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Item 7. Management’s Discussion and Analysis

2023-02-21 compared with 2022-02-28 · 262 added, 271 removed, 276 unchanged (66% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion should be read in conjunction with the accompanying audited consolidated financial statements and related notes thereto and Item 1A, “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K.

The following discussion should be read in conjunction with the accompanying audited consolidated financial statements and related notes thereto and Item 1A .

“Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K.

In this discussion, unless the context suggests otherwise, references to “our Company,” “we,” “us,” and “our” mean Kite Realty Group Trust and its direct and indirect subsidiaries, including Kite Realty Group, L.P.

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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, 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.

Kite Realty Group Trust is a publicly held REIT that, 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 that are primarily grocery-anchored and located in high-growth Sun Belt and select strategic gateway markets in the United States.

We derive our revenue primarily from the collection of contractual rents and reimbursement payments from tenants under existing lease agreements at each of our properties.

Therefore, our operating results depend materially on, among other things, the ability of our tenants to make required lease payments, the health and resilience of the U.S.

retail sector, interest rate volatility, job growth and real estate market and overall economic conditions.

retail sector, interest rate volatility, job growth, the real estate market and overall economic conditions.

As of December 31, 2022, we owned interests in 183 operating retail properties totaling approximately 28.8 million square feet and one office property with 0.3 million square feet.

Of the 183 operating retail properties, 11 contain an office component.

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

We also owned three 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.

On October 22, 2021, we completed the Merger with RPAI in which we acquired 100 operating retail properties and five development projects along with multiple parcels of entitled land for future value creation, creating a top five open-air shopping center REIT.

The combined high-quality, open-air portfolio is a mixture of predominantly necessity-based, grocery-anchored neighborhood and community centers, combined with vibrant mixed-use assets.

The Merger 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.

The Merger served 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.

Inflationary concerns have been counteracting the retail sector’s recovery from the COVID-19 pandemic and may affect consumer confidence and spending, which has impacted, and could continue to impact, our tenants’ sales and overall health and, in turn, put downward pricing pressure on rents that we are able to charge to new or renewing tenants, and in some cases, our percentage rents.

While many of our leases contain provisions designed to mitigate the adverse impact of inflation, including, for example, requirements for tenants to pay a share of operating expenses and rent increases that are tied to consumer price index increases, the stated rent increases or limits on such tenant’s obligation to pay its share of operating expenses could be lower than the increase in inflation at any given time.

Inflation may also increase labor or other general and administrative expenses that cannot be easily reduced.

Portfolio Update

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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.

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 $20.02 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.

The Company has continued to improve its asset quality and through the Merger, 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.

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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 Beauty, REI, Five Below and Total Wine.

We have aggressively targeted and executed leases with prominent grocers including Publix, Lidl, Aldi, Whole Foods, and Trader Joe’s, expanding retailers such as T.J.

Maxx, HomeGoods, Ross Dress for Less, Burlington, Old Navy, and pOpshelf, service and restaurant retailers and other retailers such as Ulta Beauty, REI, Five Below and Total Wine & More.

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

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.

In 2022, we were able to enhance our already-strong balance sheet, increase our financial flexibility, and improve our liquidity to fund future growth by increasing the capacity on our revolving line of credit to $1.1 billion in July 2022 and entering into a seven-year $300.0 million unsecured term loan.

We ended 2022 with approximately $1.2 billion of combined cash and borrowing capacity on our revolving line of credit.

In addition, as of December 31, 2022, we had $284.4 million of debt principal scheduled to mature through December 31, 2023, which we expect to retire using cash on hand and our revolving line of credit.

Results of Operations

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:

As of December 31, 2022, we owned interests in 183 operating retail properties, one office property and three development projects currently under construction.

The following table sets forth the total operating properties and development projects we owned as of December 31, 2022, 2021 and 2020:

Number of Properties

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Operating retail properties (1)

Office and other components 12 4 4

Office properties 1 1 1

Development and redevelopment projects 3 8 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.

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:

(1) Included within operating retail properties are 11, 11 and 3 properties that contain an office component as of December 31, 2022, 2021 and 2020, respectively.

The comparability of results of operations for the year ended December 31, 2022 is affected by our Merger with RPAI that was completed on October 22, 2021, in which we acquired 100 operating retail properties and five development projects, along with our development, redevelopment, and operating property acquisition and disposition activities in 2020 through 2022.

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, 2022 and 2021 ” ) in conjunction with the discussion of our activities during those periods, which is set forth below.

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

In addition to the properties we acquired in the Merger, the following properties were acquired during the years ended December 31, 2022, 2021 and 2020:

Property Name MSA Acquisition Date Owned GLA

Pan Am Plaza Garage Indianapolis, IN March 2019 N/A

Nora Plaza Indianapolis, IN August 2019 139,670

Eastgate Crossing Raleigh, NC December 2020 156,276

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.

