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Item 7. Management’s Discussion and Analysis

2022-02-28 compared with 2021-02-22 · 332 added, 275 removed, 215 unchanged (74% of the section changed)

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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.

In the following overview, we discuss, among other things, the status of our business and properties, the effect that current United States economic conditions is having on our retail tenants and us, and the current state of the financial markets and how it impacts our financing strategy.

In the following overview, we discuss, among other things, the status of our business and properties, the effect that current U.S.

economic conditions is having on our retail tenants and us, and the current state of the financial markets and how it impacts our financing strategy.

Our Business and Properties

Kite Realty Group Trust is a publicly-held real estate investment trust which, through its majority-owned subsidiary, Kite Realty Group, L.P., owns interests in various operating subsidiaries and joint ventures engaged in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in select markets in the United States.

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, open-air shopping centers and mixed-use 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.

As of December 31, 2020, we owned interests in 90 operating and redevelopment properties totaling approximately 17.3 million square feet.

We also owned two development projects under construction as of this date.

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 real estate market and overall economic conditions.

As of December 31, 2021, we owned interests in 180 operating retail properties totaling approximately 29.0 million square feet and one office property with 0.3 million square feet.

Of the 180 operating retail properties, 11 contain an office component.

We also owned eight development projects under construction as of this date.

Merger with RPAI

On October 22, 2021, we completed the 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 active 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 serves to more than double 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 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.

Portfolio Update

As has become more evident during the COVID-19 pandemic, strong real estate matters.

The strength of the Company's real estate is evidenced by our higher rent collection rates as compared to our peers, based upon publicly reported information by each peer as of February 19, 2021.

The Company has continued to improve its asset quality.

In addition, the Company's property type lends itself to retailers' current needs including curbside pick-up and buying online and picking up in store (BOPIS) that we believe will benefit from tenant demand for additional space.

The Company's operations were impacted by the bankruptcies of retailers during the COVID-19 pandemic.

The Company had leased space to national retailers that declared bankruptcy during 2020 that comprised 5.9% of our annualized base rent.

A portion of the retailers have vacated their space with us, which will lead to an expected decline in occupancy and rental revenue in 2021.

Project Focus, our disposition program completed in 2019, allowed us to dispose of weaker, non-core assets and reduce our exposure to at-risk tenants and resulted in $502 million in combined sales, the majority of which net proceeds were used to repay debt.

It also allowed us to focus our geographic footprint on locations that are benefiting from accelerating migration shifts.

In evaluating potential acquisition, development, and redevelopment opportunities, we look for strong sub-markets where average household income, population density, traffic counts and daytime workforce populations are above the broader market average.

We also focus on locations that are benefitting from current population migratory patterns, namely major cities in states with no or relatively low income taxes, and mild or temperate climates.

In our largest sub-markets, household incomes are significantly higher and state income taxes are relatively lower than the medians for those broader markets.

As has become more evident since the COVID-19 pandemic began and as we began to operate as a combined company, high-quality real estate located in high-quality markets matters.

Open-air centers are thriving for a variety of reasons including their ability to act as last mile fulfillment centers and their convenient and affordable nature for retailers and consumers.

This includes conveniently located and easily accessible parking fields, lower operating costs as compared to other retail formats, and essential anchors that drive daily trips.

In addition, the Company’s property types are particularly suited for retailers’ current and evolving needs, including curbside pick-up and buying online and picking up in store (“BOPIS”), that we believe will benefit from tenant demand for additional space.

The strength of the Company’s real estate is evidenced by our continued strong cash leasing spreads and ABR for the retail portfolio of $19.36 per square foot.

The Company has continued to improve its asset quality and through its Merger with RPAI, acquired a refined portfolio of high-quality, open-air shopping centers and mixed-use assets.

In evaluating potential acquisition, development, and redevelopment opportunities, we look for strong sub-markets where average household income, educational attainment, population density, traffic counts and daytime workforce populations are above the broader market average.

We also focus on locations that are benefiting from current population migratory patterns, namely major cities in business-friendly states with no or relatively low income taxes, and mild or temperate climates.

In our largest sub-markets, household incomes are significantly higher and state income taxes are relatively lower than the medians for the broader markets.

In addition to targeting sub-markets with strong consumer demographics, we focus on having the most desirable tenant mix at each center.

We have aggressively targeted and executed leases with prominent grocers including Publix, Aldi, Whole Foods, and Trader Joe's, expanding retailers such as TJ Maxx, Ross Dress for Less, Burlington, and Old Navy, service and restaurant retailers and other retailers such as Ulta, REI, Five Below and Total Wine.

We have aggressively targeted and executed leases with prominent grocers including Publix, Aldi, Whole Foods, and Trader Joe’s, expanding retailers such as TJ Maxx, Ross Dress for Less, Burlington, and Old Navy, service and restaurant retailers and other retailers such as Ulta Beauty, REI, Five Below and Total Wine.

Additionally, we have identified cost-efficient ways to relocate, re-tenant and renegotiate leases at several of our properties allowing us to attract more suitable tenants.

Capital and Financing Activities

Our ability to obtain capital on satisfactory terms and to refinance borrowings as they mature is affected by the condition of the economy in general and by the financial strength of properties securing borrowings.

With the successful completion of Project Focus in 2019, we were able to enhance our already-strong balance sheet, increase our financial flexibility, and improve our liquidity to fund future growth.

We ended 2020 with approximately $566.9 million of combined cash and borrowing capacity on our Credit Facility.

In addition, as of December 31, 2020, we did not have any debt principal scheduled to mature through December 31, 2021.

The amount that we may borrow under our Credit Facility is limited by the value of the assets in our unencumbered asset pool.

As of December 31, 2020, the value of the assets in our unencumbered asset pool was $1.3 billion.

The investment grade credit ratings we have received provide us with access to the unsecured public bond market, which we may continue to use in the future to finance acquisition activity, repay maturing debt and fix interest rates.

Summary of Critical Accounting Policies and Estimates

Our significant accounting policies are more fully described in Note 2 to the accompanying consolidated financial statements.

As disclosed in Note 2, the preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the compilation of our financial condition and results of operations and, in some cases, require management’s most difficult, subjective, and complex judgments.

