What changed in this filing

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Item 1. Business

2025-02-12 compared with 2024-02-20 · 63 added, 46 removed, 160 unchanged (41% of the section changed)

Unless the context suggests otherwise, references to “we,” “us,” “our” or the “Company” refer to Kite Realty Group Trust and our business and operations conducted through our directly or indirectly owned subsidiaries, including Kite Realty Group, L.P., our operating partnership (the “Operating Partnership”).

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 markets and select strategic gateway markets in the United States.

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, grocery-anchored shopping centers and vibrant mixed-use assets that are primarily located in high-growth Sun Belt markets and select strategic gateway markets in the United States.

Following our merger with Retail Properties of America, Inc.

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

As of December 31, 2023, we owned interests in 180 operating retail properties totaling approximately 28.1 million square feet and one office property with 0.3 million square feet.

As of December 31, 2024, we owned interests in 179 operating retail properties totaling approximately 27.7 million square feet, excluding one operating retail property classified as held for sale as of December 31, 2024, and two office properties with 0.4 million square feet.

Of the 179 operating retail properties, 10 contain an office component.

We also owned two development projects under construction as of this date and an additional two properties with future redevelopment opportunities.

Our retail operating portfolio was 93.9% leased to a diversified retail tenant base, with no single retail tenant accounting for more than 2.7% of our total annualized base rent (“ABR”).

Our operating retail portfolio was 95.0% leased to a diversified retail tenant base, with no single retail tenant accounting for more than 2.8% of our total annualized base rent (“ABR”).

In the aggregate, our largest 25 tenants accounted for 28.7% of our ABR.

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• The Company generated Funds From Operations (“FFO”), as defined by NAREIT, of $463.7 million;

• Same Property Net Operating Income (“Same Property NOI”) grew by 4.8% in 2023 compared to 2022 primarily due to contractual rent growth, higher base rent driven by positive new and renewal leasing spreads, lower bad debt expense, and an increase in overage rent from certain tenants;

• Same Property Net Operating Income (“Same Property NOI”) grew by 3.0% in 2024 compared to 2023 primarily due to contractual rent growth, higher base rent driven by positive new and renewal leasing spreads, and higher specialty leasing income, partially offset by higher bad debt expense;

• In 2024, we executed new and renewal leases on 720 individual spaces representing approximately 5.0 million square feet of retail space, achieving a blended cash leasing spread of 12.8% on 542 comparable leases.

The blended cash leasing spread for comparable new and non-option renewal leases was 19.9%;

• Our operating retail portfolio ABR per square foot was $20.70 as of December 31, 2023, an increase of $0.68 (or 3.4%) from the end of the prior year.

• Our operating retail portfolio was 95.0% leased as of December 31, 2024, with our anchor leased percentage at 97.1% and our small shop leased percentage at 91.2%;

• Our operating retail portfolio ABR per square foot was $21.15 as of December 31, 2024, an increase of $0.45, or 2.2%, from the prior year;

• As of December 31, 2024, we derived 80% of our operating retail portfolio ABR from properties with a grocery component, which includes shopping centers with a big box wine and spirits store.

Financing and Capital Activities

• We ended the year with full borrowing capacity on our $1.1 billion unsecured revolving credit facility (the “Revolving Facility”);

• We originated a 10-year $95.1 million mortgage payable at a fixed interest rate of 5.36% secured by the multifamily rental portion of the expansion project at One Loudoun Downtown – Pads G & H;

• We repaid the $95.0 million principal balance of the 4.23% senior unsecured notes due 2023;

• In January 2024, we completed a public offering of $350.0 million aggregate principal amount of 5.50% senior unsecured notes due 2034 (“Notes Due 2034”);

• We acquired Prestonwood Place (Dallas/Ft.

Worth MSA) for a gross purchase price of $81.0 million;

• We completed major development construction activities at The Landing at Tradition – Phase II (Port St.

Lucie, FL MSA) and placed this project in service;

• We received gross proceeds of $142.1 million from the sale of Kingwood Commons (Houston MSA), the undeveloped land and related parking garage at Pan Am Plaza (Indianapolis MSA), Reisterstown Road Plaza (Baltimore MSA), and Eastside (Dallas/Ft.

