideration at an annual or special meeting thereof to be held within 75 days after such receipt and such determination is made at such meeting, or (ii) if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) of this Agreement.

7.  
PRESUMPTIONS

 
(A)
In making a determination with respect to entitlement or authorization of indemnification hereunder, the person or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement and the Indemnitors shall have the burden of proof to overcome such presumption.

        (B)  
The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

8.
REMEDIES

 
(A)
In the event that:  (i) a determination is made in accordance with the provisions of paragraph 6 that the Indemnitee is not entitled to indemnification under this Agreement, or (ii) advancement of reasonable Expenses is not timely made pursuant to this Agreement, or (iii) payment of indemnification due the Indemnitee under this Agreement is not timely made, the Indemnitee shall be entitled to an adjudication in an appropriate court of competent jurisdiction of such Indemnitee's entitlement to such indemnification or advancement of Expenses.
 
 
 
 
 

 
 
(B)
In the event that a determination shall have been made pursuant to paragraph 6 of this Agreement that the Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this paragraph 8 shall be conducted in all respects as a de novo trial on the merits.  The fact that a determination had been made earlier pursuant to paragraph 6 of this Agreement that the Indemnitee was not entitled to indemnification shall not be taken into account in any judicial proceeding commenced pursuant to this paragraph 8 and the Indemnitee shall not be prejudiced in any way by reason of that adverse determination.  In any judicial proceeding commenced pursuant to this paragraph 8, the Indemnitors shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 
(C)
If a determination shall have been made or deemed to have been made pursuant to this Agreement that the Indemnitee is entitled to indemnification, the Indemnitors shall be bound by such determination in any judicial proceeding commenced pursuant to this paragraph 8, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 
(D)
The Indemnitors shall be precluded from asserting in any judicial proceeding commenced pursuant to this paragraph 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Indemnitors are bound by all the provisions of this Agreement.

 
(E)
In the event that the Indemnitee, pursuant to this paragraph 8, seeks a judicial adjudication of such Indemnitee's rights under, or to recover damages for breach of, this Agreement, if successful in whole or in part, the Indemnitee shall be entitled to recover from the Indemnitors, and shall be indemnified by the Indemnitors against, any and all reasonable Expenses actually incurred by such Indemnitee in such judicial adjudication.

9.            NOTIFICATION AND DEFENSE OF CLAIMS

The Indemnitee agrees promptly to notify the Indemnitors in writing upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder, but the failure so to notify the Indemnitors will not relieve the Indemnitors from any liability that the Indemnitors may have to Indemnitee under this Agreement unless the Indemnitors are materially prejudiced thereby.  With respect to any such Proceeding as to which Indemnitee notifies the Indemnitors of the commencement thereof:

 
(A)
The Indemnitors will be entitled to participate therein at their own expense.
 
 
 
 
 

 
 
(B)
Except as otherwise provided below, the Indemnitors will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee.  After notice from the Indemnitors to Indemnitee of the Indemnitors' election so to assume the defense thereof, the Indemnitors will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below.  Indemnitee shall have the right to employ Indemnitee's own counsel in such Proceeding, but the fees and disbursements of such counsel incurred after notice from the Indemnitors of the Indemnitors' assumption of the defense thereof shall be at the expense of Indemnitee unless (a) the employment by counsel by Indemnitee has been authorized by the Indemnitors, (b) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Indemnitors and the Indemnitee in the conduct of the defense of such action, (c) such Proceeding seeks penalties or other relief against the Indemnitee with respect to which the Indemnitors could not provide monetary indemnification to the Indemnitee (such as injunctive relief or incarceration) or (d) the Indemnitors shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and disbursements of counsel shall be at the expense of the Indemnitors.  The Indemnitors shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Indemnitors, or as to which Indemnitee shall have reached the conclusion specified in clause (b) above, or which involves penalties or other relief against Indemnitee of the type referred to in clause (c) above.

 
(C)
The Indemnitors shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Indemnitors' written consent.  The Indemnitors shall not settle any action or claim in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee's written consent.  Neither the Indemnitors nor Indemnitee will unreasonably withhold or delay consent to any proposed settlement.

10.
NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION

 
(A)
The rights of indemnification and to receive advancement of reasonable Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Declaration of Trust, the Bylaws, the Operating Partnership's Partnership Agreement, any other agreement, a vote of shareholders, a resolution of the Board of Trustees or otherwise.  No amendment, alteration or repeal of this Agreement or any provision hereof shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee as a member of the Board of Trustees prior to such amendment, alteration or repeal.
 
 
 
 
 

 
 
(B)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for trustees and officers of the Company, the Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available and upon any “Change in Control” the Company shall use commercially reasonable efforts to obtain or arrange for continuation and/or “tail” coverage for the Indemnitee to the maximum extent obtainable at such time.

 
(C)
In the event of any payment under this Agreement, the Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitors to bring suit to enforce such rights.

 
(D)
The Indemnitors shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

11.
CONTINUATION OF INDEMNITY

 
(A)
All agreements and obligations of the Indemnitors contained herein shall continue during the period the Indemnitee is an officer or a member of the Board of Trustees of the Company and shall continue thereafter so long as the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such Indemnitee's Corporate Status and during the period of statute of limitations for any act or omission occurring during the Indemnitee's term of Corporate Status. This Agreement shall be binding upon the Indemnitors and their respective successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee's heirs, executors and administrators.

 
(B)
The Company and the Operating Partnership shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company or the Operating Partnership, by written agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company and the Operating Partnership would be required to perform if no such succession had taken place.

12.
SEVERABILITY

If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, (i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal, or unenforceable.
 
 
 
 
 

 
13.
EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES

Notwithstanding any other provisions of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of reasonable Expenses under this Agreement with respect to any Proceeding initiated by such Indemnitee against the Indemnitors other than a proceeding commenced pursuant to paragraph 8.

14.            NOTICE TO THE COMPANY SHAREHOLDERS

Any indemnification of, or advancement of reasonable Expenses, to an Indemnitee in accordance with this Agreement, if arising out of a Proceeding by or in the right of the Company, shall be reported in writing to the shareholders of the Company with the notice of the next the Company shareholders' meeting or prior to the meeting.
 

15.            PAYMENT BY THE OPERATING PARTNERSHIP OF AMOUNTS REQUIRED   TO BE PAID   OR ADVANCED BY THE COMPANY

The obligations of the Company and the Operating Partnership under this Agreement shall be joint and several.  The Operating Partnership shall promptly pay upon demand by the Company or the Indemnitee all amounts the Company is required to pay or advance hereunder.

16.            HEADINGS

The headings of the paragraph of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

17.            MODIFICATION AND WAIVER

No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

18.            NOTICES

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the case may be, to the following addresses:
 
 
 
 
 

 
If to the Indemnitee, to the address set forth in the records of the Company.

If to the Indemnitors, to:

Kite Realty Group Trust
Kite Realty Group, L.P.
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204
Attention: Daniel R. Sink
Fax No.:  317/577-5605

or to such other address as may have been furnished to the Indemnitee by the Indemnitors or to the Indemnitors by the Indemnitee, as the case may be.

19.            GOVERNING LAW

The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without application of the conflict of laws principles thereof.

20.            COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together constitute an agreement binding on all of the parties hereto.


(Remainder of page intentionally left blank.)

 
 
 

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

KITE REALTY GROUP TRUST
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer  
 


KITE REALTY GROUP, L.P.

By:        Kite Realty Group Trust,
  its general partner
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer


INDEMNITEE:


/s/ Scott E. Murray                              
Scott E. Murray

 
 
 

Exhibit 10.24


INDEMNIFICATION AGREEMENT
 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of February 27, 2015, by and among Kite Realty Group Trust, a Maryland real estate investment trust (the “Company”), Kite Realty Group, L.P., a Delaware limited partnership (the “Operating Partnership” and together with the Company, the “Indemnitors”), and Lee A. Daniels (the “Indemnitee”). This Agreement shall be effective for all purposes as of July 1, 2014, the date on which the Indemnitee was elected a member of the Board of Trustees of the Company,

WHEREAS , the Indemnitee is an officer or a member of the Board of Trustees of the Company and in such capacity is performing a valuable service for the Company and the Operating Partnership;

WHEREAS , Maryland law permits the Company to enter into contracts with its officers or members of its Board of Trustees with respect to indemnification of, and advancement of expenses to, such persons;

WHEREAS, the Declaration of Trust of the Company (the “Declaration of Trust”) authorizes the Company to indemnify and advance expenses to its officers and trustees to the maximum extent permitted by Maryland law in effect from time to time;
 
WHEREAS , the Amended and Restated Bylaws of the Company, as amended (the “Bylaws”) provide that each officer and trustee of the Company shall be indemnified by the Company to the maximum extent permitted by Maryland law in effect from time to time and shall be entitled to advancement of expenses consistent with Maryland law;
 
WHEREAS , the Company is the general partner of, and conducts substantially all of its business through, the Operating Partnership;
 
WHEREAS, the Amended and Restated Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) provides for indemnification and advancement of expenses to the Company and its officers and trustees consistent with the applicable provisions of Maryland law, subject to the same limitations on indemnity and advancement of expenses that apply under Maryland law to indemnity and advancement of expenses by the Company of its officers and trustees;
 
WHEREAS , to induce the Indemnitee to provide services to the Company as an officer or a member of the Board of Trustees, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Declaration of Trust, the Bylaws or the Partnership Agreement, or any acquisition transaction relating to the Company, the Indemnitors desire to provide the Indemnitee with protection against personal liability as set forth herein;

NOW, THEREFORE , in consideration of the premises and the covenants contained herein, the Indemnitors and the Indemnitee hereby agree as follows:
 
 
 
 
 

 
1.            DEFINITIONS .

For purposes of this Agreement:

 
(A)
“Change in Control” shall mean

 
i.
the dissolution or liquidation of the Company;

 
ii.
the merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity or immediately following which the persons or entities who were beneficial owners (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of voting securities of the Company immediately prior thereto cease to beneficially own more than fifty percent (50%) of the voting securities of the surviving entity immediately thereafter;

 
iii.
a sale of all or substantially all of the assets of the Company to another person or entity;

 
iv.
any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) that results in any person or entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than persons who are shareholders or affiliates immediately prior to the transaction) owning thirty percent (30%) or more of the combined voting power of all classes of shares of the Company; or

 
v.
individuals who, as of the date hereof, constitute the Board of Trustees (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Trustees; provided, however, that any individual becoming a trustee subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for trustee, without written objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of trustees or other actual or threatened solicitation of proxies or contests by or on behalf of a person other than the Board of Trustees.

 
(B)
“Corporate Status” describes the status of a person who is or was a trustee or officer of the Company (or of any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's interest ceased upon consummation of the transaction) or is or was serving at the request of the Company (or any such predecessor entity) as a director, officer, partner (limited or general), member, trustee, employee or agent of any other foreign or domestic corporation, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan. The Company (and any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's existence ceased upon consummation of the transaction) shall be deemed to have requested the Indemnitee to serve an employee benefit plan where the performance of the Indemnitee's duties to the Company (or any such predecessor entity) also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan.
 