Valuation of Investment Properties

Management reviews operational and development projects, land parcels and intangible assets for impairment on a property-by-property basis whenever events or changes in circumstances indicate that the carrying value of the asset may not be recoverable.

This review for possible impairment requires certain assumptions, estimates, and significant judgment.

Impairment losses for investment properties and intangible assets are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets.

The evaluation of impairment is subject to certain management assumptions including projected net operating income, anticipated hold period, expected capital expenditures and the capitalization rate used to estimate the property's residual value.

Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset.

Our impairment review for land and development properties assumes we have the intent and the ability to complete the developments or projected uses for the land parcels.

If we determine those plans will not be completed or our assumptions with respect to operating assets are not realized, an impairment loss may be appropriate.

Depreciation may be accelerated for a redevelopment project, including partial demolition of existing structures after the asset is assessed for impairment.

Operating properties will be classified as held for sale only when those properties are available for immediate sale in their present condition and for which management believes it is probable that a sale of the property will be completed within one year, among other factors.

Operating properties classified as held for sale are carried at the lower of cost or fair value less estimated costs to sell.

Depreciation and amortization are suspended during the held-for-sale period.

Acquisition of Real Estate Investments

Upon acquisition of real estate operating properties, we estimate the fair value of acquired identifiable tangible assets and identified intangible assets and liabilities, assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date.

Based on these estimates, we record the estimated fair value to the applicable assets and liabilities.

In making estimates of fair values, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities.

The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs, as defined below.

Fair value is determined for tangible assets and intangibles, including:

• the fair value of the building on an as-if-vacant basis and the fair value of land determined either by comparable market data, real estate tax assessments, independent appraisals or other relevant data;

• above-market and below-market in-place lease values for acquired properties, which are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over the remaining non-cancelable term of the leases.

Any below-market renewal options are also considered in the in-place lease values.

The capitalized above-market and below-market lease values are amortized as a reduction of or addition to rental income over the term of the lease.

Should a tenant vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income;

• the value of having a lease in place at the acquisition date.

We utilize independent and internal sources for our estimates to determine the respective in-place lease values.

Our estimates of value are made using methods similar to those used by independent appraisers.

Factors we consider in our analysis include an estimate of costs to execute similar leases including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant.

The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases;

• the fair value of any assumed financing that is determined to be above or below market terms.

We utilize third party and independent sources for our estimates to determine the respective fair value of each mortgage payable.

The fair market value of each mortgage payable is amortized to interest expense over the remaining initial terms of the respective loan.

We also consider whether there is any value to in-place leases that have a related customer relationship intangible value.

Characteristics we consider in determining these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, among other factors.

To date, a tenant relationship has not been developed that is considered to have a current intangible value.

Revenue Recognition

As a lessor of real estate assets, the Company retains substantially all of the risks and benefits of ownership and accounts for its leases as operating leases.

Contractual minimum base rent, percentage rent, and expense reimbursements from tenants for common area maintenance costs, insurance and real estate taxes are our principal sources of revenue.

Base minimum rents are recognized on a straight-line basis over the terms of the respective leases.

Certain lease agreements contain provisions that grant additional rents based on a tenant’s sales volume (contingent overage rent).

Overage rent is recognized when tenants achieve the specified sales targets as defined in their lease agreements.

Overage rent is included in rental income in the accompanying consolidated statements of operations for the years ended December 31, 2020 and 2019.

If we determine that collectibility is probable, we recognize income from rentals based on the methodology described above.

We have accounts receivable due from tenants and are subject to the risk of tenant defaults and bankruptcies that may affect the collection of outstanding receivables.

These receivables are reduced for credit loss that is recognized as a reduction to rental income.

We regularly evaluate the collectibility of these lease-related receivables by analyzing past due account balances and consider such facts as the credit quality of our customer, historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the collectibility of rental income.

Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates.

We recognize the sale of real estate when control transfers to the buyer.

As part of our ongoing business strategy, we will, from time to time, sell land parcels and outlots, some of which are ground leased to tenants.

In 2021, we were able to enhance our already-strong balance sheet, increase our financial flexibility, and improve our liquidity to fund future growth with our transformative Merger with RPAI.

Prior to the Merger, we had taken various steps to enhance our liquidity, including the issuance of $175.0 million of Exchangeable Notes in the first quarter of 2021 to proactively fund our 2022 debt maturities.

We ended 2021 with approximately $1.0 billion of combined cash and borrowing capacity on our Revolving Facility.

In addition, as of December 31, 2021, we had $153.5 million of debt principal scheduled to mature through December 31, 2022 that we expect to retire using cash on hand and short-term deposits.

The three investment grade credit ratings we maintain provide us with access to the unsecured public bond market, which we may continue to use in the future to finance acquisition activity, repay maturing debt and fix interest rates.

Results of Operations

As of December 31, 2020, we owned interests in 90 operating and redevelopment properties and two development project currently under construction.

The following table sets forth the total operating and redevelopment properties and development projects that we owned as of December 31, 2020, 2019 and 2018:

# of Properties

As of December 31, 2021, we owned interests in 180 operating retail properties, one office property and eight development projects currently under construction.

Of the 180 operating retail properties, 11 contain an office component.

The following table sets forth the total operating properties and development projects that we owned as of December 31, 2021, 2020 and 2019:

Number of Properties

2021 2020 2019

Operating retail properties 180 83 82

Operating Office Properties and Other 4 4 3

Redevelopment Properties 3 4 3

Total Operating and Redevelopment Properties 90 90 111

Development Projects:

Total All Properties 92 91 112

The comparability of results of operations is affected by our development, redevelopment, and operating property disposition activities in 2018 through 2020.

Office and other components 12 4 4

Development and redevelopment projects 8 5 5

The comparability of results of operations is affected by our Merger with RPAI completed on October 22, 2021, in which we acquired 100 operating retail properties as well as five active development projects, along with the development, redevelopment, and operating property acquisition and disposition activities in 2019 through 2021.

Therefore, we believe it is most useful to review the comparisons of our results of operations for these years (as set forth below under “Comparison of Operating Results for the Years Ended December 31, 2021 and 2020 ” ) in conjunction with the discussion of these activities during those periods, which is set forth below.

Property Acquisition Activities

During the years ended December 31, 2020 and 2019, we acquired the properties listed in the table below.