Pebble Marketplace Las Vegas, NV February 2022 85,796

MacArthur Crossing two-tenant building Dallas, TX April 2022 56,077

Palms Plaza Miami, FL July 2022 68,976

The following operating properties were sold during the years ended December 31, 2022 and 2021.

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

Property Name MSA Disposition Date Owned GLA

Whitehall Pike Bloomington, IN March 2019 128,997

Beechwood Promenade Athens, GA April 2019 297,369

Village at Bay Park Green Bay, WI May 2019 82,254

Lakewood Promenade Jacksonville, FL May 2019 196,655

Palm Coast Landing Palm Coast, FL May 2019 168,352

Lowe’s – Perimeter Woods Charlotte, NC May 2019 166,085

Cannery Corner Las Vegas, NV May 2019 30,738

Temple Terrace Tampa, FL June 2019 90,328

University Town Center Oklahoma City, OK June 2019 348,877

Gainesville Plaza Gainesville, FL July 2019 162,189

Bolton Plaza Jacksonville, FL July 2019 154,155

Eastgate Plaza Las Vegas, NV July 2019 96,594

Burnt Store Punta Gorda, FL July 2019 95,625

Landstown Commons Virginia Beach, VA August 2019 398,139

Lima Marketplace Fort Wayne, IN September 2019 100,461

Hitchcock Plaza Aiken, SC September 2019 252,211

Merrimack Village Center Manchester, NH September 2019 78,892

Publix at Acworth Atlanta, GA October 2019 69,628

The Centre at Panola Atlanta, GA October 2019 73,075

Beacon Hill Crown Point, IN October 2019 56,820

Bell Oaks Centre Evansville, IN November 2019 94,958

Boulevard Crossing Kokomo, IN December 2019 124,634

South Elgin Commons Chicago, IL December 2019 128,000

Westside Market Dallas, TX October 2021 93,377

Plaza Del Lago (1)

Chicago, IL June 2022 100,016

Lincoln Plaza – Lowe’s (2)

Worcester, MA October 2022 —

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

(2) We sold the ground lease interest in one tenant at an existing multi-tenant operating retail property.

The total number of properties in our portfolio was not affected by this transaction.

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:

The following properties were under active development or redevelopment during portions of the years ended December 31, 2022, 2021, and 2020 and removed from our operating portfolio:

Project Name MSA Transition to

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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

Eddy Street Commons – Phase III South Bend, IN September 2020 March 2022 18,600

Glendale Town Center (3)

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Circle East (5)

Baltimore, MD October 2021 Pending 82,000

Baltimore, MD October 2021 September 2022 82,000

One Loudoun Downtown – Residential

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Washington, D.C.

October 2021 Pending 67,000

October 2021 Residential:

December 2022 67,000

Shoppes at Quarterfield (5)

Baltimore, MD October 2021 Pending 58,000

Baltimore, MD October 2021 June 2022 58,000

(1) Transition date represents the date the property was transferred from our operating portfolio into redevelopment status.

For legacy RPAI projects, the transition date represents the later of the date of the closing of the Merger and the date the project was transferred into redevelopment status.

2 This property was sold in 2020.

(2) This property was sold in July 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 will include the creation of a mixed-use development.

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

The redevelopment projects at Hamilton Crossing Centre and The Corner will include the creation of a mixed-use development.

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

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

Comparison of Operating Results for the Years Ended December 31, 2022 and 2021

The following table reflects changes in the components of our consolidated statements of operations for the years ended December 31, 2022 and 2021 (in thousands) :

Year Ended December 31,

2022 2021 Change

Rental income $ 782,349 $ 367,399 $ 414,950

Other property-related revenue 11,108 4,683 6,425

Fee income 8,539 1,242 7,297

Total revenue 801,996 373,324 428,672

Property operating 107,217 55,561 51,656

Real estate taxes 104,589 49,530 55,059

General, administrative and other 54,860 33,984 20,876

Merger and acquisition costs 925 86,522 (85,597)

Depreciation and amortization 469,805 200,460 269,345

Total expenses 737,396 426,057 311,339

Gain on sales of operating properties, net 27,069 31,209 (4,140)

Operating income (loss) 91,669 (21,524) 113,193

Other (expense) income:

Interest expense (104,276) (60,447) (43,829)

Income tax (expense) benefit of taxable REIT subsidiary (43) 310 (353)

Equity in earnings (loss) of unconsolidated subsidiaries 256 (416) 672

Other income, net 240 355 (115)