 
 
 
 

 
 
(C)
“Expenses” shall include all attorneys' and paralegals' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

 
(D)
“Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing, or any other proceeding, including appeals therefrom, whether civil, criminal, administrative, or investigative, except one initiated by the Indemnitee pursuant to paragraph 8 of this Agreement to enforce such Indemnitee's  rights under this Agreement.

       (E)  
“Special Legal Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, or in the past two years has been, retained to represent (i) the Indemnitors or the Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.

2.
INDEMNIFICATION

The Indemnitee shall be entitled to the rights of indemnification provided in this paragraph 2 and under applicable law, the Declaration of Trust, the Bylaws, the Partnership Agreement, any other agreement, a vote of shareholders or resolution of the Board of Trustees or otherwise if, by reason of such Indemnitee's Corporate Status, such Indemnitee is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding, including a Proceeding by or in the right of the Company or the Operating Partnership.  Unless prohibited by paragraph 13 hereof and subject to the other provisions of this Agreement, the Indemnitee shall be indemnified hereunder, to the maximum extent provided by Maryland law in effect from time to time, against judgments, penalties, fines, and settlements and reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with such Proceeding or any claim, issue or matter therein; provided, however, that if such Proceeding was one by or in the right of the Company or the Operating Partnership, indemnification may not be made in respect of such Proceeding if the Indemnitee shall have been adjudged to be liable to the Company or the Operating Partnership.  For purposes of this paragraph 2, excise taxes assessed on the Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines.
 
 
 
 
 

 
3.
EXPENSES OF A SUCCESSFUL PARTY

Without limiting the effect of any other provision of this Agreement and without regard to the provisions of paragraph 6 hereof, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding pursuant to a final non-appealable order, such Indemnitee shall be indemnified against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.  If the Indemnitee is not wholly successful in such Proceeding pursuant to a final non-appealable order but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such Proceeding pursuant to a final non-appealable order, the Indemnitors shall indemnify the Indemnitee against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with each successfully resolved claim, issue or matter.  For purposes of this paragraph and without limitation, the termination of any claim, issue or matter in such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

4.            ADVANCEMENT OF EXPENSES

The Indemnitors shall advance all reasonable Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding within 20 days after the receipt by the Indemnitors of a statement from the Indemnitee requesting such advance from time to time, whether prior to or after final disposition of such Proceeding.  Such statement shall reasonably evidence the Expenses incurred or to be incurred by the Indemnitee and shall include or be preceded or accompanied by (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Indemnitors as authorized by this Agreement has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the standard of conduct has not been met.  The undertaking required by clause (ii) of the immediately preceding sentence shall be an unlimited general obligation of the Indemnitee but need not be secured and may be accepted without reference to financial ability to make the repayment.

5.
WITNESS EXPENSES

Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a witness for any reason in any Proceeding to which such Indemnitee is not a named defendant or respondent, such Indemnitee shall be indemnified by the Indemnitors against all Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.
 
 
 
 
 

 
6.
DETERMINATION OF ENTITLEMENT TO AND AUTHORIZATION OF INDEMNIFICATION

 
(A)
To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitors a written request, including therewith such documentation and information reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification.
 
        (B)  
Indemnification under this Agreement may not be made unless authorized for a specific Proceeding after a determination has been made in accordance with this Section 6(B) that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the following standard of conduct: the Indemnitors shall indemnify the Indemnitee in accordance with the provisions of paragraph 2 hereof, unless   it is established that:  (a) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty; (b) the Indemnitee actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Upon receipt by the Indemnitors of the Indemnitee's written request for indemnification pursuant to subparagraph 6(A), a determination as to whether the applicable standard of conduct has been met shall be made within the period specified in paragraph 6(E):  (i) if a Change in Control shall have occurred, by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Indemnitee (unless the Indemnitee shall request that such determination be made by the person or persons and in the manner provided in clause (ii) of this paragraph 6(B), in which event the provisions of such clause (ii) shall apply) (If the Indemnitee selects Special Legal Counsel to make the determination under this clause (i), the Indemnitee shall give prompt written notice to the Indemnitors advising them of the identity of the Special Legal Counsel so selected); or (ii) if a Change in Control shall not have occurred, (A) by the Board of Trustees by a majority vote of a quorum consisting of trustees not, at the time, parties to the Proceeding, or, if such quorum cannot be obtained, then by a majority vote of a committee of the Board of Trustees consisting solely of two or more trustees not, at the time, parties to such Proceeding and who were duly designated to act in the matter by a majority vote of the full Board of Trustees in which the designated trustees who are parties may participate, (B) by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Board of Trustees or a committee of the Board of Trustees by vote as set forth in subparagraph (ii)(A) of this paragraph 6(B), or, if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established, by a majority of the full Board of Trustees in which trustees who are parties to the Proceeding may participate (If the Indemnitors select Special Legal Counsel to make the determination under this clause (ii), the Indemnitors shall give prompt written notice to the Indemnitee advising him or her of the identity of the Special Legal Counsel so selected) or (C) by the shareholders of the Company.  If it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within 10 days after such determination. Authorization of indemnification and determination as to reasonableness of Expenses shall be made in the same manner as the determination that indemnification is permissible.  However, if the determination that indemnification is permissible is made by Special Legal Counsel under clause (B) above, authorization of indemnification and determination as to reasonableness of Expenses shall be made in the manner specified under clause (B) above for the selection of such Special Legal Counsel.
 
 
 
 
 

 
 
(C)
The Indemnitee shall cooperate with the person or entity making such determination with respect to the Indemnitee's entitlement to indemnification, including providing upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any reasonable costs or expenses (including reasonable attorneys' fees and disbursements) incurred by the Indemnitee in so cooperating shall be borne by the Indemnitors (irrespective of the determination as to the Indemnitee's entitlement to indemnification) and the Indemnitors hereby indemnify and agree to hold the Indemnitee's harmless therefrom.

 
(D)
In the event the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) hereof, the Indemnitee, or the Indemnitors, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Indemnitors or to the Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the grounds that the Special Legal Counsel so selected does not meet the requirements of “Special Legal Counsel” as defined in paragraph 1 of this Agreement.  If such written objection is made, the Special Legal Counsel so selected may not serve as Special Legal Counsel until a court has determined that such objection is without merit.  If, within 20 days after submission by the Indemnitee of a written request for indemnification pursuant to paragraph 6(A) hereof, no Special Legal Counsel shall have been selected or, if selected, shall have been objected to, either the Indemnitors or the Indemnitee may petition a court for resolution of any objection which shall have been made by the Indemnitors or the Indemnitee to the other's selection of Special Legal Counsel and/or for the appointment as Special Legal Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Special Legal Counsel under paragraph 6(B) hereof.  The Indemnitors shall pay all reasonable fees and expenses of Special Legal Counsel incurred in connection with acting pursuant to paragraph 6(B) hereof, and all reasonable fees and expenses incident to the selection of such Special Legal Counsel pursuant to this paragraph 6(D).  In the event that a determination of entitlement to indemnification is to be made by Special Legal Counsel and such determination shall not have been made and delivered in a written opinion within ninety (90) days after the receipt by the Indemnitors of the Indemnitee's request in accordance with paragraph 6(A), upon the due commencement of any judicial proceeding in accordance with paragraph 8(A) of this Agreement, Special Legal Counsel shall be discharged and relieved of any further responsibility in such capacity.
 
 
 
 
 
 
 
(E)
If the person or entity making the determination whether the Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Indemnitors of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.  Such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or entity making said determination in good faith requires additional time for the obtaining or evaluating of documentation and/or information relating thereto.  The foregoing provisions of this paragraph 6(E) shall not apply:  (i) if the determination of entitlement to indemnification is to be made by the shareholders and if within 15 days after receipt by the Indemnitors of the request for such determination the Board of Trustees resolves to submit such determination to the shareholders for consideration at an annual or special meeting thereof to be held within 75 days after such receipt and such determination is made at such meeting, or (ii) if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) of this Agreement.

7.  
PRESUMPTIONS

 
(A)
In making a determination with respect to entitlement or authorization of indemnification hereunder, the person or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement and the Indemnitors shall have the burden of proof to overcome such presumption.

        (B)  
The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

8.
REMEDIES

 
(A)
In the event that:  (i) a determination is made in accordance with the provisions of paragraph 6 that the Indemnitee is not entitled to indemnification under this Agreement, or (ii) advancement of reasonable Expenses is not timely made pursuant to this Agreement, or (iii) payment of indemnification due the Indemnitee under this Agreement is not timely made, the Indemnitee shall be entitled to an adjudication in an appropriate court of competent jurisdiction of such Indemnitee's entitlement to such indemnification or advancement of Expenses.
 
 
 
 
 

 
 
(B)
In the event that a determination shall have been made pursuant to paragraph 6 of this Agreement that the Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this paragraph 8 shall be conducted in all respects as a de novo trial on the merits.  The fact that a determination had been made earlier pursuant to paragraph 6 of this Agreement that the Indemnitee was not entitled to indemnification shall not be taken into account in any judicial proceeding commenced pursuant to this paragraph 8 and the Indemnitee shall not be prejudiced in any way by reason of that adverse determination.  In any judicial proceeding commenced pursuant to this paragraph 8, the Indemnitors shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 
(C)
If a determination shall have been made or deemed to have been made pursuant to this Agreement that the Indemnitee is entitled to indemnification, the Indemnitors shall be bound by such determination in any judicial proceeding commenced pursuant to this paragraph 8, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 
(D)
The Indemnitors shall be precluded from asserting in any judicial proceeding commenced pursuant to this paragraph 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Indemnitors are bound by all the provisions of this Agreement.

 
(E)
In the event that the Indemnitee, pursuant to this paragraph 8, seeks a judicial adjudication of such Indemnitee's rights under, or to recover damages for breach of, this Agreement, if successful in whole or in part, the Indemnitee shall be entitled to recover from the Indemnitors, and shall be indemnified by the Indemnitors against, any and all reasonable Expenses actually incurred by such Indemnitee in such judicial adjudication.

9.            NOTIFICATION AND DEFENSE OF CLAIMS

The Indemnitee agrees promptly to notify the Indemnitors in writing upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder, but the failure so to notify the Indemnitors will not relieve the Indemnitors from any liability that the Indemnitors may have to Indemnitee under this Agreement unless the Indemnitors are materially prejudiced thereby.  With respect to any such Proceeding as to which Indemnitee notifies the Indemnitors of the commencement thereof:

 
(A)
The Indemnitors will be entitled to participate therein at their own expense.
 
 
 
 
 

 
 
(B)
Except as otherwise provided below, the Indemnitors will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee.  After notice from the Indemnitors to Indemnitee of the Indemnitors' election so to assume the defense thereof, the Indemnitors will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below.  Indemnitee shall have the right to employ Indemnitee's own counsel in such Proceeding, but the fees and disbursements of such counsel incurred after notice from the Indemnitors of the Indemnitors' assumption of the defense thereof shall be at the expense of Indemnitee unless (a) the employment by counsel by Indemnitee has been authorized by the Indemnitors, (b) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Indemnitors and the Indemnitee in the conduct of the defense of such action, (c) such Proceeding seeks penalties or other relief against the Indemnitee with respect to which the Indemnitors could not provide monetary indemnification to the Indemnitee (such as injunctive relief or incarceration) or (d) the Indemnitors shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and disbursements of counsel shall be at the expense of the Indemnitors.  The Indemnitors shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Indemnitors, or as to which Indemnitee shall have reached the conclusion specified in clause (b) above, or which involves penalties or other relief against Indemnitee of the type referred to in clause (c) above.

