KITE REALTY GROUP TRUST Management Discussion and Analysis of Financial Position and Results of Operations (Form 10-Q)



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

                Cautionary Note About Forward-Looking Statements


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

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

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

•risks associated with the Company's merger with Retail Properties of America
("RPAI"), including the integration of the businesses of the combined company,
the ability to achieve expected synergies or cost savings and potential
disruptions to the Company's plans and operations;
•national and local economic, business, real estate and other market conditions,
particularly in connection with low or negative growth in the U.S. economy as
well as economic uncertainty;
•financing risks, including the availability of, and costs associated with,
sources of liquidity;
•our ability to refinance, or extend the maturity dates of, our indebtedness;
•the level and volatility of interest rates;
•the financial stability of tenants, including their ability to pay rent or
request rent concessions and the risk of tenant insolvency and bankruptcies;
•the competitive environment in which we operate, including potential
oversupplies and reduction in demand for rental space;
•acquisition, disposition, development and joint venture risks;
•property ownership and management risks, including the relative illiquidity of
real estate investments, periodic costs to repair, renovate and re-lease space,
operating costs and expenses, vacancies or the inability to rent space on
favorable terms or at all;
•our ability to maintain our status as a real estate investment trust for U.S.
federal income tax purposes;
•potential environmental and other liabilities;
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•impairment in the value of real estate property we own;
•the attractiveness of our properties to tenants, the actual and perceived
impact of e-commerce on the value of shopping center assets and changing
demographic and customer traffic patterns;
•risks related to our current geographical concentration of our properties in
Texas, Florida, New York, Maryland, Virginia, and North Carolina;
•civil unrest, acts of terrorism or war, acts of God, climate change, epidemics,
pandemics (including COVID-19), natural disasters and severe weather conditions
such as hurricanes, tropical storms, tornadoes, earthquakes, droughts, floods
and fires, including such events or conditions that may result in underinsured
or uninsured losses or other increases in costs and expenses;
•changes in laws and government regulations including governmental orders
affecting the use of our properties or the ability of our tenants to operate,
and the costs of complying with such changed laws and government regulations;
•possible short-term or long-term changes in consumer behavior due to COVID-19
and the fear of future pandemics;
•insurance costs and coverage;
•risks associated with cybersecurity attacks and the loss of confidential
information and other business disruptions;
•other factors affecting the real estate industry generally; and
•other risks identified in this Quarterly Report on Form 10-Q and, from time to
time, in other reports we file with the Securities and Exchange Commission (the
"SEC") or in other documents that we publicly disseminate, including, in
particular, the section titled "Risk Factors" in our Annual Report on Form 10-K
for the fiscal year ended December 31, 2020.

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

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Our company and our properties

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

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

TO September 30, 2021, we had interests in 87 operating properties totaling approximately 16.8 million square feet. We also had six development and redevelopment projects at that date.

TO September 30, 2020, we had interests in 89 properties in operation and under development totaling approximately 17.4 million square feet. We also had three development and redevelopment projects at that date.

On October 22, 2021, we completed a merger with Retail Properties of America,
Inc. ("RPAI"), in which RPAI merged with and into a wholly-owned subsidiary of
ours in a stock-for-stock exchange with a transaction value of approximately
$4.7 billion, including the assumption of approximately $1.9 billion of debt.
See Note 11 for additional details.

Impacts on businesses of COVID-19

  The current pandemic of the novel coronavirus, or COVID-19, and the public
health measures that have been undertaken in response, have had a significant
adverse impact on many of our tenants and on our business. The effects of
COVID-19, including related government restrictions, mandatory quarantines,
"shelter in place" orders, border closures, "social distancing" practices and
other travel and gathering restrictions and practices, have caused many of our
tenants to close stores, reduce hours or significantly limit service that may
create headwinds for our tenants even after the current restrictions are lifted.
Because we cannot estimate when the COVID-19 pandemic and the containment
measures will end, if there will be a slowing or potential rollback of
"reopenings" in certain states or what short-term or long-term impact the
pandemic may have on consumer behavior, we cannot estimate the ultimate
operational and financial impact of COVID-19 on our business. However, the
following operating trends, combined with macroeconomic uncertainty, lead us to
believe that our operating results could continue to be significantly affected
by COVID-19:

•As of September 30, 2021, substantially all of our tenants have reopened.
•As of November 6, 2021, we have collected approximately 98% of rent billings
for three months ended September 30, 2021.
•Many of our tenants have taken on additional debt as a result of COVID-19,
including loans administered by the Small Business Administration. To the extent
this debt is not forgiven, the increased debt load may hamper their ability to
continue to operate and to pay rent, which could cause the Company to realize
decreased cash flow and increased vacancies at its properties.