Net loss (12,154) (81,722) 69,568

Net (income) loss attributable to noncontrolling interests (482) 916 (1,398)

Net loss attributable to common shareholders $ (12,636) $ (80,806) $ 68,170

Property operating expense to total revenue ratio 13.4 % 14.9 %

Rental income (including tenant reimbursements) increased $415.0 million, or 112.9%, due to the following (in thousands) :

Properties or components of properties sold during 2021 or 2022 $ (417)

Properties under redevelopment or acquired during 2021 and/or 2022 6,660

Properties acquired in the Merger with RPAI 402,842

Properties fully operational during 2021 and 2022 and other 5,865

Total $ 414,950

The net increase of $5.9 million in rental income for properties that were fully operational during 2021 and 2022 is primarily due to a $3.3 million increase in tenant reimbursements due to higher recoverable common area maintenance expenses and increases in base minimum rent of $2.8 million due to improved tenant performance, overage rent of $2.2 million and ancillary income of $1.4 million.

These variances were partially offset by a $2.6 million increase in bad debt expense and a $1.3 million decrease in lease termination income.

The occupancy of the fully operational properties increased from 88.0% for 2021 to 92.3% for 2022.

We continued to experience strong leasing volumes in 2022 and generate higher rents on new leases and renewals.

The average rents for new comparable leases signed in 2022 were $27.07 per square foot compared to average expiring base rents of $19.65 per square foot in that period.

The average base rents for renewals signed in 2022 were $18.52 per square foot compared to average expiring base rents of $17.06 per square foot in that period.

For the entire portfolio, the spread between leased and occupied square footage is approximately 270 basis points and represents approximately $33.0 million of NOI, the majority of

which will come online in 2023.

In addition, the ABR per square foot of our operating retail portfolio continued to improve, as it increased to $20.02 per square foot as of December 31, 2022 from $19.36 per square foot as of December 31, 2021.

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

This revenue increased by $6.4 million primarily as a result of higher gains on sales of undepreciated assets of $4.0 million recognized during the year ended December 31, 2022 and increases in miscellaneous income of $1.6 million and parking revenue of $0.8 million.

We recorded fee income of $8.5 million and $1.2 million during the years ended December 31, 2022 and 2021, respectively, from property management and development services provided to third parties and unconsolidated joint ventures.

The increase in fee income is primarily due to $7.1 million of development fees earned related to the development of a corporate campus for Republic Airways at Hamilton Crossing Centre.

Property operating expenses increased $51.7 million, or 93.0%, due to the following (in thousands) :

Properties or components of properties sold during 2021 or 2022 $ (245)

Properties under redevelopment or acquired during 2021 and/or 2022 1,032

Properties acquired in the Merger with RPAI 49,725

Properties fully operational during 2021 and 2022 and other 1,144

Total $ 51,656

The net increase of $1.1 million in property operating expenses for properties that were fully operational during 2021 and 2022 is primarily due to increases in insurance expense of $4.0 million and utilities of $0.6 million, partially offset by a $3.8 million decrease in repairs and maintenance and landscaping expenses.

As a percentage of revenue, property operating expenses decreased from 14.9% to 13.4% primarily due to an increase in revenue in 2022.

Real estate taxes increased $55.1 million, or 111.2%, primarily as a result of the Merger with RPAI as detailed below (in thousands) :

Properties or components of properties sold during 2021 or 2022 $ 38

Properties under redevelopment or acquired during 2021 and/or 2022 724

Properties acquired in the Merger with RPAI 55,038

Properties fully operational during 2021 and 2022 and other (741)

Total $ 55,059

The net decrease of $0.7 million in real estate taxes for properties that were fully operational during 2021 and 2022 is primarily due to successful real estate tax appeals at certain properties in the portfolio, most notably for certain of our Texas properties.

The majority of real estate tax expense is recoverable from tenants and such recovery is reflected within rental income.

General, administrative and other expenses increased $20.9 million, or 61.4%.

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

The Company incurred $0.9 million and $86.5 million of merger and acquisition costs related to the Merger with RPAI during the years ended December 31, 2022 and 2021, respectively.

Costs incurred during 2022 primarily consist of professional fees and technology costs while costs incurred during 2021 primarily consist of fairness opinion, severance charges, legal, professional, and data migration costs.

Depreciation and amortization expense increased $269.3 million, or 134.4%, primarily as a result of the Merger with RPAI as detailed below (in thousands) :

Properties or components of properties sold during 2021 or 2022 $ 2,686

Properties under redevelopment or acquired during 2021 and/or 2022 4,723

Properties acquired in the Merger with RPAI 260,779

Properties fully operational during 2021 and 2022 and other 1,157

Total $ 269,345

The net increase of $4.7 million in depreciation and amortization for properties under redevelopment or acquired during 2021 and 2022 is primarily due to the acquisition of Pebble Marketplace and Palms Plaza in 2022.

