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

(Mark One)
   
☒ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
  For the fiscal year ended December 31, 2020
☐ 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: 001-33268 Kite Realty Group Trust
Commission File Number: 333-202666-01 Kite Realty Group, L.P.

Kite Realty Group Trust
Kite Realty Group, L.P.
(Exact name of registrant as specified in its charter)
Maryland Kite Realty Group Trust 11-3715772
Delaware Kite Realty Group, L.P. 20-1453863
(State or other jurisdiction of incorporation or organization) (IRS Employer Identification No.)
30 S. Meridian Street Suite 1100 Indianapolis Indiana 46204
(Address of principal executive offices) (Zip code)
Telephone 317 577-5600
(Registrant’s telephone number, including area code)
  
Securities registered pursuant to Section 12(b) of the Act: 
Title of each class Trading Symbol Name of each exchange on which registered
Common Stock, $0.01 par value per common share KRG 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.
Kite Realty Group Trust Yes x No  o Kite Realty Group, L.P. Yes x No  o
 
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
 
Kite Realty Group Trust Yes    o No x Kite Realty Group, L.P. 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.
 
Kite Realty Group Trust Yes x No  o Kite Realty Group, L.P. Yes x No  o
 
Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Kite Realty Group Trust Yes x No  o Kite Realty Group, L.P. Yes x No  o
 
Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Kite Realty Group Trust:
Large accelerated filer x Accelerated filer o Non-accelerated filer o Smaller reporting company ☐
Emerging growth company ☐
 
Kite Realty Group, L.P.:
Large accelerated filer o Accelerated filer o Non-accelerated filer x Smaller reporting company ☐
Emerging growth company ☐

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

Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal controls over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report ☒

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) o
Kite Realty Group Trust Yes    ☐ No  x Kite Realty Group, L.P. Yes    ☐ No  x
 
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant as of the last business day of the Registrant’s most recently completed second quarter was $1.0 billion based upon the closing price on the New York Stock Exchange on such date. 
 
The number of Common Shares outstanding as of February 16, 2021 was 84,292,270 ($.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 12, 2021, 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.


EXPLANATORY NOTE

This report combines the annual reports on Form 10-K for the year ended December 31, 2020 of Kite Realty Group Trust, Kite Realty Group, L.P. and its subsidiaries. Unless stated otherwise or the context otherwise requires, references to “Kite Realty Group Trust” or the “Parent Company” mean Kite Realty Group Trust, and references to the “Operating Partnership” mean Kite Realty Group, L.P. and its consolidated subsidiaries. The terms “Company,” “we,” “us,” and “our” refer to the Parent Company and the Operating Partnership collectively, and those entities owned or controlled by the Parent Company and/or the Operating Partnership.

The Operating Partnership is engaged in the ownership, operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States. The Parent Company is the sole general partner of the Operating Partnership and as of December 31, 2020 owned approximately 97.1% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.9% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) are owned by the limited partners.

We believe combining the annual reports on Form 10-K of the Parent Company and the Operating Partnership into this single report benefits investors by:
•enhancing investors’ understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business;
•eliminating duplicative disclosure and providing a more streamlined and readable presentation of information because a substantial portion of the Company’s disclosure applies to both the Parent Company and the Operating Partnership; and
•creating time and cost efficiencies through the preparation of one combined report instead of two separate reports.

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

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



KITE REALTY GROUP TRUST AND KITE REALTY GROUP, L.P. AND SUBSIDIARIES
Annual Report on Form 10-K
For the Fiscal Year Ended
December 31, 2020  
 
TABLE OF CONTENTS 
    Page
     
     
Item No.    
     
Part I    
     
1
4
1A.
11
1B.
26
2
27
3
39
4
39
     
Part II    
     
5
40
6
42
7
43
7A.
59
8
59
9
59
9A.
59
9B.
63
     
Part III    
     
10
64
11
64
12
64
13
64
14
64
     
Part IV    
     
15
65
16 72
     
73



Forward-Looking Statements

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

Currently, one of the most significant factors that could cause actual outcomes to differ significantly from our forward-looking statements is the potential adverse effect of the current pandemic of the novel coronavirus ("COVID-19"), including possible resurgences and mutations, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets. The effects of COVID-19 have caused and may continue to cause many of our tenants to close stores, reduce hours or significantly limit service, making it difficult for them to meet their rent obligations, and therefore has and will continue to impact us significantly for the foreseeable future. COVID-19 has impacted us significantly, and the extent to which it will continue to impact us and our tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, the speed and effectiveness of vaccine and treatment developments and distribution pipeline, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

Additional risks, uncertainties and other factors that might cause such differences, some of which could be material, include but are not limited to: 
•national and local economic, business, real estate and other market conditions, particularly in connection with low or negative growth in the U.S. economy as well as economic uncertainty;
•financing risks, including the availability of, and costs associated with, sources of liquidity;
•our ability to refinance, or extend the maturity dates of, our indebtedness;
•the level and volatility of interest rates;
•the financial stability of tenants, including their ability to pay rent or request rent concessions and the risk of tenant insolvency or bankruptcies;
•the competitive environment in which we operate, including potential oversupplies and reduction in demand for rental space;
•acquisition, disposition, development and joint venture risks;
•property ownership and management risks, including the relative illiquidity of real estate investments, periodic costs to repair, renovate and re-lease spaces, operating costs and expenses, vacancies or the inability to rent space on favorable terms or at all;
•our ability to maintain our status as a real estate investment trust for U.S. federal income tax purposes;
•potential environmental and other liabilities;
•impairment in the value of real estate property we own;
•the attractiveness of our properties to tenants, the actual and perceived impact of e-commerce on the value of shopping center assets and changing demographics and customer traffic patterns;
•risks related to the geographical concentration of our properties in Florida, Indiana, Texas, North Carolina, and Nevada;
•civil unrest, acts of terrorism or war, acts of God, climate change, epidemics, pandemics (including COVID-19), natural disasters and severe weather conditions such as hurricanes, tropical storms, tornadoes, earthquakes, droughts, floods and fires, including such events or conditions that may result in underinsured or uninsured losses or other increased costs and expenses;
•changes in laws and government regulations including governmental orders affecting the use of our properties or the ability of our tenants to operate, and the costs of complying with such changed laws and government regulations;
•possible short-term or long-term changes in consumer behavior due to COVID-19 and the fear of future pandemics;
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•insurance costs and coverage;
•risks associated with cybersecurity attacks and the loss of confidential information and other business disruptions;
•other factors affecting the real estate industry generally; and
•other risks identified in this Annual Report on Form 10-K and, in other reports we file from time to time 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.
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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 publicly-held real estate investment trust which, through its majority-owned subsidiary, Kite Realty Group, L.P., owns interests in various operating subsidiaries and joint ventures engaged in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States.  We derive revenues primarily from activities associated with the collection of contractual rents and reimbursement payments from tenants at our properties.  Our operating results therefore depend materially on, among other things, the ability of our tenants to make required lease payments, the health and resilience of the United States retail sector, interest rate volatility, job growth and real estate market and overall economic conditions.

As of December 31, 2020, we owned interests in 90 operating and redevelopment properties totaling approximately 17.3 million square feet. We also owned two development projects under construction as of this date.  Our retail operating portfolio was 91.2% leased to a diversified retail tenant base, with no single retail tenant accounting for more than 2.5% of our total annualized base rent. In the aggregate, our largest 25 tenants accounted for 33.3% of our annualized base rent.  See Item 2, “Properties” for a list of our top 25 tenants by annualized base rent.  

Impact of COVID-19

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

The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business and how it impacts the Company's tenants and business partners. Certain segments of retailers and the Company experienced disruption during 2020, and, going forward, the potential adverse effect of the COVID-19 pandemic, including possible resurgences and mutations, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market, global economy, and financial markets, and the extent of such effects, will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

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

•As of December 31, 2020, over 98% of our tenants have reopened. However, many of these retailers are operating at a lower capacity than normal due to COVID-19. Store closures or the inability to return to full capacity, particularly if for an extended period, increase the risk of business failures and lease defaults.
•As of February 11, 2021, we have collected approximately 95% of rent billings for the three months ended December 31, 2020 and 92% of rent billings for the period from April 1, 2020 through December 31, 2020.
•Many of our tenants have taken on additional debt as a result of COVID-19, including loans administered by the Small Business Administration. To the extent this debt is not forgiven, the increased debt load may hamper their ability to continue to operate and to pay rent, which could cause the Company to realize decreased cash flow and increased vacancies at its properties.

Starting in March 2020 and continuing through January 2021, the Company received rent relief requests from a significant proportion of its tenants. Some tenants have asserted various legal arguments that they allege relieve them of the obligation to pay rent during the pandemic; the Company and its legal advisers generally disagree with these legal arguments. The Company has evaluated and will continue to evaluate tenant requests for rent relief based on many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, the Company's assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors.

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As a result of this evaluation, the Company has agreed to defer rent for approximately 375 of its tenants subject to certain conditions. The Company had deferred the collection of $6.1 million of rental income that remained outstanding as of December 31, 2020. To the extent the Company agrees to defer rent or is otherwise unable to collect rent for certain periods, the Company will realize decreased cash flow, which could significantly decrease the cash available for the Company's operating and capital uses.

We have taken various steps to mitigate the impact of COVID-19 on our liquidity, including deferrals of certain planned capital expenditures for 2020. In March 2020, we borrowed $300 million on the unsecured revolving credit facility (the "Credit Facility") as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic. Subsequent to the initial borrowing, we have repaid the $300 million of borrowings.

As of December 31, 2020, we have approximately $43.6 million of cash on hand, $523.2 million of remaining availability under our Credit Facility (based on the unencumbered pool allocated thereto), and no debt maturities until 2022.

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

We expect the significance of the COVID-19 pandemic, including the extent of its effects on our business, financial performance and condition, operating results and cash flows and the economic slowdown, to be dictated by, among other things, the duration of the COVID-19 pandemic, including possible resurgences and mutations, the success of efforts to contain it, the success of efforts to find and distribute effective drugs or vaccines and the impact of actions taken in response. These uncertainties make it difficult to predict operating results for our business for 2021.

Significant 2020 Activities
 
Even in the face of the COVID-19 pandemic, the Company continued to perform at a high level including as follows:

Operating Activities
•The Company realized net loss attributable to common shareholders of $16.2 million;
•The Company generated Funds From Operations, as defined by NAREIT, of $108.7 million and Funds From Operations, as adjusted for severance charges, of $112.0 million;
•Same Property Net Operating Income ("Same Property NOI") decreased by 6.6% in 2020 compared to 2019 as a result of the impact of COVID-19;
•As of February 11, 2021, we have collected approximately 95% of rent billings for the three months ended December 31, 2020 and 92% of rent billings for the period from April 1, 2020 through December 31, 2020.
•We executed new and renewal leases on 215 individual spaces for approximately 1.5 million square feet of retail space, achieving a blended cash leasing spread of 7.0% and blended GAAP leasing spread of 14.5% for comparable leases; and
•Our operating portfolio annual base rent ("ABR") per square foot as of December 31, 2020 was $18.42, an increase of $0.59 (or 3.3%) from the end of the prior year.

Financing and Capital Activities. 
 
 In 2020, we were able to utilize our strong balance sheet, financial flexibility and liquidity to handle the adversity and deliver strong results in the midst of the disruption caused by the COVID-19 pandemic. The Company had the following key investment highlights:

•Acquired Eastgate Crossing in Chapel Hill, North Carolina for $65.5 million; and

5

•Commenced construction on two development projects, consisting of approximately $12.6 million of capital commitments, that are anticipated to produce an average cash yield between 14.0% and 15.0%.

Through the COVID-19 pandemic, we paid $0.4495 in dividends in 2020 and were one of the few open-air peers to continuously pay a dividend.    

We ended the year with approximately $566.9 million of combined cash and borrowing capacity on our Credit Facility.

We have no debt scheduled to mature through December 31, 2021, and a debt service coverage ratio of 2.9x as of December 31, 2020.  We have been assigned investment grade corporate credit ratings from two nationally recognized credit rating agencies. These ratings were unchanged during 2020.

Business Objectives and Strategies
  
Our primary business objectives are to increase the cash flow and value of our properties, achieve sustainable long-term growth and maximize shareholder value primarily through the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers.  We invest in properties with well-located real estate and strong demographics, and we use our leasing and management strategies to improve the long-term values and economic returns of our properties.  We believe that certain of our properties represent attractive opportunities for profitable redevelopment, 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 to a strong and 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;
•Financing and Capital Preservation Strategy: Maintaining a strong balance sheet with flexibility to fund our operating and investment activities.  Funding sources include the public equity and debt markets, an existing revolving Credit Facility with $25 million outstanding, new secured debt, internally generated funds, proceeds from selling land and properties that no longer fit our strategy, and potential strategic joint ventures; and
•Growth Strategy: Prudently using available cash flow, targeted asset recycling, equity, and debt capital to selectively acquire additional retail properties and redevelop or renovate our existing properties where we believe that investment returns would meet or exceed internal benchmarks.

Operating Strategy. Our primary operating strategy is to maximize our rental rates, our returns on invested capital, 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 maximize returns on invested capital, 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 that limits our exposure to the financial condition of any one tenant or category of retail tenants;
•maintaining and improving the physical appearance, condition, layout and design of our properties and other improvements located on our properties to enhance our ability to attract customers;
•implementing offensive and defensive strategies against e-commerce competition;
6

•actively managing properties 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-leasing space to new tenants; and
•taking advantage of under-utilized land or existing square footage, reconfiguring properties for more profitable use, and adding ancillary income sources to existing facilities.

We successfully executed our operating strategy in 2020 in a number of ways, as best evidenced in leading our peer group in rent collection rates, based upon publicly reported information by each peer as of February 19, 2021. Additionally, our leasing process continues to perform at a high level as evidence by the execution of 215 new and renewal leases for approximately 1.5 million square feet. We have placed significant emphasis on maintaining a strong and diverse retail tenant mix, which has resulted in no tenant accounting for more than 2.5% of our annualized base rent. See Item 2, “Properties” for a list of our top tenants by gross leasable area ("GLA") and annualized base rent.
 
Financing and Capital Preservation 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 reinvestment of cash flows generated by operations, the sale of common or preferred shares through public offerings or private placements, the reinvestment of net 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 the amount and type of additional indebtedness we may elect to incur.  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 to generate durable cash flow to cover expected debt service. 
 
Maintaining a strong balance sheet continues to be one of our top priorities.  We maintain an investment grade credit rating that we expect will continue to enable us to opportunistically access the public unsecured bond market and 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, which may include one or more of the following actions:  
•prudently managing our balance sheet, including maintaining sufficient availability under our Credit Facility so that we have additional capacity to fund our development and redevelopment projects and pay down maturing debt if refinancing that debt is not desired or practical;
•extending the scheduled maturity dates of and/or refinancing our near-term mortgage, construction and other indebtedness;
•expanding our unencumbered asset pool;
•raising additional capital through the issuance of common shares, preferred shares or other securities;
•managing our exposure to interest rate increases on our variable-rate debt through the selective use of fixed rate hedging transactions;
•issuing unsecured bonds in the public markets, and securing property-specific long-term non-recourse financing; and
•entering into joint venture arrangements in order to access less expensive capital and mitigate risk.

Growth Strategy. Our growth strategy includes the selective deployment of financial resources to projects that are expected to generate investment returns that meet or exceed our internal benchmarks. We implement our growth strategy in a number of ways, including:  
•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 of anchor spaces while increasing rental rates, and re-leasing spaces to existing tenants at increased rental rates;
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•disposing of selected assets that no longer meet our long-term investment criteria and recycling the net proceeds into properties that provide attractive returns and rent growth potential in targeted markets or using the proceeds to repay debt, thereby reducing our leverage; and
•selectively pursuing the acquisition of retail operating properties, portfolios and companies in markets with strong demographics.

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 weighted 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, the tax consequences of the transaction, and other related factors;
•opportunities for strengthening the tenant mix at our properties through the placement of anchor tenants such as grocers, value retailers, pet supply stores, hardware stores, or sporting goods retailers, as well as further enhancing a diverse tenant mix that includes restaurants, specialty shops, and other essential retailers that provide staple goods to the community and offer a high level of convenience;
•the configuration of the property, including ease of access, availability of parking, visibility, and the demographics of the surrounding area; and
•the level of success of existing properties in the same or nearby markets.

Competition 
 
The United States commercial real estate market continues to be highly competitive. We face competition from other REITs, including other retail 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 is dominant in any of the markets in which we own properties. 
 
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 and Other Regulations. Our properties must comply with Title III of the Americans with Disabilities Act (the "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 orders requiring us to spend substantial sums to cure violations, pay attorneys' fees, or pay other amounts. 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. In addition, our properties are subject to fire and safety regulations, building codes and other land use regulations.

8

Affordable Care Act. We may be subject to excise taxes under the employer mandate provisions of the Affordable Care Act ("ACA") if we (i) do not offer health care coverage to substantially all of our full-time employees and their dependents or (ii) do not offer health care coverage that meets the ACA's affordability and minimum value standards. The excise tax is based on the number of full-time employees. We do not anticipate being subject to a penalty under the ACA; however, even in the event that we are, any such penalty would be less than $0.3 million, as we had 113 full-time employees as of December 31, 2020. 
 
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 storage tanks 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, certain of our properties have contained asbestos-containing building materials ("ACBM"), and other properties 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.

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. 

COVID-19 Regulations. As discussed in this Annual Report on Form 10-K, during the COVID-19 pandemic, our properties and our tenants have been subject to public health regulations and control measures, including states of emergency, mandatory quarantines, "shelter in place" orders, border closures, restrictions on types of businesses that may continue to operate, "social distancing" guidelines and other travel and gathering restrictions and practices, that have significantly impacted our business, see page 11 of Item 1A. "Risk Factors" for further information.
 

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, geographic locations of our assets and industry practice. Certain risks such as loss from riots, war or acts of God, and, in some cases, flooding are not insurable or the cost to insure over these events is costs prohibitive; 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. 







9

Human Capital 
 
As of December 31, 2020, we had 113 full-time employees. The majority of these employees were based at our Indianapolis, Indiana headquarters. We believe our employees are the most important part of our business. We are committed to providing a work environment that attracts, develops and retains high-performing individuals and that treats employees with dignity and respect.


When attracting, developing and retaining talent, we seek individuals who hold varied experiences and viewpoints and embody our core values to create an inclusive and diverse culture and workplace that allows each employee to do their best work and drive our collective success. We focus on leadership development at every level of the organization. We align employees’ goals with our overall strategic direction to create a clear link between individual efforts and the long-term success of the company and then provide effective feedback on their performance towards goals to ensure their growth.

We believe a commitment to our employees’ learning and development through training, educational opportunities and mentorship is critical to our ability to continue to innovate. Through performance plans, talent recognition and individual development planning, along with reward packages, we advance our talent pool and create a sustainable and long-term enterprise.

We seek to foster a corporate culture where our many stakeholders, including our employees, engage in the topic of community development and collaborate to extend resources towards the advancement of this principle. In furtherance of this commitment, we partner with and support local charitable organizations that we believe are contributing to the growth and development of the community. In recent years, our employees have donated and coordinated substantial fundraising and have spent many hours volunteering to support a variety of charities with which we partner.

The health, safety and well-being of our employees are always top priorities, and we believe our actions in response to COVID-19 were appropriate and in accordance with state and local health and safety laws. Among other things, we adopted remote working and flexible scheduling arrangements and implemented additional health and safety measures for employees working in our offices.
 
Environmental, Social and Governance Matters

The Company strives to be a responsible corporate citizen, and we recognize the importance that environmental, social, and governance ("ESG") initiatives play in our ability to generate long-term, sustainable returns. To assist us in setting and meeting ESG goals, we have formed a cross-functional task force ("ESG Task Force") to review ESG issues that are important to investors and regularly report to the Board of Trustees on ESG efforts. The ESG Task Force is led by our Chief Executive Officer and includes members from our asset management, employee experience, investor relations, marketing, internal audit, and legal groups.

In 2020, the ESG Task Force issued our ESG Policy and Corporate Citizenship Report, which we have published on our website. The Company has undertaken multiple projects to make its operations more efficient and to reduce energy and water consumption, including installing LED lighting at various parking lots, solar panels at three properties, and electric-vehicle charging stations at six properties, and implementing smart meters and other initiatives aimed at water conservation, recycling and waste diversion at our properties. Recent business initiatives encourage tenants to adopt green leases, also known as “high-performance” or “energy-aligned” leases, to equitably align the costs and benefits of energy and water efficiency investments for building owners and tenants, based on principles and best practices from the Green Lease Leaders Reference Guide by the Institute for Market Transformation and the U.S. Department of Energy. The Company also has partnered with One Tree Planted, a non-profit organization committed to reforestation, to plant new trees in 2020. We also are evaluating potential actions that might reduce our carbon footprint or otherwise mitigate our environmental impact.

As described above, we are highly committed to our employees, and our policies are designed to promote fairness, equal opportunities, diversity, well-being and professional development within the Company. Our corporate governance structure, led by our Board of Trustees, closely aligns our interests with those of our shareholders, as further described in our annual Proxy Statement.




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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 have one operating segment, which also serves as our reportable segment for disclosure purposes in accordance with accounting principles generally accepted in the United States ("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.

The Securities and Exchange Commission maintains a website (http://www.sec.gov) that contains reports, proxy statements, information statements, and other information regarding issuers that file electronically with the Securities and Exchange Commission.




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, including our ability to make distributions to our shareholders, 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 

Our business, financial condition, performance, and value are subject to risks and conditions associated with real estate assets and the real estate industry.

Our primary business is the ownership and operation of neighborhood and community shopping centers and other real estate assets. Our business, financial condition, results of operations, cash flow, per share trading price of our common shares, ability to satisfy debt service obligations, and ability to make distributions to shareholders are subject to, and could be materially and adversely affected by, risks associated with owning and operating such real estate assets including events and conditions that are beyond our control, such as 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. See the risk factors described in “Forward-Looking Statements” included elsewhere in this Annual Report on Form 10-K.
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The COVID-19 pandemic is currently having a significant adverse impact on our business, financial performance and condition, operating results and cash flows, and future outbreaks of highly infectious or contagious disease or other public health crises could have similar adverse effects on our business. Further, the COVID-19 pandemic has caused severe disruptions in the U.S. and global economy and financial markets and could potentially create widespread business continuity issues of a magnitude and duration not yet known.

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

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

The COVID-19 pandemic has disrupted our business and has had a significant adverse effect, and could continue to significantly adversely impact and disrupt, our business, financial performance and condition, operating results and cash flows. The economic slowdown or recession could continue to significantly adversely affect our business, financial performance and condition even as some government restrictions related to COVID-19 are lifted or phased out and stores reopen. Additional factors that have already and/or may in the future negatively impact our ability to operate successfully during or following the COVID-19 pandemic or a similar event, or that could otherwise significantly adversely impact and disrupt our business, financial performance and condition, operating results and cash flows, include, among others:
•the inability of our tenants to meet their lease obligations to us due to (i) continuing or increased closures of stores at our properties resulting from government or tenant actions related to the pandemic; or (ii) local, regional or national economic conditions, including high unemployment and reduced consumer discretionary spending, caused by the pandemic (for example, as of February 11, 2021, approximately 5% of our billed base rent and recoveries for the fourth quarter were uncollected);
•liquidity issues resulting from (i) reduced cash flow from operations due to the pandemic, (ii) the impact that lower operating results could have on the financial covenants in our debt agreements, and (iii) difficulty in our accessing debt and equity capital on attractive terms, or at all, and severe disruptions or instability in the global financial markets or deteriorations in credit and financing conditions;
•our increased indebtedness and decreased operating revenues, which could increase our risk of default on our loans;
•an acceleration of changes in consumer behavior in favor of e-commerce over certain of our tenants’ stores due to responses to the pandemic and concerns about contracting COVID-19 or other highly infectious or contagious diseases;
•business continuity disruptions and a deterioration in the ability of us or our tenants to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed for our or our tenants’ efficient operations;
•issues related to personnel management and remote working, including increased cybersecurity risk and other technology and communication issues and increased costs and other disruptions in the event that our employees become unable to work as a result of health issues related to COVID-19;
•the scaling back or delay of a significant amount of planned capital expenditures, including planned redevelopment projects, which could adversely affect the value of our properties;
•reduction or elimination of quarterly dividends; and
•continued volatility of our share price.

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

Ongoing challenging conditions in the United States and global economies and the challenges facing our retail tenants and non-owned anchor tenants, including bankruptcies, financial instability and consolidations, may have a material adverse effect on our business, financial performance and condition, operating results and cash flows. 
 
We derive the majority of our revenue from retail tenants who lease space from us at our properties, and our ability to generate cash from operations is dependent on the rents that we are able to charge and collect. Over the past several years, sustained weakness in certain sectors of the U.S. economy has resulted in the bankruptcy or weakened financial condition of a number of retailers, increased store closures, and reduced demand and rental rates for certain retail space. For example, Stein Mart, Ascena, and Tailored Brands have filed for bankruptcy during 2020, and several other retailers, including Bed Bath & Beyond, Office Depot, and Party City, recently announced multiple store closings. Additionally, in the event our tenants are involved in mergers or acquisitions or undertake other restructurings, such tenants may choose to consolidate, downsize or relocate their operations. These events, or other similar events with other retailers, and other economic conditions are beyond our control and could affect the overall economy as well as specific properties in our portfolio, including the following (any of which could have a material adverse effect on our business, financial performance and condition, operating results and cash flows):

•Collections. Tenants may have difficulty paying their rent obligations when due as they struggle to sell goods and services to consumers, or they may request rent deferrals, reductions or abatements, which could adversely affect our results of operations and cash flows.

•Leasing. Tenants may delay or cancel lease commencements, decline to extend or renew leases upon expiration, close stores or declare bankruptcy. Any of these actions could result in the termination of the tenant’s leases with us and the related loss of rental income. Also, 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 contained in some leases.

•Re-leasing. We may be unable to re-lease vacated space at attractive rents or at all. In some cases, it may take extended periods of time to re-lease a space, particularly one previously occupied by a major tenant or non-owned anchor. 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 and cash flows.

Tenant bankruptcies could present difficulties for our business to collect rent or make claims against a tenant in bankruptcy.

A bankruptcy filing by one of our tenants or a lease guarantor would legally prohibit us from collecting pre-bankruptcy debts, or unpaid rent, from that tenant or the lease guarantor, unless we receive an order from the bankruptcy court permitting us to do so. Such bankruptcies could delay, reduce, or ultimately preclude collection of amounts owed to us. A tenant in bankruptcy may attempt to renegotiate the lease or request significant rent concessions. 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. There are restrictions under bankruptcy laws that limit the amount of the claim we can make for future rent under a lease if the lease is rejected. As a result, it is likely that we would 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 and could have a material adverse effect on our results of operations.

The expansion of e-commerce may impact our tenants and our business. 
 
The prominence of e-commerce continues to increase and its growth is likely to continue or accelerate in the future, which could result in an adverse impact on some of our tenants and affect decisions made by current and prospective tenants in
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leasing space or operating their businesses, including reduction of the size or number of their retail locations in the future. We cannot predict with certainty how the growth in e-commerce will impact the demand for space at our properties or the revenue generated at our properties in the future. Although we continue to aggressively respond to these trends, including by entering into or renewing leases with tenants whose businesses are either more resistant to or are synergistic with, e-commerce (such as services, restaurant, grocery, specialty, essential retailers and value retailers that have benefitted from omni-channel consumer trends), the risks associated with e-commerce could have a material adverse effect on the business outlook and financial results of our present and future tenants, which in turn could have a material adverse effect on our cash flow and results of operations.
 
Our business is significantly influenced by demand for retail space generally, a decrease in which 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 elsewhere in this Annual Report on Form 10-K or otherwise, may have a greater adverse effect on our business, financial condition, results of operations, cash flow, common share trading price, and ability to satisfy our debt service obligations and to pay distributions to our shareholders than if we owned a more diversified real estate property portfolio.

We face significant competition, which may impact our rental rates, leasing terms and capital improvements. 
 
We compete for tenants with numerous developers, owners and operators of retail shopping centers, regional malls, and outlet malls, including institutional investors, other REITs, and other owner-operators. As of December 31, 2020, leases representing 8.0% of our total annualized base rent were scheduled to expire in 2021.  Our competitors may have greater capital resources or be willing to offer lower rental rates or more favorable terms for tenants, such as substantial rent reductions or abatements, tenant improvements, other improvements, early termination rights, which may pressure us to reduce our rental rates, undertake unexpected capital improvements or offer other terms less favorable to us, which could adversely affect 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. Additionally, if retailers or consumers perceive that shopping at other venues, online or by phone is more convenient, cost-effective or otherwise more attractive, our revenues and results of operations also may suffer. 

Because of our geographic concentrations, a prolonged economic downturn in certain states and regions could materially and adversely affect our financial condition and results of operations. 
 
The specific markets in which we operate may face challenging economic conditions that could persist into the future.  In particular, as of December 31, 2020, rents from our owned square footage in the states of Florida, Indiana, Texas, North Carolina, and Nevada comprised 26%, 15%, 14%, 11%, and 11% of our base rent, respectively.  This level of concentration could expose us to greater economic risks than if we owned properties in more geographic regions. Adverse economic or real estate trends in Florida, Indiana, Texas, North Carolina, and Nevada, 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. 
 
We depend on external financings to fulfill our capital needs, and 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. 
 
Partly because of the distribution requirements of being a REIT, we may not be able to fund all future capital needs, including capital for property development, redevelopment and acquisitions, with income from operations, and we rely on external financings to fulfill our capital needs. Disruptions in the financial markets generally, or relating to the real estate industry specifically, may adversely affect our ability to obtain debt financing on favorable terms or at all, which could impact our ability to acquire or develop properties when strategic opportunities exist, satisfy our principal and interest obligations or make distributions to shareholders.  These disruptions could impact the overall amount of equity and debt financing available, lower loan to value ratios, cause a tightening of lender underwriting standards and terms and cause higher interest rate spreads. As a result, we may be unable to refinance or extend our existing indebtedness on favorable terms or at all. We do not have any debt scheduled to mature through December 31, 2021. If we are not successful in refinancing our outstanding debt when it becomes due, we may have to dispose of properties on disadvantageous terms, which could adversely affect our ability to service other debt and to meet our other obligations. While we currently have sufficient capacity under our Credit Facility and operating cash flows to retire outstanding debt maturing through 2025 in the event we are not able to refinance such debt when it becomes due, our Credit Facility has a maturity date in April 2022 (which may be extended for two additional periods of six
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months subject to certain conditions), and there can be no assurance that the Credit Facility will remain outstanding or be renewed through 2025 or that our operating cash flows will continue to provide sufficient liquidity to retire any or all of our outstanding debt during this period or beyond.  If economic conditions deteriorate in any of our markets, we may have to seek less attractive, alternative sources of financing and adjust our business plan accordingly.
 
Some of our real estate assets have been subject to impairment charges and others may be subject to impairment charges in the future, 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 through future operations. In 2019, we recorded impairment charges totaling $37.7 million related to a reduction in the expected holding period of certain operating properties, which impairment charges negatively affected our net income for the applicable periods. There can be no assurances that we will not take additional charges in the future related to the impairment of our assets, which could result in an immediate negative adjustment to net income and have a material adverse effect on our results of operations in the period in which the charge is taken. Management reviews operational and development projects, land parcels and intangible assets on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. We evaluate whether there are any indicators, including poor operating performance or deteriorating general market conditions, that the carrying value of our real estate properties (including any related amortizable intangible assets or liabilities) may not be recoverable. As part of this 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. This review for possible impairment requires certain assumptions, estimates, and significant judgment. Our estimated cash flows are based on several key assumptions, including projected net operating income, anticipated hold period, expected capital expenditures, and the capitalization rate used to estimate the property's residual value. These key assumptions are subjective in nature and could differ materially from actual results if the property was disposed. 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 estimated fair value. If the above-described negative indicators are not identified during our period property evaluations, management will not assess the recoverability of a property's carrying value. 
 
The estimation of the fair value of real estate assets is highly subjective, involving a significant degree of management judgment regarding various inputs, and is typically 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, which involve a significant degree of management judgment regarding various inputs.
  
We had $1.17 billion of consolidated indebtedness outstanding as of December 31, 2020, 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 charges, along with any applicable prepayment premium, may materially adversely affect our operating performance. We had $1.17 billion of consolidated outstanding indebtedness as of December 31, 2020.  At December 31, 2020, $330.1 million of our debt bore interest at variable rates ($80.1 million when reduced by $250.0 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, 2020 increased by 1%, the increase in interest expense on our unhedged variable rate debt would decrease future cash flows by approximately $0.8 million annually. 
 
We may incur additional debt in connection with various development and redevelopment projects and may incur additional debt upon the future acquisition of operating 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 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 U.S. 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:
 
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•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 Credit Facility and various other loan agreements contain acceleration features and other covenants that restrict our operating and acquisition activities. 
 
Our 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, covenant or condition contained in the agreements, failure to maintain certain financial and operating ratios and other criteria, misrepresentations, acceleration of other material indebtedness 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 the extent such debt is secured, 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, and prevent us from obtaining additional funds needed to address cash shortfalls or pursue growth opportunities.

The agreements relating to our Credit Facility, unsecured term loan and seven-year unsecured term loan contain provisions providing that any “Event of Default” under one of these facilities or loans will constitute an “Event of Default” under the other facility or loan. In addition, these agreements relating to our Credit Facility, unsecured term loan and seven-year unsecured term loan, as well as the agreement relating to our senior unsecured notes, include a provision providing that any payment default under an agreement relating to any material indebtedness will constitute an “Event of Default” thereunder. These provisions could allow the lending institutions to accelerate the amount due under the loans.  Our Credit Facility also contains certain coverage ratios and 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 restrictions or any acceleration or payment 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 agreements relating to our Credit Facility, seven-year unsecured term loan, and senior unsecured notes as of December 31, 2020, although there can be no assurance that we will continue to remain in compliance in the future.
 
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, which if we fail to make required mortgage payments, could be subject to foreclosure by the lender or the holder of the mortgage, 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 of 1986, as amended (the "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, and due to cross-collateralization or cross-default provisions, 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 agreement, including potential performance failures by counterparties and termination costs.
 
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 effect on our results of operations or financial condition. Further, should we choose to terminate
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a hedging agreement, there could be significant costs and cash requirements involved to fulfill our initial obligation under such agreement. 
 
We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined or the use of alternative reference rates.

As of December 31, 2020, we had approximately $330.1 million of debt outstanding that was indexed to the London Interbank Offered Rate (“LIBOR”). In July 2017, the United Kingdom regulator that regulates LIBOR announced its intention to phase out LIBOR rates by the end of 2021. As a result, the Federal Reserve Board and the Federal Reserve Bank of New York organized the Alternative Reference Rates Committee, which identified the Secured Overnight Financing Rate (“SOFR”) as its preferred alternative to LIBOR in derivatives and other financial contracts. At this time, no consensus exists as to what rate or rates may become accepted alternatives to LIBOR, or the exact time when LIBOR rates will cease to be published or supported. If a published U.S. dollar LIBOR rate is unavailable after 2021, the interest rates on our debt which is indexed to LIBOR will be determined using various alternative methods, any of which may result in interest obligations which are more than or do not otherwise correlate over time with the payments that would have been made on such debt if U.S. dollar LIBOR was available in its current form. Further, the same costs and risks that may lead to the unavailability of U.S. dollar LIBOR may make one or more of the alternative methods impossible or impracticable to determine. Any of these proposals or consequences could have a material adverse effect on our financing costs, and as a result, our financial condition, operating results and cash flows.
 
Our current and any future joint ventures, and the value and performance of such investments, could be adversely affected by the structure and terms thereof and the activities of our joint venture partners.
 
As of December 31, 2020, we owned interests in two of our operating properties through consolidated joint ventures and interests in four properties through unconsolidated joint ventures, and in the future, we may seek to co-invest with third parties through other joint ventures.  Our joint ventures and the value and performance of such investments may involve risks not present with respect to our wholly owned properties, including shared decision-making authority with our joint venture partners, restrictions on the ability to sell our interests in the joint ventures without the other partners' consent, potential conflicts of interest or other disputes between us and our partners (including potential litigation or arbitration), potential losses or increased costs or expenses arising from actions taken in respect of the joint ventures, and potential impacts on our ability to qualify as a REIT.
  
Our future developments, redevelopments and acquisitions may not yield the returns we expect or may result in dilution in shareholder value. 
 
As of December 31, 2020, we have two development projects under construction and two redevelopment opportunities currently in the planning stage, including de-leasing space and evaluating development plans and costs with potential tenants and partners. Some of these plans include non-retail uses, such as multifamily housing. New development and redevelopment projects and property acquisitions are subject to a number of risks, including abandonment of a project after expending resources on due diligence, feasibility or other upfront costs, construction delays or cost overruns, unknown risks, integration issues, tenant termination or withdrawal rights, and failure to obtain governmental permits or other third-party approvals. In deciding whether to acquire, develop, or redevelop a particular property, we make certain assumptions regarding the expected future performance of that property, and our financial performance may be materially and adversely affected, or in the case of an unsuccessful redevelopment project, our entire investment could be at risk for loss, or an impairment charge could occur. In addition, the issuance of equity securities as consideration for any significant acquisitions could be dilutive to our shareholders.
 
To the extent that we pursue acquisitions in the future, we may not be successful in acquiring desirable operating properties or identifying development and redevelopment projects that meet our investment criteria, both of which may impede our growth. 
 
From time to time, consistent with our business strategy, we evaluate the market and may acquire properties when we believe strategic opportunities exist. When we pursue acquisitions, we may face competition from other real estate investors with substantial capital, including other REITs and institutional investment funds, which could limit our ability to acquire properties, increase the purchase price we are required to pay, reducing the return to our shareholders, and we may agree to material restrictions or limitations in the acquisition agreements. 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. These factors and any others could impede our growth and adversely affect our financial condition and results of operations.
 
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We may not be able to sell properties when appropriate or on terms favorable to us and could, under certain circumstances, be required to pay a 100% "prohibited transaction" penalty tax 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.  Before a property can be sold, we may need to make expenditures to correct defects or to make improvements. We may not have funds available to correct such defects or to make such improvements, and if we cannot do so, we might not be able to sell the property or might be required to sell the property on unfavorable terms. We may not be able to dispose of any of the properties on terms favorable to us or at all, and each individual sale will depend on, among other things, economic and market conditions, individual asset characteristics and the availability of potential buyers and favorable financing terms at the time. Further, we will incur marketing expenses and other transaction costs in connection with dispositions, and the process of marketing and selling a large pool of properties may distract the attention of our personnel from the operation of our business.
 
Also, the tax laws applicable to REITs impose a 100% penalty tax on any net income from “prohibited transactions.” 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. 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. 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 ("TRS). 
 
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, and insurance companies may no longer offer coverage against certain types of losses, such as environmental liabilities or other catastrophic events, or, if offered, the expense of obtaining such coverage may not be justified. 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, and in the future, we may be unable to renew or duplicate our current insurance coverage at adequate levels or at reasonable prices.  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, and the loss could seriously disrupt our operations, delay revenue and result in significant expenses. 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. 
 
Our expenses may remain constant or increase, which could reduce our cash flow and funds available for future distributions, particularly if such expenses are not offset by an increase in corresponding revenues. 
 
Our existing properties and any properties we develop or acquire in the future are and will continue to 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. 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 occupancy rates. 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. Therefore, constant or 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 business faces potential risks associated with natural disasters, severe weather conditions and climate change and related legislation and regulations, which could have an adverse effect on our cash flow and operating results.
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Global climate change continues to attract considerable public and scientific attention with widespread concern about the impact of human activity on the environment, including effects on the frequency and scale of natural disasters, and federal and state legislation and regulations in these areas continue to pose risks. Changing weather patterns and climatic conditions may affect the predictability and frequency of natural disasters in some parts of the world and create additional uncertainty as to future trends and exposures, including certain areas in which our portfolio is concentrated such as Texas, Indiana, Florida, North Carolina, and Nevada. Our properties are located in many areas that are subject to or have been affected by natural disasters and severe weather conditions such as hurricanes, tropical storms, tornadoes, earthquakes, droughts, floods and fires. Over time, the occurrence of natural disasters, severe weather conditions and changing climatic conditions can delay new development and redevelopment projects, increase repair costs and future insurance costs and negatively impact the demand for lease space in the affected areas, or in extreme cases, affect our ability to operate the properties at all.

    Changes in federal and state legislation and regulations on climate control could result in increased costs and expenses, such as utility expenses and/or capital expenditures to improve the energy efficiency of our existing properties, or potentially result in fines for non-compliance. These risks could have an adverse effect on our cash flow and operating results.

We could incur significant costs related to environmental matters, and our efforts to identify environmental liabilities may not be successful. 
 
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. 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, and some of our properties have tenants that may use hazardous or toxic substances in the routine course of their businesses. Indemnities in our leases may not fully protect us in the event that a tenant becomes insolvent. 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, liens on contaminated sites, and restrictions on operations.  We may also be liable to third parties for damage and injuries resulting from environmental contamination emanating from the real estate.  Finally, certain of our properties have contained asbestos-containing building materials ("ACBM") and other properties 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. 
 
We test our properties for compliance with applicable environmental laws on a limited basis, and we cannot give assurance that existing environmental studies with respect to our properties reveal all potential environmental liabilities or that current 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 and results of operations. 
 
Our properties must comply with Title III of the ADA to the extent that such properties are public accommodations as defined by the ADA. Noncompliance with the ADA could result in orders requiring us to spend substantial sums to cure violations, pay attorneys' fees, or pay other amounts. 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, and while our tenants typically under tenant leases are obligated to cover costs associated with compliance, if required changes involve greater expenditures or faster timelines than anticipated, the ability of these tenants to cover costs could be adversely affected. 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, these requirements, which could affect our cash flows and results of operations.

Inflation may adversely affect our financial condition and results of operations. 
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Most of our leases contain provisions requiring the tenant to pay a share of operating expenses, including common area maintenance or other operating expenses based on a fixed amount or fixed percentage, not subject to adjustment for inflation. 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. 
 
Rising interest rates could increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distributions to our shareholders, as well as decrease our share price, if investors seek higher yields through other investments.

An environment of rising interest rates could lead investors to seek higher yields through other investments, which could adversely affect the market price of our common shares. One of the factors that may influence the price of our common shares in public markets is the rate of annual cash distributions we pay as compared with the yields on alternative investments. Several other factors, such as governmental regulatory action and tax laws, could have a significant impact on the future market price of our common shares. In addition, increases in market interest rates could result in increased borrowing costs for us, which may adversely affect our cash flow and the amounts available for distributions to our shareholders.

We and our tenants face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions.

We and our tenants rely extensively on computer systems to process transactions and manage our respective businesses, and although various measures are utilized to prevent, detect and mitigate threats, we have been targeted by e-mail phishing attempts and scams in the past, 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 by very sophisticated hacking organizations. A cybersecurity attack could compromise the confidential information of our employees, tenants, and vendors. Additionally, we rely on a number of service providers and vendors, and cybersecurity risks at these service providers and vendors create additional risks for our information and business. A successful attack could lead to identity theft, fraud or other disruptions to our business operations, any of which may negatively affect our results of operations.

We conduct periodic assessments and use the results of such to create and implement a strategy designed to prevent, detect and respond to cybersecurity threats. However, there is no guarantee such efforts will be successful in preventing a cyber-attack.  
 
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 of control transaction, which could prevent our shareholders from being paid a premium for their common shares over the then-prevailing market prices. 
 
(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
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certain entities controlled by one or more of the Kites), as a group, to own more than 7% of our outstanding common shares, subject to applicable tax attribution rules. 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 include 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 ownership limits subject to certain conditions. 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 discourage a tender offer or other change of control transaction or compel a shareholder who has acquired our shares in excess of these ownership limitations to dispose of 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 of Trustees. Any preferred shares that we issue likely would 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, such as advance notice requirements for shareholder proposals, the ability of our Board of Trustees' to reclassify shares or issue additional shares, and the absence of cumulative voting rights that may have the effect of delaying, deferring or preventing a change in control of our company or the removal of existing management. 

Certain provisions of Maryland law could inhibit changes in control. 
 
Maryland law includes “business combination moratorium/fair price” provisions that, subject to limitations, prohibit certain business combinations with 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 business combinations, and “control share” provisions that provide that “control shares” (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 certain acquisitions 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. Although we have opted out of these provisions of Maryland law, our Board of Trustees may opt to make these provisions applicable to us at any time, which 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. 
 
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 sale by existing shareholders, or the perception that such issuances or sales might occur, could adversely affect the per share trading price of our common shares, dilute our existing shareholders' interests in our company or impact our ability to sell equity or equity-related securities in the future at a time and price that we deem appropriate. As of December 31, 2020, we had outstanding 84,187,999 common shares, substantially all of which are freely tradable.  In addition, 2,523,861 units of our Operating Partnership were
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owned by our executive officers and other individuals as of December 31, 2020, 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 refinancing transactions 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, whose experience in real estate acquisition, development, finance and management is a critical element of our future success. If one or more of our key executive officers were to die, become disabled or otherwise leave our employ, we may not be able to replace this person with an executive of equal skill, ability, and industry expertise within a reasonable timeframe, which could negatively affect our operations and financial condition.
 
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 and in a manner that he or she reasonably believes to be in our best interests and 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 common 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 (the “NYSE”) on which we list our common shares) have experienced and from time to time do experience significant price and volume fluctuations. The market price of our common shares could be similarly volatile, and investors in our shares may experience a decrease in the value of their shares, including decreases that may not be related to our operating performance or prospects, including the risk factors described in "Forward-Looking Statements" included elsewhere in this Annual Report on From 10-K.
 
Changes in accounting standards may adversely impact our financial results.

    The Financial Accounting Standards Board (the “FASB”), in conjunction with the SEC, has issued and may issue key pronouncements that impact how we account for our material transactions, including, but not limited to, lease accounting, business combinations and the recognition of other revenues. We are unable to predict which, if any, proposals may be issued in the future or what level of impact any such proposal could have on the presentation of our consolidated financial statements, our results of operations and the financial ratio required by our debt covenants.

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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, and we may use borrowed funds to make cash distributions and/or may choose to make distributions in part payable in our common shares. 
 
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 U.S. federal income tax, we are required to distribute annually 100% of our net taxable income, including capital gains. 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 U.S. federal income tax purposes to the extent of the holder’s adjusted tax basis in his or her 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. Finally, although we do not currently intend to do so, in order to maintain our REIT qualification, we may make distributions that are in part payable in our common shares. Taxable shareholders receiving such distributions will be required to include the full amount of such distributions as ordinary dividend income to the extent of our current or accumulated earnings and profits and may be required to sell shares received in such distribution or may be required to sell other shares or assets owned by them, at a time that may be disadvantageous, in order to satisfy any tax imposed on such distribution. If a significant number of our shareholders determine to sell common shares in order to pay taxes owed on dividend income, such sale may put downward pressure on the market price of our common shares.

Future offerings of debt securities, which would be senior to our equity securities, may adversely affect the market prices of our common shares. 
 
In the future, we may attempt to increase our capital resources by making offerings of debt securities, including unsecured notes, medium term notes, and senior or subordinated notes, as well as debt securities that are convertible into equity. Holders of our 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 being 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 shares and/or the distributions that we pay with respect to our common shares. Because we may generally issue 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 equity securities. 

RISKS RELATED TO TAX MATTERS
 
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 U.S. 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 U.S. 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 ruling, that make it more difficult, or impossible, for us to remain qualified as a REIT. 
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If we fail to qualify as a REIT for U.S. federal income tax purposes and are unable to avail ourselves of certain savings provisions set forth in the Code:

•We would be taxed as a non-REIT "C" corporation, which under current laws, among other things, means not being able 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 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;

•We would have to pay significant income taxes, which would reduce our net earnings available for investment or distribution to our shareholders. Moreover, such failure would cause an event of default under our Credit Facility and unsecured term loans 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; and

•We would be required to pay penalty taxes of $50,000 or more for each such failure.  
 
We will pay some taxes even if we qualify as a REIT. 
 
Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay certain U.S. 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% penalty tax.
 
In addition, any net taxable income earned directly by our TRS, or through entities that are disregarded for U.S. federal income tax purposes as entities separate from our TRS, will be subject to U.S. federal and possibly state corporate income tax. We have elected to treat Kite Realty Holdings, LLC as a TRS, 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 TRS will be subject to an appropriate level of U.S. federal income taxation. For example, a TRS 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 TRS 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 U.S. federal income tax on that income because not all states and localities treat REITs the same way they are treated for U.S. federal income tax purposes. To the extent that we and our affiliates are required to pay U.S. federal, state and local taxes, we will have less cash available for distributions to our shareholders. 
 
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. Additionally, the sale of properties resulting in significant tax gains could require higher distributions to our shareholders or payment of additional income taxes in order to maintain our REIT status.

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
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may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a TRS. This could increase the cost of our hedging activities because our TRS 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.
 
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 actions we would otherwise prefer not 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 effective tax rates as low as dividends paid by non-REIT "C" corporations. 
 
The maximum rate applicable to “qualified dividend income” paid by non-REIT “C” corporations to certain non-corporate U.S. shareholders has been reduced by legislation to 23.8% (taking into account the 3.8% Medicare tax applicable to net investment income).  Dividends payable by REITs, however, generally are not eligible for the reduced rates. Effective for taxable years beginning after December 31, 2017 and before January 1, 2026, non-corporate shareholders may deduct 20% of their dividends from REITs (excluding qualified dividend income and capital gains dividends). For non-corporate shareholders in the top marginal tax bracket of 37%, the deduction for REIT dividends yields an effective income tax rate of 29.6% on REIT dividends, which is higher than the 20% tax rate on qualified dividend income paid by non-REIT “C” corporations. This does not adversely affect the taxation of REITs, however, it could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT “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.

There is a risk that the tax laws applicable to REITs may change. 
 
The IRS, the United States Treasury Department and Congress frequently review U.S. federal income tax legislation, regulations and other guidance. The Company cannot predict whether, when or to what extent new U.S. federal tax laws, regulations, interpretations or rulings will be adopted. Any legislative action may prospectively or retroactively modify the Company's tax treatment and, therefore, may adversely affect our taxation or taxation of our shareholders. We urge you to consult with your tax advisor with respect to the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our stock. Although REITs generally receive certain tax advantages compared to entities taxed as non-REIT “C” corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a non-REIT “C” corporation.



