KRG 10-Q Quarterly Report Sept. 30, 2022

KITE REALTY GROUP TRUST

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krg-20220930

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

For the quarterly period ended September 30, 2022


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

For the transition period from to


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

KITE REALTY GROUP TRUST
KITE REALTY GROUP, L.P.
(Exact name of registrant as specified in its charter)

Maryland

Kite Realty Group Trust

11-3715772

Delaware

Kite Realty Group, L.P.

20-1453863

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

30 S. Meridian Street , Suite 1100 , Indianapolis , Indiana 46204

(Address of principal executive offices) (Zip Code)

( 317 ) 577-5600

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.01 par value per share

KRG

New York Stock Exchange

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

Kite Realty Group Trust

Yes

☒

Kite Realty Group, L.P.

Yes

☒

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

Kite Realty Group Trust

Yes

☒

Kite Realty Group, L.P.

Yes

☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

Kite Realty Group, L.P.:

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

☐

Emerging growth company

☐

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

Kite Realty Group Trust

Kite Realty Group, L.P.

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

Kite Realty Group Trust

Yes

☐

Kite Realty Group, L.P.

Yes

☐

The number of Common Shares outstanding as of November 2, 2022 was 219,098,907 ($0.01 par value).

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, 2022 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, open-air shopping centers and mixed-use assets in select markets in the United States, and the Parent Company conducts substantially all of its activities through the Operating Partnership and its wholly owned subsidiaries. The Parent Company is the sole general partner of the Operating Partnership and as of September 30, 2022 owned approximately 98.7% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 1.3% 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 quarterly reports on Form 10-Q of the Parent Company and the Operating Partnership into this single report benefits investors by:

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

• eliminating duplicative disclosure and providing a more streamlined and readable presentation of information as 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

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)

	Kite Realty Group Trust

	Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	4

	Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	5

	Consolidated Statements of Shareholders’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021	6

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	7

	Kite Realty Group, L.P. and subsidiaries

	Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021	8

	Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, 2022 and 2021	9

	Consolidated Statements of Partners’ Equity for the Three and Nine Months Ended September 30, 2022 and 2021	10

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2022 and 2021	11

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

	Notes to Consolidated Financial Statements	12

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	45

Item 4.	Controls and Procedures	45

PART II — OTHER INFORMATION

Item 1.	Legal Proceedings	47

Item 1A.	Risk Factors	47

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	47

Item 3.	Defaults Upon Senior Securities	47

Item 4.	Mine Safety Disclosures	47

Item 5.	Other Information	47

Item 6.	Exhibits	48

SIGNATURES		49

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

KITE REALTY GROUP TRUST

Consolidated Balance Sheets

(Unaudited)

($ in thousands, except share and per share data)


	September 30, 2022		December 31, 2021
Assets:
Investment properties, at cost	$	7,715,516	$	7,592,348
Less: accumulated depreciation	( 1,093,912 )		( 884,809 )
Net investment properties	6,621,604		6,707,539

Cash and cash equivalents	88,447		93,241
Tenant and other receivables, including accrued straight-line rent of $ 40,716 and $ 28,071 , respectively	86,593		68,444
Restricted cash and escrow deposits	8,060		7,122
Deferred costs, net	441,924		541,518
Short-term deposits	—		125,000
Prepaid and other assets	142,757		84,826
Investments in unconsolidated subsidiaries	10,560		11,885

Total assets	$	7,399,945	$	7,639,575

Liabilities and Equity:
Liabilities:
Mortgage and other indebtedness, net	$	3,012,870	$	3,150,808
Accounts payable and accrued expenses	152,015		184,982
Deferred revenue and other liabilities	300,009		321,419
Total liabilities	3,464,894		3,657,209

Commitments and contingencies
Limited Partners’ interests in Operating Partnership and other	56,954		55,173

Equity:
Common shares, $ 0.01 par value, 490,000,000 shares authorized, 219,098,394 and 218,949,569 shares issued and outstanding at September 30, 2022 and December 31, 2021, respectively	2,191		2,189
Additional paid-in capital	4,903,773		4,898,673
Accumulated other comprehensive income (loss)	72,693		( 15,902 )
Accumulated deficit	( 1,105,845 )		( 962,913 )
Total shareholders’ equity	3,872,812		3,922,047
Noncontrolling interests	5,285		5,146
Total equity	3,878,097		3,927,193
Total liabilities and equity	$	7,399,945	$	7,639,575

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

KITE REALTY GROUP TRUST

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

($ in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue:
Rental income	$	195,675	$	70,216	$	582,772	$	206,097
Other property-related revenue	3,013		1,054		7,932		3,133
Fee income	1,623		195		6,603		1,144
Total revenue	200,311		71,465		597,307		210,374

Expenses:
Property operating	25,507		10,482		77,558		30,978
Real estate taxes	25,703		8,624		80,445		26,574
General, administrative and other	14,859		8,241		41,977		23,676
Merger and acquisition costs	108		9,198		1,006		9,958
Depreciation and amortization	115,831		30,193		357,096		90,625

Total expenses	182,008		66,738		558,082		181,811

Gain on sales of operating properties, net	—		1,260		27,126		27,517

Operating income	18,303		5,987		66,351		56,080
Other (expense) income:
Interest expense	( 26,226 )		( 12,878 )		( 77,449 )		( 37,386 )
Income tax benefit of taxable REIT subsidiary	—		91		259		308

Equity in earnings (loss) of unconsolidated subsidiaries	144		( 196 )		( 56 )		( 758 )
Other income (expense), net	58		168		( 207 )		189
Net (loss) income	( 7,721 )		( 6,828 )		( 11,102 )		18,433
Net income attributable to noncontrolling interests	( 116 )		( 132 )		( 408 )		( 1,058 )
Net (loss) income attributable to common shareholders	$	( 7,837 )	$	( 6,960 )	$	( 11,510 )	$	17,375

Net (loss) income per common share – basic	$	( 0.04 )	$	( 0.08 )	$	( 0.05 )	$	0.21
Net (loss) income per common share – diluted	$	( 0.04 )	$	( 0.08 )	$	( 0.05 )	$	0.20

Weighted average common shares outstanding – basic	219,103,669		84,556,689		219,053,320		84,468,519
Weighted average common shares outstanding – diluted	219,103,669		84,556,689		219,053,320		85,383,849

Dividends declared per common share	$	0.21	$	0.18	$	0.60	$	0.50

Net (loss) income	$	( 7,721 )	$	( 6,828 )	$	( 11,102 )	$	18,433
Change in fair value of derivatives	33,131		1,919		89,628		8,653
Total comprehensive income (loss)	25,410		( 4,909 )		78,526		27,086
Comprehensive income attributable to noncontrolling interests	( 511 )		( 173 )		( 1,441 )		( 1,302 )
Comprehensive income (loss) attributable to the Company	$	24,899	$	( 5,082 )	$	77,085	$	25,784

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

KITE REALTY GROUP TRUST

Consolidated Statements of Shareholders’ Equity

(Unaudited)

(in thousands, except share data)


	Common Shares			Additional Paid-in Capital		Accumulated Other Comprehensive (Loss) Income		Accumulated Deficit		Total
	Shares	Amount
Balance at December 31, 2021	218,949,569	$	2,189	$	4,898,673	$	( 15,902 )	$	( 962,913 )	$	3,922,047
Stock compensation activity	93,334	1		1,821		—		—		1,822
Other comprehensive income	—	—		—		38,713		—		38,713
Distributions declared to common shareholders	—	—		—		—		( 41,600 )		( 41,600 )
Net loss attributable to common shareholders	—	—		—		—		( 16,804 )		( 16,804 )

Adjustment to redeemable noncontrolling interests	—	—		( 5,597 )		—		—		( 5,597 )
Balance at March 31, 2022	219,042,903	$	2,190	$	4,894,897	$	22,811	$	( 1,021,317 )	$	3,898,581
Stock compensation activity	58,095	1		2,850		—		—		2,851
Other comprehensive income	—			—		17,146		—		17,146
Distributions declared to common shareholders	—	—		—		—		( 43,808 )		( 43,808 )
Net income attributable to common shareholders	—	—		—		—		13,131		13,131

Adjustment to redeemable noncontrolling interests	—	—		3,239		—		—		3,239
Balance at June 30, 2022	219,100,998	$	2,191	$	4,900,986	$	39,957	$	( 1,051,994 )	$	3,891,140
Stock compensation activity	( 2,604 )	—		2,881		—		—		2,881
Other comprehensive income	—	—		—		32,736		—		32,736
Distributions declared to common shareholders	—	—		—		—		( 46,014 )		( 46,014 )
Net loss attributable to common shareholders	—	—		—		—		( 7,837 )		( 7,837 )

Adjustment to redeemable noncontrolling interests	—	—		( 94 )		—		—		( 94 )
Balances, September 30, 2022	219,098,394	$	2,191	$	4,903,773	$	72,693	$	( 1,105,845 )	$	3,872,812




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

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

KITE REALTY GROUP TRUST

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	( 11,102 )	$	18,433
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	359,265		92,587
Gain on sales of operating properties, net	( 27,126 )		( 27,517 )


Straight-line rent	( 12,653 )		( 1,215 )
Compensation expense for equity awards	8,209		5,667
Amortization of debt fair value adjustments	( 10,204 )		( 333 )
Amortization of in-place lease liabilities	( 3,143 )		( 1,432 )
Changes in assets and liabilities:
Tenant receivables	( 7,021 )		8,449
Deferred costs and other assets	( 15,691 )		( 1,951 )
Accounts payable, accrued expenses, deferred revenue and other liabilities	( 18,105 )		11,143
Net cash provided by operating activities	262,429		103,831

Cash flows from investing activities:
Acquisitions of interests in properties	( 100,142 )		—
Capital expenditures	( 106,536 )		( 36,935 )
Net proceeds from sales of land	3,680		47,706
Net proceeds from sales of operating properties	65,408		2,484
Investment in short-term deposits	125,000		( 125,000 )
Small business loan repayments	513		541
Change in construction payables	( 2,636 )		2,141
Distribution from unconsolidated joint venture	1,144		—
Capital contribution to unconsolidated joint venture	( 125 )		—
Net cash used in investing activities	( 13,694 )		( 109,063 )

Cash flows from financing activities:
Proceeds from issuance of common shares, net	20		31
Repurchases of common shares upon the vesting of restricted shares	( 1,144 )		( 458 )
Purchase of capped calls	—		( 9,800 )
Debt and equity issuance costs	( 4,922 )		( 6,017 )
Loan proceeds	445,000		175,000
Loan payments	( 558,151 )		( 52,096 )

Distributions paid – common shareholders	( 131,422 )		( 42,576 )
Distributions paid – redeemable noncontrolling interests	( 1,972 )		( 1,639 )
Net cash (used in) provided by financing activities	( 252,591 )		62,445

Net change in cash, cash equivalents and restricted cash	( 3,856 )		57,213
Cash, cash equivalents and restricted cash, beginning of period	100,363		46,586
Cash, cash equivalents and restricted cash, end of period	$	96,507	$	103,799

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

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

KITE REALTY GROUP, L.P. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)

(in thousands, except unit data)


	September 30, 2022		December 31, 2021
Assets:
Investment properties, at cost	$	7,715,516	$	7,592,348
Less: accumulated depreciation	( 1,093,912 )		( 884,809 )
Net investment properties	6,621,604		6,707,539

Cash and cash equivalents	88,447		93,241
Tenant and other receivables, including accrued straight-line rent of $ 40,716 and $ 28,071 , respectively	86,593		68,444
Restricted cash and escrow deposits	8,060		7,122
Deferred costs, net	441,924		541,518
Short-term deposits	—		125,000
Prepaid and other assets	142,757		84,826
Investments in unconsolidated subsidiaries	10,560		11,885

Total assets	$	7,399,945	$	7,639,575

Liabilities and Equity:
Liabilities:
Mortgage and other indebtedness, net	$	3,012,870	$	3,150,808
Accounts payable and accrued expenses	152,015		184,982
Deferred revenue and other liabilities	300,009		321,419
Total liabilities	3,464,894		3,657,209

Commitments and contingencies
Limited Partners’ interests in Operating Partnership and other	56,954		55,173

Partners’ Equity:
Common equity, 219,098,394 and 218,949,569 units issued and outstanding at September 30, 2022 and December 31, 2021, respectively	3,800,119		3,937,949
Accumulated other comprehensive income (loss)	72,693		( 15,902 )
Total Partners’ equity	3,872,812		3,922,047
Noncontrolling interests	5,285		5,146
Total equity	3,878,097		3,927,193
Total liabilities and equity	$	7,399,945	$	7,639,575

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

KITE REALTY GROUP, L.P. AND SUBSIDIARIES

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except unit and per unit data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Revenue:
Rental income	$	195,675	$	70,216	$	582,772	$	206,097
Other property-related revenue	3,013		1,054		7,932		3,133
Fee income	1,623		195		6,603		1,144
Total revenue	200,311		71,465		597,307		210,374

Expenses:
Property operating	25,507		10,482		77,558		30,978
Real estate taxes	25,703		8,624		80,445		26,574
General, administrative and other	14,859		8,241		41,977		23,676
Merger and acquisition costs	108		9,198		1,006		9,958
Depreciation and amortization	115,831		30,193		357,096		90,625

Total expenses	182,008		66,738		558,082		181,811

Gain on sales of operating properties, net	—		1,260		27,126		27,517

Operating income	18,303		5,987		66,351		56,080
Other (expense) income:
Interest expense	( 26,226 )		( 12,878 )		( 77,449 )		( 37,386 )
Income tax benefit of taxable REIT subsidiary	—		91		259		308

Equity in earnings (loss) of unconsolidated subsidiaries	144		( 196 )		( 56 )		( 758 )
Other income (expense), net	58		168		( 207 )		189
Net (loss) income	( 7,721 )		( 6,828 )		( 11,102 )		18,433
Net income attributable to noncontrolling interests	( 209 )		( 132 )		( 535 )		( 396 )
Net (loss) income attributable to common unitholders	$	( 7,930 )	$	( 6,960 )	$	( 11,637 )	$	18,037