In 2020, the effects of COVID-19 triggered a global and domestic economic
recession, and if the recession continues well beyond the lifting of government
restrictions related to COVID-19, many of our tenants could face financial
distress. Historically, economic indicators such as GDP growth, consumer
confidence and employment are correlated with demand for certain of our tenants'
products and services. These conditions could increase the number of our tenants
that are unable to meet their lease obligations to us and could limit the demand
for our space from new tenants.
We expect the significance of the COVID-19 pandemic, including the extent of its
effects on our business, financial performance and condition, operating results
and cash flows and the economic slowdown, to be dictated by, among other things,
the duration of the COVID-19 pandemic, including possible resurgences, variants
and mutations, the success of efforts to contain it, the continued speed of the
vaccine distribution, the efficacy of vaccines, including against variants of
COVID-19, acceptance and availability of vaccines and the impact of actions
taken in response to the pandemic. These uncertainties make it difficult to
predict operating results for our business. Therefore, there can be no
assurances that we will not experience further declines in revenues, net income,
FFO, or other operating metrics, which could be material.
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We have sought to take advantage of opportunities caused by the COVID-19
pandemic. During this quarter, we executed 82 new and renewal leases
representing over 584,800 square feet. In addition, we are actively negotiating
with multiple tenants to lease the vacant anchor boxes that were caused by the
disruption from the COVID-19 pandemic. Building upon our previous results, we
have leased 12 of the vacant anchor boxes since COVID-19 began and are in active
lease negotiations for multiple other spaces.
In addition, we continue to focus also on maintaining a strong balance sheet
with significant liquidity. In March 2021, we issued $175.0 million of
Exchangeable Notes with a 0.75% coupon to proactively fund our 2022 debt
maturities. In addition, we have closed on the sale of 17 ground leases during
the nine months ended September 30, 2021 for gross proceeds of $42.0 million. As
of September 30, 2021, we have over $600.0 million of liquidity, limited capital
commitments, and manageable debt maturities.
Recent Activities

Acquisition and Merger Project with RPAI

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

Under the terms of the Merger Agreement, each outstanding share of RPAI's common
stock was converted into the right to receive 0.623 common shares of the Company
plus cash in lieu of fractional Company shares with an aggregate market value of
approximately $2.8 billion.

Operating Activity

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

For comparable new and renewal leases signed in the third quarter of 2021, which
are defined as those for which the space was occupied by a tenant within the
last 12 months, we achieved a blended cash rent spread of 13.4% and a blended
GAAP rent spread of 20.7%.

Results of operations

The comparability of results of operations for the three and nine months ended
September 30, 2021 and 2020 is affected by our redevelopment activities,
acquisition activities and operating property dispositions during these
periods. Therefore, we believe it is useful to review the comparisons of our
results of operations for these periods in conjunction with the discussion of
our activities during those periods, which is set forth below.

Redevelopment activities

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

                                                                            Transition to
        Property Name                            MSA                       Redevelopment1               Transition to Operations               Owned GLA
Hamilton Crossing Centre2           Indianapolis, IN                    June 2014                   Pending                                       92,283
The Corner2                         Indianapolis, IN                    December 2015               Pending                                       26,500
Glendale Town Center 2              Indianapolis, IN                    March 2019                  Pending                                      393,002
Courthouse Shadows 3                Naples, FL                          June 2013                   Sold                                         124,802


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____________________

1              Transition date represents the date the property was 

transferred from our operation

               portfolio into redevelopment status.
2              This property has been identified as a redevelopment 

property and is not included

               in the operating portfolio or the same property pool.
3              This property was sold in July 2020.