25

ITEM 1B. UNRESOLVED STAFF COMMENTS 
 
None




ITEM 2. PROPERTIES
  
Retail Operating Properties 
 
As of December 31, 2020, we owned interests in a portfolio of 83 retail operating properties totaling approximately 16.3 million square feet of total GLA (including approximately 4.6 million square feet of non-owned anchor space).  The following table sets forth more specific information with respect to our retail operating properties as of December 31, 2020:



Property1
Location (MSA) Year
Built/
Renovated
Owned GLA2
Leased % ABR
per SqFt
Grocery Anchors4
Other Retailers4
Total Anchors Shops Total Anchors Shops
Arizona
The Corner Tucson 2008 79,902  55,883  24,019  100.0 % 100.0 % 100.0 % $ 30.87  Total Wine & More Nordstrom Rack, Panera Bread, (Home Depot)
Connecticut
Crossing at Killingly Commons Willimantic, CT 2010 206,560  149,202  57,358  79.0 % 85.7 % 61.7 % 14.77  Stop & Shop Supermarket, (Target) TJ Maxx, Michaels, Petco, Staples, Lowe's Home Improvement Center
Florida
12th Street Plaza Vero Beach 1978/2003 135,016  121,376  13,640  75.7 % 73.0 % 100.0 % 11.32  Publix Tuesday Morning
Bayport Commons Tampa 2008 98,668  73,045  25,623  100.0 % 100.0 % 100.0 % 17.85  (Target) Burlington, PetSmart, Michaels
Centre Point Commons Sarasota 2007 119,366  93,574  25,792  97.4 % 100.0 % 88.2 % 17.75  Best Buy, Dick's Sporting Goods, Office Depot, Panera Bread, (Lowe's Home Improvement Center)
Cobblestone Plaza Miami 2011 133,251  68,219  65,032  96.7 % 100.0 % 93.2 % 28.72  Whole Foods Party City, Planet Fitness
Colonial Square Fort Myers 2010 186,517  150,505  36,012  88.1 % 100.0 % 38.4 % 11.89  Kohl's, Hobby Lobby, PetSmart
Delray Marketplace Miami 2013 260,347  118,136  142,211  94.9 % 100.0 % 90.6 % 26.39  Publix Paragon Theatres, Burt & Max's, Ann Taylor Loft, Chico's, White House Black Market
Estero Town Commons Fort Meyers 2006 25,696  —  25,696  94.7 % 0.0 % 94.7 % 15.53  Lowe's Home Improvement Center, Dollar Tree
Hunter's Creek Promenade Orlando 1994 119,738  55,999  63,739  99.1 % 100.0 % 98.3 % 15.94  Publix
Indian River Square Vero Beach 1997/2004 142,622  109,000  33,622  95.9 % 100.0 % 82.7 % 11.2  (Target) Beall's, Office Depot, Dollar Tree, Panera
International Speedway Square Daytona Beach 1999/2013 233,424  203,405  30,019  79.2 % 82.3 % 57.9 % 12.24  Total Wine & More Bed Bath & Beyond, Old Navy, Staples, Michaels, Dick’s Sporting Goods, Shoe Carnival
Kings Lake Square Naples 1986/2014 88,611  45,600  43,011  99.1 % 100.0 % 98.1 % 19.37  Publix
Lake City Commons Lake City 2008 65,746  45,600  20,146  100.0 % 100.0 % 100.0 % 15.92  Publix
Lake City Commons - Phase II Lake City 2011 16,291  12,131  4,160  100.0 % 100.0 % 100.0 % 15.89  Publix PetSmart
Lake Mary Plaza Orlando 2009 21,385  14,880  6,505  100.0 % 100.0 % 100.0 % 38.22  Walgreens
Lithia Crossing Tampa 2003/2013 90,522  53,547  36,975  58.9 % 32.8 % 96.8 % 22.8  The Fresh Market Chili's, Panera Bread
Miramar Square Miami 2008 231,680  147,505  84,175  94.7 % 100.0 % 85.3 % 18.13  Sprouts Farmers Market Kohl's, Miami Children's Hospital
Northdale Promenade Tampa 1985/2017 179,559  130,269  49,290  95.0 % 100.0 % 81.9 % 12.64  (Winn Dixie) TJ Maxx, Ulta Beauty, Beall's, Crunch Fitness, Tuesday Morning
Pine Ridge Crossing Naples 1993 105,986  66,435  39,551  94.2 % 100.0 % 84.5 % 18.1  Publix, (Target) Ulta Beauty, (Beall's)
Pleasant Hill Commons Orlando 2008 70,645  45,600  25,045  100.0 % 100.0 % 100.0 % 16.06  Publix
Riverchase Plaza Naples 1991/2001 78,291  48,890  29,401  96.3 % 100.0 % 90.3 % 17.24  Publix
Saxon Crossing Daytona Beach 2009 119,909  95,304  24,605  96.0 % 100.0 % 80.5 % 15.29  (Target) Hobby Lobby, LA Fitness, (Lowe's Home Improvement Center)
Shoppes of Eastwood Orlando 1997 69,076  51,512  17,564  90.1 % 100.0 % 61.1 % 12.52  Publix
Shops at Eagle Creek Naples 1983/2013 70,731  50,187  20,544  95.8 % 100.0 % 85.7 % 16.23  The Fresh Market Staples, Panera Bread, (Lowe's Home Improvement Center)
Tamiami Crossing Naples 2016 121,591  121,591  —  73.7 % 73.7 % 0.0 % 13.46  Aldi, (Walmart) Marshalls, Michaels, PetSmart, Ross Stores, Ulta Beauty


28

Property1
Location (MSA) Year
Built/
Renovated
Owned GLA2
Leased % ABR
per SqFt
Grocery Anchors4
Other Retailers4
Total Anchors Shops Total Anchors Shops
Tarpon Bay Plaza Naples 2007 81,864  59,442  22,422  100.0 % 100.0 % 100.0 % 17.77  (Target) PetSmart, Cost Plus World Market, Ross Stores, Panera Bread
The Landing at Tradition Port St. Lucie 2007 359,227  283,208  76,019  88.4 % 89.8 % 82.9 % 15.39  (Target) TJ Maxx, Ulta Beauty, Burlington, Bed Bath & Beyond, LA Fitness, Michaels, Old Navy, PetSmart, DSW, Five Below, Ross Stores
The Shops at Julington Creek Jacksonville 2011 40,254  21,038  19,216  100.0 % 100.0 % 100.0 % 20.87  The Fresh Market
Tradition Village Center Port St. Lucie 2006 85,057  45,600  39,457  96.9 % 100.0 % 93.3 % 18.75  Publix
Waterford Lakes Village Orlando 1997 78,007  51,703  26,304  98.4 % 100.0 % 95.2 % 13.91 
Georgia
Mullins Crossing Augusta 2005 276,318  228,224  48,094  99.3 % 100.0 % 96.1 % 13.39  (Target) Ross Stores, Old Navy, Five Below, Kohls, La-Z-Boy, Marshalls, Office Max, Petco, Ulta Beauty, Panera Bread
Illinois
Naperville Marketplace Chicago 2008 83,759  61,683  22,076  97.7 % 100.0 % 91.1 % 14.01  (Caputo's Fresh Market) TJ Maxx, PetSmart
Indiana
54th & College Indianapolis 2008 —  —  —  —  % —  % —  % —  The Fresh Market
Bridgewater Marketplace Westfield 2008 25,975  —  25,975  100.0 % 0.0 % 100.0 % 22.15  (Walgreens), The Local Eatery, Original Pancake House
Castleton Crossing Indianapolis 1975/2012 286,377  247,710  38,667  97.4 % 100.0 % 80.6 % 12.21  TJ Maxx/HomeGoods, Burlington, Shoe Carnival, Value City Furniture, K&G Menswear, Chipotle, Verizon, Five Below
Cool Creek Commons Westfield 2005 125,072  54,401  70,671  68.1 % 36.0 % 92.8 % 23.50  The Fresh Market McAlister's Deli, Buffalo Wild Wings, Pet People
Depauw University Bookstore and Café Indianapolis 2012 11,974  —  11,974  100.0 % 0.0 % 100.0 % 9.17  Follett's, Starbucks
Eddy Street Commons at Notre Dame South Bend 2009 87,987  20,154  67,833  96.1 % 100.0 % 95.0 % 27.32  Hammes Bookstore & Cafe, Chipotle, Urban Outfitters, Five Guys, Kilwins, Blaze Pizza
Fishers Station Fishers 1989/2018 52,395  15,441  36,954  78.8 % 100.0 % 70.0 % 16.83  Dollar Tree, Goodwill
Geist Pavilion Fishers 2006 63,910  29,700  34,210  97.6 % 100.0 % 95.6 % 17.6  Ace Hardware, Goodwill, Ale Emporium, Pure Barre
Greyhound Commons Carmel 2005 9,152  —  9,152  100.0 % 0.0 % 100.0 % 15.33  (Lowe's Home Improvement Center), Koto Japenese Steakhouse
Nora Plaza Indianapolis 2004 139,670  73,589  66,081  94.1 % 100.0 % 87.6 % 15.29  Whole Foods, (Target) Marshalls
Rangeline Crossing Carmel 1986/2013 99,497  48,171  51,326  66.4 % 47.7 % 84.0 % 25.05  Walgreens, Panera Bread, City BBQ
Rivers Edge Indianapolis 2011 150,463  117,890  32,573  98.9 % 100.0 % 95.0 % 22.10  Nordstrom Rack, The Container Store, Arhaus Furniture, Bicycle Garage of Indy, Buy Buy Baby
Stoney Creek Commons Noblesville 2000/2013 84,226  84,226  —  64.1 % 64.1 % 0.0 % 14.38  LA Fitness, Goodwill, (Lowe's Home Improvement Center)
Traders Point I Indianapolis 2005 211,545  170,809  40,736  94.4 % 100.0 % 70.9 % 14.47  Dick's Sporting Goods, AMC Theatres, Michaels, Old Navy, PetSmart, Books-A-Million
Traders Point II Indianapolis 2005 45,978  —  45,978  90.4 % 0.0 % 90.4 % 27.72 Starbucks, Noodles & Company, Qdoba
29

Property1
Location (MSA) Year
Built/
Renovated
Owned GLA2
Leased % ABR
per SqFt
Grocery Anchors4
Other Retailers4
Total Anchors Shops Total Anchors Shops
Nevada
Centennial Center Las Vegas 2002 334,023  147,824  186,199  99.2 % 100.0 % 98.6 % 25.95 Sam's Club, Walmart Ross Stores, Big Lots, Famous Footwear, Michaels, Petco, Home Depot, HomeGoods, Skechers, Five Below, Sephora, Tillys
Centennial Gateway Las Vegas 2005 193,452  140,277  53,175  99.4 % 100.0 % 97.9 % 24.40  Trader Joe's Party City, Sportsman's Warehouse, Walgreens, UFC Fit
Eastern Beltway Center Las Vegas 1998/2006 162,318  77,436  84,882  88.7 % 100.0 % 78.4 % 27.21 Sam's Club, Walmart Petco, Ross Stores, Skechers, Old Navy, (Home Depot)
Rampart Commons Las Vegas 2002/2018 79,314  11,965  67,349  100.0 % 100.0 % 100.0 % 33.55 Athleta, North Italia, Pottery Barn, Williams Sonoma, Flower Child, Crunch Fitness
New Jersey
Bayonne Crossing New York / Northern New Jersey 2011 112,871  52,219  60,652  72.8 % 41.2 % 100.0 % 34.41 Walmart Michaels, Lowe's Home Improvement Center
Livingston Shopping Center New York / Northern New Jersey 1997 139,022  133,125  5,897  97.9 % 100.0 % 50.8 % 20.93 Cost Plus World Market, Buy Buy Baby, Nordstrom Rack, DSW, TJ Maxx, Ulta Beauty
New York
City Center New York / Northern New Jersey 2004/2018 363,023  325,139  37,884  97.0 % 100.0 % 70.9 % 25.97 ShopRite Nordstrom Rack, New York Sports Club, Burlington, Club Champion Golf, National Amusements
North Carolina
Eastgate Crossing Raleigh 1958/2007 156,276  62,386  93,890  72.7 % 55.4 % 84.2 % 32.90 Trader Joe's Chipotle, Petco, Starbucks, Ulta Beauty
Holly Springs Towne Center - Phase I Raleigh 2013 209,811  121,761  88,050  91.7 % 100.0 % 80.1 % 18.28 (Target) Dick's Sporting Goods, Marshalls, Petco, Ulta Beauty, Michaels, Old Navy, Five Below
Holly Springs Towne Center - Phase II Raleigh 2016 145,043  111,843  33,200  98.8 % 100.0 % 94.6 % 17.94 (Target) Bed Bath & Beyond, DSW, AMC Theatres, 02 Fitness
Northcrest Shopping Center Charlotte 2008 133,621  65,576  68,045  94.2 % 100.0 % 88.6 % 23.74 (Target) REI Co-Op, David's Bridal, Old Navy, Five Below
Oleander Place Wilmington 2012 45,524  30,144  15,380  100.0 % 100.0 % 100.0 % 18.05 Whole Foods
Parkside Town Commons - Phase I Raleigh 2015 55,368  22,500  32,868  100.0 % 100.0 % 100.0 % 26.23 Harris Teeter/Kroger, (Target) Petco, Guitar Center
Parkside Town Commons - Phase II Raleigh 2017 298,094  188,785  109,309  67.5  % 50.6  % 96.7  % 22.21 (Target) Golf Galaxy, Hobby Lobby, Chuy's, Starbucks, Panera Bread, Levity Live
Perimeter Woods Charlotte 2008 125,579  105,175  20,404  100.0 % 100.0 % 100.0 % 20.82 Best Buy, Off Broadway Shoes, PetSmart, Michaels, (Lowe's Home Improvement Center)
Toringdon Market Charlotte 2004 61,101  26,546  34,555  97.9 % 100.0 % 96.3 % 23.34 Earth Fare
Ohio
Eastgate Pavilion Cincinnati 1995 236,230  231,730  4,500  100.0 % 100.0 % 100.0 % 9.38 Best Buy, Dick's Sporting Goods, Value City Furniture, Petsmart, DSW
Oklahoma
Belle Isle Station Oklahoma City 2000 196,164  115,783  80,381  85.9 % 100.0 % 65.5 % 17.42 (Walmart) REI, Shoe Carnival, Old Navy, Ross Stores, Nordstrom Rack, Ulta Beauty, Five Below
Shops at Moore Oklahoma City 2010 260,625  188,037  72,588  92.6 % 94.6 % 87.2 % 12.35 Bed Bath & Beyond, Best Buy, Hobby Lobby, Old Navy, PetSmart, Ross Stores

30


Property1
Location (MSA) Year
Built/
Renovated
Owned GLA2
Leased % ABR
per SqFt
Grocery Anchors4
Other Retailers4
Total Anchors Shops Total Anchors Shops
Silver Springs Pointe Oklahoma City 2001 48,440  20,515  27,925  83.0 % 100.0 % 70.4 % 14.38 (Sam's Club), (Walmart) Kohls, Office Depot, (Home Depot)
South Carolina
Publix at Woodruff Greenville 1997 68,103  47,955  20,148  91.0 % 100.0 % 69.5 % 10.54 Publix
Shoppes at Plaza Green Greenville 2000 189,730  162,068  27,662  82.6 % 87.0 % 56.8 % 12.87  Bed Bath & Beyond, Christmas Tree Shops, American Freight, Party City, Shoe Carnival, Old Navy
Tennessee
Cool Springs Market Nashville 1995 230,981  172,712  58,269  97.8 % 100.0 % 91.4 % 16.69  (Kroger) Dick's Sporting Goods, Marshalls, Buy Buy Baby, DSW, Staples, Jo-Ann Fabric, Panera Bread
Texas
Chapel Hill Shopping Center Dallas/Ft. Worth 2001 126,812  43,450  83,362  100.0 % 100.0 % 100.0 % 26.68  H-E-B Grocery The Container Store, Cost Plus World Market
Colleyville Downs Dallas/Ft. Worth 2014 194,744  139,219  55,525  94.4 % 100.0 % 80.4 % 15.68  Whole Foods Westlake Hardware, Goody Goody Liquor, Petco, Fit Factory
Kingwood Commons Houston 1999 158,109  74,836  83,273  51.5 % 14.5 % 84.7 % 28.28  Petco, Chico's, Talbots, Ann Taylor
Market Street Village/
Pipeline Point 		Dallas/Ft. Worth 1970/2011 156,621  136,742  19,879  100.0 % 100.0 % 100.0 % 13.67  Jo-Ann Fabric, Ross Stores, Buy Buy Baby, Party City, Spec's Wine Spirits & Finer Foods
Plaza at Cedar Hill Dallas/Ft. Worth 2000/2010 295,665  234,358  61,307  92.4 % 100.0 % 63.1 % 13.67  Sprouts Farmers Market, Total Wine DSW, Ross Stores, Hobby Lobby, Office Max, Marshalls, Home Goods
Plaza Volente Austin 2004 156,146  105,000  51,146  94.8 % 100.0 % 84.2 % $ 17.34  H-E-B Grocery
Portofino Shopping Center Houston 1999/2010 369,802  218,861  150,941  83.2 % 83.6 % 82.6 % 21.38 (Sam's Club) DSW, Michaels, PGA Superstore, PetSmart, Old Navy, TJ Maxx, Nordstrom Rack, Five Below
Sunland Towne Centre El Paso 1996/2014 306,454  265,037  41,417  98.9 % 100.0 % 91.7 % 11.27 Sprouts Farmers Market PetSmart, Ross Stores, Bed Bath & Beyond, Spec's Fine Wines, At Home
Waxahachie Crossing Dallas/Ft. Worth 2010 97,127  72,191  24,936  100.0 % 100.0 % 100.0 % 15.55 Best Buy, PetSmart, Ross Stores, (Home Depot)
Westside Market Dallas/Ft. Worth 2013 93,377  70,000  23,377  100.0 % 100.0 % 100.0 % 16.66 Randalls Tom Thumb
Utah
Draper Crossing Salt Lake City 2012 164,657  115,916  48,741  100.0 % 100.0 % 100.0 % 17.28 Kroger/Smith's TJ Maxx, Dollar Tree, Downeast Home
Draper Peaks Salt Lake City 2012 227,667  101,464  126,203  91.5 % 100.0 % 84.7 % 21.27  Michaels, Office Depot, Petco, Quilted Bear, Ross Stores, (Kohl's)
 Total 11,661,731 7,878,959 3,782,772 91.2 % 92.9 % 87.6  % $ 18.42 
Total at Pro-Rata Share 11,328,324 7,591,186 3,737,138 91.2  % 93.0  % 87.7  % $ 18.44 
31


____________________
1 All properties are wholly owned, except as indicated through reference to Note 3 below. 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, 2020, except for Greyhound Commons and 54th & College.
3 Asset is owned in a joint venture.
4 Tenants within parentheses are non-owned.
32

Office Operating Properties and Other 

As of December 31, 2020, we owned interests in one office operating property, two parking garages, and one triple-net leased property. In addition, two of our retail properties contain stand-alone office components. Together, these properties have a total of 0.5 million square feet of net rentable area (“NRA”) of space.  The following table sets forth more specific information with respect to our office, parking and other properties as of December 31, 2020: 
 
($ in thousands, except per square foot data)
Property MSA Year Built/
Renovated 		Acquired,
Redeveloped
or Developed 		Owned
NRA 		Percentage
Of Owned
NRA
Leased
Annualized
Base Rent1
Percentage
of
Annualized
Office and Other
Base Rent
Base Rent
Per Leased
Sq. Ft. 		Major Tenants
Commercial Properties
Thirty South Meridian2
Indianapolis 1905/2002 Redeveloped 284,874  94.6  % $ 5,448  67.2  % $ 20.22  Carrier, Kite Realty Group, Lumina Foundation
Union Station Parking Garage3
Indianapolis 1986 Acquired N/A N/A N/A N/A N/A Denison Parking (manager)
Pan Am Plaza Parking Garage3
Indianapolis Acquired N/A N/A N/A N/A N/A Denison Parking (manager)
Stand-alone Office Components of Retail Properties
Eddy Street Office (part of Eddy Street Commons)4
South Bend 2009 Developed 81,628  100.0  % 1,324 16.4  % 16.23  University of Notre Dame Offices
Tradition Village Office (part of Tradition Village Square) Port St. Lucie 2006 Acquired 24,340  100.0  % 735 9.1  % 30.19 
Total Commercial Properties 390,842  96.1  % $ 7,507  92.7  % $ 20.00 
Other Properties
Burlington San Antonio 1992/2000 Acquired 107,400  100.0  % $ 591  7.3  % $ 5.50  Burlington
107,400  100.0  % $ 591  7.3  % $ 5.50 
Total Commercial and Other 498,242  96.9  % $ 8,098  100.0  % $ 16.77 
Multi-Family/Lodging
Embassy Suites South Bend at Notre Dame5
South Bend 2018 Developed —  N/A $ —  —  % $ —  Full service hotel with 164 rooms
The Foundry Lofts and Apartments at Eddy Street South Bend 2009 Developed —  100.0  % —  —  $ —  Air rights lease for apartment complex with 266 units
The Foundry Lofts and Apartments at Eddy Street Phase II South Bend 2020 Developed —  100.0  % —  —  $ —  Air rights lease for apartment complex with 453 units
Summit at City Center Apartments New York / Northern New Jersey 2004 Acquired —  100.0  % —  —  $ —  Apartment complex with 24 units.

33

____________
1 Annualized Base Rent represents the monthly contractual rent as of December 31, 2020 for each applicable property, multiplied by 12.
2 Annualized Base Rent includes $859,256 from the Company and subsidiaries as of December 31, 2020, which is eliminated for purposes of our consolidated financial statement presentation.
3 The garage is managed by a third party.
4 The Company also owns the Eddy Street Commons retail shopping center in South Bend, Indiana, along with a parking garage that serves a hotel and the office and retail components of the property.
5 Property owned in an unconsolidated joint venture.


Development Projects Under Construction

     In addition to our retail and office operating properties, as of December 31, 2020, we owned an interest in two development projects currently under construction.  The following table sets forth more specific information with respect to the Company’s development projects as of December 31, 2020:

($ in thousands)
Project MSA Anticipated Start Date
Projected Stabilization Date1
Projected New Total GLA Projected New Owned GLA Total Project Cost KRG Equity Requirement KRG Remaining Spend
Estimated Return on Project2
Glendale Town Center Apartments Indianapolis, IN Q2 2020 Q2 2022 207,000  24,000  $ 38,400  $ 1,200  $ 900  7.0% - 8.0%
Eddy Street Commons at Notre Dame, IN - Phase III South Bend, IN Q3 2020 Q1 2022 68,500  18,600  $ 7,500  7,500  6,100 8.5% - 9.5%
Glendale Town Center Retail3
Indianapolis, IN Q1 2021 Q1 2022 54,500  54,500  $ 11,000  3,900  3,900 27.0% - 28.0%

____________________
1 Stabilization date represents near completion of project construction and substantial occupancy of the property.
2 Projected ROI for redevelopments is an estimate of the expected incremental stabilized annual operating cash flows to be generated divided by the estimated project costs, including construction, development, financing, and other soft costs, when applicable to the project.
3 Equity requirement is lower than total project cost due to a $7.1 million TIF received from the City of Indianapolis.

34

Tenant Diversification 
 
No individual retail or office tenant accounted for more than 2.5% of the portfolio’s annualized base rent for the year ended December 31, 2020. The following table sets forth certain information for the largest 25 tenants open for business at the Company’s retail properties based on minimum rents in place as of December 31, 2020: 
 
TOP 25 TENANTS BY ANNUALIZED BASE RENT
 
($ in thousands, except per square foot data)
Number of Stores
Tenant Wholly Owned
JV1
Total Leased GLA/NRA2
ABR at Pro-Rata Share 3
ABR psf at Pro-Rata
% of Total
Portfolio
Annualized
Base Rent4
Publix Super Markets, Inc. 11 — 535,466  $ 5,455  $ 10.19  2.50  %
The TJX Companies, Inc.5
14 2 471,684  4,845  11.22  2.22 %
PetSmart, Inc. 13 1 291,379  4,084  14.62  1.87 %
Ross Stores, Inc. 12 1 364,442  4,000  11.61  1.83 %
Dick's Sporting Goods, Inc.6
7 — 340,502  3,741  10.99  1.71 %
Bed Bath & Beyond, Inc.7
13 2 387,848  3,718  10.53  1.70 %
Nordstrom Rack 5 1 197,797  3,571  20.75  1.64 %
Michaels Stores, Inc. 11 1 253,849  3,283  13.66  1.50 %
Burlington Stores, Inc. 5 — 310,423  3,039  9.79  1.39 %
National Amusements 1 — 80,000  2,953  36.92  1.35 %
Old Navy (11) / Athleta (1) 12 — 183,599  2,868  15.62  1.31 %
Kohl's Corporation 4 — 184,516  2,832  7.87  1.30 %
Walmart Stores, Inc.8
5 — —  2,776  3.42  1.27 %
Best Buy Co., Inc. 5 — 183,604  2,627  14.31  1.20 %
Petco Animal Supplies, Inc. 10 — 136,669  2,526  18.48  1.16 %
Lowe's Companies, Inc. 3 — —  2,375  4.91  1.09 %
LA Fitness 3 — 125,209  2,292  18.31  1.05 %
Hobby Lobby Stores, Inc. 5 — 271,254  2,248  8.29  1.03 %
Whole Foods Market, Inc. 4 — 139,781  2,130  15.24  0.98 %
Mattress Firm, Inc.9
16 — 76,408  2,121  27.75  0.97 %
Walgreens 4 — 63,462  2,104  33.15  0.96 %
The Kroger Co.10
3 — 60,268  2,099  9.19  0.96 %
Five Below, Inc. 11 — 92,694  1,738  18.75  0.80 %
DSW 6 1 133,255  1,687  14.33  0.77 %
Sprouts Farmers Market, Inc. 3 — 83,985  1,589  18.92  0.73  %
TOTAL 186 9 4,968,094  $ 72,702  $ 11.55  33.3  %

35

___
1 JV Stores represent stores at unconsolidated properties.
2 Excludes the estimated size of the structures located on land owned by the Company and ground leased to tenants.
3 Annualized base rent represents the monthly contractual rent for December 31, 2020, for each applicable tenant multiplied by 12. Annualized base rent does not include tenant reimbursements. Annualized base rent represents 100% of the annualized base rent at consolidated properties and our share of the annualized base rent at unconsolidated properties.
4 Annualized base rent and percent of total portfolio includes ground lease rent.
5 Includes TJ Maxx (9), Marshalls (5) and HomeGoods (2).
6 Includes Dick's Sporting Goods (6) and Golf Galaxy (1).
7 Includes Bed Bath and Beyond (8), Buy Buy Baby (4), and Cost Plus World Market (3).
8 Includes Walmart (3) and Sam's Club (2).
9 Includes Mattress Firm (12) and Sleepy's (4).
10 Includes Kroger (1), Harris Teeter (1), and Smith's (1).

36

Geographic Diversification – Annualized Base Rent by Region and State
 
The Company owns interests in 90 operating and redevelopment properties. We also own interests in two development projects under construction. The total operating portfolio consists of approximately 12 million of owned square feet in 16 states. The following table summarizes the Company’s operating properties by region and state as of December 31, 2020: 
($ in thousands)
Total Operating Portfolio Excluding Developments and Redevelopments
Developments and Redevelopments2
Joint Ventures 3
Total Operating Portfolio Including
Developments and Redevelopments
Region/State
Owned
GLA/NRA1
Annualized
Base Rent
Owned
GLA/NRA1
Annualized
Base Rent
Owned
GLA/NRA1
Annualized
Base Rent 		Number of Properties
Owned
GLA/NRA1
Annualized Base Rent - Ground Leases Total Annualized
Base Rent 		Percent of
Annualized
Base Rent
South
Florida 3,331,826  $ 52,799  —  $ —  121,591  $ 1,206  29 3,453,417  $ 3,740  $ 57,745  25.9%
Texas 1,798,711  27,500  —  —  156,146  2,568  10 1,954,857  1,374  31,442  14.1%
North Carolina 1,230,417  23,564  —  —  —  —  9 1,230,417  2,041  25,605  11.5%
Oklahoma 505,229  6,493  —  —  —  —  3 505,229  861  7,354  3.3%
Georgia 276,318  3,676  —  —  —  —  1 276,318  345  4,021  1.8%
Tennessee 230,981  3,771  —  —  —  —  1 230,981  —  3,771  1.7%
South Carolina 257,833  2,670  —  —  —  —  2 257,833  —  2,670  1.2%
Texas - Other 107,400  591  —  —  —  —  1 107,400  —  591  0.3%
Total South 7,738,715  121,064  —  —  277,737  3,774  56  8,016,452  8,361  133,199  59.8  %
Midwest
Indiana - Retail 1,394,221  22,110  344,890  2,572  —  —  19 1,739,111  1,518  26,200  11.7%
Indiana - Other 366,502  6,773  24,000  —  —  —  4 390,502  —  6,773  3.0%
Ohio 236,230  2,217  —  —  —  —  1 236,230  —  2,217  1.0%
Illinois 83,759  1,146  —  —  —  —  1 83,759  —  1,146  0.5%
Total Midwest 2,080,712  32,246  368,890  2,572  —  —  25 2,449,602  1,518  36,336  16.3%
West
Nevada 769,107  19,873  —  —  —  —  4 769,107  3,717  23,590  10.6%
Utah 392,324  7,279  —  —  —  —  2 392,324  —  7,279  3.3%
Arizona 79,902  2,467  —  —  —  —  1 79,902  —  2,467  1.1%
Total West 1,241,333  29,619  —  —  —  —  7 1,241,333  3,717  33,336  14.9%
Northeast
New York 363,023  9,142  —  —  —  —  1 363,023  —  9,142  4.1%
New Jersey 112,871  2,827  —  —  139,022  2,849  2 251,893  2,103  7,779  3.5%
Connecticut 206,560  2,411  —  —  —  —  1 206,560  1,061  3,472  1.6%
Total Northeast 682,454  14,380  —  —  139,022  2,849  4 821,476  3,164  20,393  9.1%
11,743,214  $ 197,309  368,890  $ 2,572  416,759  $ 6,623  92 12,528,863  $ 16,760  $ 223,264  100.0%
____________________
1 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 and Pan Am Plaza Parking Garage.
2 Represents the three redevelopment and two development projects not in the retail operating portfolio.
3 Represents the three operating properties owned in unconsolidated joint ventures.
37

Lease Expirations 
 
In 2021, leases representing 8.0% of total annualized base rent are scheduled to 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, 2020, assuming none of the tenants exercise renewal options. 
 
LEASE EXPIRATION TABLE – OPERATING PORTFOLIO 

($ in thousands, except per square foot data)
Expiring GLA2
Expiring Annualized Base Rent per Sq. Ft.3
Number of Expiring Leases1
Shop Tenants Anchor Tenants Office and Other Tenants Expiring Annualized Base Rent (Pro-rata) % of Total Annualized Base Rent (Pro-rata) Shop Tenants Anchor Tenants Office and Other Tenants Total
2021 170  359,532  393,054  21,110  $ 16,106  8.0  % $ 29.22  $ 13.95  $ 19.25  $ 18.56 
2022 253  520,386  1,058,556  65,020  29,293  14.6  % 27.55  13.04  21.97  16.88 
2023 242  493,066  1,120,690  113,177  32,012  15.9  % 29.19  15.07  19.67  17.85 
2024 206  451,867  744,562  33,827  22,193  11.0  % 29.76  14.13  9.17  18.42 
2025 200  413,172  1,178,558  124,107  27,545  13.7  % 30.38  11.39  13.96  20.38 
2026 133  322,876  896,743  —  17,174  8.5  % 26.12  10.34  16.39  15.85 
2027 80  212,014  367,192  9,154  10,830  5.4  % 29.11  12.57  —  15.24 
2028 72  176,834  272,757  61,747  11,103  5.5  % 31.84  15.21  31.29  19.06 
2029 50  126,717  177,159  —  6,087  3.0  % 30.96  12.21  22.19  19.77 
2030 48  148,081  266,032  —  7,887  3.9  % 28.53  14.51  62.73  19.23 
Beyond 66  147,592  925,503  54,721  20,975  10.4  % 26.57  17.02  23.16  18.61 
1,520  3,372,137  7,400,806  482,863  $ 201,205  100.0  % $ 28.92  $ 13.53  $ 16.94  $ 17.99 

____
1 Lease expiration table reflects rents in place as of December 31, 2020 and does not include option periods; 2021 expirations include 8 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 as of December 31, 2020 for each applicable tenant multiplied by 12. Excludes tenant reimbursements and ground lease revenue.

Lease Activity – New and Renewal 
 
In 2020, the Company executed new and renewal leases on 215 individual spaces totaling 1.5 million square feet (7.0% cash leasing spread and 14.5% GAAP leasing spread on 158 comparable leases).  New leases were signed on 59 individual spaces for 0.4 million square feet of GLA (9.1% cash leasing spread and 21.3% GAAP leasing spread on 42 comparable leases), while renewal leases were signed on 156 individual spaces for 1.1 million square feet of GLA (6.1% cash leasing spread and 12.0% GAAP leasing spread on 116 comparable leases).










38





ITEM 3. LEGAL PROCEEDINGS 
 
We are not subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against us. We are parties to routine litigation, claims, and administrative proceedings arising in the ordinary course of business.  Management believes that such matters will not have a material adverse impact on our consolidated financial condition, results of operations or cash flows taken as a whole.  
 
ITEM 4. MINE SAFETY DISCLOSURES 
 
Not applicable.
39

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 NYSE under the symbol “KRG.”  On February 16, 2021, the closing price of our common shares on the NYSE was $18.12. 
 
 Holders 
 
The number of registered holders of record of our common shares was 1,082 as of February 16, 2021.  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, if any, 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 Code, 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 U.S. 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 U.S. 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, 2020, approximately 89% of our distributions to shareholders constituted taxable ordinary income dividends and approximately 11% constituted taxable capital gains dividends. 
 
Under our Credit Facility, we are permitted to make distributions to our shareholders 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 Credit Facility are accelerated.
  
Issuer Repurchases; Unregistered Sales of Securities 
 
During the three months ended December 31, 2020, certain of our employees surrendered common shares owned by them to satisfy their statutory minimum U.S. federal and state tax obligations associated with the vesting of restricted common shares of beneficial interest issued under our Plan. These shares were repurchased by the Company.

The following table summarizes all of these repurchases during the three months ended December 31, 2020:



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
October 1 - October 31 — — N/A N/A
November 1 - November 30 27,125 $12.42 N/A N/A
December 1 - December 31 — — N/A N/A
Total 27,125

We did not sell any unregistered securities during 2020.
 
 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. 
 
Performance 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, 2015 to December 31, 2020, 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, 2015 and that all cash distributions were reinvested.  The shareholder return shown on the graph below is not indicative of future performance

41

KRG-20201231_G1.JPG

  12/15/ 6/16/ 12/16 6/17 12/17 6/18 12/18 6/19 12/19 6/20 12/20
Kite Realty Group Trust 100.00  110.42  94.45  78.22  83.48  75.49  64.73  74.00  99.10  60.36  79.13 
S&P 500 100.00  103.84  111.96  122.42  136.40  140.02  130.42  154.60  171.49  166.20  203.04 
FTSE NAREIT Equity REITs 100.00  113.38  108.52  111.45  114.19  115.35  108.92  128.28  137.23  111.55  126.25 



ITEM 6. SELECTED FINANCIAL DATA 
 
Not applicable.




 
42

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 “our Company,” “we,” “us,” and “our” mean Kite Realty Group Trust and its direct and indirect subsidiaries, including Kite Realty Group, L.P. 
 
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 is a publicly-held real estate investment trust which, through its majority-owned subsidiary, Kite Realty Group, L.P., owns interests in various operating subsidiaries and joint ventures engaged in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States.  We derive revenues primarily from activities associated with the collection of contractual rents and reimbursement payments from tenants at our properties.  Our operating results therefore depend materially on, among other things, the ability of our tenants to make required lease payments, the health and resilience of the United States retail sector, interest rate volatility, job growth and real estate market and overall economic conditions. 
 
As of December 31, 2020, we owned interests in 90 operating and redevelopment properties totaling approximately 17.3 million square feet. We also owned two development projects under construction as of this date.  
 
Portfolio Update 
 
As has become more evident during the COVID-19 pandemic, strong real estate matters. The strength of the Company's real estate is evidenced by our higher rent collection rates as compared to our peers, based upon publicly reported information by each peer as of February 19, 2021. The Company has continued to improve its asset quality. In addition, the Company's property type lends itself to retailers' current needs including curbside pick-up and buying online and picking up in store (BOPIS) that we believe will benefit from tenant demand for additional space.
The Company's operations were impacted by the bankruptcies of retailers during the COVID-19 pandemic. The Company had leased space to national retailers that declared bankruptcy during 2020 that comprised 5.9% of our annualized base rent. A portion of the retailers have vacated their space with us, which will lead to an expected decline in occupancy and rental revenue in 2021.

Project Focus, our disposition program completed in 2019, allowed us to dispose of weaker, non-core assets and reduce our exposure to at-risk tenants and resulted in $502 million in combined sales, the majority of which net proceeds were used to repay debt. It also allowed us to focus our geographic footprint on locations that are benefiting from accelerating migration shifts.

In evaluating potential acquisition, development, and redevelopment opportunities, we look for strong sub-markets where average household income, population density, traffic counts and daytime workforce populations are above the broader market average.  We also focus on locations that are benefitting from current population migratory patterns, namely major cities in states with no or relatively low income taxes, and mild or temperate climates.  In our largest sub-markets, household incomes are significantly higher and state income taxes are relatively lower than the medians for those broader markets. 
In addition to targeting sub-markets with strong consumer demographics, we focus on having the most desirable tenant mix at each center.  We have aggressively targeted and executed leases with prominent grocers including Publix, Aldi, Whole Foods, and Trader Joe's, expanding retailers such as TJ Maxx, Ross Dress for Less, Burlington, and Old Navy, service and restaurant retailers and other retailers such as Ulta, REI, Five Below and Total Wine.  Additionally, we have identified cost-efficient ways to relocate, re-tenant and renegotiate leases at several of our properties allowing us to attract more suitable tenants.
 




Capital and Financing 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. 
 
With the successful completion of Project Focus in 2019, we were able to enhance our already-strong balance sheet, increase our financial flexibility, and improve our liquidity to fund future growth. We ended 2020 with approximately $566.9 million of combined cash and borrowing capacity on our Credit Facility.  In addition, as of December 31, 2020, we did not have any debt principal scheduled to mature through December 31, 2021.

The amount that we may borrow under our Credit Facility is limited by the value of the assets in our unencumbered asset pool.  As of December 31, 2020, the value of the assets in our unencumbered asset pool was $1.3 billion.

The investment grade credit ratings we have received provide us with access to the unsecured public bond market, which we may continue to use in the future to finance acquisition activity, repay maturing debt and fix interest rates.  
 
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 GAAP 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, in some cases, require management’s most difficult, subjective, and complex judgments. 
 
Valuation of Investment Properties 
 
Management reviews operational and development projects, land parcels and intangible assets for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. This review for possible impairment requires certain assumptions, estimates, and 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. The evaluation of impairment is subject to certain management assumptions including projected net operating income, anticipated hold period, expected capital expenditures and the capitalization rate used to estimate the property's residual value. 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.
 
Depreciation may be accelerated for a redevelopment project, including partial demolition of existing structures after the asset is assessed for impairment. 
 
Operating properties will be classified as held for sale only when those properties are 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 classified as held for sale 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.

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 record the estimated fair value to the applicable assets and liabilities.  In making estimates of fair values, 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, as defined below.



44

Fair value is determined for tangible assets and intangibles, including:   
•the fair value of the building on an as-if-vacant basis and the fair value of 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, which 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 term of the lease.  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;
•the value of having a lease in place at the acquisition date.  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; and
•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 there is any value to in-place leases that have a related customer relationship intangible value.  Characteristics we consider in determining 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.
 
Revenue Recognition 
 
As a lessor of real estate assets, the Company retains substantially all of the risks and benefits of ownership and accounts for its leases as operating leases.  
 
Contractual minimum base rent, percentage rent, and expense reimbursements from tenants for common area maintenance costs, insurance and real estate taxes are our principal sources 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 sales targets as defined in their lease agreements.  Overage rent is included in rental income in the accompanying consolidated statements of operations for the years ended December 31, 2020 and 2019. If we determine that collectibility is probable, we recognize income from rentals based on the methodology described above. We have accounts receivable due from tenants and are subject to the risk of tenant defaults and bankruptcies that may affect the collection of outstanding receivables. These receivables are reduced for credit loss that is recognized as a reduction to rental income. We regularly evaluate the collectibility of these lease-related receivables by analyzing past due account balances and consider such facts as the credit quality of our customer, historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the collectibility of rental income. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.  
 
We recognize the sale of real estate when control transfers to the buyer.  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.







45

 
Results of Operations 

As of December 31, 2020, we owned interests in 90 operating and redevelopment properties and two development project currently under construction. The following table sets forth the total operating and redevelopment properties and development projects that we owned as of December 31, 2020, 2019 and 2018:

# of Properties
2020 2019 2018
Operating Retail Properties 83  82  105 
Operating Office Properties and Other 4  4  3 
Redevelopment Properties 3 4  3 
Total Operating and Redevelopment Properties 90  90  111 
Development Projects: 2 1 1
Total All Properties 92  91  112 
 
The comparability of results of operations is affected by our development, redevelopment, and operating property disposition activities in 2018 through 2020. 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, 2020 and 2019”) in conjunction with the discussion of these activities during those periods, which is set forth below. 
 
Property Acquisition Activities 
 
During the years ended December 31, 2020 and 2019, we acquired the properties listed in the table below. We did not acquire any properties in 2018.  

Property Name MSA Acquisition Date Owned GLA
Pan Am Plaza Garage Indianapolis, IN March 2019 N/A
Nora Plaza Indianapolis, IN August 2019 139,670 
Eastgate Crossing Raleigh, NC December 2020 156,276 

Operating Property Disposition Activities 
 
During the years ended December 31, 2020, 2019, and 2018, we sold the operating properties listed in the table below.  
46

Property Name MSA Disposition Date Owned GLA
Trussville Promenade Birmingham, AL February 2018 463,836 
Memorial Commons Goldsboro, NC March 2018 111,022 
Tamiami Crossing 1
Naples, FL June 2018 121,705 
Plaza Volente 1
Austin, TX June 2018 156,296 
Livingston Shopping Center 1
Newark, NJ June 2018 139,559 
Hamilton Crossing Alcoa, TN November 2018 175,464 
Fox Lake Crossing Chicago, IL December 2018 99,136 
Lowe's Plaza Las Vegas, NV December 2018 30,210 
Whitehall Pike Bloomington, IN March 2019 128,997 
Beechwood Promenade Athens, GA April 2019 297,369 
Village at Bay Park Green Bay, WI May 2019 82,254 
Lakewood Promenade Jacksonville, FL May 2019 196,655 
Palm Coast Landing Palm Coast, FL May 2019 168,352 
Lowe's - Perimeter Woods Charlotte, NC May 2019 166,085 
Cannery Corner Las Vegas, NV May 2019 30,738 
Temple Terrace Tampa, FL June 2019 90,328 
University Town Center Oklahoma City, OK June 2019 348,877 
Gainesville Plaza Gainesville, FL July 2019 162,189 
Bolton Plaza Jacksonville, FL July 2019 154,155 
Eastgate Plaza Las Vegas, NV July 2019 96,594 
Burnt Store Punta Gorda, FL July 2019 95,625 
Landstown Commons Virginia Beach, VA August 2019 398,139 
Lima Marketplace Fort Wayne, IN September 2019 100,461 
Hitchcock Plaza Aiken, SC September 2019 252,211 
Merrimack Village Center Manchester, NH September 2019 78,892 
Publix at Acworth Atlanta, GA October 2019 69,628 
The Centre at Panola Atlanta, GA October 2019 73,075 
Beacon Hill Crown Point, IN October 2019 56,820 
Bell Oaks Centre Evansville, IN November 2019 94,958 
Boulevard Crossing Kokomo, IN December 2019 124,634 
South Elgin Commons Chicago, IL December 2019 128,000 

____________________
1 The Company has retained a 20% ownership interest in this property.
  
 Redevelopment Activities 
 
During portions of the years ended December 31, 2020, 2019, and 2018, the following properties were under active redevelopment and removed from our operating portfolio: 
 
47

Property Name MSA
Transition to
Redevelopment1
Transition to Operating Portfolio Owned GLA
Courthouse Shadows2
Naples, FL June 2013 Pending 124,802 
Hamilton Crossing Centre3, 4
Indianapolis, IN June 2014 Pending 89,983 
City Center White Plains, NY December 2015 June 2018 363,103 
Fishers Station Indianapolis, IN December 2015 September 2018 52,414 
Beechwood Promenade 5
Athens, GA December 2015 December 2018 297,369 
The Corner3, 4
Indianapolis, IN December 2015 Pending 27,731 
Rampart Commons Las Vegas, NV March 2016 December 2018 79,314 
Burnt Store Marketplace 5
Punta Gorda, FL June 2016 March 2018 95,625 
Glendale Town Center 3
Indianapolis, IN March 2019 Pending 393,002 

____________________
1 Transition date represents the date the property was transferred from our operating portfolio into redevelopment status.
2 This property was sold in 2020.
3 This property has been identified as a redevelopment property and is not included in the operating portfolio or the same property pool.
4 This redevelopment would potentially include the creation of a mixed-use (office, retail, and multi-family) development.
5 This property was sold in 2019.

 Net Operating Income and Same Property Net Operating Income

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

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

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

When evaluating the properties that are included in the same property pool, we have established specific criteria for determining the inclusion of properties acquired or those recently under development. An acquired property is included in the same property pool when there is a full quarter of operations in both years subsequent to the acquisition date. Development and redevelopment properties are included in the same property pool four full quarters after the properties have been transferred to the operating portfolio. A redevelopment property is first excluded from the same property pool when the execution of a redevelopment plan is likely and we 1) begin recapturing space from tenants or b) the contemplated plan significantly impacts the operations of the property. At December 31, 2020, the same property pool excluded three properties in redevelopment, one recently completed development, two acquired properties, and three commercial properties.
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The following table reflects Same Property NOI1 and a reconciliation to net income attributable to common shareholders for the years ended December 31, 2020 and 2019 (unaudited):

($ in thousands) Years Ended December 31,  
2020 2019 % Change
Leased percentage at period end 91.5  % 96.1  %  
Economic Occupancy percentage2
92.1  % 92.8  %  
Same Property NOI $ 179,304  $ 191,970  (6.6) %
Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure:       
Net operating income - same properties $ 179,304  $ 191,970   
Net operating income - non-same activity3
10,084  38,403   
Other (expense) income, net (357) (471)  
General, administrative and other (30,840) (28,214)  
Loss on debt extinguishment —  (11,572)
Impairment charges —  (37,723)
Depreciation and amortization expense (128,648) (132,098)
Interest expense (50,399) (59,268)  
Gains on sales of operating properties 4,733  38,971   
Net income attributable to noncontrolling interests (100) (532)
Net loss attributable to common shareholders $ (16,223) $ (534)

____
1
Same Property NOI excludes (i) The Corner, Glendale Town Center, and Hamilton Crossing redevelopments, (ii) Eddy Street Commons - Phases II and III developments, (iii) the recently acquired Eastgate Crossing and Nora Plaza, and (iv) office properties.
2 Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent. Calculated as a weighted average based on the timing of cash rent commencement and expiration during the period.
3 Includes non-cash activity across the portfolio as well as net operating income from properties not included in the same property pool including properties sold during both periods.
 
Our Same Property NOI decreased 6.6% in 2020 compared to 2019. This decrease was primarily due to bad debt expense of $12.1 million in 2020 related to certain tenants that were impacted by the COVID-19 pandemic.  


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

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

From time to time, the Company may report or provide guidance with respect to “NAREIT FFO as adjusted” which removes the impact of certain non-recurring and non-operating transactions or other items the Company does not consider to be representative of its core operating results including without limitation, gains or losses associated with the early extinguishment of debt, gains or losses associated with litigation involving the Company that is not in the normal course of business, the impact on earnings from employee severance, and the excess of redemption value over carrying value of preferred stock redemption, which are not otherwise adjusted in the Company’s calculation of FFO.
Our calculations of FFO1 and reconciliation to consolidated net income and FFO, as adjusted for the years ended December 31, 2020, 2019 and 2018 (unaudited) are as follows:
 
($ in thousands) Years Ended December 31,
2020 2019 2018
Consolidated net loss $ (16,123) $ (2) $ (46,451)
Less: net income attributable to noncontrolling interests in properties (528) (528) (1,151)
Less: Gain on sales of operating properties (4,733) (38,971) (3,424)
Add: impairment charges —  37,723  70,360 
Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests 130,091  133,184  151,856 
   FFO of the Operating Partnership1
108,707  131,406  171,190 
Less: Limited Partners' interests in FFO (2,826) (3,153) (4,109)
   FFO attributable to Kite Realty Group Trust common shareholders1
$ 105,881  $ 128,253  $ 167,081 
FFO of the Operating Partnership1
$ 108,707  $ 131,406  $ 171,190 
Add: severance charge 3,253  —  — 
Add: loss on debt extinguishment —  11,572  — 
FFO, as adjusted, of the Operating Partnership $ 111,960  $ 142,978  $ 171,190 
  
____________________
1 “FFO of the Operating Partnership" measures 100% of the operating performance of the Operating Partnership’s real estate properties. “FFO attributable to Kite Realty Group Trust common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest in the Operating Partnership.
  
Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA) 
 
We define EBITDA, a non-GAAP financial measure, as net income before depreciation and amortization, interest expense and income tax expense of TRS. For informational purposes, we have also provided Adjusted EBITDA, which we define as EBITDA less (i) EBITDA from unconsolidated entities, (ii) gains on sales of operating properties or impairment charges, (iii) other income and expense, (iv) noncontrolling interest EBITDA and (v) other non-recurring activity or items impacting comparability from period to period. Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. Net Debt to Adjusted EBITDA is our share of net debt divided by Annualized Adjusted EBITDA. EBITDA, Adjusted EBITDA, Annualized Adjusted EBITDA and Net Debt to Adjusted EBITDA, as calculated by us, are not comparable to EBITDA and EBITDA-related measures reported by other REITs that do not define EBITDA and EBITDA-related measures exactly as we do. EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated from operating activities in accordance with GAAP, and should not be considered alternatives to net income as an indicator of performance or as alternatives to cash flows from operating activities as an indicator of liquidity.

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Considering the nature of our business as a real estate owner and operator, we believe that EBITDA, Adjusted EBITDA and the ratio of Net Debt to Adjusted EBITDA are helpful to investors in measuring our operational performance because they exclude various items included in net income that do not relate to or are not indicative of our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we have also provided Annualized Adjusted EBITDA, adjusted as described above. We believe this supplemental information provides a meaningful measure of our operating performance. We believe presenting EBITDA and the related measures in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.
  
The following table presents a reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to consolidated net income (the most directly comparable GAAP measure) and a calculation of Net Debt to Adjusted EBITDA.
 
($ in thousands) Three Months Ended
December 31, 2020
Consolidated net loss $ (6,842)
Adjustments to net income:
Depreciation and amortization 31,818 
Interest expense 12,284 
Income tax benefit of taxable REIT subsidiary (200)
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 37,060 
Adjustments to EBITDA:
Unconsolidated EBITDA 352 
Gain on sales of operating properties 159 
Severance charges 3,253 
Other income and expense, net 408 
Noncontrolling interest (132)
Adjusted EBITDA 41,100 
Annualized Adjusted EBITDA1
$ 164,402 
Company Share of Net Debt:  
Mortgage and other indebtedness $ 1,170,794 
Less: Partner share of consolidated joint venture debt 2
(1,102)
Less: Cash, cash equivalents, and restricted cash (47,760)
Plus: Company share of unconsolidated joint venture debt 22,150 
Plus: Debt Premium 5,282 
Company Share of Net Debt $ 1,149,364 
Net Debt to Adjusted EBITDA 7.0x
 
____________________
1 Represents Adjusted EBITDA for the three months ended December 31, 2020 (as shown in the table above) multiplied by four. 
2 Partner share of consolidated joint venture debt is calculated based upon the partner's pro-rata ownership of the joint venture, multiplied by the related secured debt balance.


Comparison of Operating Results for the Years Ended December 31, 2020 and 2019 
 
The following table reflects changes in the components of our consolidated statements of operations for the years ended December 31, 2020 and 2019:
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($ in thousands) 2020 2019 Net change 2019 to 2020
Revenue:      
Rental income $ 257,670  $ 308,399  $ (50,729)
Other property related revenue 8,597  6,326  2,271 
Fee income 378  448  (70)
Total revenue 266,645  315,173  (48,528)
Expenses:      
Property operating 41,012  45,575  (4,563)
Real estate taxes 35,867  38,777  (2,910)
General, administrative, and other 30,840  28,214  2,626 
Depreciation and amortization 128,648  132,098  (3,450)
Impairment charge —  37,723  (37,723)
Total expenses 236,367  282,387  (46,020)
Gains on sale of operating properties, net 4,733  38,971  (34,238)
Operating income 35,011  71,757  (36,746)
Interest expense (50,399) (59,268) 8,869 
Income tax benefit of taxable REIT subsidiary 696  282  414 
Loss on debt extinguishment —  (11,572) 11,572 
  Equity in loss of unconsolidated subsidiary (1,685) (628) (1,057)
  Other income (expense), net 254  (573) 827 
Consolidated net income (16,123) (2) (16,121)
Net income attributable to noncontrolling interests (100) (532) 432 
Net (loss) income attributable to Kite Realty Group Trust (16,223) (534) $ (15,689)
Property operating expense to total revenue ratio 15.4  % 14.5  % 0.9  %

Rental income decreased $50.7 million, or 16.4%, due to the following:
 
($ in thousands) Net change 2019 to 2020
Properties sold during 2019 $ (31,809)
Properties under redevelopment or acquired during 2019 and/or 2020 856 
Properties fully operational during 2019 and 2020 and other (19,776)
Total $ (50,729)
 
 
The net decrease of $19.8 million in rental income for properties that were fully operational during 2019 and 2020 is primarily due to $17.4 million of bad debt expense for certain non-cash straight-line rent and billed rent receivables related to tenants that are financially distressed due to the COVID-19 pandemic. In addition, the Company had a reduction in minimum rent due to a decrease in occupancy due to certain closures, most notably by certain anchor tenants, such as Stein Mart, 24 Hour Fitness, and New York Sports Club that have declared bankruptcy during the COVID-19 pandemic.