Allocation of net (loss) income:
Limited Partners	$	( 93 )	$	—	$	( 127 )	$	662
Parent Company	( 7,837 )		( 6,960 )		( 11,510 )		17,375
	$	( 7,930 )	$	( 6,960 )	$	( 11,637 )	$	18,037

Net (loss) income per common unit – basic and diluted	$	( 0.04 )	$	( 0.08 )	$	( 0.05 )	$	0.21


Weighted average common units outstanding – basic	222,059,366		87,003,748		221,791,428		86,951,170
Weighted average common units outstanding – diluted	222,059,366		87,003,748		221,791,428		87,866,501

Distributions declared per common unit	$	0.21	$	0.18	$	0.60	$	0.50

Net (loss) income	$	( 7,721 )	$	( 6,828 )	$	( 11,102 )	$	18,433
Change in fair value of derivatives	33,131		1,919		89,628		8,653
Total comprehensive income (loss)	25,410		( 4,909 )		78,526		27,086
Comprehensive income attributable to noncontrolling interests	( 209 )		( 132 )		( 535 )		( 396 )
Comprehensive income (loss) attributable to common unitholders	$	25,201	$	( 5,041 )	$	77,991	$	26,690

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

KITE REALTY GROUP, L.P. AND SUBSIDIARIES

Consolidated Statements of Partners’ Equity

(Unaudited)

(in thousands)


	General Partner				Total
	Common Equity		Accumulated Other Comprehensive (Loss) Income
Balance at December 31, 2021	$	3,937,949	$	( 15,902 )	$	3,922,047
Stock compensation activity	1,822		—		1,822
Other comprehensive income attributable to Parent Company	—		38,713		38,713
Distributions declared to Parent Company	( 41,600 )		—		( 41,600 )
Net loss attributable to Parent Company	( 16,804 )		—		( 16,804 )

Adjustment to redeemable noncontrolling interests	( 5,597 )		—		( 5,597 )
Balance at March 31, 2022	$	3,875,770	$	22,811	$	3,898,581
Stock compensation activity	2,851		—		2,851
Other comprehensive income attributable to Parent Company	—		17,146		17,146
Distributions declared to Parent Company	( 43,808 )		—		( 43,808 )
Net income attributable to Parent Company	13,131		—		13,131

Adjustment to redeemable noncontrolling interests	3,239		—		3,239
Balance at June 30, 2022	$	3,851,183	$	39,957	$	3,891,140
Stock compensation activity	2,881		—		2,881
Other comprehensive income attributable to Parent Company	—		32,736		32,736
Distributions declared to Parent Company	( 46,014 )		—		( 46,014 )
Net loss attributable to Parent Company	( 7,837 )		—		( 7,837 )

Adjustment to redeemable noncontrolling interests	( 94 )		—		( 94 )
Balance at September 30, 2022	$	3,800,119	$	72,693	$	3,872,812




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

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

KITE REALTY GROUP, L.P. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended September 30,
	2022		2021
Cash flows from operating activities:
Net (loss) income	$	( 11,102 )	$	18,433
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Depreciation and amortization	359,265		92,587
Gain on sales of operating properties, net	( 27,126 )		( 27,517 )


Straight-line rent	( 12,653 )		( 1,215 )
Compensation expense for equity awards	8,209		5,667
Amortization of debt fair value adjustments	( 10,204 )		( 333 )
Amortization of in-place lease liabilities	( 3,143 )		( 1,432 )
Changes in assets and liabilities:
Tenant receivables	( 7,021 )		8,449
Deferred costs and other assets	( 15,691 )		( 1,951 )
Accounts payable, accrued expenses, deferred revenue and other liabilities	( 18,105 )		11,143
Net cash provided by operating activities	262,429		103,831

Cash flows from investing activities:
Acquisition of interests in properties	( 100,142 )		—
Capital expenditures	( 106,536 )		( 36,935 )
Net proceeds from sales of land	3,680		47,706
Net proceeds from sales of operating properties	65,408		2,484
Investment in short-term deposits	125,000		( 125,000 )
Small business loan repayments	513		541
Change in construction payables	( 2,636 )		2,141
Distribution from unconsolidated joint venture	1,144		—
Capital contribution to unconsolidated joint venture	( 125 )		—
Net cash used in investing activities	( 13,694 )		( 109,063 )

Cash flows from financing activities:
Contributions from the General Partner	20		31
Repurchases of common shares upon the vesting of restricted shares	( 1,144 )		( 458 )
Purchase of capped calls	—		( 9,800 )
Debt and equity issuance costs	( 4,922 )		( 6,017 )
Loan proceeds	445,000		175,000
Loan payments	( 558,151 )		( 52,096 )

Distributions paid – common unitholders	( 131,422 )		( 42,576 )
Distributions paid – redeemable noncontrolling interests	( 1,972 )		( 1,639 )
Net cash (used in) provided by financing activities	( 252,591 )		62,445

Net change in cash, cash equivalents and restricted cash	( 3,856 )		57,213
Cash, cash equivalents and restricted cash, beginning of period	100,363		46,586
Cash, cash equivalents and restricted cash, end of period	$	96,507	$	103,799

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

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

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

Notes to Consolidated Financial Statements

September 30, 2022

(Unaudited)

($ in thousands, except share, per share, unit and per unit amounts and where indicated in millions or billions)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

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, operation, acquisition, development and redevelopment of high-quality, open-air shopping centers and mixed-use assets in select markets in the United States. The terms “Company,” “we,” “us,” and “our” refer to the Parent Company and the Operating Partnership, collectively, and those entities owned or controlled by the Parent Company and/or the Operating Partnership.

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

The Parent Company is the sole general partner of the Operating Partnership, and as of September 30, 2022 owned approximately 98.7 % of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 1.3 % 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.

The accompanying unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) may have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the presentation not misleading. The unaudited financial statements as of September 30, 2022 and for the three and nine months ended September 30, 2022 and 2021 include all adjustments, consisting of normal recurring adjustments, necessary in the opinion of management to present fairly the financial information set forth therein. The consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the combined Annual Report on Form 10-K of the Parent Company and the Operating Partnership for the year ended December 31, 2021.

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

On October 22, 2021, we completed a merger with Retail Properties of America, Inc. (“RPAI”) in accordance with the Agreement and Plan of Merger dated July 18, 2021 (the “Merger Agreement”), by and among the Company, its wholly owned subsidiary, KRG Oak, LLC (“Merger Sub”), and RPAI, pursuant to which RPAI merged with and into Merger Sub (the “Merger”). Immediately following the closing of the Merger, Merger Sub merged with and into the Operating Partnership so that all of the assets and liabilities of the Company continue to be held at or below the Operating Partnership level. The transaction value was approximately $ 4.7 billion, including the assumption of approximately $ 1.8 billion of debt. We acquired 100 operating retail properties and five development projects through the Merger along with multiple parcels of entitled land for future value creation.

Pursuant to the terms of the Merger Agreement, each outstanding share of RPAI common stock converted into the right to receive 0.623 common shares of the Company plus cash in lieu of fractional Company shares. The aggregate value of the Merger consideration paid or payable to former holders of RPAI common stock was approximately $ 2.8 billion, excluding the value of RPAI restricted stock units that vested at closing and certain restricted share awards assumed by the Company at closing. In connection with the Merger, the Operating Partnership issued an equivalent amount of General Partner Units to the Parent Company.

As of September 30, 2022, we owned interests in 183 operating retail properties totaling approximately 28.9 million square feet and one office property with 0.3 million square feet. Of the 183 operating retail properties, 11 contain an office component. We also owned four development projects under construction as of this date. Of the 183 operating retail properties, 180 are consolidated in these financial statements and the remaining three are accounted for under the equity method.

NOTE 2. CONSOLIDATION, INVESTMENTS IN JOINT VENTURES AND NONCONTROLLING INTERESTS

Components of Investment Properties

The following table summarizes the composition of the Company’s investment properties as of September 30, 2022 and December 31, 2021:


	Balance as of
($ in thousands)	September 30, 2022		December 31, 2021
Land, buildings and improvements	$	7,639,490	$	7,543,376
Furniture, equipment and other	7,495		7,612
Construction in progress	68,531		41,360
Investment properties, at cost	$	7,715,516	$	7,592,348

Components of Rental Income including Allowance for Uncollectible Accounts

Rental income related to the Company’s operating leases is comprised of the following for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2022		2021		2022		2021
Fixed contractual lease payments – operating leases	$	155,399	$	54,894	$	457,875	$	164,095
Variable lease payments – operating leases	36,636		12,461		112,725		38,540
Bad debt (reserve) recovery	( 1,882 )		1,709		( 3,624 )		338
Straight-line rent adjustments	4,328		585		12,951		1,109
Straight-line rent (reserve) recovery for uncollectibility	( 34 )		39		( 298 )		587
Amortization of in-place lease liabilities, net	1,228		528		3,143		1,428
Rental income	$	195,675	$	70,216	$	582,772	$	206,097

The Company makes estimates as to the collectability of its accounts receivable. In making these estimates, the Company reviews a variety of qualitative and quantitative data and considers such facts as the credit quality of our customer, historical write-off experience and current economic trends, to make a subjective determination. An allowance for uncollectible accounts, including future credit losses of the accrued straight-line rent receivables, is maintained for estimated losses resulting from the inability of certain tenants to meet contractual obligations under their lease agreements.

Short-Term Deposits

During the nine months ended September 30, 2022, the Company used the proceeds from a $ 125.0 million short-term deposit that matured on April 7, 2022 to repay borrowings on the Company’s revolving line of credit. The deposit balance was held in a custody account at Bank of New York Mellon and earned interest at a rate of the Federal Funds Rate plus 43 basis points. Interest income on the deposit is recorded within “Other income (expense), net” on the accompanying consolidated statements of operations and comprehensive income.

Consolidation and Investments in Joint Ventures

The accompanying financial statements are presented on a consolidated basis and include all accounts of the Parent Company, the Operating Partnership, the taxable REIT subsidiaries (“TRSs”) 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. As of September 30, 2022, we owned investments in three consolidated joint ventures that were VIEs in which the partners did not have substantive participating rights and we were the primary beneficiary. As of September 30, 2022, these consolidated VIEs had mortgage debt of $ 28.5 million, which were secured by assets of the VIEs totaling $ 118.9 million. The Operating Partnership guarantees the mortgage 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.

Income Taxes and REIT Compliance

Parent Company

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

We have elected to treat Kite Realty Holdings, LLC as a TRS of the Operating Partnership. In addition, in connection with the Merger, we assumed RPAI’s existing TRS, IWR Protective Corporation, 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.

Operating Partnership

The allocated share of income and loss, other than the operations of our TRSs, 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 TRSs.

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 following table summarizes the non-redeemable noncontrolling interests in consolidated properties for the nine months ended September 30, 2022 and 2021:


	Nine Months Ended September 30,
($ in thousands)	2022		2021
Noncontrolling interests balance as of January 1,	$	5,146	$	698
Net income allocable to noncontrolling interests, excluding redeemable noncontrolling interests	139		—
Noncontrolling interests balance as of September 30,	$	5,285	$	698

Noncontrolling Interests – Joint Venture

Prior to the Merger with RPAI, RPAI entered into a joint venture related to the development, ownership and operation of the multifamily rental portion of the expansion project at One Loudoun Downtown – Pads G & H. The Company owns 90 % of the joint venture.

As of September 30, 2022, the Company has funded $ 0.9 million of the partner’s development costs related to One Loudoun Downtown – Pads G & H through a loan provided by the Company to the joint venture. The loan is secured by the joint venture project, is required to be repaid subsequent to the completion of construction and stabilization of the project and is eliminated upon consolidation. Under terms defined in the joint venture agreement, after construction completion and stabilization of the development project (as defined in the joint venture agreement), the Company has the ability to call, and the joint venture partner has the ability to put to the Company, subject to certain conditions, the joint venture partner’s interest in the joint venture at fair value.

The joint venture is considered a VIE primarily because the Company’s joint venture partner does not have substantive kick-out rights or substantive participating rights. The Company is considered the primary beneficiary as it has a controlling financial interest in the joint venture. As such, the Company has consolidated this joint venture and presented the joint venture partner’s interests as noncontrolling interests.

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. As of September 30, 2022, the redemption value of the redeemable noncontrolling interests in the Operating Partnership did not exceed the historical book value, and the balances were accordingly adjusted to historical book value. As of December 31, 2021, the redemption value of the redeemable noncontrolling interests in the Operating Partnership exceeded the historical book value, and the balances were accordingly adjusted to redemption value.

We allocate net operating results of the Operating Partnership after noncontrolling interests in the consolidated properties based on the partners’ respective weighted average ownership interest. We adjust the redeemable noncontrolling interests in the Operating Partnership at the end of each reporting period to reflect their interests in the Operating Partnership or redemption value. This adjustment is reflected in our shareholders’ and Parent Company’s equity. For the three and nine months ended September 30, 2022 and 2021, the weighted average interests of the Parent Company and the limited partners in the Operating Partnership were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Parent Company’s weighted average interest in Operating Partnership	98.7	%	97.2	%	98.8	%	97.1	%
Limited partners’ weighted average interests in Operating Partnership	1.3	%	2.8	%	1.2	%	2.9	%

At September 30, 2022, the Parent Company’s interest and the limited partners’ redeemable noncontrolling ownership interests in the Operating Partnership were 98.7 % and 1.3 %. At December 31, 2021, the Parent Company’s interest and the limited partners’ redeemable noncontrolling ownership interests in the Operating Partnership were 98.9 % and 1.1 %.

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 2,955,697 and 2,377,777 Limited Partner Units outstanding as of September 30, 2022 and December 31, 2021, respectively. The increase in Limited Partner Units outstanding from December 31, 2021 is due to non-cash compensation awards made to our executive officers in the form of Limited Partner Units.