The net increase of $1.2 million in depreciation and amortization at properties that were fully operational during 2021 and 2022 is due to the timing of additions and disposals at operating properties.

We recorded a net gain of $27.1 million for the year ended December 31, 2022 on the sale of Plaza Del Lago, a portion of Hamilton Crossing Centre and the ground lease interest in Lowe’s at Lincoln Plaza compared to a net gain of $31.2 million on the sale of Westside Market and a portfolio of 17 ground leases for the year ended December 31, 2021.

Interest expense increased $43.8 million, or 72.5%, primarily due to interest costs of $39.1 million related to debt assumed in conjunction with the Merger.

Management’s discussion of the financial condition, changes in financial condition and results of operations for the year ended December 31, 2021, 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, 2021 , which is incorporated by reference in this Annual Report on Form 10-K.

Net Operating Income and Same Property Net Operating Income

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We also use same property NOI (“Same Property NOI”), a non-GAAP financial measure, to evaluate the performance of our properties.

Same Property NOI excludes properties that have not been owned for the full period presented.

It also excludes net gains from outlot sales, straight-line rent revenue, lease termination income in excess of lost rent, amortization of lease intangibles and significant prior period expense recoveries and adjustments, if any.

Same Property NOI is net income excluding properties that have not been owned for the full periods presented.

However, due to the size of the RPAI portfolio acquired in the Merger with RPAI, which closed in October 2021, the legacy RPAI properties have been deemed to qualify for the same property pool beginning in 2022 if they had a full first quarter of operations in 2021 within the legacy RPAI portfolio prior to the Merger.

Same Property NOI also excludes (i) net gains from outlot sales, (ii) straight-line rent revenue, (iii) lease termination income in excess of lost rent, (iv) amortization of lease intangibles, and (v) significant prior period expense recoveries and adjustments, if any.

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

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.

In order to provide meaningful comparative information across periods that, in some cases, predate the Merger, all information regarding the performance of the same property pool is presented as though the Merger was consummated on January 1, 2021 (i.e., as though the properties owned by RPAI prior to the Merger that are included in our same property pool had been owned by the Company for the entirety of all comparison periods for which same property pool information is presented).

NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indicators of our financial performance.

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An acquired property is included in the same property pool when there is a full quarter of operations in both years subsequent to the acquisition date.

The properties acquired in the Merger with RPAI qualify for the same property pool beginning in 2022 if they had a full first quarter of operations in 2021 within the legacy RPAI portfolio prior to the Merger.

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

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

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):

For the year ended December 31, 2022, the same property pool excludes (i) Glendale Town Center, Shoppes at Quarterfield and Circle East, which were reclassified from active redevelopment into our operating portfolio in December 2021, June 2022 and September 2022, respectively, (ii) the multifamily rental units and commercial portion at One Loudoun Downtown – Pads G & H, (iii) three active development and redevelopment projects, (iv) Arcadia Village, Pebble Marketplace and Palms Plaza, which were each acquired subsequent to January 1, 2021, and (v) office properties.

The following table presents Same Property NOI and a reconciliation to net loss attributable to common shareholders for the years ended December 31, 2022 and 2021 (unaudited) (dollars in thousands) :

Year Ended December 31,

($ in thousands) 2021 2020 Change

2022 2021 Change

Number of properties in same property pool for the period (1)

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Net operating income – same properties $ 531,440 $ 505,731

Prior period collection impact – same properties 3,665 12,414

Net operating income – non-same activity (3)

46,546 (251,154)

Total property net operating income 266,991 189,388

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

Total property NOI 581,651 266,991 117.9 %

Other income, net 8,992 1,491

General, administrative and other (54,860) (33,984)

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Gain on sales of operating properties, net 27,069 31,209

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

Net (income) loss attributable to noncontrolling interests (482) 916

Net loss attributable to common shareholders $ (12,636) $ (80,806)

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.

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

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

calculated as a weighted average based on the timing of cash rent commencement and expiration during the period.

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

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%.

(3) Includes non-cash activity across the portfolio as well as NOI from properties not included in the same property pool, including properties sold during both periods.

Our Same Property NOI increased 5.1% in 2022 compared to 2021 primarily due to improved occupancy driven by continued strong leasing activity and an increase in overage rent.

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.

Funds from Operations (“FFO”) is a widely used performance measure for real estate companies and is provided here as a supplemental measure of our 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.

The NAREIT white paper defines FFO as net income (calculated in accordance with GAAP), excluding (i) depreciation and amortization related to real estate, (ii) gains and losses from the sale of certain real estate assets, (iii) gains and losses from change in control, and (iv) 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.