• In January 2024, we completed a public offering of $350.0 million aggregate principal amount of 5.50% senior unsecured notes due 2034 (the “Notes Due 2034”), the proceeds of which were used to repay the $149.6 million principal balance of the 4.58% senior unsecured notes that matured on June 30, 2024 and the $120.0 million unsecured term loan that matured on July 17, 2024;

• In August 2024, we completed a public offering of $350.0 million aggregate principal amount of 4.95% senior unsecured notes due 2031 (the “Notes Due 2031”);

• In October 2024, we extended the maturity date of the Revolving Facility to October 3, 2028, and we have the ability to obtain more favorable pricing in certain circumstances related to our total leverage ratio;

• In October 2024, we extended the maturity date of our $250.0 million unsecured term loan (the “$250M Term Loan”) to October 24, 2027 and amended the terms to be priced on a ratings-based pricing grid;

• We acquired Parkside West Cobb, a grocery-anchored, multi-tenant retail property in the Atlanta MSA, for a gross purchase price of $40.1 million in August 2024;

• We began development activities on the retail and office portions of the expansion project at One Loudoun Downtown (the “One Loudoun Expansion”) in the Washington, D.C.

MSA during the three months ended September 30, 2024;

• We completed the major redevelopment construction activities at Carillon medical office building (“Carillon MOB”) in 2023 and reclassified the property from active redevelopment into our office portfolio in December 2024;

• We received gross proceeds of $30.6 million from the sale of Ashland & Roosevelt in the Chicago MSA in May 2024;

• We received gross proceeds of $7.6 million in connection with the sale of the first phase of a land parcel and the rights to develop 24 residential units at One Loudoun Expansion in the Washington, D.C.

MSA in December 2024;

• We declared cash dividends totaling $1.03 per share during 2024.

We have $269.6 million of debt principal scheduled to mature through December 31, 2024, which we expect will be satisfied with proceeds from the Notes Due 2034, a net debt to EBITDA ratio of 5.1x and approximately $36.4 million in cash on hand as of December 31, 2023.

We have investment grade corporate credit ratings from all three major credit rating agencies.

We have $430.0 million of debt principal scheduled to mature through December 31, 2025, the majority of which will be satisfied with proceeds from the Notes Due 2031, a net debt to EBITDA ratio of 4.7x, and approximately $128.1 million in cash on hand as of December 31, 2024.

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

During 2024, we received a credit rating upgrade with a stable outlook from two of the rating agencies and a positive credit rating outlook from the third rating agency.

Business Objectives and Strategies

Our primary business objectives are to (i) increase the cash flow and value of our properties, (ii) achieve sustainable long-term growth, and (iii) maximize shareholder value primarily through the ownership, operation, acquisition, development and redevelopment of high-quality, open-air shopping centers and mixed-used assets that are primarily grocery-anchored and located in high-growth Sun Belt markets and select strategic gateway markets.

Our primary business objectives are to (i) increase the cash flow and value of our properties, (ii) achieve sustainable long-term growth, and (iii) maximize shareholder value primarily through the ownership, operation, acquisition, development, and redevelopment of high-quality, open-air, grocery-anchored shopping centers and vibrant mixed-use assets that are primarily located in high-growth Sun Belt markets and select strategic gateway markets in the United States.

We invest in properties with well-located real estate and strong demographics, and we use our leasing and management strategies to improve the long-term value and economic returns of our properties.

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• Operating Strategy :

Maximize the internal growth in revenue from our operating properties by leasing and re-leasing to a strong and diverse group of retail and mixed-use tenants at increasing rental rates, when possible , and redeveloping or renovating certain properties to make them more attractive to existing and prospective tenants and customers;

Maximize the internal growth in revenue from our operating properties by leasing and re-leasing to a strong and diverse group of retail and mixed-use tenants at increasing rental rates, when possible , through embedded contractual rent escalations and redeveloping or renovating certain properties to make them more attractive to existing and prospective tenants and customers;

• Financing and Capital Preservation Strategy :

Maintain a strong balance sheet with flexibility to fund our operating and investment activities.

Maintain a strong balance sheet with the flexibility to fund our operating and investment activities.

Funding sources include the public equity and debt markets, our Revolving Facility with $1.1 billion of borrowing capacity as of December 31, 2024, secured debt, internally generated funds, proceeds from selling land and properties that no longer fit our strategy, and potential strategic joint ventures;

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• maintaining strong tenant and retailer relationships to avoid rent interruptions and reduce marketing, leasing, and tenant improvement costs that result from re-leasing space to new tenants;

• taking advantage of under-utilized land or existing square footage, reconfiguring properties for more profitable use, and adding ancillary income sources to existing properties.