Redeemable Noncontrolling Interests – Subsidiaries

Prior to the merger with Inland Diversified Real Estate Trust, Inc. (“Inland Diversified”) in 2014, Inland Diversified formed joint ventures with the previous owners of certain properties and issued Class B units in three joint ventures that indirectly own those properties. As of September 30, 2022, the Class B units related to one of these joint ventures that owned Crossing at Killingly Commons, our multi-tenant retail property in Dayville, Connecticut, was outstanding and accounted for as noncontrolling interests in the remaining venture. In October 2022, the remaining Class B units became redeemable at the partner’s election and the fulfillment of certain redemption criteria for cash or Limited Partner Units in the Operating Partnership. In October 2022, we received notice from our joint venture partner of its exercise of their right to redeem the remaining Class B units for cash in the amount of $ 9.7 million, which redemption was funded using cash on October 3, 2022. Prior to the redemption, the Class B units did not have a maturity date and were not mandatorily redeemable unless either party had elected for the units to be redeemed. Prior to the redemption, we consolidated this joint venture because we controlled the decision-making and our joint venture partner had limited protective rights.

We classify the redeemable noncontrolling interests related to the remaining Class B units in the accompanying consolidated balance sheets outside of permanent equity because, under certain circumstances, we may be required to pay cash to the Class B unitholders in this subsidiary upon redemption of their interests. The carrying amount of these redeemable noncontrolling interests is required to be reflected at the greater of initial book value or redemption value with a corresponding adjustment to additional paid-in capital. As of September 30, 2022 and December 31, 2021, the redemption amounts of these interests did not exceed their fair value nor did they exceed the initial book value.

The redeemable noncontrolling interests in the Operating Partnership and subsidiaries for the nine months ended September 30, 2022 and 2021 were as follows:


	Nine Months Ended September 30,
($ in thousands)	2022		2021
Redeemable noncontrolling interests balance as of January 1,	$	55,173	$	43,275
Net income allocable to redeemable noncontrolling interests	269		1,058
Distributions declared to redeemable noncontrolling interests	( 1,972 )		( 1,639 )
Other, net including adjustments to redemption value	3,484		10,587
Total limited partners’ interests in Operating Partnership and other redeemable noncontrolling interests balance as of September 30,	$	56,954	$	53,281


Limited partners’ interests in Operating Partnership	$	46,884	$	43,211
Other redeemable noncontrolling interests in certain subsidiaries	10,070		10,070
Total limited partners’ interests in Operating Partnership and other redeemable noncontrolling interests balance as of September 30,	$	56,954	$	53,281

Fair Value Measurements

We follow the framework established under Financial Accounting Standards Board (“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 an impairment.

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

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

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

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

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

Effects of Accounting Pronouncements

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848) , which 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. In March 2020, the Company elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future London Interbank Offered Rate (“LIBOR”)-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. During the nine months ended September 30, 2022, the Company elected to apply additional expedients related to contract modifications, changes in critical terms, and updates to the designated hedged risks as qualifying changes have been made to applicable debt and derivative contracts. Application of these expedients preserves the presentation of derivatives consistent with past presentation. The Company continues to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.

NOTE 3. ACQUISITIONS

RPAI Merger

On October 22, 2021, we completed a Merger with RPAI pursuant to which RPAI merged with and into Merger Sub, with the Company continuing as the surviving public company. Immediately following the closing of the Merger, Merger Sub merged with and into the Operating Partnership so that all of the assets and liabilities of the Company continue to be held at or below the Operating Partnership level. The aggregate value of the Merger consideration paid or payable to former holders of RPAI common stock was approximately $ 2.8 billion, excluding the value of RPAI restricted stock units that vested at closing and certain restricted share awards assumed by the Company at closing. The total purchase price was calculated based on the closing price of the Company’s common stock on October 21, 2021, the last business day prior to the effective time of the Merger, which was $ 21.18 per share. At the effective time of the Merger, each share of RPAI common stock issued and outstanding immediately prior to the effective time was converted into the right to receive 0.623 newly issued Company common shares plus cash in lieu of fractional Company shares. In addition, holders of (i) options to purchase shares of RPAI common stock, (ii) certain awards of restricted shares of RPAI common stock (as agreed in accordance with the Merger Agreement), and (iii) restricted stock units representing the right to vest in and be issued shares of RPAI common stock became entitled to receive cash and/or Company common shares in accordance with the terms of the Merger Agreement. The Company assumed certain existing awards of restricted shares of RPAI common stock, each of which were converted into 0.623 awards of restricted Company common shares plus cash in lieu of fractional Company shares in accordance with the Merger Agreement. In connection with the Merger, the Operating Partnership issued an equivalent amount of General Partner Units to the Parent Company. The number of RPAI common stock outstanding as of October 21, 2021 converted to shares of the Company’s common stock was determined as follows:


RPAI common stock outstanding as of October 21, 2021			214,797,869
Exchange ratio			0.623
Company common shares issued for outstanding RPAI common stock			133,814,066
Company common shares issued for RPAI restricted stock units			1,117,399
Total Company common shares issued			134,931,465

The following table presents the purchase price and total value of equity consideration paid by the Company at the close of the Merger:


(in thousands, except share price)	Price of Company common shares		Equity Consideration Given (Company common shares issued)	Total Value of Stock Consideration (1)
As of October 21, 2021	$	21.18	134,931	$	2,847,369

(1) The total value of stock consideration is the total of the common shares issued multiplied by the closing price of the Company’s common stock on October 21, 2021 excluding the value of certain RPAI restricted stock that vested at the closing of the Merger and share awards assumed by the Company at the closing of the Merger.

As a result of the Merger, the Company acquired 100 operating retail properties and five development projects under construction along with multiple parcels of entitled land for future value creation. During the nine months ended September 30, 2022, the Company incurred $ 1.0 million of merger and acquisition costs consisting primarily of professional fees and technology costs, which are recorded within “Merger and acquisition costs” in the accompanying consolidated statements of operations and comprehensive income. In addition, the Company assumed approximately $ 1.8 billion of debt in connection with the Merger.

“Rental income” and “Net income attributable to common shareholders” in the accompanying consolidated statements of operations and comprehensive income include revenues from the RPAI portfolio of $ 124.7 million and $ 375.0 million and net loss of $ 7.1 million and $ 17.3 million for the three months and nine months ended September 30, 2022, respectively, which includes $ 84.0 million and $ 265.2 million of depreciation and amortization, respectively, as a result of the Merger.

Purchase Price Allocation

In accordance with ASC 805-10, Business Combinations , the Company accounted for the Merger as a business combination using the acquisition method of accounting. Based on the value of the common shares issued, the total fair value of the assets acquired and liabilities assumed in the Merger was $ 2.8 billion as of October 22, 2021, the date of the Merger.

The Company used the following valuation methodologies, inputs and assumptions to estimate the fair value of the assets acquired and liabilities assumed:

• Investment properties: The Company estimated the fair value of the buildings on an as-if-vacant basis using either a direct capitalization method or a discounted cash flow analysis. Comparable market data, real estate tax assessments and independent appraisals were used in estimating the fair value of the land acquired. These valuation methodologies are based on Level 2 and Level 3 inputs in the fair value hierarchy, such as estimates of future income growth, capitalization rates and cash flow projections at the respective properties.

• Acquired lease intangible assets: The Company estimated the fair value of its above-market and below-market in-place leases based on the present value (using a discount rate that reflects the risk 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. This valuation methodology is based on Level 3 inputs in the fair value hierarchy.

• In-place lease liabilities: The Company estimated the fair value of its in-place leases using independent and internal sources, which are 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. This valuation methodology is based on Level 3 inputs in the fair value hierarchy.

• Mortgage and other indebtedness: The Company estimated the fair value of the secured and unsecured debt assumed, including related derivative instruments, using third party and independent sources for our estimates. Any difference between the fair value and stated value of the assumed debt is recorded as a discount or premium and amortized over the remaining term of the loan using the interest method. This valuation methodology is based on Level 2 and Level 3 inputs in the fair value hierarchy.

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


			Range of Assumptions
Net rental rate per square foot – Anchors			$ 4.00 to $ 45.00
Net rental rate per square foot – Small Shops			$ 7.00 to $ 140.00
Capitalization rate			5.50 % to 12.00 %

The following table summarizes the final purchase price allocation, including the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed:


($ in thousands)	Purchase Price Allocation
Investment properties	$	4,425,254
Acquired lease intangible assets	535,465
Cash, accounts receivable and other assets	84,632
Total assets acquired	5,045,351

Mortgage and other indebtedness, net	( 1,848,476 )
Accounts payable, other liabilities, tenant security deposits and prepaid rent	( 176,391 )
In-place lease liabilities	( 168,652 )
Noncontrolling interests	( 4,463 )
Total liabilities assumed	( 2,197,982 )

Total purchase price	$	2,847,369

The following table details the weighted average amortization periods, in years, of the purchase price allocated to real estate and related intangible assets and liabilities acquired arising from the Merger:


			Weighted Average Amortization Period (in years)
Land			10.2
Building			18.8
Tenant improvements			6.7
In-place lease intangibles			5.5
Above-market leases			5.7
Below-market leases (including below-market option periods)			20.5
Fair market value of debt adjustments			6.8

Pro Forma Financial Information (unaudited)

The pro forma financial information set forth below is based upon the Company’s historical consolidated statements of operations for the three and nine months ended September 30, 2021, adjusted to give effect for the properties assumed through the Merger as if they were acquired as of January 1, 2021. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of income would have been, nor does it purport to represent the results of income for future periods.


($ in thousands)	Three Months Ended September 30, 2021		Nine Months Ended September 30, 2021
Rental income	$	190,908	$	560,423
Net loss	$	( 38,786 )	$	( 87,551 )
Net loss attributable to common shareholders	$	( 38,358 )	$	( 86,571 )
Net loss attributable to common shareholders per common share:
Basic	$	( 0.17 )	$	( 0.39 )
Diluted	$	( 0.17 )	$	( 0.39 )

Asset Acquisitions

The Company closed on the following asset acquisitions during the nine months ended September 30, 2022:

Date

Property Name

Metropolitan
Statistical Area (MSA)

Property Type

Square
Footage

Acquisition
Price

February 16, 2022

Pebble Marketplace

Las Vegas

Multi-tenant retail

85,796

44,100

April 13, 2022

MacArthur Crossing

Dallas

Two-tenant building

56,077

21,920

July 15, 2022

Palms Plaza

Miami

Multi-tenant retail

68,976

35,750

210,849

101,770

The above acquisitions were funded using a combination of available cash on hand and proceeds from the Company’s unsecured revolving line of credit. Substantially all of the purchase price was allocated to investment properties. The Company did not acquire any properties during the nine months ended September 30, 2021.

NOTE 4. DISPOSITIONS

During the nine months ended September 30, 2022, the Company sold Plaza Del Lago, a 100,016 square foot multi-tenant retail property located in the Chicago MSA, for a sales price of $ 58.7 million and a net gain of $ 24.0 million. Plaza Del Lago also contains 8,800 square feet of residential space comprised of 18 multifamily rental units. In addition, the Company sold a portion of Hamilton Crossing Centre, a redevelopment property located in the Indianapolis MSA, for a sales price of $ 6.9 million and a net gain of $ 3.2 million during the nine months ended September 30, 2022.

During the nine months ended September 30, 2021, the Company sold 17 ground leases for gross proceeds of $ 42.0 million and a net gain of $ 27.6 million. A portion of the proceeds was used to pay down our unsecured revolving line of credit .

NOTE 5. DEFERRED COSTS AND INTANGIBLES, NET

Deferred costs consist primarily of acquired lease intangible assets, broker fees and capitalized internal commissions incurred in connection with lease originations. Deferred leasing costs, lease intangibles and similar costs are amortized on a straight-line basis over the terms of the related leases. As of September 30, 2022 and December 31, 2021, deferred costs consisted of the following:


($ in thousands)	September 30, 2022		December 31, 2021
Acquired lease intangible assets	$	539,730	$	567,149
Deferred leasing costs and other	64,286		55,817
	604,016		622,966
Less: accumulated amortization	( 162,092 )		( 81,448 )


Total	$	441,924	$	541,518

Amortization of deferred leasing costs, lease intangibles and other is included within “Depreciation and amortization” in the accompanying consolidated statements of operations and comprehensive income. The amortization of above-market lease intangibles is included as a reduction to “Rental income” in the accompanying consolidated statements of operations and comprehensive income. The amounts of such amortization included in the accompanying consolidated statements of operations are as follows:


	Nine Months Ended September 30,
($ in thousands)	2022		2021
Amortization of deferred leasing costs, lease intangibles and other	$	117,177	$	8,005
Amortization of above-market lease intangibles	$	10,161	$	700

NOTE 6. 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, Leases (Topic 842) . 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 2085. 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.

As of September 30, 2022 and December 31, 2021, deferred revenue, intangibles, net and other liabilities consisted of the following:


($ in thousands)	September 30, 2022		December 31, 2021
Unamortized in-place lease liabilities	$	193,894	$	210,261
Retainages payable and other	10,513		10,796
Tenant rents received in advance	28,059		30,125
Lease liabilities	67,543		70,237
Total	$	300,009	$	321,419

The amortization of below-market lease intangibles is included as a component of “Rental income” in the accompanying consolidated statements of operations and comprehensive income and totaled $ 13.3 million and $ 2.1 million for the nine months ended September 30, 2022 and 2021, respectively.

NOTE 7. MORTGAGE AND OTHER INDEBTEDNESS

The following table summarizes the Company’s indebtedness as of September 30, 2022 and December 31, 2021:


($ in thousands)	September 30, 2022		December 31, 2021
Mortgages payable	$	234,433	$	392,590
Senior unsecured notes	1,924,635		1,924,635
Unsecured term loans	820,000		720,000
Revolving line of credit	—		55,000
	2,979,068		3,092,225
Unamortized discounts and premiums, net	46,877		69,425
Unamortized debt issuance costs, net	( 13,075 )		( 10,842 )
Total mortgage and other indebtedness, net	$	3,012,870	$	3,150,808

Consolidated indebtedness, including weighted average interest rates and weighted average maturities as of September 30, 2022, considering the impact of interest rate swaps, is summarized below:


($ in thousands)	Amount Outstanding		Ratio		Weighted Average Interest Rate		Weighted Average Years to Maturity
Fixed rate debt (1)	$	2,795,595	94	%	3.96	%	4.6
Variable rate debt (2)	183,473		6	%	7.02	%	3.4
Debt discounts, premiums and issuance costs, net	33,802		N/A		N/A		N/A
Total	$	3,012,870	100	%	4.15	%	4.5

(1) Fixed rate debt includes the portion of variable rate debt that has been hedged by interest rate swaps. As of September 30, 2022, $ 820.0 million in variable rate debt is hedged to a fixed rate for a weighted average of 2.9 years.