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, 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:

FFO excludes the 2021 gain on sale of the ground lease portfolios as these sales were part of our capital strategy distinct from our ongoing operating strategy of selling individual land parcels from time to time.

FFO (a) should not be considered as an alternative to net income (calculated in accordance with GAAP) for the purpose of measuring our financial performance, (b) is not an alternative to cash flows from operating activities (calculated in accordance with GAAP) as a measure of our liquidity, and (c) is not indicative of funds available to satisfy our cash needs, including our ability to make distributions.

Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.

From time to time, the Company may report or provide guidance with respect to “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, (i) gains or losses associated with the early extinguishment of debt, (ii) gains or losses associated with litigation involving the Company that is not in the normal course of business, (iii) merger and acquisition costs, (iv) the impact on earnings from employee severance, (v) the excess of redemption value over carrying value of preferred stock redemption, and (vi) the impact of prior period bad debt or the collection of accounts receivable previously written off (“prior period collection impact”), which are not otherwise adjusted in the Company’s calculation of FFO.

Our calculations of FFO and reconciliation to net income and FFO, as adjusted, for the years ended December 31, 2022, 2021 and 2020 (unaudited) are as follows (in thousands) :

Year Ended December 31,

($ in thousands) 2021 2020 2019

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

2022 2021 2020

Net loss $ (12,154) $ (81,722) $ (16,123)

net income attributable to noncontrolling interests in properties (623) (514) (528)

gain on sales of operating properties, net (27,069) (31,209) (4,733)

impairment charges — — 37,723

depreciation and amortization of consolidated and unconsolidated entities,

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

depreciation and amortization of consolidated and

unconsolidated entities, net of noncontrolling interests

471,086 201,834 130,091

FFO of the Operating Partnership (1)

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Limited Partners’ interests in FFO

FFO attributable to Kite Realty Group Trust common shareholders 1

(5,395) (1,945) (2,826)

FFO attributable to common shareholders (1)

$ 425,845 $ 86,444 $ 105,881

FFO of the Operating Partnership (1)

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severance charges — — 3,253

loss on debt extinguishment — — 11,572

2020 Collection Impact (3,707) — —

prior period collection impact (2,556) (3,707) —

FFO, as adjusted, of the Operating Partnership $ 429,609 $ 171,204 $ 111,960

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

“FFO attributable to Kite Realty Group Trust common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest in the Operating Partnership.

“FFO attributable to common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest in the Operating Partnership.

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

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

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

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

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We believe presenting EBITDA and the related measures in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.

The following table presents a reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to consolidated net income (the most directly comparable GAAP measure) and a calculation of Net Debt to Adjusted EBITDA.

($ in thousands) Three Months Ended

The following table presents a reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to net income (the most directly comparable GAAP measure) and a calculation of Net Debt to Adjusted EBITDA (in thousands) :

Three Months Ended

December 31, 2022

Consolidated net loss $ (100,155)

Adjustments to net loss:

Net loss $ (1,052)

Depreciation and amortization 112,709

Interest expense 26,827

Income tax benefit of taxable REIT subsidiary (2)

Income tax expense of taxable REIT subsidiary 302

EBITDA 138,786

Adjustments to EBITDA:

Unconsolidated EBITDA 957

Merger and acquisition costs (81)

Pro forma adjustments 1

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

Loss on sales of operating properties, net 57

Other income and expense, net (759)

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Mortgage and other indebtedness, net $ 3,010,299

Partner share of consolidated joint venture debt 3

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

Company share of unconsolidated joint venture debt 41,015

Partner share of consolidated joint venture debt (2)

cash, cash equivalents, and restricted cash (124,015)

debt discounts, premiums and issuance costs, net (32,043)

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Net Debt to Adjusted EBITDA 5.2x

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.

(1) Represents Adjusted EBITDA for the three months ended December 31, 2022 (as shown in the table above) multiplied by four.

(2) Partner share of consolidated joint venture debt is calculated based upon the partner’s pro rata ownership of the joint venture, multiplied by the related secured debt balance.

Comparison of Operating Results for the Years Ended December 31, 2021 and 2020

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) 2021 2020 Net change

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

Other property-related revenue 4,683 8,597 (3,914)

Fee income 1,242 378 864

Total revenue 373,324 266,645 106,679

Property operating 55,561 41,012 14,549

Real estate taxes 49,530 35,867 13,663

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

Total expenses 426,057 236,367 189,690

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)

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 (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 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.

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 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 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 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 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 $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.

Liquidity and Capital Resources

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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.

We continued to improve the strength of our balance sheet in 2022.