Development activities

The following properties have been actively developed at various times during the period from January 1, 2020 through September 30, 2021:

        Property Name                          MSA                       Start Date             Anticipated Completion Date              Owned GLA
Glendale Town Center
Apartments                           Indianapolis, IN                     Q2 2020                         Q2 2022                          207,000
Eddy Street Commons - Phase II       South Bend, IN                       Q3 2017                         Q4 2020                            8,500
Eddy Street Commons - Phase
III                                  South Bend, IN                       Q3 2020                         Q1 2022                           18,600
The Landing at Tradition -
Phase II                             Port St. Lucie, FL                   Q2 2022                         Q2 2023                           39,900



Acquisition Activities

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

            Property Name             MSA            Acquisition Quarter        Owned GLA
         Eastgate Crossing       Raleigh, NC               Q4 2020             158,724



Comparison of operating results for the three months ended September 30, 2021 at the Completed Three Months September 30, 2020

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

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Three months ended September 30,

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

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

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

$ (4,587) $ (2,373)

Property operating expense to total revenue ratio                 14.7   %                15.9  %



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

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



The net increase of $5.2 million in rental income for properties fully
operational during 2020 and 2021 is primarily due to improved collection
activity leading to a decrease in bad debt expense, which contributed a positive
variance of $5.4 million. These positive variances were partially offset by
lower base minimum rent of $0.6 million due to an increase in vacancy driven by
the COVID-19 pandemic.

Other property related revenue primarily consists of parking revenues, gains on
the sale of land and other miscellaneous activity. This revenue increased by
$0.4 million, due to improved parking revenue during 2021.

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

Building operating expenses increased $ 0.2 million, or 1.5%, because of the following:

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                                                                              Net change 2020 to
                                                                                     2021

Buildings under redevelopment or acquired in 2020 and / or 2021

                106
Properties fully operational during 2020 and 2021 and other                                 46
Total                                                                         $            152



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

Property taxes have fallen $ 0.7 million, or 7.9%, due to the following:

                                                                              Net change 2020 to
                                                                                     2021

Buildings under redevelopment or acquired in 2020 and / or 2021

                50
Properties fully operational during 2020 and 2021 and other                              (788)
Total                                                                         $          (738)


The Internet $ 0.8 million the decrease in property taxes for fully operational properties in 2020 and 2021 is mainly due to the success of property tax appeals across the portfolio, especially for our Texas Properties. The majority of the property tax charge is recoverable from tenants and this recovery is reflected in rental income.

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

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

Depreciation and amortization expense decreased $3.8 million, or 11.1%, due to
the following:
                                                                               Net change 2020
                                                                                   to 2021

Buildings under redevelopment or acquired in 2020 and / or 2021

              770
Properties fully operational during 2020 and 2021 and other                           (4,530)
Total                                                                         $       (3,760)



The net decrease of $4.5 million in depreciation and amortization at properties
fully operational during 2020 and 2021 is primarily due to accelerated
depreciation and amortization for certain former tenants that occurred in 2020.
Interest expense increased $0.3 million or 2.6%. The increase is primarily due
to interest costs related to the Exchangeable Notes that were issued in March
2021.

Comparison of operating results for the nine months ended September 30, 2021 at the end of the nine months September 30, 2020

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

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                                                                       Nine 

Ended months September 30,

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

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

 Equity in loss of unconsolidated subsidiaries                    (758)             (1,256)                 498
Other expense, net                                                 189                 234                  (45)
Net income (loss)                                               18,433              (9,281)              27,714
Net income attributable to noncontrolling interests             (1,058)               (148)                (910)

Net income (loss) attributable to Kite Realty Group Trust $ 17,375

$ (9,429) $ 26,804

Property operating expense to total revenue ratio                 14.7   %  

15.4%



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

                                                                                  Net change
                                                                                 2020 to 2021
Properties or components of properties sold during 2020 or 2021                  $   (1,338)
Properties under redevelopment or acquired during 2020 and/or 2021          

3 438

Properties fully operational during 2020 and 2021 and other                          12,638
Total                                                                            $   14,738


The net increase in $ 12.6 million rental income from fully operational buildings in 2020 and 2021 is mainly due to an improvement in collection activity leading to a decrease in bad debts, which contributed to a positive difference of $ 13.3 million.