(2) Variable rate debt includes the portion of fixed rate debt that has been hedged by interest rate swaps. As of September 30, 2022, $ 155.0 million in fixed rate debt is hedged to a floating rate for a weighted average of 2.9 years.

Mortgages Payable

The following table summarizes the Company’s mortgages payable:


	September 30, 2022					December 31, 2021
($ in thousands)	Balance		Weighted Average Interest Rate		Weighted Average Years to Maturity	Balance		Weighted Average Interest Rate		Weighted Average Years to Maturity
Fixed rate mortgages payable (1)	$	205,960	3.98	%	1.6	$	363,577	4.13	%	1.7
Variable rate mortgage payable (2)	28,473		4.69	%	0.8	29,013		1.70	%	0.1
Total mortgages payable	$	234,433				$	392,590

(1) The fixed rate mortgages had interest rates ranging from 3.75 % to 5.73 % as of September 30, 2022 and December 31, 2021.

(2) On April 1, 2022, the interest rate on the variable rate mortgage switched to the Bloomberg Short Term Bank Yield Index (“BSBY”) plus 160 basis points from LIBOR plus 160 basis points. The one-month BSBY rate was 3.09 % as of September 30, 2022. The one-month LIBOR rate was 0.10 % as of December 31, 2021.

Mortgages payable are secured by certain real estate and, in some cases, by guarantees from the Operating Partnership, are generally due in monthly installments of principal and interest and mature over various terms through 2032. During the nine months ended September 30, 2022, we repaid mortgages payable totaling $ 155.2 million that had a weighted average fixed interest rate of 4.31 % and made scheduled principal payments of $ 3.0 million related to amortizing loans.

Unsecured Notes

The following table summarizes the Company’s senior unsecured notes and exchangeable senior notes:


		September 30, 2022				December 31, 2021
($ in thousands)	Maturity Date	Balance		Interest Rate		Balance		Interest Rate
Senior notes – 4.23 % due 2023	September 10, 2023	$	95,000	4.23	%	$	95,000	4.23	%
Senior notes – 4.58 % due 2024 (1)	June 30, 2024	149,635		4.58	%	149,635		4.58	%
Senior notes – 4.00 % due 2025 (2)	March 15, 2025	350,000		4.00	%	350,000		4.00	%
Senior notes – LIBOR + 3.65 % due 2025 (3)	September 10, 2025	80,000		7.40	%	80,000		3.86	%
Senior notes – 4.08 % due 2026 (1)	September 30, 2026	100,000		4.08	%	100,000		4.08	%
Senior notes – 4.00 % due 2026	October 1, 2026	300,000		4.00	%	300,000		4.00	%
Senior exchangeable notes – 0.75 % due 2027	April 1, 2027	175,000		0.75	%	175,000		0.75	%
Senior notes – LIBOR + 3.75 % due 2027 (4)	September 10, 2027	75,000		7.50	%	75,000		3.96	%
Senior notes – 4.24 % due 2028 (1)	December 28, 2028	100,000		4.24	%	100,000		4.24	%
Senior notes – 4.82 % due 2029 (1)	June 28, 2029	100,000		4.82	%	100,000		4.82	%
Senior notes – 4.75 % due 2030 (2)	September 15, 2030	400,000		4.75	%	400,000		4.75	%
Total senior unsecured notes		$	1,924,635			$	1,924,635

(1) Private placement notes assumed in connection with the Merger.

(2) Publicly placed notes assumed in connection with the Merger.

(3) $ 80,000 of 4.47 % senior unsecured notes has been swapped to a variable rate of three-month LIBOR plus 3.65 % through September 10, 2025.

(4) $ 75,000 of 4.57 % senior unsecured notes has been swapped to a variable rate of three-month LIBOR plus 3.75 % through September 10, 2025.

Unsecured Term Loans and Revolving Line of Credit

The following table summarizes the Company’s term loans and revolving line of credit:


		September 30, 2022				December 31, 2021
($ in thousands)	Maturity Date	Balance		Interest Rate		Balance		Interest Rate
Unsecured term loan due 2023 – fixed rate (1)(2)	November 22, 2023	$	—	—	%	$	200,000	4.10	%
Unsecured term loan due 2024 – fixed rate (1)(3)	July 17, 2024	120,000		2.68	%	120,000		2.88	%
Unsecured term loan due 2025 – fixed rate (4)	October 24, 2025	250,000		5.09	%	250,000		5.09	%
Unsecured term loan due 2026 – fixed rate (1)(5)	July 17, 2026	150,000		2.73	%	150,000		2.97	%
Unsecured term loan due 2029 – fixed rate (6)	July 29, 2029	300,000		4.05	%	—		—	%
Total unsecured term loans		$	820,000			$	720,000

Unsecured credit facility revolving line of credit – variable rate (7)	January 8, 2026	$	—	4.24	%	$	55,000	1.20	%

(1) Unsecured term loans assumed in connection with the Merger.

(2) As of December 31, 2021, $ 200,000 of LIBOR-based variable rate debt had been swapped to a fixed rate 2.85 % plus a credit spread based on a leverage grid ranging from 1.20 % to 1.85 % through November 22, 2023. The applicable credit spread was 1.25 % as of December 31, 2021.

(3) As of September 30, 2022, $ 120,000 of Secured Overnight Financing Rate (“SOFR”)-based variable rate debt has been swapped to a fixed rate of 1.58 % plus a credit spread based on a ratings grid ranging from 0.80 % to 1.65 % through July 17, 2024. The applicable

credit spread was 1.10 % as of September 30, 2022. As of December 31, 2021, $ 120,000 of LIBOR-based variable rate debt had been swapped to a fixed rate 1.68 % plus a credit spread based on a leverage grid ranging from 1.20 % to 1.70 % through July 17, 2024. The applicable credit spread was 1.20 % as of December 31, 2021.

(4) $ 250,000 of LIBOR-based variable rate debt has been swapped to a fixed rate of 5.09 % through October 24, 2025. The maturity date of the term loan may be extended for up to three additional periods of one year at the Operating Partnership’s option, subject to certain conditions.

(5) As of September 30, 2022, $ 150,000 of SOFR-based variable rate debt has been swapped to a fixed rate of 1.68 % plus a credit spread based on a ratings grid ranging from 0.75 % to 1.60 % through July 17, 2026. The applicable credit spread was 1.05 % as of September 30, 2022. As of December 31, 2021, $ 150,000 of LIBOR-based variable rate debt had been swapped to a fixed rate 1.77 % plus a credit spread based on a leverage grid ranging from 1.20 % to 1.70 % through July 17, 2026. The applicable credit spread was 1.20 % as of December 31, 2021.

(6) $ 300,000 of SOFR-based variable rate debt has been swapped to a fixed rate of 2.70 % plus a credit spread based on a ratings grid ranging from 1.15 % to 2.20 % through November 22, 2023. The applicable credit spread was 1.35 % as of September 30, 2022.

(7) The revolving line of credit has two six-month extension options that the Company can exercise, at its election, subject to (i) customary representations and warranties, including, but not limited to, the absence of an event of default as defined in the unsecured credit agreement and (ii) payment of an extension fee equal to 0.075 % of the revolving line of credit capacity. On July 29, 2022, SOFR replaced LIBOR as the interest reference rate for the revolving line of credit.

Unsecured Revolving Credit Facility

On July 29, 2022, the Operating Partnership, as borrower, and the Company entered into the Second Amendment (the “Second Amendment”) to the Sixth Amended and Restated Credit Agreement, dated as of July 8, 2021 (as amended, the “Credit Agreement”) with a syndicate of financial institutions to provide for (i) a $ 250.0 million increase to the $ 850.0 million unsecured revolving line of credit that was assumed in the Merger, resulting in a $ 1.1 billion unsecured revolving credit facility (the “2022 Revolving Facility”) and (ii) a seven-year $ 300.0 million unsecured term loan (the “$ 300 M Term Loan”). Under the Second Amendment, the Operating Partnership has the option, subject to certain customary conditions, to increase the 2022 Revolving Facility and/or incur additional term loans in an aggregate amount for all such increases and additional loans of up to $ 600.0 million, for a total facility amount of up to $ 2.0 billion. The 2022 Revolving Facility has a scheduled maturity date of January 8, 2026, 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.

Borrowings under the 2022 Revolving Facility bear interest at a rate per annum equal to SOFR plus a margin based on the Operating Partnership’s leverage ratio or credit rating, respectively, plus a facility fee based on the Operating Partnership’s leverage ratio or credit rating, respectively. The SOFR rate is also subject to an additional 0.10 % spread adjustment as specified in the Second Amendment. The 2022 Revolving Facility is currently priced on the leverage-based pricing grid. In accordance with the Credit Agreement, the credit spread set forth in the leverage grid resets quarterly based on the Company’s leverage, as calculated at the previous quarter end. The Company may irrevocably elect to convert to the ratings-based pricing grid at any time. As of September 30, 2022, making such an election would have resulted in a lower interest rate; however, the Company had not made the election to convert to the ratings-based pricing grid. The Credit Agreement includes a sustainability metric based on targeted greenhouse gas emission reductions, which results in a reduction of the otherwise applicable interest rate margin by one basis point upon achievement of targets set forth therein.

The following table summarizes the key terms of the 2022 Revolving Facility as of September 30, 2022:

($ in thousands)

Leverage-Based Pricing

Investment Grade Pricing

2022 Credit Agreement

Maturity Date

Extension Option

Extension Fee

Credit Spread

Facility Fee

Credit Spread

Facility Fee

SOFR Adjustment

$ 1,100,000 unsecured revolving line of credit

1/8/2026

2 six -month

0.075 %

1.05 %– 1.50 %

0.15 %– 0.30 %

0.725 %– 1.40 %

0.125 %– 0.30 %

0.10 %

The Operating Partnership’s ability to borrow under the Credit Agreement is subject to ongoing compliance by the Operating Partnership and its subsidiaries with various restrictive covenants, including with respect to liens, transactions with affiliates, dividends, mergers and asset sales. In addition, the Credit Agreement requires that the Operating Partnership satisfy certain financial covenants, including (i) a maximum leverage ratio; (ii) a minimum fixed charge coverage ratio; (iii) a maximum secured indebtedness ratio; (iv) a maximum unsecured leverage ratio; and (v) a minimum unencumbered interest coverage ratio. As of September 30, 2022, we were in compliance with all such covenants.

As of September 30, 2022, we had letters of credit outstanding which totaled $ 1.5 million, against which no amounts were advanced as of September 30, 2022.

Unsecured Term Loans

On July 29, 2022, in conjunction with the Second Amendment, the Operating Partnership obtained a $ 300 M Term Loan that is priced on a ratings-based pricing grid at a rate of SOFR plus a credit spread ranging from 1.15 % to 2.20 %. The SOFR rate is also subject to an additional 0.10 % spread adjustment as specified in the Second Amendment. Proceeds from the $ 300 M Term Loan were used to repay the Operating Partnership’s $ 200.0 million unsecured term loan that was assumed in the Merger and was scheduled to mature on November 22, 2023 (the “$ 200 M Term Loan”), certain secured loans, and for other general corporate purposes. The Operating Partnership is permitted to prepay the $ 300 M Term Loan in whole or in part, at any time, subject to a prepayment fee if prepaid on or before July 29, 2024. The agreement related to the $ 300 M Term Loan includes a sustainability metric based on targeted greenhouse gas emission reductions, which results in a reduction of the otherwise applicable interest rate margin by one basis point upon achievement of targets set forth therein.

On October 22, 2021, in connection with the Merger, the Operating Partnership (as successor by merger to RPAI) assumed RPAI’s $ 120.0 million (the “$ 120 M Term Loan”) and $ 150.0 million (the “$ 150 M Term Loan”) unsecured term loans, which were originally priced on a leverage-based pricing grid with the credit spread set forth in the leverage grid resetting quarterly based on the Company’s leverage, as calculated at the previous quarter end. The Company had the option to irrevocably elect to convert to a ratings-based pricing grid at any time. On August 2, 2022, the Company made the election to convert to the ratings-based pricing grid. The agreement related to the $ 150 M Term Loan includes a sustainability metric based on targeted greenhouse gas emission reductions, which results in a reduction of the otherwise applicable interest rate margin by one basis point upon achievement of targets set forth therein.

Under the agreement related to the $ 120 M Term Loan and the $ 150 M Term Loan, the Operating Partnership has the option to increase each of the term loans to $ 250.0 million 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 term loan agreement, to provide such increased amounts. The Operating Partnership is permitted to prepay each of the $ 120 M Term Loan and $ 150 M Term Loan, in whole or in part, at any time without being subject to a prepayment fee.

On October 25, 2018, the Operating Partnership entered into a term loan agreement with KeyBank National Association, as Administrative Agent, and the other lenders party thereto, providing for an unsecured term loan facility of up to $ 250.0 million (the “$ 250 M Term Loan”).

The Operating Partnership has the option to increase the $ 250 M Term Loan to $ 300.0 million, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the term loan agreement, to provide such increased amounts. The Operating Partnership is permitted to prepay the $ 250 M Term Loan in whole or in part, at any time, subject to a prepayment fee if prepaid on or before October 25, 2023.

The unsecured term loan agreements contain representations, financial and other affirmative and negative covenants and events of default that are substantially similar to those contained in the Credit Agreement. The unsecured term loan agreements all rank pari passu with the Operating Partnership’s 2022 Revolving Facility and other unsecured indebtedness of the Operating Partnership.