 
(C)
The Indemnitors shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Indemnitors' written consent.  The Indemnitors shall not settle any action or claim in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee's written consent.  Neither the Indemnitors nor Indemnitee will unreasonably withhold or delay consent to any proposed settlement.

10.
NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION

 
(A)
The rights of indemnification and to receive advancement of reasonable Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Declaration of Trust, the Bylaws, the Operating Partnership's Partnership Agreement, any other agreement, a vote of shareholders, a resolution of the Board of Trustees or otherwise.  No amendment, alteration or repeal of this Agreement or any provision hereof shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee as a member of the Board of Trustees prior to such amendment, alteration or repeal.
 
 
 
 
 

 
 
(B)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for trustees and officers of the Company, the Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available and upon any “Change in Control” the Company shall use commercially reasonable efforts to obtain or arrange for continuation and/or “tail” coverage for the Indemnitee to the maximum extent obtainable at such time.

 
(C)
In the event of any payment under this Agreement, the Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitors to bring suit to enforce such rights.

 
(D)
The Indemnitors shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

11.
CONTINUATION OF INDEMNITY

 
(A)
All agreements and obligations of the Indemnitors contained herein shall continue during the period the Indemnitee is an officer or a member of the Board of Trustees of the Company and shall continue thereafter so long as the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such Indemnitee's Corporate Status and during the period of statute of limitations for any act or omission occurring during the Indemnitee's term of Corporate Status. This Agreement shall be binding upon the Indemnitors and their respective successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee's heirs, executors and administrators.

 
(B)
The Company and the Operating Partnership shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company or the Operating Partnership, by written agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company and the Operating Partnership would be required to perform if no such succession had taken place.

12.
SEVERABILITY

If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, (i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal, or unenforceable.
 
 
 
 
 

 
13.
EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES

Notwithstanding any other provisions of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of reasonable Expenses under this Agreement with respect to any Proceeding initiated by such Indemnitee against the Indemnitors other than a proceeding commenced pursuant to paragraph 8.

14.            NOTICE TO THE COMPANY SHAREHOLDERS

Any indemnification of, or advancement of reasonable Expenses, to an Indemnitee in accordance with this Agreement, if arising out of a Proceeding by or in the right of the Company, shall be reported in writing to the shareholders of the Company with the notice of the next the Company shareholders' meeting or prior to the meeting.
 

15.            PAYMENT BY THE OPERATING PARTNERSHIP OF AMOUNTS REQUIRED   TO BE PAID   OR ADVANCED BY THE COMPANY

The obligations of the Company and the Operating Partnership under this Agreement shall be joint and several.  The Operating Partnership shall promptly pay upon demand by the Company or the Indemnitee all amounts the Company is required to pay or advance hereunder.

16.            HEADINGS

The headings of the paragraph of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

17.            MODIFICATION AND WAIVER

No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

18.            NOTICES

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the case may be, to the following addresses:
 
 
 
 
 

 
If to the Indemnitee, to the address set forth in the records of the Company.

If to the Indemnitors, to:

Kite Realty Group Trust
Kite Realty Group, L.P.
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204
Attention: Daniel R. Sink
Fax No.:  317-713-2764

or to such other address as may have been furnished to the Indemnitee by the Indemnitors or to the Indemnitors by the Indemnitee, as the case may be.

19.            GOVERNING LAW

The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without application of the conflict of laws principles thereof.

20.            COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together constitute an agreement binding on all of the parties hereto.


(Remainder of page intentionally left blank.)

 
 
 

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

KITE REALTY GROUP TRUST
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer
          
 


KITE REALTY GROUP, L.P.

By:        Kite Realty Group Trust,
  its general partner
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer
        
 


INDEMNITEE:


/s/ Lee A. Daniels                             
Lee A. Daniels

 
 
 

Exhibit 10.25

INDEMNIFICATION AGREEMENT
 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of February 27, 2015, by and among Kite Realty Group Trust, a Maryland real estate investment trust (the “Company”), Kite Realty Group, L.P., a Delaware limited partnership (the “Operating Partnership” and together with the Company, the “Indemnitors”), and Gerald W. Grupe (the “Indemnitee”). This Agreement shall be effective for all purposes as of July 1, 2014, the date on which the Indemnitee was elected a member of the Board of Trustees of the Company,

WHEREAS , the Indemnitee is an officer or a member of the Board of Trustees of the Company and in such capacity is performing a valuable service for the Company and the Operating Partnership;

WHEREAS , Maryland law permits the Company to enter into contracts with its officers or members of its Board of Trustees with respect to indemnification of, and advancement of expenses to, such persons;

WHEREAS, the Declaration of Trust of the Company (the “Declaration of Trust”) authorizes the Company to indemnify and advance expenses to its officers and trustees to the maximum extent permitted by Maryland law in effect from time to time;
 
WHEREAS , the Amended and Restated Bylaws of the Company, as amended (the “Bylaws”) provide that each officer and trustee of the Company shall be indemnified by the Company to the maximum extent permitted by Maryland law in effect from time to time and shall be entitled to advancement of expenses consistent with Maryland law;
 
WHEREAS , the Company is the general partner of, and conducts substantially all of its business through, the Operating Partnership;
 
WHEREAS, the Amended and Restated Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) provides for indemnification and advancement of expenses to the Company and its officers and trustees consistent with the applicable provisions of Maryland law, subject to the same limitations on indemnity and advancement of expenses that apply under Maryland law to indemnity and advancement of expenses by the Company of its officers and trustees;
 
WHEREAS , to induce the Indemnitee to provide services to the Company as an officer or a member of the Board of Trustees, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Declaration of Trust, the Bylaws or the Partnership Agreement, or any acquisition transaction relating to the Company, the Indemnitors desire to provide the Indemnitee with protection against personal liability as set forth herein;

NOW, THEREFORE , in consideration of the premises and the covenants contained herein, the Indemnitors and the Indemnitee hereby agree as follows:
 
 
 
 
 

 
1.            DEFINITIONS .

For purposes of this Agreement:

 
(A)
“Change in Control” shall mean

 
i.
the dissolution or liquidation of the Company;

 
ii.
the merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity or immediately following which the persons or entities who were beneficial owners (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of voting securities of the Company immediately prior thereto cease to beneficially own more than fifty percent (50%) of the voting securities of the surviving entity immediately thereafter;

 
iii.
a sale of all or substantially all of the assets of the Company to another person or entity;

 
iv.
any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) that results in any person or entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than persons who are shareholders or affiliates immediately prior to the transaction) owning thirty percent (30%) or more of the combined voting power of all classes of shares of the Company; or

 
v.
individuals who, as of the date hereof, constitute the Board of Trustees (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Trustees; provided, however, that any individual becoming a trustee subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for trustee, without written objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of trustees or other actual or threatened solicitation of proxies or contests by or on behalf of a person other than the Board of Trustees.

 
(B)
“Corporate Status” describes the status of a person who is or was a trustee or officer of the Company (or of any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's interest ceased upon consummation of the transaction) or is or was serving at the request of the Company (or any such predecessor entity) as a director, officer, partner (limited or general), member, trustee, employee or agent of any other foreign or domestic corporation, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan. The Company (and any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's existence ceased upon consummation of the transaction) shall be deemed to have requested the Indemnitee to serve an employee benefit plan where the performance of the Indemnitee's duties to the Company (or any such predecessor entity) also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan.
 
 
 
 
 

 
 
(C)
“Expenses” shall include all attorneys' and paralegals' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

 
(D)
“Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing, or any other proceeding, including appeals therefrom, whether civil, criminal, administrative, or investigative, except one initiated by the Indemnitee pursuant to paragraph 8 of this Agreement to enforce such Indemnitee's  rights under this Agreement.

       (E)  
“Special Legal Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, or in the past two years has been, retained to represent (i) the Indemnitors or the Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.

2.
INDEMNIFICATION

The Indemnitee shall be entitled to the rights of indemnification provided in this paragraph 2 and under applicable law, the Declaration of Trust, the Bylaws, the Partnership Agreement, any other agreement, a vote of shareholders or resolution of the Board of Trustees or otherwise if, by reason of such Indemnitee's Corporate Status, such Indemnitee is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding, including a Proceeding by or in the right of the Company or the Operating Partnership.  Unless prohibited by paragraph 13 hereof and subject to the other provisions of this Agreement, the Indemnitee shall be indemnified hereunder, to the maximum extent provided by Maryland law in effect from time to time, against judgments, penalties, fines, and settlements and reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with such Proceeding or any claim, issue or matter therein; provided, however, that if such Proceeding was one by or in the right of the Company or the Operating Partnership, indemnification may not be made in respect of such Proceeding if the Indemnitee shall have been adjudged to be liable to the Company or the Operating Partnership.  For purposes of this paragraph 2, excise taxes assessed on the Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines.
 
 
 
 
 

 
3.
EXPENSES OF A SUCCESSFUL PARTY

Without limiting the effect of any other provision of this Agreement and without regard to the provisions of paragraph 6 hereof, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding pursuant to a final non-appealable order, such Indemnitee shall be indemnified against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.  If the Indemnitee is not wholly successful in such Proceeding pursuant to a final non-appealable order but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such Proceeding pursuant to a final non-appealable order, the Indemnitors shall indemnify the Indemnitee against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with each successfully resolved claim, issue or matter.  For purposes of this paragraph and without limitation, the termination of any claim, issue or matter in such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

4.            ADVANCEMENT OF EXPENSES

The Indemnitors shall advance all reasonable Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding within 20 days after the receipt by the Indemnitors of a statement from the Indemnitee requesting such advance from time to time, whether prior to or after final disposition of such Proceeding.  Such statement shall reasonably evidence the Expenses incurred or to be incurred by the Indemnitee and shall include or be preceded or accompanied by (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Indemnitors as authorized by this Agreement has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the standard of conduct has not been met.  The undertaking required by clause (ii) of the immediately preceding sentence shall be an unlimited general obligation of the Indemnitee but need not be secured and may be accepted without reference to financial ability to make the repayment.

5.
WITNESS EXPENSES

Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a witness for any reason in any Proceeding to which such Indemnitee is not a named defendant or respondent, such Indemnitee shall be indemnified by the Indemnitors against all Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.
 
 
 
 
 

 
6.
DETERMINATION OF ENTITLEMENT TO AND AUTHORIZATION OF INDEMNIFICATION

 
(A)
To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitors a written request, including therewith such documentation and information reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification.
 