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

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

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

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                                                                              Net change 2020 to
                                                                                     2021

Buildings under redevelopment or acquired in 2020 and / or 2021

                501
Properties fully operational during 2020 and 2021 and other                                 27
Total                                                                         $            528



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

Property taxes have increased $ 23,000, or 0.1%, due to the following:

                                                                               Net change 2020 to
                                                                                      2021

Buildings under redevelopment or acquired in 2020 and / or 2021

                 359
Properties fully operational during 2020 and 2021 and other                                (336)
Total                                                                         $              23



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

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

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

Depreciation and amortization expense decreased $6.2 million, or 6.4%, due to
the following:
                                                                             Net change 2020 to
                                                                                    2021

Buildings under redevelopment or acquired in 2020 and / or 2021

            2,127
Properties fully operational during 2020 and 2021 and other                           (8,332)
Total                                                                        $        (6,205)



The net decrease of $8.3 million in depreciation and amortization at properties
fully operational during 2020 and 2021 is primarily due to accelerated
depreciation and amortization for certain former tenants that occurred in 2020.
Interest expense decreased $0.7 million or 1.9%. The decrease is primarily due
to interest costs incurred in the second quarter of 2020 associated with a
precautionary $300 million draw on the Credit Facility that was paid back during
the remainder of 2020 partially offset by interest costs associated with the
Exchangeable Notes issued in March 2021.

Net Operating Income and Building Operating Income

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

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

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

  When evaluating the properties that are included in the same property pool,
the Company has established specific criteria for determining the inclusion of
properties acquired or those recently under development. An acquired property is
included in the same property pool when there is a full quarter of operations in
both years subsequent to the acquisition date. Development and redevelopment
properties are included in the same property pool four full quarters after the
properties have been transferred to the operating portfolio. A redevelopment
property is first excluded from the same property pool when the execution of a
redevelopment plan is likely and the Company a) begins recapturing space from
tenants or b) the contemplated plan significantly impacts the operations of the
property. For the quarter ended September 30, 2021, the Company excluded three
redevelopment properties from the same property pool that met these criteria and
were owned in both comparable periods. In addition, the Company excluded one
recently acquired property from the same property pool.

The following table reflects the net operating income of identical properties and a reconciliation to the net income attributable to common shareholders for the three and nine months ended.
September 30, 2021 and 2020:

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

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

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

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

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



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1 Same NOI property excludes (i) The Corner, Glendale Town Center, and Hamilton crossing rearrangements, (ii)

Communes of rue Eddy – Phases II and III, and The Landing of Tradition – Developments of Phase II, (iii) the

recently acquired Eastgate crossing, and (iv) office buildings. 2 Excludes leases signed but for which tenants have not yet started paying rent in cash.

Calculated as a weighted average based on when the cash rent started and expired during the period

period.

3 Includes non-cash activity in the portfolio as well as net operating income from buildings not included

in the same real estate pool comprising the properties sold during the two periods.



Our Same Property NOI increased 10.8% for the three months ended September 30,
2021, compared to the same period of the prior year. This increase was primarily
due to improved collection activity resulting in a significant reduction in bad
debt expense in 2021 compared to 2020, which was more heavily impacted by the
COVID-19 pandemic.

Liquidity and capital resources

Overview

  As discussed above, the COVID-19 pandemic has had, and could continue to have,
an adverse impact on our liquidity and capital resources. Future decreases in
cash flow from operations resulting from tenant defaults, rent deferrals or
decreases in our rents or occupancy, would decrease the cash available for the
capital uses described below, including payment of dividends. There has been
instability in the global or domestic financial markets, and we could face
difficulty in accessing debt and equity capital on attractive terms, or at all.
In addition, a significant decline in our operating performance in the future,
including as a result of tenant delinquencies, could result in us not satisfying
the financial covenants applicable to our debt, which could result in us not
being able to incur additional debt, including the remaining capacity on our
revolving credit facility, or result in a default.
  We have taken various steps to enhance our liquidity since the pandemic began,
including the issuance of $175 million of Exchangeable Notes in the first
quarter of 2021 to proactively fund our 2022 debt maturities. In addition, we
have closed on the sale of 17 ground leases during the nine months ended
September 30, 2021 for gross proceeds of $42 million. As of September 30, 2021,
we have approximately $99.5 million in cash on hand, $4.3 million in restricted
cash and escrow deposits, $416.1 million of remaining availability under our
revolving credit facility (based on the unencumbered property pool allocated
thereto), $125.0 million of short-term deposits, and no debt maturities until
2022. However, because we do not know the ultimate severity and length of the
COVID-19 pandemic or the short-term or long-term impact it may have on consumer
behavior, and thus cannot predict the impact it will have on our tenants and on
the debt and equity capital markets, we cannot estimate the ultimate impact it
will have on our liquidity and capital resources.
Our Principal Capital Resources
For a discussion of cash generated from operations, see "Cash Flows," beginning
on page 40. In addition to cash generated from operations, we discuss below our
other principal capital resources.