While leasing activity was reduced during 2020, the Company has been able to continue to generate higher rents on new leases and renewals. The average rents for new comparable leases signed in 2020 were $20.77 per square foot compared to average expiring base rents of $19.04 per square foot in that period. The average base rents for renewals signed in 2020 were $16.10 per square foot compared to average expiring base rents of $15.18 per square foot in that period.

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Following the completion of Project Focus in 2019 and the current year leasing activity, the quality of our operating retail portfolio continued to improve. This is evidenced by the increase in the annualized base rent per square foot to $18.42 per square foot as of December 31, 2020 from $17.83 per square foot as of December 31, 2019.

Other property related revenue primarily consists of parking revenues and gains on sales of undepreciated assets.  This revenue increased by $2.3 million, primarily as a result of higher gains on sales of undepreciated assets of $5.7 million partially offset by a decrease in parking revenues of $2.0 million.

We recorded fee income of $0.4 million for the years ended December 31, 2020 and 2019, respectively, from property management services provided to unconsolidated joint ventures.
 
Property operating expenses decreased $4.6 million, or 10.0%, due to the following: 
 
($ in thousands) Net change 2019 to 2020
Properties sold during 2019 $ (4,592)
Properties under redevelopment or acquired during 2019 and/or 2020 381 
Properties fully operational during 2019 and 2020 and other (352)
Total $ (4,563)
 
The net decrease of $0.4 million in property operating expenses for properties that were fully operational during 2019 and 2020 is primarily due to a continued focus on cost controls over certain operating expense spend in 2020. These provided savings of $1.4 million that were partially offset by an increase in insurance costs of $1.0 million due to higher premiums across the real estate industry that were realized upon renewal.

As a percentage of rental revenue, property operating expenses increased between years from 14.5% to 15.4%. The increase was mostly due to a decline in revenue in 2020 due to the impact of the COVID-19 pandemic.

Real estate taxes decreased $2.9 million, or 7.5%, due to the following: 
 
($ in thousands) Net change 2019 to 2020
Properties sold during 2019 $ (3,607)
Properties under redevelopment or acquired during 2019 and/or 2020 73 
Properties fully operational during 2019 and 2020 and other 624 
Total $ (2,910)
 
The net increase of $0.6 million in real estate taxes for properties that were fully operational during 2019 and 2020 is primarily due to an increase in current year tax assessments at certain operating properties. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected in rental income.

General, administrative and other expenses increased $2.6 million, or 9.3%. The increase is primarily due to $3.3 million of severance charges incurred during the fourth quarter of 2020.

Depreciation and amortization expense decreased $3.5 million, or 2.6%, due to the following:
($ in thousands) Net change 2019 to 2020
Properties sold during 2019 $ (12,880)
Properties under redevelopment or acquired during 2019 and/or 2020 1,146 
Properties fully operational during 2019 and 2020 and other 8,284 
Total $ (3,450)
  
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The net increase of $1.1 million in properties under redevelopment or acquired during 2019 and 2020 is primarily due to a full year of operations for Nora Plaza and Pan Am Plaza Garage that were acquired in 2019. The net increase of $8.3 million in depreciation and amortization at properties fully operational during 2019 and 2020 is primarily due to accelerated depreciation of certain tenant-related assets for tenants that vacated their spaces during 2020.
 
In 2019, we recorded impairment charges totaling $37.7 million related to a reduction in the expected holding period of certain operating properties. In 2020, we did not record any impairment charges. See additional discussion in Note 8 to the consolidated financial statements.

Interest expense decreased $8.9 million or 15.0%. The decrease is due to the significant debt reduction following the successful completion of Project Focus in 2019.

The Company incurred an $11.6 million loss on debt extinguishment for the year ended December 31, 2019 related to costs incurred to retire certain secured loans that were paid off in connection with property sales. There was no such activity in 2020.

We recorded a net gain of $4.7 million for the year ended December 31, 2020 on the sale of one redevelopment property, compared to a net gain of $39.0 million on the sale of 23 assets for the year ended December 31, 2019.
 
    Management’s discussion of the financial condition, changes in financial condition and results of operations for the year ended December 31, 2019, with comparison to the year ended December 31, 2018, was included in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019.
 

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 or preferred shares, unsecured debt securities, or other securities. 
 
Our Principal Capital Resources 
 
For a discussion of cash generated from operations, see “Cash Flows,” beginning on page 56.  In addition to cash generated from operations, we discuss below our other principal capital resources. 
 
The completion of Project Focus in 2019 has enhanced our liquidity position, reduced our leverage, and reduced our borrowing costs. We continue to focus on a balanced approach to growth and staggering and extending debt maturities in order to retain our financial flexibility.
  
As of December 31, 2020, we had approximately $523 million available under our Credit Facility for future borrowings based on the unencumbered asset pool allocated to the unsecured revolving credit facility. We also had $43.6 million in cash and cash equivalents as of December 31, 2020.  

We were in compliance with all applicable financial covenants under our Credit Facility, our unsecured term loans, and our senior unsecured notes as of December 31, 2020.

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

In the future, we will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. We may also raise capital by disposing of properties, land parcels or other assets that are no longer core components of our growth strategy.  The sale price may differ from our carrying value at the time of sale. 

Our Principal Liquidity Needs 
 
Short-Term Liquidity Needs 
 
Near-Term Debt Maturities. As of December 31, 2020, we did not have any debt scheduled to mature in 2021, excluding scheduled monthly principal payments.
  
Other Short-Term Liquidity Needs. The requirements for qualifying as a REIT and for a tax deduction for some or all of the dividends paid to shareholders necessitate that we distribute at least 90% of our taxable income on an annual basis. Such requirements cause us to have substantial liquidity needs over both the short term and the long term. Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, interest expense and scheduled principal payments on our debt, expected dividend payments to our common shareholders and to Common Unit holders, and recurring capital expenditures.

 In February 2021, our Board of Trustees declared a cash distribution of $0.17 per common share and Common Unit for the first quarter of 2021. This distribution is expected to be paid on or about April 15, 2021 to common shareholders and Common Unit holders of record as of April 8, 2021.
 
Other short-term liquidity needs also include expenditures for tenant improvements, renovation costs, external leasing commissions and recurring capital expenditures.  During the year ended December 31, 2020, we incurred $1.7 million of costs for recurring capital expenditures on operating properties, $12.0 million of costs for tenant improvements and external leasing commissions, and $17.4 million to re-lease anchor space at our operating properties related to tenants open and operating as of December 31, 2020 (excluding development and redevelopment properties). We currently anticipate incurring approximately $16 million to $20 million of additional major tenant improvements costs related to releasing vacant space at a number of our operating properties.

As of December 31, 2020, we had two development projects under construction: Eddy Street Commons in South Bend, Indiana and Glendale Town Center in Indianapolis, Indiana. Total estimated costs for these projects are $56.9 million, of which our share is estimated to be $12.6 million.  We anticipate incurring the majority of the remaining costs for the projects over the next 18 months.  We believe we have the ability to fund these projects through cash flow from operations or by borrowing on the Credit Facility. 

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

Potential Redevelopment Opportunities. We are currently evaluating additional redevelopment of several other properties. We believe we will have sufficient funding for these projects through cash flow from operations, borrowings on our Credit Facility and proceeds from asset sales. 
 
Selective Acquisitions, Developments and Joint Ventures. We may selectively pursue the acquisition and development of other properties, which would require additional capital.  It is unlikely that we would have sufficient funds on hand to meet these long-term capital requirements, requiring us to satisfy these needs through additional borrowings, sales of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions and/or participation in joint venture arrangements.  We cannot be certain that we would have access to these sources of capital on satisfactory terms, if at all, to fund our long-term liquidity requirements.  We evaluate all future opportunities against pre-established criteria including, but not limited to, location, demographics, expected return, tenant credit quality, tenant relationships, and the amount of existing retail space in the market.  Our ability to access the capital markets will be dependent on a number of factors, including general capital market conditions.
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Capitalized Expenditures on Consolidated Properties 
 
The following table summarizes cash capital expenditures for our development and redevelopment properties and other capital expenditures for the year ended December 31, 2020:
Year Ended
($ in thousands) December 31, 2020
Developments $ 2,919 
Redevelopment Opportunities 308 
Recently completed redevelopments and other 4,244 
Big Box Surge activity 17,998 
Recurring operating capital expenditures (primarily tenant improvement payments) 12,797 
Total $ 38,266 

We capitalize certain indirect costs such as interest, payroll, and other general and administrative costs related to these development activities.  If we had experienced a 10% reduction in development and redevelopment activities, without a corresponding decrease in indirect project costs, we would have recorded additional expense of $0.2 million for the year ended December 31, 2020.

Impact of Changes in Credit Ratings on Our Liquidity

We have been assigned investment grade corporate credit ratings from two nationally recognized credit rating agencies. These ratings were unchanged during 2020.

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

Cash Flows 

As of December 31, 2020, we had cash and cash equivalents on hand of $43.6 million. We may be subject to concentrations of credit risk with regard to our cash and cash equivalents.  We place our cash and short-term cash investments with highly rated financial institutions.  While we attempt to limit our exposure at any point in time, occasionally, such cash and investments may temporarily be in excess of FDIC and SIPC insurance limits.  We also maintain certain compensating balances in several financial institutions in support of borrowings from those institutions.  Such compensating balances were not material to the consolidated balance sheets.

Comparison of the Year Ended December 31, 2020 to the Year Ended December 31, 2019  
 
Cash provided by operating activities was $95.5 million for the year ended December 31, 2020, a decrease of $42.4 million from the same period of 2019.  The cash flows were negatively impacted due to the significant property sales activity throughout 2019 and reduced collection activity due to the COVID-19 pandemic.
 
Cash used in investing activities was $80.8 million for the year ended December 31, 2020, as compared to cash provided by investing activities of $416.6 million in the same period of 2019.  The major changes in cash used in and provided by investing activities are as follows: 
 
•Net proceeds of $23.0 million related to the sale of one redevelopment property and five parcels of land in 2020 compared to sale proceeds of $529.4 million from the sale of 23 assets in 2019;

•Acquisition of Eastgate Crossing in 2020 for $65.3 million compared to the acquisition of Nora Plaza and Pan Am Plaza Parking Garage in 2019 for $58.2 million; and

•Decrease in capital expenditures of $15.0 million, partially offset by a change in construction payables of $2.4 million in 2020. 
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Cash used in financing activities was $20.9 million for the year ended December 31, 2020, compared to cash used in financing activities of $547.2 million in the same period of 2019.  Highlights of significant cash sources and uses in financing activities during 2020 are as follows:
 
•In March 2020, we borrowed $300.0 million on the Credit Facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic;

•During the remainder of 2020, we repaid the $300.0 million borrowing on the Credit Facility as we became incrementally more confident in the recovery from the COVID-19 pandemic;

•We borrowed $25.0 million on the Credit Facility to fund a portion of the purchase price of Eastgate Crossing;

•In 2019, we used the proceeds from the sale of operating properties to pay down $395.5 million of secured and unsecured debt;

•In 2019, we paid $14.5 million of debt extinguishment costs; and

•In 2020, we made distributions to common shareholders and Common Unit holders of $39.7 million, compared to distributions of $137.1 million in 2019.

Management’s discussion of the cash flows for the year ended December 31, 2018, with comparison to the year ended December 31, 2019, was included in Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2019.


Other Matters

Financial Instruments

We are exposed to capital market risk, such as changes in interest rates. In order to reduce the volatility relating to interest rate risk, we may enter into interest rate hedging arrangements from time to time. We do not utilize derivative financial instruments for trading or speculative purposes.
  
Obligations in Connection with Projects Under Construction 
 
We are obligated under various completion guarantees with tenants to complete tenant-specific spaces currently under construction. We believe we currently have sufficient financing in place to fund our investment in any existing or future projects through cash from operations or borrowings on our Credit Facility.   

In addition, we have provided a repayment guaranty on a $33.8 million construction loan with the development of Embassy Suites at the University of Notre Dame consistent with our 35% ownership interest. As of December 31, 2020, the current outstanding loan balance is $33.6 million, of which our share is $11.8 million.  

Our share of estimated future costs for under construction and future developments and redevelopments is further discussed on page 55 in the "Short and Long-Term Liquidity Needs" section.


Outstanding Indebtedness 
 
The following table presents details of outstanding consolidated indebtedness as of December 31, 2020 and 2019 adjusted for hedges: 
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($ in thousands)  December 31,
2020 		December 31,
2019
Senior unsecured notes $ 550,000  $ 550,000 
Unsecured revolving credit facility 25,000  — 
Unsecured term loans 250,000  250,000 
Mortgage notes payable - fixed rate 295,966  297,472 
Mortgage notes payable - variable rate 55,110  55,830 
Net debt premiums and issuance costs, net (5,282) (6,722)
Total mortgage and other indebtedness $ 1,170,794  $ 1,146,580 
  
 Consolidated indebtedness, including weighted average maturities and weighted average interest rates at December 31, 2020, is summarized below:  
($ in thousands) Outstanding Amount Ratio Weighted Average
Interest Rate 		Weighted Average
Maturity
(in years)
Fixed Rate Debt $ 1,095,966  94  % 4.17  % 5.0 
Variable Rate Debt 1
80,110  6  % 1.60  % 1.5 
Net Debt Premiums and Issuance Costs, Net (5,282) N/A N/A N/A
Total Consolidated Debt $ 1,170,794  100  % 4.00  % 4.7 

_______
1 Fixed rate debt includes, and variable rate date excludes, the portion of such debt that has been hedged by interest rate derivatives. As of December 31, 2020, $250 million in variable rate debt is hedged for a weighted average of 2.2 years.

Mortgage indebtedness is collateralized by certain real estate properties and leases.  Mortgage indebtedness is generally repaid in monthly installments of interest and principal and matures over various terms through 2030.
 
Variable interest rates on mortgage indebtedness is based on LIBOR plus 160 basis points.  At December 31, 2020, the one-month LIBOR interest rate was 0.14%.  Fixed interest rates on mortgage loans range from 3.78% to 5.73%.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK  
 
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 our Credit Facility and unsecured term loans and 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 $1.2 billion of outstanding consolidated indebtedness as of December 31, 2020 (inclusive of net unamortized net debt premiums and issuance costs of $5.3 million). As of December 31, 2020, we were party to various consolidated interest rate hedge agreements totaling $250.0 million, with maturities over various terms through 2025. Reflecting the effects of these hedge agreements, our fixed and variable rate debt would have been $1.1 billion (94%) and $80.1 million (6%), respectively, of our total consolidated indebtedness at December 31, 2020. 
 
We do not have any fixed rate debt scheduled to mature during 2021.  A 100-basis point change in interest rates on our unhedged variable rate debt as of December 31, 2020 would change our annual cash flow by $0.8 million.  Based upon the terms of our variable rate debt, we are most vulnerable to a change in short-term LIBOR interest rates.  

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 
 
The consolidated financial statements of the Company included in this Report are listed in Part IV, Item 15(a) of this report. 
 
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 
 
None. 
 
ITEM 9A. CONTROLS AND PROCEDURES 

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

Changes in Internal Control Over Financial Reporting 
 
There has been no change in the Parent Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(b) under the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2020 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Management Report on Internal Control Over Financial Reporting 
 
The Parent Company is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision of and with the participation of the Parent Company's management, including its Chief Executive Officer and Chief Financial Officer, the Parent Company conducted an evaluation of the effectiveness of its 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 its evaluation under the framework in Internal Control – Integrated Framework, the Parent Company's management has concluded that its internal control over financial reporting was effective as of December 31, 2020. 
59

 
The Parent Company's independent auditors, KPMG LLP, an independent registered public accounting firm, have issued a report on its internal control over financial reporting as stated in their report which is included herein. 
 
The Parent Company's 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. 

Kite Realty Group, L.P.

Evaluation of Disclosure Controls and Procedures 
 
An evaluation was performed under the supervision and with the participation of the Operating Partnership’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Operating Partnership's Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective. 
 
Changes in Internal Control Over Financial Reporting 
 
There has been no change in the Operating Partnership’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(b) under the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of December 31, 2020 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting.

Management Report on Internal Control Over Financial Reporting 
 
The Operating Partnership is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision of and with the participation of the Operating Partnership's management, including its Chief Executive Officer and Chief Financial Officer, the Operating Partnership conducted an evaluation of the effectiveness of its 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 its evaluation under the framework in Internal Control – Integrated Framework, the Operating Partnership's management has concluded that its internal control over financial reporting was effective as of December 31, 2020. 
 
The Operating Partnership's independent auditors, KPMG LLP, an independent registered public accounting firm, have issued a report on its internal control over financial reporting as stated in their report which is included herein. 
 
The Operating Partnership's 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. 



Report of Independent Registered Public Accounting Firm


To the Shareholders and Board of Trustees of Kite Realty Group Trust:

Opinion on Internal Control Over Financial Reporting

We have audited Kite Realty Group Trust and subsidiaries’ (the Company) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Company as of December 31, 2020, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes and financial statement schedule III – Consolidated Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements), and our report dated February 22, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Company’s 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 are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

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.



 
/s/ KPMG LLP

Indianapolis, Indiana
February 22, 2021




Report of Independent Registered Public Accounting Firm


To the Partners of Kite Realty Group, L.P. and subsidiaries and Board of Trustees of Kite Realty Group Trust:

Opinion on Internal Control Over Financial Reporting

We have audited Kite Realty Group, L.P. and subsidiaries’ (the Partnership) internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Partnership maintained, in all material respects, effective internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheet of the Partnership as of December 31, 2020, the related consolidated statements of operations and comprehensive income, partner’s equity, and cash flows for the year ended December 31, 2020, and the related notes and financial statement schedule III – Consolidated Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements), and our report dated February 22, 2021 expressed an unqualified opinion on those consolidated financial statements.

Basis for Opinion

The Partnership’s 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 Partnership’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. 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 of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

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.


 
/s/ KPMG LLP
 
Indianapolis, Indiana
February 22, 2021



ITEM 9B. OTHER INFORMATION 
 
None
 
 
63

PART III 
 
ITEM 10. INFORMATION ABOUT OUR EXECUTIVE OFFICERS   
 
The information required by this Item is hereby incorporated by reference to the material appearing in our 2021 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. 
 
ITEM 11. EXECUTIVE COMPENSATION  
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement. 
 
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDER MATTERS  
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement. 
 
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE 
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement. 
 
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES  
 
The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement.




PART IV 
 
ITEM 15. EXHIBIT AND FINANCIAL STATEMENT SCHEDULES 
(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. Other financial statement schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.
(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.





EXHIBIT INDEX
 
Exhibit No.   Description   Location
2.1     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     Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015
3.2 Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 28, 2015
3.3 Incorporated by reference to Exhibit 3.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 20, 2020
3.4     Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015
3.5 Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 28, 2015
3.6
Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 20, 2020
3.7 Filed herewith
4.1     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 Incorporated by reference to Exhibit 4.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016
4.3 Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016
4.4

Incorporated by reference to Exhibits 4.2 and 4.3 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016
4.5 Filed herewith
66

10.1     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     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     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     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 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 5, 2019
10.6 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 26, 2019
10.7     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 December 31, 2020
10.8     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 December 31, 2020
10.9     Incorporated by reference to Exhibit 10.3 the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on December 31, 2020
10.10 Incorporated by reference to Exhibit 10.8 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust filed with the SEC on November 10, 2014
10.11 Filed herewith
10.12     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
10.13     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
10.14     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
67

10.15     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
10.16     Incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015
10.17 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 November 7, 2018
10.18     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
10.19     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
10.20     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
10.21     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
10.22     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
10.23     Incorporated by reference to Exhibit 10.4 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust filed with the SEC on November 11, 2008
10.24     Incorporated by reference to Exhibit 10.20 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on March 8, 2013
10.25     Incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on March 7, 2014
10.26     Incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on March 7, 2014
10.27     Incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of Kite Realty Group Trust filled with the SEC on March 7, 2014
10.28     Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015
68

10.29     Incorporated by reference to Exhibit 10.25 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015
10.30     Incorporated by reference to Exhibit 10.26 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015
10.31 Filed herewith
10.32     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
10.33     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
10.34     Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust filed with the SEC on November 14, 2005
10.35     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
10.36     Incorporated by reference to Exhibit 10.5 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 29, 2014
10.37 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 February 3, 2016
10.38 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 17, 2019
10.39     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
10.40     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
10.41 Incorporated by reference to Exhibit 10.49 of the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 20, 2018
10.42 Incorporated by reference to Exhibit 10.1 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust filed with the SEC on August 9, 2006
69

10.43 Incorporated by reference to Exhibit 10.38 of the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2017
10.44 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 November 7, 2018
10.45 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 March 5, 2019
10.46 Filed herewith
10.47     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, 2016
10.48 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 July 29, 2016
10.49 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
10.50     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
10.51     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
10.52     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
10.53 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 April 25, 2018
10.54 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 26, 2018
10.55 Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on October 26, 2018
70

10.56 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 3, 2015
21.1     Filed herewith
23.1     Filed herewith
23.2     Filed herewith
23.3 Filed herewith
23.4 Filed herewith
31.1     Filed herewith
31.2     Filed herewith
31.3     Filed herewith
         
31.4     Filed herewith
32.1     Filed herewith
32.2     Filed herewith
99.1 Filed herewith
101.INS   Inline XBRL Instance Document   Filed herewith
101.SCH   Inline XBRL Taxonomy Extension Schema Document   Filed herewith
101.CAL   Inline XBRL Taxonomy Extension Calculation Linkbase Document   Filed herewith
101.DEF   Inline XBRL Taxonomy Extension Definition Linkbase Document   Filed herewith
101.LAB   Inline XBRL Taxonomy Extension Label Linkbase Document   Filed herewith
101.PRE   Inline XBRL Taxonomy Extension Presentation Linkbase Document   Filed herewith
104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) Filed herewith

71

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


ITEM 16. FORM 10-K SUMMARY

Not applicable.
72

SIGNATURES 
 
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
 
  KITE REALTY GROUP TRUST
    (Registrant)
     
    /s/ John A. Kite
    John A. Kite
February 22, 2021   Chairman and Chief Executive Officer
(Date)   (Principal Executive Officer)
     
     
    /s/ Heath R. Fear
    Heath R. Fear
February 22, 2021   Executive Vice President and Chief Financial Officer
(Date)   (Principal Financial Officer)
  KITE REALTY GROUP L.P.
    (Registrant)
By: Kite Realty Group Trust, its sole general partner
     
    /s/ John A. Kite
    John A. Kite
February 22, 2021   Chairman and Chief Executive Officer
(Date)   (Principal Executive Officer)
     
     
    /s/ Heath R. Fear
    Heath R. Fear
February 22, 2021   Executive Vice President and 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 the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
 
73

Signature   Title   Date
         
/s/ John A. Kite   Chairman, Chief Executive Officer, and Trustee
(Principal Executive Officer) 		  February 22, 2021
(John A. Kite)    
         
/s/ William E. Bindley   Trustee   February 22, 2021
(William E. Bindley)        
         
/s/ Victor J. Coleman   Trustee   February 22, 2021
(Victor J. Coleman)        
         
/s/ Christie B. Kelly   Trustee   February 22, 2021
(Christie B. Kelly)        
         
/s/ David R. O’Reilly   Trustee   February 22, 2021
(David R. O’Reilly)        
         
/s/ Barton R. Peterson   Trustee   February 22, 2021
(Barton R. Peterson)        
         
/s/ Lee A. Daniels   Trustee   February 22, 2021
(Lee A. Daniels)        
         
/s/ Charles H. Wurtzebach   Trustee   February 22, 2021
(Charles H. Wurtzebach)        
/s/ Caroline L. Young Trustee February 22, 2021
(Caroline L. Young)
         
/s/ Heath R. Fear   Executive Vice President and Chief Financial Officer (Principal Financial Officer)   February 22, 2021
(Heath R. Fear)    
         
/s/ David E. Buell   Senior Vice President, Chief Accounting Officer   February 22, 2021
(David E. Buell)    

74

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

Index to Financial Statements
 
    Page
Consolidated Financial Statements:  
Kite Realty Group Trust:
  F-1
Kite Realty Group, L.P. and subsidiaries
F-3
Kite Realty Group Trust:
  F-7
  F-8
  F-9
  F-10
Kite Realty Group, L.P. and subsidiaries
F-11
F-12
F-13
F-14
Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries:
  F-15
Financial Statement Schedule:  
Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries:
  F-41
  F-45
  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.  



Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Trustees of Kite Realty Group Trust:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Kite Realty Group Trust and subsidiaries (the Company) as of December 31, 2020, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes and financial statement schedule III – Consolidated Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2021 expressed an unqualified opinion on the effectiveness of the Partnership’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of investment properties for potential impairment

As discussed in Note 2 of the consolidated financial statements, land, buildings, and improvements as of December 31, 2020 was $3,109,122 thousand. The Company’s investment properties are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. This review for possible impairment triggering events requires certain assumptions, estimates, and significant judgment. The evaluation of investment properties for potential impairment is subject to certain management assumptions which includes the anticipated holding period for a real estate investment property.

We identified the evaluation of investment properties for potential impairment as a critical audit matter. Subjective and challenging auditor judgment was required to evaluate the Company’s intent and ability to hold investment properties for particular periods of time. A shortening of the anticipated holding period could indicate a potential impairment.

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control over the Company’s process to evaluate potential impairment triggering events, including evaluation of holding period. We compared the holding period assumed in the
F-1

Company’s analysis to the Company’s historical holding period for similar assets. We inquired of Company officials and inspected documents, such as meeting minutes of the board of trustees and sub-committees and the capital allocation committee to evaluate the Company’s intent and ability to hold investment properties for particular periods of time. We read external communications with investors and analysts in order to identify information regarding potential sales of the Company’s investment properties.


/s/ KPMG LLP

We have served as the Company’s auditor since 2020.

Indianapolis, Indiana
February 22, 2021
















































F-2



Report of Independent Registered Public Accounting Firm

To the Partners of Kite Realty Group, L.P. and subsidiaries and Board of Trustees of Kite Realty Group Trust:

Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheet of Kite Realty Group, L.P. and subsidiaries (the Partnership) as of December 31, 2020, the related consolidated statements of operations and comprehensive income, partner’s equity, and cash flows for the year ended December 31, 2020, and the related notes and financial statement schedule III – Consolidated Real Estate and Accumulated Depreciation (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership as of December 31, 2020, and the results of its operations and its cash flows for the year ended December 31, 2020, in conformity with U.S. generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Partnership’s internal control over financial reporting as of December 31, 2020, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 22, 2021 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Evaluation of investment properties for potential impairment

As discussed in Note 2 of the consolidated financial statements, land, buildings, and improvements as of December 31, 2020 was $3,109,122 thousand. The Partnership’s investment properties are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. This review for possible impairment triggering events requires certain assumptions, estimates, and significant judgment. The evaluation of investment properties for potential impairment is subject to certain management assumptions which includes the anticipated holding period for a real estate investment property.

We identified the evaluation of investment properties for potential impairment as a critical audit matter. Subjective and challenging auditor judgment was required to evaluate the Partnership’s intent and ability to hold investment properties for particular periods of time. A shortening of the anticipated holding period could indicate a potential impairment.

F-3

The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of an internal control over the Partnership’s process to evaluate potential impairment triggering events, including evaluation of holding period. We compared the holding period assumed in the Partnership’s analysis to the Partnership’s historical holding period for similar assets. We inquired of Partnership officials and inspected documents, such as meeting minutes of the Parent Company’s board of trustees and sub-committees and the capital allocation committee to evaluate the Partnership’s intent and ability to hold investment properties for particular periods of time. We read external communications with investors and analysts in order to identify information regarding potential sales of the Partnership’s investment properties.


/s/ KPMG LLP

We have served as the Partnership’s auditor since 2020.

Indianapolis, Indiana
February 22, 2021













































F-4






Report of Independent Registered Public Accounting Firm 


The Shareholders and Board of Trustees of Kite Realty Group Trust:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Kite Realty Group Trust (the Company) as of December 31, 2019, the related consolidated statements of operations and comprehensive income, shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Adoption of ASU No. 2016-02

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 
  
/s/ Ernst & Young LLP

We served as the Company’s auditor from 2004 until 2020.
Indianapolis, Indiana
February 20, 2020
F-5

Report of Independent Registered Public Accounting Firm 


The Partners of Kite Realty Group, L.P. and subsidiaries and the Board of Trustees of Kite Realty Group Trust:

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheet of Kite Realty Group, L.P. and subsidiaries (the Partnership) as of December 31, 2019, the related consolidated statements of operations and comprehensive income, partner’s equity and cash flows for each of the two years in the period ended December 31, 2019, and the related notes and financial statement schedule listed in the Index at Item 15(a) (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Partnership at December 31, 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2019, in conformity with U.S. generally accepted accounting principles.

Adoption of ASU No. 2016-02

As discussed in Note 2 to the consolidated financial statements, the Partnership changed its method of accounting for leases in 2019 due to the adoption of Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842), and the related amendments.

Basis for Opinion
These financial statements are the responsibility of the Partnership’s management. Our responsibility is to express an opinion on the Partnership’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Partnership in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.


 
/s/ Ernst & Young LLP

We served as the Partnership’s auditor from 2015 until 2020.
Indianapolis, Indiana
February 20, 2020

F-6


Kite Realty Group Trust
Consolidated Balance Sheets
($ in thousands, except share data)
  
  December 31,
2020 		December 31,
2019
Assets:    
Investment properties at cost: $ 3,143,961  $ 3,087,391 
      Less: accumulated depreciation (755,100) (666,952)
2,388,861  2,420,439 
Cash and cash equivalents 43,648  31,336 
Tenant and other receivables, including accrued straight-line rent of $24,783 and $27,256, respectively
57,154  55,286 
Restricted cash and escrow deposits 2,938  21,477 
Deferred costs, net 63,171  73,157 
Prepaid and other assets 39,975  34,548 
Investments in unconsolidated subsidiaries 12,792  12,644 
Total Assets $ 2,608,539  $ 2,648,887 
Liabilities and Shareholders' Equity:
Mortgage and other indebtedness, net $ 1,170,794  $ 1,146,580 
Accounts payable and accrued expenses 77,469  69,817 
Deferred revenue and other liabilities 85,649  90,180 
Total Liabilities 1,333,912  1,306,577 
Commitments and contingencies
Limited Partners' interests in Operating Partnership and other 43,275  52,574 
Equity:
Kite Realty Group Trust Shareholders' Equity:
Common Shares, $0.01 par value, 225,000,000 shares authorized, 84,187,999 and 83,963,369 shares issued and outstanding at December 31, 2020 and December 31, 2019, respectively
842  840 
Additional paid in capital 2,085,003  2,074,436 
Accumulated other comprehensive loss (30,885) (16,283)
Accumulated deficit (824,306) (769,955)
Total Kite Realty Group Trust Shareholders' Equity 1,230,654  1,289,038 
Noncontrolling Interest 698  698 
Total Equity 1,231,352  1,289,736 
Total Liabilities and Shareholders' Equity $ 2,608,539  $ 2,648,887 
 
The accompanying notes are an integral part of these consolidated financial statements.
F-7

Kite Realty Group Trust
Consolidated Statements of Operations and Comprehensive Income
($ in thousands, except share and per share data) 
  Year Ended December 31,
  2020 2019 2018
Revenue:      
Rental income $ 257,670  $ 308,399  $ 338,523 
Other property related revenue 8,597  6,326  13,138 
Fee income 378  448  2,523 
Total revenue 266,645  315,173  354,184 
Expenses:  
  Property operating 41,012  45,575  50,356 
  Real estate taxes 35,867  38,777  42,378 
  General, administrative, and other 30,840  28,214  21,320 
  Depreciation and amortization 128,648  132,098  152,163 
  Impairment charges —  37,723  70,360 
Total expenses 236,367  282,387  336,577 
Gains on sale of operating properties, net 4,733  38,971  3,424 
Operating income 35,011  71,757  21,031 
  Interest expense (50,399) (59,268) (66,785)
  Income tax benefit of taxable REIT subsidiary 696  282  227 
  Loss on debt extinguishment —  (11,572) — 
  Equity in loss of unconsolidated subsidiary (1,685) (628) (278)
  Other income (expense), net 254  (573) (646)
Consolidated net loss (16,123) (2) (46,451)
Net income attributable to noncontrolling interests (100) (532) (116)
Net loss attributable to Kite Realty Group Trust (16,223) (534) (46,567)
Net income per common share – basic & diluted $ (0.19) $ (0.01) $ (0.56)
Weighted average common shares outstanding - basic 84,142,261  83,926,296  83,693,385 
Weighted average common shares outstanding - diluted 84,142,261  83,926,296  83,693,385 
Dividends declared per common share $ 0.4495  $ 1.2700  $ 1.2700 
Consolidated net loss $ (16,123) $ (2) $ (46,451)
Change in fair value of derivatives (14,969) (13,158) (6,647)
Total comprehensive loss (31,092) (13,160) (53,098)
Comprehensive loss (income) attributable to noncontrolling interests 367  (160) 44 
Comprehensive loss attributable to Kite Realty Group Trust $ (30,725) $ (13,320) $ (53,054)

The accompanying notes are an integral part of these consolidated financial statements.
F-8

Kite Realty Group Trust
Consolidated Statements of Shareholders’ Equity
($ in thousands, except share data)
  Common Shares Additional
Paid-in Capital 		Accumulated Other
Comprehensive (Loss) Income 		Accumulated
Deficit
 
Total
Shares Amount
Balances, December 31, 2017 83,606,068  $ 836  $ 2,071,418  $ 2,990  $ (509,833) $ 1,565,411 
Stock compensation activity 163,318  2  5,695  —  —  5,697 
Other comprehensive loss attributable to Kite Realty Group Trust —  —  (6,487) —  (6,487)
Distributions declared to common shareholders —  —  —  —  (106,335) (106,335)
Net loss attributable to Kite Realty Group Trust —  —  —  —  (46,567) (46,567)
Exchange of redeemable noncontrolling interests for common shares 31,500  —  561  —  —  561 
Adjustment to redeemable noncontrolling interests 0 0 425  —  —  425 
Balances, December 31, 2018 83,800,886  $ 838  $ 2,078,099  $ (3,497) $ (662,735) $ 1,412,705 
Stock compensation activity 152,184  2  6,147  —  —  6,149 
Other comprehensive loss attributable to Kite Realty Group Trust —  —  (12,786) —  (12,786)
Distributions declared to common shareholders —  —  —  —  (106,686) (106,686)
Net loss attributable to Kite Realty Group Trust —  —  —  —  (534) (534)
Exchange of redeemable noncontrolling interests for common shares 10,299  —  167  —  —  167 
Adjustment to redeemable noncontrolling interests —  —  (9,977) —  —  (9,977)
Balances, December 31, 2019 83,963,369  $ 840  $ 2,074,436  $ (16,283) $ (769,955) $ 1,289,038 
Stock compensation activity 206,591  2  5,483  —  —  5,485 
Other comprehensive loss attributable to Kite Realty Group Trust —  —  (14,602) —  (14,602)
Distributions declared to common shareholders —  —  —  —  (38,128) (38,128)
Net loss attributable to Kite Realty Group Trust —  —  —  —  (16,223) (16,223)
Acquisition of partner's noncontrolling interest in Pan Am Plaza —  —  (2,500) —  —  (2,500)
Exchange of redeemable noncontrolling interests for common shares 18,039  —  187  —  —  187 
Adjustment to redeemable noncontrolling interests —  —  7,397  —  —  7,397 
Balances, December 31, 2020 84,187,999  $ 842  $ 2,085,003  $ (30,885) $ (824,306) $ 1,230,654 
 
The accompanying notes are an integral part of these consolidated financial statements.

F-9

Kite Realty Group Trust
Consolidated Statements of Cash Flows
($ in thousands)
  Year Ended December 31,
  2020 2019 2018
Cash flow from operating activities:      
Consolidated net loss $ (16,123) $ (2) $ (46,451)
Adjustments to reconcile consolidated net income to net cash provided by operating activities:      
Gain on sale of operating properties (4,733) (38,971) (3,424)
Impairment charge —  37,723  70,360 
Loss on debt extinguishment —  11,572  — 
Straight-line rent 3,131  (2,158) (3,060)
Depreciation and amortization 130,783  134,860  156,107 
Compensation expense for equity awards 5,998  5,375  4,869 
Amortization of debt fair value adjustment (444) (1,467) (2,630)
Amortization of in-place lease liabilities (3,822) (3,776) (6,360)
Changes in assets and liabilities:      
Tenant receivables (3,062) 3,170  (642)
Deferred costs and other assets (7,618) (6,265) (13,396)
Accounts payable, accrued expenses, deferred revenue, and other liabilities (8,595) (2,099) (990)
Net cash provided by operating activities 95,515  137,962  154,383 
Cash flow from investing activities:      
Acquisitions of interests in properties (65,298) (58,205) — 
Capital expenditures (38,266) (53,278) (59,304)
Net proceeds from sales of land 9,134  —  — 
Net proceeds from sales of operating properties 13,888  529,417  218,387 
Small business loan funding (2,199) —  — 
Change in construction payables 2,442  (542) (777)
Capital contribution to unconsolidated joint venture (541) (798) (9,973)
Net cash (used in) provided by investing activities (80,840) 416,594  148,333 
Cash flow from financing activities:      
Proceeds from issuance of common shares, net 72  350  76 
Repurchases of common shares upon the vesting of restricted shares (1,336) (533) (350)
Loan proceeds 325,000  75,000  399,500 
Loan transaction costs —  —  (5,208)
Loan payments (302,477) (470,515) (551,379)
Debt extinguishment costs —  (14,455) — 
Distributions paid – common shareholders (38,128) (133,258) (106,316)
Distributions paid – redeemable noncontrolling interests (1,533) (3,838) (3,716)
Acquisition of partner's interest in Pan Am Plaza joint venture (2,500) —  — 
Acquisition of partners' interests in Territory joint venture —  —  (21,993)
Net cash used in financing activities (20,902) (547,249) (289,386)
Net change in cash, cash equivalents, and restricted cash (6,227) 7,307  13,330 
Cash, cash equivalents, and restricted cash beginning of period 52,813  45,506  32,176 
Cash, cash equivalents, and restricted cash end of period $ 46,586  $ 52,813  $ 45,506 
Supplemental disclosures      
Cash paid for interest, net of capitalized interest $ 50,387  $ 60,534  $ 67,998 
Non-cash investing activities
Net investment in sales-type lease $ 4,665  $ —  $ — 
The accompanying notes are an integral part of these consolidated financial statements.
F-10

Kite Realty Group, L.P. and subsidiaries
Consolidated Balance Sheets
($ in thousands, except unit data)
  
  December 31,
2020 		December 31,
2019
Assets:
   
Investment properties at cost: $ 3,143,961  $ 3,087,391 
      Less: accumulated depreciation (755,100) (666,952)
  2,388,861  2,420,439 
Cash and cash equivalents 43,648  31,336 
Tenant and other receivables, including accrued straight-line rent of $24,783 and $27,256, respectively
57,154  55,286 
Restricted cash and escrow deposits 2,938  21,477 
Deferred costs, net 63,171  73,157 
Prepaid and other assets 39,975  34,548 
Investments in unconsolidated subsidiaries 12,792  12,644 
Total Assets $ 2,608,539  $ 2,648,887 
Liabilities and Equity:    
Mortgage and other indebtedness, net $ 1,170,794  $ 1,146,580 
Accounts payable and accrued expenses 77,469  69,817 
Deferred revenue and other liabilities 85,649  90,180 
Total Liabilities 1,333,912  1,306,577 
Commitments and contingencies
Limited Partners' interests in Operating Partnership and other 43,275  52,574 
Partners Equity:
 Parent Company:
Common equity, 84,187,999 and 83,963,369 units issued and outstanding at December 31, 2020 and December 31, 2019, respectively
1,261,539  1,305,321 
Accumulated other comprehensive loss (30,885) (16,283)
  Total Partners Equity 1,230,654  1,289,038 
Noncontrolling Interests 698  698 
Total Equity 1,231,352  1,289,736 
Total Liabilities and Equity $ 2,608,539  $ 2,648,887 
 
The accompanying notes are an integral part of these consolidated financial statements.

F-11

Kite Realty Group, L.P. and subsidiaries
Consolidated Statements of Operations and Comprehensive Income
($ in thousands, except unit and per unit data) 
  Year Ended December 31,
  2020 2019 2018
Revenue:      
Rental income $ 257,670  $ 308,399  $ 338,523 
Other property related revenue 8,597  6,326  13,138 
Fee income 378  448  2,523 
Total revenue 266,645  315,173  354,184 
Expenses:      
Property operating 41,012  45,575  50,356 
Real estate taxes 35,867  38,777  42,378 
General, administrative, and other 30,840  28,214  21,320 
Depreciation and amortization 128,648  132,098  152,163 
Impairment charge —  37,723  70,360 
Total expenses 236,367  282,387  336,577 
Gain on sale of operating properties, net 4,733  38,971  3,424 
Operating income 35,011  71,757  21,031 
Interest expense (50,399) (59,268) (66,785)
Income tax benefit of taxable REIT subsidiary 696  282  227 
Loss on debt extinguishment —  (11,572) — 
Equity in loss of unconsolidated subsidiaries (1,685) (628) (278)
Other income (expense), net 254  (573) (646)
Net loss (16,123) (2) (46,451)
Net income attributable to noncontrolling interests (528) (528) (1,151)
Net loss attributable to common unitholders $ (16,651) $ (530) $ (47,602)
Allocation of net (loss) income:
Limited Partners $ (428) $ 4  $ (1,035)
Parent Company (16,223) (534) (46,567)
$ (16,651) $ (530) $ (47,602)
Net loss per unit - basic and diluted $ (0.19) $ (0.01) $ (0.56)
Weighted average common units outstanding - basic 86,361,139  86,027,409  85,740,449 
Weighted average common units outstanding - diluted 86,361,139  86,027,409  85,740,449 
Distributions declared per common unit $ 0.4495  $ 1.2700  $ 1.2700 
Consolidated net loss $ (16,123) $ (2) $ (46,451)
Change in fair value of derivatives (14,969) (13,158) (6,647)
Total comprehensive loss (31,092) (13,160) (53,098)
Comprehensive income attributable to noncontrolling interests (528) (528) (1,151)
Comprehensive loss attributable to common unitholders $ (31,620) $ (13,688) $ (54,249)

The accompanying notes are an integral part of these consolidated financial statements.
F-12

Kite Realty Group, L.P. and subsidiaries
Consolidated Statements of Partner's Equity
($ in thousands)
  General Partner Total
Common Equity Accumulated
Other
Comprehensive
(Loss) Income
Balances, December 31, 2017 $ 1,562,421  $ 2,990  $ 1,565,411 
Stock compensation activity 5,697  —  5,697 
Other comprehensive loss attributable to Parent Company —  (6,487) (6,487)
Distributions declared to Parent Company (106,335) —  (106,335)
Net loss attributable to Parent Company (46,567) —  (46,567)
Conversion of Limited Partner Units to shares of the Parent Company 561  —  561 
Adjustment to redeemable noncontrolling interests 425  —  425 
Balances, December 31, 2018 $ 1,416,202  $ (3,497) $ 1,412,705 
Stock compensation activity 6,149  —  6,149 
Other comprehensive loss attributable to Parent Company —  (12,786) (12,786)
Distributions declared to Parent Company (106,686) —  (106,686)
Net loss attributable to Parent Company (534) —  (534)
Conversion of Limited Partner Units to shares of the Parent Company 167  —  167 
Adjustment to redeemable noncontrolling interests (9,977) —  (9,977)
Balances, December 31, 2019 $ 1,305,321  $ (16,283) $ 1,289,038 
Stock compensation activity 5,485  —  5,485 
Other comprehensive loss attributable to Parent Company —  (14,602) (14,602)
Distributions declared to Parent Company (38,128) —  (38,128)
Net loss attributable to Parent Company (16,223) —  (16,223)
Acquisition of partner's noncontrolling interest in Pan Am Plaza (2,500) —  (2,500)
Conversion of Limited Partner Units to shares of the Parent Company 187  —  187 
Adjustment to redeemable noncontrolling interests 7,397  —  7,397 
Balances, December 31, 2020 $ 1,261,539  $ (30,885) $ 1,230,654 
 
The accompanying notes are an integral part of these consolidated financial statements.

F-13

Kite Realty Group, L.P. and subsidiaries
Consolidated Statements of Cash Flows
($ in thousands)
  Year Ended December 31,
  2020 2019 2018
Cash flow from operating activities:      
Consolidated net loss $ (16,123) $ (2) $ (46,451)
Adjustments to reconcile consolidated net income to net cash provided by operating activities:      
Gain on sales of operating properties (4,733) (38,971) (3,424)
Impairment charge —  37,723  70,360 
Loss on debt extinguishment —  11,572  — 
Straight-line rent 3,131  (2,158) (3,060)
Depreciation and amortization 130,783  134,860  156,107 
Compensation expense for equity awards 5,998  5,375  4,869 
Amortization of debt fair value adjustment (444) (1,467) (2,630)
Amortization of in-place lease liabilities (3,822) (3,776) (6,360)
Changes in assets and liabilities:      
Tenant receivables (3,062) 3,170  (642)
Deferred costs and other assets (7,618) (6,265) (13,396)
Accounts payable, accrued expenses, deferred revenue, and other liabilities (8,595) (2,099) (990)
Net cash provided by operating activities 95,515  137,962  154,383 
Cash flow from investing activities:      
Acquisitions of interests in properties (65,298) (58,205) — 
Capital expenditures (38,266) (53,278) (59,304)
Net proceeds from sales of land 9,134  —  — 
Net proceeds from sales of operating properties 13,888  529,417  218,387 
Change in construction payables 2,442  (542) (777)
Small business loan funding (2,199) —  — 
Capital contribution to unconsolidated joint venture (541) (798) (9,973)
Net cash (used in) provided by investing activities (80,840) 416,594  148,333 
Cash flow from financing activities:      
Contributions from the General Partner 72  350  76 
Repurchases of common shares upon the vesting of restricted shares (1,336) (533) (350)
Loan proceeds 325,000  75,000  399,500 
Loan transaction costs —  —  (5,208)
Loan payments (302,477) (470,515) (551,379)
Debt extinguishment costs —  (14,455) — 
Distributions paid – common unitholders (38,128) (133,258) (106,316)
Distributions paid – redeemable noncontrolling interests (1,533) (3,838) (3,716)
Acquisition of partner's interest in Pan Am Plaza joint venture (2,500) —  — 
Acquisition of partners' interests in Territory joint venture —  —  (21,993)
Net cash used in financing activities (20,902) (547,249) (289,386)
Net change in cash, cash equivalents, and restricted cash (6,227) 7,307  13,330 
Cash, cash equivalents, and restricted cash beginning of period 52,813  45,506  32,176 
Cash, cash equivalents, and restricted cash end of period $ 46,586  $ 52,813  $ 45,506 
Supplemental disclosures      
Cash paid for interest, net of capitalized interest $ 50,387  $ 60,534  $ 67,998 
Non-cash investing activities
Net investment in sales-type lease $ 4,665  $ —  $ — 
The accompanying notes are an integral part of these consolidated financial statements.
F-14

Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries
Notes to Consolidated Financial Statements
December 31, 2020
($ in thousands, except share, per share, unit and per unit amounts and where indicated in millions or billions.)
 
Note 1. Organization 
 
Kite Realty Group Trust (the "Parent Company"), through its majority-owned subsidiary, Kite Realty Group, L.P. (the “Operating Partnership”), owns interests in various operating subsidiaries and joint ventures engaged in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States. The terms "Company," "we," "us," and "our" refer to the Parent Company and the Operating Partnership, collectively, and those entities owned or controlled by the Parent Company and/or the Operating Partnership.

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

The Parent Company is the sole general partner of the Operating Partnership, and as of December 31, 2020 owned approximately 97.1% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.9% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) were owned by the limited partners. As the sole general partner of the Operating Partnership, the Parent Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership. The Parent Company and the Operating Partnership are operated as one enterprise. The management of the Parent Company consists of the same members as the management of the Operating Partnership. As the sole general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have any significant assets other than its investment in the Operating Partnership.  
   
At December 31, 2020, we owned interests in 90 operating and redevelopment properties totaling approximately 17.3 million square feet. We also owned two development projects under construction as of this date. Of the 90 properties, 87 are consolidated in these financial statements, and the remaining three are accounted for under the equity method.

At December 31, 2019, we owned interests in 90 operating and redevelopment properties totaling approximately 17.4 million square feet. We also owned one development project under construction as of this date.  Of the 90 properties, 87 are consolidated in these financial statements and the remaining three are accounted for under the equity method.
 
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 as of December 31, 2020 and December 31, 2019 were as follows:
($ in thousands) Balance at
December 31,
2020 		December 31,
2019
Investment properties, at cost:    
Land, buildings and improvements $ 3,109,122  $ 3,038,412 
Furniture, equipment and other 6,979  7,775 
Construction in progress 27,860  41,204 
  $ 3,143,961  $ 3,087,391 

F-15



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

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

In determining whether to consolidate a VIE with the Operating Partnership, we consider all relationships between the Operating Partnership and the applicable VIE, including development agreements, management agreements and other contractual arrangements, in determining whether we have the power to direct the activities of the VIE that most significantly affect the VIE's performance.  As of December 31, 2020, we owned investments in two consolidated joint ventures that were VIEs in which the partners did not have substantive participating rights and we were the primary beneficiary.  As of this date, these VIEs had total debt of $55.1 million, which were secured by assets of the VIEs totaling $113.3 million.  The Operating Partnership guarantees the debt of these VIEs.

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

TH Real Estate Joint Venture

On June 29, 2018, the Company formed a joint venture involving TH Real Estate (the "TH Real Estate joint venture"). The Company sold three properties to the joint venture valued in the aggregate at $99.8 million and, after considering third party debt obtained by the venture upon formation, the Company contributed $10.0 million for a 20% noncontrolling ownership interest in the venture. The Company serves as the operating member responsible for day-to-day management of the properties and receives property management and leasing fees. Both members have substantive participating rights over major decisions that impact the economics and operations of the joint venture. The Company is accounting for the joint venture on the equity method as it has the ability to exercise influence, but not control over operating and financial policies.

Embassy Suites at the University of Notre Dame

In December 2017, we formed a new joint venture with an unrelated third party to develop and own an Embassy Suites full-service hotel next to our Eddy Street Commons operating property at the University of Notre Dame. We contributed $1.4 million of cash to the joint venture in return for a 35% ownership interest in the venture. The joint venture has entered into a $33.8 million construction loan, against which $33.6 million was drawn as of December 31, 2020. The joint venture is not considered a VIE. We are accounting for the joint venture under the equity method as both members have substantive participating rights and we do not control the activities of the venture.

Glendale Multifamily Joint Venture

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

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 record the estimated fair value to the applicable assets and liabilities.  In making estimates of fair values, 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, as defined below. 
 
Fair value is determined for tangible assets and intangibles, including: 
 
•the fair value of the building on an as-if-vacant basis and the fair value of 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, which 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 term of the lease.  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;
•the value of having a lease in place at the acquisition date.  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; and
•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 there is any value to in-place leases that have a related customer relationship intangible value.  Characteristics we consider in determining 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.