• taking advantage of underutilized land or existing square footage, reconfiguring properties for more profitable use, and adding ancillary income sources to existing properties.

We successfully executed our operating strategy in 2024 in a number of ways, as best evidenced by our strong growth in Same Property NOI of 3.0%.

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We implement our growth strategy in a number of ways, including:

• continually evaluating our operating properties for redevelopment and renovation opportunities that we believe will make them more attractive for leasing to new tenants, right-sizing of anchor spaces while increasing rental rates, and re-leasing spaces to existing tenants at increased rental rates;

• completing our two active development and redevelopment projects at Carillon medical office building and The Corner – IN;

• continually evaluating our operating properties for redevelopment and renovation opportunities that we believe will make them more attractive for leasing to new tenants, rightsizing of anchor spaces while increasing rental rates, and re-leasing spaces to existing tenants at increased rental rates;

• completing our two active development and redevelopment projects at The Corner – IN and One Loudoun Expansion;

• evaluating the entitled land holdings to determine the optimal real estate use and capital allocation decisions;

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• the level of success of existing properties in the same or nearby markets.

During 2023, we acquired one asset for a gross purchase price of $81.0 million and generated aggregate gross proceeds of $142.1 million from property dispositions.

During 2024, we acquired one operating retail property for a gross purchase price of $40.1 million and generated gross proceeds of $30.6 million from one property disposition and net proceeds of $13.2 million from the sale of land parcels.

commercial real estate market continues to be highly competitive.

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Environmental Regulations.

Under various laws, ordinances, and regulations, as an owner or operator of real property, we may be or may become liable for the costs of investigation, removal, or remediation of releases of certain hazardous or toxic substances (including petroleum products) at or from our currently or formerly owned or operated properties, or for property damage or bodily injury (including third-party claims), fines, liens, or natural resource damages arising from the presence of such hazardous or toxic substances.

In addition, we could be liable for the costs of investigating or remediating contamination at off-site waste disposal facilities to which we have arranged for the disposal or treatment of hazardous or toxic substances.

Under certain laws, such liability may be imposed without regard to whether or not we knew of, or caused, the presence of these hazardous or toxic substances, or whether we complied with environmental laws, and the liability may be joint and several.

Some properties in our portfolio contain, may have contained, or are adjacent to or near other properties that have contained or currently contain underground storage tanks for petroleum products or other hazardous or toxic substances.

These storage tanks may have released, or have the potential to release, such substances into the environment.

In addition, some of our properties have tenants that may use hazardous or toxic substances in the routine course of their businesses.

In addition, some of our properties have tenants that may use hazardous or toxic substances in the routine course of their business.

In general, these tenants have covenanted in their lease agreements with us to use these substances, if any, in compliance with all environmental laws and agreed to indemnify us for any damages we may suffer as a result of their use of such substances and any contamination they cause.

However, these lease provisions may not fully protect us in the event that a tenant becomes insolvent.

Also, certain of our properties have contained asbestos-containing building materials (“ACBM”) and other properties may have contained such materials based on the date of their construction.

Environmental laws require that ACBM be properly managed and maintained, and fines and penalties may be imposed on building owners or operators for failure to comply with these requirements.

The laws also may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.

Neither existing environmental, health, safety and similar laws nor the costs of our compliance with these laws has had a material adverse effect on our financial condition or results operations, and management does not believe that they will in the future.

However, these lease provisions may not fully protect us if a tenant responsible for environmental noncompliance or contamination becomes insolvent.

Also, certain of our properties have confirmed asbestos-containing building materials (“ACBM”), and other properties may contain such materials.

Environmental

laws require that ACBM be properly managed and maintained, and fines and penalties may be imposed on building owners or operators for failure to comply with these requirements.

In addition, third parties may be allowed to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers.

In addition, our operations and those of our tenants are also subject to various federal, state, and local laws and regulations governing air emissions, wastewater, stormwater, and the use, storage, and disposal of hazardous and toxic substances.

Neither existing environmental, health, safety, and similar laws nor the costs of our compliance with these laws have had a material adverse effect on our financial condition or results of operations, and management does not believe that they will in the future.

In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental contamination at properties we currently own or operate or have owned or operated in the past.

However, we cannot predict the impact of new or changed laws or regulations on properties we currently own or operate or may acquire or operate in the future.