The following table summarizes the key terms of the unsecured term loans as of September 30, 2022:

($ in thousands)

Unsecured Term Loans

Maturity Date

Leverage-Based Pricing
Credit Spread

Investment Grade Pricing
Credit Spread

SOFR Adjustment

$ 120,000 unsecured term loan due 2024

7/17/2024

1.20 % – 1.70 %

0.80 % – 1.65 %

0.10 %

$ 250,000 unsecured term loan due 2025

10/24/2025 (1)

2.00 % – 2.55 %

2.00 % – 2.50 %

N/A

$ 150,000 unsecured term loan due 2026

7/17/2026

1.20 % – 1.70 %

0.75 % – 1.60 %

0.10 %

$ 300,000 unsecured term loan due 2029

7/29/2029

N/A

1.15 % – 2.20 %

0.10 %

(1) The maturity date may be extended for up to three additional periods of one year each at the Operating Partnership’s option, subject to certain conditions.

Debt Issuance Costs

Debt issuance costs are amortized over the terms of the respective loan agreements. The following amounts of amortization of debt issuance costs are included as a component of “Interest expense” in the accompanying consolidated statements of operations and comprehensive income:


	Nine Months Ended September 30,
($ in thousands)	2022		2021
Amortization of debt issuance costs	$	2,169	$	1,963

Fair Value of Fixed and Variable Rate Debt

As of September 30, 2022, the estimated fair value of fixed rate debt was $ 1.9 billion compared to the book value of $ 2.1 billion. The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments, which ranged from 6.67 % to 7.06 %. As of September 30, 2022, the estimated fair value of variable rate debt was $ 850.5 million compared to the book value of $ 848.5 million. The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments, which ranged from 4.09 % to 5.14 %.

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 interest rate derivative agreements for trading or speculative purposes. The agreements with each of our derivative counterparties provide that in the event of default on any of our indebtedness, we could also be declared in default on our derivative obligations.

During the three months ended September 30, 2022, we amended certain interest rate swap agreements, contemporaneous with a modification of the Company’s unsecured revolving credit facility and $ 300 M Term Loan, $ 120 M Term Loan and $ 150 M Term Loan, to facilitate reference rate reform, converting the outstanding swaps from LIBOR to SOFR. In addition, we (i) designated the interest rate swaps related to the $ 200 M Term Loan that was repaid in July 2022 to the $ 300 M Term Loan with an effective date of August 2022 and a maturity date of November 2023; (ii) entered into two forward-starting interest rate swap contracts with notional amounts totaling $ 200.0 million that swap a floating rate of term SOFR to a fixed rate of 2.37 % plus a credit spread of 1.35 % with an effective date of November 2023 and a maturity date of August 2025; and (iii) entered into two agreements to swap a total of $ 100.0 million of SOFR-based variable rate debt to a fixed rate of 2.66 % plus a credit spread of 1.35 % with an effective date of August 2022 and a maturity date of August 2025.

The following table summarizes the terms and fair values of the Company’s derivative financial instruments that were designated and qualified as part of a hedging relationship as of September 30, 2022 and December 31, 2021:


($ in thousands)									Fair Value Assets (Liabilities) (1)
Type of Hedge	Number of Instruments	Aggregate Notional		Reference Rate	Interest Rate		Effective Date	Maturity Date	September 30, 2022		December 31, 2021
Cash Flow	Four	$	250,000	LIBOR	3.09	%	12/3/2018	10/24/2025	$	7,243	$	( 18,282 )
Cash Flow	Two	100,000		SOFR	2.66	%	8/1/2022	8/1/2025	3,645		—
Cash Flow	Two	200,000		SOFR	2.72	%	8/3/2022	11/22/2023	3,295		( 7,769 )
Cash Flow	Three	120,000		SOFR	1.58	%	8/15/2022	7/17/2024	5,414		( 2,190 )
Cash Flow	Three	150,000		SOFR	1.68	%	8/15/2022	7/17/2026	11,684		( 3,876 )
		$	820,000						$	31,281	$	( 32,117 )

Fair Value (2)	Two	$	155,000	LIBOR	LIBOR + 3.70 %		4/23/2021	9/10/2025	$	( 14,979 )	$	( 2,630 )

Forward-Starting Cash Flow (3)	Two	$	150,000	SOFR	1.356	%	12/1/2022	6/1/2032	$	26,732	$	299
Forward-Starting Cash Flow	Two	$	200,000	SOFR	2.37	%	11/22/2023	8/1/2025	$	4,761	$	—

(1) Derivatives in an asset position are included within “Prepaid and other assets” and derivatives in a liability position are included within “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets.

(2) The derivative agreements swap a blended fixed rate of 4.52 % for a blended floating rate of LIBOR plus 3.70 %.

(3) Subsequent to September 30, 2022, we terminated these two forward-starting interest rate swaps with notional amounts totaling $ 150.0 million and received proceeds of $ 30.9 million upon termination. This settlement is included as a component of accumulated other comprehensive income and will be reclassified to earnings over time as the hedged items are recognized in earnings.

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

We determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. As of September 30, 2022 and December 31, 2021, 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.

Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to earnings over time as the hedged items are recognized in earnings. Approximately $ 1.2 million and $ 1.7 million was reclassified as a reduction to earnings during the three months ended September 30, 2022 and 2021, respectively. Approximately $ 8.6 million and $ 4.1 million was reclassified as a reduction to earnings during the nine months ended September 30, 2022 and 2021, respectively. As interest payments on our derivatives are made over the next 12 months, we estimate the decrease to interest expense to be $ 13.1 million, assuming the current LIBOR and SOFR curves.

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

NOTE 9. SHAREHOLDERS’ EQUITY

Distributions

Our Board of Trustees declared a cash distribution of $ 0.22 per common share and Common Unit for the third quarter of 2022. This distribution was paid on October 14, 2022 to common shareholders and Common Unit holders of record as of October 7, 2022.

At-The-Market Offering Program

On February 23, 2021, the Company and the Operating Partnership entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with each of BofA Securities, Inc., Citigroup Global Markets Inc., KeyBanc Capital Markets Inc. and Raymond James & Associates, Inc., pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $ 150.0 million of its common shares of beneficial interest, $ 0.01 par value per share, under an at-the-market offering program (the “ATM Program”). On November 30, 2021, the Company and the Operating Partnership amended the Equity Distribution Agreement to reflect their filing of a shelf registration statement on November 16, 2021 with the SEC. As of September 30, 2022, the Company has no t sold any common shares under the ATM Program. The Operating Partnership intends to use the net proceeds, if any, to repay borrowings under its 2022 Revolving Facility and other indebtedness and for working capital and other general corporate purposes. The Operating Partnership may also use the net proceeds for acquisitions of operating properties and the development or redevelopment of properties, although there are currently no understandings, commitments or agreements to do so.

Share Repurchase Program

In February 2021, the Company’s Board of Trustees approved a share repurchase program, authorizing share repurchases up to an aggregate of $ 150.0 million (the “Share Repurchase Program”). In February 2022, the Company extended its Share Repurchase Program for an additional year and it will now terminate on February 28, 2023, if not terminated or extended prior to that date. In April 2022, the Company’s Board of Trustees authorized a $ 150.0 million increase to the size of the Share Repurchase Program, authorizing share repurchases up to an aggregate of $ 300.0 million. As of September 30, 2022, the Company has no t repurchased any shares under its Share Repurchase Program. The Company intends to fund any future repurchases under the Share Repurchase Program with cash on hand or availability under the 2022 Revolving Facility, subject

to any applicable restrictions. The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors.

NOTE 10. EARNINGS PER SHARE OR UNIT

Basic earnings per share or unit is calculated based on the weighted average number of common shares or units outstanding during the period. Diluted earnings per share or unit is determined based on the weighted average number of common 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 (i) outstanding options to acquire common shares; (ii) Limited Partner Units, which may be exchanged for either cash or common shares at the Parent Company’s option and under certain circumstances; (iii) appreciation-only Long-Term Incentive Plan (“AO LTIP”) units; and (iv) deferred common share units, which may be credited to the personal accounts of non-employee trustees in lieu of compensation paid in cash 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 were 3.0 million and 2.7 million for the three and nine months ended September 30, 2022, respectively, and 2.4 million and 2.5 million for the three and nine months ended September 30, 2021, respectively.

Due to the net loss allocable to common shareholders and Common Unit holders for the three and nine months ended September 30, 2022 and the three months ended September 30, 2021, no securities had a dilutive impact for those periods.

NOTE 11. COMMITMENTS AND CONTINGENCIES

Other Commitments and Contingencies

We are obligated under various completion guarantees with certain lenders and lease agreements with tenants to complete all or portions of a development project and tenant-specific space currently under construction. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through free cash flow or borrowings on the 2022 Revolving 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. Our portion of the repayment guaranty is limited to $ 5.9 million and the guaranty’s term is through July 1, 2024, the maturity date of the construction loan. As of September 30, 2022, the outstanding loan balance was $ 33.6 million, of which our share was $ 11.8 million. The loan is secured by the hotel.

As of September 30, 2022, we had outstanding letters of credit totaling $ 1.5 million with no amounts advanced against these instruments.

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.

NOTE 12. SUBSEQUENT EVENTS

Subsequent to September 30, 2022, we:

• redeemed all remaining Class B units related to a joint venture that owned Crossing at Killingly Commons that was entered into by Inland Diversified prior to its merger with the Company for $ 9.7 million;

• sold one ground lease at Lincoln Plaza, our multi-tenant retail property in Worcester, Massachusetts, for a sales price of $ 10.0 million; and

• terminated two forward-starting interest rate swaps with notional amounts totaling $ 150.0 million and received proceeds of $ 30.9 million upon termination. This settlement is included as a component of accumulated other comprehensive income and will be reclassified to earnings over time as the hedged items are recognized in earnings.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS

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

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

• risks associated with the adverse effect of the ongoing pandemic of the novel coronavirus (“COVID-19”), including possible resurgences, variants and mutations, on the financial condition, results of operations, cash flows and performance of the Company and its tenants, the real estate market and the global economy and financial markets;

• risks associated with the Company’s Merger (defined below) with Retail Properties of America, Inc. (“RPAI”), including the integration of the businesses of the combined company, the ability to achieve expected synergies or cost savings and potential disruptions to the Company’s plans and operations;

• national and local economic, business, real estate and other market conditions, particularly in connection with low or negative growth in the U.S. economy as well as economic uncertainty (including potential economic slowdown or recession, rising interest rates, inflation, unemployment, or limited growth in consumer income or spending);

• 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;

• 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, 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 (“REIT”) 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;

• business continuity disruptions and a deterioration in our tenant’s ability to operate in affected areas or delays in the supply of products or services to us or our tenants from vendors that are needed to operate efficiently, causing costs to rise sharply and inventory to fall;

• risks related to our current geographical concentration of our properties in Texas, Florida, New York, Maryland, and North Carolina;

• civil unrest, acts of terrorism or war, acts of God, climate change, epidemics, pandemics (including COVID-19), natural disasters and severe weather conditions, including such events 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;

• our ability to satisfy environmental, social or governance standards set by various constituencies;

• insurance costs and coverage;

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

• other factors affecting the real estate industry generally; and

• other risks identified in this Quarterly Report on Form 10-Q and, from time to time, in other reports we file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate, including, in particular, the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

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

Overview

Our Business and Properties

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

Merger with RPAI

On October 22, 2021, we completed a merger with RPAI in accordance with the Agreement and Plan of Merger dated July 18, 2021 (the “Merger Agreement”), by and among the Company, its wholly owned subsidiary KRG Oak, LLC (“Merger Sub”) and RPAI, pursuant to which RPAI merged with and into Merger Sub (the “Merger”). Immediately following the closing of the Merger, Merger Sub merged with and into the Operating Partnership so that all of the assets and liabilities of the Company continue to be held at or below the Operating Partnership level. As a result of the Merger, we acquired 100 operating retail properties and five development projects along with multiple parcels of entitled land for future value creation, creating a top five open-air shopping center REIT. The combined high-quality, open-air portfolio is a mixture of predominantly necessity-based, grocery-anchored neighborhood and community centers, combined with vibrant mixed-use assets. The Merger more than doubled the Company’s presence in high-growth markets that have mild or temperate climates and no or relatively low income taxes, while also introducing and/or enhancing its presence in strategic gateway markets. In addition, the combined company has additional opportunities to further increase shareholder value, including leasing of pandemic-related vacancies, optimizing net operating income (“NOI”) margins, lowering the Company’s cost of capital, and completing select development projects. Pursuant to the terms of the Merger Agreement, each outstanding share of RPAI common stock converted into the right to

receive 0.623 common shares of the Company plus cash in lieu of fractional Company shares. The Operating Partnership issued an equivalent amount of General Partner Units to the Parent Company.

Inflation

Prior to 2021, inflation was relatively low and had a minimal impact on our operating and financial performance; however, inflation has increased significantly in recent months and may continue to be elevated or increase further. Most of our leases contain provisions designed to mitigate the adverse impact of inflation, including stated rent increases and requirements for tenants to pay a share of operating expenses, including common area maintenance, real estate taxes, insurance or other operating expenses related to the maintenance of our properties, with escalation clauses in certain leases. Most of our leases also include clauses that allow us to collect additional rent based on a percentage of tenants’ gross sales over stated thresholds, which sales generally increase as prices rise. In addition, we believe that the rental rates in many of our leases are below current market rates for comparable space and that upon renewal, such rates may be increased to be in line with current rates, which may offset certain inflationary expense pressures. Due to the current high inflation environment, the U.S. Federal Reserve has aggressively raised short-term interest rates to slow the economy down, which has caused our borrowing costs to rise. We continually evaluate our exposure to interest rate fluctuations and enter into interest rate protection agreements to mitigate the impact of changes in interest rates on our variable rate debt. However, because we cannot predict with any level of certainty what future actions the U.S. Federal Reserve will take to combat the high inflationary environment, we cannot estimate the ultimate impact it will have on our operating and financial performance.

Historically, economic indicators such as GDP growth, consumer confidence and employment have been correlated with demand for certain of our tenants’ products and services. If an economic recession returns, it 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.

Impacts on Business from COVID-19

In 2020 and 2021, the COVID-19 pandemic had a significant adverse impact on many of our tenants and on our business. As the domestic economy recovered from many of the effects of COVID-19, retailers improved their operations to account for the pandemic, including using open-air centers as convenient shopping destinations and last-mile fulfillment through the use of in-store pickup, curbside pickup, and shipping from stores. We expect the ongoing effects of COVID-19 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 efficacy of vaccines, including against variants of COVID-19, public adoption rates of vaccines and the impact of other actions taken in response to the pandemic. These uncertainties make it difficult to predict operating results for our business; therefore, there can be no assurances that we will not experience further declines in revenues, net income, Funds From Operations (“FFO”) or other operating metrics, which could be material.