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.

Pre-development costs are incurred prior to vertical construction and for certain land held for development 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
F-17

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.  Land is transferred to construction in progress once construction commences on the related project. 
 
We also capitalize costs such as land acquisition, building construction, 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 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 and development projects, land parcels and intangible assets for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable. This review for possible impairment requires certain assumptions, estimates, and 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. The evaluation of impairment is subject to certain management assumptions including projected net operating income, anticipated hold period, expected capital expenditures and the capitalization rate used to estimate the property's residual value. 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.

Asset Held for Sale and Discontinued Operations 
 
Operating properties will be classified as held for sale only when those properties are 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 classified as held for sale 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.  

Restricted Cash and 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 and certain municipalities. In addition at December 31, 2019, escrow deposits included $13.2 million of proceeds from the sale of an operating property to be utilized to acquire a potential asset in a tax-deferred exchange.

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.   

The following is a summary of our cash, cash equivalents, and restricted cash total as presented in our statements of cash flows for the years ended December 31, 2020, 2019, and 2018:

2020 2019 2018
Cash and cash equivalents 43,648  31,336  35,376 
Restricted cash and escrow deposits 2,938  21,477  10,130 
Total cash, cash equivalents, restricted cash, and escrow deposits $ 46,586  $ 52,813  $ 45,506 

  
F-18


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

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

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

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

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

In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. As discussed in Note 8 to the Financial Statements, we have determined that derivative valuations are classified in Level 2 of the fair value hierarchy.

Cash and cash equivalents, accounts receivable, escrows and deposits, and other working capital balances approximate fair value. 

Note 6 to the Financial Statements includes a discussion of the fair values recorded when we recognized impairment charges in 2019 and 2018. Level 3 inputs to these transactions include our estimations of disposal values. 
 
Derivative Financial Instruments 
 
The Company accounts for its derivative financial instruments at fair value calculated in accordance with ASC 820, Fair Value Measurements and Disclosures.  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.  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, 2020 and 2019, all of our derivative instruments qualify for hedge accounting. 
 
Revenue Recognition 
 
As a lessor of real estate assets, the Company retains substantially all of the risks and benefits of ownership and accounts for its leases as operating leases. 

Contractual minimum base rent, percentage rent, and expense reimbursements from tenants for common area maintenance costs, insurance and real estate taxes are our principal sources 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 sales targets as defined in their lease agreements.  Overage rent is included in rental income in the accompanying consolidated statements of operations for the years ended December 31, 2020 and 2019. If we determine that collectibility is probable, we recognize income from rentals based on the methodology described above. We have accounts receivable due from tenants and are subject to the risk of tenant defaults and bankruptcies that may affect the collection of outstanding receivables. These receivables are reduced for credit loss that is recognized as a reduction to rental income. We regularly evaluate the collectibility
F-19

of these lease-related receivables by analyzing past due account balances and consider such facts as the credit quality of our customer, historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the collectibility of rental income. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.

We recognize the sale of real estate when control transfers to the buyer.  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.  Net gains realized on such sales were $5.9 million, $0.2 million, and $3.1 million for the years ended December 31, 2020, 2019, and 2018, respectively, and are classified as other property related revenue in the accompanying consolidated statements of operations. 
 
Tenant and Other Receivables and Allowance for Uncollectible 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 from its tenants other than corporate or personal guarantees. Other receivables consist primarily of amounts due from municipalities and from tenants for non-rental revenue related activities. 
 
An allowance for uncollectible 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. 
 
 The provision for revenues deemed uncollectible, represented 6.0%, 1.1%, 1.0% of total revenues in each of the years ended December 31, 2020, 2019 and 2018. 
 
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.

Total billed receivables due from tenants leasing space in the states of Florida, Indiana, Texas, North Carolina, and Nevada, consisted of the following as of December 31, 2020: 

Florida 39  %
Indiana 14  %
Texas 7  %
North Carolina 11  %
Nevada 4  %

For the year ended December 31, 2020, the Company's revenue recognized from tenants leasing space in the states of Florida, Indiana, Texas, North Carolina, and Nevada, were as follows:  

Florida 26  %
Indiana 15  %
Texas 14  %
North Carolina 12  %
Nevada 11  %




F-20

Earnings Per Share 
 
Basic earnings per share or unit is calculated based on the weighted average number of common shares or units outstanding during the period.  Diluted earnings per share or unit is determined based on the weighted average common number of shares or units outstanding during the period combined with the incremental average common shares or units that would have been outstanding assuming the conversion of all potentially dilutive common shares or units into common shares or units as of the earliest date possible. 
 
Potentially dilutive securities include outstanding options to acquire common shares; Limited Partner Units, which may be exchanged for either cash or common shares, at the Parent Company’s option and under certain circumstances; appreciation only LTIP units, and deferred common share units, which may be credited to the personal accounts of non-employee trustees in lieu of the payment of cash compensation or the issuance of common shares to such trustees.  Limited Partner Units have been omitted from the Parent Company’s denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the denominator would have no dilutive impact. Weighted average Limited Partner Units outstanding for the years ended December 31, 2020, 2019 and 2018 were 2.2 million, 2.1 million and 2.0 million, respectively.

These potentially dilutive securities are excluded from the computation of diluted earnings per share due to the net loss position in 2018, 2019, and 2020.

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 and evaluating financial performance. Accordingly, we have one operating segment, which also serves as our reportable segment for disclosure purposes in accordance with GAAP.

Income Taxes and REIT Compliance  

Parent Company

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

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

Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. The Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest related to unrecognized tax benefits in interest expense and penalties in selling, general, and administrative expenses.

F-21

On March 27, 2020 and December 27, 2020, the President of the United States signed and enacted into law the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) and the Consolidated Appropriations Act, 2021 (CAA). Among other provisions, the CARES Act and the CAA provide relief to U.S. federal corporate taxpayers through temporary adjustments to net operating loss rules, changes to limitations on interest expense deductibility, and the acceleration of available refunds for minimum tax credit carryforwards. The CARES Act and the CAA did not have a material effect on the Company’s consolidated financial statements.

Our tax return for the year ended December 31, 2020 has not been filed. The taxability information presented for our dividends paid in 2020 is based upon management's estimate. Consequently, the taxability of dividends is subject to change. A summary of the tax characterization of the dividends paid by the Parent Company for the years ended December 31, 2020, 2019, and 2018 is as follows:

2020 2019 2018
Ordinary income 89.3  % 29.7  % 56.0  %
Return of capital —  % 35.2  % 44.0  %
Capital gains 10.7  % 35.1  % —  %
Balance, end of year 100.0  % 100.0  % 100.0  %


Operating Partnership

The allocated share of income and loss, other than the operations of our TRS, is included in the income tax returns of the Operating Partnership's partners. Accordingly, the only U.S. federal income taxes included in the accompanying consolidated financial statements are in connection with the TRS.
 
Noncontrolling Interests 
 
We report the non-redeemable noncontrolling interests in subsidiaries as equity and the amount of consolidated net income attributable to these noncontrolling interests is set forth separately in the consolidated financial statements.  The non-redeemable noncontrolling interests in consolidated properties for the years ended December 31, 2020, 2019, and 2018 were as follows:

($ in thousands) 2020 2019 2018
Noncontrolling interests balance January 1 $ 698  $ 698  $ 698 
Net income allocable to noncontrolling interests,
  excluding redeemable noncontrolling interests 		—  —  — 
Distributions to noncontrolling interests —  —  — 
Noncontrolling interests balance at December 31 $ 698  $ 698  $ 698 




Redeemable Noncontrolling Interests – Limited Partners
 
Limited Partner Units are redeemable noncontrolling interests in the Operating Partnership. We classify redeemable noncontrolling interests in the Operating Partnership in the accompanying consolidated balance sheets outside of permanent equity because we may be required to pay cash to holders of Limited Partner Units upon redemption of their interests in the Operating Partnership or deliver registered shares upon their conversion.  The carrying amount of the redeemable noncontrolling interests in the Operating Partnership is reflected at the greater of historical book value or redemption value with a corresponding adjustment to additional paid-in capital. At December 31, 2020, the redemption value of the redeemable noncontrolling interests in the Operating Partnership did not exceed the historical book value, and the balance was accordingly adjusted to historical book value. At December 31, 2019, the redemption value of the redeemable noncontrolling interests in the Operating Partnership exceeded the historical book value, and the balance was accordingly adjusted to redemption value. 
 
F-22

We allocate net operating results of the Operating Partnership after noncontrolling interests in the consolidated properties based on the partners’ respective weighted average ownership interest.  We adjust the redeemable noncontrolling interests in the Operating Partnership at the end of each reporting period to reflect their interests in the Operating Partnership or redemption value.  This adjustment is reflected in our shareholders’ and Parent Company's equity.  For the years ended December 31, 2020, 2019, and 2018, the weighted average interests of the Parent Company and the limited partners in the Operating Partnership were as follows:  
  Year Ended December 31,
  2020 2019 2018
Parent Company’s weighted average interest in Operating Partnership 97.4  % 97.6  % 97.6  %
Limited partners' weighted average interests in Operating Partnership 2.6  % 2.4  % 2.4  %
  
At December 31, 2020, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.1% and 2.9%. At December 31, 2019, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.5% and 2.5%. 
  
Concurrent with the Parent Company’s initial public offering and related formation transactions, certain individuals received Limited Partner Units of the Operating Partnership in exchange for their interests in certain properties. The limited partners have the right to redeem Limited Partner Units for cash or, at the Parent Company's election, common shares of the Parent Company in an amount equal to the market value of an equivalent number of common shares of the Parent Company at the time of redemption. Such common shares must be registered, which is not fully in the Parent Company’s control. Therefore, the limited partners’ interest is not reflected in permanent equity. The Parent Company also has the right to redeem the Limited Partner Units directly from the limited partner in exchange for either cash in the amount specified above or a number of its common shares equal to the number of Limited Partner Units being redeemed.

There were 2,532,861 and 2,110,037 Limited Partner Units outstanding as of December 31, 2020 and 2019, respectively. The increase in Limited Partner Units outstanding from December 31, 2019 is due to non-cash compensation awards made to our executive officers. 
 
Redeemable Noncontrolling Interests - Subsidiaries 
 
Prior to our merger with Inland Diversified Real Estate Trust, Inc. ("Inland Diversified") in 2014, Inland Diversified formed joint ventures with the previous owners of certain properties and issued Class B units in three joint ventures that indirectly own those properties.  The Class B units related to one of these three joint ventures remain outstanding and are accounted for as noncontrolling interests in these properties.  The remaining Class B units will become redeemable at our partner's election in October 2022 based on the joint venture agreement and the fulfillment of certain redemption criteria.  Beginning in November 2022, with respect to the remaining joint venture, the Class B units can be redeemed at the election of either our partner or us for cash or Limited Partner Units in the Operating Partnership.  None of the issued Class B units have a maturity date and none are mandatorily redeemable unless either party has elected for the units to be redeemed. We consolidate this joint venture because we control the decision making and our joint venture partner has limited protective rights.

In 2018, certain Class B unit holders exercised their right to redeem their remaining Class B units for cash. We funded $10.0 million of the redemption in August 2018 and the remaining $12.0 million in November 2018.
 
We classify the remainder of the redeemable noncontrolling interests in a subsidiary in the accompanying consolidated balance sheets outside of permanent equity because, under certain circumstances, we may be required to pay cash to Class B unitholders in specific subsidiaries upon redemption of their interests.  The carrying amount of these redeemable noncontrolling interests is required to be reflected at the greater of initial book value or redemption value with a corresponding adjustment to additional paid-in capital. As of December 31, 2020 and 2019, the redemption amounts of these interests did not exceed their fair value, nor did they exceed the initial book value.  

The redeemable noncontrolling interests in the Operating Partnership and subsidiaries for the years ended December 31, 2020, 2019, and 2018 were as follows: 
 
F-23

($ in thousands) 2020 2019 2018
Redeemable noncontrolling interests balance January 1 $ 52,574  $ 45,743  $ 72,104 
Net income allocable to redeemable noncontrolling interests 100  532  116 
Distributions declared to redeemable noncontrolling interests (1,533) (3,191) (3,788)
Payment for partial redemption of redeemable noncontrolling interests —  —  (22,461)
Other, net including adjustments to redemption value (7,866) 9,490  (228)
Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at December 31 $ 43,275  $ 52,574  $ 45,743 
Limited partners' interests in Operating Partnership $ 33,205  $ 42,504  $ 35,673 
Other redeemable noncontrolling interests in certain subsidiaries 10,070  10,070  10,070 
Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at December 31 $ 43,275  $ 52,574  $ 45,743 
 
Effects of Accounting Pronouncements 
 
    Adoption of New Standards

    Reference Rate Reform

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

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

Leases

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

The Company entered into rent deferral agreements during the year ended December 31, 2020 that provided for legally due rent to be paid back over a period of time, typically twelve to eighteen months. The Company has deferred the payment by tenants of $6.1 million of contractually due rental income that remains outstanding as of December 31, 2020.

The future impact of such modifications is dependent upon the extent of lease concessions granted to tenants as a result of COVID-19 in future periods and the elections made by the Company at the time of entering into such concessions. There was not a material amount of rent abatement provided to tenants as a result of COVID-19 during 2020.
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Note 3. Share-Based Compensation 
 
Overview 
 
The Company's 2013 Equity Incentive Plan (the "Plan"), as amended and restated as of February 28, 2019, authorizes options to acquire common shares and other share-based compensation awards to be granted to employees and trustees for up to an additional 3,000,000 common share equivalents 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 Accounting Standards Codification. 
 
The total share-based compensation expense, net of amounts capitalized, included in general and administrative expenses for the years ended December 31, 2020, 2019, and 2018 was $5.6 million, $5.3 million, and $4.9 million, respectively.  For the years ended December 31, 2020, 2019, and 2018, total share-based compensation cost capitalized for development activities was $1.2 million, $1.1 million, and $1.7 million, respectively. The Company recognizes forfeitures as they occur. 
 
As of December 31, 2020, there were 1,604,930 shares and units available for grant under the Plan. 
 
Share Options 
 
Pursuant to the Plan, the Company may periodically grant options to purchase common shares at an exercise price equal to the grant date fair value of the Company's common shares.  Granted options typically vest over a five year period and expire 10 years from the grant date.  The Company issues new common shares upon the exercise of options.

A summary of option activity under the Plan as of December 31, 2020, and changes during the year then ended, is presented below: 
($ in thousands, except share and per share data) Aggregate Intrinsic Value Weighted-Average Remaining
Contractual Term (in years) 		Options Weighted-Average
Exercise Price
Outstanding at January 1, 2020 24,067  $ 20.25 
Granted —  — 
Exercised (2,500) 16.60 
Expired —  — 
Forfeited —  — 
Outstanding at December 31, 2020 $ —  0.25 21,567  $ 20.67 
Exercisable at December 31, 2020 $ —  0.25 21,567  $ 20.67 
Exercisable at December 31, 2019 24,067  $ 20.25 
  
There were no options granted in 2020, 2019 or 2018. 
 
The aggregate intrinsic value of the 2,500, 33,375 and 3,125 options exercised during the years ended December 31, 2020, 2019, and 2018 was $2,000, $86,000 and $23,000, respectively.
 

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 three to five years.  The Company pays dividends on restricted shares and such dividends 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, 2020 and changes during the year then ended:  
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  Number of Restricted
Shares 		Weighted Average
Grant Date Fair
Value per share
Restricted shares outstanding at January 1, 2020 321,006  $ 17.19 
Shares granted 211,476  13.21 
Shares forfeited (16,527) 17.46 
Shares vested (194,364) 17.42 
Restricted shares outstanding at December 31, 2020 321,591  $ 14.42 

The following table summarizes the restricted share grants and vestings during the years ended December 31, 2020, 2019, and 2018:  

($ in thousands, except share and per share data) Number of Restricted Shares Granted Weighted Average
Grant Date Fair
Value per share 		Fair Value of Restricted Shares Vested
2020 211,476  $ 13.21  $ 2,727 
2019 154,440  15.84  2,270 
2018 202,043  15.35  2,038 
 
As of December 31, 2020, there was $3.0 million of total unrecognized compensation cost related to restricted shares granted under the Plan, which is expected to be recognized in the consolidated statements of operations over a weighted-average period of 0.91 years.  We expect to incur $1.8 million of this expense in 2021, $1.1 million in 2022, and the remainder in 2023.  
 
Performance Awards

In 2016, the Compensation Committee established overall target values for incentive compensation for each executive officer, with 40% of the target value being granted in the form of time-based awards and the remaining 60% being granted in the form of performance awards.

In 2018, the Compensation Committee awarded each of the named executive officers a three-year performance award in the form of PSUs. The PSUs may be earned over a three-year performance period from January 1, 2018 to December 31, 2020. The performance criteria will be based 60% on the relative TSR achieved by the Company measured against a peer group over the three-year measurement period and 40% on the achievement of a defined funds available for distribution ("FAD"). The total number of PSUs issued to the executive officers was based upon a target value of $2.4 million, but may be earned in a range of 0% to 200% of the target. Additionally, any PSUs earned based on the achievement of the pre-established FAD goals will be subject to adjustment (either up or down 25%) based on the Company's absolute TSR over the three-year measurement period. Approximately 172,000 PSU's were earned based upon the Company's performance on the relative TSR measurement.

The PSUs were valued at an aggregate value of $2.2 million utilizing a Monte Carlo simulation.  There is no remaining unrecognized compensation cost related to the 2018 performance awards.

Restricted Units

Time-based restricted unit awards were made on a discretionary basis in 2018, 2019, and 2020 based on review of each prior year's performance.

The following table summarizes the activity for time-based restricted unit awards for the year ended December 31, 2020:  
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  Number of Restricted
Units 		Weighted Average
Grant Date Fair
Value per unit
Restricted units outstanding at January 1, 2020 164,016  $ 15.65 
Restricted units granted 431,913  13.10 
Restricted units vested (104,733) 16.07 
Restricted units outstanding at December 31, 2020 491,196  $ 13.32 

The following table summarizes the time-based restricted unit grants and vestings during the years ended December 31, 2020, 2019, and 2018:  

($ in thousands, except unit and per unit data) Number of Restricted Units Granted Weighted Average
Grant Date Fair
Value per Unit 		Fair Value of Restricted Units Vested
2020 431,913  $ 13.10  $ 1,784 
2019 84,987  14.11  749 
2018 92,019  13.16  1,924 

As of December 31, 2020, there was $5.4 million of total unrecognized compensation cost related to restricted units granted under the Plan, which is expected to be recognized in the consolidated statements of operations over a weighted-average period of 2.15 years.  We expect to incur $1.7 million of this expense in 2021, $1.4 million in 2022, $0.8 million in 2023, $0.8 million in 2024, and the remainder in 2025.

AO LTIP Units - 2019 Awards

During 2019, in connection with its annual review of executive compensation and as described in the table below, the Compensation Committee of the Company's Board of Trustees approved an aggregate grant of AO LTIP Units (the “2019 awards”) to the Company’s executive officers under the Plan. 
Executive   Number of AO LTIP Units Participation Threshold per AO LTIP Unit
John A. Kite   1,490,683  $ 15.79 
Thomas A. McGowan   372,671  $ 15.79 
Heath R. Fear   253,416  $ 15.79 
 
    The Company entered into an award agreement with each executive officer with respect to his awards, which provide terms of vesting, conversion, distribution, and other terms. AO LTIP Units are designed to have economics similar to stock options and allow the recipient, subject to vesting requirements, to realize value above a threshold level set as of the grant date of the award (the “Participation Threshold”).  The value of vested AO LTIP Units is realized through conversion into a number of vested LTIP Units in the Operating Partnership determined on the basis of how much the value of a common share of the Company has increased over the Participation Threshold. 

    The AO LTIP Units are only exercisable and convertible into vested LTIP Units of the Operating Partnership to the extent that they become vested AO LTIP Units.  The awards of AO LTIP Units are subject to both time-based and stock price performance-based vesting requirements.  Subject to the terms of the award agreement, the AO LTIP Units shall vest and become fully exercisable as of the date that both of the following requirements have been met:  (i) the grantee remains in continuous service from the grant date through the third anniversary of the grant date; and (ii) at any time during the five-year period following the grant date, the reported closing price per common share of the Company appreciates at least 20% over the applicable Participation Threshold per AO LTIP Unit (as set forth in the table above) for a minimum of 20 consecutive trading days.  Any AO LTIP Units that do not become vested will be forfeited and become null and void as of the fifth anniversary of the grant date, but AO LTIP Units may also be forfeited earlier in connection with a corporate transaction or with the holder’s termination of service.

F-27

    The AO LTIP Units were valued using a Monte Carlo simulation, and the resulting compensation expense of is being amortized over three years. We recognized $1.1 million of compensation expense in 2020. We expect to incur $1.1 million of this expense in 2021 and $1.1 million in 2022.

AO LTIP Units - 2020 Awards

During 2020, in connection with its annual review of executive compensation and as described in the table below, the Compensation Committee of the Company's Board of Trustees approved an aggregate grant of AO LTIP Units (the “2020 awards”) to the Company’s executive officers under the Plan. 
Executive   Number of AO LTIP Units Participation Threshold per AO LTIP Unit
John A. Kite   1,729,729  $ 17.76 
Thomas A. McGowan   405,405  $ 17.76 
Heath R. Fear   275,675  $ 17.76 
 
    The Company entered into an award agreement with each executive officer with respect to his awards, which provide terms of vesting, conversion, distribution, and other terms. AO LTIP Units are designed to have economics similar to stock options and allow the recipient, subject to vesting requirements, to realize value above a threshold level set as of the grant date of the award (the “Participation Threshold”).  The value of vested AO LTIP Units is realized through conversion into a number of vested LTIP Units in the Operating Partnership determined on the basis of how much the value of a common share of the Company has increased over the Participation Threshold. 

    The AO LTIP Units are only exercisable and convertible into vested LTIP Units of the Operating Partnership to the extent that they become vested AO LTIP Units.  The awards of AO LTIP Units are subject to both time-based and stock price performance-based vesting requirements.  Subject to the terms of the award agreement, the AO LTIP Units shall vest and become fully exercisable as of the date that both of the following requirements have been met:  (i) the grantee remains in continuous service from the grant date through the third anniversary of the grant date; and (ii) at any time during the period beginning in the second year and ending at the end of the fifth year following the grant date, the reported closing price per common share of the Company appreciates at least 15% over the applicable Participation Threshold per AO LTIP Unit (as set forth in the table above) for a minimum of 20 consecutive trading days.  Any AO LTIP Units that do not become vested will be forfeited and become null and void as of the fifth anniversary of the grant date, but AO LTIP Units may also be forfeited earlier in connection with a corporate transaction or with the holder’s termination of service.

    The AO LTIP Units were valued using a Monte Carlo simulation, and the resulting total compensation expense of $3.6 million is being amortized over five years. We recognized $0.6 million of compensation expense in 2020. We expect to annually incur $0.7 million of this expense in 2021 through 2024 and the remainder in 2025.

 
Note 4. Deferred Costs and Intangibles, net 
 
Deferred costs consist primarily of acquired lease intangible assets, broker fees and capitalized salaries and related benefits incurred in connection with lease originations.  Deferred leasing costs, lease intangibles and similar costs are amortized on a straight-line basis over the terms of the related leases. At December 31, 2020 and 2019, deferred costs consisted of the following: 
 
($ in thousands) 2020 2019
Acquired lease intangible assets $ 55,352  $ 60,862 
Deferred leasing costs and other 57,481  62,109 
  112,833  122,971 
Less—accumulated amortization (49,662) (49,814)
Total $ 63,171  $ 73,157 

The estimated net amounts of amortization from acquired lease intangible assets for each of the next five years and thereafter are as follows:
 
F-28

($ in thousands) Amortization of above market leases Amortization of acquired lease intangible assets Total
2021 $ 978  $ 4,409  $ 5,387 
2022 728  3,590  4,318 
2023 676  2,721  3,397 
2024 529  2,136  2,665 
2025 506  1,756  2,262 
Thereafter 1,105  10,487  11,592 
Total $ 4,522  $ 25,099  $ 29,621 
 
Amortization of deferred leasing costs, leasing intangibles and other is included in depreciation and amortization expense in the accompanying consolidated statements of operations. The amortization of above market lease intangibles is included as a reduction to revenue. The amounts of such amortization included in the accompanying consolidated statements of operations are as follows:
($ in thousands) For the year ended December 31,
  2020 2019 2018
Amortization of deferred leasing costs, lease intangibles and other $ 13,916  $ 14,239  $ 18,648 
Amortization of above market lease intangibles 999  1,200  2,553 
 
Note 5. Deferred Revenue, Intangibles, Net and Other Liabilities 
 
Deferred revenue and other liabilities consist of the unamortized fair value of below market lease liabilities recorded in connection with purchase accounting, retainage payables for development and redevelopment projects, tenant rent payments received in advance of the month in which they are due, and lease liabilities recorded upon adoption of ASU 2016-02.  The amortization of below market lease liabilities is recognized as revenue over the remaining life of the leases (including option periods for leases with below market renewal options) through 2046.  Tenant rent payments received in advance are recognized as revenue in the period to which they apply, which is typically the month following their receipt.
 
At December 31, 2020 and 2019, deferred revenue, intangibles, net and other liabilities consisted of the following:
 
($ in thousands) 2020 2019
Unamortized in-place lease liabilities $ 45,479  $ 50,072 
Retainages payable and other 1,943  2,254 
Tenant rents received in advance 11,716  10,839 
Lease liabilities 26,511  27,015 
Total $ 85,649  $ 90,180 
 
The amortization of below market lease intangibles is included as a component of minimum rent in the accompanying consolidated statements was $4.8 million, $5.0 million and $8.9 million for the years ended December 31, 2020, 2019 and 2018, respectively.

The estimated net amounts of amortization of in-place lease liabilities and the increasing effect on minimum rent for each of the next five years and thereafter is as follows:  
F-29

($ in thousands)
2021 $ 2,523 
2022 2,341 
2023 2,287 
2024 2,290 
2025 2,274 
Thereafter 33,764 
Total $ 45,479 

Note 6. Disposals of Operating Properties and Impairment Charges

There were no operating properties sold during the year ended December 31, 2020. The Company sold one redevelopment property during the year ended December 31, 2020 for gross proceeds of $14.0 million and a net gain of $3.1 million.

During the year ended December 31, 2019, we sold 23 operating properties for aggregate gross proceeds of $543.8 million as part of a program designed to improve the Company's portfolio quality, reduce its leverage, and focus operations on markets where the Company believes it can gain scale and generate attractive risk-adjusted returns.

The following summarizes our 2019 operating property dispositions:
Property Name MSA Disposition Date
Whitehall Pike Bloomington, IN March 2019
Beechwood Promenade Athens, GA April 2019
Village at Bay Park Green Bay, WI May 2019
Lakewood Promenade Jacksonville, FL May 2019
Palm Coast Landing Palm Coast, FL May 2019
Lowe's - Perimeter Woods Charlotte, NC May 2019
Cannery Corner Las Vegas, NV June 2019
Temple Terrace Tampa, FL June 2019
University Town Center Oklahoma City, OK June 2019
Gainesville Plaza Gainesville, FL July 2019
Bolton Plaza Jacksonville, FL July 2019
Eastgate Plaza Las Vegas, NV July 2019
Burnt Store Punta Gorda, FL July 2019
Landstown Commons Virginia Beach, VA August 2019
Lima Marketplace Fort Wayne, IN September 2019
Hitchcock Plaza Aiken, SC September 2019
Merrimack Village Center Manchester, NH September 2019
Publix at Acworth Atlanta, GA October 2019
The Centre at Panola Atlanta, GA October 2019
Beacon Hill Crown Point, IN October 2019
Bell Oaks Centre Evansville, IN November 2019
South Elgin Commons Chicago, IL December 2019
Boulevard Crossing Kokomo, IN December 2019

The Company recorded a net gain of $39.0 million as a result of the 2019 disposal activity.

During 2019, in connection with the preparation and review of the financial statements for the applicable periods, we evaluated a total of seven operating properties for impairment and recorded a cumulative $37.7 million impairment charge due
F-30

to changes in facts and circumstances underlying the Company's expected future hold period of these properties. A shortening of the expected future hold period is considered an impairment indicator under applicable accounting rules, and this indicator caused us to further evaluate the carrying value of these properties. We concluded the estimated undiscounted cash flows over the expected holding period did not exceed the carrying value of these assets given the new holding period, leading to the charge. We estimated the fair value using the market approach by utilizing recent sales offers without adjustment. We compared the estimate aggregate fair value of $176 million to the carrying values, which resulted in the recording of the non-cash impairment charge of $37.7 million for the year ended December 31, 2019.

During the year ended December 31, 2018, we sold six operating properties for aggregate gross proceeds of $122.2 million. The following summarizes our 2018 operating property dispositions:
Property Name MSA Disposition Date
Trussville Promenade Birmingham, AL February 2018
Memorial Commons Goldsboro, NC March 2018
Lake Lofts at Deerwood Jacksonville, FL November 2018
Hamilton Crossing Knoxville, TN November 2018
Fox Lake Crossing Chicago, IL December 2018
Lowe's Plaza Las Vegas, NV December 2018

In addition, we entered into a joint venture with TH Real Estate by selling an 80% interest in three operating assets for an agreed upon value of $99.8 million. The properties sold to the joint venture were the following:

Property Name MSA Disposition Date
Livingston Shopping Center New York/Northern New Jersey June 2018
Plaza Volente Austin, TX June 2018
Tamiami Crossing Naples, FL June 2018

The Company recorded a net gain of $3.4 million as a result of the 2018 disposal activity.

During 2018, in connection with the preparation and review of the financial statements for the applicable periods, we evaluated a total of seven operating properties and land previously held for development for impairment and recorded a cumulative $70.4 million impairment charge due to changes in facts and circumstances underlying the Company's expected future hold period of these properties and decision to not move forward with development of the land. A shortening of an expected future hold period is considered an impairment indicator under applicable accounting rules, and this indicator caused us to further evaluate the carrying value of these properties. We concluded the estimated undiscounted cash flows over the expected holding period did not exceed the carrying value of these assets given the new holding period, leading to the charge. We estimated the fair value using the market approach by utilizing recent sales offers without adjustment. We compared the estimated aggregate fair value of $130.2 million to the carrying values, which resulted in the recording of the non-cash impairment charges totaling $70.4 million for the year ended December 31, 2018.

The results of all the operating properties sold in 2020, 2019, and 2018 are not included in discontinued operations in the accompanying statements of operations as none of the operating properties individually, nor in the aggregate, represent a strategic shift that has had or will have a material effect on our operations or financial results.

Note 7. Mortgage and Other Indebtedness 
 
Mortgage and other indebtedness consisted of the following as of December 31, 2020 and 2019: 
F-31

 
($ in thousands) As of December 31, 2020
Principal Unamortized Net Premiums Unamortized Debt Issuance Costs Total
Senior unsecured notes—fixed rate
Maturing at various dates from September 2023 through September 2027; interest rates ranging from 4.00% to 4.57% at December 31, 2020
$ 550,000  $ —  $ (3,595) $ 546,405 
Unsecured revolving credit facility        
Matures April 20221; borrowing level up to $523.2 million available at December 31, 2020; interest at LIBOR + 1.15% or 1.29% at December 31, 2020
25,000  —  (1,672) 23,328 
Unsecured term loan        
Matures October 2025; interest at LIBOR + 2.00% or 2.14% at December 31, 2020
250,000  —  (1,647) 248,353 
Mortgage notes payable—fixed rate        
Generally due in monthly installments of principal and interest; maturing at various dates from April 2022 through June 2030; interest rates ranging from 3.78% to 5.73% at December 31, 2020
295,966  1,732  (25) 297,673 
Mortgage note payable—variable rate        
Due in monthly installments of principal and interest; maturing in February 2022; interest at LIBOR + 1.60% or 1.74% at December 31, 2020
55,110  —  (75) 55,035 
Total mortgage and other indebtedness $ 1,176,076  $ 1,732  $ (7,014) $ 1,170,794 


($ in thousands) As of December 31, 2019
Principal Unamortized Net Premiums Unamortized Debt Issuance Costs Total
Senior Unsecured Notes—Fixed Rate
Maturing at various dates from September 2023 through September 2027; interest rates ranging from 4.00% to 4.57% at December 31, 2019
$ 550,000  $ —  $ (4,231) $ 545,769 
Unsecured Revolving Credit Facility        
Matures April 20221; borrowing level up to $583.4 million available at December 31, 2019; interest at LIBOR +1.15%2 or 2.91% at December 31, 2019
—  —  (2,625) (2,625)
Unsecured Term Loans        
Matures October 2025; interest at LIBOR + 2.00% or 3.76% at December 31, 2019
250,000  —  (1,859) 248,141 
Mortgage Notes Payable—Fixed Rate        
Generally due in monthly installments of principal and interest; maturing at various dates from April 2022 through June 2030; interest rates ranging from 3.78% to 5.73% at December 31, 2019
297,472  2,176  (40) 299,608 
Mortgage Notes Payable—Variable Rate        
Due in monthly installments of principal and interest; maturing in February 2022; interest at LIBOR + 1.60%, or 3.36% at December 31, 2019
55,830  —  (143) 55,687 
Total mortgage and other indebtedness $ 1,153,302  $ 2,176  $ (8,898) $ 1,146,580 

____________________
1
The Company can extend the maturity date for two additional periods of six months each, subject to certain conditions.
2 The interest rates 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.
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The one month LIBOR interest rate was 0.14% and 1.76% as of December 31, 2020 and 2019, respectively. 
 
Debt Issuance Costs

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

The accompanying consolidated statements of operations include the following amounts of amortization of debt issuance costs as a component of interest expense:
($ in thousands) For the year ended December 31,
  2020 2019 2018
Amortization of debt issuance costs $ 2,135  $ 2,762  $ 3,944 
 
 
Unsecured Revolving Credit Facility and Unsecured Term Loans
 
    On April 24, 2018, the Company and Operating Partnership entered into the First Amendment (the “Amendment”) to the Fifth Amended and Restated Credit Agreement (the “Existing Credit Agreement,” and as amended by the Amendment, the “Amended Credit Agreement”), dated as of July 28, 2016, by and among the Operating Partnership, as borrower, the Company, as guarantor (pursuant to a springing guaranty, dated as of July 28, 2016), KeyBank National Association, as administrative agent, and the other lenders party thereto. The Amendment increases (i) the aggregate principal amount available under the
unsecured revolving credit facility (the “Credit Facility”) from $500 million to $600 million, (ii) the amount of the letter of credit issuances the Operating Partnership may utilize under the Credit Facility from $50 million to $60 million, and (iii) swingline loan capacity from $50 million to $60 million in same day borrowings.  Under the Amended Credit Agreement, the Operating Partnership has the option to increase the Credit Facility to $1.2 billion (increased from $1 billion under the Existing Credit Agreement) upon the Operating Partnership’s request, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the Amended Credit Agreement, to provide such increased amounts.

    The Amendment extends the scheduled maturity date of the Credit Facility from July 28, 2020 to April 22, 2022 (which maturity date may be extended for up to two additional periods of six months at the Operating Partnership’s option subject to certain conditions). Among other things, the Amendment also improves the Operating Partnership’s leverage ratio calculation by changing the definition of capitalization rate to six and one-half percent (6.5%) from six and three-fourths percent (6.75%), which increases the Operating Partnership’s total asset value as calculated under the Amended Credit Agreement

    On October 25, 2018, the Operating Partnership entered into a Term Loan Agreement (the “Agreement”) with KeyBank National Association, as Administrative Agent (the “Agent”), and the other lenders party thereto, providing for an unsecured term loan facility of up to $250 million (the “Term Loan”). The Term Loan ranks pari passu with the Operating Partnership’s existing $600 million unsecured revolving credit facility documented in the Operating Partnership’s Fifth Amended and Restated Credit Agreement, dated as of July 28, 2016, as amended (the “Existing Credit Agreement”), and other unsecured indebtedness of the Operating Partnership.
 
    The Term Loan has a scheduled maturity date of October 24, 2025, which maturity date may be extended for up to three additional periods of one year at the Operating Partnership’s option subject to certain conditions.
 
    The Operating Partnership has the option to increase the Term Loan to $300 million, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the Agreement, to provide such increased amounts. The Operating Partnership is permitted to prepay the Term Loan in whole or in part, at any time, subject to a prepayment fee if prepaid on or before October 25, 2023.

As of December 31, 2020, there was $25 million outstanding under the Credit Facility.  Additionally, we had letters of credit outstanding which totaled $1.2 million, against which no amounts were advanced as of December 31, 2020.

The amount that we may borrow under our Credit Facility is limited by the value of the assets in our unencumbered asset pool.  As of December 31, 2020, the value of the assets in our unencumbered asset pool, calculated pursuant to the Credit Facility agreement, was $1.3 billion. Taking into account outstanding borrowings on the line of credit, term loans, unsecured
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notes and letters of credit, we had $523.2 million available under our Credit Facility for future borrowings as of December 31, 2020.    

Our ability to borrow under the Credit Facility is subject to our compliance with various restrictive and financial covenants, including with respect to liens, indebtedness, investments, dividends, mergers and asset sales.  As of December 31, 2020, we were in compliance with all such covenants.

Senior Unsecured Notes

The Operating Partnership has $550 million of senior unsecured notes maturing at various dates through September 2027 (the "Notes").  The Notes contain a number of customary financial and restrictive covenants. As of December 31, 2020, we were in compliance with all such covenants.

Mortgage Loans 
 
Mortgage loans are secured by certain real estate and in some cases by guarantees from the Operating Partnership, and are generally due in monthly installments of interest and principal and mature over various terms through 2030. 
 
Debt Maturities

The following table presents maturities of mortgage debt and corporate debt as of December 31, 2020: 
 
($ in thousands) Scheduled Principal Payments Term Maturities Total
2021 $ 2,303  $ —  $ 2,303 
2022 1,043  203,877  204,920 
2023 806  256,517  257,323 
2024 854  —  854 
2025 904  330,000  330,904 
Thereafter 4,672  375,100  379,772 
  $ 10,582  $ 1,165,494  $ 1,176,076 
Unamortized net debt premiums and issuance costs, net     (5,282)
Total     $ 1,170,794 

Other Debt Activity

For the year ended December 31, 2020, we had total new borrowings of $325.0 million and total repayments of $302.2 million.  The components of this activity were as follows:  
•In March 2020, we borrowed $300 million on the Credit Facility as a precautionary measure in order to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic. Subsequent to the initial borrowing, we have repaid the $300 million of borrowings;
•In December 2020, we borrowed $25 million on the Credit Facility to fund a portion of the purchase price of Eastgate Crossing; and
•We made scheduled principal payments on indebtedness during the year totaling $2.2 million.

The amount of interest capitalized in 2020, 2019, and 2018 was $1.5 million, $1.9 million, and $1.8 million, respectively.
  
Fair Value of Fixed and Variable Rate Debt 
 
As of December 31, 2020, the estimated fair value of fixed rate debt was $872.8 million compared to the book value of $846.0 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 3.37% to 3.88%.  As of December 31, 2020, the estimated fair value of variable rate
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debt was $329.1 million compared to the book value of $330.1 million.  The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments, which ranged from 1.28% to 3.62%.
 
Note 8.  Derivative Instruments, Hedging Activities and Other Comprehensive Income 
 
In order to manage potential future variable interest rate risk, we enter into interest rate derivative agreements from time to time.  We do not use such agreements for trading or speculative purposes nor do we have any that are not designated as cash flow hedges.  The agreements with each of our derivative counterparties provide that, in the event of default on any of our indebtedness, we could also be declared in default on our derivative obligations.  

As of December 31, 2020, we were party to various cash flow derivative agreements with notional amounts totaling $250.0 million.  These derivative agreements effectively fix the interest rate underlying certain variable rate debt instruments over expiration dates through 2025.  Utilizing a weighted average interest rate spread over LIBOR on all variable rate debt resulted in fixing the weighted average interest rate at 4.20%.

These interest rate derivative agreements are the only assets or liabilities that we record at fair value on a recurring basis.  The valuation of these assets and liabilities is determined using widely accepted techniques including discounted cash flow analysis.  These techniques consider the contractual terms of the derivatives (including the period to maturity) and use observable market-based inputs such as interest rate curves and implied volatilities.  We also incorporate credit valuation adjustments into the fair value measurements to reflect nonperformance risk on both our part and that of the respective counterparties. 
  
We determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties.  As of December 31, 2020 and December 31, 2019, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined the credit valuation adjustments were not significant to the overall valuation of our derivatives.  As a result, we determined our derivative valuations were classified within Level 2 of the fair value hierarchy.

As of December 31, 2020, the estimated fair value of our interest rate derivatives represented a liability of $32.1 million, including accrued interest of $0.4 million.  As of December 31, 2020, this balance is reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheet.  At December 31, 2019 the estimated fair value of our interest rate derivatives was a liability of $16.8 million, including accrued interest of $0.1 million.  As of December 31, 2019, this was reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheet. 
 
Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to earnings over time as the hedged items are recognized in earnings.   Approximately $4.0 million and $0.8 million was reclassified as a reduction to earnings during the years ended December 31, 2020 and 2018, respectively. Approximately $0.6 million was reclassified as an increase to earnings during the year ended December 31, 2019. As the interest payments on our derivatives are made over the next 12 months, we estimate the increase to interest expense to be $6.4 million, assuming the current LIBOR curve. 

Unrealized gains and losses on our interest rate derivative agreements are the only components of the change in accumulated other comprehensive loss. 
 
    Note 9. Lease Information 
 
Rental Income
  
    The Company receives rental income from the leasing of retail and office space. The leases generally provide for certain increases in base rent, reimbursement for certain operating expenses, and may require tenants to pay contingent rent to the extent their sales exceed a defined threshold. Certain tenants have the option in the lease agreement to extend their lease upon the expiration of their contractual term. Variable lease payments are based upon tenant sales information and are recognized once a tenant's sales volume exceeds a defined threshold. Variable lease payments for reimbursement of operating expenses are based upon the operating expense activity for the period.
    
    From a lessor perspective, the new accounting guidance adopted in 2019 remained mostly similar to legacy GAAP as the Company elected the practical expedient to not separate non-lease components from lease components. This election resulted in a change on the Company's consolidated statements of operations as the Company no longer presents minimum rents
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and tenant reimbursements as separate amounts because the Company now accounts for these amounts as a single combined lease component, rental income, on the basis of the lease component being the predominant component of the contract. As such, non-lease components, including common area maintenance reimbursements that are of a fixed nature are recognized on a straight-line basis over the term of the lease. Further, bad debt, which has previously been recorded in property operating expenses, has now been classified as a contra-revenue account in rental income in the Company’s consolidated statements of operations and comprehensive income for the years ended December 31, 2020 and 2019. 

    The Company recognized the following lease rental income for the years ended December 31, 2020 and 2019, respectively:

($ in thousands)
Year Ended December 31,
2020 2019
Fixed Contractual Lease Payments - Operating Leases $ 218,004  $ 244,666 
Variable Lease Payments - Operating Leases 52,128  61,368 
Bad Debt Reserve (13,259) (3,620)
Straight-Line Rent Adjustment 1,155  3,362 
Straight-Line Rent Reserve for Uncollectibility (4,177) (1,153)
Amortization of In-Place Lease Liabilities, net 3,819  3,776 
Total $ 257,670  $ 308,399 


The weighted average remaining term of the lease agreements is approximately 4.5 years.  During the years ended December 31, 2020, 2019, and 2018, the Company earned overage rent of $0.2 million, $1.3 million, and $1.2 million, respectively. 
 
As of December 31, 2020, future minimum rentals to be received under non-cancelable operating leases for each of the next five years and thereafter, excluding variable lease payments, are as follows: 
 
($ in thousands)
2021 $ 217,118 
2022 196,856 
2023 165,849 
2024 137,803 
2025 111,157 
Thereafter 365,042 
Total $ 1,193,825 

Commitments under Ground Leases
  
As of December 31, 2020, we are obligated under nine ground leases for approximately 47 acres of land. Most of these ground leases require fixed annual rent payments.  The expiration dates of the remaining initial terms of these ground leases range from 2023 to 2092 with a weighted-average remaining term of 52.2 years.  Certain of these leases have five- to ten-year extension options ranging in total from 20 to 25 years.

    Upon adoption of the Leases standard, the Company did not recognize value during the option period for the right-of-use assets and lease liabilities as it was not probable the extension options will be exercised. Upon adoption, the Company recorded a right of use asset of $27.0 million and corresponding liability of $27.3 million. The right of use asset is included in prepaid and other assets and the lease liability is included in deferred revenue and other liabilities. This value was determined utilizing an estimate of our incremental borrowing rate that was specific to each lease based upon the term and underlying asset. These rates ranged from 3.93% to 6.33% with a weighted-average incremental borrowing rate of 5.86%.

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Ground lease expense incurred by the Company on these operating leases for the years ended December 31, 2020, 2019, and 2018 was $1.9 million, $1.8 million, and $1.7 million, respectively. The Company made payments of $1.8 million and $1.7 million for the years ended December 31, 2020 and 2019, respectively, which were included in operating cash flows.
 
Future minimum lease payments due under ground leases for the next five years ending December 31 and thereafter are as follows: 
 
($ in thousands)
2021 $ 1,789 
2022 1,815 
2023 1,636 
2024 1,600 
2025 1,582 
Thereafter 68,971 
Total $ 77,393 
  
Note 10. Shareholders’ Equity 
 
Common Equity 
 
Our Board of Trustees declared a cash distribution of $0.1500 per common share and Common Unit for the fourth quarter of 2020. This distribution was paid on January 15, 2021 to common shareholders and Common Unit holders of record as of January 8, 2021.

For the years ended December 31, 2020, 2019 and 2018, we declared cash distributions of $0.4495, $1.27, and $1.27 respectively per common share and Common Units.

Dividend Reinvestment and Share Purchase Plan 
 
We maintain a Dividend Reinvestment and Share Purchase Plan, which offers investors the option to invest all or a portion of their common share dividends in additional common shares.  Participants in this plan are also able to make optional cash investments with certain restrictions.
 
Note 11. Commitments and Contingencies 
 
Other Commitments and Contingencies 
 
We are not subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against us. We are parties to routine litigation, claims, and administrative proceedings arising in the ordinary course of business.  Management believes that such matters will not have a material adverse impact on our consolidated financial condition, results of operations or cash flows taken as a whole.  

We are obligated under various completion guarantees with lease agreements with tenants to complete all or portions of a development project and tenant-specific space currently under construction.  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.

In 2017, we provided a repayment guaranty on a $33.8 million construction loan associated with the development of the Embassy Suites at the University of Notre Dame consistent with our 35% ownership interest. As of December 31, 2020, the current outstanding loan balance is $33.6 million, of which our share is $11.8 million.

As of December 31, 2020, we had outstanding letters of credit totaling $1.2 million.  At that date, there were no amounts advanced against these instruments. 
  


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Note 12. Related Parties and Related Party Transactions 
 
Subsidiaries of the Company provide certain management, construction management and other services to certain entities owned by certain members of the Company’s management.  During each of the years ended December 31, 2020, 2019 and 2018, we earned less than $0.1 million, from entities owned by certain members of management. 
 
We reimburse an entity owned by certain members of our management for certain travel and related services.  During the years ended December 31, 2020, 2019 and 2018, we paid $0.5 million, $0.8 million and $0.5 million, respectively, to this related entity. 
 

Note 13. Acquisitions 

In 2020, we acquired one retail operating property for $65.3 million. The fair value of the real estate and other 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 rates. The estimates of fair value primarily relied upon Level 2 and Level 3 inputs, as previously defined.    

The following table summarizes the estimation of the fair value of assets acquired and liabilities assumed for the property acquired in 2020:

($ in thousands)
Investment properties, net $ 63,570 
Lease-related intangible assets, net 2,254 
Total acquired assets 65,824 
Accounts payable and accrued expenses 280 
Deferred revenue and other liabilities 246 
Total assumed liabilities 526 
Fair value of acquired net assets $ 65,298 

The leases at the acquired property had a weighted average remaining life at acquisition of approximately 3.2 years.

The range of the most significant Level 3 assumptions utilized in determining the value of the real estate and related assets acquired are as follows:

Low High
Net rental rate per square foot - Anchors $ 22.50  $ 27.50 
Net rental rate per square foot - Small Shops $ 15.00  $ 65.00 
Discount rate 9.0  % 9.0  %

In 2019, we acquired one retail operating property for $29.0 million and one parking garage for $29.5 million. The fair value of the real estate and other 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 primarily relied upon Level 2 and Level 3 inputs, as previously defined.
    
    The following table summarizes the estimation of the fair value of assets acquired and liabilities assumed for the properties acquired in 2019:

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($ in thousands)
Investment properties, net $ 56,393 
Lease-related intangible assets, net 2,458 
Other assets 320 
Total acquired assets 59,171 
Accounts payable and accrued expenses 595 
Deferred revenue and other liabilities 371 
Total assumed liabilities 966 
Fair value of acquired net assets $ 58,205 

    The leases at the acquired properties had a weighted average remaining life at acquisition of approximately 5.6 years.

    The range of the most significant Level 3 assumptions utilized in determining the value of the real estate and related assets acquired are as follows:

Low High
Net rental rate per square foot - Anchors $ 11.00  $ 12.96 
Net rental rate per square foot - Small Shops $ 6.33  $ 32.00 
Discount rate 9.0  % 9.0  %

    The results of operations for each of the properties acquired during the years ended December 31, 2020 and 2019 have been included in operations since their respective dates of acquisition. We did not acquire any properties in 2018.

Note 14. Impact of COVID-19

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

The Company continues to closely monitor the impact of the COVID-19 pandemic on all aspects of its business and how it impacts the Company's tenants and business partners. Certain segments of retailers and the Company experienced disruption during 2020, and, going forward, the potential adverse effect of the COVID-19 pandemic, including possible resurgences and mutations, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market, global economy, and financial markets, and the extent of such effects, will depend on future developments, which are highly uncertain and cannot be predicted with confidence.

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

•As of December 31, 2020, over 98% of our tenants have reopened. However, many of these retailers are operating at a lower capacity than normal due to COVID-19. Store closures or the inability to return to full capacity, particularly if for an extended period, increase the risk of business failures and lease defaults.
•As of February 11, 2021, we have collected approximately 95% of rent billings for the three months ended December 31, 2020 and 92% of rent billings for the period from April 1, 2020 through December 31, 2020.
•Many of our tenants have taken on additional debt as a result of COVID-19, including loans administered by the Small Business Administration. To the extent this debt is not forgiven, the increased debt load may hamper their ability to continue to operate and to pay rent, which could cause the Company to realize decreased cash flow and increased vacancies at its properties.

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Starting in March and continuing through January 2021, the Company received rent relief requests from a significant proportion of its tenants. Some tenants have asserted various legal arguments that they allege relieve them of the obligation to pay rent during the pandemic; the Company and its legal advisers generally disagree with these legal arguments. The Company has evaluated and will continue to evaluate tenant requests for rent relief based on many factors, including the tenant's financial strength, the tenant's operating history, potential co-tenancy impacts, the tenant's contribution to the shopping center in which it operates, the Company's assessment of the tenant's long-term viability, the difficulty or ease with which the tenant could be replaced, and other factors.

As a result of this evaluation, the Company has agreed to defer rent for approximately 375 of its tenants subject to certain conditions. The Company had deferred the collection of $6.1 million of rental income that remains outstanding as of December 31, 2020. To the extent the Company agrees to defer rent or is otherwise unable to collect rent for certain periods, the Company will realize decreased cash flow, which could significantly decrease the cash available for the Company's operating and capital uses.