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

As of September 30, 2021, we had approximately $416.1 million available under
our unsecured revolving credit facility for future borrowings based on the
unencumbered property pool allocated to the unsecured revolving credit
facility. We also had $224.5 million in cash, cash equivalents, and short-term
deposits as of September 30, 2021.

We were in compliance with all applicable financial covenants under our unsecured revolving credit facility, unsecured term loans and senior unsecured notes in Canada. September 30, 2021.

We have on file with the SEC a shelf registration statement on Form S-3 relating
to the offer and sale, from time to time, of an indeterminate amount of equity
and debt securities. Equity securities may be offered and sold by the Parent
Company, and the net proceeds of any such offerings would be contributed to the
Operating Partnership in exchange for additional General Partner Units. Debt
securities may be offered and sold by the Operating Partnership with the
Operating Partnership receiving the proceeds. From time to time, we may issue
securities under this shelf registration statement for general corporate
purposes, which may include acquisitions of additional properties, the repayment
of outstanding indebtedness, capital
                                       37
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expenses, 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 million of its
common shares of beneficial interest, $0.01 par value per share under an
at-the-market offering program (the "ATM Program"). As of September 30, 2021,
the Company had not sold any common shares under the ATM Program. The Operating
Partnership intends to use the net proceeds, if any, to repay borrowings under
its unsecured revolving credit facility, to repay other indebtedness and for
working capital and other general corporate purposes. The Operating Partnership
may also use net proceeds for acquisitions of operating properties and the
development or redevelopment of properties, although there are currently no
understandings, commitments or agreements to do so.

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

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

Our main liquidity needs

Short-term liquidity needs

Near-Term Debt Maturities. As of September 30, 2021, we had $108.1 million of
secured debt scheduled to mature prior to September 30, 2022, excluding
scheduled monthly principal payments and no debt maturing for the rest of 2021.
We believe we have sufficient liquidity to repay this obligation from cash on
hand.

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

In August 2021, our Board of Trustees declared a cash distribution of $0.18 per
common share and Common Unit for the third quarter of 2021. This distribution
was paid on October 8, 2021 to common shareholders and Common Unit holders of
record as of October 1, 2021. Future distributions, if any, are at the
discretion of the Board of Trustees, which will continue to evaluate our sources
and uses of capital, liquidity position, operating fundamentals, maintenance of
our REIT qualification and other factors our Board of Trustees may deem
relevant.

Other short-term liquidity needs include expenditures for tenant improvements,
external leasing commissions and recurring capital expenditures.  During the
nine months ended September 30, 2021, we incurred $0.8 million of costs for
recurring capital expenditures on operating properties, $5.3 million of costs
for tenant improvements and external leasing commissions, and $5.9 million to
re-lease anchor space at our operating properties related to tenants open and
operating as of September 30, 2021 (excluding development and redevelopment
properties). We currently anticipate incurring approximately $18 million to $24
million of additional major tenant improvement costs related to executed leases
for currently vacant space at a number of our operating properties over the next
twelve months.

As of September 30, 2021, we had five development and redevelopment projects
under construction. Our share of the total estimated costs of these projects is
approximately $22.8 million, of which $8.4 million had been incurred as of
September 30, 2021. We anticipate incurring the majority of the remaining
$14.4 million of costs over the next 24 months. We believe we have sufficient
financing in place to fund these projects and expect to do so through cash flow
from operations.