Operating Activity

During the third quarter of 2022, we executed new and renewal leases on 221 individual spaces totaling 1,574,338 square feet (10.8% cash leasing spread on 156 comparable leases). New leases were signed on 61 individual spaces for 207,224 square feet of gross leasable area (“GLA”) (30.7% cash leasing spread on 22 comparable leases), while renewal leases were signed on 160 individual spaces for 1,367,114 square feet of GLA (8.5% cash leasing spread on 134 comparable leases). Comparable new and renewal leases are defined as those for which the space was occupied by a tenant within the last 12 months.

Results of Operations

The comparability of results of operations for the three and nine months ended September 30, 2022 and 2021 is affected by our Merger with RPAI that was completed on October 22, 2021, in which we acquired 100 operating retail properties as well as five development projects, along with our development, redevelopment, and operating property acquisition and disposition activities during these periods. Therefore, we believe it is most useful to review the comparisons of our results of operations for these periods in conjunction with the discussion of our activities during those periods, which is set forth below.

Property Acquisitions

In addition to the properties we acquired in the Merger, the following properties were acquired at various times during the period from January 1, 2021 through September 30, 2022:

Property Name

Metropolitan
Statistical Area (MSA)

Acquisition Date

Owned GLA

Nora Plaza outparcel

Indianapolis, IN

December 2021

23,722

Pebble Marketplace

Las Vegas, NV

February 2022

85,796

MacArthur Crossing two-tenant building

Dallas, TX

April 2022

56,077

Palms Plaza

Miami, FL

July 2022

68,976

Operating Property Dispositions

The following operating properties were sold during the period from January 1, 2021 through September 30, 2022:

Property Name

MSA

Disposition Date

Owned GLA

Westside Market

Dallas, TX

October 2021

93,377

Plaza Del Lago (1)

Chicago, IL

June 2022

100,016

(1) Plaza Del Lago also contains 8,800 square feet of residential space comprised of 18 multifamily rental units.

Development and Redevelopment Projects

The following properties were under active development or redevelopment at various times during the period from January 1, 2021 through September 30, 2022 and removed from our operating portfolio:

Project Name

MSA

Transition to

Development or Redevelopment ( 1)

Transition to
Operating Portfolio

Owned
Commercial GLA

Hamilton Crossing Centre (2)(3)

Indianapolis, IN

June 2014

Pending

92,283

The Corner (2)

Indianapolis, IN

December 2015

Pending

24,000

Eddy Street Commons – Phase III

South Bend, IN

September 2020

March 2022

18,600

Glendale Town Center (2)

Indianapolis, IN

March 2019

December 2021

199,021

The Landing at Tradition – Phase II

Port St. Lucie, FL

September 2021

Pending

39,900

Carillon MOB (4)

Washington, D.C.

October 2021

Pending

126,000

Circle East (4)

Baltimore, MD

October 2021

September 2022

82,000

One Loudoun Downtown – Residential

and Pads G&H Commercial (4)

Washington, D.C.

October 2021

Residential: June 2022
Commercial: Pending

67,000

Shoppes at Quarterfield (4)

Baltimore, MD

October 2021

June 2022

58,000

(1) Transition date represents the date the property was transferred from our operating portfolio into redevelopment status. For legacy RPAI projects, the transition date represents the later of the date of the closing of the Merger and the date the project was transferred into redevelopment status.

(2) This property has been identified as a redevelopment property and is not included in the operating portfolio or the same property pool. The redevelopment projects at Hamilton Crossing Centre and The Corner will include the creation of a mixed-used development.

(3) A portion of the Hamilton Crossing Centre redevelopment was sold in January 2022.

(4) Project was assumed as part of the Merger with RPAI in October 2021.

Comparison of Operating Results for the Three Months Ended September 30, 2022 to the Three Months Ended September 30, 2021

The following table reflects changes in the components of our consolidated statements of operations for the three months ended September 30, 2022 and 2021.


	Three Months Ended September 30,
($ in thousands)	2022			2021			Change
Revenue:
Rental income	$	195,675		$	70,216		$	125,459
Other property-related revenue	3,013			1,054			1,959
Fee income	1,623			195			1,428
Total revenue	200,311			71,465			128,846

Expenses:
Property operating	25,507			10,482			15,025
Real estate taxes	25,703			8,624			17,079
General, administrative and other	14,859			8,241			6,618
Merger and acquisition costs	108			9,198			(9,090)
Depreciation and amortization	115,831			30,193			85,638

Total expenses	182,008			66,738			115,270

Gain on sales of operating properties, net	—			1,260			(1,260)

Operating income	18,303			5,987			12,316
Other (expense) income:
Interest expense	(26,226)			(12,878)			(13,348)
Income tax benefit of taxable REIT subsidiary	—			91			(91)

Equity in earnings (loss) of unconsolidated subsidiaries	144			(196)			340
Other income, net	58			168			(110)
Net loss	(7,721)			(6,828)			(893)
Net income attributable to noncontrolling interests	(116)			(132)			16
Net loss attributable to common shareholders	$	(7,837)		$	(6,960)		$	(877)

Property operating expense to total revenue ratio	12.7		%	14.7		%

Rental income (including tenant reimbursements) increased $125.5 million, or 178.7%, due to the following:


($ in thousands)	Net change three months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	(367)
Properties under redevelopment or acquired during 2021 and/or 2022	2,025
Properties acquired in the Merger with RPAI	122,923
Properties fully operational during 2021 and 2022 and other	878
Total	$	125,459

The net increase of $0.9 million in rental income for properties fully operational during 2021 and 2022 is primarily due to a $1.0 million increase in tenant reimbursements due to higher recoverable common area maintenance expenses and real estate taxes and higher overage rent of $0.9 million due to improved tenant performance. These variances were partially offset by an increase in bad debt expense of $1.0 million and lower base minimum rent of $0.4 million due to the receipt of $1.4 million of previously unbilled base rent from a tenant during the three months ended September 30, 2021. The occupancy of the fully operational properties increased from 88.9% for 2021 to 91.0% for 2022.

Other property-related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity. This revenue increased by $2.0 million primarily as a result of higher gains on sales of undepreciated assets of $1.3 million recognized during the three months ended September 30, 2022 and an increase in parking revenue of $0.2 million.

We recorded fee income of $1.6 million and $0.2 million during the three months ended September 30, 2022 and 2021, respectively, from property management and development services provided to third parties and unconsolidated joint ventures. The increase in fee income is primarily related to development fee services for the development of a corporate campus for Republic Airways.

Property operating expenses increased $15.0 million, or 143.3%, due to the following:


($ in thousands)	Net change three months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	(118)
Properties under redevelopment or acquired during 2021 and/or 2022	366
Properties acquired in the Merger with RPAI	13,367
Properties fully operational during 2021 and 2022 and other	1,410
Total	$	15,025

The net increase of $1.4 million in property operating expenses for properties fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $1.1 million and utilities of $0.4 million, partially offset by a reduction in non-recoverable operating expenses. As a percentage of revenue, property operating expenses decreased from 14.7% to 12.7% due to an increase in revenue in 2022.

Real estate taxes increased $17.1 million, or 198.0%, due to the following:


($ in thousands)	Net change three months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	(154)
Properties under redevelopment or acquired during 2021 and/or 2022	279
Properties acquired in the Merger with RPAI	16,356
Properties fully operational during 2021 and 2022 and other	598
Total	$	17,079

The net increase of $0.6 million in real estate taxes for properties that were fully operational during 2021 and 2022 is primarily due to a slight increase in real estate tax assessments at certain properties in the portfolio as well as lower real estate tax refunds received in 2022. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected within rental income.

General, administrative and other expenses increased $6.6 million, or 80.3%. This increase is primarily due to incremental head count as part of the Merger and higher share-based compensation expense.

The Company incurred $0.1 million of merger and acquisition costs related to the Merger with RPAI during the three months ended September 30, 2022 compared to $9.2 million of merger and acquisition costs incurred during the three months ended September 30, 2021.

Depreciation and amortization expense increased $85.6 million, or 283.6%, primarily as a result of the Merger with RPAI as detailed below:


($ in thousands)	Net change three months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	(255)
Properties under redevelopment or acquired during 2021 and/or 2022	1,603
Properties acquired in the Merger with RPAI	83,857
Properties fully operational during 2021 and 2022 and other	433
Total	$	85,638

The net increase of $0.4 million in depreciation and amortization at properties fully operational during 2021 and 2022 is primarily due to the timing of additions and disposals at operating properties.

Interest expense increased $13.3 million, or 103.6%, primarily due to interest costs of $11.4 million related to debt assumed in conjunction with the Merger.

Comparison of Operating Results for the Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

The following table reflects changes in the components of our consolidated statements of operations for the nine months ended September 30, 2022 and 2021.


	Nine Months Ended September 30,
($ in thousands)	2022			2021			Change
Revenue:
Rental income	$	582,772		$	206,097		$	376,675
Other property-related revenue	7,932			3,133			4,799
Fee income	6,603			1,144			5,459
Total revenue	597,307			210,374			386,933

Expenses:
Property operating	77,558			30,978			46,580
Real estate taxes	80,445			26,574			53,871
General, administrative and other	41,977			23,676			18,301
Merger and acquisition costs	1,006			9,958			(8,952)
Depreciation and amortization	357,096			90,625			266,471

Total expenses	558,082			181,811			376,271

Gain on sales of operating properties, net	27,126			27,517			(391)

Operating income	66,351			56,080			10,271
Other (expense) income:
Interest expense	(77,449)			(37,386)			(40,063)
Income tax benefit of taxable REIT subsidiary	259			308			(49)

Equity in loss of unconsolidated subsidiaries	(56)			(758)			702
Other (expense) income, net	(207)			189			(396)
Net (loss) income	(11,102)			18,433			(29,535)
Net income attributable to noncontrolling interests	(408)			(1,058)			650
Net (loss) income attributable to common shareholders	$	(11,510)		$	17,375		$	(28,885)

Property operating expense to total revenue ratio	13.0		%	14.7		%

Rental income (including tenant reimbursements) increased $376.7 million, or 182.8%, due to the following:


($ in thousands)	Net change nine months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	285
Properties under redevelopment or acquired during 2021 and/or 2022	4,579
Properties acquired in the Merger with RPAI	370,191
Properties fully operational during 2021 and 2022 and other	1,620
Total	$	376,675

The net increase of $1.6 million in rental income for properties fully operational during 2021 and 2022 is primarily due to a $2.3 million increase in tenant reimbursements due to higher recoverable common area maintenance expenses, higher overage rent of $1.3 million and ancillary income of $0.9 million, and higher base minimum rent of $0.4 million due to improved tenant performance. These variances were partially offset by a $2.1 million increase in bad debt expense and a $1.2 million decrease in lease termination income.

Other property-related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity. This revenue increased by $4.8 million primarily as a result of higher gains on sales of undepreciated assets of $2.4 million recognized during the nine months ended September 30, 2022 and an increase in parking revenue of $0.9 million.

We recorded fee income of $6.6 million and $1.1 million during the nine months ended September 30, 2022 and 2021, respectively, from property management and development services provided to third parties and unconsolidated joint ventures. The increase in fee income is primarily related to development fee services for the development of a corporate campus for Republic Airways.

Property operating expenses increased $46.6 million, or 150.4%, due to the following:


($ in thousands)	Net change nine months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	(91)
Properties under redevelopment or acquired during 2021 and/or 2022	687
Properties acquired in the Merger with RPAI	45,872
Properties fully operational during 2021 and 2022 and other	112
Total	$	46,580

The net increase of $0.1 million in property operating expenses for properties fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $2.6 million and utilities of $0.8 million, partially offset by a $3.3 million decrease in repairs and maintenance and landscaping expenses. As a percentage of revenue, property operating expenses decreased from 14.7% to 13.0% due to an increase in revenue in 2022.

Real estate taxes increased $53.9 million, or 202.7%, due to the following:


($ in thousands)	Net change nine months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	376
Properties under redevelopment or acquired during 2021 and/or 2022	493
Properties acquired in the Merger with RPAI	53,415
Properties fully operational during 2021 and 2022 and other	(413)
Total	$	53,871

The net decrease of $0.4 million in real estate taxes for properties that were fully operational during 2021 and 2022 is primarily due to successful real estate tax appeals at certain properties in the portfolio, most notably for certain of our Texas properties. The majority of real estate tax expense is recoverable from tenants and such recovery is reflected in rental income.

General, administrative and other expenses increased $18.3 million, or 77.3%. This increase is primarily due to incremental head count as part of the Merger and higher share-based compensation expense.

The Company incurred $1.0 million and $10.0 million of merger and acquisition costs related to the Merger with RPAI during the nine months ended September 30, 2022 and 2021, respectively. These costs primarily consist of professional fees and technology costs.

Depreciation and amortization expense increased $266.5 million, or 294.0%, primarily as a result of the Merger with RPAI as detailed below:


($ in thousands)	Net change nine months ended September 30, 2021 to 2022
Properties or components of properties sold during 2021 or 2022	$	3,343
Properties under redevelopment or acquired during 2021 and/or 2022	3,325
Properties acquired in the Merger with RPAI	263,671
Properties fully operational during 2021 and 2022 and other	(3,868)
Total	$	266,471

The net decrease of $3.9 million in depreciation and amortization at properties fully operational during 2021 and 2022 is primarily due to the timing of additions and disposals at operating properties.

Interest expense increased $40.1 million, or 107.2%, primarily due to interest costs of $37.9 million related to debt assumed in conjunction with the Merger.