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Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries
Schedule III
Consolidated Real Estate and Accumulated Depreciation
($ in thousands)   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  $ 12,892  $ —  $ 755  $ 2,624  $ 13,647  $ 16,271  $ 4,530  1978/2003 2012
54th & College * —  2,672  —  —  —  2,672  —  2,672  —  2008 NA
Bayonne Crossing 42,113  47,809  43,960  —  917  47,809  44,877  92,686  12,397  2011 2014
Bayport Commons * —  7,005  20,776  —  4,109  7,005  24,886  31,891  8,162  2008 NA
Belle Isle * —  9,130  41,167  —  5,968  9,130  47,135  56,265  12,409  2000 2015
Bridgewater Marketplace * —  3,407  8,602  —  1,244  3,407  9,845  13,252  3,708  2008 NA
Burlington Coat Factory * —  —  2,773  —  29  —  2,802  2,802  2,093  1992/2000 2000
Castleton Crossing * —  9,761  28,052  —  944  9,761  28,996  38,757  8,212  1975 2013
Chapel Hill Shopping Center 18,250  —  35,109  —  1,856  —  36,965  36,965  9,380  2001 2015
City Center * —  20,565  180,007  —  4,690  20,565  184,697  205,262  46,121  2018 2014
Centennial Center 70,455  58,960  72,676  —  4,720  58,960  77,396  136,356  25,247  2002 2014
Centennial Gateway 23,962  5,305  48,739  —  576  5,305  49,315  54,620  12,364  2005 2014
Centre Point Commons 14,410  2,918  22,310  —  132  2,918  22,441  25,359  5,790  2007 2014
Cobblestone Plaza * —  11,221  45,028  —  2,849  11,221  47,877  59,098  13,852  2011 NA
Colonial Square * —  7,521  18,696  —  2,138  7,521  20,834  28,355  5,009  2010 2014
Colleyville Downs * —  5,446  38,533  —  2,064  5,446  40,597  46,043  12,875  2014 2015
Cool Creek Commons * —  6,062  13,428  —  3,802  6,062  17,229  23,291  7,192  2005 NA
Cool Springs Market * —  12,644  22,870  40  6,449  12,684  29,319  42,003  10,152  1995 2013
Crossing at Killingly Commons * —  21,999  34,968  —  (5) 21,999  34,963  56,962  10,252  2010 2014
Delray Marketplace 55,110  18,750  88,421  1,284  4,960  20,034  93,381  113,415  24,378  2013 NA
DePauw University Bookstore & Café —  64  663  —  45  64  708  772  416  2012 NA
Draper Crossing * —  9,054  27,241  —  894  9,054  28,134  37,188  8,171  2012 2014
Draper Peaks * —  11,498  47,125  522  4,135  12,020  51,260  63,280  11,529  2012 2014
Eastern Beltway Center 34,100  23,221  45,725  —  4,675  23,221  50,400  73,621  11,620  1998/2006 2014
Eastgate Crossing —  4,244  59,326  —  —  4,244  59,326  63,570  —  1958/2007 2020
Eastgate Pavilion * —  8,026  18,763  —  904  8,026  19,667  27,693  9,224  1995 2004
Eddy Street Commons —  1,900  37,051  —  1,154  1,900  38,205  40,105  13,599  2009 NA
Estero Town Commons * —  8,973  9,960  —  989  8,973  10,949  19,922  4,077  2006 NA
Fishers Station * —  4,008  15,607  —  73  4,008  15,680  19,688  5,215  2018 NA

F-41

    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)                      
Geist Pavilion * $ —  $ 1,368  $ 8,280  $ —  $ 2,362  $ 1,368  $ 10,642  $ 12,010  $ 4,898  2006 NA
Greyhound Commons * —  2,629  794  —  863  2,629  1,657  4,286  942  2005 NA
Holly Springs Towne Center * —  12,319  45,904  —  4,783  12,319  50,688  63,007  11,499  2013 NA
Holly Springs Towne Center - Phase II * —  11,590  49,006  —  1,455  11,590  50,461  62,051  8,159  2016 NA
Hunters Creek Promenade * —  8,335  12,681  179  1,151  8,514  13,831  22,345  3,685  1994 2013
Indian River Square * —  5,100  6,305  1,100  1,924  6,200  8,229  14,429  3,251  1997/2004 2005
International Speedway Square * —  7,424  12,840  —  6,875  7,424  19,715  27,139  11,267  1999 NA
King's Lake Square * —  4,519  15,405  —  1,698  4,519  17,103  21,622  8,698  1986/2014 2003
Kingwood Commons * —  5,715  30,668  —  249  5,715  30,916  36,631  11,185  1999 2013
Lake City Commons —  3,415  10,242  —  365  3,415  10,608  14,023  3,415  2008 2014
Lake City Commons - Phase II * —  1,277  2,225  —  (124) 1,277  2,102  3,379  486  2011 2014
Lake Mary Plaza —  1,413  8,706  —  160  1,413  8,866  10,279  2,071  2009 2014
Lithia Crossing * —  3,065  7,611  —  6,248  3,065  13,859  16,924  5,443  1994/2003 2011
Market Street Village * —  9,764  16,360  —  3,052  9,764  19,412  29,176  8,557  1970/2004 2005
Miramar Square 31,625  26,492  30,847  389  11,331  26,880  42,178  69,058  9,986  2008 2014
Mullins Crossing * —  10,582  42,140  —  6,233  10,582  48,373  58,955  14,063  2005 2014
Naperville Marketplace —  5,364  11,475  —  160  5,364  11,634  16,998  4,328  2008 NA
Nora Plaza 3,790  21,310  —  2,150  3,790  23,460  27,249  2,077  2004 2019
Northcrest Shopping Center —  4,044  33,684  —  1,284  4,044  34,968  39,012  8,101  2008 2014
Northdale Promenade * —  1,718  27,292  —  161  1,718  27,453  29,171  12,891  2017 NA
Oleander Place * —  863  5,935  —  285  863  6,220  7,083  2,522  2012 2011
Parkside Town Commons - Phase I * —  3,108  42,194  (60) 711  3,047  42,905  45,952  11,279  2015 N/A
Parkside Town Commons - Phase II * —  20,722  66,524  —  9,828  20,722  76,352  97,074  15,245  2017 N/A
Perimeter Woods * —  8,993  27,277  —  1,937  8,993  29,213  38,206  6,857  2008 2014
Pine Ridge Crossing * —  5,640  16,885  —  3,981  5,640  20,866  26,506  8,278  1994 2006
Plaza at Cedar Hill * —  5,782  36,649  —  11,784  5,782  48,433  54,215  22,537  2000 2004
Pleasant Hill Commons —  3,350  10,116  —  356  3,350  10,472  13,822  3,292  2008 2014
Portofino Shopping Center * —  4,754  75,221  —  19,144  4,754  94,366  99,120  30,615  1999 2013
Publix at Woodruff * —  1,783  6,361  —  869  1,783  7,230  9,013  3,697  1997 2012
Rampart Commons 8,816  1,136  42,726  —  592  1,136  43,318  44,454  11,926  2018 2014
Rangeline Crossing * —  2,006  18,020  —  619  2,006  18,639  20,645  7,580  1986/2013 NA

F-42

    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)                      
Riverchase Plaza * $ —  $ 3,889  $ 11,389  $ —  $ 1,136  $ 3,889  $ 12,525  $ 16,414  $ 5,351  1991/2001 2006
Rivers Edge * —  5,647  31,347  —  1,938  5,647  33,285  38,932  11,614  2011 2008
Saxon Crossing 11,400  3,764  16,762  —  578  3,764  17,340  21,104  5,069  2009 2014
Shoppes at Plaza Green * —  3,749  23,011  —  2,184  3,749  25,195  28,944  9,554  2000 2012
Shoppes of Eastwood * —  1,688  8,949  —  504  1,688  9,454  11,142  3,691  1997 2013
Shops at Eagle Creek * —  3,668  8,760  —  5,234  3,668  13,994  17,662  6,123  1998 2003
Shops at Julington Creek 4,785  2,372  7,300  —  260  2,372  7,561  9,933  1,537  2011 2014
Shops at Moore 21,300  6,284  23,348  —  1,200  6,284  24,548  30,832  5,451  2010 2014
Silver Springs Pointe —  7,580  4,992  —  321  7,580  5,313  12,893  1,605  2001 2014
Stoney Creek Commons * —  628  3,700  —  5,913  628  9,614  10,242  4,107  2000 NA
Sunland Towne Centre * —  14,774  22,528  —  3,540  14,774  26,068  40,842  12,047  1996 2004
Tarpon Bay Plaza * —  4,273  23,001  —  4,452  4,273  27,454  31,727  8,350  2007 NA
The Corner 14,750  3,772  24,642  —  28  3,772  24,669  28,441  5,970  2008 2014
The Landing at Tradition * —  18,505  46,210  —  2,980  18,505  49,191  67,696  10,922  2007 2014
Toringdon Market * —  5,448  8,703  —  622  5,448  9,325  14,773  2,734  2004 2013
Traders Point * —  9,443  34,697  —  3,403  9,443  38,100  47,543  20,127  2005 NA
Traders Point II * —  2,376  6,363  —  914  2,376  7,277  9,653  3,281  2005 NA
Tradition Village Center * —  3,140  14,826  —  632  3,140  15,458  18,598  3,943  2006 2014
Waterford Lakes Village * —  2,317  6,347  —  602  2,317  6,949  9,266  3,138  1997 2004
Waxahachie Crossing —  1,411  15,552  —  100  1,411  15,652  17,063  3,429  2010 2014
Westside Market * —  4,194  17,723  —  427  4,194  18,150  22,344  3,707  2013 2014
Total Operating Properties 351,076  621,773  2,142,304  3,452  200,519  625,225  2,342,823  2,968,048  688,558     

F-43

    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
Office Properties                      
Thirty South * $ —  $ 1,643  $ 9,536  $ —  $ 21,922  $ 1,643  $ 31,457  $ 33,100  $ 14,246  1905/2002 2001
Pan Am Plaza Garage * —  —  29,536  —  276  —  29,813  29,813  7,761  1986 2019
Union Station Parking Garage * —  904  2,650  —  1,857  904  4,506  5,410  2,057  1986 2001
Total Office Properties —  2,547  41,722  —  24,055  2,547  65,777  68,324  24,064     
Development and Redevelopment Properties                    
Eddy Street Commons - Phase II 4,188  5,642  —  —  4,188  5,642  9,830  267  NA NA
Glendale Town Center* —  1,307  43,221  —  4,148  1,307  47,369  48,676  32,685  NA NA
Hamilton Crossing Centre* —  5,531  10,339  —  63  5,531  10,403  15,934  4,471  NA NA
The Corner * —  304  4,145  —  —  304  4,145  4,449  —  NA NA
Total Development and Redevelopment Properties —  11,329  63,347  —  4,211  11,329  67,558  78,888  37,423     
Other **                      
Bridgewater Marketplace * —  1,722  —  —  —  1,722  —  1,722  —  NA NA
KRG Development —  —  716  —  —  —  716  716  74  NA NA
KRG New Hill * —  1,812  —  —  —  1,812  —  1,812  —  NA NA
KRG Peakway —  5,777  —  —  —  5,777  —  5,777  —  NA NA
Pan Am Plaza —  11,694  —  —  —  11,694  —  11,694  —  NA NA
Total Other —  21,006  716  —  —  21,006  716  21,722  74     
Line of credit/Term Loan/Unsecured notes 825,000  —  —  —  —  —  —  —  —  NA NA
Grand Total $ 1,176,076  $ 656,655  $ 2,248,089  $ 3,452  $ 228,785  $ 660,107  $ 2,476,874  $ 3,136,982  $ 750,119     
____________________
* This property or a portion of the property is included as an unencumbered asset used in calculating our 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-44

Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries
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, 2020, 2019, and 2018 are as follows: 
2020 2019 2018
Balance, beginning of year $ 3,079,616  $ 3,633,376  $ 3,949,431 
Acquisitions 63,570  57,494  — 
Improvements 39,544  52,713  68,349 
Impairment —  (56,948) (73,198)
Disposals (45,748) (607,019) (311,206)
Balance, end of year $ 3,136,982  $ 3,079,616  $ 3,633,376 
 
 
The unaudited aggregate cost of investment properties for U.S. federal tax purposes as of December 31, 2020 was $2.3 billion. 
 

Note 2. Reconciliation of Accumulated Depreciation 
 
The changes in accumulated depreciation of the Company for the years ended December 31, 2020, 2019, and 2018 are as follows: 
2020 2019 2018
Balance, beginning of year $ 661,546  $ 695,012  $ 660,276 
Depreciation expense 113,973  117,216  132,662 
Impairment —  (19,226) (2,838)
Disposals (25,400) (131,456) (95,088)
Balance, end of year $ 750,119  $ 661,546  $ 695,012 
 
 
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-45

Exhibit 3.7


CERTIFICATE OF LIMITED PARTNERSHIP

OF

KITE REALTY GROUP, L.P.

The undersigned, desiring to form a limited partnership pursuant to the Delaware Revised Uniform Limited Partnership Act, do hereby certify as follows:

I.The name of the limited partnership is: Kite Realty Group, L.P. (the “Partnership”)

II.The address of the Partnership’s registered office in the State of Delaware is 2711 Centreville Road, Suite 400, Wilmington, Delaware 19808. The name of the Partnership's registered agent for service of process in the State of Delaware at such address is Corporation Service Company.

III.The name and mailing address of the sole general partner is as follows:

NAME MAILING ADDRESS

Kite Realty Group Trust 30 S. Meridian Street
Suite 1100
Indianapolis, IN 46204


IN WITNESS WHEREOF, the undersigned have executed this Certificate of Limited Partnership of Kite Realty Group, L.P. as of March 29, 2004

KITE REALTY GROUP TRUST



By: /s/ John A. Kite
Name: John A. Kite
Title: Trustee



Exhibit 4.5


DESCRIPTION OF THE REGISTRANT’S SECURITIES

REGISTERED PURSUANT TO SECTION 12 OF THE
SECURITIES EXCHANGE ACT OF 1934

The following description sets forth certain material terms and provisions of our common shares, par value $0.01 per share, which is the only security of Kite Realty Group Trust or Kite Realty Group, L.P. registered under Section 12 of the Securities Exchange Act of 1934, as amended. This description also summarizes relevant provisions of the Maryland General Corporation Law and certain provisions of our declaration of trust and bylaws. The following summary does not purport to be complete and is subject to, and is qualified in its entirety by reference to, the applicable provisions of Maryland law and our declaration of trust and our bylaws, each of which are incorporated by reference as exhibits to the Annual Report on Form 10-K of which this Exhibit 4.5 is a part. We encourage you to read the declaration of trust, the bylaws and the applicable provisions of Maryland law for additional information. Unless the context suggests otherwise, references herein to “we,” “us,” “our” or the “Company” refer to Kite Realty Group Trust.

Authorized Capital Shares

Our declaration of trust currently provides that we may issue up to 225,000,000 common shares of beneficial interest, par value $0.01 per share, and 40,000,000 preferred shares of beneficial interest, par value $0.01 per share.

Maryland law and our declaration of trust provide that none of our shareholders is personally liable for any of our obligations solely as a result of that shareholder’s status as a shareholder.

DESCRIPTION OF COMMON SHARES

Voting Rights of Common Shares

Subject to the provisions of our declaration of trust regarding restrictions on the transfer and ownership of shares of beneficial interest, each outstanding common share entitles the holder to one vote on all matters submitted to a vote of shareholders, including the election of trustees, and, except as provided with respect to any other class or series of shares of beneficial interest, the holders of such common shares will possess the exclusive voting power. There is no cumulative voting in the election of trustees, which means that the holders of a plurality of the outstanding common shares, voting as a single class, can elect all of the trustees then standing for election.

Under the Maryland statute governing real estate investment trusts formed under the laws of that state, which we refer to as the Maryland REIT law, a Maryland REIT generally cannot amend its declaration of trust or merge unless recommended by its board of trustees and approved by the affirmative vote of shareholders holding at least two-thirds of the shares entitled to vote on the matter unless a lesser percentage (but not less than a majority of all the votes entitled to be cast on the matter) is set forth in the REIT’s declaration of trust. Our declaration of trust and bylaws provide for approval by a majority of all votes entitled to be cast on all other matters in all situations permitting or requiring action by shareholders except with respect to the election of trustees (which requires a majority of all the votes cast in an uncontested election at a meeting of our shareholders at which a quorum is present), dissolution (which requires two-thirds of all the votes entitled to be cast) and removal of trustees (which requires two-thirds


of all the votes entitled to be cast). Our declaration of trust permits the trustees to amend the declaration of trust from time to time to qualify as a REIT under the Internal Revenue Code or the Maryland REIT law, without the affirmative vote or written consent of the shareholders.

Dividends, Liquidation and Other Rights

All common shares offered will be duly authorized, fully paid and nonassessable. Holders of our common shares will be entitled to receive dividends when, as and if declared by our board of trustees out of assets legally available for the payment of dividends. They also will be entitled to share ratably in our assets legally available for distribution to our shareholders in the event of our liquidation, dissolution or winding up, after payment of or adequate provision for all of our known debts and liabilities. These rights will be subject to the preferential rights of any other class or series of our shares and to the provisions of our declaration of trust regarding restrictions on transfer of our shares.

Holders of our common shares will have no preference, conversion, exchange, sinking fund, redemption or appraisal rights and will have no preemptive rights to subscribe for any of the securities. Subject to the restrictions on transfer of shares contained in our declaration of trust and to the ability of the board of trustees to create common shares with differing voting rights, all common shares will have equal dividend, liquidation and other rights.

Power to Classify and Reclassify Shares and Issue Additional Common Shares or Preferred Shares

Our declaration of trust authorizes our board of trustees to classify any unissued preferred shares and to reclassify any previously classified but unissued common shares and preferred shares of any series from time to time in one or more series, as authorized by the board of trustees. Prior to issuance of shares of each class or series, the board of trustees is required by the Maryland REIT law and our declaration of trust to set for each such class or series, subject to the provisions of our declaration of trust regarding the restrictions on transfer of shares of beneficial interest, the terms, preferences, conversion or other rights, voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each such class or series. As a result, our board of trustees could authorize the issuance of preferred shares that have priority over the common shares with respect to dividends and rights upon liquidation and with other terms and conditions that could have the effect of delaying, deterring or preventing a transaction or a change in control that might involve a premium price for holders of common shares or otherwise might be in their best interest.

To permit us increased flexibility in structuring possible future financings and acquisitions and in meeting other needs that might arise, our declaration of trust allows us to issue additional common shares or preferred shares and to classify or reclassify unissued common shares or preferred shares and thereafter to issue the classified or reclassified shares without shareholder approval, unless shareholder approval is required by applicable law or the rules of any stock exchange or automated quotation system on which our securities may be listed or traded. Although we have no present intention of doing so, we could issue a class or series of shares that could delay, deter or prevent a transaction or a change in control that might involve a premium price for holders of common shares or might otherwise be in their best interests.

Holders of our common shares do not have preemptive rights, which means they have no right to acquire any additional shares that we may issue at a subsequent date.

Transfer Agent and Registrar

The transfer agent and registrar for our common shares is Broadridge Corporate Issuer Solutions.



Certain Provisions of Maryland Law and Our Declaration of Trust and Bylaws

The following description of certain provisions of Maryland law and of our declaration of trust and bylaws is only a summary. For a complete description, we refer you to the applicable Maryland law, our declaration of trust and bylaws.

Number of Trustees; Vacancies

Our declaration of trust and bylaws provide that the number of our trustees will be established by a vote of a majority of the members of our board of trustees. We currently have nine trustees. Our bylaws provide that any vacancy, including a vacancy created by an increase in the number of trustees, may be filled only by a vote of a majority of the remaining trustees, even if the remaining trustees do not constitute a quorum. Pursuant to our declaration of trust, each of our trustees is elected by our shareholders to serve until the next annual meeting and until their successors are duly elected and qualify. Under Maryland law, our board may elect to create staggered terms for its members.

Our bylaws provide that at least a majority of our trustees will be “independent,” with independence being defined in the manner established by our board of trustees and in a manner consistent with listing standards established by the New York Stock Exchange.

Removal of Trustees

Our declaration of trust provides that a trustee may be removed only with cause and only upon the affirmative vote of at least two-thirds of the votes entitled to be cast in the election of trustees. Absent removal of all of our trustees, this provision, when coupled with the provision in our bylaws authorizing our board of trustees to fill vacant trusteeships, may preclude shareholders from removing incumbent trustees and filling the vacancies created by such removal with their own nominees.

Business Combinations

Our board has approved a resolution that exempts us from the provisions of the Maryland business combination statute described below but may opt to make these provisions applicable to us in the future. Maryland law prohibits “business combinations” between us and an interested shareholder or an affiliate of an interested shareholder for five years after the most recent date on which the interested shareholder becomes an interested shareholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. Maryland law defines an interested shareholder as:

•any person who beneficially owns 10% or more of the voting power of our shares; or

•an affiliate or associate of ours who, at any time within the two-year period prior to the date in question, was the beneficial owner of 10% or more of the voting power of our then outstanding voting shares.

A person is not an interested shareholder under Maryland law if our board of trustees approves in advance the transaction by which the person otherwise would have become an interested shareholder. However, in approving a transaction, our board of trustees may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by our board of trustees.



After the five-year prohibition, any business combination between us and an interested shareholder generally must be recommended by our board of trustees and approved by the affirmative vote of at least:

•80% of the votes entitled to be cast by holders of our then outstanding shares of beneficial interest; and
•two-thirds of the votes entitled to be cast by holders of our voting shares other than shares held by the interested shareholder with whom or with whose affiliate the business combination is to be effected or shares held by an affiliate or associate of the interested shareholder.

These super-majority vote requirements do not apply if our common shareholders receive a minimum price, as described under Maryland law, for their shares in the form of cash or other consideration in the same form as previously paid by the interested shareholder for its shares.

The statute permits various exemptions from its provisions, including business combinations that are approved by our board of trustees before the time that the interested shareholder becomes an interested shareholder.

Control Share Acquisitions

Our bylaws contain a provision exempting any and all acquisitions of our common shares from the control shares provisions of Maryland law. However, our board of trustees may opt to make these provisions applicable to us at any time by amending or repealing this provision in the future, and may do so on a retroactive basis. Maryland law provides that “control shares” of a Maryland REIT acquired in a “control share acquisition” have no voting rights unless approved by a vote of two-thirds of the votes entitled to be cast on the matter. Shares owned by the acquiror or by officers or trustees who are our employees are excluded from the shares entitled to vote on the matter. “Control shares” are issued and outstanding voting shares that, if aggregated with all other shares previously acquired by the acquiring person, or in respect of which the acquiring person is able to exercise or direct the exercise of voting power (except solely by virtue of a revocable proxy), would entitle the acquiring person to exercise or direct the exercise of the voting power in electing trustees within one of the following ranges of voting power:

•one-tenth or more but less than one-third;
•one-third or more but less than a majority; or
•a majority or more of all voting power.

Control shares do not include shares the acquiring person is then entitled to vote as a result of having previously obtained shareholder approval. A “control share acquisition” means the acquisition of control shares subject to certain exceptions.

A person who has made or proposes to make a control share acquisition may compel our board of trustees to call a special meeting of shareholders to be held within 50 days of demand to consider the voting rights of the shares. The right to compel the calling of a special meeting is subject to the satisfaction of certain conditions, including an undertaking to pay the expenses of the special meeting. If no request for a special meeting is made, we may present the question at any shareholders’ meeting.

If voting rights are not approved at the shareholders’ meeting or if the acquiring person does not deliver the statement required by Maryland law, then, subject to certain conditions and limitations, we may redeem for fair value any or all of the control shares, except those for which voting rights have previously been approved. Fair value is determined without regard to the absence of voting rights for the control shares and as of the date of the last control share acquisition or of any meeting of shareholders at


which the voting rights of the shares were considered and not approved. If voting rights for control shares are approved at a shareholders’ meeting, the acquiror may then vote a majority of the shares entitled to vote, and all other shareholders may exercise appraisal rights. The fair value of the shares for purposes of these appraisal rights may not be less than the highest price per share paid by the acquiror in the control share acquisition. The control share acquisition statute does not apply to shares acquired in a merger, consolidation or share exchange if we are a party to the transaction, nor does it apply to acquisitions approved by or exempted by our declaration of trust or bylaws.

Merger, Amendment of Declaration of Trust

Under Maryland REIT law, a Maryland REIT generally cannot dissolve, amend its declaration of trust or merge with another entity unless recommended by the board of trustees and approved by the affirmative vote of shareholders holding at least two-thirds of the shares entitled to vote on the matter unless a lesser percentage, but not less than a majority of all the votes entitled to be cast on the matter, is set forth in the REIT’s declaration of trust. Under our declaration of trust, we cannot dissolve or merge with another entity without the affirmative vote of the holders of two-thirds of the votes entitled to be cast on the matter. Our declaration of trust, including its provisions on removal of trustees, may be amended only by the affirmative vote of the holders of two-thirds of the votes entitled to be cast on the matter. Under the Maryland REIT law and our declaration of trust, our trustees are permitted, without any action by our shareholders, to amend the declaration of trust from time to time to qualify as a REIT under the Internal Revenue Code or the Maryland REIT law without the affirmative vote or written consent of the shareholders.

Limitation of Liability and Indemnification

Our declaration of trust limits the liability of our trustees and officers for money damages, except for liability resulting from:

•actual receipt of an improper benefit or profit in money, property or services; or
•a final judgment based upon a finding of active and deliberate dishonesty by the trustee that was material to the cause of action adjudicated.

Our declaration of trust authorizes us, to the maximum extent permitted by Maryland law, to indemnify, and to pay or reimburse reasonable expenses to, any of our present or former trustees or officers or any individual who, while a trustee or officer and at our request, serves or has served another entity, employee benefit plan or any other enterprise as a trustee, director, officer, partner or otherwise. The indemnification covers any claim or liability against the person. Our declaration of trust and bylaws require us, to the maximum extent permitted by Maryland law, to indemnify each present or former trustee or officer who is made a party to a proceeding by reason of his or her service to us.

Maryland law will permit us to indemnify our present and former trustees and officers against liabilities and reasonable expenses actually incurred by them in any proceeding unless:

•the act or omission of the trustee or officer 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;
•the trustee or officer actually received an improper personal benefit in money, property or services; or
•in a criminal proceeding, the trustee or officer had reasonable cause to believe that the act or omission was unlawful.



In addition, Maryland law will prohibit us from indemnifying our present and former trustees and officers for an adverse judgment in an action by us or in a derivative action or if the trustee or officer was adjudged to be liable for an improper personal benefit. Our bylaws and Maryland law require us, as a condition to advancing expenses in certain circumstances, to obtain:

•a written affirmation by the trustee or officer of his or her good faith belief that he or she has met the standard of conduct necessary for indemnification; and
•a written undertaking to repay the amount reimbursed if the standard of conduct is not met.

In addition, we have entered into indemnification agreements with each of our trustees and executive officers that provide for indemnification to the maximum extent permitted by Maryland law.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to trustees, officers or persons controlling the registrant pursuant to the foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Act and is therefore unenforceable.

Operations

We generally are prohibited from engaging in certain activities, including acquiring or holding property or engaging in any activity that would cause us to fail to qualify as a REIT.

Term and Termination

Our declaration of trust provides for us to have a perpetual existence. Pursuant to our declaration of trust, and subject to the provisions of any of our classes or series of shares of beneficial interest then outstanding and the approval by a majority of the entire board of trustees, our shareholders, at any meeting thereof, by the affirmative vote of at least two-thirds of all of the votes entitled to be cast on the matter, may approve a plan of liquidation and dissolution.

Meetings of Shareholders

Under our bylaws, annual meetings of shareholders are to be held each year at a date and time as determined by our board of trustees. Special meetings of shareholders may be called only by a majority of the trustees then in office, by the Chairman of our board of trustees, our President or our Chief Executive Officer. Only matters set forth in the notice of the special meeting may be considered and acted upon at such a meeting. Our bylaws provide that any action required or permitted to be taken at a meeting of shareholders may be taken without a meeting by unanimous written consent, if that consent sets forth that action and is signed by each shareholder entitled to vote on the matter.

Advance Notice of Trustee Nominations and New Business

Our bylaws provide that, with respect to an annual meeting of shareholders, nominations of persons for election to our board of trustees and the proposal of business to be considered by shareholders at the annual meeting may be made only:

•pursuant to our notice of the meeting;
•by our board of trustees; or
•by a shareholder who was a shareholder of record both at the time of the provision of notice and at the time of the meeting who is entitled to vote at the meeting and has complied with the advance notice procedures set forth in our bylaws.



With respect to special meetings of shareholders, only the business specified in our notice of meeting may be brought before the meeting of shareholders and nominations of persons for election to our board of trustees may be made only:

•pursuant to our notice of the meeting;
•by our board of trustees; or
•provided that our board of trustees has determined that trustees shall be elected at such meeting, by a shareholder who was a shareholder of record both at the time of the provision of notice and at the time of the meeting who is entitled to vote at the meeting and has complied with the advance notice provisions set forth in our bylaws.

The purpose of requiring shareholders to give advance notice of nominations and other proposals is to afford our board of trustees the opportunity to consider the qualifications of the proposed nominees or the advisability of the other proposals and, to the extent considered necessary by our board of trustees, to inform shareholders and make recommendations regarding the nominations or other proposals. The advance notice procedures also permit a more orderly procedure for conducting our shareholder meetings. Although our bylaws do not give our board of trustees the power to disapprove timely shareholder nominations and proposals, they may have the effect of precluding a contest for the election of trustees or proposals for other action if the proper procedures are not followed, and of discouraging or deterring a third party from conducting a solicitation of proxies to elect its own slate of trustees to our board of trustees or to approve its own proposal.

Possible Anti-Takeover Effect of Certain Provisions of Maryland Law and of Our Declaration of Trust and Bylaws

The business combination provisions of Maryland law (if our board of trustees opts to make them applicable to us), the control share acquisition provisions of Maryland law (if the applicable provision in our bylaws is rescinded), the limitations on removal of trustees, the restrictions on the acquisition of our shares of beneficial interest, the power to issue additional common shares or preferred shares and the advance notice provisions of our bylaws could have the effect of delaying, deterring or preventing a transaction or a change in the control that might involve a premium price for holders of the common shares or might otherwise be in their best interest. The “unsolicited takeovers” provisions of Maryland law permit our board of trustees, without shareholder approval and regardless of what is provided in our declaration of trust or bylaws, to implement takeover defenses that we may not yet have.




Exhibit 10.11


SEPARATION AGREEMENT

This SEPARATION AGREEMENT (the “Agreement”), dated as of November 3, 2020 (the “Effective Date”), is made and entered into by and between Kite Realty Group Trust, a Maryland real estate investment trust (together with its subsidiaries and affiliates, the “Company”), and Scott Murray (“Executive”).

WHEREAS, the Company and Executive entered into that certain Executive Employment Agreement, dated as of August 6, 2014 (the “Employment Agreement”); and

WHEREAS, the parties have come to an agreement regarding the conclusion of Executive’s employment with the Company after long and dedicated service.

NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Executive hereby agree as follows:

1.Resignation from Employment. Executive acknowledges and agrees that his employment with the Company will end, as a result of his resignation, effective as of November 11, 2020 (the “Separation Date”). Between the Effective Date and the Separation Date is a transition period, during which Executive will perform transition duties as requested by the Company. Executive has been and hereby is instructed of Executive’s obligation to cooperate with the Company and to observe the standards set forth in Section 8 of the Employment Agreement, including regarding confidentiality and non-disparagement during the transition period. Executive acknowledges that the Company reserves the right to accelerate the Separation Date in the event that Executive does not adhere to these instructions and that, if such acceleration is necessary, the new date of Executive’s termination will become the Separation Date as defined in this Agreement. As of the Separation Date, Executive shall not represent that Executive is an employee, officer, agent, or representative of the Company for any purpose.

2.Resignation from Offices Held. Pursuant to Section 1.1(e) of the Employment Agreement, Executive shall resign, effective as of the Separation Date, from all of Executive’s offices, directorships, appointments, and other positions Executive holds with the Company and any affiliate. Executive shall execute such documents requested by the Company to affect the purpose of the foregoing sentence.

3.Consideration.

a.Whether or not Executive executes this Agreement or the Waiver (as defined below), within ten (10) days following the Separation Date, Executive will receive Executive’s final paycheck, which will include all earned but unpaid base salary and accrued but unused vacation through the Separation Date, and will remain eligible to receive any other amounts that constitute the “Compensation Accrued at Termination” under the terms of the Employment Agreement. As of the


Separation Date, Executive shall not be eligible to participate in, or be covered by, any employee benefit plan or program offered by or through the Company and shall not receive any benefits or payments from the Company, except as otherwise provided in this Agreement, under the terms of applicable Company-sponsored benefit plans, or by applicable law.

b.If Executive executes this Agreement, executes and does not revoke the Waiver in accordance with Section 4 of this Agreement, and fully abides by each of their terms, in consideration for the terms of this Agreement and the Waiver, the Company will (together, the “Separation Benefits”):
i.pay Executive a single lump sum cash payment equal to $1,740,307.00 (subject to applicable withholdings), which amount represents two times the sum of (A) Executive’s base salary in effect on the Separation Date and (B) Executive’s average “Annual Cash Incentive” (as defined in the Employment Agreement) actually paid to Executive with respect to the prior three fiscal years and which amount shall be paid within 60 days of the Separation Date;
ii.pay Executive a single lump sum cash payment equal to $150,000.00 (subject to applicable withholdings), which amount represents a payment in lieu of Executive’s Partial Year Bonus (as defined in the Employment Agreement) and which amount shall be paid within 60 days of the Separation Date;
iii.if Executive is eligible for and elects COBRA coverage, pay for or reimburse Executive’s COBRA premiums to provide Executive and/or Executive’s family with continued medical, prescription, and dental benefits at least equal to those which would have been provided to them in accordance with the Company’s welfare benefit plans, practices, policies, and programs (to the extent applicable generally to other peer employees of the Company) for 18 months following the Separation Date; provided, however, that if Executive becomes reemployed with another employer and is eligible to receive medical, prescription, and dental benefits under another employer-provided plan, the benefits described herein shall be secondary to those provided under such other employer-provided plan;
iv.subject to Section 3(b)(vi), all Time Vested Awards (as defined in the Employment Agreement and as set forth on Exhibit A attached hereto) shall become fully vested and non-forfeitable to the extent not already so vested;
v.subject to Section 3(b)(vi), all Performance-Based Awards (as defined in the Employment Agreement) shall become vested on a Pro-Rata Basis (as defined in the Employment Agreement), but only if at the end of the performance period, the applicable performance objectives are achieved (for this purpose, only the performance periods that have already commenced as of the Separation Date shall be taken into account to determine whether the performance objectives ultimately are achieved, and any performance period that has not commenced as of the Separation Date shall be disregarded);


vi.(A) with respect to Executive’s AO LTIP Units (as defined in Executive’s applicable Appreciation Only LTIP Unit Agreement, by and between Kite Realty Group Trust, Kite Realty Group, L.P., and Executive), if the performance-based vesting eligibility requirement has already been met as of the Separation Date or is met within the 90 days following the Separation Date, then a pro-rated number of AO LTIP Units shall vest and become exercisable based on a fraction, the numerator of which is the number of days from the grant date of such AO LTIP Units to the Separation Date and the denominator of which is the total number of days from the grant date of such AO LTIP Units to the third anniversary of the Grant Date, and (B) Executive’s vested AO LTIP Units (including the AO LTIP Units vesting and becoming exercisable pursuant to the immediately preceding clause) shall remain exercisable until the close of business at Company headquarters on the 90th day following the Separation Date (and if not exercised, shall be forfeited); and
vii.waive, as of the Separation Date, all no-sell restrictions applicable to shares of the Company’s common stock (including common stock issued upon conversion of LTIP units) then-held by Executive.

c.Executive acknowledges and agrees that (i) no amounts are payable under the Employment Agreement in connection with Executive’s termination of employment, and the Separation Benefits are in excess of any amounts otherwise due to Executive from the Company and (ii) other than as expressly set forth in this Agreement, Executive is not entitled to and will not seek any further consideration for his employment or service or termination of employment or service with the Company, including but not limited to, any other wages or base compensation, bonus compensation of any kind, notice payment, equity or equity-based compensation, severance, vacation pay, sick pay, expense reimbursements (other than those approved pursuant to standard Company policy), or other benefits (except for fully vested and non-forfeitable rights under Company-sponsored benefit plans, which are not affected by this Agreement, but which are subject to the terms and conditions of such benefit plans). Executive acknowledges that absent Executive’s execution of this Agreement, execution and non-revocation of the Waiver, and compliance with their terms, Executive will not be entitled to receive any of the Separation Benefits.

d.All payments to be made to Executive under this Agreement, or otherwise by the Company, shall be subject to withholding to satisfy required withholding taxes and other required deductions.

4.Waiver. Payment of the Separation Benefits is contingent upon Executive’s execution and delivery to the Company of the Waiver and Release Agreement attached hereto as Exhibit B (the “Waiver”) within 45 days following the Separation Date and upon Executive’s not revoking such Waiver. If Executive does not execute the Waiver within such time period or revokes such Waiver, Executive shall forfeit all rights to and entitlement to receive the Separation Benefits.


5.Restrictive Covenants and Survival. In consideration for the Separation Benefits, Executive acknowledges and agrees that Section 8.1 (Confidential Information), Section 8.2 (Noncompetition), Section 8.3 (Non-Solicitation), Section 8.4 (Cooperation with Regard to Litigation), Section 8.5 (Non-Disparagement), Section 8.7 (Remedies), Section 9 (Governing Law, Disputes, and Arbitration), Section 10 (Miscellaneous), and Section 11 (Section 409A Savings Provisions) of the Employment Agreement shall survive termination of the Employment Agreement and Executive’s termination of employment; provided, however, that Section 8.3 (Non-Solicitation) shall be amended as of the Separation Date to delete clause (b). Such provisions of the Employment Agreement are incorporated herein. Where there is a conflict between such provisions and this Agreement, this Agreement shall prevail.

6.General Provisions. Except as explicitly incorporated herein, this Agreement contains the entire understanding and agreement between the parties relating to the subject matter of this Agreement and supersedes any and all prior agreements or understandings between the parties pertaining to the subject matter hereof, including the Employment Agreement. This Agreement may not be altered or amended except by an instrument in writing signed by both parties. Executive has not relied upon any representation or statement outside this Agreement with regard to the subject matter, basis, or effect of this Agreement. This Agreement will be governed by, and construed in accordance with, the laws of the State of Indiana, excluding the choice of law rules thereof, and shall be subject to the arbitration provisions under the Employment Agreement. This Agreement will be binding upon and inure to the benefit of the parties and their respective representatives, successors, and permitted assigns. The Company may, without the consent of Executive, assign its rights and obligations under this Agreement to any successor entity, and such rights may be enforced by any such successor. If any one or more of the provisions of this Agreement, or any part thereof, will be held to be invalid, illegal, or unenforceable, the validity, legality, and enforceability of the remainder of this Agreement will not in any way be affected or impaired thereby. This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. Any party may execute this Agreement by electronic (PDF) signature.

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IN WITNESS WHEREOF, the undersigned, intending to be bound hereby, have agreed to the terms and conditions of this Agreement as of the date set forth below.



KITE REALTY GROUP TRUST

By: /s/ John Kite Date: 11/3/2020
Name: John Kite
Title: CEO


EXECUTIVE



/s/ Scott Murray Date: 11/3/2020
Scott Murray































Exhibit A

SCHEDULE OF TIME VESTED AWARDS


Grant Date
Total Grant
Unvested (Termination Date of November 11, 2020)
2/17/2016
5,438 LTIPs
1,087 LTIPs
2/15/2017
5,410 LTIPs
---
2/23/2018
13,297 LTIPs
4,433 LTIPs
2/22/2019
12,407 LTIPs
8,271 LTIPs
2/12/2020
16,977 LTIPs
16,977 LTIPs





































Exhibit B

WAIVER AND RELEASE AGREEMENT

This WAIVER AND RELEASE AGREEMENT (the “Waiver”), effective as of the Waiver Effective Date (as defined below in Section 1(f)), is entered into by Scott Murray (“Executive”) in consideration of the Separation Benefits to be provided to Executive by Kite Realty Group Trust, a Maryland real estate investment trust (together with its subsidiaries and affiliates, the “Company”) pursuant to that certain Separation Agreement, dated as of November ___, 2020, by and between the Company and Executive (the “Separation Agreement”). Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Separation Agreement.

1.General Release. In consideration for the Separation Benefits, Executive, on behalf of himself and his representatives, agents, heirs, executors, administrators, successors and assigns, hereby releases, remises and forever discharges the Company, its parents, subsidiaries, joint ventures, affiliates, divisions, predecessors, successors, assigns, and each of their respective directors, officers, partners, attorneys, shareholders, administrators, employees, agents, representatives, employment benefit plans, plan administrators, fiduciaries, trustees, insurers and re-insurers (whether past, present, or future), and all of their predecessors, successors, and assigns (all of the foregoing, collectively, the “Releasees”) from any and all claims, causes of action, covenants, contracts, agreements, promises, damages, disputes, demands, suits, and all other manner of actions whatsoever, in law or in equity, that Executive ever had, may have had, now has, or that Executive hereinafter can, shall or may have, whether known or unknown, asserted or unasserted, suspected or unsuspected, arising out of or in connection with any event, transaction, or matter occurring or existing on or before the date Executive executes this Waiver, including claims as a result of or related to Executive’s employment with the Company or the termination of that employment (the “Released Claims”). THIS IS A GENERAL RELEASE.

a.Released Claims. The Released Claims released include, but are not limited to, any claims for monetary damages; any claims related to Executive’s employment with the Company or the termination thereof; any claims to severance or similar benefits (except as provided below in Section 0(c)); any claims to expenses, attorneys’ fees, or other indemnities; any claims to options or other interests in or securities of the Company; any claims based on any event, transaction, matter, actions, or failures to act that occurred or existed on or before the date Executive executes this Waiver; and any claims for other remedies or damages sought in any legal proceeding or charge filed with any court, federal, state, or local agency, arbitrator, or other adjudicator, either by Executive or by any person claiming to act on Executive’s behalf or in Executive’s interest. Executive understands that the Released Claims may have arisen under different federal, state, or local statutes, regulations, or common law doctrines. Executive hereby specifically, but without limitation, agrees to release all Releasees from any and all claims under each of the following laws:


i.Antidiscrimination laws, such as Title VII of the Civil Rights Act of 1964, as amended, and Executive Order 11246 (which, together, prohibit discrimination based on, inter alia, race, color, national origin, religion, or sex); Section 1981 of the Civil Rights Act of 1866 (which prohibits discrimination based on race or color); the Americans with Disabilities Act and Sections 503 and 504 of the Rehabilitation Act of 1973 (which prohibit discrimination based upon disability); the Age Discrimination in Employment Act, as amended, 29 U.S.C. Section 621 et seq. (which prohibits discrimination on the basis of age); the Equal Pay Act (which prohibits paying men and women unequal pay for equal work); the Indiana Civil Rights Law, Ind. Code Ann. 22-9-1-0.1 et seq. (which prohibits discrimination based on race, color, national origin, ancestry, religion, sex, or disability); or any other federal, state, or local statute, regulation, common law doctrine, or decision concerning discrimination, harassment, or retaliation on these or any other grounds or otherwise governing the employment relationship.
ii.Other employment laws, such as the federal Worker Adjustment and Retraining Notification Act of 1988 (known as the WARN Act, which requires advance notice of certain workforce reductions); the Employee Retirement Income Security Act of 1974 (which, among other things, protects employee benefits); the Fair Labor Standards Act of 1938 (which regulates wage and hour matters); the Family and Medical Leave Act of 1993 (which requires employers to provide leaves of absence under certain circumstances); the Indiana Wage Payment and Wage Claims Acts (which regulates wage and hour matters); and any other federal, state, or local statute, regulation, common law doctrine, or decision relating to employment, reemployment rights, leaves of absence, or any other aspect of employment.
iii.Other laws of general application, such as federal, state, or local laws enforcing express or implied employment agreements or other contracts or covenants, or addressing breaches of such agreements, contracts, or covenants; federal, state or local laws providing relief for alleged wrongful discharge or termination, physical or personal injury, emotional distress, fraud, intentional or negligent misrepresentation, defamation, invasion of privacy, violation of public policy or similar claims; common law claims under any tort, contract, or other theory now or hereafter recognized, and any other federal, state, or local statute, regulation, common law doctrine, or decision regulating or regarding employment.

b.Participation in Agency Proceedings. Nothing in this Waiver shall prevent Executive from filing a charge with the Equal Employment Opportunity Commission (the “EEOC”), the National Labor Relations Board (the “NLRB”), or other similar federal, state, or local agency, or from participating in any investigation or proceeding conducted by the EEOC, the NLRB, or similar federal, state, or local agencies. However, by entering into this Waiver, Executive understands and agrees that Executive is waiving any and all rights to recover any monetary relief or other personal relief as a result of any such EEOC, NLRB, or


similar federal, state, or local agency proceeding, including any subsequent legal action. Notwithstanding the foregoing, nothing in this Waiver prohibits or restricts Executive (or Executive’s attorney) from filing a charge or complaint with the Securities and Exchange Commission (the “SEC”), the Financial Industry Regulatory Authority (“FINRA”), or any other securities regulatory agency or authority. Executive further understands that this Waiver does not limit Executive’s ability to communicate with any securities regulatory agency or authority or otherwise participate in any investigation or proceeding that may be conducted by any securities regulatory agency or authority without notice to the Company. This Waiver does not limit Executive’s right to receive an award for information provided to the SEC staff or any other securities regulatory agency or authority.

c.Claims Not Released. The Released Claims do not include claims by Executive for: (i) the Separation Benefits or the right to enforce the Separation Agreement; (ii) his “Compensation Accrued at Termination” as defined in the Employment Agreement, including previously vested benefits under any Company-sponsored benefit plan; (iii) rights under Executive’s indemnification agreement with the Company; (iv) unemployment compensation or workers’ compensation benefits; and (v) any other rights that cannot by law be released by private agreement. Additionally, this Waiver does not preclude Executive from challenging the validity or enforceability of this Waiver (including under the Age Discrimination in Employment Act), or from providing any information in response to a valid subpoena, court order, other legal process, or as otherwise required to be provided by law.

d.No Existing Claims or Assignment of Claims. Executive represents and warrants (i) that he has not previously filed or joined in any claims that are released in this Waiver, (ii) that he has not given or sold any portion of any claims released herein to anyone else, and (iii) that he will indemnify and hold harmless the Company and the Releasees from all liabilities, claims, demands, costs, expenses, and/or attorneys’ fees incurred as a result of any such prior assignment or transfer.

e.Defend Trade Secrets Act. Pursuant to 18 U.S.C. Section 1833(b), an individual may not be held liable under any criminal or civil federal or state trade secret law for disclosure of a trade secret: (i) made in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, an individual suing an employer for retaliation based on the reporting of a suspected violation of law may disclose a trade secret to his attorney and use the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal and the individual does not disclose the trade secret except pursuant to court order.

f.Acknowledgements; Effective Date. Executive acknowledges and agrees that:


i.he is hereby advised in writing to consult an attorney before signing this Waiver;
ii.he has relied solely on his own judgment and/or that of his attorney regarding the consideration for and the terms of the Waiver and is signing this Waiver knowingly and voluntarily of his own free will;
iii.he is not entitled to the Separation Benefits unless he agrees to and honors the terms of this Waiver and continues to honor the surviving terms of the Separation Agreement and the Employment Agreement, including, but not limited to, Section 8 (Confidentiality; Non-Competition and Non-Disclosure; Executive Cooperation; Non-Disparagement) of the Employment Agreement;
iv.he has been given at least 45 calendar days to consider the Waiver and return it to Mellissa Boggs at 30 South Meridian Street, Suite 1100, Indianapolis, IN 46204 or mboggs@kiterealty.com, and any revisions thereto, whether material or immaterial, will not restart this period, or he expressly waives his right to have at least 45 days to consider this Waiver;
v.he may revoke this Waiver within seven calendar days after signing it by submitting a written notice of revocation to Mellissa Boggs at 30 South Meridian Street, Suite 1100, Indianapolis, IN 46204 or mboggs@kiterealty.com, that this Waiver is not effective or enforceable until after the seven day period of revocation has expired without revocation (the “Waiver Effective Date”), and that if he revokes this Waiver within the seven day revocation period, he will not receive the Separation Benefits;
vi.he has read and understands the Waiver and further understands that, subject to the limitations contained herein, it includes a general release of any and all known and unknown, foreseen and unforeseen claims presently asserted or otherwise arising through the date of his signing of the Waiver that he may have against the Company;
vii.no statements made or conduct by the Company has in any way coerced or unduly influenced him to execute the Waiver; and
viii.with Executive’s receipt of the Waiver, he also received an “OWBPA CHART AND MEMO TO AFFECTED EMPLOYEES,” attached hereto, and that Executive has read and understands that document.


g.Acknowledgement of Legal Effect of Release. BY SIGNING THIS WAIVER, EXECUTIVE UNDERSTANDS THAT HE IS WAIVING ALL RIGHTS HE MAY HAVE HAD TO PURSUE OR BRING A LAWSUIT OR MAKE ANY LEGAL CLAIM AGAINST THE COMPANY OR THE RELEASEES, INCLUDING, BUT NOT LIMITED TO, CLAIMS THAT IN ANY WAY ARISE FROM OR RELATE TO EXECUTIVE’S EMPLOYMENT OR THE TERMINATION OF THAT EMPLOYMENT, FOR ALL OF TIME UP TO AND INCLUDING THE DATE OF THE EXECUTION OF THIS WAIVER. EXECUTIVE FURTHER UNDERSTANDS THAT BY SIGNING THIS WAIVER, EXECUTIVE IS PROMISING NOT TO PURSUE OR BRING ANY


SUCH LAWSUIT OR LEGAL CLAIM SEEKING MONETARY OR OTHER RELIEF.
2.No Admission. This Waiver does not constitute an admission of liability or wrongdoing on the part of the Company; the Company does not admit there has been any wrongdoing whatsoever against Executive; and the Company expressly denies that any wrongdoing has occurred.

3.Entire Agreement. There are no other agreements of any nature between the Company and Executive with respect to the matters discussed in this Waiver, except as expressly stated herein, and in signing this Waiver, Executive is not relying on any agreements or representations, except those expressly contained in this Waiver.

4.Execution. It is not necessary that the Company sign this Waiver following Executive’s full and complete execution of it for it to become fully effective and enforceable.

5.Severability. If any provision of this Waiver is found, held, or deemed by a court of competent jurisdiction to be void, unlawful, or unenforceable under any applicable statute or controlling law, the remainder of this Waiver shall continue in full force and effect.

6.Governing Law. This Waiver shall be governed by the laws of the State of Indiana, excluding the choice of law rules thereof.

7.Headings. Section and subsection headings contained in this Waiver are inserted for the convenience of reference only. Section and subsection headings shall not be deemed to be a part of this Waiver for any purpose, and they shall not in any way define or affect the meaning, construction, or scope of any of the provisions hereof.


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By signing below, EXECUTIVE represents and warrants that EXECUTIVE has full legal capacity to enter into this WAIVER, EXECUTIVE has carefully read and understands this WAIVER in its entirety, has had a full opportunity to review this WAIVER with an attorney of EXECUTIVE’s choosing, and has executed this WAIVER voluntarily, without duress, coercion, or undue influence.

IN WITNESS WHEREOF, the undersigned Executive, intending to be bound hereby, have agreed to the terms and conditions of this Waiver as of the date set forth below.



EXECUTIVE



_____________________________________ Date: _____________________
Scott Murray
































OWBPA CHART AND MEMO TO AFFECTED EMPLOYEES


Exhibit 10.31


INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is entered into as of February 16, 2020, 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 Caroline L. Young (the “Indemnitee”). This Agreement shall be effective for all purposes as of May 14, 2020, 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.

A.“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.
A.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: Heath R. Fear 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/ John A. Kite
Name: John A. Kite
Title: Chairman and Chief Executive Officer


KITE REALTY GROUP, L.P.