We did not acquire any properties in 2018.

Results from operations for the year ended December 31, 2021 reflect the combined operation for the approximately two and a half months since the Company’s Merger with RPAI on October 22, 2021.

In the future, our results of operations will reflect the combined operations for the entire period presented.

Therefore, our historical financial statements may not be indicative of future operations results.

Property Acquisitions

During the years ended December 31, 2021, 2020 and 2019, in addition to the properties we acquired in the Merger, we acquired the following properties:

Property Name MSA Acquisition Date Owned GLA

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Eastgate Crossing Raleigh, NC December 2020 156,276

Operating Property Disposition Activities

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

Nora Plaza outparcel Indianapolis, IN December 2021 23,722

Operating Property Dispositions

During the years ended December 31, 2021 and 2019, we sold the following operating properties.

We did not sell any operating properties during the year ended December 31, 2020.

Property Name MSA Disposition Date Owned GLA

Trussville Promenade Birmingham, AL February 2018 463,836

Memorial Commons Goldsboro, NC March 2018 111,022

Tamiami Crossing 1

Naples, FL June 2018 121,705

Plaza Volente 1

Austin, TX June 2018 156,296

Livingston Shopping Center 1

Newark, NJ June 2018 139,559

Hamilton Crossing Alcoa, TN November 2018 175,464

Fox Lake Crossing Chicago, IL December 2018 99,136

Lowe's Plaza Las Vegas, NV December 2018 30,210

Whitehall Pike Bloomington, IN March 2019 128,997

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South Elgin Commons Chicago, IL December 2019 128,000

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1 The Company has retained a 20% ownership interest in this property.

Redevelopment Activities

During portions of the years ended December 31, 2020, 2019, and 2018, the following properties were under active redevelopment and removed from our operating portfolio:

Property Name MSA Transition to

Redevelopment 1

Transition to Operating Portfolio Owned GLA

Westside Market Dallas, TX October 2021 93,377

Development and Redevelopment Projects

During portions of the years ended December 31, 2021, 2020, and 2019, the following projects were under active development or redevelopment and removed from our operating portfolio:

Project Name MSA Transition to

Development or Redevelopment 1

Transition to

Operating Portfolio Owned

Commercial GLA

Courthouse Shadows 2

Naples, FL June 2013 Pending 124,802

Naples, FL June 2013 Sold 124,802

Hamilton Crossing Centre 3,4

Indianapolis, IN June 2014 Pending 92,283

City Center White Plains, NY December 2015 June 2018 363,103

Fishers Station Indianapolis, IN December 2015 September 2018 52,414

Beechwood Promenade 5

Athens, GA December 2015 December 2018 297,369

The Corner 3,4

Indianapolis, IN December 2015 Pending 24,000

Rampart Commons Las Vegas, NV March 2016 December 2018 79,314

Burnt Store Marketplace 5

Punta Gorda, FL June 2016 March 2018 95,625

Eddy Street Commons – Phase II South Bend, IN September 2017 December 2020 8,200

Eddy Street Commons – Phase III South Bend, IN September 2020 Pending 18,600

Glendale Town Center 3

Indianapolis, IN March 2019 Pending 393,002

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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 5

Washington, D.C.

October 2021 Pending 126,000

Circle East 5

Baltimore, MD October 2021 Pending 82,000

One Loudoun Downtown – Residential

and Pads G&H Commercial 5

Washington, D.C.

October 2021 Pending 67,000

Shoppes at Quarterfield 5

Baltimore, MD October 2021 Pending 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 was sold in 2020.

3 This property has been identified as a redevelopment property and is not included in the operating portfolio or the same property pool.

4 This redevelopment would potentially include the creation of a mixed-use (office, retail, and multi-family) development.

5 This property was sold in 2019.

4 This redevelopment will include the creation of a mixed-use development.

5 Projects were assumed as part of the Merger with RPAI in October 2021.

Net Operating Income and Same Property Net Operating Income

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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.

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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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.

When we receive 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.

We believe that Same Property NOI is helpful to investors as a measure of our operating performance because it includes only the NOI of properties that have been owned for the full period presented.

We believe such presentation eliminates disparities in net income due to the acquisition or disposition of properties during the particular period presented and thus provides a more consistent metric for the comparison of our properties.

We believe 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.

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Development and redevelopment properties are included in the same property pool four full quarters after the properties have been transferred to the operating portfolio.

A redevelopment property is first excluded from the same property pool when the execution of a redevelopment plan is likely and we 1) begin recapturing space from tenants or b) the contemplated plan significantly impacts the operations of the property.

At December 31, 2020, the same property pool excluded three properties in redevelopment, one recently completed development, two acquired properties, and three commercial properties.

The following table reflects Same Property NOI 1 and a reconciliation to net income attributable to common shareholders for the years ended December 31, 2020 and 2019 (unaudited):

($ in thousands) Years Ended December 31,

2020 2019 % Change

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.

At December 31, 2021, the same property pool excluded (i) the recently completed Glendale Town Center and Eddy Street Commons – Phase II development projects, (ii) eight active development and redevelopment projects, (iii) the 2020 acquisition of Eastgate Crossing, (iv) the legacy RPAI portfolio, and (v) office properties.

The following table reflects Same Property NOI 1 and a reconciliation to net loss attributable to common shareholders for the years ended December 31, 2021 and 2020 (unaudited):

Year Ended December 31,

($ in thousands) 2021 2020 Change

Number of properties in same property pool for the period 82 82

Leased percentage at period end 93.1 % 91.4 %

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Same Property NOI $ 190,232 $ 179,325 6.1 %

Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure:

Reconciliation of Same Property NOI to most

directly comparable GAAP measure:

Net operating income – same properties $ 190,232 $ 179,325

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76,759 10,063

Other (expense) income, net (357) (471)

Total property net operating income 266,991 189,388

Other income (expense), net 1,491 (357)

General, administrative and other (33,984) (30,840)

Loss on debt extinguishment — (11,572)

Impairment charges — (37,723)

Depreciation and amortization expense (128,648) (132,098)

Merger and acquisition costs (86,522) —

Depreciation and amortization (200,460) (128,648)

Interest expense (60,447) (50,399)

Gains on sales of operating properties 4,733 38,971

Net income attributable to noncontrolling interests (100) (532)

Gain on sales of operating properties, net 31,209 4,733

Net loss (income) attributable to noncontrolling interests 916 (100)

Net loss attributable to common shareholders $ (80,806) $ (16,223)

1 Same Property NOI excludes (i) The Corner, Glendale Town Center, and Hamilton Crossing redevelopments, (ii) Eddy Street Commons - Phases II and III developments, (iii) the recently acquired Eastgate Crossing and Nora Plaza, and (iv) office properties.