Net Operating Income and Same Property Net Operating Income

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

We also use same property NOI (“Same Property NOI”), a non-GAAP financial measure, to evaluate the performance of our properties. Same Property NOI is net income excluding properties that have not been owned for the full periods presented. However, due to the size of the RPAI portfolio acquired in the Merger with RPAI, which closed in October 2021, the legacy RPAI properties have been deemed to qualify for the same property pool beginning in 2022 if they had a full first quarter of operations in 2021 within the legacy RPAI portfolio prior to the Merger. Same Property NOI also excludes (i) net gains from outlot sales, (ii) straight-line rent revenue, (iii) lease termination income in excess of lost rent, (iv) amortization of lease intangibles, and (v) 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 expiration of 12 months or the start date of a replacement tenant. The Company believes that Same Property NOI is helpful to investors as a measure of our operating performance because it includes only the NOI of properties that have been owned for the full periods presented. The Company believes such presentation eliminates disparities in net income due to the acquisition or disposition of properties during the particular periods presented and thus provides a more consistent metric for the comparison of our properties. Same Property NOI includes the results of properties that have been owned for the entire current and prior year reporting periods. In order to provide meaningful comparative information across periods that, in some cases, predate the Merger, all information regarding the performance of the same property pool is presented as though the Merger was consummated on January 1, 2021 (i.e., as though the properties owned by RPAI prior to the Merger that are included in our same property pool had been owned by the Company for the entirety of all comparison periods for which same property pool information is presented).

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. The properties acquired in the Merger with RPAI qualify for the same property pool beginning in 2022 if they had a full first quarter of operations in 2021 within the legacy RPAI portfolio prior to the Merger. 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 (a) begin recapturing space from tenants or (b) the contemplated plan significantly impacts the operations of the property.

For the three and nine months ended September 30, 2022, the same property pool excludes (i) Glendale Town Center, Shoppes at Quarterfield and Circle East, which were reclassified from active redevelopment into our operating portfolio in December 2021, June 2022 and September 2022, respectively, (ii) the multifamily rental units at One Loudoun Downtown – Pads G & H, (iii) four active development and redevelopment projects, (iv) Arcadia Village, Pebble Marketplace and Palms Plaza, which were acquired subsequent to January 1, 2021, and (v) office properties.

The following table reflects Same Property NOI and a reconciliation to net income (loss) attributable to common shareholders for the three and nine months ended September 30, 2022 and 2021:


	Three Months Ended September 30,								Nine Months Ended September 30,
($ in thousands)	2022			2021			Change		2022			2021			Change
Number of properties in same property pool for the period (1)	177			177					177			177

Leased percentage at period end	94.1		%	93.0		%			94.1		%	93.0		%
Economic occupancy percentage (2)	91.2		%	90.1		%			90.9		%	90.0		%

Same Property NOI	$	133,598		$	127,996		4.4	%	$	394,910		$	377,162		4.7	%

Reconciliation of Same Property NOI to most directly comparable GAAP measure:
Net operating income – same properties	$	133,598		$	127,996				$	394,910		$	377,162
Prior period collection impact – same properties	523			2,245					3,565			12,241
Net operating income – non-same activity (3)	13,357			(78,077)					34,226			(237,725)
Total property NOI	147,478			52,164			182.7	%	432,701			151,678			185.3	%
Other income, net	1,825			258					6,599			883
General, administrative and other	(14,859)			(8,241)					(41,977)			(23,676)
Merger and acquisition costs	(108)			(9,198)					(1,006)			(9,958)
Depreciation and amortization	(115,831)			(30,193)					(357,096)			(90,625)
Interest expense	(26,226)			(12,878)					(77,449)			(37,386)
Gain on sales of operating properties, net	—			1,260					27,126			27,517
Net income attributable to noncontrolling interests	(116)			(132)					(408)			(1,058)
Net (loss) income attributable to common shareholders	$	(7,837)		$	(6,960)				$	(11,510)		$	17,375

(1) Same Property NOI excludes (i) Glendale Town Center, Shoppes at Quarterfield and Circle East, which were reclassified from active redevelopment into our operating portfolio in December 2021, June 2022 and September 2022, respectively, (ii) the multifamily rental units at One Loudoun Downtown – Pads G & H, (iii) four active development and redevelopment projects, (iv) Arcadia Village, Pebble Marketplace and Palms Plaza, which were acquired subsequent to January 1, 2021, and (v) 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 NOI from properties not included in the same property pool, including properties sold during both periods.

Our Same Property NOI increased 4.4% for the three months ended September 30, 2022 compared to the same period of the prior year primarily due to improved occupancy driven by continued strong leasing activity.

Funds From Operations

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

Considering the nature of our business as a real estate owner and operator, the Company believes that FFO is helpful to investors in measuring our operational performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. FFO excludes the 2021 gain on sale of the ground lease portfolios as these sales were part of our capital strategy distinct from our ongoing operating strategy of selling individual land parcels from time to time. FFO (a) should not be considered as an alternative to net income (calculated in accordance with GAAP) for the purpose of measuring our financial performance, (b) is not an alternative to cash flow from operating activities (calculated in accordance with GAAP) as a measure of our liquidity, and (c) is not indicative of funds available to satisfy our cash needs, including our ability to make distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.

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

Our calculations of FFO (1) and reconciliation to consolidated net income and FFO, as adjusted, for the three and nine months ended September 30, 2022 and 2021 (unaudited) are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
($ in thousands)	2022		2021		2022		2021
Net (loss) income	$	(7,721)	$	(6,828)	$	(11,102)	$	18,433
Less: net income attributable to noncontrolling interests in properties	(209)		(132)		(535)		(396)
Less: gain on sales of operating properties, net	—		(1,260)		(27,126)		(27,517)

Add: depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests	116,186		30,537		358,161		91,650
FFO of the Operating Partnership (1)	108,256		22,317		319,398		82,170
Less: Limited Partners’ interests in FFO	(1,437)		(543)		(3,932)		(2,301)
FFO attributable to common shareholders (1)	$	106,819	$	21,774	$	315,466	$	79,869

FFO of the Operating Partnership (1)	$	108,256	$	22,317	$	319,398	$	82,170
Add: merger and acquisition costs	108		9,198		1,006		9,958
Less: prior period collection impact	(691)		(2,063)		(2,745)		(3,329)
FFO, as adjusted, of the Operating Partnership	$	107,673	$	29,452	$	317,659	$	88,799

(1) “FFO of the Operating Partnership” measures 100% of the operating performance of the Operating Partnership’s real estate properties. “FFO attributable to 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 interest expense, income tax expense of the taxable REIT subsidiary, and depreciation and amortization. For informational purposes, we also provide Adjusted EBITDA, which we define as EBITDA less (i) EBITDA from unconsolidated entities, (ii) gains on sales of operating properties or impairment charges, (iii) merger and acquisition costs, (iv) other income and expense, (v) noncontrolling interest EBITDA, and (vi) other non-recurring activity or items impacting comparability from period to period. Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. Net Debt to Adjusted EBITDA is our share of net debt divided by Annualized Adjusted EBITDA. EBITDA, Adjusted EBITDA, Annualized Adjusted EBITDA and Net Debt to Adjusted EBITDA, as calculated by us, are not comparable to EBITDA and EBITDA-related measures reported by other REITs that do not define EBITDA and EBITDA-related measures exactly as we do. EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated from operating activities in accordance with GAAP and should not be considered alternatives to net income as an indicator of performance or as alternatives to cash flows from operating activities as an indicator of liquidity.

Considering the nature of our business as a real estate owner and operator, we believe that EBITDA, Adjusted EBITDA and the ratio of Net Debt to Adjusted EBITDA are helpful to investors in measuring our operational performance because they exclude various items included in net income that do not relate to, or are not indicative of, our operating performance, such as gains or losses from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we also provide 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 net income (the most directly comparable GAAP measure) and a calculation of Net Debt to Adjusted EBITDA:


($ in thousands)	Three Months Ended September 30, 2022
Net loss	$	(7,721)
Depreciation and amortization	115,831
Interest expense	26,226
Income tax benefit of taxable REIT subsidiary	—
EBITDA	134,336
Unconsolidated EBITDA	637
Merger and acquisition costs	108
Gain on sales of operating properties, net	—
Other income and expense, net	(202)
Noncontrolling interests	(209)
Adjusted EBITDA	134,670

Annualized Adjusted EBITDA (1)	$	538,680

Company share of Net Debt:
Mortgage and other indebtedness, net	$	3,012,870
Plus: Company share of unconsolidated joint venture debt	37,723
Less: Partner share of consolidated joint venture debt (2)	(569)
Less: cash, cash equivalents, and restricted cash	(98,639)
Less: debt discounts, premiums and issuance costs, net	(33,802)
Company share of Net Debt	$	2,917,583
Net Debt to Adjusted EBITDA	5.4x

(1) Represents Adjusted EBITDA for the three months ended September 30, 2022 (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.

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 interest or dividend rate, the maturity date and the Company’s debt maturity ladder, the impact of financial metrics such as overall Company leverage levels and coverage ratios, and the Company’s ability 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.

One of the benefits of the Merger was a strengthened balance sheet to provide the Company with increased liquidity, a well-staggered debt maturity ladder, and an appropriately sized development pipeline. As part of the Merger, we assumed an $850.0 million unsecured revolving credit facility along with other indebtedness. In July 2022, we increased the capacity of the unsecured revolving credit facility to $1.1 billion (the “2022 Revolving Facility”), of which the available borrowing capacity

was $1.1 billion as of September 30, 2022, and issued a seven-year $300.0 million unsecured term loan that was used to retire 2022 and 2023 debt maturities.

As of September 30, 2022, we had approximately $88.4 million in cash on hand, $8.1 million in restricted cash and escrow deposits, $1.1 billion of remaining availability under the 2022 Revolving Facility, and no debt maturities until 2023. During the nine months ended September 30, 2022, we used the $125.0 million short-term deposit that matured on April 7, 2022 to repay borrowings on our revolving line of credit. We believe we will have adequate liquidity over the next 12 months and beyond to operate our business and meet our cash requirements.

We derive the majority of our revenue from tenants who lease space from us at our properties. Therefore, our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our tenants. While we believe that the nature of the properties in which we typically invest—primarily neighborhood and community shopping centers—provides a relatively stable revenue flow, an economic downturn and/or the ongoing effects of COVID-19, among other events, could adversely affect the ability of some of our tenants to meet their lease obligations.

Our Principal Capital Resources

For a discussion of cash generated from operations, see “Cash Flows” beginning on page 44. In addition to cash generated from operations, our other principal capital resources are discussed below.

Over the last several years, we have made substantial progress in enhancing our liquidity position and reducing our leverage and borrowing costs. We continue to focus on a balanced approach to growth and staggering debt maturities in order to retain our financial flexibility.

As of September 30, 2022, we had approximately $1.1 billion available under the 2022 Revolving Facility for future borrowings. We also had $88.4 million in cash and cash equivalents as of September 30, 2022.

We were in compliance with all applicable financial covenants under the 2022 Revolving Facility, unsecured term loans and senior unsecured notes as of September 30, 2022.

On July 29, 2022, the Operating Partnership entered into the Second Amendment (the “Second Amendment”) to the sixth amended and restated credit agreement with a syndicate of financial institutions to provide for a $250.0 million increase to the unsecured revolving credit facility, the “2022 Revolving Facility”. Under the Second Amendment, the Operating Partnership has the option to increase the 2022 Revolving Facility to an aggregate committed amount of up to $1.7 billion upon the Operating Partnership’s request, subject to certain conditions. In addition, the Operating Partnership issued a seven-year $300.0 million unsecured term loan, the proceeds of which were used to repay the Operating Partnership’s existing $200.0 million unsecured term loan that was scheduled to mature on November 22, 2023, certain secured loans, and for other general corporate purposes.

On November 16, 2021, the Company filed with the SEC a shelf registration statement on Form S-3, which is effective for a term of three years, relating to the offer and sale, from time to time, of an indeterminate amount of equity and debt securities. Equity securities may be offered and sold by the Parent Company, and the net proceeds of any such offerings would be contributed to the Operating Partnership in exchange for additional General Partner Units. Debt securities may be offered and sold by the Operating Partnership with the Operating Partnership receiving the proceeds. From time to time, we may issue securities under this shelf registration statement for general corporate purposes, which may include acquisitions of additional properties, repayment of outstanding indebtedness, capital expenditures, the expansion, redevelopment, and/or improvement of properties in our portfolio, working capital and other general purposes.

On February 23, 2021, the Company and the Operating Partnership entered into an Equity Distribution Agreement (the “Equity Distribution Agreement”) with each of BofA Securities, Inc., Citigroup Global Markets Inc., KeyBanc Capital Markets Inc. and Raymond James & Associates, Inc., pursuant to which the Company may sell, from time to time, up to an aggregate sales price of $150.0 million of its common shares of beneficial interest, $0.01 par value per share under an at-the-market offering program (the “ATM Program”). On November 30, 2021, the Company and the Operating Partnership amended the Equity Distribution Agreement to reflect their filing of a shelf registration statement on November 16, 2021 with the SEC. As of September 30, 2022, the Company has not sold any common shares under the ATM Program. The Operating Partnership intends to use the net proceeds, if any, to repay borrowings under its 2022 Revolving Facility and other indebtedness and for working capital and other general corporate purposes. The Operating Partnership may also use the net proceeds for acquisitions of operating properties and the development or redevelopment of properties, although there are currently no understandings, commitments or agreements to do so.

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 September 30, 2022, we had $189.3 million of secured debt scheduled to mature prior to September 30, 2023, excluding scheduled monthly principal payments. We believe we have sufficient liquidity to repay this obligation from cash on hand and borrowings on the 2022 Revolving Facility.

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 and long term. Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, scheduled interest and principal payments on our debt of approximately $30.0 million and $0.9 million, respectively, for the remainder of 2022, expected dividend payments to our common shareholders and Common Unit holders, and recurring capital expenditures.

In August 2022, our Board of Trustees declared a cash distribution of $0.22 per common share and Common Unit for the third quarter of 2022. This distribution was paid on October 14, 2022 to common shareholders and Common Unit holders of record as of October 7, 2022. Future distributions, if any, are at the discretion of the Board of Trustees, who will continue to evaluate our sources and uses of capital, liquidity position, operating fundamentals, maintenance of our REIT qualification and other factors they may deem relevant. We believe we have sufficient liquidity to pay any dividend from cash on hand and borrowings on the 2022 Revolving Facility.