        (B)  
Indemnification under this Agreement may not be made unless authorized for a specific Proceeding after a determination has been made in accordance with this Section 6(B) that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the following standard of conduct: the Indemnitors shall indemnify the Indemnitee in accordance with the provisions of paragraph 2 hereof, unless   it is established that:  (a) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty; (b) the Indemnitee actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Upon receipt by the Indemnitors of the Indemnitee's written request for indemnification pursuant to subparagraph 6(A), a determination as to whether the applicable standard of conduct has been met shall be made within the period specified in paragraph 6(E):  (i) if a Change in Control shall have occurred, by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Indemnitee (unless the Indemnitee shall request that such determination be made by the person or persons and in the manner provided in clause (ii) of this paragraph 6(B), in which event the provisions of such clause (ii) shall apply) (If the Indemnitee selects Special Legal Counsel to make the determination under this clause (i), the Indemnitee shall give prompt written notice to the Indemnitors advising them of the identity of the Special Legal Counsel so selected); or (ii) if a Change in Control shall not have occurred, (A) by the Board of Trustees by a majority vote of a quorum consisting of trustees not, at the time, parties to the Proceeding, or, if such quorum cannot be obtained, then by a majority vote of a committee of the Board of Trustees consisting solely of two or more trustees not, at the time, parties to such Proceeding and who were duly designated to act in the matter by a majority vote of the full Board of Trustees in which the designated trustees who are parties may participate, (B) by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Board of Trustees or a committee of the Board of Trustees by vote as set forth in subparagraph (ii)(A) of this paragraph 6(B), or, if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established, by a majority of the full Board of Trustees in which trustees who are parties to the Proceeding may participate (If the Indemnitors select Special Legal Counsel to make the determination under this clause (ii), the Indemnitors shall give prompt written notice to the Indemnitee advising him or her of the identity of the Special Legal Counsel so selected) or (C) by the shareholders of the Company.  If it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within 10 days after such determination. Authorization of indemnification and determination as to reasonableness of Expenses shall be made in the same manner as the determination that indemnification is permissible.  However, if the determination that indemnification is permissible is made by Special Legal Counsel under clause (B) above, authorization of indemnification and determination as to reasonableness of Expenses shall be made in the manner specified under clause (B) above for the selection of such Special Legal Counsel.
 
 
 
 
 

 
 
(C)
The Indemnitee shall cooperate with the person or entity making such determination with respect to the Indemnitee's entitlement to indemnification, including providing upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any reasonable costs or expenses (including reasonable attorneys' fees and disbursements) incurred by the Indemnitee in so cooperating shall be borne by the Indemnitors (irrespective of the determination as to the Indemnitee's entitlement to indemnification) and the Indemnitors hereby indemnify and agree to hold the Indemnitee's harmless therefrom.

 
(D)
In the event the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) hereof, the Indemnitee, or the Indemnitors, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Indemnitors or to the Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the grounds that the Special Legal Counsel so selected does not meet the requirements of “Special Legal Counsel” as defined in paragraph 1 of this Agreement.  If such written objection is made, the Special Legal Counsel so selected may not serve as Special Legal Counsel until a court has determined that such objection is without merit.  If, within 20 days after submission by the Indemnitee of a written request for indemnification pursuant to paragraph 6(A) hereof, no Special Legal Counsel shall have been selected or, if selected, shall have been objected to, either the Indemnitors or the Indemnitee may petition a court for resolution of any objection which shall have been made by the Indemnitors or the Indemnitee to the other's selection of Special Legal Counsel and/or for the appointment as Special Legal Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Special Legal Counsel under paragraph 6(B) hereof.  The Indemnitors shall pay all reasonable fees and expenses of Special Legal Counsel incurred in connection with acting pursuant to paragraph 6(B) hereof, and all reasonable fees and expenses incident to the selection of such Special Legal Counsel pursuant to this paragraph 6(D).  In the event that a determination of entitlement to indemnification is to be made by Special Legal Counsel and such determination shall not have been made and delivered in a written opinion within ninety (90) days after the receipt by the Indemnitors of the Indemnitee's request in accordance with paragraph 6(A), upon the due commencement of any judicial proceeding in accordance with paragraph 8(A) of this Agreement, Special Legal Counsel shall be discharged and relieved of any further responsibility in such capacity.
 
 
 
 
 
 
 
(E)
If the person or entity making the determination whether the Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Indemnitors of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.  Such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or entity making said determination in good faith requires additional time for the obtaining or evaluating of documentation and/or information relating thereto.  The foregoing provisions of this paragraph 6(E) shall not apply:  (i) if the determination of entitlement to indemnification is to be made by the shareholders and if within 15 days after receipt by the Indemnitors of the request for such determination the Board of Trustees resolves to submit such determination to the shareholders for consideration at an annual or special meeting thereof to be held within 75 days after such receipt and such determination is made at such meeting, or (ii) if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) of this Agreement.

7.  
PRESUMPTIONS

 
(A)
In making a determination with respect to entitlement or authorization of indemnification hereunder, the person or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement and the Indemnitors shall have the burden of proof to overcome such presumption.

       (B)  
The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

8.
REMEDIES

 
(A)
In the event that:  (i) a determination is made in accordance with the provisions of paragraph 6 that the Indemnitee is not entitled to indemnification under this Agreement, or (ii) advancement of reasonable Expenses is not timely made pursuant to this Agreement, or (iii) payment of indemnification due the Indemnitee under this Agreement is not timely made, the Indemnitee shall be entitled to an adjudication in an appropriate court of competent jurisdiction of such Indemnitee's entitlement to such indemnification or advancement of Expenses.
 
 
 
 
 

 
 
(B)
In the event that a determination shall have been made pursuant to paragraph 6 of this Agreement that the Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this paragraph 8 shall be conducted in all respects as a de novo trial on the merits.  The fact that a determination had been made earlier pursuant to paragraph 6 of this Agreement that the Indemnitee was not entitled to indemnification shall not be taken into account in any judicial proceeding commenced pursuant to this paragraph 8 and the Indemnitee shall not be prejudiced in any way by reason of that adverse determination.  In any judicial proceeding commenced pursuant to this paragraph 8, the Indemnitors shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 
(C)
If a determination shall have been made or deemed to have been made pursuant to this Agreement that the Indemnitee is entitled to indemnification, the Indemnitors shall be bound by such determination in any judicial proceeding commenced pursuant to this paragraph 8, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 
(D)
The Indemnitors shall be precluded from asserting in any judicial proceeding commenced pursuant to this paragraph 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Indemnitors are bound by all the provisions of this Agreement.

 
(E)
In the event that the Indemnitee, pursuant to this paragraph 8, seeks a judicial adjudication of such Indemnitee's rights under, or to recover damages for breach of, this Agreement, if successful in whole or in part, the Indemnitee shall be entitled to recover from the Indemnitors, and shall be indemnified by the Indemnitors against, any and all reasonable Expenses actually incurred by such Indemnitee in such judicial adjudication.

9.            NOTIFICATION AND DEFENSE OF CLAIMS

The Indemnitee agrees promptly to notify the Indemnitors in writing upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder, but the failure so to notify the Indemnitors will not relieve the Indemnitors from any liability that the Indemnitors may have to Indemnitee under this Agreement unless the Indemnitors are materially prejudiced thereby.  With respect to any such Proceeding as to which Indemnitee notifies the Indemnitors of the commencement thereof:

 
(A)
The Indemnitors will be entitled to participate therein at their own expense.
 
 
 
 
 

 
 
(B)
Except as otherwise provided below, the Indemnitors will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee.  After notice from the Indemnitors to Indemnitee of the Indemnitors' election so to assume the defense thereof, the Indemnitors will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below.  Indemnitee shall have the right to employ Indemnitee's own counsel in such Proceeding, but the fees and disbursements of such counsel incurred after notice from the Indemnitors of the Indemnitors' assumption of the defense thereof shall be at the expense of Indemnitee unless (a) the employment by counsel by Indemnitee has been authorized by the Indemnitors, (b) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Indemnitors and the Indemnitee in the conduct of the defense of such action, (c) such Proceeding seeks penalties or other relief against the Indemnitee with respect to which the Indemnitors could not provide monetary indemnification to the Indemnitee (such as injunctive relief or incarceration) or (d) the Indemnitors shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and disbursements of counsel shall be at the expense of the Indemnitors.  The Indemnitors shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Indemnitors, or as to which Indemnitee shall have reached the conclusion specified in clause (b) above, or which involves penalties or other relief against Indemnitee of the type referred to in clause (c) above.

 
(C)
The Indemnitors shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Indemnitors' written consent.  The Indemnitors shall not settle any action or claim in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee's written consent.  Neither the Indemnitors nor Indemnitee will unreasonably withhold or delay consent to any proposed settlement.

10.
NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION

 
(A)
The rights of indemnification and to receive advancement of reasonable Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Declaration of Trust, the Bylaws, the Operating Partnership's Partnership Agreement, any other agreement, a vote of shareholders, a resolution of the Board of Trustees or otherwise.  No amendment, alteration or repeal of this Agreement or any provision hereof shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee as a member of the Board of Trustees prior to such amendment, alteration or repeal.
 
 
 
 
 

 
 
(B)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for trustees and officers of the Company, the Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available and upon any “Change in Control” the Company shall use commercially reasonable efforts to obtain or arrange for continuation and/or “tail” coverage for the Indemnitee to the maximum extent obtainable at such time.

 
(C)
In the event of any payment under this Agreement, the Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitors to bring suit to enforce such rights.

 
(D)
The Indemnitors shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

11.
CONTINUATION OF INDEMNITY

 
(A)
All agreements and obligations of the Indemnitors contained herein shall continue during the period the Indemnitee is an officer or a member of the Board of Trustees of the Company and shall continue thereafter so long as the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such Indemnitee's Corporate Status and during the period of statute of limitations for any act or omission occurring during the Indemnitee's term of Corporate Status. This Agreement shall be binding upon the Indemnitors and their respective successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee's heirs, executors and administrators.

 
(B)
The Company and the Operating Partnership shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company or the Operating Partnership, by written agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company and the Operating Partnership would be required to perform if no such succession had taken place.

12.
SEVERABILITY

If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, (i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal, or unenforceable.
 
 
 
 
 

 
13.
EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES

Notwithstanding any other provisions of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of reasonable Expenses under this Agreement with respect to any Proceeding initiated by such Indemnitee against the Indemnitors other than a proceeding commenced pursuant to paragraph 8.

14.            NOTICE TO THE COMPANY SHAREHOLDERS

Any indemnification of, or advancement of reasonable Expenses, to an Indemnitee in accordance with this Agreement, if arising out of a Proceeding by or in the right of the Company, shall be reported in writing to the shareholders of the Company with the notice of the next the Company shareholders' meeting or prior to the meeting.
 

15.            PAYMENT BY THE OPERATING PARTNERSHIP OF AMOUNTS REQUIRED   TO BE PAID   OR ADVANCED BY THE COMPANY

The obligations of the Company and the Operating Partnership under this Agreement shall be joint and several.  The Operating Partnership shall promptly pay upon demand by the Company or the Indemnitee all amounts the Company is required to pay or advance hereunder.

16.            HEADINGS

The headings of the paragraph of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

17.            MODIFICATION AND WAIVER

No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

18.            NOTICES

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the case may be, to the following addresses:
 
 
 
 
 

 
If to the Indemnitee, to the address set forth in the records of the Company.