With environmental sustainability becoming a national priority, we have continued to demonstrate our strong commitment to be a responsible corporate citizen through resource reduction and employee training that has resulted in reductions of energy consumption, waste and improved maintenance cycles.

We have continued to demonstrate our strong commitment to being a responsible corporate citizen through resource reduction and employee training that has resulted in reductions of energy consumption and waste and improved maintenance cycles.

We have a wholly owned captive insurance company, Birch Property and Casualty, LLC (“Birch”), which insures the first layer of general liability insurance for our properties subject to certain limitations.

Birch was formed as part of our overall risk management program and to stabilize insurance costs, manage exposure, and recoup expenses through the function of the captive program.

We capitalized Birch in accordance with the applicable regulatory requirements.

We have capitalized Birch in accordance with the applicable regulatory requirements.

We also carry comprehensive liability, fire, extended coverage, and rental loss insurance that covers all properties in our portfolio.

We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, cost of the coverage, geographic locations of our assets, and industry practice.

Certain risks such as loss from riots, war or acts of God, and, in some cases, flooding are not insurable or the cost to insure over these events is cost prohibitive;

Certain risks, such as loss from riots, war, or acts of God, and, in some cases, flooding, are not insurable, or the cost to insure against these events is cost prohibitive;

therefore, we do not carry insurance for these losses.

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All of our employees must adhere to a Code of Business Conduct and Ethics that sets standards for appropriate behavior, and all employees must also complete required internal training on respect in the workplace and diversity to further enhance our cultural behaviors.

We have achieved our targets of at least 30% diverse representation on our Board of Trustees and at least one female-chaired committee with the chairing of our Corporate Governance and Nominating Committee by a female trustee.

As of December 31, 2023, approximately 51% of our workforce was female and minorities represented approximately 21% of our team.

In 2023, we achieved our targets of at least 30% diverse representation on our Board of Trustees and at least one female-chaired committee with the chairing of our Corporate Governance and Nominating Committee by a female trustee.

December 31, 2024, approximately 51% of our workforce was female, and minorities represented approximately 23% of our team.

Professional Development and Training

We believe a commitment to our employees’ learning and development through training, educational opportunities, and mentorship is critical to our ability to continue to innovate.

We focus on leadership development at every level of the organization.

We focus on professional development at every level of the organization.

We align employees’ goals with our overall strategic direction to create a clear link between individual efforts and the long-term success of the Company and provide effective feedback on employees’ performance towards goals to ensure their growth and development.

We use the following tools to recognize our employees, advance our talent pool, and create a sustainable and long-term enterprise:

(i) performance plans, (ii) talent recognition via our digital employee-to-employee Recognition Wall, (iii) Level Up award that recognizes employees who have made an extraordinary effort to help the Company achieve success, (iv) FOCUSED award that acknowledges employees who have embodied our FOCUSED values (forward-thinking, optimistic, collaborative, urgent, sound, empowered, and dedicated) throughout the year, and (v) individual development planning, along with reward packages.

The Company also provides reimbursement for those seeking to further their education through degree or certification programs and in 2023, we implemented a learning management system to enhance our employees’ technical and professional development.

(i) performance plans, (ii) Level Up award that recognizes employees who have made an extraordinary effort to help the Company achieve success, (iii) FOCUSED award that acknowledges employees who have embodied our FOCUSED values (forward-thinking, optimistic, collaborative, urgent, sound, empowered, and dedicated) throughout the year, and (iv) individual development planning, along with reward packages.

The Company also provides reimbursement opportunities for employees pursuing educational degrees or certification programs that are relevant to their roles or professional development, and we have a learning management system to enhance our employees’ technical and professional development.

Community Development

We seek to foster a corporate culture where our many stakeholders, including our employees, engage in the topic of community development and collaborate to extend resources towards the advancement of this principle.

We are proud to be an active citizen of the communities in which we operate.

We are proud to be active citizens of the communities in which we operate.

In furtherance of this commitment, we partner with and support local charitable organizations that we believe are contributing to the growth and development of the community and host dozens of free community events throughout our portfolio.

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We provide a wide range of employee benefits, including comprehensive medical, prescription, dental, and vision insurance coverage, the majority of which is paid by the Company.

We also provide paid maternity, paternity and adoption leave, matching 401(k) contributions, free life insurance, disability benefits, spousal death benefits, education assistance reimbursements, and remote working and flexible scheduling arrangements.