Other short-term liquidity needs include expenditures for tenant improvements, external leasing commissions and recurring capital expenditures. During the nine months ended September 30, 2022, we incurred $22.9 million for recurring capital expenditures on operating properties and $45.1 million for tenant improvements and external leasing commissions, which includes costs to re-lease anchor space at our operating properties related to tenants open and operating as of September 30, 2022 (excluding development and redevelopment properties). We currently anticipate incurring approximately $100 million of additional major tenant improvement costs related to leasing activity for space that is currently vacant at a number of our operating properties over the next 12 to 18 months. We believe we have the ability to fund these costs through cash flows from operations or borrowings on the 2022 Revolving Facility.

During the nine months ended September 30, 2022, we completed major redevelopment construction activities at Shoppes at Quarterfield, the residential portion of the project at One Loudoun Downtown and Circle East and placed these projects in service. As of September 30, 2022, we had four development projects under construction. Total estimated costs for the four projects are $112.7 million, of which our share is estimated to be $80.8 million. As of September 30, 2022, we have incurred $21.6 million of these costs. We anticipate incurring the majority of the remaining costs for these projects over the next 24 months and believe we have the ability to fund these projects through cash flow from operations or borrowings on the 2022 Revolving Facility.

Share Repurchase Program

In February 2021, the Company’s Board of Trustees approved a share repurchase program, authorizing share repurchases up to an aggregate of $150.0 million (the “Share Repurchase Program”). In February 2022, the Company extended its Share Repurchase Program for an additional year and it will now terminate on February 28, 2023, if not terminated or extended prior to that date. In April 2022, the Company’s Board of Trustees authorized a $150.0 million increase to the size of the Share Repurchase Program, authorizing share repurchases up to an aggregate of $300.0 million. As of September 30, 2022, the Company has not repurchased any shares under its Share Repurchase Program. The Company intends to fund any future repurchases under the Share Repurchase Program with cash on hand or availability under the 2022 Revolving Facility, subject to any applicable restrictions. The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors.

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, payment of indebtedness at maturity and obligations under ground leases.

Selective Acquisitions, Developments and Joint Ventures . We may selectively pursue the acquisition, development and redevelopment of other properties, which would require additional capital. It is unlikely that we would have sufficient funds on hand to meet these long-term capital requirements. We would have to satisfy these needs through additional borrowings, sales of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions 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. Our ability to access the capital markets will be dependent on a number of factors, including general capital market conditions.

Potential Debt Repurchases. We may from time to time, depending on market conditions and prices, contractual restrictions, our financial liquidity and other factors, seek to repurchase our senior unsecured notes maturing at various dates through September 2030 in open-market transactions, by tender offer or otherwise, as market conditions warrant.

Commitments under Ground Leases. We are obligated under 12 ground leases for approximately 98 acres of land as of September 30, 2022. Most of these ground leases require fixed annual rent payments and the expiration dates of the remaining initial terms of these ground leases range from 2023 to 2092.

Capital Expenditures on Consolidated Properties

The following table summarizes cash capital expenditures for our development and redevelopment projects and other capital expenditures for the nine months ended September 30, 2022:


($ in thousands)	Nine Months Ended September 30, 2022
Active development and redevelopment projects	$	34,850
Redevelopment opportunities	326


Recurring operating capital expenditures (primarily tenant improvements) and other	71,360
Total	$	106,536

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 nine months ended September 30, 2022.

Debt Maturities

The following table presents maturities of mortgage and corporate debt as of September 30, 2022, presented on a calendar year basis:


	Secured Debt
($ in thousands)	Scheduled Principal Payments		Term Maturities		Unsecured Debt		Total
2022	$	872	$	—	$	—	$	872
2023	3,020		189,330		95,000		287,350
2024	2,721		—		269,635		272,356
2025	2,848		—		430,000		432,848
2026	2,981		—		550,000		552,981
Thereafter	30,181		2,480		1,400,000		1,432,661
	$	42,623	$	191,810	$	2,744,635	$	2,979,068
Debt discounts, premiums and issuance costs, net							33,802
Total							$	3,012,870

Failure to comply with the obligations under our debt agreements (including payment obligations) could cause an event of default under such debt, which, among other things, could result in the loss of title to the assets securing the debt, acceleration of the payment of all principal and interest and/or termination of the agreements, or exposure to the risk of foreclosure. In addition, certain of our variable rate loans contain cross-default provisions that provide that a violation by us of any financial covenant set forth in the 2022 Revolving Facility will constitute an “Event of Default” under the loans, which could allow the lenders to accelerate the amounts due under our debt agreements if we fail to satisfy these financial covenants. See “Item 1A. Risk Factors – Risks Related to Our Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 for more information related to the risks associated with our indebtedness.

Impact of Changes in Credit Ratings on Our Liquidity

We have received investment grade corporate credit ratings from three nationally recognized credit rating agencies. These ratings did not change as of September 30, 2022.

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 September 30, 2022, we had cash, cash equivalents and restricted cash of $96.5 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 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 Nine Months Ended September 30, 2022 to the Nine Months Ended September 30, 2021

Cash provided by operating activities was $262.4 million for the nine months ended September 30, 2022 and $103.8 million for the same period of 2021. The cash flows were positively impacted by the Merger, which generated significant incremental operating income, along with improved collection activity including previously deferred rent from the COVID-19 pandemic. This improvement was partially offset by costs paid as part of the Merger along with higher interest costs related to debt assumed in the Merger.

Cash used in investing activities was $13.7 million for the nine months ended September 30, 2022 and $109.1 million for the same period of 2021. Highlights of significant cash sources and uses in investing activities are as follows:

• We received the proceeds from a $125.0 million short-term deposit that matured on April 7, 2022;

• We acquired Pebble Marketplace, the two-tenant building adjacent to MacArthur Crossing and Palms Plaza for a total of $100.1 million during the nine months ended September 30, 2022;

• We received net proceeds of $65.4 million from the sale of Plaza Del Lago and a portion of Hamilton Crossing Centre during the nine months ended September 30, 2022 compared to net proceeds of $47.7 million related to the sale of 17 ground leases and other land parcels during the nine months ended September 30, 2021; and

• Capital expenditures increased by $69.6 million driven by the construction activity at our active development projects and anchor leasing activity, partially offset by a change in construction payables of $2.6 million for the nine months ended September 30, 2022.

Cash used in financing activities was $252.6 million for the nine months ended September 30, 2022 compared to cash provided by financing activities of $62.4 million for the same period of 2021. Highlights of significant cash sources and uses in financing activities are as follows:

• We issued a seven-year $300.0 million unsecured term loan and borrowed $145.0 million on our unsecured revolving line of credit during the nine months ended September 30, 2022;

• In 2022, we repaid (i) a $200.0 million unsecured term loan that was scheduled to mature in 2023, (ii) $200.0 million of borrowings on our unsecured revolving line of credit, with no amount outstanding as of September 30, 2022, and (iii) mortgages payable totaling $155.2 million along with $3.0 million of scheduled principal payments using proceeds from the $300.0 million unsecured term loan, $125.0 million short-term deposit and property sales;

• We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $133.4 million for the nine months ended September 30, 2022 compared to distributions of $44.2 million for the nine months ended September 30, 2021; and

• In 2021, we issued $175.0 million of exchangeable senior notes in a private placement offering to fund a portion of our 2022 debt maturities and other borrowings. In connection with this issuance, we incurred transaction costs of $5.3 million and purchased capped calls for $9.8 million.

Critical Accounting Estimates

We based the discussion and analysis of our financial condition and results of operations upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. There were no changes made by management to the critical accounting policies in the three months ended September 30, 2022. We discuss the most critical estimates in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market Risk Related to Fixed and Variable Rate Debt

We had $3.0 billion of outstanding consolidated indebtedness as of September 30, 2022 (inclusive of net unamortized debt discounts, premiums and issuance costs of $33.8 million). As of September 30, 2022, we were party to various consolidated interest rate hedge agreements totaling $975.0 million with maturities over various terms through 2026 . Reflecting the effects of these hedge agreements, our fixed and variable rate debt would have been $2.8 billion (94%) and $183.5 million (6%), respectively, of our total consolidated indebtedness as of September 30, 2022.

As of September 30, 2022, we had $189.3 million of fixed rate debt scheduled to mature within the next 12 months. A 100-basis point change in interest rates on this debt as of September 30, 2022 would change our annual cash flow by $1.9 million. A 100-basis point change in interest rates on our unhedged variable rate debt as of September 30, 2022 would change our annual cash flow by $1.8 million. Based upon the terms of our variable rate debt, we are most vulnerable to a change in short-term Secured Overnight Financing Rate (“SOFR”) interest rates.

ITEM 4. CONTROLS AND PROCEDURES

Kite Realty Group Trust

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There has been no change in the Parent Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(b) under the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Kite Realty Group, L.P.

Evaluation of Disclosure Controls and Procedures

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

Changes in Internal Control Over Financial Reporting

There has been no change in the Operating Partnership’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(b) under the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of September 30, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors previously disclosed in response to Part I, “Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2021 filed on February 28, 2022.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

From time to time, certain of our employees surrender 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 under the Company’s 2013 Equity Incentive Plan, as amended and restated as of May 11, 2022, which are repurchased by the Company. There were no shares of common stock surrendered or repurchased during the three months ended September 30, 2022.

As of September 30, 2022, $300.0 million remained available for repurchases under our Share Repurchase Program announced in February 2021. The Company’s Board of Trustees increased the size of the program from $150.0 million to $300.0 million in April 2022. This program may be suspended or terminated at any time by the Company and will terminate on February 28, 2023, if not terminated or extended prior to that date.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

Not applicable.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5. OTHER INFORMATION

Not applicable.

ITEM 6. EXHIBITS

Exhibit No.

Description

Location

2.1

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

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

3.1

Articles of Amendment and Restatement of Declaration of Trust of the Kite Realty Group Trust, as supplemented and amended

Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 28, 2022

3.2

Second Amended and Restated Bylaws of the Company, as amended

Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 28, 2022

10.1

Second Amendment to Sixth Amended and Restated Credit Agreement, dated as of July 29, 2022, by and among Kite Realty Group, L.P., Kite Realty Group Trust, KeyBank National Association, as administrative agent, and the lenders party thereto

Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 2, 2022

10.2

Fourth Amendment to Term Loan Agreement, dated as of July 29, 2022, by and among Kite Realty Group, L.P., Kite Realty Group Trust, KeyBank National Association, as administrative agent, and the lenders party thereto

Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 2, 2022

31.1

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

Filed herewith

31.2

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

Filed herewith

31.3

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

Filed herewith

31.4

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

Filed herewith

32.1

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

Filed herewith

32.2

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

Filed herewith

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

Filed herewith

101.SCH

Inline XBRL Taxonomy Extension Schema Document

Filed herewith

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Filed herewith

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

Filed herewith

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

Filed herewith

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Filed herewith

104

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

Filed herewith

SIGNATURES

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

KITE REALTY GROUP TRUST

Date:

November 4, 2022

By:

/s/ JOHN A. KITE

John A. Kite

Chairman and Chief Executive Officer

(Principal Executive Officer)

Date:

November 4, 2022

By:

/s/ HEATH R. FEAR

Heath R. Fear

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

KITE REALTY GROUP, L.P.

By: Kite Realty Group Trust, its sole general partner

Date:

November 4, 2022

By:

/s/ JOHN A. KITE

John A. Kite

Chairman and Chief Executive Officer

(Principal Executive Officer)

Date:

November 4, 2022

By:

/s/ HEATH R. FEAR

Heath R. Fear

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

TABLE OF CONTENTS

Part I Financial Information Item 1. Financial Statements Note 1. Organization and Basis Of Presentation Note 2. Consolidation, Investments in Joint Ventures and Noncontrolling Interests Note 3. Acquisitions Note 4. Dispositions Note 5. Deferred Costs and Intangibles, Net Note 6. Deferred Revenue, Intangibles, Net and Other Liabilities Note 7. Mortgage and Other Indebtedness Note 8. Derivative Instruments, Hedging Activities and Other Comprehensive Income Note 9. Shareholders Equity Note 10. Earnings Per Share Or Unit Note 11. Commitments and Contingencies Note 12. Subsequent Events Item 2. Management S Discussion and Analysis Of Financial Condition and Results Of Operations Item 3. Quantitative and Qualitative Disclosures About Market Risk Item 4. Controls and Procedures Part II Other Information Item 1. Legal Proceedings Item 1A. Risk Factors Item 2. Unregistered Sales Of Equity Securities and Use Of Proceeds Item 3. Defaults Upon Senior Securities Item 4. Mine Safety Disclosures Item 5. Other Information Item 6. Exhibits

Exhibits

2.1 Agreement and Plan of Merger, dated as of July 18, 2021, by and among Kite Realty Group Trust, KRG Oak, LLC, and Retail Properties of America, Inc. Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 19, 2021 3.1 Articles of Amendment and Restatement of Declaration of Trust of the Kite Realty Group Trust, as supplemented and amended Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 28, 2022 3.2 Second Amended and Restated Bylaws of the Company, as amended Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 28, 2022 10.1 Second Amendment to Sixth Amended and Restated Credit Agreement, dated as of July 29, 2022, by and among Kite Realty Group, L.P., Kite Realty Group Trust, KeyBank National Association, as administrative agent, and the lenders party thereto Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 2, 2022 10.2 Fourth Amendment to Term Loan Agreement, dated as of July 29, 2022, by and among Kite Realty Group, L.P., Kite Realty Group Trust, KeyBank National Association, as administrative agent, and the lenders party thereto Incorporated by reference to Exhibit 10.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 2, 2022 31.1 Certification of principal executive officer of the Parent Company required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 31.2 Certification of principal financial officer of the Parent Company required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 31.3 Certification of principal executive officer of the Operating Partnership required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 31.4 Certification of principal financial officer of the Operating Partnership required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 Filed herewith 32.1 Certification of Chief Executive Officer and Chief Financial Officer of the Parent Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith 32.2 Certification of Chief Executive Officer and Chief Financial Officer of the Operating Partnership pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 Filed herewith

KRG 10-Q Quarter ended Sept. 30, 2022

Exhibits