If to the Indemnitors, to:

Kite Realty Group Trust
Kite Realty Group, L.P.
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204
Attention: Daniel R. Sink
Fax No.:  317-713-2764

or to such other address as may have been furnished to the Indemnitee by the Indemnitors or to the Indemnitors by the Indemnitee, as the case may be.

19.            GOVERNING LAW

The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without application of the conflict of laws principles thereof.

20.            COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together constitute an agreement binding on all of the parties hereto.


(Remainder of page intentionally left blank.)

 
 
 

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

KITE REALTY GROUP TRUST
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer
           
 


KITE REALTY GROUP, L.P.

By:        Kite Realty Group Trust,
  its general partner
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer
         
 


INDEMNITEE:


/s/ Gerald W. Grupe                         
Gerald W. Grupe

 
 
 

Exhibit 10.26

INDEMNIFICATION AGREEMENT
 

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of February 27, 2015, by and among Kite Realty Group Trust, a Maryland real estate investment trust (the “Company”), Kite Realty Group, L.P., a Delaware limited partnership (the “Operating Partnership” and together with the Company, the “Indemnitors”), and Charles H. Wurtzebach (the “Indemnitee”). This Agreement shall be effective for all purposes as of July 1, 2014, the date on which the Indemnitee was elected a member of the Board of Trustees of the Company,

WHEREAS , the Indemnitee is an officer or a member of the Board of Trustees of the Company and in such capacity is performing a valuable service for the Company and the Operating Partnership;

WHEREAS , Maryland law permits the Company to enter into contracts with its officers or members of its Board of Trustees with respect to indemnification of, and advancement of expenses to, such persons;

WHEREAS, the Declaration of Trust of the Company (the “Declaration of Trust”) authorizes the Company to indemnify and advance expenses to its officers and trustees to the maximum extent permitted by Maryland law in effect from time to time;
 
WHEREAS , the Amended and Restated Bylaws of the Company, as amended (the “Bylaws”) provide that each officer and trustee of the Company shall be indemnified by the Company to the maximum extent permitted by Maryland law in effect from time to time and shall be entitled to advancement of expenses consistent with Maryland law;
 
WHEREAS , the Company is the general partner of, and conducts substantially all of its business through, the Operating Partnership;
 
WHEREAS, the Amended and Restated Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) provides for indemnification and advancement of expenses to the Company and its officers and trustees consistent with the applicable provisions of Maryland law, subject to the same limitations on indemnity and advancement of expenses that apply under Maryland law to indemnity and advancement of expenses by the Company of its officers and trustees;
 
WHEREAS , to induce the Indemnitee to provide services to the Company as an officer or a member of the Board of Trustees, and to provide the Indemnitee with specific contractual assurance that indemnification will be available to the Indemnitee regardless of, among other things, any amendment to or revocation of the Declaration of Trust, the Bylaws or the Partnership Agreement, or any acquisition transaction relating to the Company, the Indemnitors desire to provide the Indemnitee with protection against personal liability as set forth herein;

NOW, THEREFORE , in consideration of the premises and the covenants contained herein, the Indemnitors and the Indemnitee hereby agree as follows:
 
 
 
 
 

 
1.            DEFINITIONS .

For purposes of this Agreement:

 
(A)
“Change in Control” shall mean

 
i.
the dissolution or liquidation of the Company;

 
ii.
the merger, consolidation, or reorganization of the Company with one or more other entities in which the Company is not the surviving entity or immediately following which the persons or entities who were beneficial owners (as determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) of voting securities of the Company immediately prior thereto cease to beneficially own more than fifty percent (50%) of the voting securities of the surviving entity immediately thereafter;

 
iii.
a sale of all or substantially all of the assets of the Company to another person or entity;

 
iv.
any transaction (including without limitation a merger or reorganization in which the Company is the surviving entity) that results in any person or entity or “group” (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (other than persons who are shareholders or affiliates immediately prior to the transaction) owning thirty percent (30%) or more of the combined voting power of all classes of shares of the Company; or

 
v.
individuals who, as of the date hereof, constitute the Board of Trustees (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Trustees; provided, however, that any individual becoming a trustee subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the trustees then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for trustee, without written objection to such nomination) shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of trustees or other actual or threatened solicitation of proxies or contests by or on behalf of a person other than the Board of Trustees.

 
(B)
“Corporate Status” describes the status of a person who is or was a trustee or officer of the Company (or of any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's interest ceased upon consummation of the transaction) or is or was serving at the request of the Company (or any such predecessor entity) as a director, officer, partner (limited or general), member, trustee, employee or agent of any other foreign or domestic corporation, partnership, joint venture, limited liability company, trust, other enterprise (whether conducted for profit or not for profit) or employee benefit plan. The Company (and any domestic or foreign predecessor entity of the Company in a merger, consolidation or other transaction in which the predecessor's existence ceased upon consummation of the transaction) shall be deemed to have requested the Indemnitee to serve an employee benefit plan where the performance of the Indemnitee's duties to the Company (or any such predecessor entity) also imposes or imposed duties on, or otherwise involves or involved services by, the Indemnitee to the plan or participants or beneficiaries of the plan.
 
 
 
 
 

 
 
(C)
“Expenses” shall include all attorneys' and paralegals' fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a Proceeding.

 
(D)
“Proceeding” includes any action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing, or any other proceeding, including appeals therefrom, whether civil, criminal, administrative, or investigative, except one initiated by the Indemnitee pursuant to paragraph 8 of this Agreement to enforce such Indemnitee's  rights under this Agreement.

       (E)  
“Special Legal Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither presently is, or in the past two years has been, retained to represent (i) the Indemnitors or the Indemnitee in any matter material to either such party, or (ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder.

2.
INDEMNIFICATION

The Indemnitee shall be entitled to the rights of indemnification provided in this paragraph 2 and under applicable law, the Declaration of Trust, the Bylaws, the Partnership Agreement, any other agreement, a vote of shareholders or resolution of the Board of Trustees or otherwise if, by reason of such Indemnitee's Corporate Status, such Indemnitee is, or is threatened to be made, a party to any threatened, pending, or completed Proceeding, including a Proceeding by or in the right of the Company or the Operating Partnership.  Unless prohibited by paragraph 13 hereof and subject to the other provisions of this Agreement, the Indemnitee shall be indemnified hereunder, to the maximum extent provided by Maryland law in effect from time to time, against judgments, penalties, fines, and settlements and reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with such Proceeding or any claim, issue or matter therein; provided, however, that if such Proceeding was one by or in the right of the Company or the Operating Partnership, indemnification may not be made in respect of such Proceeding if the Indemnitee shall have been adjudged to be liable to the Company or the Operating Partnership.  For purposes of this paragraph 2, excise taxes assessed on the Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines.
 
 
 
 
 

 
3.
EXPENSES OF A SUCCESSFUL PARTY

Without limiting the effect of any other provision of this Agreement and without regard to the provisions of paragraph 6 hereof, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a party to and is successful, on the merits or otherwise, in any Proceeding pursuant to a final non-appealable order, such Indemnitee shall be indemnified against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.  If the Indemnitee is not wholly successful in such Proceeding pursuant to a final non-appealable order but is successful, on the merits or otherwise, as to one or more but less than all claims, issues, or matters in such Proceeding pursuant to a final non-appealable order, the Indemnitors shall indemnify the Indemnitee against all reasonable Expenses actually incurred by or on behalf of such Indemnitee in connection with each successfully resolved claim, issue or matter.  For purposes of this paragraph and without limitation, the termination of any claim, issue or matter in such Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

4.            ADVANCEMENT OF EXPENSES

The Indemnitors shall advance all reasonable Expenses incurred by or on behalf of the Indemnitee in connection with any Proceeding within 20 days after the receipt by the Indemnitors of a statement from the Indemnitee requesting such advance from time to time, whether prior to or after final disposition of such Proceeding.  Such statement shall reasonably evidence the Expenses incurred or to be incurred by the Indemnitee and shall include or be preceded or accompanied by (i) a written affirmation by the Indemnitee of the Indemnitee's good faith belief that the standard of conduct necessary for indemnification by the Indemnitors as authorized by this Agreement has been met and (ii) a written undertaking by or on behalf of the Indemnitee to repay the amounts advanced if it should ultimately be determined that the standard of conduct has not been met.  The undertaking required by clause (ii) of the immediately preceding sentence shall be an unlimited general obligation of the Indemnitee but need not be secured and may be accepted without reference to financial ability to make the repayment.

5.
WITNESS EXPENSES

Notwithstanding any other provision of this Agreement, to the extent that the Indemnitee is, by reason of such Indemnitee's Corporate Status, a witness for any reason in any Proceeding to which such Indemnitee is not a named defendant or respondent, such Indemnitee shall be indemnified by the Indemnitors against all Expenses actually incurred by or on behalf of such Indemnitee in connection therewith.
 
 
 
 
 

 
6.
DETERMINATION OF ENTITLEMENT TO AND AUTHORIZATION OF INDEMNIFICATION

 
(A)
To obtain indemnification under this Agreement, the Indemnitee shall submit to the Indemnitors a written request, including therewith such documentation and information reasonably necessary to determine whether and to what extent the Indemnitee is entitled to indemnification.
 
        (B)  
Indemnification under this Agreement may not be made unless authorized for a specific Proceeding after a determination has been made in accordance with this Section 6(B) that indemnification of the Indemnitee is permissible in the circumstances because the Indemnitee has met the following standard of conduct: the Indemnitors shall indemnify the Indemnitee in accordance with the provisions of paragraph 2 hereof, unless   it is established that:  (a) the act or omission of the Indemnitee was material to the matter giving rise to the Proceeding and (x) was committed in bad faith or (y) was the result of active and deliberate dishonesty; (b) the Indemnitee actually received an improper personal benefit in money, property or services; or (c) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful.  Upon receipt by the Indemnitors of the Indemnitee's written request for indemnification pursuant to subparagraph 6(A), a determination as to whether the applicable standard of conduct has been met shall be made within the period specified in paragraph 6(E):  (i) if a Change in Control shall have occurred, by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Indemnitee (unless the Indemnitee shall request that such determination be made by the person or persons and in the manner provided in clause (ii) of this paragraph 6(B), in which event the provisions of such clause (ii) shall apply) (If the Indemnitee selects Special Legal Counsel to make the determination under this clause (i), the Indemnitee shall give prompt written notice to the Indemnitors advising them of the identity of the Special Legal Counsel so selected); or (ii) if a Change in Control shall not have occurred, (A) by the Board of Trustees by a majority vote of a quorum consisting of trustees not, at the time, parties to the Proceeding, or, if such quorum cannot be obtained, then by a majority vote of a committee of the Board of Trustees consisting solely of two or more trustees not, at the time, parties to such Proceeding and who were duly designated to act in the matter by a majority vote of the full Board of Trustees in which the designated trustees who are parties may participate, (B) by Special Legal Counsel in a written opinion to the Board of Trustees, a copy of which shall be delivered to the Indemnitee, with Special Legal Counsel selected by the Board of Trustees or a committee of the Board of Trustees by vote as set forth in subparagraph (ii)(A) of this paragraph 6(B), or, if the requisite quorum of the full Board of Trustees cannot be obtained therefor and the committee cannot be established, by a majority of the full Board of Trustees in which trustees who are parties to the Proceeding may participate (If the Indemnitors select Special Legal Counsel to make the determination under this clause (ii), the Indemnitors shall give prompt written notice to the Indemnitee advising him or her of the identity of the Special Legal Counsel so selected) or (C) by the shareholders of the Company.  If it is so determined that the Indemnitee is entitled to indemnification, payment to the Indemnitee shall be made within 10 days after such determination. Authorization of indemnification and determination as to reasonableness of Expenses shall be made in the same manner as the determination that indemnification is permissible.  However, if the determination that indemnification is permissible is made by Special Legal Counsel under clause (B) above, authorization of indemnification and determination as to reasonableness of Expenses shall be made in the manner specified under clause (B) above for the selection of such Special Legal Counsel.
 