By: Kite Realty Group Trust, its general partner

By: /s/ John A. Kite
Name: John A. Kite
Title: Chairman and Chief Executive Officer


INDEMNITEE:


__/s/ Caroline L. Young____________
Name:_Caroline L. Young___________


Exhibit 10.46


Award No. _______


KITE REALTY GROUP TRUST
2013 EQUITY INCENTIVE PLAN LTIP UNIT AGREEMENT
COVER SHEET
Pursuant to the Kite Realty Group Trust 2013 Equity Incentive Plan (as it has been amended and/or restated from time to time, the “Plan”) and the Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P. (as amended from time to time, the “Limited Partnership Agreement”), Kite Realty Group, L.P., a Delaware limited partnership (the “Limited Partnership”), and Kite Realty Group Trust, a Maryland real estate investment trust and the sole general partner of the Limited Partnership (the “Company”), together hereby grant and issue to the grantee (the “Grantee”) named below an award (the “Award”) of LTIP Units (as defined in the Limited Partnership Agreement) in the number set forth below in consideration of the Grantee’s agreement to provide services to or for the benefit of the Limited Partnership. The LTIP Units have the rights, voting powers, restrictions, limitations as to distributions, qualifications, and terms and conditions of redemption and conversion set forth in the Limited Partnership Agreement. Upon the close of business on the Final Acceptance Date, if the terms and conditions of the Award set forth on this cover sheet and in the attached LTIP Unit Agreement (collectively, the “Agreement”), in the Limited Partnership Agreement, and in the Plan are accepted, the Grantee shall receive the number of LTIP Units specified below, effective as of the Grant Date, subject to the vesting, forfeiture, and other conditions set forth in this Agreement, in the Limited Partnership Agreement, and in the Plan.

Name of Grantee:
Number of LTIP Units Covered by this Agreement:
Grant Date: December 31, 2020
Final Acceptance Date
“Class A Unit Economic Balance” (as defined in the Limited Partnership Agreement on the Grant Date: $ 0

Vesting Schedule:
One-third (1/3) of the LTIP Units shall vest on December 31st of each of 2023, 2024, and 2025, subject to your continued Service through each applicable vesting date.


By your signature below, you agree to all of the terms and conditions described herein, in the attached Agreement, and in the Plan, a copy of which is also attached. You acknowledge that you have carefully reviewed the Plan and agree that the Plan will control in the event any provision of this Agreement should appear to be inconsistent.


KITE REALTY GROUP, L.P.,
a Delaware limited partnership
By:
Kite Realty Group Trust,
a Maryland real estate investment trust, its general partner
By:
Name:
Title:
KITE REALTY GROUP TRUST,
a Maryland real estate investment trust
By:
Name:
Title:
GRANTEE:
(Sign Name)
(Print Name)
Address:


Attachment
This is not a share certificate or a negotiable instrument.





















KITE REALTY GROUP TRUST
2013 EQUITY INCENTIVE PLAN LTIP UNIT AGREEMENT
Acceptance of Agreement
Unless you are already a Partner (as defined in the Limited Partnership Agreement), you must sign, as a Partner, and deliver to the Limited Partnership, a Limited Partner Acceptance to the Limited Partnership Agreement (attached hereto as Exhibit A). Upon signature and delivery of the Limited Partner Acceptance on or prior to the Final Acceptance Date, to the extent required, you shall be admitted as a Partner of the Limited Partnership, as of the Grant Date, with beneficial ownership of the number of LTIP Units specified on the cover sheet of this Agreement. Thereupon, you shall have all the rights of a Partner of the Limited Partnership with respect to the number of LTIP Units specified on the cover sheet of this Agreement, as set forth in the Limited Partnership Agreement, subject, however, to the restrictions and conditions specified herein, in the Limited Partnership Agreement, and in the Plan. In order to confirm receipt of this Agreement, Grantee must sign and deliver to the Company a copy of this Agreeme
Vesting of LTIP Units
You shall vest in the LTIP Units in accordance with the vesting schedule set forth on the cover sheet of this Agreement. Fractional numbers of LTIP Units shall be rounded down to the next nearest whole number, and you cannot vest in more than the number of LTIP Units specified on the cover sheet of this Agreement
Your right to the LTIP Units will become fully vested on your termination of Service due to death or Disability. No additional LTIP Units will vest after your Service has terminated for any reason
Leaves of Absence
For purposes of this Agreement, your Service does not terminate when you go on a bona fide leave of absence that was approved by your employer in writing if the terms of the leave provide for continued Service crediting, or when continued Service crediting is required by applicable law. Your Service terminates in any event when the approved leave ends unless you immediately return to active employee work
Your employer may determine, in its discretion, which leaves count for this purpose and when your Service terminates for all purposes under the Agreement and the Plan, in accordance with the provisions of the Plan. Notwithstanding the foregoing, the Company may determine, in its discretion, which leaves count for this purpose even if your employer does not agree.
Forfeiture of LTIP Units
Unless otherwise specified in an employment or other written agreement between the Company or an Affiliate, as applicable, and you, in the event that your Service terminates for any reason other than death or Disability, you will forfeit to the Company all of the LTIP Units that have not yet vested. Upon such forfeiture, your rights to such LTIP Units shall be null and void, and neither you nor any of your successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such LTIP Units


Distributions
You shall be entitled to distributions on the LTIP Units in accordance with the terms and provisions of the Limited Partnership Agreement.
For purposes of the Limited Partnership Agreement, (i) the Distribution Participation Date for the LTIP Units (regardless of vesting) shall be the Grant Date, and (ii) for the avoidance of doubt, no Special LTIP Unit Distribution shall be payable with respect to the LTIP Units covered by this Agreement.
Conversion and Redemption
The LTIP Units shall be subject to conversion and redemption in accordance with the terms and provisions of the Limited Partnership Agreement. Furthermore, in accordance with the Limited Partnership Agreement, in the event the Grantee’s Service is terminated, the Company reserves the right at any time thereafter to convert vested LTIP Units into Class A Units of the Limited Partnership (as defined in the Limited Partnership Agreement) as set forth in the Limited Partnership Agreement, subject to the limitations set forth therein, and in addition, to redeem any such Class A Units for Shares or cash, at the election of the Company. Upon any such conversion and redemption, this Agreement shall be fully satisfied, and the Company shall have no further obligation under the Agreemen

Restrictions on Transfer
You shall not, without the consent of the Company (which the Company may give or withhold in its sole discretion), sell, pledge, assign, hypothecate, transfer, or otherwise dispose of (collectively, “Transfer”) any LTIP Units (the “Transfer Restrictions”); provided, however, that the Transfer Restrictions shall not apply to any Transfer of LTIP Units to the Limited Partnership or the Company or to any Transfer by will or pursuant to the laws of descent and distribution.

In addition, during the one (1)-year period which begins as of the applicable vesting date of the LTIP Units, the LTIP Units which vested on such vesting date (and any Partnership Units, Shares, or other securities into which such LTIP Units may be converted) may not be Transferred, nor may the LTIP Units which vested on such vesting date (and any Partnership Units, Shares, or other securities into which such LTIP Units may be converted) be made subject to execution, attachment, or similar process; provided, however, that this Transfer Restriction (i) shall not prohibit the Grantee from exchanging or otherwise disposing of the LTIP Units (and any Partnership Units, Shares, or other securities into which such LTIP Units may be converted) in connection with a Corporate Transaction or other transaction in which LTIP Units or other securities held by other Limited Partners or Company shareholders, as applicable, are required to be exchanged or otherwise disposed; and (ii) shall cease to apply to your vested LTIP Units (and any Partnership Units, Shares, or other securities into which such LTIP Units may be converted) upon your termination of Service due to death or Disability.



Investment Representation
You hereby make the covenants, representations, and warranties set forth on Exhibit B attached hereto as of the date of acceptance of this Agreement and on each applicable vesting date, as set forth above. All of such covenants, warranties, and representations shall survive the execution and delivery of this Agreement by you. You shall immediately notify the Limited Partnership upon discovering that any of the representations or warranties set forth on Exhibit B were false when made or have, as a result of changes in circumstances, become fals

Registration
You hereby acknowledge that the LTIP Units have not been registered under the Securities Act and that the LTIP Units cannot be transferred by you other than in accordance with the terms and conditions set forth in the Plan, this Agreement, and the Limited Partnership Agreement and, in any event, unless such transfer is registered under the Securities Act or an exemption from such registration is available. Neither the Company nor the Limited Partnership has made any agreements, covenants, or undertakings whatsoever to register the transfer of the LTIP Units under the Securities Act. Neither the Company nor the Limited Partnership has made any representations, warranties, or covenants whatsoever as to whether any exemption from the Securities Act, including, without limitation, any exemption for limited sales in routine brokers’ transactions pursuant to Rule 144 of the Securities Act (“Rule 144”), will be available. If an exemption under Rule 144 is available at all, it will not be available until all applicable terms and conditions of Rule 144 have been satisfi

Code Section 83(b) Election
You hereby agree to make an election to include in gross income in the year of grant the LTIP Units pursuant to Section 83(b) of the Code substantially in the form attached hereto as Exhibit C and to supply the necessary information in accordance with the regulations promulgated thereunder.

YOU ACKNOWLEDGE THAT IT IS YOUR SOLE RESPONSIBILITY, AND NOT THE COMPANY’S OR THE LIMITED PARTNERSHIP’S, TO FILE A TIMELY ELECTION UNDER CODE SECTION 83(b), EVEN IF YOU REQUEST THE COMPANY, THE LIMITED PARTNERSHIP, OR THEIR RESPECTIVE REPRESENTATIVES TO MAKE THIS FILING ON YOUR BEHALF. YOU ARE RELYING SOLELY ON YOUR OWN ADVISORS WITH RESPECT TO THE DECISION AS TO WHETHER TO FILE ANY CODE SECTION 83(b) ELECTION AND REGARDING THE ACCURACY AND TIMELINESS OF SUCH FILING



Amendment
You acknowledge that the Plan may be amended, suspended, or terminated and that this Agreement may be amended, suspended, or terminated by the Company, on behalf of the Limited Partnership, for the purpose of satisfying changes in law or for any other lawful purpose, provided that no such action shall impair your rights under this Agreement without your written consent.

Withholding Taxes
You agree as a condition of this Award that you will make acceptable arrangements to pay any withholding or other taxes that may be due in connection with the Award of the LTIP Units. In the event that the Company or an Affiliate, as applicable, determines that any federal, state, local, or foreign tax or withholding payment is required relating to the LTIP Units arising from this Award, the Company or an Affiliate, as applicable, shall have the right to require such payments from you, or withhold such amounts from other payments due to you from the Company or an Affiliate, as applicable
Retention Rights
This Agreement and the Award evidenced hereby do not give you the right to be retained by the Company or an Affiliate in any capacity. Unless otherwise specified in an employment or other written agreement between the Company or an Affiliate, as applicable, and you, the Company or an Affiliate, as applicable, reserves the right to terminate your Service at any time and for any reason
Legend
The records of the Limited Partnership evidencing the LTIP Units shall bear an appropriate legend, as determined by the Limited Partnership in its sole discretion, to the effect that such LTIP Units are subject to restrictions as set forth in this Agreement, in the Plan, and in the Limited Partnership Agreement.
Clawback
This Award is subject to mandatory repayment by you to the Company to the extent you are or in the future become subject to any Company “clawback” or recoupment policy that requires the repayment by you to the Company of compensation paid by the Company to you in the event that you fail to comply with, or violate, the terms or requirements of such policy.
If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, and you knowingly engaged in the misconduct, were grossly negligent in engaging in the misconduct, knowingly failed to prevent the misconduct, or were grossly negligent in failing to prevent the misconduct, you shall reimburse the Company the amount of any payment in settlement of this Award earned or accrued during the 12-month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document that contained such material noncompliance.


Applicable Law and Venue
This Agreement will be interpreted and enforced under the laws of the State of Maryland, other than any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction. You agrees that the exclusive venue for any disputes arising out of or related to this Agreement shall be the state or federal courts located in Indianapolis, Indiana
Remedies
You shall be liable to the Company and the Limited Partnership for all costs and damages, including incidental and consequential damages, resulting from a disposition of the Award or the LTIP Units which is in violation of the provisions of this Agreement. Without limiting the generality of the foregoing, you agree that the Company and the Limited Partnership shall be entitled to obtain specific performance of your obligations under this Agreement and immediate injunctive relief in the event any action or proceeding is brought in equity to enforce the same. You will not urge as a defense that there is an adequate remedy at la

The Plan
The text of the Plan is incorporated into this Agreement by reference.
Certain capitalized terms used in this Agreement are defined in the Plan and have the meaning set forth in the Plan.
This Agreement, the Limited Partnership Agreement, and the Plan constitute the entire understanding between you and the Company regarding this Award. Any prior agreements, commitments, or negotiations concerning this Award are superseded; except that any written employment, consulting, confidentiality, non-competition, non-solicitation, and/or severance agreement between you and the Company or an Affiliate, as applicable, shall supersede this Agreement with respect to its subject matter
Data Privacy
In order to administer the Plan, the Company may process personal data about you. Such data includes, but is not limited to, information provided in this Agreement and any changes thereto, other appropriate personal and financial data about you, such as your contact information, payroll information, and any other information that might be deemed appropriate by the Company to facilitate the administration of the Plan
By accepting this Award, you give explicit consent to the Company to process any such personal data.
Consent to Electronic Delivery

The Company may choose to deliver certain statutory materials relating to the Plan in electronic form. By accepting the LTIP Units, you agree that the Company may deliver the Plan prospectus and the Company’s annual report to you in an electronic format. If at any time you would prefer to receive paper copies of these documents, as you are entitled to, the Company would be pleased to provide copies. Please contact the Company at (317) 577-5600 to request paper copies of these documents.


Code Section 409A
It is intended that this Award comply with Code Section 409A or an exemption to Code Section 409A. To the extent that the Company determines that you would be subject to the additional twenty percent (20%) tax imposed on certain non-qualified deferred compensation plans pursuant to Code Section 409A as a result of any provision of this Agreement, such provision shall be deemed amended to the minimum extent necessary to avoid application of such additional tax. The nature of any such amendment shall be determined by the Committee. For purposes of this Award, a termination of employment only occurs upon an event that would be a “separation from service” within the meaning of Code Section 40

Profits Interest
The Company, the Limited Partnership, and you acknowledge and agree that the LTIP Units are hereby issued to you for the performance of services to or for the benefit of the Limited Partnership in your capacity as a Partner or in anticipation of becoming a Partner.

The Company, the Limited Partnership, and you intend that (a) the LTIP Units be treated as “profits interests” within the meaning of the Code, Treasury Regulations promulgated thereunder, and any published guidance by the Internal Revenue Service with respect thereto, including, without limitation, Internal Revenue Service Revenue Procedure 93-27, 1993-2 C.B. 343, as clarified by Internal Revenue Service Revenue Procedure 2001-43, 2001-2 C.B. 191; (b) the issuance of such interests not be a taxable event to the Limited Partnership or you as provided in such Revenue Procedures; and (c) the Limited Partnership Agreement, the Plan, and this Agreement be interpreted consistently with such intent.

You are urged to consult with your own tax advisor regarding the tax consequences of the receipt of LTIP Units, the vesting of LTIP Units, the conversion of LTIP Units into Class A Units, the holding of LTIP Units and Class A Units, the redemption or other disposition of Class A Units, and the acquisition, holding, and disposition of Shares.

You shall make no contribution of capital to the Limited Partnership in connection with the Award and, as a result, your Capital Account (as defined in the Limited Partnership Agreement) balance in the Limited Partnership immediately after your receipt of the LTIP Units shall be equal to zero, unless you were a Partner in the Limited Partnership prior to this Award, in which case your Capital Account balance shall not be increased as a result of your receipt of the LTIP Units.

By signing this Agreement, you agree to all of the terms and conditions described above and in the Plan.





EXHIBIT A

LIMITED PARTNER ACCEPTANCE
This Limited Partner Acceptance to the Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P. (the “Acceptance”), which Acceptance is incorporated into that certain Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P. dated as of August 16, 2004 and as amended from time to time (the “Limited Partnership Agreement”), is executed and delivered by the undersigned. As of the date hereof, the undersigned, designated as an Additional Limited Partner, is admitted as a Limited Partner of the Partnership, and by said undersigned’s execution and delivery hereof, said undersigned agrees to be bound by the terms and provisions of the Limited Partnership Agreement, including the power of attorney set forth in Section 15.11 of the Limited Partnership Agreement. The number of LTIP Units issued as of the date hereof to the undersigned designated as an Additional Limited Partner is shown opposite such Additional Limited Partner’s signature below. All terms used herein and not otherwise defined shall have the meanings given them in the Limited Partnership Agreement.

This Acceptance may be executed in two or more counterparts, each of which shall be deemed an original but all of which collectively shall constitute one and the same document.

Dated:_____________________
GENERAL PARTNER
KITE REALTY GROUP TRUST
By:_________________________________________
Name:
Title:


Number of LTIP Units: _____________________
ADDITIONAL LIMITED PARTNER

_________________________________________
Name:
Tax ID#:
Address:



















EXHIBIT B
GRANTEE’S COVENANTS, REPRESENTATIONS, AND WARRANTIES
The Grantee hereby represents, warrants, and covenants as follows:
(a) The Grantee has received and had an opportunity to review the following documents (the “Background Documents”):
(i) The Company’s latest Annual Report to Shareholders;
(ii) The Company’s Proxy Statement for its most recent Annual Meeting of Shareholders;
(iii) The Company’s Report on Form 10-K for the fiscal year most recently ended;
(iv) The Company’s Form 10-Q for the most recently ended quarter if one has been filed by the Company with the Securities and Exchange Commission since the filing of the Form 10-K described in clause (iii) above;
(v) Each of the Company’s Current Report(s) on Form 8-K, if any, filed since the later of the Form 10-K described in clause (iii) above and the Form 10-Q described in clause (iv) above;
(vii) The Limited Partnership Agreement; and
(viii) The Plan.
The Grantee also acknowledges that any delivery of the Background Documents and other information relating to the Company and the Limited Partnership prior to the determination by the Limited Partnership of the suitability of the Grantee as a holder of LTIP Units shall not constitute an offer of LTIP Units until such determination of suitability shall be made.
(b) The Grantee hereby represents and warrants that:
(i) The Grantee either (A) is an “accredited investor” as defined in Rule 501(a) under the Securities Act of 1933, as amended (the “Securities Act”), or (B) by reason of the business and financial experience of the Grantee, together with the business and financial experience of those persons, if any, retained by the Grantee to represent or advise him, her, or it with respect to the grant to him, her, or it of LTIP Units, the potential conversion of LTIP Units into Class A Units of the Limited Partnership (“Partnership Units”) and the potential redemption of such Partnership Units for common shares of beneficial interests, par value $0.01 per share, of the Company (“Shares”), has such knowledge, sophistication, and experience in financial and business matters and in making investment decisions of this type that the Grantee (I) is capable of evaluating the merits and risks of an investment in the Limited Partnership and potential investment in the Company and of making an informed investment decision, (II) is capable of protecting his, her, or its own interest or has engaged representatives or advisors to assist him, her, or it in protecting his, her, or its interests, and (III) is capable of bearing the economic risk of such investment.
(ii) The Grantee understands that (A) the Grantee is responsible for consulting his, her, or its own tax advisors with respect to the application of the U.S. federal income tax laws, and the tax laws of any state, local, or other taxing jurisdiction to which the Grantee is or by reason of the Award of LTIP Units may become subject, to his, her, or its particular situation; (B) the Grantee has not received or relied upon business or tax advice from the Company, the Limited Partnership, or any of their respective employees, officers, directors, shareholders, agents, consultants, advisors, or any affiliates of any of them in their capacity as such; (C) the Grantee provides or will provide services to the Limited Partnership on a regular basis and in such capacity has access to such information, and has such experience of and involvement in the business and operations of the Limited Partnership, as the Grantee believes to


be necessary and appropriate to make an informed decision to accept this Award of LTIP Units; and (D) an investment in the Limited Partnership and/or the Company involves substantial risks. The Grantee has been given the opportunity to make a thorough investigation of matters relevant to the LTIP Units and has been furnished with, and has reviewed and understands, materials relating to the Limited Partnership and the Company and their respective activities (including, but not limited to, the Background Documents). The Grantee has been afforded the opportunity to obtain any additional information (including any exhibits to the Background Documents) deemed necessary by the Grantee to verify the accuracy of information conveyed to the Grantee. The Grantee confirms that all documents, records, and books pertaining to his, her, or its receipt of LTIP Units which were requested by the Grantee have been made available or delivered to the Grantee. The Grantee has had an opportunity to ask questions of and receive answers from the Limited Partnership and the Company, or from a person or persons acting on their behalf, concerning the terms and conditions of the LTIP Units. The Grantee has relied upon, and is making its decision solely upon, the Background Documents and other written information provided to the Grantee by the Limited Partnership or the Company. The Grantee did not receive any tax, legal, or financial advice from the Limited Partnership or the Company and, to the extent it deemed necessary, has consulted with its own advisors in connection with its evaluation of the Background Documents, this Agreement, and the Grantee’s receipt of LTIP Units.
(iii) The LTIP Units to be issued, the Partnership Units issuable upon conversion of the LTIP Units, and any Shares issued in connection with the redemption of any such Partnership Units will be acquired for the account of the Grantee for investment only and not with a current view to, or with any intention of, a distribution or resale thereof, in whole or in part, or the grant of any participation therein, without prejudice, however, to the Grantee’s right (subject to the terms of the LTIP Units, the Plan, and this Agreement) at all times to sell or otherwise dispose of all or any part of his or her LTIP Units, Partnership Units, or Shares in compliance with the Securities Act, and applicable state securities laws, and subject, nevertheless, to the disposition of his or her assets being at all times within his or her control.
(iv) The Grantee acknowledges that (A) neither the LTIP Units to be issued, nor the Partnership Units issuable upon conversion of the LTIP Units, have been registered under the Securities Act or state securities laws by reason of a specific exemption or exemptions from registration under the Securities Act and applicable state securities laws and, if such LTIP Units or Partnership Units are represented by certificates, such certificates will bear a legend to such effect, (B) the reliance by the Limited Partnership and the Company on such exemptions is predicated in part on the accuracy and completeness of the representations and warranties of the Grantee contained herein, (C) such LTIP Units, or Partnership Units, therefore, cannot be resold unless registered under the Securities Act and applicable state securities laws, or unless an exemption from registration is available, (D) there is no public market for such LTIP Units and Partnership Units, and (E) neither the Limited Partnership nor the Company has any obligation or intention to register such LTIP Units or the Partnership Units issuable upon conversion of the LTIP Units under the Securities Act or any state securities laws or to take any action that would make available any exemption from the registration requirements of such laws, except that, upon the redemption of the Partnership Units for Shares, the Company currently intends to issue such Shares under the Plan and pursuant to a Registration Statement on Form S-8 under the Securities Act, to the extent that (i) the Grantee is eligible to receive such Shares under the Plan at the time of such issuance, and (ii) the Company has filed an effective Form S-8 Registration Statement with the Securities and Exchange Commission registering the issuance of such Shares. The Grantee hereby acknowledges that because of the restrictions on transfer or assignment of such


LTIP Units acquired hereby and the Partnership Units issuable upon conversion of the LTIP Units which are set forth in the Limited Partnership Agreement or this Agreement, the Grantee may have to bear the economic risk of his, her, or its ownership of the LTIP Units acquired hereby and the Partnership Units issuable upon conversion of the LTIP Units for an indefinite period of time.
(v) The Grantee has determined that the LTIP Units are a suitable investment for the Grantee.
(vi) No representations or warranties have been made to the Grantee by the Limited Partnership or the Company, or any employee, officer, director, shareholder, agent, consultant, advisors, or affiliate of any of them, and the Grantee has received no information relating to an investment in the Limited Partnership or the LTIP Units except the information specified in paragraph (a) above.
(c) So long as the Grantee holds any LTIP Units, the Grantee shall disclose to the Limited Partnership in writing such information as may be reasonably requested with respect to ownership of LTIP Units as the Limited Partnership may deem reasonably necessary to ascertain and to establish compliance with provisions of the Internal Revenue Code of 1986, as amended (the “Code”), applicable to the Limited Partnership or to comply with requirements of any other appropriate taxing authority.
(d) The Grantee hereby agrees to make an election under Section 83(b) of the Code with respect to the LTIP Units awarded hereunder and has delivered with this Agreement a completed, executed copy of the election form attached hereto as Exhibit C. The Grantee agrees to file the election (or to permit the Limited Partnership to file such election on the Grantee’s behalf) within thirty (30) days after the Award of the LTIP Units hereunder with the IRS Service Center at which such Grantee files his or her personal income tax returns.
(e) The address set forth on the signature page of this Agreement is the address of the Grantee’s principal residence, and the Grantee has no present intention of becoming a resident of any country, state, or jurisdiction other than the country and state in which such residence is sited.
(f) The representations of the Grantee as set forth above are true and complete to the best of the information and belief of the Grantee, and the Limited Partnership shall be notified promptly of any changes in the foregoing representations.





















EXHIBIT C

ELECTION UNDER SECTION 83(b) OF
THE INTERNAL REVENUE CODE

The undersigned hereby makes an election pursuant to Section 83(b) of the Internal Revenue Code with respect to the property described below and supplies the following information in accordance with the regulations promulgated thereunder:
1. The name, address, and social security number of the undersigned:
Name:
Address:

Social Security No.:
2. Description of property with respect to which the election is being made:
The election is being made with respect to ______ LTIP Units in Kite Realty Group, L.P. (the “Limited Partnership”).
3. The date on which the property was transferred is December 31, 2020.
4. The taxable year to which this election relates is calendar year 2020.
5. Nature of restrictions to which the property is subject:
(a) With limited exceptions, until the LTIP Units vest, the LTIP Units may not be transferred in any manner without the consent of the Limited Partnership.
(b) The LTIP Units are subject to the provisions of a LTIP Unit Agreement between the undersigned, the Limited Partnership, and Kite Realty Group Trust. The LTIP Units are subject to vesting and forfeiture terms and conditions under the terms of the LTIP Unit Agreement.
6. The fair market value at time of transfer (determined without regard to any restrictions other than restrictions which by their terms will never lapse) of the LTIP Units with respect to which this election is being made was $0 per LTIP Unit.
7. The amount paid by the undersigned for the LTIP Units was $0 per LTIP Unit.
8. A copy of this statement has been furnished to the Limited Partnership and to its sole
general partner, Kite Realty Group Trust.


Dated: ______________________
________________________________________
(Sign Name)

________________________________________
(Print Name)



















PROCEDURES FOR GRANTEE MAKING ELECTION
UNDER INTERNAL REVENUE CODE SECTION 83(b)


The following procedures must be followed with respect to the attached form for making an election under Internal Revenue Code Section 83(b) in order for the election to be effective:

1.You must file one copy of the completed election form with the IRS Service Center where you file your federal income tax returns within 30 days after the Grant Date of your LTIP Units.

1.At the same time you file the election form with the IRS, you must also give a copy of the election form to the Secretary of the Company.



Exhibit 21.1

Kite Realty Group List of Subsidiaries


Name of Subsidiary
Jurisdiction of Incorporation or Formation
116 & Olio, LLC
Indiana
6179 N Rural, LLC
Indiana
Brentwood Land Partners, LLC
Delaware
Bulwark, LLC
Delaware
Corner Associates, LP
Indiana
Dayville Property Development, LLC
Connecticut
Glendale Centre, L.L.C.
Indiana
Glendale Centre Apartments, LLC
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 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 Pan Am Garage, LLC
Indiana
Kite Realty Peakway at 55, LLC
Indiana
Kite Realty Washington Parking, LLC
Indiana
Kite San Antonio, LLC
Indiana
Kite Washington Parking, LLC
Indiana
Kite Washington, LLC
Indiana
Kite West 86th Street II, LLC
Indiana
Kite West 86th Street, LLC
Indiana
KRG 116 Legacy, LLC
Indiana
KRG 951 & 41, LLC
Indiana
KRG Aiken Hitchcock, LLC
Delaware


KRG Ashwaubenon Bay Park, LLC
Delaware
KRG Bayonne Urban Renewal, LLC
Delaware
KRG Beacon Hill, LLC
Indiana
KRG Beechwood, LL
Indiana
KRG Belle Isle, LLC
Indiana
KRG Bennet Knoll, LLC
Indiana
KRG Bolton Plaza, LLC
Indiana
KRG Bradenton Centre Point, 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 Centre, LLC
Indiana
KRG Chapel Hill Shopping Center, LLC
Delaware
KRG Charlotte Northcrest, LLC
Delaware
KRG Charlotte Perimeter Woods, LLC
Delaware
KRG CHP Management, LLC
Delaware
KRG College I, LLC
Indiana
KRG College, LLC
Indiana
KRG Colleyville Downs, LLC
Indiana
KRG Construction, LLC
Indiana
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 Courthouse Shadows II, LLC
Delaware
KRG Daytona Management II, LLC
Delaware
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 Draper Peaks Outlot, LLC
Indiana
KRG Eagle Creek III, LLC
Indiana
KRG Eagle Creek IV, LLC
Indiana
KRG Eastgate Chapel Hill, 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 Land II, LLC
Indiana
KRG Eddy Street Land III, 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, LLC
Indiana
KRG Fort Myers Colonial Square, LLC
Delaware
KRG Fort Wayne Lima, LLC
Delaware
KRG Fort Wayne Lima Outlot, LLC
Delaware
KRG Frisco Westside, LLC
Delaware
KRG Gainesville, LLC
Indiana
KRG Glendale Centre Apartments Member, LLC
Indiana
KRG Greencastle, LLC
Indiana
KRG Hamilton Crossing Management, LLC
Delaware
KRG Hamilton Crossing, LLC
Indiana
KRG Henderson Eastgate, LLC
Delaware
KRG Hunter’s Creek, LLC
Indiana
KRG Indian River, LLC
Delaware
KRG Indian River Outlot, LLC
Delaware
KRG ISS LH OUTLOT, LLC
Indiana
KRG ISS, LLC
Indiana
KRG Jacksonville Julington Creek, LLC
Delaware
KRG Jacksonville Julington Creek II, LLC
Delaware
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 Lakewood, LLC
Indiana
KRG Las Vegas Centennial Center, LLC
Delaware
KRG Las Vegas Centennial Gateway, LLC
Delaware
KRG Las Vegas Eastern Beltway, LLC
Delaware
KRG Lithia, LLC
Indiana
KRG Livingston Center, LLC
Indiana
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 Merrimack Village, LLC
Delaware
KRG Miramar Square, LLC
Delaware
KRG Naperville Management, LLC
Delaware
KRG Naperville, LLC
Indiana
KRG New Hill Place, LLC
Indiana
KRG Newburgh Bell Oaks, LLC
Delaware
KRG Nora Plaza, LLC
Indiana
KRG Norman University, LLC
Delaware
KRG Norman University II, LLC
Delaware
KRG Norman University III, LLC
Delaware
KRG Northdale, LLC
Indiana
KRG North Las Vegas Losee, 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 Orange City Saxon, LLC
Delaware
KRG Palm Coast Landing, LLC
Delaware
KRG Pan Am Plaza, LLC
Indiana
KRG Pan Am Plaza Garage, 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 Port St. Lucie Landing, LLC
Delaware
KRG Port St. Lucie Square, LLC
Delaware
KRG Portofino, LLC
Indiana
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 South Elgin Commons, 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 Tucson Corner, LLC
Delaware
KRG-USCRF Plaza Volente, LLC
Indiana
KRG-USCRF Retail Portfolio LLC
Delaware
KRG-USCRF Retail Portfolio Member LLC
Indiana
KRG Vero, LLC
Delaware
KRG Virginia Beach Landstown, LLC
Delaware
KRG Virginia Beach Landstown Outlot, LLC
Indiana
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 White Plains Garage, 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/PRP Oldsmar, LLC
Florida
LC White Plains, LLC
New York
Meridian South Insurance, LLC
TN
MS Insurance Protected Cell Series 2014-15
TN
Noblesville Partners, LLC
Indiana
Property Tax Advantage Advisors, LLC
Indiana
SB Hotel, LLC
Indiana
SB Hotel 2, LLC
Indiana
Splendido Real Estate, LLC
Delaware
Westfield One, LLC
Indiana


Whitehall Pike, LLC
Indiana
PROPERTY OWNERS’ ASSOCIATION
Brentwood Property Owners’ Association, Inc.
Florida
Delray Marketplace Master Association, Inc.
Florida
Eddy Street Commons at Notre Dame Master Association, Inc.
Indiana
Estero Town Commons Property Owners Association, Inc.
Florida
Pleasant Hill Commons Property Owners’ Association, Inc.
Florida
Riverchase Owners’ Association, Inc.
Florida
Tamiami Crossing Property Owners Association, Inc.
Florida
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. 333-188436, 333-159219, 333-152943, 333-120142, and 333-231582) and the Registration Statements on Form S-3 (File Nos. 333-223144 and 333-127585) of Kite Realty Group Trust and in the related Prospectuses of our report dated February 20, 2020, with respect to the consolidated financial statements and schedule of Kite Realty Group Trust, included in this Annual Report (Form 10-K) for the year ended December 31, 2020.


/s/ Ernst & Young LLP

Indianapolis, Indiana
February 22, 2021



Exhibit 23.2

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-223144) of Kite Realty Group, L.P. and subsidiaries and in the related Prospectus of our report dated February 20, 2020, with respect to the consolidated financial statements and schedule of Kite Realty Group, L.P. and subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2020.


/s/ Ernst & Young LLP

Indianapolis, Indiana
February 22, 2021



Exhibit 23.3



Consent of Independent Registered Public Accounting Firm

The Board of Trustees
Kite Realty Group Trust:

We consent to the incorporation by reference in the registration statements on Form S-8 (No. 333‑188436, 333-159219, 333-152943, 333-120142, and 333-231582) and the registration statements on Form S-3 (No. 333-223144 and 333-127585) of Kite Realty Group Trust of our reports dated February 22, 2021, with respect to the consolidated balance sheet of Kite Realty Group Trust and subsidiaries as of December 31, 2020, the related consolidated statements of operations and comprehensive income, shareholders’ equity, and cash flows for the year ended December 31, 2020, and the related notes and financial statement schedule III, and the effectiveness of internal control over financial reporting as of December 31, 2020, which reports appear in the December 31, 2020 combined annual report on Form 10‑K of Kite Realty Group Trust and Kite Realty Group, L.P.


/s/ KPMG LLP

Indianapolis, Indiana
February 22, 2021


Exhibit 23.4


Consent of Independent Registered Public Accounting Firm

The Board of Trustees
Kite Realty Group Trust:

We consent to the incorporation by reference in the registration statement on Form S-3 (No. 333-223144) of Kite Realty Group, L.P. and subsidiaries of our reports dated February 22, 2021, with respect to the consolidated balance sheet of Kite Realty Group, L.P. and subsidiaries as of December 31, 2020, the related consolidated statements of operations and comprehensive income, partner’s equity, and cash flows for the year ended December 31, 2020, and the related notes and financial statement schedule III, and the effectiveness of internal control over financial reporting as of December 31, 2020, which reports appear in the December 31, 2020 combined annual report on Form 10‑K of Kite Realty Group Trust and Kite Realty Group, L.P.


/s/ KPMG LLP

Indianapolis, Indiana
February 22, 2021


EXHIBIT 31.1
KITE REALTY GROUP TRUST

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(s) 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(s) 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 directors (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 22, 2021 By: /s/ John A. Kite
John A. Kite
Chairman and Chief Executive Officer




EXHIBIT 31.2
KITE REALTY GROUP TRUST

CERTIFICATION
I, Heath R. Fear, 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(s) 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(s) 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 directors (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 22, 2021 By: /s/ Heath R. Fear
Heath R. Fear
Executive Vice President and Chief Financial Officer




EXHIBIT 31.3
KITE REALTY GROUP, L.P.

CERTIFICATION
I, John A. Kite, certify that:

1.I have reviewed this annual report on Form 10-K of Kite Realty Group, L.P.;

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(s) 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(s) 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 directors (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 22, 2021 By: /s/ John A. Kite
John A. Kite
Chief Executive Officer




EXHIBIT 31.4
KITE REALTY GROUP, L.P.

CERTIFICATION
I, Heath R. Fear, certify that:

1.I have reviewed this annual report on Form 10-K of Kite Realty Group, L.P.;

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(s) 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(s) 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 directors (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 22, 2021 By: /s/ Heath R. Fear
Heath R. Fear
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 “Parent Company”), and Heath R. Fear, Chief Financial Officer of the Parent Company, each hereby certifies based on his knowledge, 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 Parent Company for the year ended December 31, 2020 (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 Parent Company.
Date: February 22, 2021 By: /s/ John A. Kite
John A. Kite
Chairman and Chief Executive Officer
Date: February 22, 2021 By: /s/ Heath R. Fear
Heath R. Fear
Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Parent Company and will be retained by the Parent Company and furnished to the Securities and Exchange Commission or its staff upon request.




EXHIBIT 32.2
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, Chief Executive Officer of Kite Realty Group, L.P. (the “Operating Partnership”), and Heath R. Fear, Chief Financial Officer of the Operating Partnership, each hereby certifies based on his knowledge, 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 Operating Partnership for the year ended December 31, 2020 (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 Operating Partnership.
Date: February 22, 2021 By: /s/ John A. Kite
John A. Kite
Chief Executive Officer
Date: February 22, 2021 By: /s/ Heath R. Fear
Heath R. Fear
Chief Financial Officer

A signed original of this written statement required by Section 906 has been provided to the Operating Partnership and will be retained by the Operating Partnership and furnished to the Securities and Exchange Commission or its staff upon request.





Exhibit 99.1


Material U.S. Federal Income Tax Considerations

The following is a summary of certain U.S. federal income tax considerations relating to our qualification and taxation as a real estate investment trust, a “REIT,” and the acquisition, holding, and disposition of (i) our common shares, preferred shares and depositary shares (together with common shares and preferred shares, the “shares”) as well as our warrants and rights, and (ii) debt securities issued by Kite Realty Group, L.P. (our “operating partnership”) (together with the shares, the “securities”). For purposes of this discussion, references to “our Company,” “we” and “us” mean only Kite Realty Group Trust and not its subsidiaries or affiliates. This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), the Treasury Regulations, rulings and other administrative interpretations and practices of the Internal Revenue Service (the “IRS”) (including administrative interpretations and practices expressed in private letter rulings which are binding on the IRS only with respect to the particular taxpayers who requested and received those rulings), and judicial decisions, all as currently in effect, and all of which are subject to differing interpretations or to change, possibly with retroactive effect. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any of the tax consequences described below. We have not sought and will not seek an advance ruling from the IRS regarding any matter discussed in this section. The summary is also based upon the assumption that we will operate our Company and its subsidiaries and affiliated entities in accordance with their applicable organizational documents. This summary is for general information only, and does not purport to discuss all aspects of U.S. federal income taxation that may be important to a particular investor in light of its investment or tax circumstances, or to investors subject to special tax rules, including:
•
tax-exempt organizations, except to the extent discussed below in “-Taxation of U.S. Shareholders-Taxation of Tax-Exempt Shareholders,”
•
broker-dealers,
•
non-U.S. corporations, non-U.S. partnerships, non-U.S. trusts, non-U.S. estates, or individuals who are not taxed as citizens or residents of the United States, all of which may be referred to collectively as “non-U.S. persons,” except to the extent discussed below in “-Taxation of Non-U.S. Shareholders” and “-Taxation of Holders of Debt Securities Issued by our Operating Partnership-Non-U.S. Holders of Debt Securities,”
•
trusts and estates,
•
regulated investment companies, or “RICs,”



•
REITs, financial institutions,
•
insurance companies,
•
subchapter S corporations,
•
foreign (non-U.S. governments),
•
persons subject to the alternative minimum tax provisions of the Code,
•
persons holding the shares as part of a “hedge,” “straddle,” “conversion,” “synthetic security” or other integrated investment,
•
persons holding the shares through a partnership or similar pass-through entity,
•
persons with a “functional currency” other than the U.S. dollar,
•
persons holding 10% or more (by vote or value) of the beneficial interest in us, except to the extent discussed below,
•
persons who do not hold the shares as a “capital asset,” within the meaning of Section 1221 of the Code,
•
corporations subject to the provisions of Section 7874 of the Code,
•
U.S. expatriates, or
•
persons otherwise subject to special tax treatment under the Code.


This summary does not address state, local or non-U.S. tax considerations. This summary also does not consider tax considerations that may be relevant with respect to securities we (or our operating partnership) may issue, or selling security holders may sell, other than our shares and certain debt instruments of our operating partnership described below. Each time we or selling security holders sell securities, we will provide a prospectus supplement that will contain specific information about the terms of that sale and may add to, modify or update the discussion below as appropriate.

Each prospective investor is advised to consult his or her tax advisor to determine the impact of his or her personal tax situation on the anticipated tax consequences of the acquisition, ownership and sale of our shares, warrants, and rights, and/or debt securities issued by our operating partnership. This includes the U.S. federal, state, local, foreign and other tax considerations of the ownership and sale of our shares, warrants, and rights, and/or debt securities issued by our operating partnership and the potential changes in applicable tax laws.




Taxation of our Company as a REIT

We elected to be taxed as a REIT commencing with our first taxable year ended December 31, 2004. A REIT generally is not subject to U.S. federal income tax on the “REIT taxable income” (computed without regard to the dividends-paid deduction and its net capital gain or loss) that it distributes to shareholders provided that the REIT meets the applicable REIT distribution requirements and other requirements for qualification as a REIT under the Code. We believe that we are organized and have operated and we intend to continue to operate, in a manner to qualify for taxation as a REIT under the Code. However, qualification and taxation as a REIT depends upon our ability to meet the various qualification tests imposed under the Code, including through our actual annual (or in some cases quarterly) operating results, requirements relating to income, asset ownership, distribution levels and diversity of share ownership, and the various other REIT qualification requirements imposed under the Code. Given the complex nature of the REIT qualification requirements, the ongoing importance of factual determinations and the possibility of future change in our circumstances, we cannot provide any assurances that we will be organized or operated in a manner so as to satisfy the requirements for qualification and taxation as a REIT under the Code. See “-Failure to Qualify as a REIT.”

The sections of the Code that relate to our qualification and operation as a REIT are highly technical and complex. This discussion sets forth the material aspects of the sections of the Code that govern the U.S. federal income tax treatment of a REIT and its shareholders. This summary is qualified in its entirety by the applicable Code provisions, relevant rules and Treasury regulations, and related administrative and judicial interpretations.

Taxation of REITs in General

For each taxable year in which we qualify for taxation as a REIT, we generally will not be subject to U.S. federal corporate income tax on our REIT taxable income (computed without regard to the dividends-paid deduction and its net capital gain or loss) that is distributed currently to our shareholders. This treatment substantially eliminates the “double taxation” at the corporate and stockholder levels that generally results from an investment in a non-REIT “C” corporation. A non-REIT “C” corporation is a corporation that generally is required to pay tax at the corporate level. Double taxation means taxation once at the corporate level when income is earned and once again at the shareholder level when the income is distributed. In general, the income that we generate is taxed only at the shareholder level upon a distribution of dividends to our shareholders.

U.S. shareholders generally will be subject to taxation on dividends distributed by us (other than designated capital gain dividends and “qualified dividend income”) at rates applicable to ordinary income, instead of at lower capital gain rates. For taxable years beginning and before January 1, 2026, generally, U.S. shareholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations. Capital gain dividends and qualified dividend income will continue to be subject to a maximum 20% rate.

Any net operating losses, foreign tax credits and other tax attributes of a REIT generally do not pass through to its shareholders, subject to special rules for certain items such as the capital gains that the REIT recognizes.

Even if we qualify for taxation as a REIT, we will be subject to U.S. federal income tax in the following circumstances:



1. We will be taxed at regular corporate rates on any undistributed REIT taxable income (computed without regard to the dividends-paid deduction and its net capital gain or loss).
2. If we have (1) net income from the sale or other disposition of “foreclosure property” that is held primarily for sale to customers in the ordinary course of business, or (2) other non-qualifying income from foreclosure property, such income will be subject to tax at the highest corporate rate.
3. Our net income from “prohibited transactions” 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 other than foreclosure property.
4. If we fail to satisfy either the 75% gross income test or the 95% gross income test, as discussed below, but our failure is due to reasonable cause and not due to willful neglect and we nonetheless maintain our qualification as a REIT because of specified cure provisions, we will be subject to a 100% tax on an amount equal to (a) the greater of (1) the amount by which we fail the 75% gross income test or (2) the amount by which we fail the 95% gross income test, as the case may be, multiplied by (b) a fraction intended to reflect our profitability.
5. We will be subject to a 4% nondeductible excise tax on the excess of the required distribution over the sum of amounts actually distributed, excess distributions from the preceding tax year and amounts retained for which U.S. federal income tax was paid, if we fail to make the required distributions by the end of a calendar year. The required distribution for each calendar year is equal to the sum of:
• 85% of our REIT ordinary income for the year;
• 95% of our REIT capital gain net income for the year other than capital gains we elect to retain and pay tax on as described below; and
• any undistributed taxable income from prior taxable years.
6. We will be subject to a 100% penalty tax on certain rental income we receive when a taxable REIT subsidiary provides services to our tenants, on certain expenses deducted by a taxable REIT subsidiary on payments made to us and on income for services rendered to us by a taxable REIT subsidiary, if the arrangements among us, our tenants, and our taxable REIT subsidiaries do not reflect arm’s-length terms.
7. If we acquire any assets from a non-REIT “C” corporation in a carry-over basis transaction, we would be liable for corporate income tax, at the highest applicable corporate rate for the “built-in gain” with respect to those assets if we disposed of those assets within five years after they were acquired. To the extent that assets are transferred to us in a carry-over basis transaction by a partnership in which a corporation owns an interest, we will be subject to this tax in proportion to the non-REIT “C” corporation’s interest in the partnership. Built-in gain is the amount by which an asset’s fair market value exceeds its adjusted tax basis at the time we acquire the asset. The results described in this paragraph assume that the non-REIT “C” corporation will not elect, in lieu of this treatment, to be subject to an immediate tax when the asset is acquired by us.



8. We may elect to retain and pay U.S. federal income tax on our net long-term capital gain. In that case, a U.S. shareholder would include its proportionate share of our undistributed long-term capital gain (to the extent that we make a timely designation of such gain to the shareholder) in its income, would be deemed to have paid the tax we paid on such gain, and would be allowed a credit for its proportionate share of the tax deemed to have been paid, and an adjustment would be made to increase the basis of the U.S. shareholder in our common shares.
9. If we violate the asset tests (other than certain de minimis violations) or other requirements applicable to REITs, as described below, but our failure is due to reasonable cause and not due to willful neglect and we nevertheless maintain our REIT qualification because of specified cure provisions, we will be subject to a tax equal to the greater of $50,000 or the amount determined by multiplying the net income generated by such non-qualifying assets by the highest rate of tax applicable to non-REIT “C” corporations during periods when such assets would have caused us to fail the asset test.
10. If we fail to satisfy a requirement under the Code which would result in the loss of our REIT qualification, other than a failure to satisfy a gross income test, or an asset test as described in paragraph 10 above, but nonetheless maintain our qualification as a REIT because the requirements of certain relief provisions are satisfied, we will be subject to a penalty of $50,000 for each such failure.
11. If we fail to comply with the requirements to send annual letters to our shareholders requesting information regarding the actual ownership of our shares and the failure was not due to reasonable cause or was due to willful neglect, we will be subject to a $25,000 penalty or, if the failure is intentional, a $50,000 penalty.
12. The earnings of any subsidiaries that are non-REIT “C” corporations, including any taxable REIT subsidiary, are subject to U.S. federal corporate income tax.
13. As the “successor” to Inland Diversified for U.S. federal income tax purposes as a result of the Merger, if Inland Diversified failed to qualify as a REIT for a taxable year before the Merger or for the taxable year that includes the Merger, and no relief is available, as a result of the Merger we would inherit any corporate tax liabilities of Inland Diversified for Inland Diversified’s open tax years (possibly extending back six years to Inland Diversified’s 2013 tax year), including penalties and interest.


Notwithstanding our qualification as a REIT, we and our subsidiaries may be subject to a variety of taxes, including payroll taxes and state, local, and foreign income, property and other taxes on our assets, operations and/or net worth. We could also be subject to tax in situations and on transactions not presently contemplated.

Requirements for Qualification as a REIT

The Code defines a “REIT” as a corporation, trust or association:



1. that is managed by one or more trustees or directors;
2. that issues transferable shares or transferable certificates to evidence its beneficial ownership;
3. that would be taxable as a domestic corporation, but for Sections 856 through 859 of the Code;
4. that is neither a financial institution nor an insurance company within the meaning of certain provisions of the Code;
5. that is beneficially owned by 100 or more persons;
6. not more than 50% in value of the outstanding shares or other beneficial interest of which is owned, actually or constructively, by five or fewer individuals (as defined in the Code to include certain entities and as determined by applying certain attribution rules) during the last half of each taxable year;
7. that makes an election to be a REIT for the current taxable year, or has made such an election for a previous taxable year that has not been revoked or terminated, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to elect and maintain REIT status;
8. that uses a calendar year for U.S. federal income tax purposes;
9. that meets other applicable tests, described below, regarding the nature of its income and assets and the amount of its distributions; and
10. that has no earnings and profits from any non-REIT taxable year at the close of any taxable year.

The Code provides that conditions (1), (2), (3) and (4) above must be met during the entire taxable year and condition (5) above must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Conditions (5) and (6) do not apply until after the first taxable year for which an election is made to be taxed as a REIT. Condition (6) must be met during the last half of each taxable year. For purposes of determining share ownership under condition (6) above, a supplemental unemployment compensation benefits plan, a private foundation or a portion of a trust permanently set aside or used exclusively for charitable purposes generally is considered an individual. However, a trust that is a qualified trust under Code Section 401(a) generally is not considered an individual, and beneficiaries of a qualified trust are treated as holding shares of a REIT in proportion to their actuarial interests in the trust for purposes of condition (6) above.
We believe that we have been organized, have operated and have issued sufficient shares of beneficial interest with sufficient diversity of ownership to allow us to satisfy the above conditions. In addition, our declaration of trust contain restrictions regarding the transfer of shares of beneficial interest that are intended to assist us in continuing to satisfy the share ownership requirements described in conditions (5) and (6) above. If we fail to satisfy these share ownership requirements, we will fail to qualify as a REIT unless we qualify for certain relief provisions described below.




To monitor our compliance with condition (6) above, we are generally required to maintain records regarding the actual ownership of our shares. To do so, we must demand written statements each year from the record holders of specified percentages of our shares pursuant to which the record holders must disclose the actual owners of the shares (i.e., the persons required to include in gross income the dividends paid by us). We must maintain a list of those persons failing or refusing to comply with this demand as part of our records. We could be subject to monetary penalties if we fail to comply with these record-keeping requirements. A shareholder that fails or refuses to comply with the demand is required by Treasury regulations to submit a statement with its tax return disclosing the actual ownership of our stock and other information. If we comply with the record-keeping requirement and we do not know or, exercising reasonable diligence, would not have known of our failure to meet condition (6) above, then we will be treated as having met condition (6) above.

To qualify as a REIT, we cannot have at the end of any taxable year any undistributed earnings and profits that are attributable to a non-REIT taxable year. We elected to be taxed as a REIT beginning with our first taxable year in 2004 and we have not succeeded to any earnings and profits of a non-REIT “C” corporation. Therefore, we do not believe we have had any undistributed non-REIT earnings and profits. As the “successor” to Inland Diversified for U.S. federal income tax purposes as a result of the Merger, if Inland Diversified failed to qualify as a REIT for a taxable year before the Merger or the taxable year 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 the 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. 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 taxable year that includes the Merger, 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.

Effect of Subsidiary Entities

Ownership of Interests in Partnerships and Limited Liability Companies. In the case of a REIT which is a partner in a partnership or a member in a limited liability company treated as a partnership for U.S. federal income tax purposes, Treasury regulations provide that the REIT will be deemed to own its pro rata share of the assets of the partnership or limited liability company, as the case may be, based on its capital interests in such partnership or limited liability company. Our capital interest in a partnership or limited liability company is based on either our percentage ownership of the capital of the partnership or limited liability company or based on the allocations provided in the applicable partnership or limited liability company operating agreement, using the more conservative calculation. Also, the REIT will be deemed to be entitled to the income of the partnership or limited liability company attributable to its pro rata share of the assets of that entity. The character of the assets and gross income of the partnership or limited liability company retains the same character in the hands of the REIT for purposes of Section 856 of the Code, including satisfying the gross income tests and the asset tests. Thus, our pro rata share of the assets and items of income of our operating partnership, including our operating partnership’s share of these items of any partnership or limited liability company in which it owns an interest, are treated as our assets and items of income for purposes of applying the requirements described in this prospectus, including the income and asset tests described below.