1 Same Property NOI excludes (i) the recently completed Glendale Town Center and Eddy Street Commons – Phase II development projects, (ii) eight active development and redevelopment projects, (iii) the 2020 acquisition of Eastgate Crossing, (iv) the legacy RPAI portfolio, and (v) office properties.

2 Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent.

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3 Includes non-cash activity across the portfolio as well as net operating income from properties not included in the same property pool including properties sold during both periods.

Our Same Property NOI decreased 6.6% in 2020 compared to 2019.

This decrease was primarily due to bad debt expense of $12.1 million in 2020 related to certain tenants that were impacted by the COVID-19 pandemic.

Our Same Property NOI increased 6.1% in 2021 compared to 2020 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.

When excluding the impact of 2020 collections, Same Property NOI grew by approximately 4.0%.

Funds From Operations

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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.

Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the

current NAREIT definition or that interpret the current NAREIT definition differently than we do.

For informational purposes, we have also provided FFO adjusted for loss on debt extinguishment.

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

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 the collection of 2020 accounts receivable previously written off (“2020 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 years ended December 31, 2021, 2020 and 2019 (unaudited) are as follows:

($ in thousands) Years Ended December 31,

2020 2019 2018

Year Ended December 31,

($ in thousands) 2021 2020 2019

Consolidated net loss $ (81,722) $ (16,123) $ (2)

net income attributable to noncontrolling interests in properties (514) (528) (528)

Gain on sales of operating properties (4,733) (38,971) (3,424)

gain on sales of operating properties, net (31,209) (4,733) (38,971)

impairment charges — — 37,723

depreciation and amortization of consolidated and unconsolidated entities, net of noncontrolling interests 130,091 133,184 151,856

depreciation and amortization of consolidated and unconsolidated entities,

net of noncontrolling interests 201,834 130,091 133,184

FFO of the Operating Partnership 1

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$ 88,389 $ 108,707 $ 131,406

severance charge 3,253 — —

merger and acquisition costs 86,522 — —

severance charges — 3,253 —

loss on debt extinguishment — — 11,572

2020 Collection Impact (3,707) — —

FFO, as adjusted, of the Operating Partnership $ 171,204 $ 111,960 $ 142,978

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1 “FFO of the Operating Partnership” measures 100% of the operating performance of the Operating Partnership’s real estate properties.

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Earnings before Interest, Tax, Depreciation, and Amortization (EBITDA)

We define EBITDA, a non-GAAP financial measure, as net income before depreciation and amortization, interest expense and income tax expense of TRS.

For informational purposes, we have also provided Adjusted EBITDA, which we define as EBITDA less (i) EBITDA from unconsolidated entities, (ii) gains on sales of operating properties or impairment charges, (iii) other income and expense, (iv) noncontrolling interest EBITDA and (v) other non-recurring activity or items impacting comparability from period to period.

We define EBITDA, a non-GAAP financial measure, as net income before depreciation and amortization, interest expense and income tax expense of the TRS.

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.

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

For informational purposes, we have also provided Annualized Adjusted EBITDA, adjusted as described above.

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.

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Consolidated net loss $ (100,155)

Adjustments to net income:

Adjustments to net loss:

Depreciation and amortization 109,835

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Income tax benefit of taxable REIT subsidiary (2)

Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) 37,060

EBITDA 32,739

Adjustments to EBITDA:

Unconsolidated EBITDA 882

Gain on sales of operating properties 159

Severance charges 3,253

Merger and acquisition costs 76,564

Pro forma adjustments 1

Gain on sales of operating properties, net (3,692)

Other income and expense, net (508)

Noncontrolling interest (132)

Noncontrolling interests (118)

Adjusted EBITDA 120,235

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Company share of Net Debt:

Mortgage and other indebtedness $ 1,170,794

Mortgage and other indebtedness, net $ 3,150,808

Partner share of consolidated joint venture debt 3

Cash, cash equivalents, and restricted cash (47,760)

cash, cash equivalents, restricted cash and short-term deposits (226,644)

Company share of unconsolidated joint venture debt 30,164

Debt Premium 5,282

debt discounts, premiums and issuance costs, net (58,583)

Company share of Net Debt $ 2,895,165

Net Debt to Adjusted EBITDA 6.0x

____________________

1 Pro forma adjustments to reflect as if the properties (including the legacy RPAI portfolio) acquired during the fourth quarter of 2021 were owned for the entire period.

2 Represents Adjusted EBITDA for the three months ended December 31, 2021 (as shown in the table above) multiplied by four.

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The following table reflects changes in the components of our consolidated statements of operations for the years ended December 31, 2021 and 2020:

($ in thousands) 2020 2019 Net change 2019 to 2020

($ in thousands) 2021 2020 Net change

Rental income $ 367,399 $ 257,670 $ 109,729

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General, administrative and other 33,984 30,840 3,144

Merger and acquisition costs 86,522 — 86,522

Depreciation and amortization 200,460 128,648 71,812

Impairment charge — 37,723 (37,723)

Total expenses 426,057 236,367 189,690

Gains on sale of operating properties, net 4,733 38,971 (34,238)

Operating income 35,011 71,757 (36,746)

Gain on sales of operating properties, net 31,209 4,733 26,476

Operating (loss) income (21,524) 35,011 (56,535)

Interest expense (60,447) (50,399) (10,048)

Income tax benefit of taxable REIT subsidiary 310 696 (386)

Loss on debt extinguishment — (11,572) 11,572

Equity in loss of unconsolidated subsidiary (1,685) (628) (1,057)

Other income (expense), net 254 (573) 827

Consolidated net income (16,123) (2) (16,121)

Net income attributable to noncontrolling interests (100) (532) 432

Net (loss) income attributable to Kite Realty Group Trust (16,223) (534) $ (15,689)