 
 
 
 

 
 
(C)
The Indemnitee shall cooperate with the person or entity making such determination with respect to the Indemnitee's entitlement to indemnification, including providing upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Indemnitee and reasonably necessary to such determination.  Any reasonable costs or expenses (including reasonable attorneys' fees and disbursements) incurred by the Indemnitee in so cooperating shall be borne by the Indemnitors (irrespective of the determination as to the Indemnitee's entitlement to indemnification) and the Indemnitors hereby indemnify and agree to hold the Indemnitee's harmless therefrom.

 
(D)
In the event the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) hereof, the Indemnitee, or the Indemnitors, as the case may be, may, within seven days after such written notice of selection shall have been given, deliver to the Indemnitors or to the Indemnitee, as the case may be, a written objection to such selection.  Such objection may be asserted only on the grounds that the Special Legal Counsel so selected does not meet the requirements of “Special Legal Counsel” as defined in paragraph 1 of this Agreement.  If such written objection is made, the Special Legal Counsel so selected may not serve as Special Legal Counsel until a court has determined that such objection is without merit.  If, within 20 days after submission by the Indemnitee of a written request for indemnification pursuant to paragraph 6(A) hereof, no Special Legal Counsel shall have been selected or, if selected, shall have been objected to, either the Indemnitors or the Indemnitee may petition a court for resolution of any objection which shall have been made by the Indemnitors or the Indemnitee to the other's selection of Special Legal Counsel and/or for the appointment as Special Legal Counsel of a person selected by the court or by such other person as the court shall designate, and the person with respect to whom an objection is so resolved or the person so appointed shall act as Special Legal Counsel under paragraph 6(B) hereof.  The Indemnitors shall pay all reasonable fees and expenses of Special Legal Counsel incurred in connection with acting pursuant to paragraph 6(B) hereof, and all reasonable fees and expenses incident to the selection of such Special Legal Counsel pursuant to this paragraph 6(D).  In the event that a determination of entitlement to indemnification is to be made by Special Legal Counsel and such determination shall not have been made and delivered in a written opinion within ninety (90) days after the receipt by the Indemnitors of the Indemnitee's request in accordance with paragraph 6(A), upon the due commencement of any judicial proceeding in accordance with paragraph 8(A) of this Agreement, Special Legal Counsel shall be discharged and relieved of any further responsibility in such capacity.
 
 
 
 
 
 
 
(E)
If the person or entity making the determination whether the Indemnitee is entitled to indemnification shall not have made a determination within 60 days after receipt by the Indemnitors of the request therefor, the requisite determination of entitlement to indemnification shall be deemed to have been made and the Indemnitee shall be entitled to such indemnification, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.  Such 60-day period may be extended for a reasonable time, not to exceed an additional 30 days, if the person or entity making said determination in good faith requires additional time for the obtaining or evaluating of documentation and/or information relating thereto.  The foregoing provisions of this paragraph 6(E) shall not apply:  (i) if the determination of entitlement to indemnification is to be made by the shareholders and if within 15 days after receipt by the Indemnitors of the request for such determination the Board of Trustees resolves to submit such determination to the shareholders for consideration at an annual or special meeting thereof to be held within 75 days after such receipt and such determination is made at such meeting, or (ii) if the determination of entitlement to indemnification is to be made by Special Legal Counsel pursuant to paragraph 6(B) of this Agreement.

7.  
PRESUMPTIONS

 
(A)
In making a determination with respect to entitlement or authorization of indemnification hereunder, the person or entity making such determination shall presume that the Indemnitee is entitled to indemnification under this Agreement and the Indemnitors shall have the burden of proof to overcome such presumption.

        (B)  
The termination of any Proceeding by conviction, or upon a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, creates a rebuttable presumption that the Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

8.
REMEDIES

 
(A)
In the event that:  (i) a determination is made in accordance with the provisions of paragraph 6 that the Indemnitee is not entitled to indemnification under this Agreement, or (ii) advancement of reasonable Expenses is not timely made pursuant to this Agreement, or (iii) payment of indemnification due the Indemnitee under this Agreement is not timely made, the Indemnitee shall be entitled to an adjudication in an appropriate court of competent jurisdiction of such Indemnitee's entitlement to such indemnification or advancement of Expenses.
 
 
 
 
 

 
 
(B)
In the event that a determination shall have been made pursuant to paragraph 6 of this Agreement that the Indemnitee is not entitled to indemnification, any judicial proceeding commenced pursuant to this paragraph 8 shall be conducted in all respects as a de novo trial on the merits.  The fact that a determination had been made earlier pursuant to paragraph 6 of this Agreement that the Indemnitee was not entitled to indemnification shall not be taken into account in any judicial proceeding commenced pursuant to this paragraph 8 and the Indemnitee shall not be prejudiced in any way by reason of that adverse determination.  In any judicial proceeding commenced pursuant to this paragraph 8, the Indemnitors shall have the burden of proving that the Indemnitee is not entitled to indemnification or advancement of Expenses, as the case may be.

 
(C)
If a determination shall have been made or deemed to have been made pursuant to this Agreement that the Indemnitee is entitled to indemnification, the Indemnitors shall be bound by such determination in any judicial proceeding commenced pursuant to this paragraph 8, absent:  (i) a misstatement by the Indemnitee of a material fact, or an omission of a material fact necessary to make the Indemnitee's statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification under applicable law.

 
(D)
The Indemnitors shall be precluded from asserting in any judicial proceeding commenced pursuant to this paragraph 8 that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court that the Indemnitors are bound by all the provisions of this Agreement.

 
(E)
In the event that the Indemnitee, pursuant to this paragraph 8, seeks a judicial adjudication of such Indemnitee's rights under, or to recover damages for breach of, this Agreement, if successful in whole or in part, the Indemnitee shall be entitled to recover from the Indemnitors, and shall be indemnified by the Indemnitors against, any and all reasonable Expenses actually incurred by such Indemnitee in such judicial adjudication.

9.            NOTIFICATION AND DEFENSE OF CLAIMS

The Indemnitee agrees promptly to notify the Indemnitors in writing upon being served with any summons, citation, subpoena, complaint, indictment, information, or other document relating to any Proceeding or matter which may be subject to indemnification or advancement of Expenses covered hereunder, but the failure so to notify the Indemnitors will not relieve the Indemnitors from any liability that the Indemnitors may have to Indemnitee under this Agreement unless the Indemnitors are materially prejudiced thereby.  With respect to any such Proceeding as to which Indemnitee notifies the Indemnitors of the commencement thereof:

 
(A)
The Indemnitors will be entitled to participate therein at their own expense.
 
 
 
 
 

 
 
(B)
Except as otherwise provided below, the Indemnitors will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee.  After notice from the Indemnitors to Indemnitee of the Indemnitors' election so to assume the defense thereof, the Indemnitors will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation or as otherwise provided below.  Indemnitee shall have the right to employ Indemnitee's own counsel in such Proceeding, but the fees and disbursements of such counsel incurred after notice from the Indemnitors of the Indemnitors' assumption of the defense thereof shall be at the expense of Indemnitee unless (a) the employment by counsel by Indemnitee has been authorized by the Indemnitors, (b) the Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Indemnitors and the Indemnitee in the conduct of the defense of such action, (c) such Proceeding seeks penalties or other relief against the Indemnitee with respect to which the Indemnitors could not provide monetary indemnification to the Indemnitee (such as injunctive relief or incarceration) or (d) the Indemnitors shall not in fact have employed counsel to assume the defense of such action, in each of which cases the fees and disbursements of counsel shall be at the expense of the Indemnitors.  The Indemnitors shall not be entitled to assume the defense of any Proceeding brought by or on behalf of the Indemnitors, or as to which Indemnitee shall have reached the conclusion specified in clause (b) above, or which involves penalties or other relief against Indemnitee of the type referred to in clause (c) above.

 
(C)
The Indemnitors shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without the Indemnitors' written consent.  The Indemnitors shall not settle any action or claim in any manner that would impose any penalty or limitation on Indemnitee without Indemnitee's written consent.  Neither the Indemnitors nor Indemnitee will unreasonably withhold or delay consent to any proposed settlement.

10.
NON-EXCLUSIVITY; SURVIVAL OF RIGHTS; INSURANCE SUBROGATION

 
(A)
The rights of indemnification and to receive advancement of reasonable Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which the Indemnitee may at any time be entitled under applicable law, the Declaration of Trust, the Bylaws, the Operating Partnership's Partnership Agreement, any other agreement, a vote of shareholders, a resolution of the Board of Trustees or otherwise.  No amendment, alteration or repeal of this Agreement or any provision hereof shall be effective as to the Indemnitee with respect to any action taken or omitted by the Indemnitee as a member of the Board of Trustees prior to such amendment, alteration or repeal.
 
 
 
 
 

 
 
(B)
To the extent that the Company maintains an insurance policy or policies providing liability insurance for trustees and officers of the Company, the Indemnitee shall be covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available and upon any “Change in Control” the Company shall use commercially reasonable efforts to obtain or arrange for continuation and/or “tail” coverage for the Indemnitee to the maximum extent obtainable at such time.

 
(C)
In the event of any payment under this Agreement, the Indemnitors shall be subrogated to the extent of such payment to all of the rights of recovery of the Indemnitee, who shall execute all papers required and take all actions necessary to secure such rights, including execution of such documents as are necessary to enable the Indemnitors to bring suit to enforce such rights.

 
(D)
The Indemnitors shall not be liable under this Agreement to make any payment of amounts otherwise indemnifiable hereunder if and to the extent that the Indemnitee has otherwise actually received such payment under any insurance policy, contract, agreement, or otherwise.

11.
CONTINUATION OF INDEMNITY

 
(A)
All agreements and obligations of the Indemnitors contained herein shall continue during the period the Indemnitee is an officer or a member of the Board of Trustees of the Company and shall continue thereafter so long as the Indemnitee shall be subject to any threatened, pending or completed Proceeding by reason of such Indemnitee's Corporate Status and during the period of statute of limitations for any act or omission occurring during the Indemnitee's term of Corporate Status. This Agreement shall be binding upon the Indemnitors and their respective successors and assigns and shall inure to the benefit of the Indemnitee and such Indemnitee's heirs, executors and administrators.

 
(B)
The Company and the Operating Partnership shall require and cause any successor (whether direct or indirect by purchase, merger, consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company or the Operating Partnership, by written agreement in form and substance reasonably satisfactory to the Indemnitee, expressly to assume and agree to perform this Agreement in the same manner and to the same extent that the Company and the Operating Partnership would be required to perform if no such succession had taken place.