We have included a brief summary of the rules governing the U.S. federal income taxation of partnerships and limited liability companies and their partners or members below in “-Tax Aspects of Our Ownership of Interests in the Operating Partnership and other Partnerships and Limited Liability



Companies.” We have control of our operating partnership and substantially all of the subsidiary partnerships and limited liability companies in which our operating partnership has invested and intend to continue to operate them in a manner consistent with the requirements for our qualification and taxation as a REIT. In the future, we may be a limited partner or non-managing member in some of our partnerships and limited liability companies. If such a partnership or limited liability company were to take actions which could jeopardize our qualification as a REIT or require us to pay tax, we may be forced to dispose of our interest in such entity. In addition, it is possible that a partnership or limited liability company could take an action which could cause us to fail a REIT income or asset test, and that we would not become aware of such action in a time frame which would allow us to dispose of our interest in the partnership or limited liability company or take other corrective action on a timely basis. In that case, we could fail to qualify as a REIT unless entitled to relief, as described below.

Under the Bipartisan Budget Act of 2015, liability is imposed on the partnership (rather than its partners) for adjustments to reported partnership taxable income resulting from audits or other tax proceedings. The liability can include an imputed underpayment of tax, calculated by using the highest marginal U.S. federal income tax rate, as well as interest and penalties on such imputed underpayment of tax. Using certain rules, partnerships may be able to transfer these liabilities to their partners. In the event any adjustments are imposed by the IRS on the taxable income reported by any subsidiary partnerships, we intend to utilize certain rules to the extent possible to allow us to transfer any liability with respect to such adjustments to the partners of the subsidiary partnerships who should properly bear such liability. However, there is no assurance that we will qualify under those rules or that we will have the authority to use those rules under the operating agreements for certain of our subsidiary partnerships.

Ownership of Interests in Qualified REIT Subsidiaries. We may acquire 100% of the stock of one or more corporations that are qualified REIT subsidiaries. A corporation will qualify as a qualified REIT subsidiary if we own 100% of its stock and it is not a taxable REIT subsidiary. A qualified REIT subsidiary will not be treated as a separate corporation, and all assets, liabilities and items of income, deduction and credit of a qualified REIT subsidiary will be treated as our assets, liabilities and such items (as the case may be) for all purposes of the Code, including the REIT qualification tests. For this reason, references in this discussion to our income and assets should be understood to include the income and assets of any qualified REIT subsidiary we own. Our ownership of the stock of a qualified REIT subsidiary will not violate the restrictions against ownership of securities of any one issuer which constitute more than 10% of the voting power or value of such issuer’s securities or more than 5% of the value of our total assets, as described below in “-Asset Tests Applicable to REITs.”

Ownership of Interests in Taxable REIT Subsidiaries. A taxable REIT subsidiary of ours is a corporation other than a REIT in which we directly or indirectly hold stock, and that has made a joint election with us to be treated as a taxable REIT subsidiary under Section 856(l) of the Code. A taxable REIT subsidiary also includes any corporation other than a REIT in which a taxable REIT subsidiary of ours owns, directly or indirectly, securities (other than certain “straight debt” securities), which represent more than 35% of the total voting power or value of the outstanding securities of such corporation. Other than some activities relating to lodging and health care facilities, a taxable REIT subsidiary may generally engage in any business, including the provision of customary or non-customary services to our tenants without causing us to receive impermissible tenant service income under the REIT gross income tests. A taxable REIT subsidiary is required to pay regular U.S. federal income tax, and state and local income tax where applicable, as a non-REIT “C” corporation. In addition, a taxable REIT subsidiary may be prevented from deducting interest on debt as discussed below in “-Interest Deduction Limitation Enacted by H.R. 1.” If dividends are paid to us by one or more of our taxable REIT subsidiaries, then a portion of the dividends we distribute to shareholders who are taxed at individual rates will generally be eligible for



taxation at lower capital gains rates, rather than at ordinary income rates. See “-Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders-Qualified Dividend Income.”

Generally, a taxable REIT subsidiary can perform impermissible tenant services without causing us to receive impermissible tenant services income under the REIT income tests. However, several provisions applicable to the arrangements between us and our taxable REIT subsidiaries ensure that such taxable REIT subsidiaries will be subject to an appropriate level of U.S. federal income taxation. For example, taxable REIT subsidiaries are limited in their ability to deduct interest payments in excess of a certain amount made directly or indirectly to us. In addition, we will be obligated to pay a 100% penalty tax on some payments we receive or on certain expenses deducted by our taxable REIT subsidiaries, and on income earned by our taxable REIT subsidiaries for services provided to, or on behalf of, us, if the economic arrangements between us, our tenants and such taxable REIT subsidiaries are not comparable to similar arrangements among unrelated parties. Our taxable REIT subsidiaries, and any future taxable REIT subsidiaries acquired by us, may make interest and other payments to us and to third parties in connection with activities related to our properties. There can be no assurance that our taxable REIT subsidiaries will not be limited in their ability to deduct interest payments made to us. In addition, there can be no assurance that the IRS might not seek to impose the 100% penalty tax on a portion of payments received by us from, or expenses deducted by, or service income imputed to, our taxable REIT subsidiaries. See “-Failure to Satisfy the Gross Income Tests” for further discussion of these rules and the 100% penalty tax.

We own subsidiaries that have elected to be treated as taxable REIT subsidiaries for U.S. federal income tax purposes. Each of our taxable REIT subsidiaries is taxable as a non-REIT “C” corporation and has elected, together with us, to be treated as our taxable REIT subsidiary or is treated as a taxable REIT subsidiary under the 35% subsidiary rule discussed above. We may elect, together with other corporations in which we may own directly or indirectly stock, for those corporations to be treated as our taxable REIT subsidiaries.

Gross Income Tests
To qualify as a REIT, we must satisfy two gross income tests which are applied on an annual basis. First, in each taxable year at least 75% of our gross income (excluding gross income from prohibited transactions, certain hedging transactions, as described below, and certain foreign currency transactions) must be derived from investments relating to real property or mortgages on real property, including:
1.
“rents from real property”;
2.
dividends or other distributions on, and gain from the sale of, shares in other REITs;
3.
again from the sale of real property or mortgages on real property, in either case, not held for sale to customers;
4.
interest income derived from mortgage loans secured by real property; and
5.
income attributable to temporary investments of new capital in stocks and debt instruments during the one-year period following our receipt of new capital that we raise through equity offerings or issuance of debt obligations with at least a five-year term.




Second, at least 95% of our gross income in each taxable year (excluding gross income from prohibited transactions, certain hedging transactions, as described below, and certain foreign currency transactions) must be derived from some combination of income that qualifies under the 75% gross income test described above, as well as (a) other dividends, (b) interest, and (c) gain from the sale or disposition of stock or securities, in either case, not held for sale to customers.

Beginning with our taxable years beginning on or after January 1, 2005, gross income from certain hedging transactions is excluded from gross income for purposes of the 95% gross income requirement. Similarly, gross income from certain hedging transactions entered into after July 30, 2008 is excluded from gross income for purposes of the 75% gross income test. See “-Requirements for Qualification as a REIT-Gross Income Tests-Income from Hedging Transactions.”

Rents from Real Property. Rents we receive will qualify as “rents from real property” for the purpose of satisfying the gross income requirements for a REIT described above only if several conditions are met. These conditions relate to the identity of the tenant, the computation of the rent payable, and the nature of the property lease.
1.
First, the amount of rent must not be based in whole or in part on the income or profits of any person. However, an amount we receive or accrue generally will not be excluded from the term “rents from real property” solely by reason of being based on a fixed percentage or percentages of receipts or sales;
2. Second, we, or an actual or constructive owner of 10% or more of our shares, must not actually or constructively own 10% or more of the interests in the tenant, or, if the tenant is a corporation, 10% or more of the voting power or value of all classes of stock of the tenant. Rents received from such tenant that is a taxable REIT subsidiary, however, will not be excluded from the definition of “rents from real property” as a result of this condition if either (i) at least 90% of the space at the property to which the rents relate is leased to third parties, and the rents paid by the taxable REIT subsidiary are comparable to rents paid by our other tenants for comparable space or (ii) the property is a qualified lodging facility or a qualified health care property and such property is operated on behalf of the taxable REIT subsidiary by a person who is an “eligible independent contractor” (as described below) and certain other requirements are met;
3.
Third, rent attributable to personal property, leased in connection with a lease of real property, must not be greater than 15% of the total rent received under the lease. If this requirement is not met, then the portion of rent attributable to personal property will not qualify as “rents from real property”; and



4.
Fourth, for rents to qualify as rents from real property for the purpose of satisfying the gross income tests, we generally must not operate or manage the property or furnish or render services to the tenants of such property, other than through an “independent contractor” who is adequately compensated and from whom we derive no revenue or through a taxable REIT subsidiary. To the extent that impermissible services are provided by an independent contractor or taxable REIT subsidiary, the cost of the services generally must be borne by the independent contractor or taxable REIT subsidiary. We anticipate that any services we provide directly to tenants will be “usually or customarily rendered” in connection with the rental of space for occupancy only and not otherwise considered to be provided for the tenants’ convenience. We may provide a minimal amount of “non-customary” services to tenants of our properties, other than through an independent contractor or taxable REIT subsidiary, but we intend that our income from these services will not exceed 1% of our total gross income from the property. If the impermissible tenant services income exceeds 1% of our total income from a property, then all of the income from that property will fail to qualify as rents from real property. If the total amount of impermissible tenant services income does not exceed 1% of our total income from the property, the services will not “taint” the other income from the property (that is, it will not cause the rent paid by tenants of that property to fail to qualify as rents from real property), but the impermissible tenant services income will not qualify as rents from real property. We are deemed to have received income from the provision of impermissible services in an amount equal to at least 150% of our direct cost of providing the service.

We monitor (and intend to continue to monitor) the activities provided at, and the non-qualifying income arising from, our properties and believe that we have not provided services at levels that will cause us to fail to meet the income tests. We provide services and may provide access to third party service providers at some or all of our properties. Based upon our experience in the retail markets where the properties are located, we believe that all access to service providers and services provided to tenants by us (other than through a qualified independent contractor or a taxable REIT subsidiary) either are usually or customarily rendered in connection with the rental of real property and not otherwise considered rendered to the occupant, or, if considered impermissible services, will not result in an amount of impermissible tenant service income that will cause us to fail to meet the income test requirements. However, we cannot provide any assurance that the IRS will agree with these positions.

Income we receive which is attributable to the rental of parking spaces at the properties will constitute rents from real property for purposes of the REIT gross income tests if the services provided with respect to the parking facilities are performed by independent contractors from whom we derive no income, either directly or indirectly, or by a taxable REIT subsidiary. We believe that the income we receive that is attributable to parking facilities will meet these tests and, accordingly, will constitute rents from real property for purposes of the REIT gross income tests.

We may in the future hold one or more hotel properties. We expect to lease any such hotel properties to our taxable REIT subsidiary (or to a joint venture entity in which our taxable REIT subsidiary will have an interest). In order for rent paid pursuant to a REIT’s leases to constitute “rents from real property,” the leases must be respected as true leases for U.S. federal income tax purposes. Accordingly, the leases cannot be treated as service contracts, joint ventures or some other type of arrangement. The determination of whether the leases are true leases for U.S. federal income tax purposes depends upon an analysis of all the surrounding facts and circumstances. We intend to structure the leases so that the leases will be respected as true leases for U.S. federal income tax purposes. With respect to the management of the hotel properties, the taxable REIT subsidiary (or the taxable REIT subsidiary-joint venture entity-lessee) intends to enter into a management contract with a hotel management company that



qualifies as an “eligible independent contractor.” A taxable REIT subsidiary must not directly or indirectly operate or manage a lodging or health care facility or, generally, provide to another person, under a franchise, license or otherwise, rights to any brand name under which any lodging facility or health care facility is operated. Although a taxable REIT subsidiary may not operate or manage a lodging facility, it may lease or own such a facility so long as the facility is a “qualified lodging facility” and is operated on behalf of the taxable REIT subsidiary by an “eligible independent contractor.” A “qualified lodging facility” is, generally, a hotel at which no authorized gambling activities are conducted, and includes the customary amenities and facilities operated as part of, or associated with, the hotel. “Customary amenities” must be customary for other properties of a comparable size and class owned by other owners unrelated to the REIT. An “eligible independent contractor” is an independent contractor that, at the time a management agreement is entered into with a taxable REIT subsidiary to operate a “qualified lodging facility,” is actively engaged in the trade or business of operating “qualified lodging facilities” for a person or persons unrelated to either the taxable REIT subsidiary or any REITs with which the taxable REIT subsidiary is affiliated. A hotel management company that otherwise would qualify as an “eligible independent contractor” with regard to a taxable REIT subsidiary of a REIT will not so qualify if the hotel management company and/or one or more actual or constructive owners of 10% or more of the hotel management company actually or constructively own more than 35% of the REIT, or one or more actual or constructive owners of more than 35% of the hotel management company own 35% or more of the REIT (determined with respect to a REIT whose shares are regularly traded on an established securities market by taking into account only the shares held by persons owning, directly or indirectly, more than 5% of the outstanding shares of the REIT and, if the stock of the eligible independent contractor is publicly traded, 5% of the publicly traded stock of the eligible independent contractor). We intend to take all steps reasonably practicable to ensure that none of our taxable REIT subsidiaries will engage in “operating” or “managing” any hotels and that the hotel management companies engaged to operate and manage hotels leased to or owned by the taxable REIT subsidiaries will qualify as “eligible independent contractors” with regard to those taxable REIT subsidiaries. We expect that rental income we receive, if any, that is attributable to the hotel properties will constitute rents from real property for purposes of the REIT gross income tests.

Interest Income. “Interest” generally will be non-qualifying income for purposes of the 75% or 95% gross income tests if it depends in whole or in part on the income or profits of any person. However, interest based on a fixed percentage or percentages of receipts or sales may still qualify under the gross income tests. We do not expect to derive significant amounts of interest that will not qualify under the 75% and 95% gross income tests.

Dividend Income. Our share of any dividends received from any taxable REIT subsidiaries will qualify for purposes of the 95% gross income test but not for purposes of the 75% gross income test. We do not anticipate that we will receive sufficient dividends from any taxable REIT subsidiaries to cause us to exceed the limit on non-qualifying income under the 75% gross income test. Dividends that we receive from other qualifying REITs will qualify for purposes of both REIT income tests.

Income from Hedging Transactions. From time to time we may enter into hedging transactions with respect to one or more of our assets or liabilities. Any such hedging transactions could take a variety of forms, including the use of derivative instruments such as interest rate swap or cap agreements, option agreements, and futures or forward contracts. Income of a REIT, including income from a pass-through subsidiary, arising from “clearly identified” hedging transactions that are entered into to manage the risk of interest rate or price changes with respect to borrowings, including gain from the disposition of such hedging transactions, to the extent the hedging transactions hedge indebtedness incurred, or to be incurred, by the REIT to acquire or carry real estate assets (each such hedge, a “Borrowings Hedge”), will



not be treated as gross income for purposes of either the 95% gross income test or the 75% gross income test. Income of a REIT arising from hedging transactions that are entered into to manage the risk of currency fluctuations with respect to our investments (each such hedge, a “Currency Hedge”) will not be treated as gross income for purposes of either the 95% gross income test or the 75% gross income test provided that the transaction is “clearly identified.” Effective for taxable years beginning after December 31, 2015, this exclusion from the 95% and 75% gross income tests also will apply if we previously entered into a Borrowings Hedge or a Currency Hedge, a portion of the hedged indebtedness or property is disposed of, and in connection with such extinguishment or disposition we enter into a new “clearly identified” hedging transaction to offset the prior hedging position. In general, for a hedging transaction to be “clearly identified,” (1) it must be identified as a hedging transaction before the end of the day on which it is acquired, originated, or entered into; and (2) the items of risks being hedged must be identified “substantially contemporaneously” with entering into the hedging transaction (generally not more than 35 days after entering into the hedging transaction). To the extent that we hedge with other types of financial instruments or in other situations, the resultant income will be treated as income that does not qualify under the 95% or 75% gross income tests unless the hedge meets certain requirements and we elect to integrate it with a specified asset and to treat the integrated position as a synthetic debt instrument. We intend to structure any hedging transactions in a manner that does not jeopardize our qualification as a REIT but there can be no assurance we will be successful in this regard.

Income from Prohibited Transactions. Any gain that we realize on the sale of any property held as inventory or otherwise held primarily for sale to customers in the ordinary course of business, including our share of any such gain realized by our operating partnership, either directly or through its subsidiary partnerships and limited liability companies, will be treated as income from a prohibited transaction that is subject to a 100% penalty tax. Under existing law, whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. However, we will not be treated as a dealer in real property with respect to a property that we sell for the purposes of the 100% tax if (i) we have held the property for at least two years for the production of rental income prior to the sale, (ii) capitalized expenditures on the property in the two years preceding the sale are less than 30% of the net selling price of the property, and (iii) we either (a) have seven or fewer sales of property (excluding certain property obtained through foreclosure) for the year of sale or (b) the aggregate tax basis of property sold during the year is 10% or less of the aggregate tax basis of all of our assets as of the beginning of the taxable year, (c) the fair market value of property sold during the year is 10% or less of the aggregate fair market value of all of our assets as of the beginning of the taxable year; or (d) the aggregate adjusted basis of property sold during the year is 20% or less of the aggregate adjusted basis of all of our assets as of the beginning of the taxable year and the aggregate adjusted basis of property sold during the 3-year period ending with the year of sale is 10% or less of the aggregate tax basis of all of our assets as of the beginning of each of the three taxable years ending with the year of sale; or (e) the fair market value of property sold during the year is 20% or less of the aggregate fair market value of all of our assets as of the beginning of the taxable year and the fair market value of property sold during the three-year period ending with the year of sale is 10% or less of the aggregate fair market value of all of our assets as of the beginning of each of the three taxable years ending with the year of sale. If we rely on clauses (b), (c), (d), or (e) in the preceding sentence, substantially all of the marketing and development expenditures with respect to the property sold must be made through an independent contractor from whom we derive no income or our TRS. The sale of more than one property to one buyer as part of one transaction constitutes one sale for purposes of this “safe harbor.”

We intend to hold our properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning our properties and to make occasional sales of the



properties as are consistent with our investment objectives. However, the IRS may successfully contend that some or all of the sales made by us or our operating partnership or its subsidiary partnerships or limited liability companies are prohibited transactions.

In that case, we would be required to pay the 100% penalty tax on our allocable share of the gains resulting from any such sales.

Income from Foreclosure Property. We generally will be subject to tax at the maximum corporate rate (effective for taxable years beginning after December 31, 2017, 21%) on any net income from foreclosure property, including any gain from the disposition of the foreclosure property, other than income that constitutes qualifying income for purposes of the 75% gross income test. Foreclosure property is real property and any personal property incident to such real property (1) that we acquire as the result of having bid on the property at foreclosure, or having otherwise reduced the property to ownership or possession by agreement or process of law, after a default (or upon imminent default) on a lease of the property or a mortgage loan held by us and secured by the property, (2) for which we acquired the related loan or lease at a time when default was not imminent or anticipated, and (3) with respect to which we made a proper election to treat the property as foreclosure property. Any gain from the sale of property for which a foreclosure property election has been made and remains in place generally will not be subject to the 100% tax on gains from prohibited transactions described above, even if the property would otherwise constitute inventory or dealer property. To the extent that we receive any income from foreclosure property that does not qualify for purposes of the 75% gross income test, we intend to make an election to treat the related property as foreclosure property if the election is available (which may not be the case with respect to any acquired “distressed loans”).

Failure to Satisfy the Gross Income Tests. If we fail to satisfy one or both of the 75% or 95% gross income tests for any taxable year, we may nevertheless qualify as a REIT for that year if we are entitled to relief under the Code. These relief provisions will be generally available if (1) our failure to meet these tests was due to reasonable cause and not due to willful neglect and (2) following our identification of the failure to meet the 75% and/or 95% gross income tests for any taxable year, we file a schedule with the IRS setting forth a description of each item of our gross income that satisfies the gross income tests for purposes of the 75% or 95% gross income test for such taxable year in accordance with Treasury regulations. It is not possible, however, to state whether in all circumstances we would be entitled to the benefit of these relief provisions. If these relief provisions are inapplicable to a particular set of circumstances, we will fail to qualify as a REIT. As discussed above, under “- Taxation of our Company as a REIT - General,” even if these relief provisions apply, a tax would be imposed based on the amount of non-qualifying income. We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the income tests applicable to REITs.

Any redetermined rents, redetermined deductions, excess interest, or redetermined TRS service income we generate will be subject to a 100% penalty tax. In general, redetermined rents are rents from real property that are overstated as a result of services furnished by one of our taxable REIT subsidiaries to any of our tenants, redetermined deductions and excess interest represent amounts that are deducted by a taxable REIT subsidiary for amounts paid to us that are in excess of the amounts that would have been deducted based on arm’s-length negotiations, and redetermined TRS service income is gross income (less deductions allocable thereto) of a taxable REIT subsidiary attributable to services provided to, or on behalf of, us that is less than the amounts that would have been paid by us to the taxable REIT subsidiary if based on arm’s-length negotiations. Rents we receive will not constitute redetermined rents if they qualify for the safe harbor provisions contained in the Code. Safe harbor provisions are provided where:



1.
amounts are excluded from the definition of impermissible tenant service income as a result of satisfying the 1% de minimis exception;
2.
a taxable REIT subsidiary renders a significant amount of similar services to unrelated parties and the charges for such services are substantially comparable;
3.
rents paid to us by tenants leasing at least 25% of the net leasable space of the REIT’s property who are not receiving services from the taxable REIT subsidiary are substantially comparable to the rents paid by the REIT’s tenants leasing comparable space who are receiving such services from the taxable REIT subsidiary and the charge for the service is separately stated; or
4.
the taxable REIT subsidiary’s gross income from the service is not less than 150% of the taxable REIT subsidiary’s direct cost of furnishing the service.

While we anticipate that any fees paid to a taxable REIT subsidiary for tenant services will reflect arm’s-length rates, a taxable REIT subsidiary may under certain circumstances provide tenant services which do not satisfy any of the safe-harbor provisions described above. Nevertheless, these determinations are inherently factual, and the IRS has broad discretion to assert that amounts paid between related parties should be reallocated to clearly reflect their respective incomes. If the IRS successfully made such an assertion, we would be required to pay a 100% penalty tax on the redetermined rent, redetermined deductions or excess interest, as applicable.

Asset Tests

At the close of each calendar quarter, we must satisfy the following tests relating to the nature and diversification of our assets. For purposes of the asset tests, a REIT is not treated as owning the stock of a qualified REIT subsidiary or an equity interest in any entity treated as a partnership otherwise disregarded for U.S. federal income tax purposes. Instead, a REIT is treated as owning its proportionate share of the assets held by such entity.



1.
At least 75% of the value of our total assets must be represented by some combination of “real estate assets,” cash, cash items, U.S. government securities, and, in some circumstances, stock or debt instruments purchased with new capital. For purposes of this test, real estate assets include interests in real property, such as land and buildings, leasehold interests in real property, stock of other corporations that qualify as REITs (and debt instruments issued by publicly offered REITs, interests in mortgages on interests in real property and personal property leased in connection with real property to the extent that rents attributable to such personal property are treated as “rents from real property”), and some types of mortgage-backed securities and mortgage loans. Assets that do not qualify for purposes of the 75% asset test are subject to the additional asset tests described below.
2.
Not more than 25% of our total assets may be represented by securities other than those described in the first bullet above;
3.
Except for securities described in the first bullet above and the last bullet below and securities in qualified REIT subsidiaries and taxable REIT subsidiaries, the value of any one issuer’s securities owned by us may not exceed 5% of the value of our total assets.
4.
Except for securities described in the first bullet above and the last bullet below and securities in qualified REIT subsidiaries and taxable REIT subsidiaries we may not own more than 10% of any one issuer’s outstanding voting securities.
5.
Except for securities described in the first bullet above and the last bullet below and securities in qualified REIT subsidiaries and taxable REIT subsidiaries, and certain types of indebtedness that are not treated as securities for purposes of this test, as discussed below, we may not own more than 10% of the total value of the outstanding securities of any one issuer.
6.
Not more than 20% (25% for tax years beginning before January 1, 2018) of the value of our total assets may be represented by the securities of one or more TRSs.
7.
Not more than 25% of our total assets may be represented by debt instruments issued by publicly offered REITs that are “nonqualified” debt instruments (e.g., not secured by interests in mortgages on interests in real property and personal property leased in connection with real property to the extent that rents attributable to such personal property are treated as “rents from real property”).

The 10% value test does not apply to certain “straight debt” and other excluded securities, as described in the Code, including (1) loans to individuals or estates; (2) obligations to pay rent from real property; (3) rental agreements described in Section 467 of the Code; (4) any security issued by other REITs; (5) certain securities issued by a state, the District of Columbia, a foreign government, or a political subdivision of any of the foregoing, or the Commonwealth of Puerto Rico; and (6) any other arrangement as determined by the IRS. In addition, (1) a REIT’s interest as a partner in a partnership is not considered a security for purposes of the 10% value test; (2) any debt instrument issued by a partnership (other than straight debt or other excluded security) will not be considered a security issued by



the partnership if at least 75% of the partnership’s gross income is derived from sources that would qualify for the 75% REIT gross income test; and (3) any debt instrument issued by a partnership (other than straight debt or other excluded security) will not be considered a security issued by a partnership to the extent of the REIT’s interest as a partner in the partnership.

For purposes of the 10% value test, debt will meet the “straight debt” safe harbor if (1) neither us, nor any of our controlled taxable REIT subsidiaries (i.e., taxable REIT subsidiaries more than 50% of the vote or value of the outstanding stock of which is directly or indirectly owned by us), own any securities not described in the preceding paragraph that have an aggregate value greater than one percent of the issuer’s outstanding securities, as calculated under the Code, (2) the debt is a written unconditional promise to pay on demand or on a specified date a sum certain in money, (3) the debt is not convertible, directly or indirectly, into stock, and (4) the interest rate and the interest payment dates of the debt are not contingent on the profits, the borrower’s discretion or similar factors. However, contingencies regarding time of payment and interest are permissible for purposes of qualifying as a straight debt security if either (1) such contingency does not have the effect of changing the effective yield of maturity, as determined under the Code, other than a change in the annual yield to maturity that does not exceed the greater of (i) 5% of the annual yield to maturity or (ii) 0.25%, or (2) neither the aggregate issue price nor the aggregate face amount of the issuer’s debt instruments held by the REIT exceeds $1,000,000 and not more than 12 months of unaccrued interest can be required to be prepaid thereunder. In addition, debt will not be disqualified from being treated as “straight debt” solely because the time or amount of payment is subject to a contingency upon a default or the exercise of a prepayment right by the issuer of the debt, provided that such contingency is consistent with customary commercial practice.

Our operating partnership owns 100% of the interests of one or more taxable REIT subsidiaries. We are considered to own our pro rata share (based on our ownership in the operating partnership) of the interests in each taxable REIT subsidiary equal to our proportionate share (by capital) of the operating partnership. Each taxable REIT subsidiary has elected, together with us, to be treated as our taxable REIT subsidiary. So long as each taxable REIT subsidiary qualifies as such, we will not be subject to the 5% asset test, 10% voting securities limitation or 10% value limitation with respect to our ownership interest in each taxable REIT subsidiary. In the future, we may elect, together with other corporations in which we own directly or indirectly stock, for those corporations to be treated as our taxable REIT subsidiaries. We believe that the aggregate value of our interests in our taxable REIT subsidiaries does not exceed, and believe that in the future it will not exceed, 20% (25% for tax years beginning before January 1, 2018) of the aggregate value of our gross assets. To the extent that we own an interest in an issuer that does not qualify as a REIT, a qualified REIT subsidiary, or a taxable REIT subsidiary, we believe that our pro rata share of the value of the securities, including debt, of any such issuer does not exceed 5% of the total value of our assets. Moreover, with respect to each issuer in which we own an interest that does not qualify as a qualified REIT subsidiary or a taxable REIT subsidiary, we believe that our ownership of the securities of any such issuer complies with the 10% voting securities limitation and 10% value limitation.

No independent appraisals have been obtained to support these conclusions and we cannot provide any assurance that the IRS might disagree with our determinations.

Failure to Satisfy the Asset Tests. The asset tests must be satisfied not only on the last day of the calendar quarter in which we, directly or through pass-through subsidiaries, acquire securities in the applicable issuer, but also on the last day of the calendar quarter in which we increase our ownership of securities of such issuer, including as a result of increasing our interest in pass-through subsidiaries. After initially meeting the asset tests at the close of any quarter, we will not lose our status as a REIT for failure to satisfy the asset tests solely by reason of changes in the relative values of our assets (including, for tax



years beginning after July 30, 2008, a discrepancy caused solely by the change in the foreign currency exchange rate used to value a foreign asset). If failure to satisfy the asset tests results from an acquisition of securities or other property during a quarter, we can cure this failure by disposing of sufficient non-qualifying assets within 30 days after the close of that quarter. An acquisition of securities could include an increase in our interest in our operating partnership, the exercise by limited partners of their redemption right relating to units in the operating partnership or an additional capital contribution of proceeds of an offering of our shares of beneficial interest. We intend to maintain adequate records of the value of our assets to ensure compliance with the asset tests and to take any available action within 30 days after the close of any quarter as may be required to cure any noncompliance with the asset tests. Although we plan to take steps to ensure that we satisfy such tests for any quarter with respect to which testing is to occur, there can be no assurance that such steps will always be successful. If we fail to timely cure any noncompliance with the asset tests, we would cease to qualify as a REIT, unless we satisfy certain relief provisions.

The failure to satisfy the 5% asset test, or the 10% vote or value asset tests can be remedied even after the 30-day cure period under certain circumstances. Specifically, if we fail these asset tests at the end of any quarter and such failure is not cured within 30 days thereafter, we may dispose of sufficient assets (generally within six months after the last day of the quarter in which our identification of the failure to satisfy these asset tests occurred) to cure such a violation that does not exceed the lesser of 1% of our assets at the end of the relevant quarter or $10,000,000. If we fail any of the other asset tests or our failure of the 5% and 10% asset tests is in excess of the de minimis amount described above, as long as such failure was due to reasonable cause and not willful neglect, we are permitted to avoid disqualification as a REIT, after the 30-day cure period, by taking steps including the disposing of sufficient assets to meet the asset test (generally within six months after the last day of the quarter in which our identification of the failure to satisfy the REIT asset test occurred), paying a tax equal to the greater of $50,000 or the highest corporate income tax rate of the net income generated by the non-qualifying assets during the period in which we failed to satisfy the asset test, and filing in accordance with applicable Treasury regulations a schedule with the IRS that describes the assets that caused us to fail to satisfy the asset test(s). We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the asset tests applicable to REITs. In certain circumstances, utilization of such provisions could result in us being required to pay an excise or penalty tax, which could be significant in amount.

Annual Distribution Requirements

To qualify as a REIT, we are required to distribute dividends, other than capital gain dividends, to our shareholders each year in an amount at least equal to:
1.
the sum of: (1) 90% of our “REIT taxable income,” (computed without regard to the dividends-paid deduction and its net capital gain or loss); and (2) 90% of our after tax net income, if any, from foreclosure property; minus
2.
the sum of specified items of non-cash income.

For purposes of this test, non-cash income means income attributable to leveled stepped rents, original issue discount included in our taxable income without the receipt of a corresponding payment, cancellation of indebtedness or a like-kind exchange that is later determined to be taxable.
We generally must make dividend distributions in the taxable year to which they relate. Dividend distributions may be made in the following year in two circumstances. First, if we declare a dividend in



October, November, or December of any year with a record date in one of these months and pay the dividend on or before January 31 of the following year. Such distributions are treated as both paid by us and received by each shareholder on December 31 of the year in which they are declared. Second, distributions may be made in the following year if they are declared before we timely file our tax return for the year and if made with or before the first regular dividend payment after such declaration. These distributions are taxable to our shareholders in the year in which paid, even though the distributions relate to our prior taxable year for purposes of the 90% distribution requirement.

In order for distributions to be counted as satisfying the annual distribution requirement for REITs, and to provide us with a REIT-level tax deduction, the distributions must not be “preferential dividends.” A dividend is not a preferential dividend if the distribution is (1) pro rata among all outstanding shares of stock within a particular class, and (2) in accordance with the preferences among different classes of stock as set forth in our organizational documents. This requirement does not apply to publicly offered REITs, including us, with respect to distributions made in tax years beginning after 2014, but would apply to us if we ceased to qualify as a publicly offered REIT.

To the extent that we do not distribute all of our net capital gain or distribute at least 90%, but less than 100%, of our “REIT taxable income” (computed without regard to the dividends-paid deduction and its net capital gain or loss), we will be required to pay tax on that amount at regular corporate tax rates. We intend to make timely distributions sufficient to satisfy these annual distribution requirements. In this regard, the partnership agreement of our operating partnership authorizes us, as general partner of our operating partnership, to take such steps as may be necessary to cause our operating partnership to distribute to its partners an amount sufficient to permit us to meet these distribution requirements. In certain circumstances we may elect to retain, rather than distribute, our net long-term capital gains and pay tax on such gains. In this case, we could elect for our shareholders to include their proportionate share of such undistributed long-term capital gains in income, and to receive a corresponding credit for their share of the tax that we paid. Our shareholders would then increase their adjusted basis of their stock by the difference between (1) the amounts of capital gain dividends that we designated and that they included in their taxable income, minus (2) the tax that we paid on their behalf with respect to that income.

To the extent that in the future we may have available net operating losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. Such losses, however, (1) will generally not affect the character, in the hands of our shareholders, of any distributions that are actually made as ordinary dividends or capital gains; and (2) cannot be passed through or used by our shareholders. See “-Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders-Distributions Generally.”

If we fail to distribute during each calendar year at least the sum of (a) 85% of our REIT ordinary income for such year, (b) 95% of our REIT capital gain net income for such year, and (c) any undistributed taxable income from prior periods, we would be subject to a non-deductible 4% excise tax on the excess of such required distribution over the sum of (x) the amounts actually distributed, and (y) the amounts of income we retained and on which we paid corporate income tax.

In addition, if we were to recognize built-in-gain on the disposition of any assets acquired from a non-REIT “C” corporation in a transaction in which our basis in the assets was determined by reference to the non-REIT “C” corporation’s basis (for instance, if the assets were acquired in a tax-free reorganization), we would be required to distribute at least 90% of the built-in-gain net of the tax we would pay on such gain.




We expect that our REIT taxable income (computed without regard to the dividends-paid deduction and its net capital gain or loss) will be less than our cash flow because of depreciation and other non-cash charges included in computing REIT taxable income (computed without regard to the dividends-paid deduction and its net capital gain or loss). Accordingly, we anticipate that we will generally have sufficient cash or liquid assets to enable us to satisfy the distribution requirements described above.

However, from time to time, we may not have sufficient cash or other liquid assets to meet these distribution requirements due to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of income and deduction of expenses in arriving at our taxable income. If these timing differences occur, we may need to arrange for short-term, or possibly long-term, borrowings or need to pay dividends in the form of taxable dividends in order to meet the distribution requirements. Further, under amendments to Section 451 of the Code made by H.R. 1, subject to certain exceptions, we must accrue income for U.S. federal income tax purposes no later than when such income is taken into account as revenue in our financial statements, which could create additional differences between REIT taxable income and the receipt of cash attributable to such income.

We may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our shareholders in a later year, which may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends. However, we will be required to pay interest to the IRS based upon the amount of any deduction claimed for deficiency dividends.

The Internal Revenue Code limits the deductibility of net interest expense paid or accrued on debt properly allocable to a trade or business to 30% of “adjusted taxable income,” subject to certain exceptions. Any deduction in excess of the limitation is carried forward and may be used in a subsequent year, subject to the 30% limitation. Adjusted taxable income is determined without regard to certain deductions, including those for net interest expense, net operating loss carryforwards and, for taxable years beginning before January 1, 2022, depreciation, amortization and depletion. If we or our subsidiaries, as applicable, are eligible to make and make a timely election (which is irrevocable), the 30% limitation does not apply to a trade or business involving real property development, redevelopment, construction, reconstruction, rental, operation, acquisition, conversion, disposition, management, leasing or brokerage, within the meaning of Section 469(c)(7)(C) of the Code. If this election is made, depreciable real property (including certain improvements) held by the relevant trade or business must be depreciated under the alternative depreciation system under the Code, which is generally less favorable than the generally applicable system of depreciation under the Code. If we do not make the election or if the election is determined not to be available with respect to all or certain of our business activities, the interest deduction limitation could result in us having more REIT taxable income and thus increase the amount of distributions we must make to comply with the REIT requirements and avoid incurring corporate level tax. Similarly, the limitation could cause our TRSs to have greater taxable income and thus potentially greater corporate tax liability.

Furthermore, under amendments to Section 451 of the Code, subject to certain exceptions, we must accrue income for U.S. federal income tax purposes no later than when such income is taken into account as revenue in our financial statements, which could create additional differences between REIT taxable income and the receipt of cash attributable to such income. In addition, Section 162(m) of the Code places a per-employee limit of $1 million on the amount of compensation that a publicly held corporation may deduct in any one year with respect to its chief executive officer and certain other highly compensated executive officers. Changes to Section 162(m) eliminated an exception that formerly



permitted certain performance-based compensation to be deducted even if in excess of $1 million, which may have the effect of increasing our REIT taxable income. If these timing differences occur, we may need to arrange for short-term, or possibly long-term, borrowings or need to pay dividends in the form of taxable stock dividends in order to meet the distribution requirements.

We may be able to rectify a failure to meet the distribution requirement for a year by paying “deficiency dividends” to our shareholders in a later year, which may be included in our deduction for dividends paid for the earlier year. Thus, we may be able to avoid being taxed on amounts distributed as deficiency dividends. However, we will be required to pay interest to the IRS based upon the amount of any deduction claimed for deficiency dividends.

Record-Keeping Requirements

We are required to comply with applicable record-keeping requirements. Failure to comply could result in monetary fines.


Failure to Qualify as a REIT

If we fail to satisfy one or more requirements for REIT qualification other than gross income and asset tests that have the specific savings clauses, we can avoid termination of our REIT qualification by paying a penalty of $50,000 for each such failure, provided that our noncompliance was due to reasonable cause and not willful neglect.

If we fail to qualify for taxation as a REIT in any taxable year and the relief provisions do not apply, we will be subject to tax, including any applicable alternative minimum tax, on our taxable income at regular corporate rates. If we fail to qualify for taxation as a REIT, we will not be required to make any distributions to shareholders, and any distributions that are made to shareholders will not be deductible by us. As a result, our failure to qualify for taxation as a REIT would significantly reduce the cash available for distributions by us to our shareholders. In addition, if we fail to qualify for taxation as a REIT, all distributions to shareholders, to the extent of our current and accumulated earnings and profits, will be taxable as regular corporate dividends. For taxable years prior to 2026, generally U.S. shareholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations. Alternatively, such dividends paid to U.S. shareholders that are individuals, trusts and estates may be taxable at the preferential income tax rates (i.e., the 20% maximum U.S. federal rate) for qualified dividends. In addition, subject to the limitations of the Code, corporate distributees may be eligible for the dividends-received deduction. Unless entitled to relief under specific statutory provisions, we also will be disqualified from taxation as a REIT for the four taxable years following the year during which qualification was lost. In addition, if we were to be considered the “successor” to another REIT (through a merger, for example), the other REIT’s disqualification from taxation as a REIT would prevent us from being taxed as a REIT for the four taxable years following the year during which the other REIT’s qualification was lost. There can be no assurance that we would be entitled to any statutory relief. We intend to take advantage of any and all relief provisions that are available to us to cure any violation of the requirements applicable to REITs.







Tax Aspects of Our Ownership of Interests in the Operating Partnership and other Partnerships and Limited Liability Companies

General

Substantially all of our investments are owned indirectly through Kite Realty Group, L.P., our operating partnership. In addition, our operating partnership holds certain of its investments indirectly through subsidiary partnerships and limited liability companies that we believe are treated as partnerships or as disregarded entities for U.S. federal income tax purposes. In general, entities that are classified as partnerships or as disregarded entities for U.S. federal income tax purposes are “pass-through” entities which are not required to pay U.S. federal income tax. Rather, partners or members of such entities are allocated their pro rata shares of the items of income, gain, loss, deduction and credit of the entity, and are required to include these items in calculating their U.S. federal income tax liability, without regard to whether the partners or members receive a distribution of cash from the entity. We include in our income our pro rata share of the foregoing items for purposes of the various REIT gross income tests and in the computation of our REIT taxable income (computed without regard to the dividends-paid deduction and its net capital gain or loss). Moreover, for purposes of the REIT asset tests, we include our pro rata share of assets, based on capital interests, of assets held by our operating partnership, including its share of its subsidiary partnerships and limited liability companies. See “-Requirements for Qualification as a REIT-Effect of Subsidiary Entities-Ownership of Interests in Partnerships and Limited Liability Companies.”

Entity Classification

Our interests in our operating partnership and the subsidiary partnerships and limited liability companies involve special tax considerations, including the possibility that the IRS might challenge the status of one or more of these entities as a partnership or disregarded entity, and assert that such entity is an association taxable as a corporation for U.S. federal income tax purposes. If our operating partnership, or a subsidiary partnership or limited liability company, were treated as an association, it would be taxable as a corporation and would be required to pay an entity-level tax on its income. In this situation, the character of our assets and items of gross income could change and could preclude us from satisfying the REIT asset tests and possibly the REIT income tests. See “-Requirements for Qualification as a REIT-Gross Income Tests,” and “-Asset Tests.” This, in turn, would prevent us from qualifying as a REIT. See “-Failure to Qualify as a REIT” for a discussion of the effect of our failure to meet these tests for a taxable year. In addition, a change in our operating partnership’s or a subsidiary partnership’s or limited liability company’s status as a partnership for tax purposes might be treated as a taxable event. If so, we might incur a tax liability without any related cash distributions.

We believe our operating partnership and each of our other partnerships and limited liability companies (other than our taxable REIT subsidiaries) will be treated for U.S. federal income tax purposes as a partnership or disregarded entity. Pursuant to Treasury regulations under Section 7701 of the Code, a partnership will be treated as a partnership for U.S. federal income tax purposes unless it elects to be treated as a corporation or would be treated as a corporation because it is a “publicly traded partnership.” A “publicly traded partnership” is any partnership (i) the interests in which are traded on an established securities market or (ii) the interests in which are readily tradable on a “secondary market or the substantial equivalent thereof.”

The Company and the operating partnership currently take the reporting position for U.S. federal income tax purposes that the operating partnership is not a publicly traded partnership. There is a risk, however, that the right of a holder of operating partnership units to redeem the units for common shares



could cause operating partnership units to be considered readily tradable on the substantial equivalent of a secondary market. Under the relevant Treasury regulations, interests in a partnership will not be considered readily tradable on a secondary market or on the substantial equivalent of a secondary market if the partnership qualifies for specified “safe harbors,” which are based on the specific facts and circumstances relating to the partnership. We and the operating partnership believe that the operating partnership will qualify for at least one of these safe harbors at all times in the foreseeable future. The operating partnership cannot provide any assurance that it will continue to qualify for one of the safe harbors mentioned above.

If the operating partnership is a publicly traded partnership, it will be taxed as a corporation unless at least 90% of its gross income consists of “qualifying income” under Section 7704 of the Code. Qualifying income is generally real property rents and other types of passive income. We believe that the operating partnership will have sufficient qualifying income so that it would be taxed as a partnership, even if it were a publicly traded partnership. The income requirements applicable to us in order for us to qualify as a REIT under the Code and the definition of qualifying income under the publicly traded partnership rules are very similar. Although differences exist between these two income tests, we do not believe that these differences would cause the operating partnership not to satisfy the 90% gross income test applicable to publicly traded partnerships.

If our operating partnership were taxable as a corporation, most, if not all, of the tax consequences described herein would be inapplicable. In particular, we would not qualify as a REIT because the value of our ownership interest in our operating partnership would exceed 5% of our assets and we would be considered to hold more than 10% of the voting securities (and more than 10% of the value of the outstanding securities) of another corporation (see “- Requirements for Qualification as a REIT-Asset Tests” above). In this event, the value of our shares could be materially adversely affected (see “-Failure to Qualify as a REIT” above).

Allocations of Partnership Income, Gain, Loss and Deduction

The partnership agreement generally provides that items of operating income and loss will be allocated to the holders of units in proportion to the number of units held by each such unit holder. Certain limited partners have agreed, or may agree in the future, to guarantee debt of our operating partnership, either directly or indirectly through an agreement to make capital contributions to our operating partnership under limited circumstances. As a result of these guarantees or contribution agreements, such limited partners could under limited circumstances be allocated net loss that would have otherwise been allocable to us.

If an allocation of partnership income or loss does not comply with the requirements of Section 704(b) of the Code and the Treasury regulations thereunder, the item subject to the allocation will be reallocated in accordance with the partners’ interests in the partnership. This reallocation will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item. Our operating partnership’s allocations of taxable income and loss are intended to comply with the requirements of Section 704(b) of the Code and the Treasury regulations promulgated under this section of the Code.

Tax Allocations with Respect to the Properties

Under Section 704(c) of the Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership,



must be allocated in a manner so that the contributing partner is charged with the unrealized gain or benefits from the unrealized loss associated with the property at the time of the contribution. The amount of the unrealized gain or unrealized loss is generally equal to the difference between the fair market value or book value and the adjusted tax basis of the property at the time of contribution. These allocations are solely for U.S. federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners. The partnership agreement requires that these allocations be made in a manner consistent with Section 704(c) of the Code.

Treasury regulations issued under Section 704(c) of the Code provide partnerships with a choice of several methods of accounting for book-tax differences. We and our operating partnership have agreed to use the “traditional method” for accounting for book-tax differences for the properties initially contributed to our operating partnership. Under the traditional method, which is the least favorable method from our perspective, the carryover basis of contributed properties in the hands of our operating partnership (i) may cause us to be allocated lower amounts of depreciation and other deductions for tax purposes than would be allocated to us if all contributed properties were to have a tax basis equal to their fair market value at the time of the contribution and (ii) in the event of a sale of such properties, could cause us to be allocated taxable gain in excess of our corresponding economic or book gain (or taxable loss that is less than our economic or book loss) with respect to the sale, with a corresponding benefit to the contributing partners. Therefore, the use of the traditional method could result in our having taxable income that is in excess of economic income and our cash distributions from the operating partnership. This excess taxable income is sometimes referred to as “phantom income” and will be subject to the REIT distribution requirements described in “-Annual Distribution Requirements.” Because we rely on our cash distributions from the operating partnership to meet the REIT distribution requirements, the phantom income could adversely affect our ability to comply with the REIT distribution requirements and cause our shareholders to recognize additional dividend income without an increase in distributions. See “-Requirements for Qualification as a REIT” and “-Annual Distribution Requirements.” We and our operating partnership have not yet decided what method will be used to account for book-tax differences for other properties acquired by our operating partnership in the future. Any property acquired by our operating partnership in a taxable transaction will initially have a tax basis equal to its fair market value and, accordingly, Section 704(c) of the Code will not apply.

Taxation of U.S. Shareholders

Taxation of Taxable U.S. Shareholders

This section summarizes the taxation of U.S. shareholders that are not tax-exempt organizations. For these purposes, the term “U.S. shareholder” is a beneficial owner of our shares that is, for U.S. federal income tax purposes:
1.
a citizen or resident of the United States;
2.
a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of a political subdivision thereof (including the District of Columbia);
3.
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or



4.
any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) it has a valid election in place to be treated as a U.S. person.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our shares, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding our shares should consult its own tax advisor regarding the U.S. federal income tax consequences to the partner of the acquisition, ownership and disposition of our shares by the partnership.

Distributions Generally. So long as we qualify as a REIT, distributions out of our current or accumulated earnings and profits that are not designated as capital gains dividends or “qualified dividend income” will be taxable to our taxable U.S. shareholders as ordinary income and will not be eligible for the dividends-received deduction in the case of U.S. shareholders that are corporations. For purposes of determining whether distributions to holders of shares are out of current or accumulated earnings and profits, our earnings and profits will be allocated first to any outstanding preferred shares and then to our outstanding common shares. Dividends received from REITs are generally not eligible to be taxed at the preferential qualified dividend income rates currently available to individual U.S. shareholders who receive dividends from taxable non-REIT “C” corporations. However, for taxable years prior to 2026, generally U.S. stockholders that are individuals, trusts or estates may deduct 20% of the aggregate amount of ordinary dividends distributed by us, subject to certain limitations.

Capital Gain Dividends. We may elect to designate distributions of our net capital gain as “capital gain dividends.” Distributions that we properly designate as “capital gain dividends” will be taxable to our taxable U.S. shareholders as long-term capital gains without regard to the period for which the U.S. shareholder that receives such distribution has held its shares. Designations made by us will only be effective to the extent that they comply with Revenue Ruling 89-81, which requires that distributions made to different classes of shares be composed proportionately of dividends of a particular type. If we designate any portion of a dividend as a capital gain dividend, a U.S. shareholder will receive an IRS Form 1099-DIV indicating the amount that will be taxable to the shareholder as capital gain. Corporate shareholders, however, may be required to treat up to 20% of some capital gain dividends as ordinary income. Recipients of capital gain dividends from us that are taxed at corporate income tax rates will be taxed at the normal corporate income tax rates on these dividends.

We may elect to retain and pay taxes on some or all of our net long-term capital gains, in which case U.S. shareholders will be treated as having received, solely for U.S. federal income tax purposes, our undistributed capital gains as well as a corresponding credit or refund, as the case may be, for taxes that we paid on such undistributed capital gains. A U.S. shareholder will increase the basis in its shares by the difference between the amount of capital gain included in its income and the amount of tax it is deemed to have paid. A U.S. shareholder that is a corporation will appropriately adjust its earnings and profits for the retained capital gain in accordance with Treasury regulations to be prescribed by the IRS. Our earnings and profits will be adjusted appropriately.

We will classify portions of any designated capital gain dividend or undistributed capital gain as either:



1.
a long-term capital gain distribution, which would be taxable to non-corporate U.S. shareholders at a maximum rate of 20% (excluding the 3.8% tax on “net investment income,”), and, effective for taxable years beginning after December 31, 2017, taxable to U.S. shareholders that are corporations at a maximum rate of 21%; or
2.
an “unrecaptured Section 1250 gain” distribution, which would be taxable to non-corporate U.S. shareholders at a maximum rate of 25%, to the extent of previously claimed depreciation deductions.

Distributions from us in excess of our current and accumulated earnings and profits will not be taxable to a U.S. shareholder to the extent that they do not exceed the adjusted basis of the U.S. shareholder’s shares in respect of which the distributions were made. Rather, the distribution will reduce the adjusted basis of these shares. To the extent that such distributions exceed the adjusted basis of a U.S. shareholder’s shares of our shares, the U.S. shareholder generally must include such distributions in income as long-term capital gain, or short-term capital gain if the shares have been held for one year or less. In addition, any dividend that we declare in October, November or December of any year and that is payable to a shareholder of record on a specified date in any such month will be treated as both paid by us and received by the shareholder on December 31 of such year, provided that we actually pay the dividend before the end of January of the following calendar year.