We also provide paid maternity, paternity, and adoption leave;

matching 401(k) contributions;

free life insurance;

disability benefits;

spousal death benefits;

education assistance reimbursements;

and remote working and flexible scheduling arrangements.

In addition, to enhance the well-being of our employees, we provide them with access to health and wellness programs that support physical, mental, and financial health, such as Lunch & Learns and Wellness Wednesdays.

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The Company strives to be a responsible corporate citizen, and we recognize the importance that environmental, social, and governance (“ESG”) initiatives play in our ability to generate long-term, sustainable returns.

In 2020, we formed a cross-functional task force (the “ESG Task Force”) that is comprised of senior leadership and members from a variety of functional areas and is led by our Chief Executive Officer.

The ESG Task Force meets quarterly and focuses on setting, implementing, monitoring and communicating to our investors and other stakeholders our ESG strategy and related initiatives that are important and regularly reports to the Board of Trustees.

In July 2023, the ESG Task Force issued the Company’s annual Corporate Responsibility Report, which is published on our website and provides a comprehensive overview of our ESG strategies and initiatives.

In 2020, we established a cross-functional task force (the “ESG Task Force”) that is comprised of senior leadership and members from a variety of functional areas and is led by our Chief Executive Officer.

The ESG Task Force meets quarterly and focuses on setting, implementing, monitoring, and communicating to our investors and other stakeholders our ESG strategy and related initiatives and regularly reports to the Board of Trustees.

In June 2024, the ESG Task Force issued the Company’s annual Corporate Responsibility Report, which is published on our website and provides a comprehensive overview of our ESG strategies and initiatives.

The Company is committed to implementing sustainable business practices at our properties and is actively undertaking multiple projects to make our operations more energy efficient and reduce our environmental impact.

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• installing LED lighting in parking lots (78% of our properties have installed such LED lighting as of December 31, 2024, with a goal of 80% of the portfolio by the end of 2026);

• implementing smart meters and other initiatives aimed at water conservation, recycling and waste diversion (16% of our properties have implemented water efficiency measures, with a goal of 25% of the portfolio by the end of 2026);

• installing electric vehicle (“EV”) charging stations (240 charging stations have been installed across 24 properties for a total of 12% of the portfolio, with a goal of 20% of the portfolio by the end of 2026);

• implementing smart meters and other initiatives aimed at water conservation, recycling, and waste diversion (22% of our properties have implemented smart irrigation controls as of December 31, 2024, with a goal of 25% of the portfolio by the end of 2026);

• installing electric vehicle (“EV”) charging stations (332 charging stations have been installed across 27 properties for a total of 15% of the portfolio as of December 31, 2024, with a goal of 20% of the portfolio by the end of 2026);

• receiving IREM certifications (100 properties or 56% of the portfolio have received such certifications as of December 31, 2024, with a goal of 75% of the portfolio by the end of 2026).

In addition, we implemented a policy to transition landscaping in all future redevelopment projects to drought-tolerant landscape where permitted by code.

Recent business initiatives encourage tenants to adopt green leases, also known as “high-performance” or “energy-aligned” leases, to equitably align the costs and benefits of energy and water efficiency investments for building owners and tenants based on principles and best practices from the Green Lease Leaders Reference Guide by the Institute for Market Transformation and the U.S.

In addition, we implemented a policy to transition landscaping in all future redevelopment projects to drought-tolerant landscaping where permitted by code.

Recent business initiatives encourage tenants to adopt green leases, also referred to as “high-performance” or “energy-aligned” leases, to equitably align the costs and benefits of energy and water efficiency investments for building owners and tenants based on principles and best practices from the Green Lease Leaders Reference Guide by the Institute for Market Transformation and the U.S.

Department of Energy.

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Also available on our website are copies of our Code of Business Conduct and Ethics, Code of Ethics for Principal Executive Officer and Senior Financial Officers, Corporate Governance Guidelines, and the charters for each of the committees of our Board of Trustees—the Audit Committee, the Corporate Governance and Nominating Committee, and the Compensation Committee.

Copies of our Code of Business Conduct and Ethics, Code of Ethics for Principal Executive Officer and Senior Financial Officers, Corporate Governance Guidelines, and our committee charters are also available from us in print and free of charge to any shareholder upon request.

Copies of these documents are also available from us in print and free of charge to any shareholder upon request.

Any person wishing to obtain such copies should contact our Investor Relations department by mail at our principal executive offices.

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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 1. Business