12.
SEVERABILITY

If any provision or provisions of this Agreement shall be held to be invalid, illegal, or unenforceable for any reason whatsoever, (i) the validity, legality, and enforceability of the remaining provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall not in any way be affected or impaired thereby, and (ii) to the fullest extent possible, the provisions of this Agreement (including, without limitation, each portion of any paragraph of this Agreement containing any such provision held to be invalid, illegal, or unenforceable, that is not itself invalid, illegal, or unenforceable) shall be construed so as to give effect to the intent manifested by the provisions held invalid, illegal, or unenforceable.
 
 
 
 
 

 
13.
EXCEPTION TO RIGHT OF INDEMNIFICATION OR ADVANCEMENT OF EXPENSES

Notwithstanding any other provisions of this Agreement, the Indemnitee shall not be entitled to indemnification or advancement of reasonable Expenses under this Agreement with respect to any Proceeding initiated by such Indemnitee against the Indemnitors other than a proceeding commenced pursuant to paragraph 8.

14.            NOTICE TO THE COMPANY SHAREHOLDERS

Any indemnification of, or advancement of reasonable Expenses, to an Indemnitee in accordance with this Agreement, if arising out of a Proceeding by or in the right of the Company, shall be reported in writing to the shareholders of the Company with the notice of the next the Company shareholders' meeting or prior to the meeting.
 

15.            PAYMENT BY THE OPERATING PARTNERSHIP OF AMOUNTS REQUIRED   TO BE PAID   OR ADVANCED BY THE COMPANY

The obligations of the Company and the Operating Partnership under this Agreement shall be joint and several.  The Operating Partnership shall promptly pay upon demand by the Company or the Indemnitee all amounts the Company is required to pay or advance hereunder.

16.            HEADINGS

The headings of the paragraph of this Agreement are inserted for convenience only and shall not be deemed to constitute part of this Agreement or to affect the construction thereof.

17.            MODIFICATION AND WAIVER

No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by each of the parties hereto.  No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall such waiver constitute a continuing waiver.

18.            NOTICES

All notices, requests, demands, and other communications hereunder shall be in writing and shall be deemed to have been duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been directed, or (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, if so delivered or mailed, as the case may be, to the following addresses:
 
 
 
 
 

 
If to the Indemnitee, to the address set forth in the records of the Company.

If to the Indemnitors, to:

Kite Realty Group Trust
Kite Realty Group, L.P.
30 S. Meridian Street
Suite 1100
Indianapolis, Indiana  46204
Attention: Daniel R. Sink
Fax No.:  317-713-2764

or to such other address as may have been furnished to the Indemnitee by the Indemnitors or to the Indemnitors by the Indemnitee, as the case may be.

19.            GOVERNING LAW

The parties agree that this Agreement shall be governed by, and construed and enforced in accordance with, the laws of the State of Maryland, without application of the conflict of laws principles thereof.

20.            COUNTERPARTS

This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together constitute an agreement binding on all of the parties hereto.


(Remainder of page intentionally left blank.)

 
 
 

IN WITNESS WHEREOF , the parties hereto have executed this Agreement as of the day and year first above written.

KITE REALTY GROUP TRUST
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer
          
 


KITE REALTY GROUP, L.P.

By:        Kite Realty Group Trust,
  its general partner
 
 
By: /s/ Daniel R. Sink
Name: Daniel R. Sink
Title: Executive Vice President and Chief Financial Officer
      
 


INDEMNITEE:


/s/ Charles H. Wurtzebach                           
Charles H. Wurtzebach

 
 
 

 
 
EXHIBIT 12.1
 
 
Kite Realty Group Trust
 
 
Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends
 
 

 
   
Years ended December 31
 
   
2014
   
2013
   
2012
   
2011
   
2010
 
Earnings:
                             
Net (loss) income from continuing operations
  $ (16,452 )   $ (726 )   $ (11,455 )   $ 3,753     $ (9,256 )
Add:
                                       
Income taxes expense (benefit)
    24       262       (106 )     (1 )     266  
Fixed charges, net of capitalized interest
    45,549       28,026       23,423       21,660       24,859  
Less:
                                       
Income (loss) from unconsolidated entities
    —       —       —       4,320       —  
Earnings before fixed charges and preferred dividends
  $ 29,121     $ 27,562     $ 11,862     $ 21,092     $ 15,869  
                                         
Fixed charges:
                                       
Interest expense
  $ 45,513     $ 27,994     $ 23,392     $ 21,625     $ 24,831  
Capitalized interest
    4,789       5,081       7,444       8,487       8,807  
Interest within rental expense
    36       33       31       34       28  
Total fixed charges
  $ 50,338     $ 33,108     $ 30,867     $ 30,146     $ 33,666  
Preferred dividends
    8,456       8,456       7,920       5,775       377  
Total fixed charges and preferred dividends
  $ 58,794     $ 41,564     $ 38,787     $ 35,921     $ 34,043  
                                         
Ratio of earnings to fixed charges and preferred dividends
    (1 )     (2 )     (3 )     (4 )     (5 )
 
 
(1)  
The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2014 was $29.7 million.  The calculation of earnings includes $121.0 million of non-cash depreciation expense.
 
(2)  
The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2013 was $14.0 million.  The calculation of earnings includes $54.5 million of non-cash depreciation expense.
 
(3)  
The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2012 was $26.9 million.  The calculation of earnings includes $38.8 million of non-cash depreciation expense and a $8.0 million non-cash remeasurement loss on consolidation of Parkside Town Commons, net.
 
(4)  
The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2011 was $14.8 million.  The calculation of earnings includes $33.1 million of non-cash depreciation expense.
 
(5)  
The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2010 was $18.2 million.  The calculation of earnings includes $36.1 million of non-cash depreciation expense.
 

 
 
 


 
EXHIBIT 21.1
 
 
Kite Realty Group List of Subsidiaries
     
Name of Subsidiary
 
Jurisdiction of Incorporation or Formation
     
116 & Olio, LLC
 
Indiana
50 th & 12 th , LLC
 
Indiana
82   & Otty, LLC
 
Indiana
Brentwood Land Partners, LLC
 
Delaware
Brentwood Property Owners’ Association, Inc.
 
Florida
Bulwark, LLC
 
Delaware
Cornelius Adair, LLC
 
Indiana
Corner Associates, LP
 
Indiana
Dayville Property Development, LLC
 
Connecticut
Delray Marketplace Master Association, Inc.
 
Florida
Eagle Plaza II, LLC
 
Indiana
Eddy Street Commons at Notre Dame Master Association, Inc.
 
Indiana
Estero Town Commons Property Owners Association, Inc.
 
Florida
Fishers Station Development Company
 
Indiana
Glendale Centre, L.L.C
 
Indiana
International Speedway Square, Ltd.
 
Florida
Kite Acworth Management, LLC
 
Delaware
Kite Acworth, LLC
 
Indiana
Kite Eagle Creek, LLC
 
Indiana
Kite Greyhound III, LLC
 
Indiana
Kite Greyhound, LLC
 
Indiana
Kite King’s Lake, LLC
 
Indiana
Kite Kokomo Management, LLC
 
Delaware
Kite Kokomo, LLC
 
Indiana
Kite McCarty State, LLC
 
Indiana
Kite New Jersey, LLC
 
Delaware
Kite Pen, LLC
 
Indiana
Kite Realty Advisors, LLC d/b/a KMI Realty Advisors
 
Indiana
Kite Realty Construction, LLC
 
Indiana
Kite Realty Development, LLC
 
Indiana
Kite Realty Eddy Street Garage, LLC
 
Indiana
Kite Realty Eddy Street Land, LLC
 
Indiana
Kite Realty FS Hotel Operators, LLC
 
Indiana
Kite Realty Group Trust
 
Maryland
Kite Realty Group, L.P.
 
Delaware
Kite Realty Holding, LLC
 
Indiana
Kite Realty New Hill Place, LLC
 
Indiana
Kite Realty Peakway at 55, LLC
 
Indiana
Kite Realty Washington Parking, LLC
 
Indiana
Kite Realty/White LS Hotel Operators, LLC
 
Indiana
Kite San Antonio, LLC
 
Indiana
Kite Washington Parking, LLC
 
Indiana
Kite Washington, LLC
 
Indiana
Kite West 86 th Street II, LLC
 
Indiana
Kite West 86 th Street, LLC
 
Indiana
KRG 951 & 41, LLC
 
Indiana
KRG Aiken Hitchcock, LLC
 
Delaware

 
 
 


KRG Alcoa TN, LLC
 
Delaware
KRG Alcoa Hamilton, LLC
 
Delaware
KRG Ashwaubenon Bay Park, LLC
 
Delaware
KRG Athens Eastside, LLC
 
Delaware
KRG Bayonne Urban Renewal, LLC
 
Delaware
KRG Beacon Hill, LLC
 
Indiana
KRG Beechwood,  LLC
 
Indiana
KRG Bolton Plaza, LLC
 
Indiana
KRG Bradenton Centre Point, LLC
 
Delaware
KRG Branson Hills IV, LLC
 
Delaware
KRG Branson Hills K-II, LLC
 
Delaware
KRG Branson Hills, LLC
 
Delaware
KRG Branson Hills T-III, LLC
 
Delaware
KRG Bridgewater, LLC
 
Indiana
KRG Burnt Store, LLC
 
Indiana
KRG Capital, LLC
 
Indiana
KRG Castleton Crossing, LLC
 
Indiana
KRG Cedar Hill Plaza, LP
 
Delaware
KRG Cedar Hill Village, LP
 
Indiana
KRG Centre, LLC
 
Indiana
KRG Charlotte Northcrest, LLC
 
Delaware
KRG Charlotte Perimeter Woods, LLC
 
Delaware
KRG CHP Management, LLC
 
Delaware
KRG Clay, LLC
 
Indiana
KRG College I, LLC
 
Indiana
KRG College, LLC
 
Indiana
KRG Construction, LLC
 
Indiana
KRG Conyers Heritage, LLC
 
Delaware
KRG Cool Creek Management, LLC
 
Indiana
KRG Cool Creek Outlots, LLC
 
Indiana
KRG Cool Springs, LLC
 
Indiana
KRG Corner Associates, LLC
 
Indiana
KRG Courthouse Shadows I, LLC
 
Delaware
KRG Courthouse Shadows, LLC
 
Delaware
KRG Cove Center, LLC
 
Indiana
KRG Dallas Wheatland, LLC
 
Delaware
KRG Daytona Management II, LLC
 
Delaware
KRG Daytona Management, LLC
 
Indiana
KRG Daytona Outlot Management, LLC
 
Delaware
KRG Dayville Killingly Member II, LLC
 
Delaware
KRG Dayville Killingly Member, LLC
 
Delaware
KRG Delray Beach, LLC
 
Indiana
KRG Development, LLC d/b/a Kite Development
 
Indiana
KRG Draper Crossing, LLC
 
Delaware
KRG Draper Peaks, LLC
 
Delaware
KRG Eagle Creek III, LLC
 
Indiana
KRG Eagle Creek IV, LLC
 
Indiana
KRG Eastgate Pavilion, LLC
 
Indiana
KRG Eastwood, LLC
 
Indiana
KRG Eddy Street Apartments, LLC
 
Indiana
KRG Eddy Street Commons at Notre Dame Declarant, LLC
 
Indiana
KRG Eddy Street Commons, LLC
 
Indiana
KRG Eddy Street FS Hotel, LLC
 
Indiana
KRG Eddy Street Land Management, LLC
 
Delaware

 
 