As part of the Merger, we assumed an $850.0 million unsecured revolving credit facility along with other indebtedness.

In July 2022, we amended our revolving credit facility to increase the capacity of the unsecured revolving credit facility to $1.1 billion (as amended, the “2022 Revolving Facility”), of which the available borrowing capacity was $1.1 billion as of December 31, 2022, and entered into a seven-year $300.0 million unsecured term loan that was used to retire 2022 and 2023 debt maturities.

As of December 31, 2022, we had approximately $115.8 million in cash on hand, $6.2 million in restricted cash and escrow deposits, $1.1 billion of remaining availability under the 2022 Revolving Facility, and $284.4 million of debt maturities due in 2023.

During the year ended December 31, 2022, we used the $125.0 million short-term deposit that matured on April 7, 2022 to repay borrowings on our revolving line of credit.

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

We derive the majority of our revenue from tenants who lease space from us under existing lease agreements at each of our properties.

Therefore, our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our tenants.

While we believe that the nature of the properties in which we typically invest—primarily neighborhood and community shopping centers—provides a relatively stable revenue flow, an economic downturn and/or the ongoing effects of COVID-19, among other events, could adversely affect the ability of some of our tenants to meet their lease obligations.

Our Principal Capital Resources

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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

As of December 31, 2022, we had approximately $1.1 billion available under the 2022 Revolving Facility for future borrowings.

We also had $115.8 million in cash and cash equivalents as of December 31, 2022.

We were in compliance with all applicable financial covenants under the 2022 Revolving Facility, unsecured term loans and senior unsecured notes as of December 31, 2022.

On July 29, 2022, the Operating Partnership entered into the Second Amendment (the “Second Amendment”) to the sixth amended and restated credit agreement with a syndicate of financial institutions to provide for a $250.0 million increase to the unsecured revolving credit facility, as amended, the “2022 Revolving Facility.” Under the Second Amendment, the Operating Partnership has the option to increase the 2022 Revolving Facility to an aggregate committed amount of up to $1.7 billion upon the Operating Partnership’s request, subject to certain conditions.

In addition, the Operating Partnership entered into a seven-year $300.0 million unsecured term loan, the proceeds of which were used to repay the Operating Partnership’s existing $200.0 million unsecured term loan that was scheduled to mature on November 22, 2023, certain secured loans, and for other general corporate purposes.

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.

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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.

On November 30, 2021, the Company and the Operating Partnership amended the Equity Distribution Agreement to reflect their filing of a shelf registration statement on November 16, 2021 with the SEC.

As of December 31, 2022, the Company has not sold any common shares under the ATM Program.

The Operating Partnership intends to use the net proceeds, if any, to repay borrowings under its 2022 Revolving Facility and other indebtedness and for working capital and other general corporate purposes.

The Operating Partnership may also use 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.

The Operating Partnership may also use the net proceeds for acquisitions of operating properties and the development or redevelopment of properties, although there are currently no understandings, commitments or agreements to do so.

In the future, we will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities.

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Near-Term Debt Maturities .

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.

As of December 31, 2022, we had $189.4 million of secured debt, excluding scheduled monthly principal payments, and $95.0 million of unsecured debt scheduled to mature in 2023.

We believe we have sufficient liquidity to repay these obligations from cash on hand and borrowings on the 2022 Revolving Facility.

Other Short-Term Liquidity Needs.

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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 April 15, 2022 to common shareholders and Common Unit holders of record as of April 8, 2022.

Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, scheduled interest and principal payments on our debt of approximately $120 million and $3.0 million, respectively, in 2023, expected dividend payments to our common shareholders and Common Unit holders, and recurring capital expenditures.

In February 2023, our Board of Trustees declared a cash distribution of $0.24 per common share and Common Unit for the first quarter of 2023, which is expected to be paid on April 14, 2023 to common shareholders and Common Unit holders of record as of April 7, 2023.

Future distributions, if any, are at the discretion of the Board of Trustees, who will continue to evaluate our sources and uses of capital, liquidity position, operating fundamentals, maintenance of our REIT qualification and other factors they may deem relevant.

We believe we have sufficient liquidity to pay any dividend from cash on hand and borrowings on the 2022 Revolving Facility.

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

During the 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.

During the year ended December 31, 2022, we incurred $35.6 million for recurring capital expenditures on operating properties and $63.9 million for tenant improvements and external leasing commissions, which includes costs to re-lease anchor space at our operating properties related to tenants open and operating as of December 31, 2022 (excluding development and redevelopment properties).

We currently anticipate incurring approximately $100 million of additional major tenant improvement costs related to leasing activity for space that is currently vacant at a number of our operating properties over the next 12 to 18 months.