Equity in loss of unconsolidated subsidiaries (416) (1,685) 1,269

Other income, net 355 254 101

Net loss (81,722) (16,123) (65,599)

Net loss (income) attributable to noncontrolling interests 916 (100) 1,016

Net loss attributable to Kite Realty Group Trust (80,806) (16,223) $ (64,583)

Property operating expense to total revenue ratio 14.9 % 15.4 % (0.5 %)

Rental income decreased $50.7 million, or 16.4%, due to the following:

($ in thousands) Net change 2019 to 2020

Properties sold during 2019 $ (31,809)

Rental income (including tenant reimbursements) increased $109.7 million, or 42.6%, due to the following:

($ in thousands) Net change

Properties or components of properties sold during 2020 or 2021 $ (2,606)

Properties under redevelopment or acquired during 2020 and/or 2021 4,243

Properties acquired in the Merger with RPAI 94,716

Properties fully operational during 2020 and 2021 and other 13,376

Total $ 109,729

The net decrease of $19.8 million in rental income for properties that were fully operational during 2019 and 2020 is primarily due to $17.4 million of bad debt expense for certain non-cash straight-line rent and billed rent receivables related to tenants that are financially distressed due to the COVID-19 pandemic.

In addition, the Company had a reduction in minimum rent due to a decrease in occupancy due to certain closures, most notably by certain anchor tenants, such as Stein Mart, 24 Hour Fitness, and New York Sports Club that have declared bankruptcy during the COVID-19 pandemic.

While leasing activity was reduced during 2020, the Company has been able to continue to generate higher rents on new leases and renewals.

The net increase of $13.4 million in rental income for properties that were 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 $10.7 million on billed rent and $5.1 million on straight-line rent.

These positive variances were partially offset by lower base minimum rent of $1.7 million due to an increase in vacancies driven by the COVID-19 pandemic.

The occupancy of the fully operational properties declined from 92.0% for 2020 to 89.1% for 2021.

We continued to experience strong leasing volumes in 2021 and continued to generate higher rents on new leases and renewals.

The average rents for new comparable leases signed in 2021 were $21.38 per square foot compared to average expiring base rents of $17.22 per square foot in that period.

The average base rents for renewals signed in 2021 were $18.09 per square foot compared to average expiring base rents of $16.92 per square foot in that period.

Following the completion of Project Focus in 2019 and the current year leasing activity, the quality of our operating retail portfolio continued to improve.

This is evidenced by the increase in the annualized base rent per square foot to $18.42 per square foot as of December 31, 2020 from $17.83 per square foot as of December 31, 2019.

Other property related revenue primarily consists of parking revenues and gains on sales of undepreciated assets.

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

We recorded fee income of $0.4 million for the years ended December 31, 2020 and 2019, respectively, from property management services provided to unconsolidated joint ventures.

Property operating expenses decreased $4.6 million, or 10.0%, due to the following:

($ in thousands) Net change 2019 to 2020

Properties sold during 2019 $ (4,592)

For the entire portfolio, the spread between leased and occupied square footage is approximately 250 basis points and represents approximately $33.0 million of NOI that will come online in the future.

In addition, the ABR per square foot of our operating retail portfolio continued to improve, as it increased to $19.36 per square foot as of December 31, 2021 from $18.42 per square foot as of December 31, 2020.

Other property-related revenue primarily consists of parking revenues, gains on the sale of land and other miscellaneous activity.

This revenue decreased by $3.9 million primarily as a result of lower gains on sales of undepreciated assets of $5.5 million, partially offset by a recovery in parking revenue of approximately $1.0 million.

We recorded fee income of $1.2 million and $0.4 million for the years ended December 31, 2021 and 2020, respectively, from property management and development services provided to unconsolidated joint ventures.

Property operating expenses increased $14.5 million, or 35.5%, due to the following:

($ in thousands) Net change

Properties or components of properties sold during 2020 or 2021 $ (8)

Properties under redevelopment or acquired during 2020 and/or 2021 (27)

Properties acquired in the Merger with RPAI 14,247

Properties fully operational during 2020 and 2021 and other 337

Total $ 14,549

The net decrease of $0.4 million in property operating expenses for properties that were fully operational during 2019 and 2020 is primarily due to a continued focus on cost controls over certain operating expense spend in 2020.

The net increase of $0.3 million in property operating expenses for properties that were fully operational during 2020 and 2021 is primarily due to a continued focus on cost controls over certain operating expense spend in 2021.

These provided savings of $1.3 million that were partially offset by an increase in insurance costs of $0.7 million due to higher premiums across the real estate industry that were realized upon renewal.

As a percentage of rental revenue, property operating expenses increased between years from 14.5% to 15.4%.

The increase was mostly due to a decline in revenue in 2020 due to the impact of the COVID-19 pandemic.

Real estate taxes decreased $2.9 million, or 7.5%, due to the following:

($ in thousands) Net change 2019 to 2020

Properties sold during 2019 $ (3,607)

As a percentage of rental revenue, property operating expenses decreased between years from 15.4% to 14.9%.

The decrease was primarily due to an increase in revenue in 2021.

Real estate taxes increased $13.7 million, or 38.1%, primarily as a result of the Merger with RPAI as detailed below:

($ in thousands) Net change

Properties or components of properties sold during 2020 or 2021 $ (189)

Properties under redevelopment or acquired during 2020 and/or 2021 494

Properties acquired in the Merger with RPAI 13,929

Properties fully operational during 2020 and 2021 and other (571)

Total $ 13,663

The net increase of $0.6 million in real estate taxes for properties that were fully operational during 2019 and 2020 is primarily due to an increase in current year tax assessments at certain operating properties.

The net decrease of $0.6 million in real estate taxes for properties that were fully operational during 2020 and 2021 is primarily due to successful real estate tax appeals at certain properties in the portfolio in 2021.

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 $3.1 million, or 10.2%.

The increase is primarily due to $3.3 million of severance charges incurred during the fourth quarter of 2020.

Depreciation and amortization expense decreased $3.5 million, or 2.6%, due to the following:

($ in thousands) Net change 2019 to 2020

Properties sold during 2019 $ (12,880)

The increase is primarily due to incremental head count as part of the Merger and higher share-based compensation expense.

The Company incurred $86.5 million of merger and acquisition costs related to its Merger with RPAI in 2021.

These costs primarily consist of fairness opinion, severance charges, legal, professional, and data migration costs.

Depreciation and amortization expense increased $71.8 million, or 55.8%, primarily as a result of the Merger with RPAI as detailed below:

($ in thousands) Net change

Properties or components of properties sold during 2020 or 2021 $ (175)

Properties under redevelopment or acquired during 2020 and/or 2021 3,062

Properties acquired in the Merger with RPAI 79,790

Properties fully operational during 2020 and 2021 and other (10,865)

Total $ 71,812

The net increase of $1.1 million in properties under redevelopment or acquired during 2019 and 2020 is primarily due to a full year of operations for Nora Plaza and Pan Am Plaza Garage that were acquired in 2019.

The net increase of $8.3 million in depreciation and amortization at properties fully operational during 2019 and 2020 is primarily due to accelerated depreciation of certain tenant-related assets for tenants that vacated their spaces during 2020.

In 2019, we recorded impairment charges totaling $37.7 million related to a reduction in the expected holding period of certain operating properties.

In 2020, we did not record any impairment charges.

See additional discussion in Note 8 to the consolidated financial statements.

Interest expense decreased $8.9 million or 15.0%.

The decrease is due to the significant debt reduction following the successful completion of Project Focus in 2019.

The Company incurred an $11.6 million loss on debt extinguishment for the year ended December 31, 2019 related to costs incurred to retire certain secured loans that were paid off in connection with property sales.

There was no such activity in 2020.

We recorded a net gain of $4.7 million for the year ended December 31, 2020 on the sale of one redevelopment property, compared to a net gain of $39.0 million on the sale of 23 assets for the year ended December 31, 2019.

The net increase of $3.1 million in properties under redevelopment or acquired during 2020 and 2021 is primarily due to a full year of operations for Eastgate Crossing, which was acquired in 2020.

The net decrease of $10.9 million in depreciation and amortization at properties fully operational during 2020 and 2021 is due to $4.0 million of accelerated depreciation

recorded in 2020 in connection with the write-off of assets taken out of service along with certain assets being fully depreciated in the prior year.

Interest expense increased $10.0 million or 19.9%.

The increase is primarily due to interest costs of $9.3 million related to debt assumed in conjunction with the Merger along with incremental interest for the Exchangeable Notes issued in March 2021.

We recorded a net gain of $31.2 million for the year ended December 31, 2021 on the sale of one operating property and a portfolio of 17 ground leases compared to a net gain of $4.7 million on the sale of one redevelopment property for the year ended December 31, 2020.

Management’s discussion of the financial condition, changes in financial condition and results of operations for the year ended December 31, 2020, with comparison to the year ended December 31, 2019, was included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2020.

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Our primary finance and capital strategy is to maintain a strong balance sheet with sufficient flexibility to fund our operating and investment activities in a cost-effective manner.

We consider a number of factors when evaluating our level of indebtedness and when making decisions regarding additional borrowings or equity offerings, including the estimated value of properties to be developed or acquired, the estimated market value of our properties and the Company as a whole upon placement of the borrowing or offering, and the ability of particular properties to generate cash flow to cover debt service.

We 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 revolving line of credit, of which the borrowing capacity was $793.5 million as of December 31, 2021, along with other indebtedness.

In addition, we closed on multiple sales for net proceeds of $80.7 million during the year ended December 31, 2021, with the majority of the activity related to the sale of 17 ground leases and one operating property.

As of December 31, 2021, we had approximately $93.2 million in cash on hand, $7.1 million in restricted cash and escrow deposits, $793.5 million of remaining availability under our Revolving Facility, $125.0 million of short-term deposits, and $153.5 million of debt maturities due in 2022.

We believe we will have adequate liquidity over the next 12 months and beyond 2022 to operate our business and to meet our cash requirement.

However, because we do not know the ultimate severity and length of the COVID-19 pandemic or the short- 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 46.

In addition to cash generated from operations, we discuss below our other principal capital resources.

The completion of Project Focus in 2019 has enhanced our liquidity position, reduced our leverage, and reduced our borrowing costs.

We continue to focus on a balanced approach to growth and staggering and extending debt maturities in order to retain our financial flexibility.

As of December 31, 2020, we had approximately $523 million available under our Credit Facility for future borrowings based on the unencumbered asset pool allocated to the unsecured revolving credit facility.

We also had $43.6 million in cash and cash equivalents as of December 31, 2020.

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

We have on file with the SEC a shelf registration statement on Form S-3 relating to the offer and sale, from time to time, of an indeterminate amount of equity and debt securities.

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 December 31, 2021, we had approximately $793.5 million available under our Revolving Facility for future borrowings.

We also had $218.2 million in cash, cash equivalents and short-term deposits as of December 31, 2021.

We were in compliance with all applicable financial covenants under our Revolving Facility, unsecured term loans, and senior unsecured notes as of December 31, 2021.

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

Equity securities may be offered and sold by the Parent Company, and the net proceeds of any such offerings would be contributed to the Operating Partnership in exchange for additional General Partner Units.

Debt securities may be offered and sold by the Operating Partnership with the Operating Partnership receiving the proceeds.

From time to time, we may issue securities under this shelf registration statement to fund the repayment of long-term debt upon maturity, for other general corporate purposes or as otherwise set forth in the applicable prospectus

We plan to file a new shelf registration statement on Form S-3 prior to or upon expiration of the current registration statement.

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 the filing by the Company and the Operating Partnership of a shelf registration statement on November 16, 2021 with the SEC.

As of December 31, 2021, 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 Revolving Facility and 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.

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Near-Term Debt Maturities .

As of December 31, 2020, we did not have any debt scheduled to mature in 2021, excluding scheduled monthly principal payments.

As of December 31, 2021, we had $153.5 million of secured debt scheduled to mature in 2022, excluding scheduled monthly principal payments.

We believe we have sufficient liquidity to repay this obligation from cash on hand and short-term deposits.

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.

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 payments of approximately $115 million in 2022 and scheduled principal payments on our debt of approximately $3.7 million in 2022, expected dividend payments to our common shareholders and Common Unit holders, and recurring capital expenditures.

In February 2022, our Board of Trustees declared a cash distribution of $0.20 per common share and Common Unit for the first quarter of 2022.

This distribution is expected to be paid on or about April 15, 2021 to common shareholders and Common Unit holders of record as of April 8, 2021.

Other short-term liquidity needs also include expenditures for tenant improvements, renovation costs, external leasing commissions and recurring capital expenditures.

During the year ended December 31, 2020, we incurred $1.7 million of costs for recurring capital expenditures on operating properties, $12.0 million of costs for tenant improvements and external leasing commissions, and $17.4 million to re-lease anchor space at our operating properties related to tenants open and operating as of December 31, 2020 (excluding development and redevelopment properties).

We currently anticipate incurring approximately $16 million to $20 million of additional major tenant improvements costs related to releasing vacant space at a number of our operating properties.

As of December 31, 2020, we had two development projects under construction:

Eddy Street Commons in South Bend, Indiana and Glendale Town Center in Indianapolis, Indiana.

This distribution is expected to be paid on April 15, 2022 to common shareholders and Common Unit holders of record as of April 8, 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.

Other short-term liquidity needs include expenditures for tenant improvements, external leasing commissions and recurring capital expenditures.

During the year ended December 31, 2021, we incurred $3.8 million for recurring capital expenditures on operating properties, $14.7 million for tenant improvements and external leasing commissions, and $9.7 million to re-lease anchor space at our operating properties related to tenants open and operating as of December 31, 2021 (excluding development and redevelopment projects).

We currently anticipate incurring approximately $100 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 12 to 18 months.

We believe we have the ability to fund these costs through cash flow from operations or by borrowing on the Revolving Facility.

As of December 31, 2021, we had eight development projects under construction, including five projects assumed in the Merger with RPAI.

Total estimated costs for these projects are $185.6 million, of which our share is estimated to be $121.7 million.

We anticipate incurring the majority of the remaining costs for the projects over the next 18 months.

We believe we have the ability to fund these projects through cash flow from operations or by borrowing on the Credit Facility.

As of December 31, 2021, we have incurred $16.6 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 by borrowing on the Revolving Facility.

Share Repurchase Plan

In February 2021, the Company’s Board of Trustees approved a share repurchase program, authorizing share repurchases up to an aggregate of $150.0 million (the “Share Repurchase Program”).

In February 2022, the Company extended its share repurchase program for an additional year.

The Share Repurchase Program, as extended, will terminate on February 28, 2023, if not terminated or extended prior to that date.

As of December 31, 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 the 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, and payment of indebtedness at maturity.

Potential Redevelopment Opportunities.

We are currently evaluating additional redevelopment of several other properties.

We believe we will have sufficient funding for these projects through cash flow from operations, borrowings on our Credit Facility and proceeds from asset sales.

Selective Acquisitions, Developments and Joint Ventures .

We may selectively pursue the acquisition and development of other properties, which would require additional capital.

It is unlikely that we would have sufficient funds on hand to meet these long-term capital requirements, requiring us to satisfy these needs through additional borrowings, sales of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions and/or participation in joint venture arrangements.

We 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 in the market.

Our ability to access the capital markets will be dependent on a number of factors, including general capital market conditions.

Capitalized Expenditures on Consolidated Properties

The following table summarizes cash capital expenditures for our development and redevelopment properties and other capital expenditures for the year ended December 31, 2020:

($ in thousands) December 31, 2020

Developments $ 2,919

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 December 31, 2021.

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 year ended December 31, 2021:

($ in thousands) Year Ended

December 31, 2021

Active development and redevelopment projects $ 22,546

Redevelopment opportunities 10

Recently completed redevelopments and other 4,244

Big Box Surge activity 17,998

Recurring operating capital expenditures (primarily tenant improvement payments) 12,797

Recently completed projects and other 13,686

Anchor re-tenanting 9,662

Recurring operating capital expenditures (primarily tenant improvements) 11,409

Total $ 57,313

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Impact of Changes in Credit Ratings on Our Liquidity

We have been assigned investment grade corporate credit ratings from two nationally recognized credit rating agencies.

These ratings were unchanged during 2020.

In the future, the ratings could change based upon, among other things, the impact that prevailing economic conditions may have on our results of operations and financial condition.

We previously received investment grade corporate credit ratings from two nationally recognized credit rating agencies and these ratings were unchanged during 2021.

We were assigned an investment grade corporate credit rating from a third nationally recognized rating agency in October 2021.

In the future, these 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.

As of December 31, 2020, we had cash and cash equivalents on hand of $43.6 million.

As of December 31, 2021, we had cash, cash equivalents and restricted cash of $100.4 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.

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.

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Comparison of the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Cash provided by operating activities was $95.5 million for the year ended December 31, 2020, a decrease of $42.4 million from the same period of 2019.

The cash flows were negatively impacted due to the significant property sales activity throughout 2019 and reduced collection activity due to the COVID-19 pandemic.

Cash used in investing activities was $80.8 million for the year ended December 31, 2020, as compared to cash provided by investing activities of $416.6 million in the same period of 2019.

The major changes in cash used in and provided by investing activities are as follows:

• Net proceeds of $23.0 million related to the sale of one redevelopment property and five parcels of land in 2020 compared to sale proceeds of $529.4 million from the sale of 23 assets in 2019;

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

• Decrease in capital expenditures of $15.0 million, partially offset by a change in construction payables of $2.4 million in 2020.

Cash used in financing activities was $20.9 million for the year ended December 31, 2020, compared to cash used in financing activities of $547.2 million in the same period of 2019.

Highlights of significant cash sources and uses in financing activities during 2020 are as follows:

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

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

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

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

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

Cash provided by operating activities was $100.4 million for the year ended December 31, 2021, an increase of $4.8 million from the same period of 2020.

The cash flows were positively impacted by the completion of the Merger, which generated 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 the debt assumed in the Merger.

Cash used in investing activities was $91.0 million for the year ended December 31, 2021, and $80.8 million in the same period of 2020.

Highlights of significant cash sources and uses in investing activities are as follows:

• Cash acquired in the Merger with RPAI in 2021 of $15.0 million;

• Net proceeds of $80.7 million related to the sale of one operating property and 17 ground leases in 2021 and other land parcels compared to net proceeds of $23.0 million related to the sale of one redevelopment property and five parcels of land in 2020;

• Acquisition of a multi-tenant retail outparcel at Nora Plaza in 2021 and acquisition deposits for $10.4 million compared to the acquisition of Eastgate Crossing in 2020 for $65.3 million;

• Investment in a short-term interest-bearing deposit of $125.0 million using the proceeds from the March 2021 Exchangeable Notes;

• Increase in capital expenditures of $19.0 million, partially offset by a change in construction payables of $4.4 million in 2021.

Cash provided by financing activities was $44.5 million for the year ended December 31, 2021, and cash used in financing activities was $20.9 million in the same period of 2020.

Highlights of significant cash sources and uses in financing activities are as follows:

• In March 2021, we issued $175.0 million of Exchangeable 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 October 2021, we borrowed $40.0 million on the Revolving Facility;

• In 2021, we paid down debt by $77.6 million using a portion of the proceeds from the sale of 17 ground leases and the Exchangeable Notes;

• In 2021, we made distributions to common shareholders and Common Unit holders of $60.0 million, compared to distributions of $39.7 million in 2020;

• In March 2020, we borrowed $300.0 million on our $600.0 million unsecured revolving line of credit as a precautionary measure to increase our cash position and preserve financial flexibility in light of uncertainty in the global markets resulting from the COVID-19 pandemic.

During the remainder of 2020, we repaid the $300.0 million borrowing on the unsecured revolving line of credit as we became incrementally more confident in the recovery from the COVID-19 pandemic;

• In December 2020, we borrowed $25.0 million on the $600.0 million unsecured revolving line of credit to fund a portion of the purchase price of Eastgate Crossing, which was repaid in February 2021.

Management’s discussion of the cash flows for the year ended December 31, 2019, with comparison to the year ended December 31, 2020, was included in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2020.

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In order to reduce the volatility relating to interest rate risk, we may enter into interest rate hedging arrangements from time to time.

We do not utilize derivative financial instruments for trading or speculative purposes.

We do not use derivative financial instruments for trading or speculative purposes.

Obligations in Connection with Projects Under Construction

We are obligated under various completion guarantees with tenants to complete tenant-specific spaces currently under construction.

We believe we currently have sufficient financing in place to fund our investment in any existing or future projects through cash from operations or borrowings on our Credit Facility.

In addition, we have provided a repayment guaranty on a $33.8 million construction loan with the development of Embassy Suites at the University of Notre Dame consistent with our 35% ownership interest.

We believe we currently have sufficient financing in place to fund our investment in any existing or future projects through cash from operations or borrowings on our Revolving Facility.

In addition, we have provided a repayment guaranty on a $33.8 million construction loan with the development of Embassy Suites at Eddy Street Commons consistent with our 35% ownership interest.

As of December 31, 2021, the current outstanding loan balance is $33.6 million, of which our share is $11.8 million.

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Senior unsecured notes $ 1,749,635 $ 550,000

Exchangeable senior notes – fixed rate 175,000 —

Unsecured revolving credit facility 55,000 25,000

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Mortgage notes payable – variable rate 29,013 55,110

Net debt premiums and issuance costs, net (5,282) (6,722)

Total mortgage and other indebtedness $ 1,170,794 $ 1,146,580

Debt discounts, premiums and issuance costs, net 58,583 (5,282)

Total mortgage and other indebtedness, net $ 3,150,808 $ 1,170,794

Consolidated indebtedness, including weighted average maturities and weighted average interest rates at December 31, 2021, is summarized below:

($ in thousands) Outstanding Amount Ratio Weighted Average

Interest Rate Weighted Average

($ in thousands) Amount Outstanding Ratio Weighted Average

Interest Rate Weighted

Average Maturity

Fixed rate debt 1

$ 2,853,212 92 % 4.00 % 4.6

Variable rate debt 2

239,013 8 % 3.01 % 4.2

Net Debt Premiums and Issuance Costs, Net (5,282) N/A N/A N/A

Debt discounts, premiums and issuance costs, net 58,583 N/A N/A N/A

Total consolidated debt $ 3,150,808 100 % 3.92 % 4.6

1 Fixed rate debt includes, and variable rate date excludes, the portion of such debt that has been hedged by interest rate derivatives.

As of December 31, 2020, $250 million in variable rate debt is hedged for a weighted average of 2.2 years.

Mortgage indebtedness is collateralized by certain real estate properties and leases.

Mortgage indebtedness is generally repaid in monthly installments of interest and principal and matures over various terms through 2030.

1 Fixed rate debt includes the portion of variable rate debt that has been hedged by interest rate swaps.

As of December 31, 2021, $720.0 million in variable rate debt is hedged to a fixed rate for a weighted average of 3.2 years.

2 Variable rate debt includes the portion of fixed rate debt that has been hedged by interest rate swaps.

As of December 31, 2021, $155.0 million in fixed rate debt is hedged to a floating rate for a weighted average of 3.7 years.

Mortgage indebtedness is collateralized by certain real estate properties and leases and is generally repaid in monthly installments of interest and principal with maturities over various terms through 2032.

Variable interest rates on mortgage indebtedness is based on LIBOR plus 160 basis points.

At December 31, 2021, the one-month LIBOR interest rate was 0.10%.

Fixed interest rates on mortgage loans range from 3.78% to 5.73%.

Fixed interest rates on mortgages payable range from 3.75% to 5.73%.

Critical Accounting Estimates

Our significant accounting policies are more fully described in Note 2 to the accompanying consolidated financial statements.

As disclosed in Note 2, the preparation of financial statements in accordance with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes.

Actual results could differ from those estimates.

Acquisition of Real Estate Investments

In accordance with ASC 805, Business Combinations , we accounted for the Merger as a business combination using the acquisition method of accounting, which requires the application of a screen test to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets to determine whether a transaction is accounted for as an asset acquisition or business combination.

Upon acquisition of real estate operating properties, including those assets acquired in the Merger with RPAI, we estimate the fair value of acquired identifiable tangible assets and identified intangible assets and liabilities, assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date.

Based on these estimates, we record the estimated fair value to the applicable assets and liabilities.

In making estimates of fair values, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities.

The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs, as defined below.

Fair value is determined for tangible assets and intangibles, including:

• above-market and below-market in-place lease values for acquired properties, which are based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over the remaining non-cancelable term of the leases.