To the extent that we have available net operating losses and capital losses carried forward from prior tax years, such losses may reduce the amount of distributions that we must make in order to comply with the REIT distribution requirements. See “-Taxation of our Company as a REIT” and “-Requirements for Qualification as a REIT-Annual Distribution Requirements.” Such losses, however, are not passed through to U.S. shareholders and do not offset income of U.S. shareholders from other sources, nor would such losses affect the character of any distributions that we make, which are generally subject to tax in the hands of U.S. shareholders to the extent that we have current or accumulated earnings and profits. Under amendments made by H.R. 1 to Section 172 of the Code, our deduction for any net operating loss carryforwards arising from losses we sustain in taxable years beginning after December 31, 2017 is limited to 80% of our REIT taxable income (determined without regard to the deduction for dividends paid), and any unused portion of losses arising in taxable years ending after December 31, 2017 may not be carried back, but may be carried forward indefinitely.

The maximum amount of dividends that we may designate as capital gain and as “qualified dividend income” (discussed below) with respect to any taxable year (effective for distributions in tax years beginning after December 31, 2014) may not exceed the dividends actually paid by us with respect to such year, including dividends paid by us in the succeeding tax year that relate back to the prior tax year for purposes of determining our dividends-paid deduction.

Qualified Dividend Income. We may elect to designate a portion of our distributions paid to shareholders as “qualified dividend income.” A portion of a distribution that is properly designated as qualified dividend income is taxable to non-corporate U.S. shareholders as capital gain, provided that the shareholder has held the shares with respect to which the distribution is made for more than 60 days during the 121-day period beginning on the date that is 60 days before the date on which such shares become ex-dividend with respect to the relevant distribution. The maximum amount of our distributions eligible to be designated as qualified dividend income for a taxable year is equal to the sum of:



1.
the qualified dividend income received by us during such taxable year from non-REIT corporations (including our taxable REIT subsidiaries);
2.
the excess of any “undistributed” “REIT taxable income” (computed without regard to the dividends-paid deduction and its net capital gain or loss) recognized during the immediately preceding year over the U.S. federal income tax paid by us with respect to such undistributed “REIT taxable income” (computed without regard to the dividends-paid deduction and its net capital gain or loss); and
3.
the excess of (i) any income recognized during the immediately preceding year attributable to the sale of a built-in-gain asset that was acquired in a carry-over basis transaction from a non-REIT “C” corporation with respect to which we are required to pay U.S. federal income tax, over (ii) the U.S. federal income tax paid by us with respect to such built-in gain.
Generally, dividends that we receive will be treated as qualified dividend income for purposes of the first bullet above if (A) the dividends are received from (i) a U.S. corporation (other than a REIT or a RIC), (ii) any of our taxable REIT subsidiaries, or (iii) a “qualifying foreign corporation,” and (B) specified holding period requirements and other requirements are met. A foreign corporation (other than a “foreign personal holding company,” a “foreign investment company,” or “passive foreign investment company”) will be a qualifying foreign corporation if it is incorporated in a possession of the United States, the corporation is eligible for benefits of an income tax treaty with the United States that the Secretary of Treasury determines is satisfactory, or the stock of the foreign corporation on which the dividend is paid is readily tradable on an established securities market in the United States. We generally expect that an insignificant portion, if any, of our distributions from us will consist of qualified dividend income. If we designate any portion of a dividend as qualified dividend income, a U.S. shareholder will receive an IRS Form 1099-DIV indicating the amount that will be taxable to the shareholder as qualified dividend income.

Passive Activity Losses and Investment Interest Limitations. Distributions we make and gain arising from the sale or exchange by a U.S. shareholder of our shares will not be treated as passive activity income. As a result, U.S. shareholders generally will not be able to apply any “passive losses” against this income or gain. Distributions we make, to the extent they do not constitute a return of capital, generally will be treated as investment income for purposes of computing the investment interest limitation. A U.S. shareholder may elect, depending on its particular situation, to treat capital gain dividends, capital gains from the disposition of shares and income designated as qualified dividend income as investment income for purposes of the investment interest limitation, in which case the applicable capital gains will be taxed at ordinary income rates. We will notify shareholders regarding the portions of our distributions for each year that constitute ordinary income, return of capital and qualified dividend income.

Distributions to Holders of Depositary Shares. Owners of depositary shares will be treated for U.S. federal income tax purposes as if they were owners of the underlying preferred shares represented by such depositary shares. Accordingly, such owners will be entitled to take into account, for U.S. federal income tax purposes, income and deductions to which they would be entitled if they were direct holders of underlying preferred shares. In addition, (i) no gain or loss will be recognized for U.S. federal income tax purposes upon the withdrawal of certificates evidencing the underlying preferred shares in exchange for depositary receipts, (ii) the tax basis of each share of the underlying preferred shares to an exchanging



owner of depositary shares will, upon such exchange, be the same as the aggregate tax basis of the depositary shares exchanged therefor, and (iii) the holding period for the underlying preferred shares in the hands of an exchanging owner of depositary shares will include the period during which such person owned such depositary shares.

Dispositions of Our Shares. If a U.S. shareholder sells, redeems or otherwise disposes of its shares in a taxable transaction, it will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale or other disposition and the holder’s adjusted basis in the shares for tax purposes. In general, a U.S. shareholder’s adjusted basis will equal the U.S. shareholder’s acquisition cost, increased by the excess for net capital gains deemed distributed to the U.S. shareholder (discussed above) less tax deemed paid on it and reduced by returns on capital.

In general, capital gains recognized by individuals and other non-corporate U.S. shareholders upon the sale or disposition of shares of our shares will be subject to a maximum U.S. federal income tax rate of 20% (excluding the 3.8% tax on “net investment income”), if our shares are held for more than one year, and will be taxed at ordinary income rates of up to 37% for taxable years beginning before January 1, 2026 if the stock is held for one year or less. Gains recognized by U.S. shareholders that are corporations are subject to U.S. federal income tax at a maximum rate of 21%, whether or not such gains are classified as long-term capital gains. The IRS has the authority to prescribe, but has not yet prescribed, Treasury regulations that would apply a capital gain tax rate of 25% (which is higher than the long-term capital gain tax rates for non-corporate U.S. shareholders) to a portion of capital gain realized by a non-corporate U.S. shareholder on the sale of our shares that would correspond to the REIT’s “unrecaptured Section 1250 gain.” U.S. shareholders should consult with their own tax advisors with respect to their capital gain tax liability.

Capital losses recognized by a U.S. shareholder upon the disposition of our shares that were held for more than one year at the time of disposition will be considered long-term capital losses, and are generally available only to offset capital gain income of the shareholder but not ordinary income (except in the case of individuals, who may offset up to $3,000 of ordinary income each year). In addition, any loss upon a sale or exchange of shares of our shares by a U.S. shareholder who has held the shares for six months or less, after applying holding period rules, will be treated as a long-term capital loss to the extent of distributions that we make that are required to be treated by the U.S. shareholder as long-term capital gain.
If a shareholder recognizes a loss upon a subsequent disposition of our shares in an amount that exceeds a prescribed threshold, it is possible that the provisions of Treasury regulations involving “reportable transactions” could apply, with a resulting requirement to separately disclose the loss-generating transaction to the IRS. These regulations, though directed towards “tax shelters,” are broadly written, and apply to transactions that would not typically be considered tax shelters. The Code imposes significant penalties for failure to comply with these requirements. U.S. shareholders should consult their tax advisors concerning any possible disclosure obligation with respect to the receipt or disposition of our shares, or transactions that we might undertake directly or indirectly.
Redemption of Preferred Shares and Depositary Shares. Whenever we redeem any preferred shares held by the depositary, the depositary will redeem as of the same redemption date the number of depositary shares representing the preferred shares so redeemed. The treatment accorded to any redemption by us for cash (as distinguished from a sale, exchange or other disposition) of our preferred shares to a holder of such preferred shares can only be determined on the basis of the particular facts as to each holder at the time of redemption. In general, a holder of our preferred shares will recognize capital gain or loss measured by the difference between the amount received by the holder of such shares upon



the redemption and such holder’s adjusted tax basis in the preferred shares redeemed (provided the preferred shares are held as a capital asset) if such redemption (i) is ‘‘not essentially equivalent to a dividend’’ with respect to the holder of the preferred shares under Section 302(b)(1) of the Code, (ii) is a “substantially disproportionate” redemption with respect to the shareholder under Section 302(b)(2) of the Code, or (iii) results in a ‘‘complete termination’’ of the holder’s interest in all classes of our shares under Section 302(b)(3) of the Code. In applying these tests, there must be taken into account not only any series or class of the preferred shares being redeemed, but also such holder’s ownership of other classes of our shares and any options (including stock purchase rights) to acquire any of the foregoing. The holder of our preferred shares also must take into account any such securities (including options) which are considered to be owned by such holder by reason of the constructive ownership rules set forth in Sections 318 and 302(c) of the Code.
If the holder of preferred shares owns (actually or constructively) none of our voting shares, or owns an insubstantial amount of our voting shares, based upon current law, it is probable that the redemption of preferred shares from such a holder would be considered to be “not essentially equivalent to a dividend.” However, whether a distribution is “not essentially equivalent to a dividend” depends on all of the facts and circumstances, and a holder of our preferred shares intending to rely on any of these tests at the time of redemption should consult its tax advisor to determine their application to its particular situation.
Satisfaction of the “substantially disproportionate” and “complete termination” exceptions is dependent upon compliance with the respective objective tests set forth in Section 302(b)(2) and Section 302(b)(3) of the Code. A distribution to a holder of preferred shares will be “substantially disproportionate” if the percentage of our outstanding voting shares actually and constructively owned by the shareholder immediately following the redemption of preferred shares (treating preferred shares redeemed as not outstanding) is less than 80% of the percentage of our outstanding voting shares actually and constructively owned by the shareholder immediately before the redemption, and immediately following the redemption the shareholder actually and constructively owns less than 50% of the total combined voting power of the Company. Because our preferred shares are nonvoting shares, a shareholder would have to reduce such holder’s holdings (if any) in our classes of voting shares to satisfy this test.
If the redemption does not meet any of the tests under Section 302 of the Code, then the redemption proceeds received from our preferred shares will be treated as a distribution on our shares as described under ‘‘-Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders-Distributions Generally,’’ and ‘‘-Taxation of Non-U.S. Shareholders-Distributions Generally.’’ If the redemption of a holder’s preferred shares is taxed as a dividend, the adjusted basis of such holder’s redeemed preferred shares will be transferred to any other shares held by the holder. If the holder owns no other shares, under certain circumstances, such basis may be transferred to a related person, or it may be lost entirely.

With respect to a redemption of our preferred shares that is treated as a distribution with respect to our shares, which is not otherwise taxable as a dividend, the IRS has proposed Treasury regulations that would require any basis reduction associated with such a redemption to be applied on a share-by-share basis which could result in taxable gain with respect to some shares, even though the holder’s aggregate basis for the shares would be sufficient to absorb the entire amount of the redemption distribution (in excess of any amount of such distribution treated as a dividend). Additionally, these proposed Treasury regulations would not permit the transfer of basis in the redeemed shares of the preferred shares to the remaining shares held (directly or indirectly) by the redeemed holder. Instead, the unrecovered basis in our preferred shares would be treated as a deferred loss to be recognized when certain conditions are satisfied. These proposed Treasury regulations would be effective for transactions that occur after the date the regulations are published as final Treasury regulations. There can, however,



be no assurance as to whether, when, and in what particular form such proposed Treasury regulations will ultimately be finalized.

Net Investment Income Tax. In certain circumstances, certain U.S. shareholders that are individuals, estates or trusts are subject to a 3.8% tax on “net investment income,” which includes, among other things, dividends on and gains from the sale or other disposition of REIT shares. U.S. shareholders should consult their own tax advisors regarding this legislation.

Taxation of Tax Exempt Shareholders

U.S. tax-exempt entities, including qualified employee pension and profit sharing trusts and individual retirement accounts, generally are exempt from U.S. federal income taxation. Such entities, however, may be subject to taxation on their unrelated business taxable income, or UBTI. While some investments in real estate may generate UBTI, the IRS has ruled that dividend distributions from a REIT to a tax-exempt entity generally do not constitute UBTI. Based on that ruling, and provided that (1) a tax-exempt shareholder has not held our shares as “debt financed property” within the meaning of the Code (i.e., where the acquisition or holding of our shares is financed through a borrowing by the U.S. tax-exempt shareholder), (2) our shares are not otherwise used in an unrelated trade or business of a U.S. tax-exempt shareholder, and (3) we do not hold an asset that gives rise to “excess inclusion income,” distributions that we make and income from the sale of our shares generally should not give rise to UBTI to a U.S. tax-exempt shareholder.

Tax-exempt shareholders that are social clubs, voluntary employee benefit associations, supplemental unemployment benefit trusts, or qualified group legal services plans exempt from U.S. federal income taxation under Sections 501(c)(7), (c)(9), (c)(17) or (c)(20) of the Code, respectively, or single parent title-holding corporations exempt under Section 501(c)(2) and whose income is payable to any of the aforementioned tax-exempt organizations, are subject to different UBTI rules, which generally require such shareholders to characterize distributions from us as UBTI unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for certain purposes so as to offset the income generated by its investment in our shares. These shareholders should consult with their tax advisors concerning these set aside and reserve requirements.

In certain circumstances, a pension trust (1) that is described in Section 401(a) of the Code, (2) is tax exempt under Section 501(a) of the Code, and (3) that owns more than 10% of the value of our shares could be required to treat a percentage of the dividends as UBTI, if we are a “pension-held REIT.” We will not be a pension-held REIT unless:
1.
either (1) one pension trust owns more than 25% of the value of our stock, or (2) one or more pension trusts, each individually holding more than 10% of the value of our shares, collectively own more than 50% of the value of our shares; and
2.
we would not have qualified as a REIT but for the fact that Section 856(h)(3) of the Code provides that shares owned by such trusts shall be treated, for purposes of the requirement that not more than 50% of the value of the outstanding shares of a REIT is owned, directly or indirectly, by five or fewer “individuals” (as defined in the Code to include certain entities), as owned by the beneficiaries of such trusts.




The percentage of any REIT dividend from a “pension-held REIT” that is treated as UBTI is equal to the ratio of the UBTI earned by the REIT, treating the REIT as if it were a pension trust and therefore subject to tax on UBTI, to the total gross income of the REIT. An exception applies where the percentage is less than 5% for any year, in which case none of the dividends would be treated as UBTI. The provisions requiring pension trusts to treat a portion of REIT distributions as UBTI will not apply if the REIT is able to satisfy the “not closely held requirement” without relying upon the “look-through” exception with respect to pension trusts. As a result of certain limitations on the transfer and ownership of our common and preferred shares contained in our declaration of trust, we do not expect to be classified as a “pension-held REIT,” and accordingly, the tax treatment described above with respect to pension-held REITs should be inapplicable to our tax-exempt shareholders.

Taxation of Non-U.S. Shareholders

The following discussion addresses the rules governing U.S. federal income taxation of non-U.S. shareholders. For purposes of this summary, “non-U.S. shareholder” is a beneficial owner of our shares that is not a U.S. shareholder (as defined above under “-Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders”) or an entity that is treated as a partnership for U.S. federal income tax purposes. These rules are complex, and no attempt is made herein to provide more than a brief summary of such rules. Accordingly, the discussion does not address all aspects of U.S. federal income taxation and does not address state local or foreign tax consequences that may be relevant to a non-U.S. shareholder in light of its particular circumstances. Prospective non-U.S. shareholders are urged to consult their tax advisors to determine the impact of U.S. federal, state, local and foreign income tax laws on their ownership of our common shares or preferred shares, including any reporting requirements.

Distributions Generally. As described in the discussion below, distributions paid by us with respect to our common shares, preferred shares and depositary shares will be treated for U.S. federal income tax purposes as either:
1.
ordinary income dividends;
2.
long-term capital gain; or
3.
return of capital distributions.
4.
This discussion assumes that our shares will continue to be considered regularly traded on an established securities market for purposes of the Foreign Investment in Real Property Tax Act of 1980, or FIRPTA, provisions described below. If our shares are no longer regularly traded on an established securities market, the tax considerations described below would materially differ.

Ordinary Income Dividends. A distribution paid by us to a non-U.S. shareholder will be treated as an ordinary income dividend if the distribution is payable out of our earnings and profits and:
1.
not attributable to our net capital gain; or



2.
the distribution is attributable to our net capital gain from the sale of U.S. Real Property Interests, or “USRPIs,” and the non-U.S. shareholder owns 10% or less of the value of our common shares at all times during the one-year period ending on the date of the distribution.

In general, non-U.S. shareholders will not be considered to be engaged in a U.S. trade or business solely as a result of their ownership of our shares. In cases where the dividend income from a non-U.S. shareholder’s investment in our shares is, or is treated as, effectively connected with the non-U.S. shareholder’s conduct of a U.S. trade or business, the non-U.S. shareholder generally will be subject to U.S. federal income tax at graduated rates, in the same manner as U.S. shareholders are taxed with respect to such dividends. Such income must generally be reported on a U.S. income tax return filed by or on behalf of the non-U.S. shareholder. The income may also be subject to the 30% branch profits tax in the case of a non-U.S. shareholder that is a corporation.

Generally, we will withhold and remit to the IRS 30% (or lower applicable treaty rate) of dividend distributions (including distributions that may later be determined to have been made in excess of current and accumulated earnings and profits) that could not be treated as capital gain distributions with respect to the non-U.S. shareholder (and that are not deemed to be capital gain dividends for purposes of the FIRPTA withholding rules described below) unless:
1.
a lower treaty rate applies and the non-U.S. shareholder files an IRS Form W-8BEN or Form W-8BEN-E, as applicable, evidencing eligibility for that reduced treaty rate with us; or
2.
the non-U.S. shareholder files an IRS Form W-8ECI with us claiming that the distribution is income effectively connected with the non-U.S. shareholder’s trade or business; or
3.
the non-U.S. shareholder is a foreign sovereign or controlled entity of a foreign sovereign and also provides an IRS Form W-8EXP claiming an exemption from withholding under section 892 of the Code.

Return of Capital Distributions. Unless (A) our shares constitute a USRPI, as described in “-Dispositions of Our Shares” below, or (B) either (1) the non-U.S. shareholder’s investment in our shares is effectively connected with a U.S. trade or business conducted by such non-U.S. shareholder (in which case the non-U.S. shareholder will be subject to the same treatment as U.S. shareholders with respect to such gain) or (2) the non-U.S. shareholder is a nonresident alien individual who was present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States (in which case the non-U.S. shareholder will be subject to a 30% tax on the individual’s net capital gain for the year), distributions that we make which are not dividends out of our earnings and profits will not be subject to U.S. federal income tax. If we cannot determine at the time a distribution is made whether or not the distribution will exceed current and accumulated earnings and profits, the distribution will be subject to withholding at the rate applicable to dividends. The non-U.S. shareholder may seek a refund from the IRS of any amounts withheld if it subsequently is determined that the distribution was, in fact, in excess of our current and accumulated earnings and profits. If our shares constitute a USRPI, as described below, distributions that we make in excess of the sum of (1) the non-U.S. shareholder’s proportionate share of our earnings and profits, and (2) the non-U.S. shareholder’s basis in its shares, will be taxed



under FIRPTA at the rate of tax, including any applicable capital gains rates, that would apply to a U.S. shareholder of the same type (e.g., an individual or a corporation, as the case may be), and the collection of the tax will be enforced by a refundable withholding tax at a rate of 15% of the amount by which the distribution exceeds the non-U.S. shareholder’s share of our earnings and profits.

Capital Gain Dividends. A distribution paid by us to a non-U.S. shareholder will be treated as long-term capital gain if the distribution is paid out of our current or accumulated earnings and profits and:
1.
the distribution is attributable to our net capital gain (other than from the sale of USRPIs) and we timely designate the distribution as a capital gain dividend; or
2.
the distribution is attributable to our net capital gain from the sale of USRPIs and the non-U.S. common shareholder owns more than 10% of the value of common shares at any point during the one-year period ending on the date on which the distribution is paid.

Long-term capital gain that a non-U.S. shareholder is deemed to receive from a capital gain dividend that is not attributable to the sale of USRPIs generally will not be subject to U.S. federal income tax in the hands of the non-U.S. shareholder unless:
1.
the non-U.S. shareholder’s investment in our shares is effectively connected with a U.S. trade or business of the non-U.S. shareholder, in which case the non-U.S. shareholder will be subject to the same treatment as U.S. shareholders with respect to any gain, except that a non-U.S. shareholder that is a corporation also may be subject to the 30% (or lower applicable treaty rate) branch profits tax; or
2.
the non-U.S. shareholder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and has a “tax home” in the United States in which case the nonresident alien individual will be subject to a 30% tax on his capital gains.

Under FIRPTA, distributions that are attributable to net capital gain from the sale by us of USRPIs and paid to a non-U.S. shareholder that owns more than 10% of the value of our shares at any time during the one-year period ending on the date on which the distribution is paid will be subject to U.S. tax as income effectively connected with a U.S. trade or business. The FIRPTA tax will apply to these distributions whether or not the distribution is designated as a capital gain dividend, and, in the case of a non-U.S. shareholder that is a corporation, such distributions also may be subject to the 30% (or lower applicable treaty rate) branch profits tax.

Any distribution paid by us that is treated as a capital gain dividend or that could be treated as a capital gain dividend with respect to a particular non-U.S. shareholder will be subject to special withholding rules under FIRPTA. We will withhold and remit to the IRS 21% (effective for taxable years beginning after December 31, 2017) (or, to the extent provided in Treasury Regulations, 20%) of any distribution that could be treated as a capital gain dividend with respect to the non-U.S. shareholder, whether or not the distribution is attributable to the sale by us of USRPIs. The amount withheld is creditable against the non-U.S. shareholder’s U.S. federal income tax liability or refundable when the non-U.S. shareholder properly and timely files a tax return with the IRS. In addition, distributions to



certain non-U.S. publicly traded shareholders that meet certain record-keeping and other requirements (“qualified shareholders”) are exempt from FIRPTA, except to the extent owners of such qualified shareholders that are not also qualified shareholders own, actually or constructively, more than 10% of our capital stock. Furthermore, distributions to “qualified foreign pension funds” (as defined in the Code) or entities all of the interests of which are held by “qualified foreign pension funds” are exempt from FIRPTA. Non-U.S. stockholders should consult their tax advisors regarding the application of these rules.

Undistributed Capital Gain. Although the law is not entirely clear on the matter, it appears that amounts designated by us as undistributed capital gains in respect of our shares held by non-U.S. shareholders generally should be treated in the same manner as actual distributions by us of capital gain dividends. Under this approach, the non-U.S. shareholder would be able to offset as a credit against their U.S. federal income tax liability resulting therefrom their proportionate share of the tax paid by us on the undistributed capital gains treated as long-term capital gains to the non-U.S. shareholder, and generally receive from the IRS a refund to the extent their proportionate share of the tax paid by us were to exceed the non-U.S. shareholder’s actual U.S. federal income tax liability on such long-term capital gain. If we were to designate any portion of our net capital gain as undistributed capital gain, a non-U.S. shareholder should consult its tax advisors regarding taxation of such undistributed capital gain.

Dispositions of Our Shares. Unless our shares constitute a USRPI, a sale of our shares by a non-U.S. shareholder generally will not be subject to U.S. federal income taxation under FIRPTA. Generally, subject to the discussion below regarding dispositions by “qualified shareholders” and “qualified foreign pensions funds,” with respect to any particular shareholder, our shares will constitute a USRPI only if each of the following three statements is true:
1.
Fifty percent or more of our assets on any of certain testing dates during a prescribed testing period consist of interests in real property located within the United States, excluding for this purpose, interests in real property solely in a capacity as creditor;
2.
We are not a “domestically-controlled qualified investment entity.” A domestically-controlled qualified investment entity includes a REIT, less than 50% of value of which is held directly or indirectly by non-U.S. shareholders at all times during a specified testing period. Although we believe that we are and will remain a domestically-controlled REIT, because our shares are publicly traded, we cannot guarantee that we are or will remain a domestically-controlled qualified investment entity; and
3.
Either (a) our shares are not “regularly traded,” as defined by applicable Treasury regulations, on an established securities market; or (b) our shares are “regularly traded” on an established securities market and the selling non-U.S. shareholder has held over 10% of our outstanding common shares any time during the five-year period ending on the date of the sale.

In addition, dispositions of our capital stock by qualified shareholders are exempt from FIRPTA, except to the extent owners of such qualified shareholders that are not also qualified shareholders own, actually or constructively, more than 10% of our capital stock. An actual or deemed disposition of our capital stock by such shareholders may also be treated as a dividend. Furthermore, dispositions of our capital stock by “qualified foreign pension funds” or entities all of the interests of which are held by “qualified foreign pension funds” are exempt from FIRPTA. Non-U.S. stockholders should consult their tax advisors regarding the application of these rules.




Specific wash sales rules applicable to sales of shares in a domestically-controlled qualified investment entity could result in gain recognition, taxable under FIRPTA, upon the sale of our shares even if we are a domestically-controlled qualified investment entity. These rules would apply if a non-U.S. shareholder (1) disposes of our shares within a 30-day period preceding the ex-dividend date of a distribution, any portion of which, but for the disposition, would have been taxable to such non-U.S. shareholder as gain from the sale or exchange of a USRPI, and (2) acquires, or enters into a contract or option to acquire, other shares of our shares during the 61-day period that begins 30 days prior to such ex-dividend date, and (3) if our shares are “regularly traded” on an established securities market in the United State, such non-US stockholder has owned more than 10% of our outstanding shares at any time during the one-year period ending on the date of such distribution.

If gain on the sale of our shares were subject to taxation under FIRPTA, the non-U.S. shareholder would be required to file a U.S. federal income tax return and would be subject to the same treatment as a U.S. shareholder with respect to such gain, subject to the applicable alternative minimum tax and a special alternative minimum tax in the case of non-resident alien individuals, and, if our common shares were not “regularly traded” on an established securities market, the purchaser of the shares generally would be required to withhold 15% of the purchase price and remit such amount to the IRS.

Gain from the sale of our shares that would not otherwise be subject to FIRPTA will nonetheless be taxable in the United States to a non-U.S. shareholder as follows: (1) if the non-U.S. shareholder’s investment in our shares is effectively connected with a U.S. trade or business conducted by such non-U.S. shareholder, the non-U.S. shareholder will be subject to the same treatment as a U.S. shareholder with respect to such gain, or (2) if the non-U.S. shareholder is a nonresident alien individual who was present in the U.S. for 183 days or more during the taxable year and has a “tax home” in the United States, the nonresident alien individual will be subject to a 30% tax on the individual’s capital gain.

Taxation of Holders of Our Warrants and Rights

Warrants. Holders of our warrants will not generally recognize gain or loss upon the exercise of a warrant. A holder’s basis in the preferred shares, depositary shares representing preferred shares or common shares, as the case may be, received upon the exercise of the warrant will be equal to the sum of the holder’s adjusted tax basis in the warrant and the exercise price paid. A holder’s holding period in the preferred shares, depositary shares representing preferred shares or common shares, as the case may be, received upon the exercise of the warrant will not include the period during which the warrant was held by the holder. Upon the expiration of a warrant, the holder will recognize a capital loss in an amount equal to the holder’s adjusted tax basis in the warrant. Upon the sale or exchange of a warrant to a person other than us, a holder will recognize gain or loss in an amount equal to the difference between the amount realized on the sale or exchange and the holder’s adjusted tax basis in the warrant. Such gain or loss will be capital gain or loss and will be long-term capital gain or loss if the warrant was held for more than one year. Upon the sale of the warrant to us, the IRS may argue that the holder should recognize ordinary income on the sale. Prospective holders of our warrants should consult their own tax advisors as to the consequences of a sale of a warrant to us.

Rights. In the event of a rights offering, the tax consequences of the receipt, expiration, and exercise of the rights we issue will be addressed in detail in a prospectus supplement. Prospective holders of our rights should review the applicable prospectus supplement in connection with the ownership of any rights, and consult their own tax advisors as to the consequences of investing in the rights.




Dividend Reinvestment and Share Purchase Plan

General

We plan to offer shareholders, prospective shareholders and unit holders the opportunity to participate in our Dividend Reinvestment and Share Purchase Plan, which is referred to herein as the “DRIP.” Although we do not currently plan to offer any discount in connection with the DRIP, we reserve the right to offer a discount on shares purchased with reinvested dividends or cash distributions and shares purchased through the optional cash investment feature.

Amounts Treated as a Distribution

Generally, a DRIP participant will be treated as having received a distribution with respect to our shares for U.S. federal income tax purposes in an amount determined as described below.
1.
A shareholder who participates in the dividend reinvestment feature of the DRIP and whose dividends are reinvested in our shares purchased from us will be treated for U.S. federal income tax purposes as having received a distribution from us with respect to our shares equal to the fair market value of our shares credited to the shareholder’s DRIP account on the date the dividends are reinvested. The amount of the distribution deemed received (and that will be reported on the Form 1099-DIV received by the shareholder) may exceed the amount of the cash dividend that was reinvested, due to a discount being offered on the purchase price of the shares purchased.



2.
A shareholder who participates in the dividend reinvestment feature of the DRIP and whose dividends are reinvested in our shares purchased in the open market, will be treated for U.S. federal income tax purposes as having received (and will receive a Form 1099-DIV reporting) a distribution from us with respect to its shares equal to the fair market value of our shares credited to the shareholder’s DRIP account (plus any brokerage fees and any other expenses deducted from the amount of the distribution reinvested) on the date the dividends are reinvested. If we offer a discount on our shares purchased on the open market in the future, the amount of the distribution the shareholder will be treated as receiving (and that will be reported on the Form 1099-DIV received by the shareholder) may exceed the cash distribution reinvested as a result of any such discount.
3.
A shareholder who participates in both the dividend reinvestment and the cash investment features of the DRIP and who purchases our shares through the cash investment feature of the DRIP will be treated for U.S. federal income tax purposes as having received a distribution from us with respect to its shares equal to the fair market value of our shares credited to the shareholder’s DRIP account on the date the shares are purchased less the amount paid by the shareholder for our shares (plus any brokerage fees and any other expenses paid by the shareholder).
4.
A shareholder who participates in the optional cash purchase through the DRIP will not be treated as receiving a distribution from us if no discount is offered.
5.
Newly enrolled participants who are making their initial investment in our common shares through the DRIP’s optional cash purchase feature and therefore are not currently our shareholders should not be treated as receiving a distribution from us, even if a discount is offered.
6.
Although the tax treatment with respect to a shareholder who participates only in the cash investment feature of the DRIP and does not participate in the dividend reinvestment feature of the DRIP is not entirely clear, we will report any discount offered as a distribution to that shareholder on Form 1099-DIV. Shareholders are urged to consult with their tax advisor regarding the tax treatment to them of receiving a discount on cash investments in our shares made through the DRIP.

In the situations described above, a shareholder will be treated as receiving a distribution from us even though no cash distribution is actually received. These distributions will be taxable in the same manner as all other distributions paid by us, as described above under “-Taxation of U.S. Shareholders-Taxation of Taxable U.S. Shareholders,” “-Taxation of U.S. Shareholders -Taxation of Tax-Exempt Shareholders,” or “-Taxation of Non-U.S. Shareholders,” as applicable.

Basis and Holding Period in Shares Acquired Pursuant to the DRIP. The tax basis for our shares acquired by reinvesting cash distributions through the DRIP generally will equal the fair market value of our shares on the date of distribution (plus the amount of any brokerage fees paid by the shareholder). Accordingly, if we offer a discount on the purchase price of our shares purchased with reinvested cash distributions, the tax basis in our shares would include the amount of any discount. The holding period for



our shares acquired by reinvesting cash distributions will begin on the day following the date of distribution.

The tax basis in our shares acquired through an optional cash investment generally will equal the cost paid by the participant in acquiring our shares, including any brokerage fees paid by the shareholder. If we offer a discount on the purchase price of our shares purchased by making an optional cash investment, then the tax basis in those shares also would include any amounts taxed as a dividend. The holding period for our shares purchased through the optional cash investment feature of the DRIP generally will begin on the day our shares are purchased for the participant’s account.

Withdrawal of Shares from the DRIP. When a participant withdraws stock from the DRIP and receives whole shares, the participant will not realize any taxable income. However, if the participant receives cash for a fractional share, the participant will be required to recognize gain or loss with respect to that fractional share.

Effect of Withholding Requirements. Withholding requirements generally applicable to distributions from us will apply to all amounts treated as distributions pursuant to the DRIP. See “-Information Reporting and Backup Withholding Tax Applicable to Shareholders-U.S. Shareholders-Generally” and “-Information Reporting and Backup Withholding Tax Applicable to Shareholders-Non-U.S. Shareholders-Generally” for discussion of the withholding requirements that apply to other distributions that we pay. All withholding amounts will be withheld from distributions before the distributions are reinvested under the DRIP. Therefore, if a U.S. shareholder is subject to withholding, distributions which would otherwise be available for reinvestment under the DRIP will be reduced by the withholding amount.

Information Reporting and Backup Withholding Tax Applicable to Shareholders

U.S. Shareholders - Generally

In general, information-reporting requirements will apply to payments of distributions on our shares and payments of the proceeds of the sale of our shares to some U.S. shareholders, unless an exception applies. Further, the payer will be required to withhold backup withholding tax on such payments at the rate of 28% if:
1.
the payee fails to furnish a taxpayer identification number, or TIN, to the payer or to establish an exemption from backup withholding;
2.
the IRS notifies the payer that the TIN furnished by the payee is incorrect;
3.
there has been a notified payee under-reporting with respect to interest, dividends or original issue discount described in Section 3406(c) of the Code; or
4.
there has been a failure of the payee to certify under the penalty of perjury that the payee is not subject to backup withholding under the Code.
Some shareholders may be exempt from backup withholding. Any amounts withheld under the backup withholding rules from a payment to a shareholder will be allowed as a credit against the shareholder’s U.S. federal income tax liability and may entitle the shareholder to a refund, provided that the required information is furnished to the IRS.




U.S. Shareholders - Withholding on Payments in Respect of Certain Foreign Accounts.

As described below, certain future payments made to “foreign financial institutions” and “non-financial foreign entities” may be subject to withholding at a rate of 30%. U.S. shareholders should consult their tax advisors regarding the effect, if any, of this withholding provision on their ownership and disposition of our common stock. See “- Non-U.S. Shareholders - Withholding on Payments to Certain Foreign Entities” below.

Non-U.S. Shareholders - Generally

Generally, information reporting will apply to payments or distributions on our shares, and backup withholding described above for a U.S. shareholder will apply, unless the payee certifies that it is not a U.S. person or otherwise establishes an exemption. The payment of the proceeds from the disposition of our shares to or through the U.S. office of a U.S. or foreign broker will be subject to information reporting and, possibly, backup withholding as described above for U.S. shareholders, or the withholding tax for non-U.S. shareholders, as applicable, unless the non-U.S. shareholder certifies as to its non-U.S. status or otherwise establishes an exemption, provided that the broker does not have actual knowledge that the shareholder is a U.S. person or that the conditions of any other exemption are not, in fact, satisfied. The proceeds of the disposition by a non-U.S. shareholder of our shares to or through a foreign office of a broker generally will not be subject to information reporting or backup withholding. However, if the broker is a U.S. person, a controlled foreign corporation for U.S. federal income tax purposes, or a foreign person 50% or more of whose gross income from all sources for specified periods is from activities that are effectively connected with a U.S. trade or business, a foreign partnership 50% or more of whose interests are held by partners who are U.S. persons, or a foreign partnership that is engaged in the conduct of a trade or business in the United States, then information reporting generally will apply as though the payment was made through a U.S. office of a U.S. or foreign broker unless the broker has documentary evidence as to the non-U.S. shareholder’s foreign status and has no actual knowledge to the contrary.

Applicable Treasury regulations provide presumptions regarding the status of shareholders when payments to the shareholders cannot be reliably associated with appropriate documentation provided to the payor. If a non-U.S. shareholder fails to comply with the information reporting requirement, payments to such person may be subject to the full withholding tax even if such person might have been eligible for a reduced rate of withholding or no withholding under an applicable income tax treaty. Because the application of these Treasury regulations varies depending on the non-U.S. shareholder’s particular circumstances, non-U.S. shareholders are urged to consult their tax advisor regarding the information reporting requirements applicable to them.

Backup withholding is not an additional tax. Any amounts that we withhold under the backup withholding rules will be refunded or credited against the non-U.S. shareholder’s U.S. federal income tax liability if certain required information is furnished to the IRS. Non-U.S. shareholders should consult their own tax advisors regarding application of backup withholding in their particular circumstances and the availability of and procedure for obtaining an exemption from backup withholding under current Treasury regulations.

Non-U.S. Shareholders - Withholding on Payments to Certain Foreign Entities

The Foreign Account Tax Compliance Act (“FATCA”) imposes a 30% withholding tax on certain types of payments made to “foreign financial institutions” and certain other non-U.S. entities



unless certain due diligence, reporting, withholding, and certification obligations requirements are satisfied.

Under the applicable Treasury Regulations and administrative guidance, FATCA imposes a 30% withholding tax on dividends in respect of our shares if paid to a foreign entity unless (i) the foreign entity is a “foreign financial institution” that undertakes certain due diligence, reporting, withholding, and certification obligations, or in the case of a foreign financial institution that is a resident in a jurisdiction that has entered into an intergovernmental agreement to implement FATCA, the entity complies with the diligence and reporting requirements of such agreement, (ii) the foreign entity is not a “foreign financial institution” and either certifies it does not have any “substantial United States Owners” (as defined in the Code) or identifies certain of its U.S. investors, or (iii) the foreign entity otherwise is exempted under FATCA. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of our shares on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.

If withholding is required under FATCA on a payment related to our shares, investors that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction (provided that such benefit is available). Prospective investors should consult their tax advisors regarding the effect of FATCA in their particular circumstances.

Taxation of Holders of Debt Securities Issued by our Operating Partnership

The following discussion summarizes certain U.S. federal income tax considerations relating to the purchase, ownership and disposition of debt securities issued by our Operating Partnership. This summary assumes the debt securities will be issued with no more than a de minimis amount of original issue discount for U.S. federal income tax purposes. This summary only applies to investors that will hold their debt securities as “capital assets” (within the meaning of Section 1221 of the Code) and purchase their debt securities in the initial offering at their issue price. If such debt securities are purchased at a price other than the offering price, the amortizable bond premium or market discount rules may apply which are not described herein. Prospective holders should consult their own tax advisors regarding these possibilities. This section also does not apply to any debt securities treated as “equity,” rather than debt, for U.S. federal income tax purposes.

The tax consequences of owning any notes issued with more than de minimis original issue discount, floating rate debt securities, convertible or exchangeable notes, indexed notes or other debt securities not covered by this discussion that we offer will be discussed in the applicable prospectus supplement.

U.S. Holders of Debt Securities

This section summarizes the taxation of U.S. Holders of debt securities that are not tax-exempt organizations. For these purposes, the term “U.S. Holder” is a beneficial owner of our debt securities that is, for U.S. federal income tax purposes:



1.
a citizen or resident of the United States;
2.
a corporation (including an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or of a political subdivision thereof;
3.
an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
4.
any trust if (1) a U.S. court is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust, or (2) it has a valid election in place to be treated as a U.S. person.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds our debt securities, the U.S. federal income tax treatment of a partner generally will depend upon the status of the partner and the activities of the partnership. A partner of a partnership holding our debt securities should consult its own tax advisor regarding the U.S. federal income tax consequences to the partner of the acquisition, ownership and disposition of our debt securities by the partnership.

Payments of Interest. Interest on a note will generally be taxable to a U.S. Holder as ordinary interest income at the time it is received or accrued, in accordance with the U.S. Holder’s regular method of tax accounting for U.S. federal income tax purposes.

Sale, Exchange, Retirement, Redemption or Other Taxable Disposition of the Debt Securities. Upon a sale, exchange, retirement, redemption or other taxable disposition of debt securities, a U.S. Holder generally will recognize taxable gain or loss in an amount equal to the difference, if any, between the “amount realized” on the disposition and the U.S. Holder’s adjusted tax basis in such debt securities. The amount realized will include the amount of any cash and the fair market value of any property received for the debt securities (other than any amount attributable to accrued but unpaid interest, which will be taxable as ordinary income (as described above under “-Taxation of Holders of Debt Securities Issued by our Operating Partnership-U.S. Holders of Debt Securities-Payments of Interest”) to the extent not previously included in income). A U.S. Holder’s adjusted tax basis in a note generally will be equal to the cost of the note to such U.S. Holder decreased by any payments received on the note other than stated interest. Any such gain or loss generally will be capital gain or loss, and will be long-term capital gain or loss if the U.S. Holder’s holding period for the note is more than one year at the time of disposition. For noncorporate U.S. Holders, long-term capital gain generally will be subject to reduced rates of taxation. The deductibility of capital losses against ordinary income is subject to certain limitations.
Information Reporting and Backup Withholding. Payments of interest on, or the proceeds of the sale, exchange or other taxable disposition (including a retirement or redemption) of, a note are generally subject to information reporting unless the U.S. Holder is an exempt recipient (such as a corporation). Such payments may also be subject to U.S. federal backup withholding unless (1) the U.S. Holder is an exempt recipient (such as a corporation), or (2) prior to payment, the U.S. Holder provides a taxpayer identification number and certifies as required on a duly completed and executed IRS Form W-9 (or permitted substitute or successor form), and otherwise complies with the requirements of the backup withholding rules. Backup withholding is not an additional tax. Any amounts withheld under the backup



withholding rules will be allowed as a refund or credit against that U.S. Holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.

Net Investment Income. In certain circumstances, certain U.S. Holders that are individuals, estates, or trusts are subject to a 3.8% tax on “net investment income,” which includes, among other things, interest income and net gains from the sale, exchange or other taxable disposition (including a retirement or redemption) of the debt securities, unless such interest payments or net gains are derived in the ordinary course of the conduct of a trade or business (other than a trade or business that consists of certain passive activities or securities or commodities trading activities). Investors in debt securities should consult their own tax advisors regarding the applicability of this tax to their income and gain in respect of their investment in the debt securities.

Tax-Exempt Holders of Debt Securities

In general, a tax-exempt organization is exempt from U.S. federal income tax on its income, except to the extent of its UBTI (as defined above under “-Taxation of U.S. Shareholders-Taxation of U.S. Tax-Exempt Shareholders”). Interest income accrued on the debt securities and gain recognized in connection with dispositions of the debt securities generally will not constitute UBTI unless the tax-exempt organization holds the debt securities as debt-financed property (e.g., the tax-exempt organization has incurred “acquisition indebtedness” with respect to such note). Before making an investment in the debt securities, a tax-exempt investor should consult its tax advisors with regard to UBTI and the suitability of the investment in the debt securities.

Non-U.S. Holders of Debt Securities

The following discussion addresses the rules governing U.S. federal income taxation of Non-U.S. Holders of debt securities. For purposes of this summary, “Non-U.S. Holder” is a beneficial owner of our debt securities that is not (i) a U.S. Holder (as defined above under “-U.S. Holders of Debt Securities”) or (ii) an entity treated as a partnership for U.S. federal income tax purposes.

Payments of Interest. Subject to the discussions below concerning backup withholding and FATCA (as defined below), all payments of interest on the debt securities made to a Non-U.S. Holder will not be subject to U.S. federal income or withholding taxes under the “portfolio interest” exception of the Code, provided that:



1.
interest on the note is not effectively connected with the Non-U.S. Holder’s conduct of a trade or business in the United States (or, if provided by an applicable income tax treaty, is not attributable to a United States permanent establishment),
2.
the Non-U.S. Holder does not own, actually or constructively, 10% or more of the capital or profits interest in the Operating Partnership,
3.
the Non-U.S. Holder is not a controlled foreign corporation with respect to which the Operating Partnership is a “related person” (within the meaning of Section 864(d)(4) of the Code),
4.
the Non-U.S. Holder is not a bank whose receipt of interest on a note is described in Section 881(c)(3)(A) of the Code, and
5.
either (1) the Non-U.S. Holder provides its name and address on an IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable form) and certifies, under penalties of perjury, that it is not a U.S. Holder, or (2) the non-U.S. Holder holds its notes through certain foreign intermediaries and satisfies the certification requirements of applicable United States Treasury regulations. Special certification rules apply to non-U.S. Holders that are pass-through entities rather than corporations or individuals.

The applicable Treasury Regulations provide alternative methods for satisfying the certification requirement described above. In addition, under these Treasury Regulations, special rules apply to pass-through entities and this certification requirement may also apply to beneficial owners of pass-through entities. If a Non-U.S. Holder cannot satisfy the requirements described above, payments of interest will generally be subject to the 30% U.S. federal withholding tax, unless the Non-U.S. Holder provides the applicable withholding agent with a properly executed (1) IRS Form W-8BEN or IRS Form W-8BEN-E (or other applicable form) claiming an exemption from or reduction in withholding under an applicable income tax treaty or (2) IRS Form W-8ECI (or other applicable form) stating that interest paid on the debt securities is not subject to U.S. federal withholding tax because it is effectively connected with the conduct by such Non-U.S. Holder of a trade or business in the United States (as discussed below under “-Non-U.S. Holders of Debt Securities-Income Effectively Connected with a U.S. Trade or Business”).

Sale, Exchange, Retirement, Redemption or Other Taxable Disposition of the Debt Securities. Subject to the discussions below concerning backup withholding and FATCA and except with respect to accrued but unpaid interest, which generally will be taxable as interest and may be subject to the rules described above under “-Non-U.S. Holders of Debt Securities-Payments of Interest,” a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on the receipt of payments of principal on a note, or on any gain recognized upon the sale, exchange, retirement, redemption or other taxable disposition of a note, unless:



1.
such gain is effectively connected with the conduct by such Non-U.S. Holder of a trade or business within the United States, in which case such gain will be taxed as described below under “-Non-U.S. Holders of Debt Securities-Income Effectively Connected with a U.S. Trade or Business,” or
2.
such Non-U.S. Holder is an individual who is present in the United States for 183 days or more in the taxable year of disposition, and certain other conditions are met, in which case such Non-U.S. Holder will be subject to tax at 30% (or, if applicable, a lower treaty rate) on the gain derived from such disposition, which may be offset by U.S. source capital losses.
Income Effectively Connected with a U.S. Trade or Business. If a Non-U.S. Holder is engaged in a trade or business in the United States, and if interest on the debt securities or gain realized on the sale, exchange or other taxable disposition (including a retirement or redemption) of the debt securities is effectively connected with the conduct of such trade or business, the Non-U.S. Holder generally will be subject to regular U.S. federal income tax on such income or gain in the same manner as if the Non-U.S. Holder were a U.S. Holder. If the Non-U.S. Holder is eligible for the benefits of an income tax treaty between the United States and the Non-U.S. Holder’s country of residence, any “effectively connected” income or gain generally will be subject to U.S. federal income tax only if it is also attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States. In addition, if such a Non-U.S. Holder is a foreign corporation, such holder may also be subject to a branch profits tax equal to 30% (or such lower rate provided by an applicable income tax treaty) of its effectively connected earnings and profits, subject to certain adjustments. Payments of interest that are effectively connected with a U.S. trade or business will not be subject to the 30% U.S. federal withholding tax provided that the Non-U.S. Holder claims exemption from withholding. To claim exemption from withholding, the Non-U.S. Holder must certify its qualification, which generally can be done by filing a properly executed IRS Form W-8ECI (or other applicable form).
Information Reporting and Backup Withholding. Generally, we must report annually to the IRS and to Non-U.S. Holders the amount of interest paid to Non-U.S. Holders and the amount of tax, if any, withheld with respect to those payments. Copies of these information returns reporting such interest and withholding may also be made available under the provisions of a specific treaty or agreement to the tax authorities of the country in which the Non-U.S. Holder resides. In general, a Non-U.S. Holder will not be subject to backup withholding or additional information reporting requirements with respect to payments of interest that we make, provided that the statement described above in last bullet point under “-Non-U.S Holders of Debt Securities-Interest” has been received and we do not have actual knowledge or reason to know that the holder is a U.S. person, as defined under the Code, that is not an exempt recipient. In addition, proceeds from a sale or other disposition of a note by a Non-U.S. Holder generally will be subject to information reporting and, depending on the circumstances, backup withholding with respect to payments of the proceeds of the sale or disposition (including a retirement or redemption) of a note within the United States or conducted through certain U.S. or U.S.-related financial intermediaries, unless the statement described above has been received and we do not have actual knowledge or reason to know that the holder is a U.S. person. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules will be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability if the required information is furnished in a timely manner to the IRS.
Additional Withholding Requirements. As discussed above under “-Information Reporting and Backup Withholding Tax Applicable to Shareholders-Non-U.S. Shareholders-Withholding on Payments to Certain Foreign Entities,” FATCA imposes a 30% withholding tax on certain types of payments made



to “foreign financial institutions” and certain other non-U.S. entities unless certain due diligence, reporting, withholding, and certification obligations requirements are satisfied.
As a general matter, payments to Non-U.S. Holders that are foreign entities (whether as beneficial owner or intermediary) of interest on, and (subject to the proposed Treasury Regulations discussed below) the gross proceeds from the sale or other disposition of, a debt obligation of a U.S. issuer will be subject to a withholding tax (separate and apart from, but without duplication of, the withholding tax described above) at a rate of 30%, unless various U.S. information reporting and due diligence requirements (generally relating to ownership by U.S. persons of interests in or accounts with those entities) have been satisfied. While withholding under FATCA would have applied also to payments of gross proceeds from the sale or other disposition of a debt obligation of a U.S. issuer on or after January 1, 2019, proposed Treasury Regulations eliminate FATCA withholding on payments of gross proceeds entirely. Taxpayers generally may rely on these proposed Treasury Regulations until final Treasury Regulations are issued.
If withholding is required under FATCA on a payment related to the debt securities, Non-U.S. Holders that otherwise would not be subject to withholding (or that otherwise would be entitled to a reduced rate of withholding) generally will be required to seek a refund or credit from the IRS to obtain the benefit of such exemption or reduction (provided that such benefit is available). Prospective investors should consult their tax advisors regarding the effect of FATCA in their particular circumstances.

Other Tax Considerations

State, Local and Foreign Taxes

We may be required to pay tax in various state or local jurisdictions, including those in which we transact business, and our shareholders may be required to pay tax in various state or local jurisdictions, including those in which they reside. Our state and local tax treatment may not conform to the U.S. federal income tax consequences discussed above. In addition, a shareholder’s state and local tax treatment may not conform to the U.S. federal income tax consequences discussed above. Consequently, prospective investors should consult with their tax advisors regarding the effect of state and local tax laws on an investment in our shares and depository shares.

A portion of our income is earned through our taxable REIT subsidiaries. The taxable REIT subsidiaries are subject to U.S. federal, state and local income tax at the full applicable corporate rates. In addition, a taxable REIT subsidiary will be limited in its ability to deduct interest payments in excess of a certain amount made directly or indirectly to us. To the extent that our taxable REIT subsidiaries and we are required to pay U.S. federal, state or local taxes, we will have less cash available for distribution to shareholders.

Tax Shelter Reporting

If a holder recognizes a loss as a result of a transaction with respect to our shares of at least (i) for a holder that is an individual, S corporation, trust or a partnership with at least one non-corporate partner, $2 million or more in a single taxable year or $4 million or more in a combination of taxable years, or (ii) for a holder that is either a corporation or a partnership with only corporate partners, $10 million or more in a single taxable year or $20 million or more in a combination of taxable years, such holder may be required to file a disclosure statement with the IRS on Form 8886. Direct shareholders of portfolio securities are in many cases exempt from this reporting requirement, but shareholders of a REIT currently are not excepted. The fact that a loss is reportable under these regulations does not affect the legal determination of whether the taxpayer’s treatment of the loss is proper. Shareholders should consult their tax advisors to determine the applicability of these regulations in light of their individual circumstances.



Legislative or Other Actions Affecting REITs
The rules dealing with U.S. federal income taxation are constantly under review by persons involved in the legislative process and by the IRS and the U.S. Treasury Department. We cannot give you any assurances as to whether, or in what form, any proposals affecting REITs or their shareholders will be enacted. Changes to the U.S. federal tax laws and interpretations thereof could adversely affect an investment in our shares. Investors should consult with their tax advisors regarding the effect of potential changes to the federal tax laws and on an investment in our shares.