We believe we have the ability to fund these costs through cash flows from operations or borrowings on the 2022 Revolving Facility.

During the year ended December 31, 2022, we completed major redevelopment construction activities at Eddy Street Commons – Phase III, Shoppes at Quarterfield, the residential and commercial portions of the project at One Loudoun Downtown and Circle East and placed these projects in service.

As of December 31, 2022, we had three development projects under construction.

Our share of total estimated costs for the three projects is $102.8 million, of which our share of the

remaining expected funding requirement is estimated to be $70.9 million.

As of December 31, 2022, we have incurred $26.7 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.

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 flows from operations or borrowings on the 2022 Revolving Facility.

Share Repurchase Program

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

In February 2022, the Company extended its Share Repurchase Program for an additional year, and in February 2023, extended the program for another year so it will now terminate on February 28, 2024, if not terminated or extended prior to that date.

In April 2022, our Board of Trustees authorized a $150.0 million increase to the size of the Share Repurchase Program, authorizing share repurchases up to an aggregate of $300.0 million.

As of December 31, 2022, the Company has not repurchased any shares under the Share Repurchase Program.

The Company intends to fund any future repurchases under the Share Purchase Program with cash on hand or availability under the 2022 Revolving Facility, subject to any applicable restrictions.

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We evaluate all future opportunities against pre-established criteria including, but not limited to, location, demographics, expected return, tenant credit quality, tenant relationships, and the amount of existing retail space.

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

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

Potential Debt Repurchases.

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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

The following table summarizes cash capital expenditures for our development and redevelopment projects and other capital expenditures for the year ended December 31, 2022 (in thousands) :

December 31, 2022

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Redevelopment opportunities 363

Recently completed projects and other 13,686

Anchor re-tenanting 9,662

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

Recurring operating capital expenditures (primarily tenant improvements) and other 112,927

Total $ 158,540

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Impact of Changes in Credit Ratings on Our Liquidity

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.

We have received investment grade corporate credit ratings from three nationally recognized credit rating agencies.

These ratings did not change in 2022.

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.

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, 2022, we had cash, cash equivalents and restricted cash of $122.0 million.

We may be subject to concentrations of credit risk with regard to our cash and cash equivalents.

We may be subject to concentrations of credit risk with regards to our cash and cash equivalents.

We place our cash and short-term investments with highly rated financial institutions.

While we attempt to limit our exposure at any point in time, occasionally, such cash and investments may temporarily be in excess of FDIC and SIPC insurance limits.

While we attempt to limit our exposure at any point in time, occasionally such cash and investments may temporarily be in excess of the Federal Deposit Insurance Corporation (“FDIC”) and the Securities Investor Protection Corporation (“SIPC”) insurance limits.

We also maintain certain compensating balances in several financial institutions in support of borrowings from those institutions.

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Comparison of the Year Ended December 31, 2022 to the Year Ended December 31, 2021

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.

Our cash flow activities are summarized as follows (in thousands) :

Year Ended December 31,

2022 2021 Change

Net cash provided by operating activities $ 379,283 $ 100,351 $ 278,932

Net cash used in investing activities (45,149) (91,033) 45,884

Net cash (used in) provided by financing activities (312,527) 44,459 (356,986)

Increase in cash, cash equivalents and restricted cash 21,607 53,777 (32,170)

Cash, cash equivalents and restricted cash, beginning of year 100,363 46,586

Cash, cash equivalents and restricted cash, end of year $ 121,970 $ 100,363

Cash provided by operating activities was $379.3 million for the year ended December 31, 2022 and $100.4 million for the same period of 2021.

The cash flows were positively impacted by the Merger, which generated significant incremental operating income due to the increased scale of the Company.

This improvement was partially offset by higher general and administrative expenses due to increased head count and higher interest costs related to the debt assumed in the Merger.

Cash used in investing activities was $45.1 million for the year ended December 31, 2022 and $91.0 million for the same period of 2021.

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.

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

• We acquired Pebble Marketplace, the two-tenant building adjacent to MacArthur Crossing and Palms Plaza in 2022 for $100.1 million compared to the acquisition of a multi-tenant retail outparcel at Nora Plaza in 2021 and acquisition deposits for $10.4 million;

• We received net proceeds of $80.4 million from the sale of Plaza Del Lago, a portion of Hamilton Crossing Centre and other land parcels in 2022 compared to net proceeds of $80.7 million from the sale of Westside Market, 17 ground leases and other land parcels in 2021;

• Capital expenditures increased by $101.2 million driven by the construction activity at our development projects and anchor leasing activity, partially offset by a change in construction payables of $6.3 million in 2022.

Cash used in financing activities was $312.5 million for the year ended December 31, 2022 compared to cash provided by financing activities of $44.5 million for the same period of 2021.