 


KRG Eddy Street Land, LLC
 
Indiana
KRG Eddy Street Office, LLC
 
Indiana
KRG Estero, LLC
 
Indiana
KRG Evans Mullins, LLC
 
Delaware
KRG Evans Mullins Outlots, LLC
 
Delaware
KRG Fishers Station II, LLC
 
Indiana
KRG Fishers Station, LLC
 
Indiana
KRG Four Corner Square, LLC
 
Indiana
KRG Fort Myers Colonial Square, LLC
 
Delaware
KRG Fort Myers Village Walk, LLC
 
Delaware
KRG Fort Wayne Lima, LLC
 
Delaware
KRG Fort Wayne Lima Outlot, LLC
 
Delaware
KRG Fox Lake Crossing II, LLC
 
Indiana
KRG Fox Lake Crossing, LLC
 
Delaware
KRG Frisco Westside, LLC
 
Delaware
KRG Gainesville, LLC
 
Indiana
KRG Geist Management, LLC
 
Indiana
KRG Goldsboro Memorial, LLC
 
Delaware
KRG Greencastle, LLC
 
Indiana
KRG Hamilton Crossing Management, LLC
 
Delaware
KRG Hamilton Crossing, LLC
 
Indiana
KRG Harvest Square, LLC
 
Delaware
KRG Henderson Eastgate, LLC
 
Delaware
KRG Hot Springs Fairgrounds, LLC
 
Delaware
KRG Hunter’s Creek, LLC
 
Indiana
KRG Jacksonville Deerwood Lake, LLC
 
Delaware
KRG Jacksonville Julington Creek, LLC
 
Delaware
KRG Jacksonville Julington Creek II, LLC
 
Delaware
KRG Jacksonville Richlands, LLC
 
Delaware
KRG Indian River, LLC
 
Delaware
KRG ISS LH OUTLOT, LLC
 
Indiana
KRG ISS, LLC
 
Indiana
KRG Kingwood Commons, LLC
 
Indiana
KRG Kissimmee Pleasant Hill, LLC
 
Delaware
KRG Kokomo Project Company, LLC
 
Indiana
KRG Lake City Commons, LLC
 
Delaware
KRG Lake City Commons II, LLC
 
Delaware
KRG Lake Mary, LLC
 
Delaware
KRG Lake St. Louis Hawk Ridge, LLC
 
Delaware
KRG Lakewood, LLC
 
Indiana
KRG Las Vegas Centennial Center, LLC
 
Delaware
KRG Las Vegas Centennial Gateway, LLC
 
Delaware
KRG Las Vegas Craig, LLC
 
Delaware
KRG Las Vegas Eastern Beltway, LLC
 
Delaware
KRG Lithia, LLC
 
Indiana
KRG Magellan, LLC
 
Maryland
KRG Management, LLC
 
Indiana
KRG Market Street Village I, LLC
 
Indiana
KRG Market Street Village II, LLC
 
Indiana
KRG Market Street Village, LP
 
Indiana
KRG Marysville, LLC
 
Indiana
KRG Merrimack Village, LLC
 
Delaware
KRG Miramar Square, LLC
 
Delaware
KRG Naperville Management, LLC
 
Delaware

 
 
 


KRG Naperville, LLC
 
Indiana
KRG Neenah Fox Point, LLC
 
Delaware
KRG New Hill Place I, LLC
 
Indiana
KRG New Hill Place, LLC
 
Indiana
KRG New Hill Place II, LLC
 
Indiana
KRG Newburgh Bell Oaks, LLC
 
Delaware
KRG Norman University, LLC
 
Delaware
KRG Norman University II, LLC
 
Delaware
KRG Norman University III, LLC
 
Delaware
KRG Norman University IV, LLC
 
Delaware
KRG Northdale, LLC
 
Indiana
KRG North Las Vegas Losee, LLC
 
Delaware
KRG Oak and Ford Zionsville, LLC
 
Indiana
KRG Ocean Isle Beach Landing, LLC
 
Delaware
KRG Oklahoma City Silver Springs, LLC
 
Delaware
KRG Oldsmar Management, LLC
 
Delaware
KRG Oldsmar Project Company, LLC
 
Delaware
KRG Oldsmar, LLC
 
Indiana
KRG Oleander, LLC
 
Indiana
KRG Omaha Whispering Ridge, LLC
 
Delaware
KRG Orange City Saxon, LLC
 
Delaware
KRG Palm Coast Landing, LLC
 
Delaware
KRG Pan Am Plaza, LLC
 
Indiana
KRG Panola I, LLC
 
Delaware
KRG Panola II, LLC
 
Indiana
KRG Parkside I, LLC
 
Indiana
KRG Parkside II, LLC
 
Indiana
KRG Peakway at 55, LLC
 
Indiana
KRG Pembroke Pines, LLC
 
Indiana
KRG Pine Ridge, LLC
 
Delaware
KRG Pipeline Pointe, LP
 
Indiana
KRG Plaza Green, LLC
 
Indiana
KRG Plaza Volente Management, LLC
 
Delaware
KRG Plaza Volente, LP
 
Indiana
KRG Pleasant Prairie Ridge, LLC
 
Delaware
KRG Port St. Lucie Landing, LLC
 
Delaware
KRG Port St. Lucie Square, LLC
 
Delaware
KRG Portofino, LLC
 
Indiana
KRG Portofino Project Company, LLC
 
Indiana
KRG PR Ventures, LLC
 
Indiana
KRG Prattville Legends, LLC
 
Delaware
KRG Rampart, LLC
 
Delaware
KRG Riverchase, LLC
 
Delaware
KRG Rivers Edge II, LLC
 
Indiana
KRG Rivers Edge, LLC
 
Indiana
KRG San Antonio, LP
 
Indiana
KRG Shops at Moore II, LLC
 
Delaware
KRG Shops at Moore Member, LLC
 
Delaware
KRG Shops at Moore, LLC
 
Delaware
KRG Shreveport Regal Court, LLC
 
Delaware
KRG South Elgin Commons, LLC
 
Delaware
KRG St. Cloud 13 th , LLC
 
Delaware
KRG Stevens Point Pinecrest, LLC
 
Delaware
KRG Sunland II, LP
 
Indiana

 
 
 


KRG Sunland Management, LLC
 
Delaware
KRG Sunland, LP
 
Indiana
KRG Temple Terrace, LLC
 
Delaware
KRG Temple Terrace Member, LLC
 
Delaware
KRG Territory Member, LLC
 
Delaware
KRG Territory, LLC
 
Delaware
KRG Texas, LLC
 
Indiana
KRG Toringdon Market, LLC
 
Indiana
KRG Traders Management, LLC
 
Delaware
KRG Trussville I, LLC
 
Indiana
KRG Trussville II, LLC
 
Indiana
KRG Tucson Corner, LLC
 
Delaware
KRG Vero, LLC
 
Indiana
KRG Virginia Beach Landstown, LLC
 
Delaware
KRG Washington Management, LLC
 
Delaware
KRG Waterford Lakes, LLC
 
Indiana
KRG Waxahachie Crossing GP, LLC
 
Delaware
KRG Waxahachie Crossing LP, LLC
 
Delaware
KRG Waxahachie Crossing Limited Partnership
 
Illinois
KRG Whitehall Pike Management, LLC
 
Indiana
KRG White Plains City Center Member II, LLC
 
Delaware
KRG White Plains City Center Member, LLC
 
Delaware
KRG White Plains City Center, LLC
 
Delaware
KRG Woodruff Greenville, LLC
 
Indiana
KRG/Atlantic Delray Beach, LLC
 
Florida
KRG/CP Pan Am Plaza, LLC
 
Indiana
KRG/I-65 Partners Beacon Hill, LLC
 
Indiana
KRG/KP Northwest 20, LLC
 
Indiana
KRG/PRISA II Parkside, LLC
 
Delaware
KRG/PRP Oldsmar, LLC
 
Florida
KRG/WLM Marysville, LLC
 
Indiana
Meridian South Insurance, LLC
 
Tennessee
Meridian South Tax Advisors, LLC
 
Indiana
MS Insurance Protected Cell Series 2014-15
 
Tennessee
Noblesville Partners, LLC
 
Indiana
Pleasant Hill Commons Property Owners’ Association, Inc.
 
Florida
Preston Commons, LLP
 
Indiana
Riverchase Owners’ Association, Inc.
 
Florida
Splendido Real Estate, LLC
 
Delaware
Tradition Commercial Association, Inc.
 
Florida
Westfield One, LLC
 
Indiana
Whitehall Pike, LLC
 
Indiana
White Plains City Center Condo Association, Inc.
 
New York

 
 
 



EXHIBIT 23.1

 
Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-120142, 333-152943, and 333-159219) and the Registration Statements on Form S-3 (File Nos. 333-127585,  333-163945 and 333-178792) in the related Prospectuses of Kite Realty Group Trust and Subsidiaries of our reports dated February 27, 2015, with respect to the consolidated financial statements and schedule of Kite Realty Group Trust and Subsidiaries and the effectiveness of internal control over financial reporting of Kite Realty Group Trust and Subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2014.


 
/s/ Ernst & Young LLP

Indianapolis, Indiana

February 27, 2015

 
 
 

 
EXHIBIT 31.1
 
CERTIFICATION
 
 
I, John A. Kite, certify that:
 
1.
I have reviewed this annual report on Form 10-K of Kite Realty Group Trust;
     
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions):
     
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2015
   
 
By:
/s/ John A. Kite
   
John A. Kite
   
Chairman and Chief Executive Officer
 
EXHIBIT 31.2
 
 
CERTIFICATION
 
I, Daniel R. Sink, certify that:
 
1.
I have reviewed this annual report on Form 10-K of Kite Realty Group Trust;
     
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
     
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
     
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
     
 
a.
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
     
 
b.
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
     
 
c.
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
     
 
d.
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
     
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions):
     
 
a.
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
     
 
b.
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: February 27, 2015
   
     
 
By:
/s/ Daniel R. Sink
   
Daniel R. Sink
   
Chief Financial Officer

 
EXHIBIT 32.1
 
 
Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350,
 
 
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
 
 
The undersigned, John A. Kite, Chairman and Chief Executive Officer of Kite Realty Group Trust (the “Company”), and Daniel R. Sink, Chief Financial Officer of the Company, each hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that:
 
1.
The Annual Report on Form 10-K of the Company for the year ended December 31, 2014 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
   
2.
The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

     
Date: February 27, 2015
By:
/s/ John A. Kite
   
John A. Kite
   
Chairman and Chief Executive Officer

 
By:
/s/ Daniel R. Sink
   
Daniel R. Sink
   
Chief Financial Officer
 
A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the SEC or its staff upon request.