                                       38
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Share buyback plan

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

Long-term liquidity needs

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

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

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

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

Capital expenditure on Consolidated properties

The following table summarizes cash capital expenditures for our development and
redevelopment properties and other capital expenditures for the nine months
ended September 30, 2021:
                                                                         Nine Months Ended
                                                                           September 30,
($ in thousands)                                                               2021
Active developments and redevelopment                                  $    

13,440

Redevelopment opportunities                                                            10
Recently completed projects and other                                       

12,439

Anchor retenanting                                                          

5 933

Recurring operating capital expenditures (primarily tenant improvement
payments)                                                                           5,113
Total                                                                  $           36,935



We capitalize certain indirect costs such as interest, payroll, and other
general and administrative costs related to these development activities. If we
were to experience a 10% reduction in development and redevelopment activities,
without a corresponding decrease in indirect project costs, we would have
recorded additional expense of less than $0.1 million for the three months ended
September 30, 2021.




                                       39
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Debt maturities

The following table shows the maturities of mortgage debt and corporate debt at September 30, 2021 presented by calendar year:

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




Failure to comply with our obligations under our indebtedness agreements
(including our payment obligations) could cause an event of default under such
debt, which, among other things, could result in the loss of title to assets
securing such debt, the acceleration of principal and interest payments or the
termination of the debt facilities, or exposure to the risk of foreclosure. In
addition, certain of our variable rate loans contain cross-default provisions
which provide that a violation by us of any financial covenant set forth in our
unsecured revolving credit facility agreement will constitute an event of
default under the loans, which could allow the lenders to accelerate the amounts
due under our indebtedness agreements if we fail to satisfy these financial
covenants. See "Item 1.A Risk Factors - Risks Related to Our Operations" in Kite
Realty Group Trust's Annual Report on Form 10-K for the year ended December 31,
2020 for more information related to the risks associated with our indebtedness.

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

Impact of credit rating changes on our liquidity

We have obtained investment grade corporate credit ratings from two nationally recognized credit rating agencies. These dimensions remain unchanged at September 30, 2021.

After September 30, 2021, another nationally recognized rating agency has assigned us an investment grade credit rating.

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

Cash Flows

As of September 30, 2021, we had cash, cash equivalents, and restricted cash on
hand of $103.8 million. We may be subject to concentrations of credit risk with
regard to our cash and cash equivalents.  We place our cash and short-term cash
investments with highly rated financial institutions. While we attempt to limit
our exposure at any point in time, occasionally, such cash and investments may
temporarily be in excess of FDIC and SIPC insurance limits.

                                       40
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Comparison of the completed nine months September 30, 2021 at the end of the nine months
September 30, 2020

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

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

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

• Increase in capital expenditure by $ 6.3 million and an increase in construction debts of $ 4.7 million; and

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

The cash flows generated by financing activities were $ 62.4 million for the nine months ended September 30, 2021, and $ 14.7 million during the same period of 2020. Highlights of the main sources and uses of cash in financing activities in the first nine months of 2021 and 2020 are as follows:

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

•In March 2020, we borrowed $300.0 million, net, on the Credit Facility as a
precautionary measure in order to increase our cash position and preserve
financial flexibility in light of the uncertainty in the global markets
resulting from the COVID-19 pandemic. Through September 30, 2020, we had repaid
$250.0 million of these borrowings;

• In 2021, we repaid the debt of $ 52.1 million, using part of the proceeds from the sale of seventeen land leases in 2021 and the proceeds from the issuance of exchangeable senior notes; and

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

Funds from operations

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

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

                                       41

————————————————– ——————————-

  From time to time, the Company may report or provide guidance with respect to
"NAREIT FFO as adjusted" which removes the impact of certain non-recurring and
non-operating transactions or other items the Company does not consider to be
representative of its core operating results including without limitation, gains
or losses associated with the early extinguishment of debt, gains or losses
associated with litigation involving the Company that is not in the normal
course of business, merger and acquisition costs, the impact on earnings from
employee severance, the excess of redemption value over carrying value of
preferred stock redemption, and the impact of 2020 bad debt or 2020 accounts
receivable ("2020 Collection Impact") which are not otherwise adjusted in the
Company's calculation of FFO.
Our calculations of FFO1 and reconciliation to consolidated net income and FFO,
as adjusted, for the three and nine months ended September 30, 2021 and 2020
(unaudited) are as follows:

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