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.

• We entered into a seven-year $300.0 million unsecured term loan and borrowed $155.0 million on our unsecured revolving line of credit in 2022;

• In 2022, we repaid (i) a $200.0 million unsecured term loan that was scheduled to mature in 2023, (ii) $210.0 million of borrowings on our unsecured revolving line of credit, with no amount outstanding as of December 31, 2022, and (iii) mortgages payable totaling $155.2 million along with $3.8 million of scheduled principal payments using proceeds from the $300.0 million unsecured term loan, $125.0 million short-term deposit and property sales;

• We made distributions to common shareholders and holders of common partnership interests in the Operating Partnership of $182.2 million in 2022 compared to distributions of $60.0 million in 2021;

• In 2021, we issued $175.0 million of exchangeable senior notes in a private placement offering to proactively fund a portion of our 2022 debt maturities and other borrowings.

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.

Management’s discussion of the cash flows for the year ended December 31, 2020, with comparison to the year ended December 31, 2021, 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, 2021.

Other Matters

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We are exposed to capital market risk, such as changes in interest rates.

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

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

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 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.

Our share of estimated future costs for under construction and future developments and redevelopments is further discussed on page 44 in the “Short- and Long-Term Liquidity Needs” section.

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

We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through free cash flow or borrowings on the 2022 Revolving Facility.

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

Our portion of the repayment guaranty is limited to $5.9 million and the guaranty’s term is through July 1, 2024, the maturity date of the construction loan.

As of December 31, 2022, the outstanding loan balance was $33.5 million, of which our share was $11.7 million.

We also provide repayment and completion guaranties on loans totaling $66.2 million associated with the development of The Corner mixed-use project in the Indianapolis MSA.

As of December 31, 2022, the outstanding balance of the loans was $30.6 million, of which our share was $15.3 million.

Our share of estimated future costs for under construction and future developments and redevelopments is further discussed beginning on page 43 in the “Short- and Long-Term Liquidity Needs” section.

Outstanding Indebtedness

The following table presents details of outstanding consolidated indebtedness as of December 31, 2021 and 2020, adjusted for hedges:

($ in thousands) December 31,

2021 December 31,

The following table provides details on our outstanding consolidated indebtedness as of December 31, 2022 and 2021, adjusted for hedges (in thousands) :

December 31, 2022 December 31, 2021

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

Exchangeable senior notes – fixed rate 175,000 —

Unsecured revolving credit facility 55,000 25,000

Senior exchangeable notes – fixed rate 175,000 175,000

Unsecured revolving line of credit — 55,000

Unsecured term loans 820,000 720,000

Mortgage notes payable – fixed rate 363,577 295,966

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

Mortgages payable – fixed rate 205,328 363,577

Mortgages payable – variable rate 28,293 29,013

Debt discounts, premiums and issuance costs, net 32,043 58,583

Total mortgage and other indebtedness, net $ 3,010,299 $ 3,150,808

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

($ in thousands) Amount Outstanding Ratio Weighted Average

Consolidated indebtedness, including weighted average interest rates and weighted average maturities as of December 31, 2022, is summarized below (dollars in thousands) :

Outstanding Ratio Weighted Average

Interest Rate Weighted

Average Maturity

Average Years

Fixed rate debt (1)

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Debt discounts, premiums and issuance costs, net 32,043 N/A N/A N/A

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

Total $ 3,010,299 100 % 4.21 % 4.2

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

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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%.

The variable interest rate on mortgage indebtedness is based on the Bloomberg Short Term Bank Yield Index (“BSBY”) plus 160 basis points.

As of December 31, 2022, the one-month BSBY interest rate was 4.36%.

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

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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.

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.

Acquisition of Investment Properties

In accordance with ASC 805, Business Combinations , we accounted for the October 2021 Merger with RPAI 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.

estimates of fair value, a number of sources are used, 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.

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• 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.

We use 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.

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• 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 and other indebtedness, including related derivative instruments, assumed.

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

We use third party and independent sources for our estimates to determine the respective fair value of each mortgage and other indebtedness, including related derivative instruments, assumed.

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

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

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• a significant concentration of financially troubled tenants;

• a reduction in anticipated holding period;

• a reduction in the anticipated holding period;

• a cost accumulation or delay in project completion date significantly above and beyond the original development or redevelopment estimate;

• a significant decrease in market price not in line with general market trends;

• a significant decrease in the market price not in line with general market trends;

• any other quantitative or qualitative events or factors deemed significant by the Company’s management or Board of Trustees.

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

If we determine that collectibility is not probable, we recognize income only to the extent that cash has been received from the tenant.

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.

5 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis