A
N
N
U
A
L
R
E
P
O
R
T
2
0
0
5
b u i
l d i n g v a l u e
buildingng
FRONT COVER: Sunrise over Stoney Creek Commons
For 45 years, our passion,
ingenuity and integrity
have been at the heart
of our success.
Dorothea Jackson
T O O U R F E L L O W S H A R E H O L D E R S :
2005 was a year of considerable
While our roots in construction go back fi ve
are anticipated to total approximately
shopping center that we are developing
achievement for Kite Realty Group. In
decades, Kite Realty Group has evolved into
1.8 million square feet. We expect these
near Naples, Florida in a joint venture
our fi rst full year as a public company, we
a full-service real estate owner, developer,
projects to generate strong returns and
with a private developer. The land was
generated a competitive 24.3 percent total
and operator, primarily focused on high-
enhance shareholder value as they come
fully zoned when we entered into the
return for our shareholders, increased
quality neighborhood and community
online throughout 2006 and 2007. We
joint venture, signifi cantly mitigating
Funds from Operations to $1.13 per diluted
shopping centers. The dynamic tenants
also continue to evaluate development
our risk. In addition, we are analyzing
share and made signifi cant investments in
that occupy our properties offer customers
opportunities within our core markets –
opportunities relating to strategic
the Company’s future.
the highest-quality goods and services. We
particularly the dynamic South Florida
fi nancial joint venture partners.
believe this results in a competitive, visible
region. With roughly 180 acres in our
We also followed through on our time-
and sustainable earnings stream that can
land inventory, we have already begun
As we look into 2006 and beyond, we
honored strategy of maximizing cash fl ow
weather economic cycles.
to secure the resources necessary for
are excited by the opportunities that
and building shareholder value. Tapping
future development.
we see. Already we are allocating
the resources of our expert in-house
Finding attractive acquisition opportunities
resources to our 2007 operating plan, as
personnel, strong broker network and
in today’s real estate market, however,
Although development is our primary
the majority of our 2006 initiatives are
strategic joint venture partners, we started
is challenging. Competitive pressures,
means of building shareholder value,
funded and underway. We are fortunate
ten new development projects in vibrant
low interest rates and soaring property
we also keep an eye out for compelling
to work with some of the brightest, most
retail markets, closed $111 million in new
values have combined to depress initial
acquisition opportunities. In 2005, we
energetic and passionate people in the
acquisitions and ended the year with an
investment yields. Given this environment,
acquired fi ve high-quality retail assets at
real estate industry. With a talented team
operating portfolio occupancy rate in
Kite Realty Group’s ability to build value
a total cost of $111 million. Among them
of professionals, a promising pipeline
excess of 95 percent.
through ground-up development and
are Market Street Village, a 100 percent
and a strong capital base, we believe Kite
redevelopment provides us with a distinct
leased community shopping center
Realty Group is well positioned to build
And that’s just the beginning.
competitive advantage. Through our
occupying a premiere location in suburban
shareholder value through development,
vertically integrated approach, we control
Dallas/Ft. Worth, and Indian River Square,
acquisitions, joint ventures and advisory
In 2006, we plan to build upon this success.
every stage of the development cycle,
another fully leased, high-profi le property
services. Our ability to build value
We are committed to building value for
from land procurement to managing the
in Vero Beach, Florida. In addition to
through a full range of strategies sets us
our shareholders through development,
properties that we build. By utilizing in-
diversifying our asset base, we believe
apart. We have worked hard to earn your
redevelopment and accretive acquisitions.
ternal resources and eliminating the need to
these acquisitions meet our requirements
trust and look forward to sharing our
With our strong balance sheet and
outsource, we are able to mitigate risk and
for risk-adjusted returns.
success with you in 2006.
conservative capital structure, we are well-
ultimately enhance development returns.
positioned to execute on our strategy in 2006
We are also pleased with the partnerships
and beyond. At year-end, we maintained
In 2005, we began ten development
we established in 2005. Joint ventures
a debt-to-market capitalization ratio of
projects at a total anticipated cost
allow us to share risk while providing
approximately 40 percent, a 3.3 times fi xed
of $138 million, exceeding the high
increased access to investment
charge ratio and a 2.9 times debt coverage
end of our goal by approximately 90
opportunities and ancillary fee income.
ratio. We believe Kite Realty Group is in an
percent. At year end we had 14 retail
One example is Estero Town Commons,
excellent position to fund future growth.
properties under development, which
a 183,600 square foot community
2
Alvin E. Kite
John A. Kite
Chairman of the Board
of Trustees
Chief Executive Offi cer
President and Trustee
2 0 0 5 O P E R A T I N G A N D
F I N A N C I A L P E R F O R M A N C E
Kite Realty Group Trust is a full-
service, vertically integrated real estate
investment trust engaged primarily in the
development, construction, acquisition,
ownership and operation of high-quality
neighborhood and community shopping
centers in selected growth markets in the
United States. As of December 31, 2005,
Kite Realty Group owned interests in 45
operating properties totaling 6.7 million
square feet and 14 retail properties under
development, which are anticipated
to total 1.8 million square feet.
Headquartered in Indianapolis, Indiana,
Kite Realty Group began operations
as a real estate investment trust in
August 2004 following the Company’s
initial public offering of common shares.
4
S e l e c t e d F i n a n c i a l D a t a
Year Ended
December 31, 2005
Period from
August 16, 2004
through
December 31, 20041
Operating Data:
Consolidated revenue
Net income (loss)
Funds from operations (FFO) 2,
for the Kite portfolio
Common Share Data:
FFO - diluted 2
Net income (loss) - diluted
Cash dividends declared 3
$99,364,855
$29,088,946
13,435,840
(332,322)
34,021,691
7,416,461
$1.13
0.62
0.75
$0.27
(0.02)
0.28125
Financial Position at Year End:
Total assets
Total shareholders equity
$799,229,806
$563,543,771
278,879,380
158,199,060
Common Shares and Partnership Units Outstanding at Year End:
Shares of common stock
28,555,187
19,148,267
Limited partnership units
Market value of common
shares and partnership units
8,618,664
8,281,882
$575,079,475
$419,132,677
Data at Year End:
Number of operating properties
Gross leasable area (GLA)
of operating properties 4
Percent leased - operating properties
Number of development properties
45
36
6,723,592
5,229,026
95.5%
14
95.6%
9
GLA of development properties 4
1,823,561
1,252,331
Total market capitalization 5
Number of employee
$958,891,302
$711,350,937
95 81
1 We commenced operations as a public company on August 16, 2004 after completing our IPO and related
formation transactions.
2 FFO is a non-GAAP fi nancial measure commonly used in the real estate industry that we believe provides
useful information to investors. Please refer to Management’s Discussion & Analysis of Financial Condition
and Results of Operations for a defi nition of FFO and a reconciliation to net income.
3 Cash dividends for the period in 2004 includes a pro-rated distribution of $0.09375 for the period from
the date of our IPO (August 16, 2004) through September 30, 2004.
4 Includes non-owned anchor space and structures on land that is ground leased to tenants and owned
by Kite Realty Group.
5 Includes our share of joint venture debt.
5
S E N I O R M A N A G E M E N T T E A M
Mark Jenkins, Senior Vice President, Development
David Lee, Vice President, Property Operations
Jeff Lynch, Senior Vice President, Development
and Advisory Services
Tanya Marsh, Senior Real Estate and Corporate Counsel
George McMannis, Senior Vice President, Finance
and Capital Markets
Tom Olinger, Vice President, SEC and Financial Reporting
Gregg Poetz, Senior Vice President, Leasing
Jeff Schroeder, Vice President, Construction
Bob Solloway, Senior Real Estate and Corporate Counsel
K I T E B U I L D S V A L U E
Kite Realty Group’s vertically integrated
platform allows us to control all facets of
the development process, while helping
mitigate the associated risks. We began
2005 with nine projects in our development
pipeline at a total projected cost of $102
million. Over the course of the year, we
began ten new projects while moving
fi ve projects to the operating portfolio.
By year-end, our development pipeline
encompassed 14 projects at a total
projected cost of $176 million.
Traders Point, Indianapolis, IN
Circuit City Plaza, Ft. Lauderdale, FL (MSA)
We believe current conditions warrant
continued investment in development, and
we expect our strong pipeline to make
healthy contributions to cash fl ow and
shareholder value in 2006 and 2007.
6
Extensive due diligence and entitlement expertise
Construction experience and internal controls
L A N D P R O C U R E M E N T P R E - D E V E L O P M E N T L E A S I N G C O N S T R U C T I O N M A N A G E M E N T
Pre -leasing throughout proje ct lif e
A c t i v e D e v e l o p m e n t P i p e l i n e
as of December 31, 2005
Property
Projected Total Estimated
Location (MSA) Opening Date 1 Project Cost (Millions)
Beacon Hill Shopping Center 2
Crown Point, IN
Bridgewater Marketplace, Phase I
Indianapolis, IN
Cornelius Gateway 2
Portland, OR
Eagle Creek, Phase II
Estero Town Commons 2
Naples, FL
Naples, FL
Gateway Shopping Center, Phase I 2
Seattle, WA
Geist Pavilion
Indianapolis, IN
Naperville Marketplace
Chicago, IL
Red Bank Commons
Sandifur Plaza 2
Evansville, IN
Tri-Cities, WA
Stoney Creek Commons, Phase II
Indianapolis, IN
Tarpon Springs Plaza
Naples, FL
Traders Point II
Zionsville Place
Indianapolis, IN
Indianapolis, IN
Q3 2006
Q3 2006
Q2 2006
Q1 2005
Q3 2006
Q1 2007
Q1 2005
Q3 2005
Q1 2005
Q4 2006
Q3 2006
Q1 2007
Q2 2005
Q2 2006
$17.0
15.0
5.4
9.1
20.0
8.5
11.9
30.5
6.4
6.4
6.0
21.5
10.7
8.0
$176.4
1 Opening date is defi ned as the fi rst date a tenant is open for business or a ground lease payment is made.
2 Property held in joint venture project, total estimated project cost includes both KRG and partner shares.
Chris Lehman, Project Superintendent, Stoney Creek Commons, Indianapolis, IN (MSA)
7
L E A S I N G
Leasing is about building and
maintaining relationships. Our seasoned
leasing team is customer-focused and
knows what it takes to attract and retain
tenants. Kite Realty Group’s long-standing
relationships with well-known national
retailers like Lowe’s, Walgreens, Target,
Publix and Bed, Bath & Beyond provide
strong anchors for our existing and
future retail centers. In 2005, Kite Realty
Group signed 90 new and renewal leases
representing 486,614 square feet.
T h e o c c u p a n c y r a t e
o f o u r o p e r a t i n g
p o r t f o l i o e x c e e d s
9 5 p e r c e n t .
8
building
Top Ten Retail Anchors by GLA
as of December 31, 2005
Lowe’s
Wal-Mart
Federated Department Stores
Marsh Supermarkets
Circuit City
Dominick’s
Publix
Dick’s Sporting Goods
Kmart
Burlington Coat Factory
Portland, OR (MSA)
Greyhound Commons, Indianapolis, IN (MSA)
Marty Arrivo, Beth Patterson, Andrew Hasbrook,
John Schick, Gregg Poetz, Kim Caso, Scott Barrett,
Luke Isenbarger and Toby Davis
9
L A N D P R O C U R E M E N T A N D P R E - D E V E L O P M E N T
In 2005, we invested $75 million in
undeveloped land – over half of which
was included in the $138 million in 2005
development starts. In total, we own
approximately 180 acres of undeveloped
land in various stages of entitlement.
At Kite Realty Group, we employ an
experienced team of pre-development
engineers accomplished in navigating
the complicated and lengthy process of
entitlement and designing attractive
environments for our tenants and
customers. Our expertise allows us to
control costs and operate more effi ciently
during this critical development phase.
O v e r c o m i n g
o b s t a c l e s
a n d d e s i g n i n g
o p p o r t u n i t i e s .
Preliminary design, Delray Beach, Florida
Eric Strickland, Jil Froelich and Doug Pedersen
11
building
C O N S T R U C T I O N
O u r c o n s t r u c t i o n
e x p e r i e n c e m e a n s
o n t i m e a n d o n b u d g e t
p r o j e c t e x e c u t i o n .
Geist Pavilion, Indianapolis, IN (MSA)
Preliminary design, Pembroke Pines, Florida
At heart, we are builders. Throughout
We are able to leverage our construction
Kite Realty Group’s history, construction has
experience through merchant building
been a cornerstone of our success.
activities and third-party construction for
Our wealth of experience ensures that our
clients like Lowe’s, Kerasotes Theatres,
projects are completed on time and on
Walgreens, Kohl’s and Target. These
budget. We also place a priority on risk
opportunities not only generate fee income,
management, with exacting standards for
but also strengthen our relationships with
fi nancial planning and underwriting.
key tenants and serve as a source of new
development opportunities.
Jeff Schroeder and Noli Aurellano
13
K I T E B U I L D S V A L U E . . .
B Y R E C Y C L I N G C A P I T A L
One of our strategies involves recycling
proceeds from the sale of non-core
properties into our core retail portfolio.
In the fourth quarter, we disposed of
Mid-America Clinical Laboratories, a
single-tenant commercial asset that we
redeveloped in 2001. We then redeployed
the $21.3 million in proceeds toward
the purchase of Market Street Village,
a 149,000 square foot, 100% leased
community shopping center in the Dallas/
Fort Worth Metroplex. This transaction
allowed us to diversify our tenant
base further by replacing a single local
commercial tenant with fi ve well-known
national retail tenants.
P u t t i n g c a p i t a l
t o w o r k
i n c r e a t i v e w a y s .
Wade Achenbach, Adam Chavers,
George McMannis and Lindsey Hire
14
BEFORE
AFTER
Reinvested
proceeds
in Market
Street Village.
Acquired vacant building for $3.6 million.
Invested $10.1 million in redevelopment.
Sold commercial asset for $21.3 million.
K I T E B U I L D S V A L U E . . .
T H R O U G H S E L E C T I V E A C Q U I S I T I O N S
While we believe that current market
conditions justify a greater allocation
of capital toward development, we are
also committed to pursuing selective
acquisitions that meet our criteria for
risk-adjusted returns. In 2005, we acquired
fi ve high-quality shopping centers at a total
cost of $111 million. All of these properties
occupy premiere locations in growing,
affl uent markets and allow us to further
diversify and strengthen our tenant base.
Plaza Volente, Austin, TX
Name of Center
MSA Acquisition Cost
(Millions)
Owned GLA
Fox Lake Crossing
Chicago, IL
Indian River Square
Vero Beach, FL
Plaza Volente
Austin, TX
$15.5
16.5
35.9
Bolton Plaza
Jacksonville, FL 14.0
Market Street Village
Dallas/Fort Worth, TX
29.0
$110.9
99,095
144,246
156,308
172,938
149,000
721,587
Embassy Suites Hotel, Washington, D.C.
Eli Lilly Faris Campus, Indianapolis, IN
G e n e r a t i n g r e v e n u e
t h r o u g h r e a l e s t a t e
a d v i s o r y s e r v i c e s .
K I T E B U I L D S V A L U E . . .
T H R O U G H A D V I S O R Y
S E R V I C E S
Kite Realty Group provides a full range
of real estate consulting services through
our subsidiary, KMI Realty Advisors. KMI
offers clients a customizable platform
covering portfolio, due diligence, facility
and program management, as well as
fi nancial, acquisition and development
consulting services. Everything KMI does
is focused on helping our clients achieve
their investment goals. As of December 31,
2005, KMI managed or co-managed real
estate portfolios covering approximately
seven million square feet. We anticipate
utilizing this platform to further enhance
fee revenue opportunities.
17
BOARD OF TRUSTEES
Alvin E. Kite
Chairman of the Board,
Kite Realty Group Trust
John A. Kite
President and Chief Executive Offi cer,
Kite Realty Group Trust
William E. Bindley 2,3
Chairman, Bindley Capital Partners and
Priority Healthcare Corporation
Dr. Richard A. Cosier 1,3
Dean, Krannert School of Management,
Purdue University
Eugene Golub 2
Chairman, Golub and Company
Gerald L. Moss 1,3
Honorary Of Counsel, Bingham McHale, LLP
Michael L. Smith 1,2
Retired former Executive Vice President
and Chief Financial Offi cer,
Anthem Blue Cross and Blue Shield
1 Audit Committee
2 Compensation Committee
3 Corporate Government and Nominating Committee
Alvin E. Kite
John A. Kite
William E. Bindley
Dr. Richard A. Cosier
Eugene Golub
Gerald L. Moss
Michael L. Smith
building
Traders Point, Indianapolis, IN
EXECUTIVE MANAGEMENT TEAM
Thomas K. McGowan
Executive Vice President of Development,
Chief Operating Offi cer and
President of KRG Construction
Daniel R. Sink
Chief Financial Offi cer and
Senior Vice President
John A. Kite
President and Chief Executive Offi cer
S H A R E H O L D E R I N F O R M A T I O N
Corporate Headquarters:
Kite Realty Group Trust, 30 South Meridian, Suite 1100, Indianapolis, Indiana 46204
Phone: (317) 577-5600 Fax: (317) 577-5605 Internet: www.kiterealty.com
Exchange Listing: New York Stock Exchange. NYSE: KRG
Independent Auditors: Ernst & Young, LLP
Transfer Agent and Registrar:
LaSalle Bank National Association
135 South LaSalle Street
Chicago, IL 60603-3499
(312) 904-2000
Shareholder Information: Shareholders seeking fi nancial and operating information
may contact Investor Relations, Kite Realty Group Trust, 30 South Meridian, Suite 1100,
Indianapolis, Indiana 46204. Current investor information, including press releases and
quarterly earnings information, can be obtained at www.kiterealty.com.
Form 10-K: Copies of the Company’s Annual Report on Form 10-K for the year ended
December 31, 2005 are available to shareholders without charge upon written request to
Investor Relations, Kite Realty Group Trust, 30 South Meridian, Suite 1100, Indianapolis,
Indiana 46204.
Securities and Exchange Commission and New York Stock Exchange Certifi cations: The certi-
fi cations of the Chief Executive Offi cer and Chief Financial Offi cer of the Company certifying
the quality of the Company’s public disclosure and required to be fi led with the Securities
and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, have
been fi led as Exhibits 31.1 and 31.2, respectively, in the Company’s Annual Report on Form
10-K for the year ended December 31, 2005. The Company has submitted to the New York
Stock Exchange the certifi cation of the Chief Executive Offi cer certifying that he is not aware
of any violation by the Company of the New York Stock Exchange corporate governance
listing standards.
Annual Meeting: The Annual Meeting of Shareholders will be held at 9:00 a.m. local time on
May 4, 2006, at 30 South Meridian, 8th Floor Conference Center, Indianapolis, Indiana 46204.
This annual report contains certain statements that are not historical fact and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors which may cause the actual results of the Company to differ materially from historical results or from any results expressed or implied by such forward-looking
statements, including, without limitation: national and local economic, business, real estate and other market conditions; the competitive environment in which the Company operates; fi nancing risks; possible future downgrades
in our credit ratings; property ownership/management risks; the level and volatility of interest rates; fi nancial stability of tenants; the Company’s ability to maintain its status as a REIT for federal income tax purposes; acquisition,
disposition, development and joint venture risks, including risks that developments and redevelopments are not completed on time or on budget and strategies, actions and performance of affi liates that the Company may not
control; potential environmental and other liabilities; and other factors affecting the real estate industry generally. The Company refers you to the documents fi led by the Company from time to time with the Securities and Ex-
change Commission, specifi cally the section titled “Business Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, which discuss these and other factors that could adversely affect the
Company’s results.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
H Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
h Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 2005 or
For the transition period from
to
Commission File Number: 001-32268
Kite Realty Group Trust
Maryland
State of Organization:
11-3715772
IRS Employer Identification Number:
30 S. Meridian Street, Suite 1100
Indianapolis, Indiana 46204
Telephone: (317) 577-5600
(Address, including zip code and telephone number, including area code, of principal executive offices)
Title of each class
Common Shares, $0.01 par value
Name of each exchange
on which registered
New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by checkmark if the Registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities
Act Yes h No H
Indicate by checkmark if the Registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the
Act Yes h No H
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes H No h
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of Registrant’s knowledge, in any definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K. h
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
Large accelerated filer h Accelerated filer H Non-accelerated filer h
Indicate by checkmark whether the Registrant is a shell company (as defined in Rule 12-b of the Act) Yes h No H
The aggregate market value of the voting shares held by non-affiliates of the Registrant as the last business day of the
Registrant’s most recently completed second quarter was $272.7 million based upon the closing price of $15.00 per share on the
New York Stock Exchange on such date.
The number of Common Shares outstanding as of March 10, 2006 was 28,583,414 ($.01 par value).
Portions of the Proxy Statement relating to the Registrant’s Annual Meeting of Shareholders, scheduled to be held on May 4,
2006, to be filed with the Securities and Exchange Commission, are incorporated by reference into Part III, Items 10-14 of this
Annual Report on Form 10-K as indicated herein.
Documents Incorporated by Reference
KITE REALTY GROUP TRUST
Annual Report on Form 10-K
For the Fiscal Year Ended
December 31, 2005
TABLE OF CONTENTS
Item No.
Part I
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.
1.A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1.B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2.
Legal Proceeding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3.
Submission of Matters to a Vote of Security Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4.
Part II
5.
Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
6.
7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . . .
7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
8.
9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . .
9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Part III
10.
11.
12.
Directors and Executive Officers of the Registrant
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneficial Owners and Management and Related
Shareholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
13.
14.
Part IV
15.
Exhibits and Financial Statement Schedule . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
1
10
24
24
37
37
38
40
41
58
58
58
58
61
61
61
61
61
61
62
63
PART I
FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K, together with other statements and information publicly disseminated
by Kite Realty Group Trust, contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such statements are based
on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and
other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.
Future events and actual results, performance, transactions or achievements, financial or otherwise, may differ
materially from the results, performance, transactions or achievements expressed or implied by the forward-
looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could
be material, include, but are not limited to:
•
•
•
•
•
•
•
•
•
•
•
•
national and local economic, business, real estate and other market conditions;
the ability of tenants to pay rent;
the competitive environment in which the Company operates;
financing risks;
property ownership and management risks;
the level and volatility of interest rates;
the financial stability of tenants;
the Company’s ability to maintain its status as a real estate investment trust (“REIT”) for federal income
tax purposes;
acquisition, disposition, development and joint venture risks;
potential environmental and other liabilities;
other factors affecting the real estate industry generally; and
other risks identified in this Annual Report on Form 10-K and, from time to time, in other reports we
file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly
disseminate.
The Company undertakes no obligation to publicly update or revise these forward-looking statements,
whether as a result of new information, future events or otherwise.
ITEM 1. BUSINESS
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”) and their predecessor
companies. References to “Kite Property Group” or the “Predecessor” mean our predecessor businesses.
Overview
We are a full-service, vertically integrated real estate company engaged primarily in the development,
construction, acquisition, ownership and operation of high quality neighborhood and community shopping
centers in selected growth markets in the United States. We also provide real estate facility management,
construction, development and other advisory services to third parties.
As of December 31, 2005, we owned interests in a portfolio of 40 retail operating properties totaling
approximately 6.2 million square feet of gross leasable area (including approximately 1.7 million square feet
of non-owned anchor space) and 14 retail development properties that are expected to contain approximately
1.8 million square feet of total gross leasable area (including non-owned anchor space). Our retail operating
portfolio was 95.3% leased as of December 31, 2005 to a diversified tenant base, with no single retail tenant
accounting for more than 3.3% of our total annualized base rent. We also own interests in four commercial
operating properties totaling approximately 563,000 square feet of net rentable area and a related parking garage.
Occupancy of our commercial operating portfolio was 97.3% as of December 31, 2005, with no single
commercial tenant accounting for more than 2.8% of our annualized base rent. See “Item 2. Properties” for a
list of our top 25 tenants by annualized base rent. Our operating portfolio consists of properties in Indiana, Texas,
Florida, Georgia, Illinois, New Jersey, Ohio, Oregon and Washington. In addition, we own interests in land
parcels comprising approximately 180 acres that may be used for future development of retail or commercial
properties or for expansion of existing properties.
We were formed in March 2004 and organized as a Maryland real estate investment trust. From inception
until August 16, 2004, neither we, our Operating Partnership, nor our other subsidiaries had any operations. We
commenced operations on August 16, 2004 after completing our initial public offering (“IPO”), concurrently
with the consummation of various formation transactions that consolidated into our Operating Partnership the
ownership of a portfolio of properties and property interests, and certain commercial real estate businesses of
our predecessor, the Kite Property Group, a nationally recognized real estate owner and developer. Kite, Inc.,
an affiliate of Kite Property Group, was founded in 1960 by our Chairman, Al Kite, and grew from an interior
construction company to a full-service, vertically integrated real estate development, construction and
management company.
We conduct all of our business through our Operating Partnership, of which we are the sole general partner.
As of December 31, 2005, we held an approximate 77% interest in our Operating Partnership.
2005 Activities
Completion of Offering of Common Shares. On October 3, 2005, the Company completed an offering (the
“2005 Offering”) of 8,500,000 common shares at a price of $15.01 per share, for gross proceeds of approximately
$127.6 million. On October 28, 2005, the underwriters of the offering exercised a portion of their overallotment
option and purchased an additional 900,000 common shares at the public offering price of $15.01 per share,
which resulted in additional gross proceeds of approximately $13.5 million. The Company used the net proceeds
of this offering of approximately $133.2 million, after deducting underwriting discounts, commissions and other
expenses as follows:
•
•
•
•
•
to repay outstanding construction indebtedness of approximately $38.6 million and acquisition
indebtedness of approximately $0.5 million on our Traders Point property;
to repay outstanding indebtedness on our Eagle Creek II development property and our Weston Park,
Shops at Otty and Circuit City operating properties totaling approximately $13.6 million;
to pay down our secured revolving credit facility by approximately $60.2 million;
to acquire an 85% interest in Bolton Plaza Shopping Center in Jacksonville, Florida for approximately
$14.0 million; and
for general corporate purposes, including acquisition of land, capital expenditures, development costs
and working capital of approximately $6.3 million.
2005 Acquisition Activities. During 2005, we completed the acquisition of five operating properties totaling
approximately 1.0 million square feet of gross leasable area (including non-owned anchor space) for a total
acquisition cost of approximately $111 million (including assumed debt), as described below:
• Fox Lake Crossing. On February 7, we acquired Fox Lake Crossing, a 99,095 square foot neighborhood
shopping center in Fox Lake, Illinois (a suburb of Chicago, Illinois), for a total purchase price of
approximately $15.5 million, inclusive of $12.3 million of assumed debt;
2
• Plaza Volente. On May 16, we acquired Plaza Volente, a 160,308 square foot neighborhood shopping
center in Austin, Texas, for a total purchase price of approximately $35.9 million, inclusive of
$28.7 million of new debt and $7.2 million of borrowings on our revolving credit facility incurred in
connection with the acquisition;
• Indian River Square. On May 16, we acquired Indian River Square, a 379,246 square foot (including
235,000 square feet of non-owned anchor space) community shopping center in Vero Beach, Florida for
a total purchase price of approximately $16.5 million, inclusive of $13.3 million of new debt and
$3.2 million of borrowings on our revolving credit facility incurred in connection with the acquisition;
• Bolton Plaza Shopping Center. On November 1, we contributed $14.0 million to acquire an 85% interest
in Bolton Plaza, a 172,938 square foot community shopping center in Orange Park, Florida (a suburb
of Jacksonville, Florida). We financed this acquisition with proceeds from our 2005 Offering; and
• Market Street Village. On November 17, we acquired Market Street Village, a 156,000 square foot
(including a future 7,000 square foot single tenant small shop building) community shopping center in
Hurst, Texas (a suburb of Dallas/Ft. Worth, Texas) for a total purchase price of approximately
$29.0 million. We initially financed this acquisition with borrowings on our revolving credit facility. On
December 30, we executed a like-kind exchange under Section 1031 of the Internal Revenue Code and
sold our Mid-America Clinical Labs property for $21.3 million and used the proceeds to pay down the
revolving credit facility.
2005 Development Activities. During 2005, we added ten parcels to our development pipeline:
• Stoney Creek Commons, Phase II, Noblesville, Indiana (a suburb of Indianapolis, Indiana). This project
will be a 49,330 square foot shopping center located adjacent to a Lowe’s developed by us in 2000 and
is 100% pre-leased to Office Depot and Gregg Appliances. This project has a total estimated cost of
approximately $6.0 million and an anticipated opening date in the third quarter of 2006;
• Bridgewater Marketplace, Phase I, Westfield, Indiana (a suburb of Indianapolis, Indiana). In October,
we acquired 12 acres for approximately $4.8 million and placed an adjacent eight acres under contract.
Bridgewater Marketplace is anticipated to be a two-phase development. Phase I will be developed on
the first 12 acres and is an estimated 51,000 square foot neighborhood shopping center expected to include
a Walgreen’s, two outparcels and approximately 25,000 square feet of small shops. Phase I of this project
has an expected opening date in the third quarter of 2006.
• Zionsville Place, Zionsville, Indiana (a suburb of Indianapolis, Indiana). In August, we added this
project, a 42,400 square foot mixed use retail/commercial center, to the development pipeline. Featuring
a combination of small shops and garden-style offices, Zionsville Place will be developed on a seven-acre
parcel that we acquired in 2004. This project has an estimated total cost of approximately $8.0 million
and an anticipated opening date in the second quarter of 2006;
• Beacon Hill Shopping Center, Crown Point, Indiana. In July, we contributed approximately $4.0 million
and 122,733 units of the Operating Partnership valued at approximately $1.9 million for a 50% interest
in a joint venture that owned 82 acres of undeveloped land. Beacon Hill Shopping Center, Phase I consists
of 36 acres and will be an estimated 161,000 square foot community shopping center (including
105,000 square feet of non-owned space). This project has an estimated total cost of approximately
$17.0 million and a projected opening date in the third quarter of 2006. The remaining 46 acres is being
marketed to big box retailers;
• Gateway Shopping Center, Phase I, Marysville, Washington (a suburb of Seattle, Washington). In June,
we contributed $4.1 million for a 50% interest in a joint venture that acquired 18.8 acres of undeveloped
land. Phase I of Gateway Shopping Center will be an estimated 133,200 square foot community shopping
center (including 103,000 square feet of non-owned space to be occupied by Kohl’s). The estimated total
3
cost for Phase I of this project is approximately $8.5 million with an anticipated opening date in the first
quarter of 2007.
• Cornelius Gateway, Cornelius, Oregon (a suburb of Portland, Oregon). In June, we contributed
approximately $2.2 million to acquire an 80% interest in a joint venture that acquired 3.9 acres of
undeveloped land. Cornelius Gateway will be a 36,100 square foot neighborhood shopping center
featuring a 14,800 square foot non-owned Walgreen’s and 21,300 square feet of small shops. This project
has a total estimated cost of approximately $5.4 million. In December, we sold the Walgreen’s as part
of our merchant building activity for a gross sales price of approximately $5.6 million. The anticipated
opening date for the small shops is in the second quarter of 2006;
• Sandifur Plaza, Tri-Cities, Washington. In April, we contributed approximately $1.7 million to acquire
an interest in two joint ventures that collectively acquired 3.5 acres of undeveloped land. Sandifur Plaza
will be a 27,400 square foot neighborhood shopping center featuring a 14,800 square foot Walgreen’s
and 12,600 square feet of small shops. We have an 80% interest in the entity that owns the Walgreen’s
space and a 95% interest in the entity that owns the small shop space. This project has a total estimated
cost of approximately $6.4 million and an anticipated opening date in the fourth quarter of 2006;
• Naperville Marketplace, Naperville, Illinois (a suburb of Chicago, Illinois). In March, we acquired a
100% interest in a partially constructed Super K-Mart on a 21.6-acre site for approximately $9.5 million.
Naperville Marketplace is an estimated 175,000 square foot neighborhood shopping center anchored by
a 70,000 square foot Marsh Supermarket and includes junior box retailers and small shops. The total cost
of this project is approximately $30.5 million. The Marsh Supermarket opened in August and is being
marketed for sale; however, the Company cannot presently determine whether it can sell this asset within
the next twelve months. The remainder of the center is anticipated to open in the second quarter of 2006;
• Tarpon Springs Plaza, Naples, Florida. In March, we acquired a 15 acre site from the Company’s
Principals in exchange for 214,049 units of our Operating Partnership valued at approximately
$3.1 million. Tarpon Springs Plaza is an estimated 273,300 square foot community shopping center
(including a 191,900 square foot non-owned Target) that
is expected to include approximately
70,000 square feet of retail junior box tenants, 25,000 square feet of retail shops and up to four outparcels.
This project has an estimated total cost of approximately $21.5 million and an anticipated opening date
in the first quarter of 2007; and
• Estero Town Commons, Naples, Florida. In January, we contributed approximately $10 million to acquire
a 40% interest in a joint venture that acquired 33 acres of undeveloped land. Estero Town Commons is
an estimated 183,600 square foot community shopping center (including 158,000 square feet of non-
owned anchor and outlot space) with an expected total project cost of approximately $20 million and
an anticipated opening date in the third quarter of 2006.
Also during 2005, we completed the following development properties and added them to our
operating portfolio:
• Traders Point, a 328,278 square foot upscale community shopping center (including 75,777 square feet
of non-owned anchor and outlot space) located in Indianapolis, Indiana (opened October 2004 and
transferred to the operating portfolio in September 2005);
• Cool Creek Commons, a 133,177 square foot upscale community shopping center (including
12,529 square feet of outlot space) located in Carmel, Indiana, a suburb of Indianapolis, Indiana (opened
October 2004 and transferred to the operating portfolio in March 2005);
• Weston Park, Phase I, a shopping center consisting of ground leased outlots located in Carmel, Indiana,
a suburb of Indianapolis, Indiana (opened and transferred to the operating portfolio in March 2005);
• Greyhound Commons, a restaurant park of ground leased outlots located in Carmel, Indiana, a
suburb of Indianapolis, Indiana (opened in March 2005 and transferred to the operating portfolio in
December 2005); and
4
• Martinsville Shops, a 10,986 square foot shopping center located in Martinsville, Indiana (opened and
transferred to the operating portfolio in June 2005)
In addition, three of our retail development properties became partially operational during 2005:
• Traders Point II, a 50,200 square foot community shopping center in Indianapolis, Indiana located
adjacent to our Traders Point property (June 2005);
• Red Bank Commons, a 246,500 square foot neighborhood shopping center (including 212,000 square feet
of non-owned anchor space) located in Evansville, Indiana (June 2005); and
• Geist Pavilion, a 64,300 square foot neighborhood shopping center located in Fishers, Indiana, a suburb
of Indianapolis, Indiana (March 2005).
2005 Land Acquisitions. During 2005, we made the following significant land acquisitions:
• Delray Marketplace, Delray Beach, Florida. In October, we contributed $16.7 million for a 50% interest
in a joint venture that owns 32.5 acres of undeveloped land. Delray Beach Marketplace is a planned
mixed-use development that is zoned to support up to 322,000 square feet and is anticipated to include
two anchors, junior boxes, small shops, restaurants and residential units; and
• Grand Palms Plaza, Pembroke Pines, Florida. In October, we contributed $11.0 million for a
50% interest in a joint venture that acquired 22.2 acres of undeveloped land. Grand Palms Plaza is a
planned 145,000 square foot community shopping center to be anchored by Whole Foods and is expected
to include small shops, a junior box and outparcels.
2005 Dispositions: During 2005, we sold the following two properties:
• Mid-America Clinical Labs, Indianapolis, Indiana. In December, we sold Mid-America Clinical Labs
in a like-kind exchange under Section 1031 of the Internal Revenue Code for a gross sales price of
approximately $21.3 million and recognized a gain of approximately $7.2 million; and
• Cornelius Gateway, Cornelius, Oregon. In December, we sold the Walgreen’s as part of our merchant
building activity for a gross sales price of approximately $5.6 million and a net gain before income taxes
and minority interest of approximately $1.6 million.
Distributions. In 2005, we declared four quarterly cash distributions of $0.1875 per common share (which
is equivalent to an annual distribution of $0.75 per common share).
Business Strategy
Our primary business objectives are to generate increasing cash flow, achieve sustainable long-term growth
and maximize shareholder value primarily through the development, acquisition and operation of well-located
community and neighborhood shopping centers. We seek to implement our business objectives by:
•
•
•
successfully completing the construction and lease-up of our development portfolio;
continuing to pursue well-located land which can support development;
acquiring well-located, high quality retail properties through our investment and market selection process;
• maintaining a focused property management and leasing strategy;
•
•
selling certain assets and recycling capital; and
leveraging our construction and advisory services businesses.
Development Activities. We serve as an in-house and third-party developer for national retailers and other
clients, providing a broad range of services that include site selection, development incentives procurement,
design, leasing, construction and property management. As a vertically integrated real estate company, we control
5
all aspects of the development process from design to operation, which improves our ability to deliver a quality
product to our tenants on budget and on time. We have in-house capabilities and expertise in project design,
development, leasing, construction and property management. Our construction expertise enables us to better
identify and complete redevelopment and value-enhancing acquisition opportunities. We believe that our
vertically integrated platform allows us to achieve attractive risk-adjusted returns on our development projects
while substantially mitigating the risks associated with ground-up development.
As of December 31, 2005, we had an extensive development pipeline, which we expect to be a significant
source of growth for us over the next several years. We had 14 retail properties under development as of
December 31, 2005, that are expected to contain approximately 1.8 million square feet, of which approximately
690,000 square feet will be owned by us with the remainder to be owned by anchor tenants upon completion
of the development. The total estimated cost for these properties is approximately $176.4 million, of which
approximately $107.7 million had been incurred as of December 31, 2005.
Acquisition of Development Parcels. As of December 31, 2005, we owned interests in undeveloped land
parcels comprising approximately 180 acres that represent future retail and commercial development
opportunities, either in the form of expansion of existing properties or development of new retail properties.
We believe our extensive development pipeline creates substantial opportunities to increase cash flow and create
long-term shareholder value.
Property Acquisitions and our Investment and Market Selection Process. We seek to develop and acquire
primarily neighborhood and community shopping centers in neighborhood trade areas with attractive
demographics. When specific markets are selected, we seek a convenient and easily accessible location,
preferably occupying a dominant corner that has abundant parking facilities, is close to residential communities,
and has excellent visibility for our tenants and easy access for neighborhood shoppers. Our selection process
emphasizes the following factors:
Market and Trade Area: In order to take advantage of our current resources and create economies of scale,
our development and acquisition activities are focused primarily in or near the markets in which we currently
operate or in which we have had previous experience. By having a presence in a market and developing
relationships in that market, we have a greater awareness of market trends and opportunities.
We evaluate each market based on appropriate criteria and prospective use, including:
•
•
•
•
•
historical and projected population growth;
average household income and density of population within a one-, three- or five-mile radius of
the center depending on the characteristics of the property;
transportation patterns and infrastructure;
barriers to the development of competing centers; and
diverse employment base.
We also consider opportunities to expand into other geographic markets if we believe that those
markets have favorable long-term growth prospects.
Property Characteristics: We focus on neighborhood and community shopping centers anchored by
market-leading retailers or smaller operators with dominant niche positions. In addition, we focus on the
presence of one or more additional anchors for these centers, including off-price retailers, office superstores,
grocers and fabric and clothing retailers, all of whom we believe increase traffic at the centers and are
generally beneficial to the value of the center. We also seek properties with a diverse tenant mix that includes
service retailers, such as banks, florists, video stores, restaurants, and apparel and specialty shops. We target
dominant shopping centers that generate a steady, repetitive flow of traffic by providing staple goods to
the community and offering a high level of convenience with ease of access and abundant parking.
6
We plan to focus our new investments in the shopping center sector, but also may selectively pursue
commercial development opportunities in markets where we currently operate and where we believe we can
leverage our existing infrastructure and relationships to generate attractive risk adjusted returns. In evaluating
future investments in properties other than neighborhood and community shopping centers, we seek properties
or transactions that have unique characteristics that present a compelling case for investment. Examples might
include properties having high entry yields, properties that are outside of our target markets but are being sold
as part of a portfolio package, properties that are debt-free, a transaction in which we might issue units in
our Operating Partnership or properties that provide substantial growth potential through redevelopment.
Retailer Relationships: We seek to partner with key tenants and retailers, such as Lowe’s, Walgreen’s,
Old Navy, Bed Bath & Beyond, Staples, Publix, Kohl’s, Target and Wal-Mart, to identify attractive
investments in new and existing markets. We seek to maintain strong tenant and retailer relationships in
order to avoid rent interruptions and reduce marketing, leasing and tenant improvement costs that result
from re-tenanting space.
We believe that we will continue to source a significant volume of growth opportunities through the
extensive network of tenant, corporate and institutional relationships that we have established through our
Predecessor over the last four decades. Additionally, we believe our status as a publicly traded umbrella
partnership REIT will enhance our ability to acquire properties from tax-motivated sellers through the use
of Operating Partnership units as consideration, thereby providing sellers with liquidity and diversification
while providing the opportunity for substantial deferral of income taxes that otherwise would be due as
a result of a cash sale
Property Management and Leasing Strategy. We believe that focused property management, leasing and
tenant retention are essential to maximizing the cash flow and value of our properties. Our property management
and leasing functions are supervised and administered by personnel at our principal executive office.
Our primary goal in property management is to maintain an attractive shopping environment on a cost
effective basis for our tenants. Our property managers maintain regular contact with our tenants and frequently
visit each asset to supervise the local personnel and to ensure the proper implementation and execution of our
policies and directives. As part of our ongoing property management, we conduct regular physical property
reviews to improve our properties, react to changing market conditions and ensure proper maintenance. In
addition, we have a competitive bid process for the majority of our service contracts. In the future, we may
establish regional offices in certain markets such as Texas and Florida where we plan to expand our current
operations through additional acquisitions and development.
Our relationships with several national retailers that currently occupy space at our properties are the
cornerstone of our overall leasing strategy. These nationally recognized anchors enhance the stability and
attractiveness of our properties by driving customer traffic, thereby enhancing the performance of our non-anchor
tenants and small shops. Due to the importance of these anchors to our business, our leasing and development
teams work closely with each of these retailers on site selection and expansion opportunities within our current
and future portfolio. This focused coverage allows us to anticipate space needs, fill vacant space in our existing
portfolio and identify opportunities to enter into new markets.
Our leasing representatives have become experts in the markets in which we operate by becoming familiar with
current tenants as well as potential local, regional and national tenants who would complement our current tenant
base. We study demographics, tenant sales and merchandizing mix to optimize the sales performance of our centers
and thereby increase rents. We believe this hands-on approach maximizes the value of our shopping centers.
Disposition Strategy. We review each of our assets on a regular basis to determine the appropriate capital
strategy for the asset. This review involves weighing the asset’s future potential growth against its current market
value. Subject to REIT qualification rules, avoidance of the 100% “prohibited transactions tax” applicable to REITs
and tax protection obligations that we undertook in connection with our formation transactions, we will consider
disposing of properties if our management determines that a sale of a property would be in our best interests based
7
on the price being offered for the property, the operating performance of the property, the tax consequences of the
sale and other factors and circumstances surrounding the proposed sale. Property dispositions that would give rise
to an indemnification obligation under the tax protection obligations we undertook in connection with our formation
transactions are subject to approval by a majority of our independent trustees.
Construction and Advisory Services Operations. We provide general construction, construction
management, design/build and complete site development services and have experience in corporate,
institutional, hotel, medical and retail construction. KMI Realty Advisors, one of our subsidiaries, is a registered
real estate advisor, providing strategic property services to both the public and private sector. KMI provides a
full range of real estate consulting services, including portfolio management, due diligence, acquisition,
development, financial, program management, facility management and disposition services. KMI utilizes
resources from our development and construction operations to customize a real estate strategy to achieve specific
client goals. In addition to being a continuing source of advisory income, we believe that KMI will help facilitate
future access to capital and avenues for growth.
Financing Strategy
We consider a number of factors when evaluating our level of indebtedness and when making decisions
regarding the additional borrowings, including the purchase price of properties to be developed or acquired with
debt financing, the estimated market value of our properties upon refinancing and the ability of particular
properties, as well as our Company as a whole, to generate cash flow to cover expected debt service.
Generally speaking, although we may incur any of the forms of indebtedness described below, we intend
to focus primarily on financing future growth through the incurrence of secured debt on an individual property
or a portfolio of properties. We may incur debt in the form of purchase money obligations to the sellers of
properties, or in the form of publicly or privately placed debt instruments, financing from other banks,
institutional investors, or other lenders, any of which may be unsecured or may be secured by mortgages or other
interests in our properties. This indebtedness may be recourse, non-recourse or cross-collateralized and, if
recourse, that recourse may include our general assets and, if non-recourse, may be limited to the particular
property to which the indebtedness relates. In addition, we may invest in properties subject to existing loans
secured by mortgages or similar liens on the properties, or may refinance properties acquired on a leveraged
basis. We may use the proceeds from any borrowings for working capital, to purchase additional interests in
partnerships or joint ventures in which we participate, to refinance existing indebtedness or to finance
acquisitions, expansion, redevelopment of existing properties or development of new properties. We also may
incur indebtedness for other purposes when, in the opinion of our board or management, it is advisable to do
so. In addition, we may need to borrow to make distributions (including distributions that may be required under
the Internal Revenue Code) if we do not have sufficient cash available to make those distributions.
Business Segments
The principal business of the Company and its consolidated subsidiaries is the development, construction,
acquisition, ownership and operation of high quality neighborhood and community shopping centers in selected
growth markets in the United States. We have aligned our operations into two business segments: (i) real estate
operation and development and (ii) construction and advisory services. See Note 12 — Segment Information
in our Notes to Consolidated and Combined Financial Statements contained in this Form 10-K for information
on our two business segments and the reconciliation of total segment revenues to total revenues, total segment
operating income to operating income, total segment net income (loss) to net income (loss) and total segment
assets to total assets for the years ended December 31, 2005, 2004 and 2003.
Competition
We encounter competition for development and acquisitions of existing income-producing properties. We
believe that competition for the development, acquisition and operation of neighborhood and community shopping
centers is highly fragmented. We face competition from institutional investors, other REITs and owner-operators
8
engaged in the development, acquisition, ownership and leasing of shopping centers as well as from numerous
local, regional and national real estate developers and owners in each of our markets. We also face competition
in leasing available space at our properties to prospective tenants. The actual competition for tenants varies
depending upon the characteristics of each local market in which we own and manage property. We believe that
the principal competitive factors in attracting tenants in our market areas are location, price, the presence of anchor
tenants and maintenance of properties.
Government Regulation
Americans with Disabilities Act. Our properties must comply with Title III of the Americans with
Disabilities Act, or ADA, to the extent that such properties are public accommodations as defined by the ADA.
The ADA may require removal of structural barriers to access by persons with disabilities in certain public areas
of our properties where such removal is readily achievable. We believe that our properties are in substantial
compliance with the ADA and that we will not be required to make substantial capital expenditures to address
the requirements of the ADA. However, noncompliance with the ADA could result in imposition of fines or an
award of damages to private litigants. The obligation to make readily achievable accommodations is an ongoing
one, and we will continue to assess our properties and to make alterations as appropriate in this respect.
Environmental Regulations. Some of the 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 the
storage of petroleum products or other hazardous or toxic substances. These operations may have released, or
have the potential to release, such substances into the environment. In addition, some of our properties have
tenants which may use hazardous or toxic substances in the routine course of their businesses. As a general rule,
these tenants have covenanted to use these substances, if any, in compliance with all environmental laws and
have agreed to indemnify us for any damages that we may suffer as a result of their use of such substances.
However, these lease provisions may not fully protect us in the event that a tenant becomes insolvent. Finally,
one of our properties has contained asbestos-containing building materials, or ACBM and another property may
have contained such materials based on the date of its construction. Environmental laws require that ACBM be
properly managed and maintained, and may impose fines and penalties 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. We are not aware of any environmental
issues that may materially affect the operation of any of our properties.
Insurance
We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the
properties in our portfolio. We believe the policy specifications and insured limits are appropriate and adequate
given the relative risk of loss, the cost of the coverage and industry practice. We do not carry insurance for
generally uninsurable losses such as loss from riots, war or acts of God, and, in some cases, flooding. Some
of our policies, such as those covering losses due to terrorism and floods, are insured subject to limitations
involving large deductibles or co-payments and policy limits that may not be sufficient to cover losses.
Offices
Our principal executive office is located at 30 S. Meridian Street, Suite 1100, Indianapolis, IN 46204. Our
telephone number is (317) 577-5600.
Employees
We have approximately 95 employees. Of these employees, approximately 72 are “home office” executive
and administrative personnel and approximately 23 are on-site management and administrative personnel.
9
Available Information
Our Internet website address is www.kiterealty.com. You can obtain on our website, free of charge, a copy
of our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and
any amendments to those reports, as soon as reasonably practicable after we electronically file such reports or
amendments with, or furnish them to, the SEC. Our Internet website and the information contained therein or
connected thereto are not intended to be incorporated into this Annual Report on Form 10-K.
Also available on our website, free of charge, are copies of our Code of Business Conduct and Ethics, our
Code of Ethics for Principal Executive Officer and Senior Financial Officers, our 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, our Code of Ethics for Principal Executive Officer and Senior Financial Officers,
our Corporate Governance Guidelines, and our committee charters are also available free of charge, upon request,
in print to any shareholder. You can also obtain such copies in print by contacting our Investor Relations
department by mail at our principal executive office.
ITEM 1.A. RISK FACTORS
The following factors, among others, could cause actual results to differ materially from those contained
in forward-looking statements made in this Annual Report on Form 10-K and presented elsewhere by our
management from time to time. These factors, among others, may have a material adverse effect on our business,
financial condition, operating results and cash flows, and you should carefully consider them. It is not possible
to predict or identify all such factors. You should not consider this list to be a complete statement of all potential
risks or uncertainties. Past performance should not be considered an indication of future performance.
We have separated the risks into three groups:
•
•
•
risks related to our operations;
risks related to our organization and structure; and
tax risks.
RISKS RELATED TO OUR OPERATIONS
We expect to continue to experience rapid growth and may not be able to adapt our management and
operational systems to respond to the integration of additional properties without significant disruption
or expense.
We are currently in a period of rapid growth. Our portfolio includes 26 operating properties that we have
acquired since 1999, including 13 since our IPO, which contain approximately 3.8 million square feet of owned
gross leasable area. Since our IPO, we have delivered nine properties from our development pipeline into our
operating portfolio, and we are currently developing 14 additional retail properties projected to total
approximately 1.8 million square feet of gross leasable area (including non-owned anchor space). We also expect
to continue to pursue additional acquisition and development opportunities.
As a result of the rapid growth of our portfolio, we cannot assure you that we will be able to adapt our
management, administrative, accounting and operational systems or hire and retain sufficient operational staff
to integrate these properties into our portfolio and manage any future acquisitions of additional properties without
operating disruptions or unanticipated costs. As we develop or acquire additional properties, we will be subject
to risks associated with managing new properties, including tenant retention and mortgage default. In addition,
acquisitions or developments may cause disruptions in our operations and divert management’s attention away
from day-to-day operations, which could impair our relationships with our current tenants, retailers and
employees. In addition, our profitability may suffer because of acquisition-related costs or amortization costs
for acquired goodwill and other intangible assets. Our failure to successfully integrate any future properties into
10
our portfolio could have a material adverse effect on our results of operations and financial condition and our
ability to make distributions to our shareholders.
Our future developments, acquisitions and investment opportunities may not yield the returns we expect
or may result in shareholder dilution.
We expect to develop and/or acquire a number of real estate properties in the near future. Shareholders
ultimately may not like the location, lease terms or other relevant economic and financial data of any real
properties, other assets or other companies we may develop or acquire in the future. New developments are
subject to a number of risks, including, but not limited to:
•
•
•
•
•
•
abandonment of development activities after expending resources to determine feasibility;
construction delays or cost overruns that may increase project costs;
our investigation of a property or building prior to our acquisition, and any representations we may
receive from the seller, may fail to reveal various liabilities or defects or identify necessary repairs
until after the property is acquired, which could reduce the cash flow from the property or increase
our acquisition costs;
financing risks;
the failure to meet anticipated occupancy or rent levels; and
failure to receive required zoning, occupancy,
authorizations and changes in applicable zoning and land use laws.
land use and other governmental permits and
In addition, if a project is delayed, certain tenants may have the right to terminate their leases. If any of
these problems occur, development costs for a project will increase, which will result in reduced returns, or even
losses, from such investments. In deciding whether to acquire or develop a particular property, we make certain
assumptions regarding the expected future performance of that property. If these new properties do not perform
as expected, our financial performance will be adversely affected. In addition, the issuance of equity securities
for any acquisitions could be substantially dilutive to our shareholders.
Our results of operations will be significantly influenced by the economies of the markets in which we
operate, and the market for retail space generally.
We are susceptible to adverse developments in the markets in which we operate, such as business layoffs
or downsizing, industry slowdowns, relocations of businesses, changing demographics, increased Internet
shopping, infrastructure quality, state budgetary constraints and priorities, increases in real estate and other taxes,
costs of complying with government regulations or increased regulation and other factors. In addition, as of
December 31, 2005, 34% of our retail operating and development owned gross leasable area and 100% of our
commercial operating square footage were located in the state of Indiana, which exposes us to greater economic
risks than if we owned properties in numerous geographic regions. Any adverse economic or real estate
developments in Indiana and the surrounding region or any of the markets in which we operate, or any decrease
in demand for retail space resulting from the local regulatory environment, business climate or fiscal problems,
could adversely affect our financial condition, results of operations, cash flow, the trading price of our common
shares and our ability to satisfy our debt service obligations and to pay distributions to our shareholders.
Moreover, because our portfolio of properties consists primarily of community and neighborhood shopping
centers, a decrease in the demand for retail space may have a greater adverse effect on our business and financial
condition than if we owned a more diversified real estate portfolio. The market for retail space has been and
could be adversely affected by weakness in the national, regional and local economies, the adverse financial
condition of some large retailing companies, the ongoing consolidation in the retail sector, the excess amount
of retail space in a number of markets, and increasing consumer purchases through catalogues or the Internet.
To the extent that any of these conditions occur, they are likely to affect market rents for retail space and could
harm our business.
11
We had approximately $375.2 million of consolidated indebtedness outstanding as of December 31, 2005,
which may impede our operating performance and reduce our ability to incur additional indebtedness
to fund our growth.
Required repayments of debt and related interest can adversely affect our operating performance. We had
approximately $375.2 million of consolidated outstanding indebtedness as of December 31, 2005.
Approximately $103.8 million of this debt (as reduced by $65 million of interest rate swaps) currently bears
interest at a variable rate. Interest rates are currently low relative to historical levels and may increase significantly
in the future. Failure to hedge effectively against interest rate changes may adversely affect results of operations.
If our interest expense increased significantly, it would adversely affect our results of operations.
We also intend to incur additional debt in connection with future developments and acquisitions of
properties. Our organizational documents do not limit the amount of indebtedness that we may incur. We may
borrow new funds to develop or acquire properties. In addition, we may incur or increase our mortgage debt
by obtaining loans secured by some or all of the real estate properties we develop or acquire. We also may borrow
funds if necessary to satisfy the requirement that we distribute to shareholders at least 90% of our annual REIT
taxable income or otherwise as is necessary or advisable to ensure that we maintain our qualification as a REIT
for federal income tax purposes or otherwise avoid paying taxes that can be eliminated through distributions
to our shareholders.
Our substantial debt may harm our business and operating results by:
•
•
requiring us to use a substantial portion of our funds from operations to pay interest, which reduces
the amount available for distributions;
placing us at a competitive disadvantage compared to our competitors that have less debt;
• making us more vulnerable to economic and industry downturns and reducing our flexibility in
responding to changing business and economic conditions; and
•
limiting our ability to borrow more money for operating or capital needs or to finance acquisitions
in the future.
In addition to the risks discussed above and those normally associated with debt financing, including the
risk that our cash flow will be insufficient to meet required payments of principal and interest, we also are subject
to the risk that we will not be able to refinance the existing indebtedness on our properties (which, in most cases,
will not have been fully amortized at maturity) or obtain permanent financing on development projects we
financed with construction loans or mezzanine debt, and that the terms of any refinancing we could obtain would
not be as favorable as the terms of our existing indebtedness. If we are not successful in refinancing this debt
when it becomes due, we may be forced to dispose of properties on disadvantageous terms, which might
adversely affect our ability to service other debt and to meet our other obligations.
Mortgage debt obligations expose us to the possibility of foreclosure, which could result in the loss of our
investment in a property or group of properties subject to mortgage debt.
As of December 31, 2005, all of our indebtedness was secured by our real estate assets. If a property or
group of properties is mortgaged to secure payment of debt and we are unable to meet mortgage payments, the
holder of the mortgage or lender could foreclose on the property, resulting in loss of our investment. Also, certain
of these mortgages contain customary negative covenants which, among other things, limit our ability, without
the prior consent of the lender, to further mortgage the property, to enter into new leases or materially modify
existing leases, and to discontinue insurance coverage.
Our financial covenants may restrict our operating and acquisition activities.
Our revolving credit facility contains certain financial and operating covenants, including, among other
things, certain coverage ratios, as well as limitations on our ability to incur debt, make dividend payments, sell
all or substantially all of our assets and engage in mergers and consolidations and certain acquisitions. These
12
covenants may restrict our ability to pursue certain business initiatives or certain acquisition transactions. In
addition, failure to meet any of the financial covenants could cause an event of default under and/or accelerate
some or all of our indebtedness, which could have a material adverse effect on us.
Failure by any major tenant with leases in multiple locations to make rental payments to us, because of
a deterioration of its financial condition or otherwise, could seriously harm our performance.
We derive the majority of our revenue from tenants who lease space from us at our properties. Therefore,
our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from
our tenants. Our leases generally do not contain provisions designed to ensure the creditworthiness of our tenants.
At any time, our tenants may experience a downturn in their business that may significantly weaken their financial
condition. As a result, our tenants may delay lease commencements, decline to extend or renew leases upon
expiration, fail to make rental payments when due, close a number of stores or declare bankruptcy. Any of these
actions could result in the termination of the tenant’s leases and the loss of rental income attributable to the
terminated leases. In addition, lease terminations by a major tenant or non-owned anchor or a failure by that
major tenant or non-owned anchor to occupy the premises could result in lease terminations or reductions in
rent by other tenants in the same shopping centers under the terms of some leases. In that event, we may be
unable to re-lease the vacated space at attractive rents or at all. The occurrence of any of the situations described
above, particularly if it involves a substantial tenant or a non-owned anchor with leases in multiple locations,
could seriously harm our performance. As of December 31, 2005, the four largest tenants in our operating
portfolio in terms of annualized base rent were Circuit City, the State of Indiana, Eli Lilly and Marsh
Supermarkets, with scheduled annualized base rents for each representing 3.3%, 2.8%, 2.8% and 2.8%,
respectively, of our total annualized base rent. In November 2005, Marsh Supermarkets announced in a press
release that it had retained a financial advisor to explore strategic alternatives for the enhancement of shareholder
value, including a possible sale of the company.
We may be unable to collect balances due from any tenants in bankruptcy.
We cannot assure you that any tenant that files for bankruptcy protection will continue to pay us rent. A
bankruptcy filing by or relating to one of our tenants or a lease guarantor would bar all efforts by us to collect
pre-bankruptcy debts from that tenant or the lease guarantor, or their property, unless we receive an order
permitting us to do so from the bankruptcy court. A tenant or lease guarantor bankruptcy could delay our efforts
to collect past due balances under the relevant leases, and could ultimately preclude collection of these sums.
If a lease is assumed by the tenant in bankruptcy, all pre-bankruptcy balances due under the lease must be paid
to us in full. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured
claim for damages. Any unsecured claim we hold may be paid only to the extent that funds are available and
only in the same percentage as is paid to all other holders of unsecured claims, and there are restrictions
under bankruptcy laws that limit the amount of the claim we can make if a lease is rejected. As a result, it is
likely that we will recover substantially less than the full value of any unsecured claims we hold from a tenant
in bankruptcy.
One of our current tenants, Winn-Dixie, filed for bankruptcy protection in February 2005. This tenant operates
in two locations in our portfolio (Shops at Eagle Creek and Waterford Lakes) totaling approximately 103,400 square
feet at an average base rent of $7.80 per square foot, representing approximately 1.4% of our total annualized base
rent as of December 31, 2005. The tenant continues to operate in both locations and has paid rent through March,
2006 but there can be no assurance of its ability to pay rent prospectively. On February 28, 2006, Winn-Dixie
announced plans to close its store at Shops at Eagle Creek but had not at that date rejected the lease at this property.
The store at Shops at Eagle Creek contains approximately 51,700 square feet leased to Winn-Dixie at a base rent
of $7.69 per square foot. In its announcement, Winn-Dixie included its store at Waterford Lakes on its list of stores
that it intended to retain as of that date. The delay or failure of Winn-Dixie to make payments under its leases,
or the rejection by it of its leases under federal bankruptcy law, would adversely impact our performance, which
impact could be material. In addition, Winn-Dixie’s termination of leases or closure of stores could result in
reductions in rent by other tenants in the same shopping centers.
13
We may experience reduced revenue with respect to our Glendale Mall property while we evaluate
strategic alternatives with respect to this property.
We are currently evaluating several strategic alternatives with respect to our Glendale Mall property in
Indianapolis, Indiana, including the possibility of redeveloping or selling the property. At 724,000 square feet
of gross leasable area (including approximately 145,000 square feet of non-owned anchor space), Glendale Mall
is our largest property on a square footage basis with an annualized base rent of approximately $2.5 million as
of December 31, 2005, representing approximately 4.2% of our total annualized base rent. As of December 31,
2005, Glendale Mall was approximately 81% leased. We are currently evaluating several strategic alternatives
with respect to this property, including continuing to lease space in its current configuration and the possibility
of redeveloping or selling the property.
If we decide to redevelop the property, we may have to obtain the consent of various tenants in order to
do so and various tenants may have the right to withdraw from Glendale Mall if the redevelopment project is
not completed on time. In addition, we will bear the risks of construction delays or cost overruns that may increase
project costs and make a project uneconomical and the risk that occupancy or rental rates at a completed project
will not be sufficient to enable us to pay operating expenses or earn the targeted rate of return on investment.
The revenue generated from this property could potentially be lower during any redevelopment since we would
not be receiving rent with respect to the space being redeveloped.
Our current and future joint venture investments could be adversely affected by our lack of sole decision-
making authority, our reliance on joint venture partners’ financial condition, any disputes that may arise
between us and our joint venture partners and our exposure to potential losses from the actions of our
joint venture partners.
As of December 31, 2005, we owned five of our operating properties through joint ventures, two of which
were accounted for using the equity method as we do not exercise requisite control for consolidation treatment.
For the twelve months ended December 31, 2005, the five properties represented approximately 10% of our
annualized base rent. In addition, five of the properties in our development pipeline are currently owned through
joint ventures. These joint ventures involve risks not present with respect to our wholly owned properties,
including the following:
•
•
•
•
•
•
we may share decision-making authority with our joint venture partners regarding major decisions
affecting the ownership or operation of the joint venture and the joint venture property, such as the
sale of the property or the making of additional capital contributions for the benefit of the property,
which may prevent us from taking actions that are opposed by our joint venture partners;
prior consent of our joint venture partners may be required for a sale or transfer to a third party of
our interests in the joint venture, which restricts our ability to dispose of our interest in the joint venture;
our joint venture partners might become bankrupt or fail to fund their share of required capital
contributions, which may delay construction or development of a property or increase our financial
commitment to the joint venture;
our joint venture partners may have business interests or goals with respect to the property that conflict
with our business interests and goals, which could increase the likelihood of disputes regarding the
ownership, management or disposition of the property;
disputes may develop with our joint venture partners over decisions affecting the property or the joint
venture, which may result in litigation or arbitration that would increase our expenses and distract our
officers and/or trustees from focusing their time and effort on our business, and possibly disrupt the
day-to-day operations of the property such as by delaying the implementation of important decisions
until the conflict or dispute is resolved; and
we may suffer losses as a result of the actions of our joint venture partners with respect to our joint
venture investments and the activities of a joint venture could adversely affect our ability to qualify
as a REIT, even though we may not control the joint venture.
14
In the future, we intend to co-invest with third parties through joint ventures that may involve similar or
additional risks.
Adverse market conditions may impede our ability to renew leases or re-let space as leases expire and
require us to undertake unbudgeted capital improvements, which could harm our business.
The economic performance and value of our real estate assets is subject to all of the risks associated with
owning and operating real estate, including risks related to adverse changes in national, regional and local
economic and market conditions. Our operating and development properties currently are located in nine states,
with approximately 41% of owned square footage and approximately 39% of total annualized base rent located
in the State of Indiana. The economic condition of each of our markets may be dependent on one or more
industries. An economic downturn in one of these industry sectors may result in an increase in tenant
bankruptcies, which may harm our performance in the affected market. Economic and market conditions also
may affect the ability of our tenants to make lease payments. If our properties do not generate sufficient income
to meet our operating expenses, our income and results of operations would be significantly harmed.
We face significant competition, which may impede our ability to renew leases or re-let space as leases
expire, require us to undertake unbudgeted capital improvements, or impede our ability to make future
developments or acquisitions or increase the cost of these developments or acquisitions.
We compete with numerous developers, owners and operators of retail shopping centers for tenants. These
competitors include institutional
investors, other REITs and other owner-operators of community and
neighborhood shopping centers, some of which own or may in the future own properties similar to ours in the
same submarkets in which our properties are located, but which have greater capital resources. If our competitors
offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants,
we may lose potential tenants and we may be pressured to reduce our rental rates below those we currently charge
in order to retain tenants when our tenants’ leases expire. As a result, our financial condition, results of operations,
cash flow, trading price of our common shares and ability to satisfy our debt service obligations and to pay
distributions to our shareholders may be adversely affected. As of December 31, 2005, leases were scheduled
to expire on a total of approximately 4.0% of the space at our properties in 2006. In addition, increased
competition for tenants may require us to make capital improvements to properties that we would not have
otherwise planned to make. Any unbudgeted capital improvements we undertake may reduce cash available for
distributions to shareholders.
We also face significant competition for development and acquisition opportunities. Many of our competitors
have greater financial resources than us and a greater ability to borrow funds to develop or acquire properties.
Competition for investments may reduce the number of suitable investment opportunities available to us and may
have the effect of increasing development or acquisition costs and/or reducing the rents we can charge and, as a
result, adversely affecting our operating results. The current market for acquisitions is extremely competitive.
We may not be successful in identifying suitable development projects or acquisitions that meet our
criteria, which may impede our growth.
A central part of our business strategy is expansion through development projects and acquisitions, which
requires us to identify suitable development or acquisition candidates or investment opportunities that meet our
criteria and are compatible with our growth strategy. We may not be successful in identifying suitable real estate
properties or other assets that meet our development or acquisition criteria or in completing developments,
acquisitions or investments on satisfactory terms. Failure to identify or complete developments or acquisitions
could slow our growth, which could in turn adversely affect our operations.
Redevelopment activities may be delayed or otherwise may not perform as expected.
We expect to redevelop certain of our properties in the future. In connection with any redevelopment of
our properties, we will bear certain risks, including the risks of construction delays or cost overruns that may
increase project costs and make a project uneconomical, the risk that occupancy or rental rates at a completed
15
project will not be sufficient to enable us to pay operating expenses or earn the targeted rate of return on
investment, and the risk of incurrence of predevelopment costs in connection with projects that are not pursued
to completion. In addition, various tenants may have the right to withdraw from a property if a development
and/or redevelopment project is not completed on time. In the case of a redevelopment project, consents may
be required from various tenants in order to redevelop a center. In case of an unsuccessful redevelopment project,
our loss could exceed our investment in the project.
We may not be able to sell properties when appropriate.
Real estate property investments generally cannot be sold quickly. In connection with our formation at the time
of our IPO, we entered into an agreement that restricts our ability, prior to December 31, 2016, to dispose of six of
our properties in taxable transactions and limits the amount of gain we can trigger with respect to certain other
properties without incurring reimbursement obligations owed to certain limited partners of our Operating Partnership.
We have agreed that if we dispose of any interest in six specified properties in a taxable transaction before
December 31, 2016, then we will indemnify the contributors of those properties for their tax liabilities attributable
to the built-in gain that exists with respect to such property interest as of the time of our IPO (and tax liabilities incurred
as a result of the reimbursement payment). The six properties to which our tax indemnity obligations relate represented
approximately 24% of our annualized base rent in the aggregate as of December 31, 2005. These six properties are
International Speedway Square, Shops at Eagle Creek, Whitehall Pike, Ridge Plaza Shopping Center, Thirty South
and Market Street Village. We also agreed to limit the aggregate gain these certain limited partners of our Operating
Partnership would recognize with respect to certain other contributed properties through December 31, 2016 to not
more than $48 million in total, with certain annual limits, unless we reimburse them for the taxes attributable to the
excess gain (and any taxes imposed on the reimbursement payments), and to take certain other steps to help them
avoid incurring taxes that are deferred in connection with the formation transactions.
The agreement described above is extremely complicated and imposes a number of procedural requirements
on us, which make it more difficult for us to ensure that we comply with all of the various terms of the agreement
and therefore creates a greater risk that we may be required to make an indemnity payment. The complicated
nature of this agreement also might adversely impact our ability to pursue other transactions, including certain
kinds of strategic transactions and reorganizations.
Also, the tax laws applicable to REITs require that we hold our properties for investment, rather than
primarily for sale in the ordinary course of business, which may cause us to forego or defer sales of properties
that otherwise would be in our best interest. Therefore, we may be unable to vary our portfolio promptly in
response to market conditions, which may adversely affect our financial position. In addition, we will be subject
to income taxes on gains from the sale of any properties owned by any taxable REIT subsidiary.
Our performance and value are subject to risks associated with real estate assets and with the real
estate industry.
Our ability to make expected distributions to our shareholders depends on our ability to generate substantial
revenues from our properties. Events and conditions generally applicable to owners and operators of real property
that are beyond our control may decrease cash available for distribution and the value of our properties. These
events include:
•
•
•
•
•
adverse changes in the national, regional and local economic climate, particularly in Indiana, where
approximately 41% of our owned square footage and 39% of our total annualized base rent is located;
local oversupply, increased competition or reduction in demand for space;
inability to collect rent from tenants;
vacancies or our inability to rent space on favorable terms;
decreased attractiveness of our properties to tenants;
16
•
•
•
•
•
•
•
•
•
•
changes in market rental rates;
inability to finance property development, tenant improvements and acquisitions on favorable terms;
increased operating costs, including costs incurred for maintenance, insurance premiums, utilities and
real estate taxes;
the need to periodically fund the costs to repair, renovate and re-let space;
weather conditions that may increase or decrease energy costs and other weather-related expenses;
costs of complying with changes in governmental regulations, including those governing usage,
zoning, the environment and taxes;
civil unrest, acts of terrorism, earthquakes and other national disasters or acts of God that may result
in underinsured or uninsured losses;
the relative illiquidity of real estate investments;
changing demographics; and
changing traffic patterns.
In addition, periods of economic slowdown or recession, rising interest rates or declining demand for real
estate, or the public perception that any of these events may occur, could result in a general decline in rents or
an increased incidence of defaults under existing leases, which would adversely affect our financial condition,
results of operations, cash flow, per share trading price of our common shares and ability to satisfy our debt
service obligations and to make distributions to our shareholders.
Potential losses may not be covered by insurance.
We carry comprehensive liability, fire, extended coverage and rental loss insurance covering all of the
properties in our portfolio. We do not carry insurance for generally uninsurable losses such as loss from riots,
war or acts of God, and, in some cases, flooding. Some of our policies, such as those covering losses due to
terrorism and floods, are insured subject to limitations involving large deductibles or co-payments and policy
limits that may not be sufficient to cover losses. If we experience a loss that is uninsured or that exceeds policy
limits, we could lose the capital invested in the damaged properties as well as the anticipated future cash flows
from those properties. Inflation, changes in building codes and ordinances, environmental considerations, and
other factors also might make it impractical or undesirable to use insurance proceeds to replace a property after
it has been damaged or destroyed. In addition, if the damaged properties are subject to recourse indebtedness,
we would continue to be liable for the indebtedness, even if these properties were irreparably damaged.
Rising operating expenses could reduce our cash flow and funds available for future distributions.
Our existing properties and any properties we develop or acquire in the future are and will be subject to
operating risks common to real estate in general, any or all of which may negatively affect us. The expenses
of owning and operating properties are not necessarily reduced when circumstances such as market factors and
competition cause a reduction in income from the properties. As a result, if any property is not fully occupied
or if rents are being paid in an amount that is insufficient to cover operating expenses, then we could be required
to expend funds for that property’s operating expenses. The properties will be subject to increases in real
estate and other tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and
administrative expenses.
We could incur significant costs related to government regulation and environmental matters.
Under various federal, state and local laws, ordinances and regulations, an owner or operator of real estate
may be required to investigate and clean up hazardous or toxic substances or petroleum product releases at a
property and may be held liable to a governmental entity or to third parties for property damage and for
17
investigation and clean up costs incurred by such parties in connection with contamination. The cost of
investigation, remediation or removal of such substances may be substantial, and the presence of such substances,
or the failure to properly remediate such substances, may adversely affect the owner’s ability to sell or rent such
property or to borrow using such property as collateral. In connection with the ownership, operation and
management of real properties, we are potentially liable for removal or remediation costs, as well as certain other
related costs, including governmental fines and injuries to persons and property.
Some of the 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 the storage of petroleum products or other
hazardous or toxic substances. These operations may have released, or have the potential to release, such
substances into the environment. In addition, some of our properties have tenants which may use hazardous or
toxic substances in the routine course of their businesses. As a general rule, these tenants have covenanted to
use these substances, if any, in compliance with all environmental laws and have agreed to indemnify us for
any damages that we may suffer as a result of their use of such substances. However, these lease provisions
may not fully protect us in the event that a tenant becomes insolvent. Finally, one of our properties has contained
asbestos-containing building materials, or ACBM and another property may have contained such materials based
on the date of its construction. Environmental laws require that ACBM be properly managed and maintained,
and may impose fines and penalties 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.
Our properties must also comply with Title III of the Americans with Disabilities Act, or ADA, to the extent
that such properties are public accommodations as defined by the ADA. The ADA may require removal of
structural barriers to access by persons with disabilities in certain public areas of our properties where such
removal is readily achievable. Noncompliance with the ADA could result in imposition of fines or an award
of damages to private litigants.
Our share price could be volatile and could decline, resulting in a substantial or complete loss on our
shareholders’ investment.
The stock markets, including The New York Stock Exchange (NYSE), on which we list our common shares,
have experienced significant price and volume fluctuations. As a result, the market price of our common shares
could be similarly volatile, and investors in our common shares may experience a decrease in the value of their
shares, including decreases unrelated to our operating performance or prospects. Among the market conditions
that may affect the market price of our publicly traded securities are the following:
•
•
•
•
•
•
•
•
•
our financial condition and operating performance and the performance of other similar companies;
actual or anticipated differences in our quarterly operating results;
changes in our revenues or earnings estimates or recommendations by securities analysts;
publication of research reports about us or our industry by securities analysts;
additions and departures of key personnel;
strategic decisions by us or our competitors, such as acquisitions, divestments, spin-offs, joint ventures,
strategic investments or changes in business strategy;
the reputation of REITs generally and the reputation of REITs with portfolios similar to ours;
the attractiveness of the securities of REITs in comparison to securities issued by other entities
(including securities issued by other real estate companies);
an increase in market interest rates, which may lead prospective investors to demand a higher
distribution rate in relation to the price paid for our shares;
18
•
•
•
•
•
•
the passage of legislation or other regulatory developments that adversely affect us or our industry;
speculation in the press or investment community;
actions by institutional shareholders or hedge funds;
changes in accounting principles;
terrorist acts; and
general market conditions, including factors unrelated to our performance.
In the past, securities class action litigation has often been instituted against companies following periods
of volatility in their stock price. This type of litigation could result in substantial costs and divert our
management’s attention and resources.
A substantial number of common shares eligible for future sale could cause our common share price to
decline significantly.
If our shareholders sell, or the market perceives that our shareholders intend to sell, substantial amounts
of our common shares in the public market, the market price of our common shares could decline significantly.
These sales also might make it more difficult for us to sell equity or equity-related securities in the future at
a time and price that we deem appropriate. As of December 31, 2005, we had outstanding 28,555,187 common
shares. Of these shares, approximately 27,700,000 are freely tradable, except for any shares held by our
“affiliates,” as that term is defined by Rule 144 under the Securities Act. In addition, beginning August 16, 2005,
approximately 8.3 million units of our Operating Partnership, which are owned by certain of our executive
officers and other individuals, became redeemable by the holder for cash or, at our election, common shares.
Pursuant to registration rights of certain of our executive officers and other individuals, we filed a registration
statement with the SEC in August 2005 to register 9,115,149 common shares issued in, or issuable upon
redemption of units in our Operating Partnership issued in, our formation transactions. As restrictions on resale
end and units are redeemed for common shares, the market price of our common shares could drop significantly
if the holders of such shares sell them or are perceived by the market as intending to sell them.
RISKS RELATED TO OUR ORGANIZATION AND STRUCTURE
Our organizational documents contain provisions that generally would prohibit any person (other than
members of the Kite family who, as a group, are currently allowed to own up to 21.5% of our outstanding
common shares) from beneficially owning more than 7% of our outstanding common shares (or up to 9.8%
in the case of certain designated investment entities, as defined in our declaration of trust), which may
discourage third parties from conducting a tender offer or seeking other change of control transactions
that could involve a premium price for our shares or otherwise benefit our shareholders.
Our organizational documents contain provisions that may have an anti-takeover effect and inhibit a change
in our management.
(1) There are ownership limits and restrictions on transferability in our declaration of trust. In order for
us to qualify as a REIT, no more than 50% of the value of our outstanding shares may be owned, actually or
constructively, by five or fewer individuals at any time during the last half of each taxable year. To make sure
that we will not fail to satisfy this requirement and for anti-takeover reasons, our declaration of trust generally
prohibits any shareholder (other than an excepted holder or certain designated investment entities, as defined
in our declaration of trust) from owning (actually, constructively or by attribution), more than 7% of the value
or number of our outstanding common shares. Our declaration of trust provides an excepted holder limit that
allows members of the Kite family (Al Kite, John Kite and Paul Kite, their family members and certain entities
controlled by one or more of the Kites), as a group, to own more than 7% of our outstanding common shares,
so long as, under the applicable tax attribution rules, no one excepted holder treated as an individual would hold
more than 21.5% of our common shares, no two excepted holders treated as individuals would own more than
19
28.5% of our common shares, no three excepted holders treated as individuals would own more than 35.5% of
our common shares, no four excepted holders treated as individuals would own more than 42.5% of our common
shares, and no five excepted holders treated as individuals would own more than 49.5% of our common shares.
Currently, one of the excepted holders would be attributed all of the common shares owned by each other
excepted holder and, accordingly, the excepted holders as a group would not be allowed to own in excess of
21.5% of our common shares. If at a later time, there were not one excepted holder that would be attributed
all of the shares owned by the excepted holders as a group, the excepted holder limit would not permit each
excepted holder to own 21.5% of our common shares. Rather, the excepted holder limit would prevent two or
more excepted holders who are treated as individuals under the applicable tax attribution rules from owning a
higher percentage of our common shares than the maximum amount of common shares that could be owned
by any one excepted holder (21.5%), plus the maximum amount of common shares that could be owned by any
one or more other individual common shareholders who are not excepted holders (7%). Certain entities that are
defined as designated investment entities in our declaration of trust, which generally includes pension funds,
mutual funds, and certain investment management companies, are permitted to own up to 9.8% of our outstanding
common shares, so long as each beneficial owner of the shares owned by such designated investment entity would
satisfy the 7% ownership limit if those beneficial owners owned directly their proportionate share of the common
shares owned by the designated investment entity. Our board of trustees may waive the 7% ownership limit or
the 9.8% designated investment entity limit for a shareholder that is not an individual if such shareholder provides
information and makes representations to the board that are satisfactory to the board, in its reasonable discretion,
to establish that such person’s ownership in excess of the 7% limit or the 9.8% limit, as applicable, would not
jeopardize our qualification as a REIT. In addition, our declaration of trust contains certain other ownership
restrictions intended to prevent us from earning income from related parties if such income would cause us to
fail to comply with the REIT gross income requirements. The various ownership restrictions may:
•
•
discourage a tender offer or other transactions or a change in management or control that might involve
a premium price for our shares or otherwise be in the best interests of our shareholders; or
compel a shareholder who has acquired our shares in excess of these ownership limitations to dispose
of the additional shares and, as a result, to forfeit the benefits of owning the additional shares. Any
acquisition of our common shares in violation of these ownership restrictions will be void ab initio
and will result in automatic transfers of our common shares to a charitable trust, which will be
responsible for selling the common shares to permitted transferees and distributing at least a portion
of the proceeds to the prohibited transferees.
(2) Our declaration of trust permits our board of trustees to issue preferred shares with terms that may
discourage a third party from acquiring us. Our declaration of trust permits our board of trustees to issue up
to 40,000,000 preferred shares, having those preferences, conversion or other rights, voting powers, restrictions,
limitations as to distributions, qualifications, or terms or conditions of redemption as determined by our board.
Thus, our board could authorize the issuance of preferred shares with terms and conditions that could have the
effect of discouraging a takeover or other transaction in which holders of some or a majority of our shares might
receive a premium for their shares over the then-prevailing market price of our shares. In addition, any preferred
shares that we issue likely would rank senior to our common shares with respect to payment of distributions,
in which case we could not pay any distributions on our common shares until full distributions were paid with
respect to such preferred shares.
(3) Our declaration of trust and bylaws contain other possible anti-takeover provisions. Our declaration
of trust and bylaws contain other provisions that may have the effect of delaying, deferring or preventing a change
in control of our company or the removal of existing management and, as a result, could prevent our shareholders
from being paid a premium for their common shares over the then-prevailing market prices. These provisions
include advance notice requirements for shareholder proposals and our board of trustees’ power to reclassify
shares and issue additional common shares or preferred shares and the absence of cumulative voting rights.
20
Certain provisions of Maryland law could inhibit changes in control.
Certain provisions of Maryland law may have the effect of inhibiting a third party from making a proposal
to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders
of our common shares with the opportunity to realize a premium over the then-prevailing market price of such
shares, including:
•
•
“business combination moratorium/fair price” provisions that, subject to limitations, prohibit certain
business combinations between us and an “interested shareholder” (defined generally as any person
who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five
years after the most recent date on which the shareholder becomes an interested shareholder, and
thereafter imposes stringent fair price and super-majority shareholder voting requirements on these
combinations; and
“control share” provisions that provide that “control shares” of our company (defined as shares which,
when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise
one of three increasing ranges of voting power in electing trustees) acquired in a “control share
acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares”
from a party other than the issuer) have no voting rights except to the extent approved by our
shareholders by the affirmative vote of at least two thirds of all the votes entitled to be cast on the
matter, excluding all interested shares, and are subject to redemption in certain circumstances.
We have opted out of these provisions of Maryland law. However, our board of trustees may opt to make
these provisions applicable to us at any time.
Our management has limited experience operating a REIT or a public company.
We have limited operating history as a REIT or a public company. Our board of trustees and executive
officers have overall responsibility for our management and, while certain of our officers and trustees have
extensive experience in real estate marketing, development, management, finance and law, our executive officers
have limited experience in operating a business in accordance with the Internal Revenue Code requirements for
maintaining qualification as a REIT or in operating a public company. We cannot assure you that our past
experience will be sufficient to successfully operate our company as a REIT or a public company. If we fail
to qualify as a REIT, and are not able to avail ourselves of certain savings provisions set forth in the Internal
Revenue Code, the value of our common shares and our ability to raise additional capital will be adversely
affected because we will be required to pay corporate tax at applicable rates on our taxable income, our
distributions to shareholders will not be deductible in computing our taxable income for federal income tax
purposes and we will no longer be required to make distributions to shareholders.
Certain officers and trustees may have interests that conflict with the interests of shareholders.
Certain of our officers and members of our board of trustees own limited partnership units in our Operating
Partnership. These individuals may have personal interests that conflict with the interests of our shareholders
with respect to business decisions affecting us and our Operating Partnership, such as interests in the timing
and pricing of property sales or refinancings in order to obtain favorable tax treatment. As a result, the effect
of certain transactions on these unit holders may influence our decisions affecting these properties.
Certain members of our management team have outside business interests that could require time
and attention.
Certain members of our management team own interests in properties that are not part of our Company.
These properties include various outlots and interests in buildings that are held for sale, a 243-room Indianapolis
luxury hotel and condominium development that is planned for 2006 delivery, one option property and Kite,
Inc., a full service self-performing interior construction company. In some cases, one or more of these individuals
or their affiliates will have certain management and fiduciary obligations that may conflict with such person’s
responsibilities as an officer or trustee of our company and may adversely affect our operations.
21
We depend on external capital.
To qualify as a REIT, we will be required to distribute to our shareholders each year at least 90% of our
net taxable income excluding net capital gains. In order to eliminate federal income tax, we will be required
to distribute annually 100% of our net taxable income, including capital gains. Because of these distribution
requirements, we likely will not be able to fund all future capital needs, including capital for property
development and acquisitions, with income from operations. We therefore will have to rely on third-party sources
of capital, which may or may not be available on favorable terms, if at all. Our access to third-party sources
of capital depends on a number of things, including the market’s perception of our growth potential and our
current and potential future earnings and our ability to qualify as a REIT for federal income tax purposes.
Our rights and the rights of our shareholders to take action against our trustees and officers are limited.
Maryland law provides that a director or officer has no liability in that capacity if he or she performs his
or her duties in good faith, in a manner he or she reasonably believes to be in our best interests that an ordinarily
prudent person in a like position would use under similar circumstances. Our declaration of trust and bylaws
require us to indemnify our trustees and officers for actions taken by them in those capacities to the extent
permitted by Maryland law. As a result, we and our shareholders may have more limited rights against our trustees
and officers than might otherwise exist under common law. Accordingly, in the event that actions taken in good
faith by any of our trustees or officers impede the performance of our company, our shareholders’ ability to
recover damages from such trustee or officer will be limited.
We may have assumed liabilities in connection with our formation transactions.
As part of our formation transactions, we acquired entities and assets that are subject to existing liabilities,
some of which may have been unknown at the time our initial public offering was completed. Unknown liabilities
might include liabilities for cleanup or remediation of undisclosed environmental conditions, claims by customers,
vendors or other persons dealing with our predecessor entities (that had not been asserted or threatened prior to
our initial public offering), tax liabilities and accrued but unpaid liabilities incurred in the ordinary course of
business. While in some instances we may have the right to seek reimbursement against an insurer or another third
party for certain of these liabilities, there can be no assurance that we will be entitled to any such reimbursement
or that ultimately we will be able to recover in respect of such rights for any of these historical liabilities.
Our shareholders have limited ability to prevent us from making any changes to our policies that they
believe could harm our business, prospects, operating results or share price.
Our board of trustees has adopted policies with respect to certain activities. These policies may be amended
or revised from time to time at the discretion of our board of trustees without a vote of our shareholders. This
means that our shareholders will have limited control over changes in our policies. Such changes in our policies
intended to improve, expand or diversify our business may not have the anticipated effects and consequently
may adversely affect our business and prospects, results of operations and share price.
TAX RISKS
Failure of our company to qualify as a REIT would have serious adverse consequences to us and
our shareholders.
We elected to be taxed as a REIT for federal income tax purposes commencing with our taxable year ending
December 31, 2004, and we plan to operate so that we can meet the requirements for qualification and taxation
as a REIT. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT,
and the statements in this Annual Report on Form 10-K are not binding on the IRS or any court. As a REIT,
we generally will not be subject to federal income tax on our income that we distribute currently to our
shareholders. Many of the REIT requirements, however, are highly technical and complex. The determination
that we are a REIT requires an analysis of various factual matters and circumstances that may not be totally
within our control. For example, to qualify as a REIT, at least 95% of our gross income must come from specific
22
passive sources, such as rent, that are itemized in the REIT tax laws. In addition, to qualify as a REIT, we cannot
own specified amounts of debt and equity securities of some issuers. We also are required to distribute to our
shareholders with respect to each year at least 90% of our REIT taxable income (excluding capital gains). The
fact that we hold substantially all of our assets through our Operating Partnership and its subsidiaries and joint
ventures further complicates the application of the REIT requirements for us. Even a technical or inadvertent
mistake could jeopardize our REIT status and, given the highly complex nature of the rules governing REITs
and the ongoing importance of factual determinations, we cannot provide any assurance that we will continue
to qualify as a REIT. Furthermore, Congress and the IRS might make changes to the tax laws and regulations,
and the courts might issue new rulings, that make it more difficult, or impossible, for us to remain qualified as
a REIT.
If we fail to qualify as a REIT for federal income tax purposes, and are unable to avail ourselves of certain
savings provisions set forth in the Internal Revenue Code, we would be subject to federal income tax at regular
corporate rates. As a taxable corporation, we would not be allowed to take a deduction for distributions to
shareholders in computing our taxable income or pass through long term capital gains to individual shareholders
at favorable rates. We also could be subject to the federal alternative minimum tax and possibly increased state
and local taxes. We would not be able to elect to be taxed as a REIT for four years following the year we first
failed to qualify unless the IRS were to grant us relief under certain statutory provisions. If we failed to qualify
as a REIT, we would have to pay significant income taxes, which would reduce our net earnings available for
investment or distribution to our shareholders. This likely would have a significant adverse effect on our earnings
and the value of our securities. In addition, we would no longer be required to pay any distributions to
shareholders. If we fail to qualify as a REIT for federal income tax purposes and are able to avail ourselves of
one or more of the statutory savings provisions in order to maintain our REIT status, we would nevertheless
be required to pay penalty taxes of $50,000 or more for each such failure.
We will pay some taxes even if we qualify as a REIT.
Even if we qualify as a REIT for federal income tax purposes, we will be required to pay certain federal,
state and local taxes on our income and property. For example, we will be subject to income tax to the extent
we distribute less than 100% of our REIT taxable income (including capital gains). Additionally, we will be
subject to a 4% nondeductible excise tax on the amount, if any, by which dividends paid by us in any calendar
year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of
our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,”
that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of
property held primarily for sale to customers in the ordinary course of business. The determination as to whether
a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. While
we will undertake sales of assets if those assets become inconsistent with our long-term strategic or return
objectives, we do not believe that those sales should be considered prohibited transactions, but there can be no
assurance that the IRS would not contend otherwise. The need to avoid prohibited transactions could cause us
to forego or defer sales of properties that our predecessors otherwise would have sold or that it might otherwise
be in our best interest to sell. In addition, any net taxable income earned directly by our taxable REIT subsidiaries,
or through entities that are disregarded for federal income tax purposes as entities separate from our taxable REIT
subsidiaries, will be subject to federal and possibly state corporate income tax. We have elected to treat Kite
Realty Holdings, LLC as a taxable REIT subsidiary, and we may elect to treat other subsidiaries as taxable REIT
subsidiaries in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries
ensure that a taxable REIT subsidiary will be subject to an appropriate level of federal income taxation. For
example, a taxable REIT subsidiary is limited in its ability to deduct interest payments made to an affiliated REIT.
In addition, the REIT has to pay a 100% penalty tax on some payments that it receives or on some deductions
taken by the taxable REIT subsidiaries if the economic arrangements between the REIT, the REIT’s tenants,
and the taxable REIT subsidiary are not comparable to similar arrangements between unrelated parties. Finally,
some state and local jurisdictions may tax some of our income even though as a REIT we are not subject to
federal income tax on that income because not all states and localities treat REITs the same as they are treated
23
for federal income tax purposes. To the extent that we and our affiliates are required to pay federal, state and
local taxes, we will have less cash available for distributions to our shareholders.
ITEM 1.B. UNRESOLVED STAFF COMMENTS
None
ITEM 2. PROPERTIES
Retail Operating Properties
As of December 31, 2005, we owned interests in a portfolio of 40 retail operating properties totaling
approximately 6.2 million square feet of gross leasable area (“GLA”) (including non-owned anchor space). The
following sets forth more specific information with respect to the Company’s retail operating properties as of
December 31, 2005:
Operating Retail Properties — Table I
Property(1)
State
MSA
Year
Built/
Renovated
Year
Added to
Operating
Portfolio
Acquired,
Redeveloped,
or
Developed
Total
GLA(2)
Owned
GLA(2)
Percentage
of Owned
GLA
Leased(3)
International Speedway
Square . . . . . . . . . . . . . . . . .
King’s Lake Square . . . . . . . .
Wal-Mart Plaza(4)
. . . . . . . . . .
Waterford Lakes . . . . . . . . . . .
Shops at Eagle Creek . . . . . . .
Circuit City Plaza . . . . . . . . . .
Indian River Square . . . . . . . .
Bolton Plaza . . . . . . . . . . . . . .
Centre at Panola . . . . . . . . . . .
Publix at Acworth . . . . . . . . . .
Silver Glen Crossing . . . . . . .
Fox Lake Crossing . . . . . . . . .
Glendale Mall . . . . . . . . . . . . .
Cool Creek Commons . . . . . .
Boulevard Crossing . . . . . . . .
Traders Point . . . . . . . . . . . . . .
Hamilton Crossing . . . . . . . . .
Fishers Station(5) . . . . . . . . . . .
Whitehall Pike . . . . . . . . . . . .
The Centre(6) . . . . . . . . . . . . . .
The Corner Shops . . . . . . . . . .
Stoney Creek Commons I . . .
Greyhound Commons . . . . . .
Weston Park Phase I . . . . . . . .
Martinsville Shops . . . . . . . . .
50 South Morton . . . . . . . . . . .
Ridge Plaza . . . . . . . . . . . . . . .
Eastgate Pavilion . . . . . . . . . .
Shops at Otty(7) . . . . . . . . . . . .
Plaza at Cedar Hill . . . . . . . . .
Sunland Towne Centre . . . . . .
FL
FL
FL
FL
FL
FL
FL
FL
GA
GA
IL
IL
IN
IN
IN
IN
IN
IN
IN
IN
IN
IN
IN
IN
IN
IN
NJ
OH
OR
TX
TX
Daytona
Naples
Gainesville
Orlando
Naples
Ft. Lauderdale
Vero Beach
Jacksonville
Atlanta
Atlanta
Chicago
Chicago
Indianapolis
Indianapolis
Kokomo
Indianapolis
Indianapolis
Indianapolis
Bloomington
Indianapolis
Indianapolis
Indianapolis
Indianapolis
Indianapolis
Martinsville
Indianapolis
Oak Ridge
Cincinnati
Portland
Dallas
El Paso
1999
2003
2004
2004
2003
2004
2005
2005
2004
2004
2004
2005
1999
2005
2004
2005
2004
2004
1999
1986
1984
2000
2005
2005
2005
1999
2003
2004
2004
2004
2004
1999
1986
1970
1997
1998
2004
1997/
2004
1986
2001
1996
2002
2002
1958/
2000
2005
2004
2005
1999
1989
1999
1986
1984/
2003
2000
2005
2005
2005
1999
2002
1995
2004
2000
1996
24
Developed
Acquired
Acquired
Acquired
Acquired
Developed
Acquired
233,901
85,497
177,826
77,948
75,944
435,884
379,246
172,938
Acquired
73,079
Acquired
69,628
Acquired
138,224
Acquired
Acquired
99,095
Redeveloped 724,026
Developed
Developed
Developed
Acquired
Acquired
Developed
Developed
Developed
Developed
Developed
Developed
Developed
Developed
Acquired
Acquired
Developed
Acquired
Acquired
133,207
214,696
328,278
87,424
114,457
128,997
80,689
42,545
143,397
153,187
12,200
10,986
2,000
114,928
231,730
154,845
299,783
312,539
220,901
85,497
177,826
77,948
75,944
45,884
144,246
172,938
73,079
69,628
132,675
99,095
579,189
120,678
112,696
252,501
82,424
114,457
128,997
80,689
42,545
0
0
0
10,986
2,000
114,928
231,730
9,845
299,783
307,563
98.9%
97.5%
100.0%
100.0%
89.4%
97.0%
100.0%
95.4%
100.0%
98.3%
96.0%
93.3%
81.2%
92.8%
96.0%
94.8%
100.0%
84.4%
100.0%
89.0%
100.0%
*
*
*
100.0%
100.0%
94.4%
100.0%
100.0%
100.0%
99.5%
Operating Retail Properties — Table I (continued)
Property(1)
State
MSA
Year
Built/
Renovated
Year
Added to
Operating
Portfolio
Acquired,
Redeveloped,
or
Developed
Total
GLA(2)
Owned
GLA(2)
Percentage
of Owned
GLA
Leased(3)
Galleria Plaza(8)
. . . . . . . . . . .
Cedar Hill Village . . . . . . . . . .
Preston Commons . . . . . . . . . .
Burlington Coat(9) . . . . . . . . . .
Plaza Volente . . . . . . . . . . . . . .
Market Street Village . . . . . . .
TX
TX
TX
TX
TX
TX
50th & 12th . . . . . . . . . . . . . . . WA
176th & Meridian . . . . . . . . . . WA
Four Corner Square . . . . . . . . WA
Total
. . . . . . . . . . . . . . . . . . . .
Dallas
Dallas
Dallas
San Antonio
Austin
Hurst
Seattle
Seattle
Seattle
2002
2002
2002
1992/
2000
2004
1970/
2004
2004
2004
1985
2004
2004
2002
2000
2005
2005
2004
2004
2004
Acquired
Acquired
Developed
Redeveloped
44,306
139,092
142,564
107,400
44,306
44,262
27,564
107,400
100.0%
94.2%
90.0%
100.0%
Acquired
Acquired
160,308
156,000
156,308
149,000
100.0%
100.0%
Developed
Developed
Acquired
14,500
14,560
73,086
14,500
14,560
73,086
100.0%
100.0%
98.6%
6,160,940 4,497,658
95.3%
(*) Property consists of ground leases only, no Owned GLA. As of 12/31/05, the following were leased: Stoney
Creek Commons I — 1 of 2 outlots leased; Greyhound Commons — 2 of 4 outlots leased; and Weston
Park Phase I — 2 of 3 outlots leased.
(1) All properties are wholly-owned, except as indicated. Unless otherwise noted, each property is owned in
fee simple by us.
(2) Owned GLA represents gross leasable area that is owned by us. Total GLA includes Owned GLA, square
footage attributable to non-owned anchor space and non-owned structures on ground leases.
(3) Percentage of Owned GLA Leased reflects Owned GLA/NRA leased as of 12/31/05 except for Stoney Creek
Commons, Greyhound Commons, and Weston Park Phase I (see *)
(4) We acquired a 99.9% interest in this property through a joint venture with a third party that manages the
property. At the current time, we receive 85% of the cash flow from the property, which percentage may
decrease under certain circumstances.
(5) This property is divided into two parcels: a grocery store and small shops. We own a 25% interest in the
small shops in a joint venture and a 100% interest in the grocery store. The joint venture partner is entitled
to an annual preferred payment of $96,000. All remaining cash flow is distributed to us.
(6) We own a 60% interest in this property through a joint venture with the third party that manages the property.
(7) We do not own the land at this property. We have leased the land pursuant to two ground leases that expire
in 2017. We have six five-year options to renew this lease.
(8) We do not own the land at this property. We lease the land pursuant to a ground lease that expires in 2027.
We have five five-year renewal options.
(9) We do not own the land at this property. We have leased the land pursuant to a ground lease that expires
in 2012. We have six five-year renewal options and a right of first refusal to purchase the land.
25
d
n
a
s
t
n
a
n
e
T
r
o
j
a
M
)
3
(
s
r
o
h
c
n
A
d
e
n
w
O
-
n
o
N
t
o
L
A
e
v
a
S
,
n
o
i
l
l
i
M
A
s
k
o
o
B
,
t
r
a
M
-
l
a
W
y
t
i
C
t
i
u
c
r
i
C
,
h
t
a
B
d
e
B
,
t
r
a
M
n
i
e
t
S
s
n
e
e
r
g
l
a
W
,
x
i
l
b
u
P
)
5
(
e
i
x
i
D
-
n
n
i
W
)
5
(
e
i
x
i
D
-
n
n
i
W
,
)
d
e
n
w
o
-
n
o
n
(
t
r
a
M
-
l
a
W
,
y
t
i
C
t
i
u
c
r
i
C
7
0
.
1
1
$
0
6
.
2
1
$
0
2
.
5
$
.
7
6
1
1
$
5
7
.
0
1
$
.
8
7
9
1
$
)
d
e
n
w
o
-
n
o
n
(
t
e
g
r
a
T
,
)
d
e
n
w
o
-
n
o
n
(
s
’
e
w
o
L
,
p
o
h
s
g
a
R
,
s
l
l
a
e
B
,
t
o
p
e
D
e
c
fi
f
O
3
8
.
9
$
)
d
e
n
w
o
-
n
o
n
(
s
’
e
w
o
L
,
s
e
r
t
a
e
h
T
s
e
t
o
s
a
r
e
K
,
s
e
r
y
A
.
.
S
L
t
r
a
M
n
i
e
t
S
,
t
e
k
r
a
M
h
s
e
r
F
)
d
e
n
w
o
-
n
o
n
(
s
’
e
w
o
L
,
l
a
v
i
n
r
a
C
e
o
h
S
,
o
c
t
e
P
,
x
x
a
M
J
T
)
d
e
n
w
o
-
n
o
n
(
s
’
l
h
o
K
s
t
r
o
p
S
C
M
,
s
’
k
c
i
n
i
m
o
D
s
’
k
c
i
n
i
m
o
D
S
V
C
,
x
i
l
b
u
P
t
r
a
M
-
l
a
W
x
i
l
b
u
P
6
6
.
6
$
.
6
3
1
1
$
5
3
.
1
1
$
9
2
.
4
1
$
9
8
.
3
1
$
4
9
.
4
$
.
4
0
5
1
$
.
6
6
2
1
$
A
s
k
o
o
B
,
s
t
e
k
r
a
m
r
e
p
u
S
h
s
r
a
M
,
s
l
e
a
h
c
i
M
,
d
n
o
y
e
B
&
h
t
a
B
d
e
B
,
s
d
o
o
G
g
n
i
t
r
o
p
S
s
’
k
c
i
D
.
3
8
3
1
$
,
e
r
u
t
i
n
r
u
F
y
t
i
C
e
u
l
a
V
,
s
d
o
o
G
g
n
i
t
r
o
p
S
s
’
k
c
i
D
y
u
B
t
s
e
B
S
V
C
,
P
&
A
s
’
l
l
a
h
s
r
a
M
,
s
g
n
i
h
T
N
‘
s
n
e
n
i
L
,
y
b
b
o
L
y
b
b
o
H
e
r
o
t
s
m
o
o
R
,
y
t
i
C
t
i
u
c
r
i
C
,
t
r
a
m
K
)
d
e
n
w
o
-
n
o
n
(
y
e
n
n
e
P
C
J
,
s
s
e
n
t
i
F
r
u
o
H
4
2
n
o
i
l
i
v
a
P
e
o
h
S
y
v
a
N
d
l
O
,
n
o
i
l
l
i
M
t
o
p
e
D
e
c
fi
f
O
t
e
k
r
a
m
r
e
p
u
S
h
s
r
a
M
s
’
e
w
o
L
o
c
s
O
)
d
e
n
w
o
-
n
o
n
(
s
’
e
w
o
L
)
d
e
n
w
o
-
n
o
n
(
s
’
e
w
o
L
s
c
i
r
b
a
F
k
c
o
c
n
a
H
0
9
.
6
1
$
9
1
.
2
1
$
6
8
.
7
$
.
9
9
2
1
$
.
1
1
2
1
$
—
—
—
.
4
4
3
1
$
.
0
0
6
6
$
.
6
0
6
1
$
4
5
9
.
$
0
2
.
7
2
$
.
8
8
1
1
$
7
7
.
9
$
1
4
.
4
2
$
4
1
.
6
1
$
%
2
.
5
%
1
.
2
%
9
.
1
%
8
.
1
%
5
.
1
%
8
.
1
%
8
.
2
%
2
.
2
%
7
.
1
%
6
.
1
%
8
.
3
%
6
.
2
%
8
.
4
%
7
.
3
%
7
.
2
%
8
.
7
%
9
.
2
%
4
.
2
%
0
.
2
%
9
.
1
%
0
.
1
%
2
.
0
%
4
.
0
%
4
.
0
%
3
.
0
%
3
.
0
%
5
.
3
%
3
.
4
%
8
.
0
%
1
.
7
%
1
.
6
%
2
.
2
%
3
.
1
9
1
3
,
1
5
6
,
2
$
2
2
5
,
0
5
0
,
1
$
7
1
5
,
4
2
9
7
3
9
,
9
0
9
0
2
8
,
9
2
7
7
2
7
,
0
8
8
$
$
$
$
—
—
—
—
—
0
0
9
,
2
3
2
$
9
1
4
,
8
1
4
,
2
$
2
2
5
,
0
5
0
,
1
$
7
1
5
,
4
2
9
7
3
9
,
9
0
9
0
2
8
,
9
2
7
7
2
7
,
0
8
8
$
$
$
$
—
—
—
—
—
1
8
0
,
4
9
6
,
9
1
$
e
l
l
i
v
s
e
n
i
a
G
a
n
o
t
y
a
D
s
e
l
p
a
N
o
d
n
a
l
r
O
s
e
l
p
a
N
e
l
a
d
r
e
d
u
a
L
.
t
F
L
F
L
F
L
F
L
F
L
F
L
F
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
4
(
e
r
a
u
q
S
y
a
w
d
e
e
p
S
l
a
n
o
i
t
a
n
r
e
t
n
I
)
7
(
e
r
a
u
q
S
e
k
a
L
s
’
g
n
i
K
.
.
.
.
.
.
.
)
4
(
a
z
a
l
P
t
r
a
M
-
l
a
W
)
7
(
s
e
k
a
L
d
r
o
f
r
e
t
a
W
)
7
(
k
e
e
r
C
e
l
g
a
E
t
a
s
p
o
h
S
.
.
.
.
.
a
z
a
l
P
y
t
i
C
t
i
u
c
r
i
C
5
4
4
,
8
1
4
,
1
$
—
5
4
4
,
8
1
4
,
1
$
0
0
0
,
0
0
3
,
3
1
$
h
c
a
e
B
o
r
e
V
L
F
.
.
.
.
.
.
.
e
r
a
u
q
S
r
e
v
i
R
n
a
i
d
n
I
4
5
5
,
9
9
0
,
1
$
6
1
4
,
0
3
8
4
9
3
,
6
7
7
$
$
2
0
3
,
5
0
9
,
1
$
0
6
0
,
5
8
2
,
1
$
5
3
9
,
1
6
4
,
2
$
—
—
—
0
0
0
,
5
8
$
—
0
0
0
,
0
4
1
$
4
5
5
,
9
9
0
,
1
$
—
e
l
l
i
v
n
o
s
k
c
a
J
6
1
4
,
0
3
8
4
9
3
,
6
7
7
$
$
2
0
3
,
0
2
8
,
1
$
0
6
0
,
5
8
2
,
1
$
5
3
9
,
1
2
3
,
2
$
—
—
8
0
7
,
1
1
3
,
4
$
—
5
0
4
,
5
2
1
,
2
1
$
a
t
n
a
l
t
A
a
t
n
a
l
t
A
o
g
a
c
i
h
C
o
g
a
c
i
h
C
s
i
l
o
p
a
n
a
i
d
n
I
7
2
5
,
8
3
8
,
1
$
5
0
9
,
8
6
3
,
1
$
—
0
0
5
,
5
5
1
$
7
2
0
,
3
8
6
,
1
$
5
0
9
,
8
6
3
,
1
$
0
0
8
,
4
9
8
,
6
1
$
0
1
0
,
6
8
4
,
2
1
$
s
i
l
o
p
a
n
a
i
d
n
I
o
m
o
k
o
K
L
F
A
G
A
G
L
I
L
I
N
I
N
I
N
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
7
(
h
t
r
o
w
c
A
a
l
o
n
a
P
t
a
t
a
e
r
t
n
e
C
x
i
l
b
u
P
.
.
.
a
z
a
l
P
n
o
t
l
o
B
)
7
(
g
n
i
s
s
o
r
C
n
e
l
G
r
e
v
l
i
S
.
.
.
.
.
.
g
n
i
s
s
o
r
C
e
k
a
L
x
o
F
.
)
7
,
4
(
l
l
a
M
e
l
a
d
n
e
l
G
s
n
o
m
m
o
C
k
e
e
r
C
l
o
o
C
.
.
g
n
i
s
s
o
r
C
d
r
a
v
e
l
u
o
B
26
1
7
1
,
5
4
9
,
3
$
0
0
0
,
5
3
6
$
0
7
1
,
0
1
3
,
3
$
—
s
i
l
o
p
a
n
a
i
d
n
I
N
I
.
.
.
.
.
.
.
.
.
.
.
.
t
n
i
o
P
s
r
e
d
a
r
T
2
5
8
,
4
6
4
,
1
$
7
4
8
,
6
7
1
,
1
$
0
0
0
,
4
1
0
,
1
$
4
3
3
,
3
3
9
2
7
3
,
5
1
5
0
0
0
,
5
7
0
0
5
,
2
0
2
0
0
0
,
0
9
1
0
2
6
,
7
4
1
0
0
0
,
2
3
1
$
$
$
$
$
$
$
4
2
5
,
2
4
7
,
1
$
7
6
7
,
9
0
2
,
2
$
6
5
2
,
0
9
3
$
0
0
6
,
0
6
5
,
3
$
2
8
4
,
4
8
0
,
3
$
7
1
7
,
1
8
0
,
1
$
5
8
0
,
3
7
6
$
0
0
0
,
5
7
$
0
0
5
,
2
0
2
$
0
0
0
,
0
9
1
$
0
0
0
—
—
—
—
0
0
5
,
1
7
$
4
3
3
,
3
3
9
2
7
3
,
5
1
5
1
5
3
,
3
9
3
,
1
$
7
4
8
,
6
7
1
,
1
$
0
0
0
,
4
1
0
,
1
$
0
2
6
,
7
4
1
0
0
0
,
2
3
1
$
$
$
$
$
$
$
—
—
—
—
—
—
—
4
7
2
,
9
5
1
,
5
3
9
3
,
1
9
6
,
9
$
$
4
2
1
,
6
6
8
,
1
$
—
—
—
—
—
—
0
0
5
,
2
2
1
$
—
0
8
2
,
5
9
$
4
2
5
,
2
4
7
,
1
$
7
6
7
,
9
0
2
,
2
$
6
5
7
,
7
6
2
$
0
0
6
,
0
6
5
,
3
$
2
0
2
,
9
8
9
,
2
$
7
1
7
,
1
8
0
,
1
$
5
8
0
,
3
7
6
$
—
—
3
6
8
,
8
2
7
,
6
1
$
—
—
1
6
0
,
4
9
9
,
6
2
$
5
7
7
,
7
1
4
,
7
1
$
s
i
l
o
p
a
n
a
i
d
n
I
s
i
l
o
p
a
n
a
i
d
n
I
n
o
t
g
n
i
m
o
o
l
B
s
i
l
o
p
a
n
a
i
d
n
I
s
i
l
o
p
a
n
a
i
d
n
I
s
i
l
o
p
a
n
a
i
d
n
I
s
i
l
o
p
a
n
a
i
d
n
I
s
i
l
o
p
a
n
a
i
d
n
I
e
l
l
i
v
s
n
i
t
r
a
M
s
i
l
o
p
a
n
a
i
d
n
I
e
g
d
i
R
k
a
O
i
t
a
n
n
i
c
n
i
C
d
n
a
l
t
r
o
P
o
s
a
P
l
E
s
a
l
l
a
D
s
a
l
l
a
D
s
a
l
l
a
D
N
I
N
I
N
I
N
I
N
I
N
I
N
I
N
I
N
I
N
I
J
N
H
O
R
O
X
T
X
T
X
T
X
T
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
t
S
s
r
e
h
s
i
F
e
k
i
P
l
l
a
h
e
t
i
h
W
)
6
,
4
(
e
r
t
n
e
C
e
h
T
s
p
o
h
S
r
e
n
r
o
C
e
h
T
)
7
(
g
n
i
s
s
o
r
C
n
o
t
l
i
m
a
H
)
7
(
s
n
o
m
m
o
C
k
e
e
r
C
y
e
n
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
n
o
m
m
o
C
d
n
u
o
h
y
e
r
G
I
e
s
a
h
P
k
r
a
P
n
o
t
s
e
W
.
.
.
.
.
.
.
.
.
.
.
s
p
o
h
S
e
l
l
i
v
s
n
i
t
r
a
M
.
.
.
.
.
.
.
a
z
a
l
P
e
g
d
i
R
n
o
t
r
o
M
h
t
u
o
S
0
5
)
7
(
n
o
i
l
i
v
a
P
e
t
a
g
t
s
a
E
.
.
.
.
y
t
t
O
t
a
s
p
o
h
S
l
l
i
H
r
a
d
e
C
t
a
a
z
a
l
P
e
r
t
n
e
C
e
n
w
o
T
d
n
a
l
n
u
S
.
.
.
.
.
.
.
)
7
(
a
z
a
l
P
a
i
r
e
l
l
a
G
)
7
(
e
g
a
l
l
i
V
l
l
i
H
r
a
d
e
C
f
o
e
g
a
t
n
e
c
r
e
P
t
n
e
R
e
s
a
B
d
e
s
a
e
L
r
e
P
d
e
n
w
O
)
2
(
A
L
G
d
e
z
i
l
a
u
n
n
A
d
e
z
i
l
a
u
n
n
A
d
e
z
i
l
a
u
n
n
A
l
a
t
o
T
l
i
a
t
e
R
e
u
n
e
v
e
R
l
a
t
o
T
l
i
a
t
e
R
)
1
(
e
u
n
e
v
e
R
d
n
u
o
r
G
e
s
a
e
L
e
u
n
e
v
e
R
d
e
z
i
l
a
u
n
n
A
t
n
e
R
e
s
a
B
e
u
n
e
v
e
R
s
e
c
n
a
r
b
m
u
c
n
E
A
S
M
e
t
a
t
S
y
t
r
e
p
o
r
P
I
I
e
l
b
a
T
—
s
e
i
t
r
e
p
o
r
P
l
i
a
t
e
R
g
n
i
t
a
r
e
p
O
d
n
a
s
t
n
a
n
e
T
r
o
j
a
M
)
3
(
s
r
o
h
c
n
A
d
e
n
w
O
-
n
o
N
,
y
t
i
C
t
i
u
c
r
i
C
,
s
’
n
n
A
o
J
,
t
o
p
e
D
e
c
fi
f
O
,
s
s
o
R
y
r
o
t
c
a
F
t
a
o
C
n
o
t
g
n
i
l
r
u
B
)
d
e
n
w
o
-
n
o
n
(
s
’
e
w
o
L
y
r
e
c
o
r
G
B
-
E
-
H
e
r
o
t
S
e
r
a
w
d
r
a
H
n
o
s
n
h
o
J
s
c
i
r
b
a
F
k
c
o
c
n
a
H
s
’
n
e
e
r
g
l
a
W
s
’
n
e
e
r
g
l
a
W
t
n
e
R
e
s
a
B
d
e
s
a
e
L
r
e
P
d
e
n
w
O
)
2
(
A
L
G
8
6
.
3
2
$
0
5
.
4
$
7
6
.
5
1
$
3
8
.
2
1
$
.
6
7
2
3
$
4
7
.
9
2
$
.
7
5
1
1
$
6
1
.
1
1
$
%
0
.
0
0
1
5
8
2
,
9
5
0
,
0
5
$
0
8
8
,
0
2
2
,
2
$
3
0
4
,
8
3
8
,
7
4
$
2
4
6
,
0
9
7
,
8
9
1
$
%
2
.
1
%
0
.
1
%
0
.
5
%
1
.
4
%
0
.
1
%
9
.
0
%
7
.
1
f
o
e
g
a
t
n
e
c
r
e
P
d
e
z
i
l
a
u
n
n
A
l
a
t
o
T
l
i
a
t
e
R
e
u
n
e
v
e
R
d
e
z
i
l
a
u
n
n
A
d
e
z
i
l
a
u
n
n
A
l
a
t
o
T
l
i
a
t
e
R
)
1
(
e
u
n
e
v
e
R
d
n
u
o
r
G
e
s
a
e
L
e
u
n
e
v
e
R
d
e
z
i
l
a
u
n
n
A
t
n
e
R
e
s
a
B
e
u
n
e
v
e
R
2
5
3
,
7
8
5
0
0
3
,
3
8
4
4
0
1
,
9
4
5
,
2
8
7
9
,
6
2
0
,
2
0
0
0
,
5
7
4
0
0
0
,
3
3
4
4
4
0
,
4
3
8
$
$
$
$
$
$
$
—
—
2
5
3
,
7
8
5
0
0
3
,
3
8
4
0
0
0
,
0
0
1
0
0
7
,
5
1
1
$
$
4
0
1
,
9
4
4
,
2
8
7
2
,
1
1
9
,
1
—
—
—
0
0
0
,
5
7
4
0
0
0
,
3
3
4
4
4
0
,
4
3
8
$
$
$
$
$
$
$
)
d
e
u
n
i
t
n
o
c
(
I
I
e
l
b
a
T
—
s
e
i
t
r
e
p
o
r
P
l
i
a
t
e
R
g
n
i
t
a
r
e
p
O
s
e
c
n
a
r
b
m
u
c
n
E
A
S
M
e
t
a
t
S
y
t
r
e
p
o
r
P
0
4
1
,
1
9
5
,
4
$
s
a
l
l
a
D
—
o
i
n
o
t
n
A
n
a
S
—
0
0
0
,
0
8
6
,
8
2
$
8
2
1
,
7
3
6
,
4
0
8
8
,
2
1
2
,
4
$
$
n
i
t
s
u
A
t
s
r
u
H
e
l
t
t
a
e
S
e
l
t
t
a
e
S
e
l
t
t
a
e
S
X
T
X
T
X
T
X
T
A
W
A
W
A
W
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
n
o
m
m
o
C
n
o
t
s
e
r
P
)
7
(
y
r
o
t
c
a
F
t
a
o
C
n
o
t
g
n
i
l
r
u
B
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
t
n
e
l
o
V
a
z
a
l
P
e
g
a
l
l
i
V
t
e
e
r
t
S
t
e
k
r
a
M
.
.
.
.
.
.
.
.
.
.
.
h
t
2
1
&
h
t
0
5
n
a
i
d
i
r
e
M
&
h
t
6
7
1
)
7
(
e
r
a
u
q
S
r
e
n
r
o
C
r
u
o
F
.
.
.
.
.
.
.
.
.
.
.
.
.
.
l
a
t
o
T
m
o
r
f
t
n
e
R
e
s
a
B
d
e
z
i
l
a
u
n
n
A
e
d
u
l
c
n
i
t
o
n
s
e
o
d
e
l
b
a
t
s
i
h
T
.
2
1
y
b
d
e
i
l
p
i
t
l
u
m
,
y
t
r
e
p
o
r
p
e
l
b
a
c
i
l
p
p
a
h
c
a
e
r
o
f
5
0
0
2
r
e
b
m
e
c
e
D
r
o
f
t
n
e
r
l
a
u
t
c
a
r
t
n
o
c
e
h
t
s
t
n
e
s
e
r
p
e
r
t
n
e
R
e
s
a
B
d
e
z
i
l
a
u
n
n
A
)
1
(
.
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
a
s
s
e
n
i
s
u
b
r
o
f
n
e
p
o
s
t
n
a
n
e
t
y
t
r
e
p
o
r
p
t
n
e
m
p
o
l
e
v
e
d
s
e
r
u
t
c
u
r
t
s
d
e
n
w
o
-
n
o
n
d
n
a
e
c
a
p
s
r
o
h
c
n
a
d
e
n
w
o
-
n
o
n
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
g
a
t
o
o
f
e
r
a
u
q
s
,
A
L
G
d
e
n
w
O
s
e
d
u
l
c
n
i
A
L
G
l
a
t
o
T
.
s
u
y
b
d
e
n
w
o
s
i
t
a
h
t
a
e
r
a
e
l
b
a
s
a
e
l
s
s
o
r
g
s
t
n
e
s
e
r
p
e
r
A
L
G
d
e
n
w
O
)
2
(
d
e
c
n
u
o
n
n
a
t
o
n
s
a
h
e
i
x
i
D
-
n
n
i
W
,
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
A
.
s
n
o
i
t
a
r
e
p
o
s
s
e
n
i
s
u
b
s
t
i
e
z
i
n
a
g
r
o
e
r
o
t
y
c
t
p
u
r
k
n
a
b
1
1
r
e
t
p
a
h
C
r
o
f
n
o
i
t
i
t
e
p
a
d
e
l
fi
.
c
n
I
,
s
e
r
o
t
S
e
i
x
i
D
-
n
n
i
W
,
5
0
0
2
y
r
a
u
r
b
e
F
n
I
e
l
g
a
E
t
a
s
p
o
h
S
t
a
e
r
o
t
s
s
t
i
e
s
o
l
c
o
t
s
n
a
l
p
d
e
c
n
u
o
n
n
a
e
i
x
i
D
-
n
n
i
W
,
6
0
0
2
,
8
2
y
r
a
u
r
b
e
F
n
O
.
e
s
a
e
l
r
e
h
t
i
e
d
e
t
c
e
j
e
r
t
i
s
a
h
r
o
n
,
s
e
i
t
r
e
p
o
r
p
s
’
y
n
a
p
m
o
C
e
h
t
f
o
r
e
h
t
i
e
t
a
s
e
r
o
t
s
e
h
t
e
s
o
l
c
o
t
s
n
a
l
p
n
i
a
t
e
r
o
t
d
e
d
n
e
t
n
i
t
i
t
a
h
t
s
e
r
o
t
s
f
o
t
s
i
l
s
t
i
n
o
s
e
k
a
L
d
r
o
f
r
e
t
a
W
t
a
e
r
o
t
s
s
t
i
d
e
d
u
l
c
n
i
e
i
x
i
D
-
n
n
i
W
,
t
n
e
m
e
c
n
u
o
n
n
a
s
t
i
n
I
.
y
t
r
e
p
o
r
p
s
i
h
t
t
a
e
s
a
e
l
e
h
t
d
e
t
c
e
j
e
r
e
t
a
d
t
a
h
t
t
a
t
o
n
d
a
h
t
u
b
k
e
e
r
C
.
s
r
o
h
c
n
a
d
e
n
w
o
-
n
o
n
g
n
i
d
u
l
c
n
i
,
y
t
r
e
p
o
r
p
e
h
t
t
a
A
L
G
f
o
t
e
e
f
e
r
a
u
q
s
0
0
0
,
0
1
t
s
a
e
l
t
a
y
p
u
c
c
o
t
a
h
t
s
t
n
a
n
e
t
t
s
e
g
r
a
l
e
e
r
h
t
e
h
t
s
t
n
e
s
e
r
p
e
R
.
y
t
r
e
p
o
r
p
s
i
h
t
s
e
g
a
n
a
m
y
t
r
a
p
d
r
i
h
t
A
.
s
e
s
a
e
l
d
n
u
o
r
g
n
o
.
)
n
o
i
t
r
o
p
G
R
K
(
3
7
3
,
6
9
4
,
2
$
f
o
t
b
e
d
y
b
d
e
r
e
b
m
u
c
n
e
s
i
d
n
a
e
r
u
t
n
e
v
t
n
i
o
j
d
e
t
a
d
i
l
o
s
n
o
c
n
u
n
a
n
i
d
l
e
h
s
i
y
t
r
e
p
o
r
p
s
i
h
T
.
y
t
i
l
i
c
a
f
t
i
d
e
r
c
g
n
i
v
l
o
v
e
r
e
h
t
r
e
d
n
u
d
e
r
e
b
m
u
c
n
e
s
i
y
t
r
e
p
o
r
p
s
i
h
T
.
e
t
a
d
t
a
h
t
f
o
s
a
)
3
(
)
4
(
)
5
(
)
6
(
)
7
(
27
)
5
(
p
u
o
r
G
y
t
l
a
e
R
e
t
i
K
f
o
t
n
e
m
t
r
a
p
e
D
a
n
a
i
d
n
I
7
4
.
9
;
s
e
t
a
i
c
o
s
s
A
c
i
t
s
o
n
g
a
i
D
s
e
t
a
i
c
o
s
s
A
e
r
a
c
h
t
l
a
e
H
y
t
i
s
r
e
v
i
n
U
a
n
a
i
d
n
I
l
a
c
i
d
e
M
y
t
i
s
r
e
v
i
n
U
n
o
i
t
a
r
t
s
i
n
i
m
d
A
2
1
3
2
.
%
3
0
1
.
%
5
8
1
.
e
l
b
a
t
n
e
r
t
e
n
f
o
t
e
e
f
e
r
a
u
q
s
0
0
0
,
3
6
5
y
l
e
t
a
m
i
x
o
r
p
p
a
g
n
i
l
a
t
o
t
s
e
i
t
r
e
p
o
r
p
l
a
i
c
r
e
m
m
o
c
g
n
i
t
a
r
e
p
o
r
u
o
f
n
i
s
t
s
e
r
e
t
n
i
d
e
n
w
o
e
w
,
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
A
s
e
i
t
r
e
p
o
r
p
l
a
i
c
r
e
m
m
o
c
s
’
y
n
a
p
m
o
C
e
h
t
o
t
t
c
e
p
s
e
r
h
t
i
w
n
o
i
t
a
m
r
o
f
n
i
c
fi
i
c
e
p
s
e
r
o
m
h
t
r
o
f
s
t
e
s
g
n
i
w
o
l
l
o
f
e
h
T
.
e
g
a
r
a
g
g
n
i
k
r
a
p
d
e
t
a
l
e
r
a
d
n
a
)
”
A
R
N
“
(
a
e
r
a
s
e
i
t
r
e
p
o
r
P
l
a
i
c
r
e
m
m
o
C
s
t
n
a
n
e
T
r
o
j
a
M
t
n
e
R
e
s
a
B
f
o
e
g
a
t
n
e
c
r
e
P
r
e
P
d
e
s
a
e
L
.
t
F
.
q
S
d
e
z
i
l
a
u
n
n
A
l
a
i
c
r
e
m
m
o
C
t
n
e
R
e
s
a
B
d
e
z
i
l
a
u
n
n
A
)
1
(
t
n
e
R
e
s
a
B
e
g
a
t
n
e
c
r
e
P
d
e
n
w
O
f
O
d
e
n
w
O
,
d
e
r
i
u
q
c
A
d
e
p
o
l
e
v
e
d
e
R
d
e
s
a
e
L
A
R
N
A
R
N
s
e
c
n
a
r
b
m
u
c
n
E
d
e
p
o
l
e
v
e
D
r
o
/
t
l
i
u
B
r
a
e
Y
d
e
t
a
v
o
n
e
R
A
S
M
:
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
a
y
t
r
e
p
o
r
P
a
n
a
i
d
n
I
,
s
e
i
t
i
r
u
c
e
S
y
t
i
C
,
y
l
l
i
L
i
l
E
.
5
4
7
1
$
%
4
.
2
6
0
0
2
,
6
3
9
,
4
$
%
8
.
4
9
6
4
3
,
8
9
2
9
9
0
,
2
8
9
,
2
2
$
d
e
p
o
l
e
v
e
d
e
R
2
0
0
2
/
5
0
9
1
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
h
t
u
o
S
y
t
r
i
h
T
6
3
2
,
3
1
8
%
0
.
0
0
1
5
7
8
,
5
8
d
e
p
o
l
e
v
e
D
3
0
0
2
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
.
.
.
.
.
.
.
)
4
(
s
t
c
u
d
o
r
P
N
E
P
3
0
6
,
6
6
4
,
1
%
0
.
0
0
1
1
3
4
,
3
6
d
e
p
o
l
e
v
e
d
e
R
2
0
0
2
/
8
9
9
1
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
.
.
)
2
(
l
a
c
i
d
e
M
l
l
i
M
g
n
i
r
p
S
g
n
i
k
r
a
P
n
o
s
i
n
e
D
A
N
/
/
A
N
A
N
/
/
A
N
A
N
/
d
e
r
i
u
q
c
A
6
8
9
1
s
i
l
o
p
a
n
a
i
d
n
I
f
o
.
t
p
e
D
a
n
a
i
d
n
I
n
o
i
t
a
r
t
s
i
n
i
m
d
A
3
0
6
.
%
8
8
.
0
5
4
,
3
9
6
%
0
.
0
0
1
0
0
0
,
5
1
1
1
8
7
,
3
6
0
,
4
$
d
e
p
o
l
e
v
e
D
4
0
0
2
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
g
n
i
k
r
a
P
)
4
,
3
(
e
g
a
r
a
G
n
o
i
t
a
t
S
n
o
i
n
U
l
o
o
P
r
o
t
o
M
e
t
a
t
S
a
n
a
i
d
n
I
)
n
o
i
t
r
o
p
G
R
K
(
,
7
1
6
9
6
0
6
$
,
f
o
t
b
e
d
y
b
d
e
r
e
b
m
u
c
n
e
s
i
y
t
r
e
p
o
r
p
s
i
h
T
.
y
t
r
e
p
o
r
p
s
i
h
t
t
a
s
t
n
a
n
e
t
e
h
t
f
o
e
n
o
h
t
i
w
e
r
u
t
n
e
v
t
n
i
o
j
a
h
g
u
o
r
h
t
y
t
r
e
p
o
r
p
s
i
h
t
n
i
t
s
e
r
e
t
n
i
%
0
5
a
n
w
o
e
W
.
2
1
y
b
d
e
i
l
p
i
t
l
u
m
,
y
t
r
e
p
o
r
p
e
l
b
a
c
i
l
p
p
a
h
c
a
e
r
o
f
5
0
0
2
r
e
b
m
e
c
e
D
r
o
f
t
n
e
r
l
a
u
t
c
a
r
t
n
o
c
y
l
h
t
n
o
m
e
h
t
s
t
n
e
s
e
r
p
e
r
t
n
e
r
e
s
a
b
d
e
z
i
l
a
u
n
n
A
.
n
o
i
t
a
d
i
l
o
s
n
o
c
n
i
d
e
t
a
n
i
m
i
l
e
s
i
h
c
i
h
w
y
n
a
p
m
o
C
e
h
t
o
t
e
l
b
a
t
u
b
i
r
t
t
a
0
2
6
,
8
4
4
$
f
o
t
n
e
r
e
s
a
b
d
e
z
i
l
a
u
n
n
a
s
e
d
u
l
c
n
I
.
y
t
i
l
i
c
a
f
t
i
d
e
r
c
g
n
i
v
l
o
v
e
r
e
h
t
r
e
d
n
u
d
e
r
e
b
m
u
c
n
e
s
i
y
t
r
e
p
o
r
p
s
i
h
T
.
0
0
0
,
0
0
5
$
y
l
e
t
a
m
i
x
o
r
p
p
a
s
i
t
n
e
r
e
s
a
b
d
e
z
i
l
a
u
n
n
a
5
0
0
2
)
1
(
)
2
(
)
3
(
)
4
(
)
5
(
28
5
4
.
4
1
$
%
0
0
0
1
.
9
8
4
,
9
0
9
,
7
$
%
3
.
7
9
2
5
6
,
2
6
5
0
8
8
,
5
4
0
,
7
2
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
l
a
t
o
T
d
n
a
s
t
n
a
n
e
T
r
o
j
a
M
s
r
o
h
c
n
A
d
e
n
w
o
-
n
o
N
1
3
.
c
e
D
)
4
(
5
0
0
2
t
c
e
j
o
r
P
)
4
(
t
s
o
C
/
d
e
s
a
e
L
-
e
r
P
)
5
(
d
e
t
t
i
m
m
o
C
A
L
G
d
e
i
p
u
c
c
O
l
a
t
o
T
)
3
(
A
L
G
d
e
n
w
O
)
2
(
A
L
G
s
e
c
n
a
r
b
m
u
c
n
E
g
n
i
n
e
p
O
f
o
e
p
y
T
)
1
(
e
t
a
D
y
t
r
e
p
o
r
P
e
e
r
T
y
t
r
a
P
7
5
8
0
1
,
0
7
9
1
1
,
6
5
1
,
4
3
$
0
0
1
,
8
3
$
t
s
o
C
d
e
r
r
u
c
n
I
l
a
t
o
T
f
o
s
a
d
e
t
a
m
i
t
s
E
%
0
.
4
8
%
1
6
8
.
t
n
e
c
r
e
P
f
o
d
e
n
w
O
A
L
G
t
n
e
c
r
e
P
d
e
n
w
O
f
o
d
e
t
c
e
j
o
r
P
d
e
t
c
e
j
o
r
P
n
i
a
t
n
o
c
o
t
d
e
t
c
e
p
x
e
e
r
a
t
a
h
t
s
e
i
t
r
e
p
o
r
p
t
n
e
m
p
o
l
e
v
e
d
l
i
a
t
e
r
4
1
d
e
n
w
o
e
w
,
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
a
,
s
e
i
t
r
e
p
o
r
p
l
i
a
t
e
r
g
n
i
t
a
r
e
p
o
r
u
o
o
t
n
o
i
t
i
d
d
a
n
I
c
fi
i
c
e
p
s
e
r
o
m
h
t
r
o
f
s
t
e
s
g
n
i
w
o
l
l
o
f
e
h
T
.
n
o
i
t
e
l
p
m
o
c
n
o
p
u
)
e
c
a
p
s
r
o
h
c
n
a
d
e
n
w
o
-
n
o
n
g
n
i
d
u
l
c
n
i
(
a
e
r
a
e
l
b
a
s
a
e
l
s
s
o
r
g
f
o
t
e
e
f
e
r
a
u
q
s
n
o
i
l
l
i
.
m
8
1
y
l
e
t
a
m
i
x
o
r
p
p
a
:
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
a
s
e
i
t
r
e
p
o
r
p
t
n
e
m
p
o
l
e
v
e
d
l
i
a
t
e
r
s
’
y
n
a
p
m
o
C
e
h
t
o
t
t
c
e
p
s
e
r
h
t
i
w
n
o
i
t
a
m
r
o
f
n
i
s
e
i
t
r
e
p
o
r
P
t
n
e
m
p
o
l
e
v
e
D
l
i
a
t
e
R
t
s
o
C
d
e
r
r
u
c
n
I
l
a
t
o
T
f
o
s
a
d
e
t
a
m
i
t
s
E
t
n
e
c
r
e
P
f
o
d
e
n
w
O
A
L
G
t
n
e
c
r
e
P
d
e
n
w
O
f
o
d
e
t
c
e
j
o
r
P
d
e
t
c
e
j
o
r
P
d
n
a
s
t
n
a
n
e
T
r
o
j
a
M
s
r
o
h
c
n
A
d
e
n
w
o
-
n
o
N
1
3
.
c
e
D
)
4
(
5
0
0
2
t
c
e
j
o
r
P
)
4
(
t
s
o
C
/
d
e
s
a
e
L
-
e
r
P
)
5
(
d
e
t
t
i
m
m
o
C
A
L
G
d
e
i
p
u
c
c
O
l
a
t
o
T
)
3
(
A
L
G
d
e
n
w
O
)
2
(
A
L
G
s
e
c
n
a
r
b
m
u
c
n
E
g
n
i
n
e
p
O
f
o
e
p
y
T
)
1
(
e
t
a
D
y
t
r
e
p
o
r
P
A
S
M
s
n
o
i
t
a
z
i
l
i
b
a
t
S
6
0
0
2
/
s
e
i
r
e
v
i
l
e
D
5
0
0
2
a
d
i
r
o
l
F
r
e
l
i
a
t
e
r
x
o
b
g
i
B
3
6
8
8
,
$
0
8
0
9
,
$
.
%
0
0
0
1
A
N
/
0
0
0
,
5
6
1
—
5
0
0
2
1
Q
l
i
a
t
e
R
L
F
,
s
e
l
p
a
N
.
.
.
.
)
9
(
I
I
e
s
a
h
P
,
k
e
e
r
C
e
l
g
a
E
)
d
e
n
w
o
-
n
o
n
(
t
o
p
e
D
e
m
o
H
;
)
d
e
n
w
o
-
n
o
n
(
t
r
a
M
-
l
a
W
y
b
d
e
r
o
h
c
n
A
t
n
i
o
P
s
r
e
d
a
r
T
5
2
7
,
8
1
1
7
,
5
0
5
6
0
1
,
%
0
6
4
.
%
7
.
0
4
0
0
2
,
0
5
0
0
6
,
6
4
6
2
6
,
5
9
5
,
7
$
5
0
0
2
2
Q
l
i
a
t
e
R
N
I
,
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
.
.
.
.
.
.
.
I
I
t
n
i
o
P
s
r
e
d
a
r
T
0
0
4
,
6
%
7
7
7
.
%
0
.
9
6
0
0
5
,
6
4
2
0
0
5
,
4
3
6
4
2
,
5
2
4
,
4
$
5
0
0
2
1
Q
l
i
a
t
e
R
N
I
,
e
l
l
i
v
s
n
a
v
E
.
.
.
.
.
.
s
n
o
m
m
o
C
k
n
a
B
d
e
R
a
n
a
i
d
n
I
%
8
.
0
3
%
0
.
3
4
0
0
0
,
6
2
5
0
0
4
,
5
4
1
6
2
4
,
2
8
7
,
9
1
$
0
0
3
,
4
6
0
0
3
,
4
6
4
5
5
,
1
6
7
,
7
$
5
0
0
2
1
Q
l
i
a
t
e
R
N
I
,
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
l
i
v
a
P
t
s
i
e
G
.
.
.
.
.
.
.
l
a
t
o
T
A
S
M
s
e
i
r
e
v
i
l
e
D
7
0
0
2
–
6
0
0
2
a
d
i
r
o
l
F
29
)
e
l
a
s
r
o
f
t
i
u
s
-
o
t
-
d
l
i
u
b
(
t
o
p
e
D
e
c
fi
f
O
,
g
g
e
r
G
H
H
s
’
n
e
e
r
g
l
a
W
0
4
0
,
1
0
3
5
,
3
0
0
0
,
6
0
0
0
,
5
1
%
5
.
0
2
.
%
0
0
0
1
e
c
fi
f
o
)
d
e
n
w
o
-
n
o
n
(
,
s
p
o
h
s
l
l
a
m
S
e
l
y
t
s
-
n
e
d
r
a
g
3
1
3
3
,
0
0
0
8
,
s
’
l
i
T
n
a
V
&
k
c
a
r
t
S
4
8
2
,
0
1
0
0
0
,
7
1
%
5
7
.
%
0
0
.
%
0
.
0
%
0
.
0
%
0
.
0
%
0
.
0
0
0
0
,
1
6
1
0
0
0
,
6
5
9
5
9
,
0
1
1
,
4
$
6
0
0
2
3
Q
l
i
a
t
e
R
N
I
,
t
n
i
o
P
n
w
o
r
C
.
.
.
.
.
.
.
.
.
.
.
.
.
.
g
n
i
p
p
o
h
S
)
8
(
r
e
t
n
e
C
l
l
i
H
n
o
c
a
e
B
a
n
a
i
d
n
I
0
0
4
,
2
4
0
0
4
,
7
3
1
3
0
,
1
5
0
3
5
,
4
1
2
0
3
3
,
9
4
1
3
0
,
1
4
6
0
0
2
2
Q
l
i
a
t
e
R
N
I
,
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
.
.
.
.
.
.
.
e
c
a
l
P
e
l
l
i
v
s
n
o
i
Z
6
0
0
2
6
0
0
2
3
Q
3
Q
l
i
a
t
e
R
l
i
a
t
e
R
N
I
N
I
,
s
i
l
o
p
a
n
a
i
d
n
I
,
s
i
l
o
p
a
n
a
i
d
n
I
.
.
.
I
e
c
a
l
p
t
e
k
r
a
M
r
e
t
a
w
e
g
d
i
r
B
I
I
s
n
o
m
m
o
C
k
e
e
r
C
y
e
n
o
t
S
x
x
a
M
J
T
,
t
e
k
r
a
m
r
e
p
u
S
h
s
r
a
M
4
5
7
,
1
2
0
0
5
,
0
3
%
7
.
8
6
%
0
.
0
4
0
0
0
,
5
7
1
0
0
0
,
5
7
1
7
3
9
,
2
9
0
,
6
1
$
5
0
0
2
3
Q
l
i
a
t
e
R
L
I
,
o
g
a
c
i
h
C
.
.
)
0
1
(
e
c
a
l
p
t
e
k
r
a
M
e
l
l
i
v
r
e
p
a
N
s
i
o
n
i
l
l
I
)
d
e
n
w
o
-
n
o
n
(
t
e
g
r
a
T
r
e
l
i
a
t
e
r
x
o
b
g
i
B
2
8
5
,
1
1
8
0
6
,
0
1
$
0
0
0
,
0
2
0
0
5
,
1
2
$
%
9
9
5
.
%
1
5
8
.
%
0
.
0
%
0
.
0
0
0
3
,
3
7
2
0
0
6
,
3
8
1
0
0
5
,
1
8
0
0
6
,
5
2
9
2
2
,
7
4
7
,
4
0
8
5
,
4
0
8
,
7
$
$
7
0
0
2
6
0
0
2
1
Q
3
Q
l
i
a
t
e
R
l
i
a
t
e
R
L
F
L
F
,
s
e
l
p
a
N
,
s
e
l
p
a
N
.
.
.
.
.
.
.
.
a
z
a
l
P
s
g
n
i
r
p
S
n
o
p
r
a
T
)
8
,
7
(
s
n
o
m
m
o
C
n
w
o
T
o
r
e
t
s
E
t
s
o
C
d
e
r
r
u
c
n
I
l
a
t
o
T
f
o
s
a
d
e
t
a
m
i
t
s
E
t
n
e
c
r
e
P
f
o
d
e
n
w
O
A
L
G
t
n
e
c
r
e
P
d
e
n
w
O
f
o
d
e
t
c
e
j
o
r
P
d
e
t
c
e
j
o
r
P
d
n
a
s
t
n
a
n
e
T
r
o
j
a
M
s
r
o
h
c
n
A
d
e
n
w
o
-
n
o
N
1
3
.
c
e
D
)
4
(
5
0
0
2
t
c
e
j
o
r
P
)
4
(
t
s
o
C
/
d
e
s
a
e
L
-
e
r
P
)
5
(
d
e
t
t
i
m
m
o
C
A
L
G
d
e
i
p
u
c
c
O
l
a
t
o
T
)
3
(
A
L
G
d
e
n
w
O
)
2
(
A
L
G
s
e
c
n
a
r
b
m
u
c
n
E
g
n
i
n
e
p
O
f
o
e
p
y
T
)
1
(
e
t
a
D
y
t
r
e
p
o
r
P
A
S
M
s
e
i
r
e
v
i
l
e
D
7
0
0
2
–
6
0
0
2
n
o
g
e
r
O
)
d
e
u
n
i
t
n
o
c
(
s
e
i
t
r
e
p
o
r
P
t
n
e
m
p
o
l
e
v
e
D
l
i
a
t
e
R
)
d
e
n
w
o
-
n
o
n
(
s
’
n
e
e
r
g
l
a
W
6
2
9
3
,
0
0
4
5
,
%
0
.
0
%
0
.
0
0
0
1
,
6
3
0
0
3
,
1
2
6
0
0
2
2
Q
l
i
a
t
e
R
R
O
,
d
n
a
l
t
r
o
P
.
.
.
.
.
.
.
.
.
-
o
t
-
d
l
i
u
B
y
a
w
e
t
a
G
s
u
i
l
e
n
r
o
C
)
8
(
e
l
a
S
r
o
F
t
i
u
S
,
9
6
6
7
0
1
$
,
0
0
4
6
7
1
$
3
1
5
3
7
,
$
,
0
0
3
8
3
1
$
%
8
.
1
6
)
d
e
n
w
o
-
n
o
n
(
s
’
l
h
o
K
2
4
5
5
,
s
’
n
e
e
r
g
l
a
W
4
3
9
1
,
0
0
4
6
,
0
0
5
8
,
%
0
.
4
5
%
0
.
0
0
0
4
,
7
2
0
0
4
,
7
2
2
8
9
,
9
1
2
,
1
$
6
0
0
2
4
Q
l
i
a
t
e
R
A
W
,
s
e
i
t
i
C
-
i
r
T
%
0
.
0
0
1
%
0
.
0
%
8
.
2
1
1
6
5
,
7
9
2
,
1
1
6
7
,
4
4
5
7
8
6
,
5
7
9
,
3
3
$
0
0
2
,
3
3
1
0
0
2
,
0
3
7
0
0
2
1
Q
l
i
a
t
e
R
A
W
,
e
l
t
t
a
e
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
)
8
,
7
(
e
l
a
S
r
o
f
t
i
u
S
-
o
t
-
d
l
i
u
B
a
z
a
l
P
r
u
f
i
d
n
a
S
n
o
t
g
n
i
h
s
a
W
.
.
.
.
r
e
t
n
e
C
g
n
i
p
p
o
h
S
.
.
.
.
.
.
)
1
1
,
8
,
7
,
6
(
I
e
s
a
h
P
y
a
w
e
t
a
G
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
l
a
t
o
T
d
e
n
g
i
s
e
v
a
h
e
w
h
c
i
h
w
r
o
f
t
e
e
f
e
r
a
u
q
s
1
9
0
,
1
0
1
y
l
e
t
a
m
i
x
o
r
p
p
a
r
o
f
n
o
i
t
a
i
t
o
g
e
n
r
e
d
n
u
s
e
s
a
e
l
s
e
d
u
l
c
n
I
.
s
t
n
a
n
e
t
o
t
d
e
s
a
e
l
d
n
u
o
r
g
d
n
a
y
n
a
p
m
o
C
e
h
t
y
b
d
e
n
w
o
s
l
e
c
r
a
p
d
n
a
s
t
o
l
t
u
o
s
e
d
u
l
c
n
I
.
s
e
i
t
r
e
p
o
r
p
s
n
o
m
m
o
C
n
w
o
T
o
r
e
t
s
E
d
n
a
I
I
e
s
a
h
P
,
k
e
e
r
C
e
l
g
a
E
r
u
o
t
a
s
t
n
a
n
e
t
r
o
h
c
n
a
h
t
i
w
s
e
s
a
e
l
d
n
u
o
r
g
o
t
n
i
r
e
t
n
e
o
t
s
t
n
e
m
e
e
r
g
a
o
w
t
s
u
l
p
t
n
e
t
n
i
f
o
s
r
e
t
t
e
l
g
n
i
d
n
i
b
-
n
o
n
.
r
o
h
c
n
a
d
e
n
w
o
-
n
o
n
t
o
o
f
e
r
a
u
q
s
0
0
0
,
3
9
a
d
n
a
,
s
t
o
l
t
u
o
o
w
t
,
s
p
o
h
s
l
l
a
m
s
f
o
t
e
e
f
e
r
a
u
q
s
0
0
0
,
5
4
e
d
u
l
c
n
i
o
t
d
e
t
c
e
j
o
r
p
s
i
d
n
a
r
e
t
n
e
C
g
n
i
p
p
o
h
S
y
a
w
e
t
a
G
r
o
f
d
e
t
a
p
i
c
i
t
n
a
s
i
e
s
a
h
p
d
n
o
c
e
s
A
.
n
o
i
t
c
u
r
t
s
n
o
c
r
e
d
n
u
r
o
g
n
i
t
s
i
x
e
y
l
t
n
e
r
r
u
c
s
i
t
a
h
t
.
s
d
n
a
s
u
o
h
t
n
i
s
r
a
l
l
o
D
n
e
h
t
,
n
r
u
t
e
r
d
e
r
r
e
f
e
r
p
(
l
l
i
H
n
o
c
a
e
B
;
)
%
5
9
s
p
o
h
s
l
l
a
m
s
;
%
0
8
s
’
n
e
e
r
g
l
a
W
(
a
z
a
l
P
r
u
f
i
d
n
a
S
;
)
%
0
8
(
y
a
w
e
t
a
G
s
u
i
l
e
n
r
o
C
:
s
e
r
u
t
n
e
v
t
n
i
o
j
h
g
u
o
r
h
t
s
e
i
t
r
e
p
o
r
p
t
n
e
m
p
o
l
e
v
e
d
g
n
i
w
o
l
l
o
f
e
h
t
n
w
o
e
W
.
n
a
l
p
e
t
i
s
y
r
a
n
i
m
i
l
e
r
p
n
o
d
e
s
a
b
t
s
o
C
d
e
t
a
m
i
t
s
E
l
a
t
o
T
d
n
a
e
t
a
D
g
n
i
n
e
p
O
)
4
(
)
5
(
)
6
(
)
7
(
)
8
(
)
%
0
4
n
e
h
t
,
n
r
u
t
e
r
d
e
r
r
e
f
e
r
p
(
s
n
o
m
m
o
C
n
w
o
T
o
r
e
t
s
E
d
n
a
;
)
%
5
2
n
e
h
t
d
n
a
d
e
h
c
a
e
r
s
i
d
l
o
h
s
e
r
h
t
n
r
u
t
e
r
f
o
e
t
a
r
l
a
n
r
e
t
n
i
l
i
t
n
u
%
0
5
n
e
h
t
,
n
r
u
t
e
r
d
e
r
r
e
f
e
r
p
(
r
e
t
n
e
C
g
n
i
p
p
o
h
S
y
a
w
e
t
a
G
;
)
%
0
5
a
g
n
i
y
a
p
s
i
d
n
a
y
a
p
o
t
d
e
t
a
g
i
l
b
o
s
i
t
n
a
n
e
t
e
h
T
.
r
e
l
i
a
t
e
r
x
o
b
g
i
b
a
h
t
i
w
y
t
r
e
p
o
r
p
I
I
e
s
a
h
P
,
k
e
e
r
C
e
l
g
a
E
e
r
i
t
n
e
e
h
t
r
o
f
e
s
a
e
l
d
n
u
o
r
g
a
o
t
n
i
r
e
t
n
e
o
t
t
n
e
m
e
e
r
g
a
n
a
o
t
n
i
d
e
r
e
t
n
e
e
v
a
h
e
W
)
9
(
.
d
e
t
u
c
e
x
e
s
i
e
s
a
e
l
d
n
u
o
r
g
e
h
t
l
i
t
n
u
t
n
e
r
s
t
i
f
o
n
o
i
t
r
o
p
r
e
h
t
e
h
w
e
n
i
m
r
e
t
e
d
y
l
t
n
e
s
e
r
p
t
o
n
n
a
c
y
n
a
p
m
o
C
e
h
t
,
r
e
v
e
w
o
h
;
e
l
a
s
r
o
f
d
e
t
e
k
r
a
m
g
n
i
e
b
s
i
d
n
a
,
5
0
0
2
,
t
s
u
g
u
A
n
i
d
e
n
e
p
o
,
y
r
a
i
d
i
s
b
u
s
T
I
E
R
e
l
b
a
x
a
t
a
y
b
d
e
n
w
o
s
i
h
s
r
a
M
t
o
o
f
e
r
a
u
q
s
0
0
0
,
0
7
A
)
0
1
(
.
6
0
0
2
3
Q
s
i
r
e
t
n
e
c
e
h
t
f
o
r
e
d
n
i
a
m
e
r
e
h
t
r
o
f
g
n
i
n
e
p
o
d
e
t
c
e
j
o
r
p
e
h
T
.
s
h
t
n
o
m
e
v
l
e
w
t
t
x
e
n
e
h
t
n
i
h
t
i
w
t
e
s
s
a
s
i
h
t
l
l
e
s
n
a
c
t
i
s
e
r
u
t
c
u
r
t
s
t
o
l
t
u
o
d
e
n
w
o
-
n
o
n
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
b
l
l
i
w
t
c
e
j
o
r
p
e
w
t
a
h
t
e
g
a
t
o
o
f
e
r
a
u
q
s
s
e
d
u
l
c
x
e
t
I
.
s
u
y
b
d
e
n
w
o
e
b
l
l
i
w
t
c
e
j
o
r
p
e
w
t
a
h
t
a
e
r
a
e
l
b
a
s
a
e
l
s
s
o
r
g
s
t
n
e
s
e
r
p
e
r
A
L
G
d
e
n
w
O
d
e
t
c
e
j
o
r
P
.
e
d
a
m
s
i
t
n
e
m
y
a
p
r
a
l
i
m
i
s
r
o
e
s
a
e
l
d
n
u
o
r
g
a
r
o
s
s
e
n
i
s
u
b
r
o
f
n
e
p
o
s
i
t
n
a
n
e
t
a
e
t
a
d
t
s
r
fi
e
h
t
s
a
d
e
n
fi
e
d
s
i
e
t
a
D
g
n
i
n
e
p
O
)
1
(
)
2
(
e
c
a
p
s
r
o
h
c
n
a
d
e
n
w
o
-
n
o
n
d
n
a
,
s
u
y
b
d
e
n
w
o
s
i
t
a
h
t
d
n
a
l
n
o
s
e
r
u
t
c
u
r
t
s
t
o
l
t
u
o
d
e
n
w
o
-
n
o
n
o
t
e
l
b
a
t
u
b
i
r
t
t
a
e
g
a
t
o
o
f
e
r
a
u
q
s
d
e
t
c
e
j
o
r
p
,
A
L
G
d
e
n
w
O
d
e
t
c
e
j
o
r
P
s
e
d
u
l
c
n
i
A
L
G
l
a
t
o
T
d
e
t
c
e
j
o
r
P
)
3
(
30
.
e
c
a
p
s
r
o
h
c
n
a
d
e
n
w
o
-
n
o
n
s
e
d
u
l
c
x
e
o
s
l
a
t
I
.
s
t
n
a
n
e
t
o
t
e
s
a
e
l
d
n
u
o
r
g
o
t
t
c
e
p
x
e
e
w
t
a
h
t
d
n
a
s
u
y
b
d
e
n
w
o
s
i
t
a
h
t
d
n
a
l
n
o
Land Held For Future Development
As of December 31, 2005, we owned interests in land parcels comprising approximately 180 acres that may
be used for future expansion of existing properties or development of new retail or commercial properties.
Option Properties and Rights of First Refusal
In connection with our IPO, we entered into option agreements with the contributors of our properties (or
entities controlled or owned by them) that granted our Operating Partnership the right to acquire the following
property or interests therein:
•
Erskine Village. A joint venture among Kite South Bend, LLC, Kimco Realty Corporation and
Schottenstein Management purchased this 800,000 square foot Scottsdale Mall location in South Bend,
Indiana in August 2003 in order to redevelop it. The 58-acre parcel of land is located at the intersection
of Miami Street and Ireland Road in South Bend, Indiana. Our Operating Partnership has the right
to purchase Kite South Bend, LLC’s 25% interest in this joint venture, subject to approval of the other
joint venture partners and the lender.
Under the terms of the option agreement, once the property reaches 85% occupancy, we may directly or
indirectly acquire the property at a price equal to the lesser of:
•
•
the annualized net operating income for the property (based on net operating income over a three-
month period which includes the month of exercise) divided by 8.5% multiplied by the contributors’
interest in the property; or
the then fair market value of the property based on the average of two appraisals (or the average of
the two closest of three appraisals in certain circumstances) multiplied by the contributors’ interest
in the property.
The option price is payable in operating partnership units or cash, at our option. Each of our options expires
four years from the date construction begins on the property. We also have a right of first refusal to acquire the
property (or the contributors’ interest therein) if a third party offers to acquire the property (or the interest) at
the price offered by the third party or, if the option is then exercisable, at the option price described above, if
lower. If we do not acquire the property during the four-year option period, then the contributors will agree to
sell the property (or their interests therein) as soon as reasonably practicable.
On March 31, 2005, the Company acquired 32.7 acres of undeveloped land in Naples, Florida (Tarpon
Springs Plaza) at a price equal to Messrs. Al Kite, John Kite, Paul Kite and Tom McGowan’s net equity in the
property at cost plus the assumption of certain liabilities and the obligation to repay certain indebtedness. The
equity portion of the purchase price was paid through the issuance of 214,049 units of the Operating Partnership
valued at approximately $3.1 million.
31
Tenant Diversification
No individual retail or commercial tenant accounted for more than 3.3% of the portfolio’s annualized base
rent for the year ended December 31, 2005 or 4.5% of total retail portfolio GLA as of December 31, 2005. The
following table sets forth certain information for the largest 10 tenants and non-owned anchor tenants (based
on total gross leasable area) open for business at the Company’s retail properties based on minimum rents in
place as of December 31, 2005:
Top 10 Retail Tenants by Gross Leasable Area
Tenant
Lowe’s Home Center . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wal-Mart
Federated Department Stores . . . . . . . .
Marsh Supermarkets(1) . . . . . . . . . . . . . . .
Circuit City . . . . . . . . . . . . . . . . . . . . . . . . . .
Dominick’s . . . . . . . . . . . . . . . . . . . . . . . . . .
Publix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dick’s Sporting Goods . . . . . . . . . . . . . . .
Kmart . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Burlington Coat Factory . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Number of
Locations
Total
GLA
Number of
Leases
Company
Owned GLA
Number of
Anchor Owned
Locations
Anchor
Owned GLA
7
3
1
3
4
2
3
2
1
1
27
919,630
459,649
237,455
194,902
132,352
131,613
129,357
126,672
110,875
107,400
2,549,905
1
2
1
3
4
2
3
2
1
1
20
128,997
234,649
237,455
194,902
132,352
131,613
129,357
126,672
110,875
107,400
1,534,272
6
1
0
0
0
0
0
0
0
0
7
790,633
225,000
0
0
0
0
0
0
0
0
1,015,633
(1)
Includes the Marsh Supermarket at Naperville Marketplace, which is owned by a taxable REIT subsidiary
and which the Company is marketing for sale; however, the Company cannot presently determine whether
it can sell this asset within the next twelve months.
32
The following table sets forth certain information for the largest 25 tenants open for business at the
Company’s retail and commercial properties based on minimum rents in place as of December 31, 2005:
Top 25 Tenants by Annualized Base Rent(1)
Tenant
Circuit City . . . . . . . . . . . . . . . . .
State of Indiana . . . . . . . . . . . . .
Eli Lilly . . . . . . . . . . . . . . . . . . .
Marsh Supermarkets(5) . . . . . . . .
Dominick’s . . . . . . . . . . . . . . . . .
Dick’s Sporting Goods . . . . . . . .
H-E-B Grocery . . . . . . . . . . . . . .
Walgreen’s
. . . . . . . . . . . . . . . . .
Bed Bath & Beyond . . . . . . . . . .
Lowe’s Home Center . . . . . . . . .
Publix . . . . . . . . . . . . . . . . . . . . .
Wal-Mart . . . . . . . . . . . . . . . . . . .
Ross Stores . . . . . . . . . . . . . . . . .
Office Depot . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Kmart
University Medical
Diagnostics Associates(3)
. . . .
Old Navy(6) . . . . . . . . . . . . . . . . .
Winn-Dixie(4)
. . . . . . . . . . . . . . .
Kerasotes Theatres . . . . . . . . . . .
A & P . . . . . . . . . . . . . . . . . . . . .
Shoe Pavilion . . . . . . . . . . . . . . .
City Securities . . . . . . . . . . . . . .
Indiana University
Healthcare Associates(3) . . . . .
Bealls . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . .
Petsmart
Total
. . . . . . . . . . . . . . . . . . . . . .
Type of
Property
Number of
Locations
Leased
GLA/NRA
% of
Owned
GLA/NRA
of the
Portfolio
Annualized
Base Rent(1,2)
Annualized
Base
Rent per
Sq. Ft.
% of Total
Portfolio
Annualized
Base Rent
Retail
Commercial
Commercial
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Retail
Commercial
Retail
Retail
Retail
Retail
Retail
Commercial
Commercial
Retail
Retail
4
3
1
2
2
2
1
3
3
1
3
2
3
3
1
1
4
2
2
1
1
1
1
2
2
132,352
210,393
99,542
124,902
131,613
126,672
105,000
39,070
85,895
128,997
129,357
234,649
87,656
84,372
110,875
32,256
85,420
103,406
43,050
58,732
31,396
34,949
31,175
79,611
50,909
2.6%
4.0%
2.0%
2.4%
2.6%
2.5%
2.1%
0.8%
1.7%
2.5%
2.5%
4.5%
1.7%
1.7%
2.2%
0.6%
1.7%
2.0%
0.8%
1.2%
0.6%
0.7%
0.6%
1.6%
1.0%
$ 1,930,110
$ 1,663,733
$ 1,642,443
$ 1,633,958
$ 1,411,728
$ 1,220,000
$ 1,155,000
$ 1,031,023
$ 1,021,921
$ 1,014,000
989,361
$
930,927
$
884,301
$
873,089
$
850,379
$
$
$
$
$
$
$
$
$
$
$
844,402
824,758
806,266
776,496
763,516
722,108
694,900
622,201
576,000
537,095
2,382,249
46.6% $25,419,715
$14.58
$ 7.91
$16.50
$13.08
$10.73
$ 9.63
$11.00
$26.39
$11.90
$ 7.86
$ 7.65
$ 3.97
$10.09
$10.35
$ 7.67
$26.18
$ 9.66
$ 7.80
$18.04
$13.00
$23.00
$19.88
$19.96
$ 7.24
$10.55
$10.67
3.3%
2.8%
2.8%
2.8%
2.4%
2.1%
2.0%
1.7%
1.7%
1.7%
1.7%
1.6%
1.5%
1.5%
1.4%
1.4%(3)
1.4%
1.4%
1.3%
1.3%
1.2%
1.2%
1.0%(3)
1.0%
0.9%
43.1%
(1) Annualized base rent represents the monthly contractual rent for December 2005 for each applicable tenant multiplied by 12.
(2)
(3)
(4)
(5)
(6)
Excludes tenants at development properties which are Build-to-Suits for sale.
Property held in unconsolidated joint venture. Annualized base rent is reflected at 100 percent.
In February 2005, Winn-Dixie Stores, Inc. filed a petition for Chapter 11 bankruptcy to reorganize its business operations. On
February 28, 2006, Winn-Dixie announced plans to close its store at Shops at Eagle Creek but had not at that date rejected the lease
at this property. In its announcement, Winn-Dixie included its store at Waterford Lakes on its list of stores that it intended to retain
as of that date.
Excludes the Marsh Supermarket at Naperville Marketplace, which is owned by a taxable REIT subsidiary and which the Company
is marketing for sale; however, the Company cannot presently determine whether it can sell this asset within the next twelve months.
Also excludes the Marsh Supermarket at Geist Pavilion where the tenant has commenced payment of rent but has not opened
for business.
This tenant’s lease at Glendale Mall for approximately 20,600 square feet at a base rent of $8.50 per square foot expired in January
2006 and the tenant elected to not renew.
33
Geographic Information
The Company owns 40 operating retail properties totaling approximately 6.2 million of owned square feet
in nine states. As of December 31, 2005, the Company owned interests in four operating commercial properties
totaling approximately 563,000 square feet of net rentable area and a related parking garage. All of these
commercial properties are located in the state of Indiana. The following table summarizes the Company’s
operating properties by state as of December 31, 2005:
Number of
Operating
Properties
Owned
GLA/NRA(2)
Percent of
Owned
GLA/NRA
Total
Number
of Leases
Indiana . . . . . . . . . . . . . . . . . . . .
• Retail — Mall . . . . . . . . . . .
• Retail . . . . . . . . . . . . . . . . . .
• Commercial . . . . . . . . . . . . .
Texas . . . . . . . . . . . . . . . . . . . . . .
Florida . . . . . . . . . . . . . . . . . . . . .
Illinois . . . . . . . . . . . . . . . . . . . . .
New Jersey . . . . . . . . . . . . . . . . .
Georgia . . . . . . . . . . . . . . . . . . . .
Washington . . . . . . . . . . . . . . . . .
Ohio . . . . . . . . . . . . . . . . . . . . . .
Oregon . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . .
19
1
13
5
8
8
2
1
2
3
1
1
45
2,089,814
579,189
947,973
562,652
1,136,186
1,001,184
231,770
114,928
142,707
102,146
231,730
9,845
5,060,310
41.3%
11.5%
18.7%
11.1%
22.4%
19.8%
4.6%
2.3%
2.8%
2.0%
4.6%
0.2%
100.0%
211
41
147
23
96
118
36
16
28
26
6
7
544
Annualized
Base
Rent(3)
$21,906,051
$ 2,321,935
$11,674,627
$ 7,909,489
$13,735,638
$ 9,431,942
$ 3,105,362
$ 1,742,524
$ 1,606,810
$ 1,742,044
$ 2,209,767
267,756
$
$55,747,894
100.0%
Annualized
Base Rent
per
Leased
SF
Percent of
Annualized
Base Rent
39.3%
4.2%
20.9%
14.2%
24.6%
16.9%
5.6%
3.1%
2.9%
3.1%
4.0%
0.5%
$11.46
$ 4.94
$13.05
$14.45
$12.16
$ 9.63
$14.12
$16.06
$11.36
$17.22
$ 9.54
$27.20
$11.53
(1)
Excludes tenants at development properties which are Build-to-Suits for sale.
(2) Owned GLA/NRA represents gross leasable area or net leasable area owned by the Company. It does not include 24 parcels or outlots
owned by the Company and ground leased to tenants which contain 24 non-owned structures totaling approximately 159,319 square
feet. It also excludes the square footage of Union Station Parking Garage.
(3) Annualized Base Rent Revenue excludes $2,220,880 in annualized ground lease revenue attributable to parcels and outlots owned
by the Company and ground leased to tenants. It also excludes approximately $500,000 in 2005 annualized minimum rent attributable
to Union Station Parking Garage as well as the leases on properties classified as development properties.
Lease Expirations
Approximately 4.0% and 4.5% of total annualized base rent and total GLA/NRA, respectively, expire in
2006. The following tables show scheduled lease expirations for retail and commercial tenants and development
property tenants open for business and development property tenants open for business as of December 31, 2005
assuming none of the tenants exercise renewal options. The tables include tenants open for business at operating
retail and commercial properties as of December 31, 2005.
34
Lease Expiration Table — Operating Portfolio(1)
Number of
Expiring
Leases(2)
Expiring
GLA/NRA(3)
% of Total
GLA/NRA
Expiring
Expiring
Annualized
Base Rent(4)
% of Total
Annualized
Base Rent
Expiring
Annualized
Base Rent
per Sq. Ft.
Expiring
Ground Lease
Revenue
2006 . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . .
Beyond . . . . . . . . . . . . . . . . . . . .
84
79
46
55
70
34
33
18
32
43
44
Total
. . . . . . . . . . . . . . . . . . . . . .
538
220,034
236,113
443,975
200,641
443,207
573,557
269,439
180,008
308,393
592,536
1,422,446
4,890,349
4.5% $ 2,244,126
4.8% $ 3,262,127
9.1% $ 3,289,545
4.1% $ 3,042,755
9.1% $ 5,356,643
11.7% $ 5,119,426
5.5% $ 3,677,126
3.7% $ 2,544,668
6.3% $ 3,940,821
12.1% $ 6,970,357
29.1% $17,354,213
4.0%
5.7%
5.8%
5.4%
9.4%
9.0%
6.5%
4.5%
6.9%
12.3%
30.5%
100.0% $56,801,807
100.0%
$10.20
$13.82
$ 7.41
$15.17
$12.09
$ 8.93
$13.65
$14.14
$12.78
$11.76
$12.20
$11.62
0
$
0
$
0
$
0
$
0
$
0
$
85,000
$
$
0
$ 427,900
$ 251,500
$1,456,480
$2,220,880
(1)
(2)
Excludes tenants at development properties which are Build-to-Suits for sale.
Lease expiration table reflects rents in place as of December 31, 2005 and does not include option periods; 2006 expirations include
month-to-month tenants. This column also excludes ground leases.
(3)
Expiring GLA excludes square footage for non-owned ground lease structures.
(4) Annualized base rent represents the monthly contractual rent for December 2005 for each applicable tenant multiplied by 12. Excludes
ground lease revenue.
Lease Expiration Table — Retail Anchor Tenants(1)
Number of
Expiring
Leases(2)
2006 . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . .
Beyond . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . .
3
6
3
3
11
7
5
1
5
13
30
87
Expiring
GLA(3)
66,964
91,926
342,049
69,389
284,459
407,087
135,399
11,960
91,602
462,074
1,312,063
% of Total
GLA
Expiring
Expiring
Annualized
Base Rent(4)
% of Total
Annualized
Base Rent
Expiring
Annualized
Base Rent
per Sq. Ft.
Expiring
Ground Lease
Revenue
1.4%
1.9%
7.0%
1.4%
5.8%
8.3%
2.8%
0.2%
1.9%
9.5%
26.8%
170,982
$
$
744,076
$ 1,414,227
$
669,318
$ 2,586,106
$ 2,080,426
$ 1,137,158
161,460
$
$
983,243
$ 4,313,053
$14,932,047
0.3%
1.3%
2.5%
1.2%
4.6%
3.7%
2.0%
0.3%
1.7%
7.6%
26.2%
$ 2.55
$ 8.09
$ 4.13
$ 9.65
$ 9.09
$ 5.11
$ 8.40
$13.50
$10.73
$ 9.33
$11.38
$ 8.91
0
$
0
$
0
$
0
$
0
$
0
$
0
$
0
$
0
$
$
0
$1,040,000
$1,040,000
3,274,972
67.0% $29,192,096
51.4%
(1)
(2)
Retail anchor tenants are defined as tenants which occupy 10,000 square feet or more. Excludes tenants at development properties
which are Build-to-Suits for sale.
Lease expiration table reflects rents in place as of December 31, 2005 and does not include option periods; 2006 expirations include
month-to-month tenants. This column also excludes ground leases.
Expiring GLA excludes square footage for non-owned ground lease structures.
(3)
(4) Annualized base rent represents the monthly contractual rent for December 2005 for each applicable property multiplied by 12.
Excludes ground lease revenue.
35
Lease Expiration Table — Retail Shops
Number of
Expiring
Leases(1)
Expiring
GLA(2)
% of Total
GLA
Expiring
Expiring
Annualized
Base Rent(3)
% of Total
Annualized
Base Rent
Expiring
Annualized
Base Rent
per Sq. Ft.
Expiring
Ground Lease
Revenue
2006 . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . .
Beyond . . . . . . . . . . . . . . . . . . . .
79
71
42
52
58
24
26
13
25
26
12
145,967
140,232
93,961
131,252
149,870
66,928
96,988
39,694
66,842
89,491
46,952
3.0%
2.9%
1.9%
2.7%
3.0%
1.4%
2.0%
0.8%
1.4%
1.8%
0.9%
$ 1,959,495
$ 2,440,691
$ 1,715,381
$ 2,373,437
$ 2,590,758
$ 1,396,557
$ 1,949,260
$
793,577
$ 1,569,228
$ 1,956,275
955,563
$
3.4%
4.3%
3.0%
4.2%
4.6%
2.5%
3.4%
1.4%
2.8%
3.4%
1.7%
Total
. . . . . . . . . . . . . . . . . . . . . .
428
1,068,177
21.8% $19,700,222
34.7%
$13.42
$17.40
$18.26
$18.08
$17.29
$20.87
$20.10
$19.99
$23.48
$21.86
$20.35
$18.44
0
$
0
$
0
$
0
$
0
$
0
$
85,000
$
$
0
$ 427,900
$ 251,500
$ 416,480
$1,180,880
(1)
Lease expiration table reflects rents in place as of December 31, 2005 and does not include option periods; 2006 expirations include
month-to-month tenants. This column also excludes ground leases.
(2)
Expiring GLA excludes square footage for non-owned ground lease structures.
(3) Annualized base rent represents the monthly contractual rent for December 2005 for each applicable property multiplied by 12.
Excludes ground lease revenue.
Lease Expiration Table — Commercial Tenants
Number of
Expiring
Leases(1)
Expiring
NRA
% of Total
NRA
Expiring
Expiring
Annualized
Base Rent(2)
% of Total
Annualized
Base Rent
Expiring
Annualized
Base Rent
per Sq. Ft.
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beyond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2
2
1
0
1
3
2
4
2
4
2
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23
7,103
3,955
7,965
0
8,878
99,542
37,052
128,354
149,949
40,971
63,431
547,200
0.2%
0.1%
0.2%
0.0%
0.2%
2.0%
0.8%
2.6%
3.0%
0.8%
1.3%
$ 113,648
77,360
$
$ 159,938
$
0
$ 179,780
$1,642,443
$ 590,708
$1,589,631
$1,388,350
$ 701,029
$1,466,602
0.2%
0.1%
0.3%
0.0%
0.3%
2.9%
1.1%
2.8%
2.4%
1.2%
2.6%
11.2%
$7,909,489
13.9%
$16.00
$19.56
$20.08
$ 0.00
$20.25
$16.50
$15.94
$12.38
$ 9.26
$17.11
$23.12
$14.45
(1)
Lease expiration table reflects rents in place as of December 31, 2005 and does not include option periods; 2006 expirations include
month-to-month tenants. This column also excludes ground leases.
(2) Annualized base rent represents the monthly contractual rent for December 2005 for each applicable property multiplied by 12.
36
ITEM 3. LEGAL PROCEEDINGS
We are a party to various legal proceedings, which arise in the ordinary course of business. We are not
currently involved in any litigation nor, to our knowledge, is any litigation threatened against us the outcome
of which would, in our judgment based on information currently available to us, have a material adverse effect
on our consolidated financial position or consolidated results of operations
ITEM 4. SUBMISSION OF MATTTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders through the solicitation of proxies or otherwise during
the fourth quarter of 2005.
37
PART II
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED SHAREHOLDER
MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Market Information — Our common shares are currently listed and traded on the New York Stock Exchange
(“NYSE”) under the symbol “KRG”. On March 10, 2006, the last reported sales price of our common shares
on the NYSE was $15.20.
The following table sets forth, for the periods indicated, the high and low sales prices and the closing prices
for the Company’s common shares:
Period August 11, 2004 to September 30, 2004 . . . . . . . . . . .
Quarter Ended December 31, 2004 . . . . . . . . . . . . . . . . . . . . . . .
Quarter Ended March 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarter Ended June 30, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Quarter Ended September 30, 2005 . . . . . . . . . . . . . . . . . . . . . . .
Quarter Ended December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . .
High
$13.56
$15.61
$15.65
$15.50
$16.52
$16.26
Low
$12.50
$12.70
$14.05
$13.40
$14.75
$14.04
Closing
$13.15
$15.28
$14.40
$15.00
$14.92
$15.47
Holders — The number of holders of record of our common shares was 21 as of March 10, 2006.
Distributions — Our Board of Trustees declared the following cash distributions per share to our common
shareholders for the year ended December 31, 2005 and for the period from the date of our IPO on August 16,
2004 through December 31, 2004:
Record Date
Quarter
3rd 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 4, 2004
4th 2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 4, 2005
1st 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . April 5, 2005
2nd 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
July 5, 2005
3rd 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . October 3, 2005
4th 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 6, 2006
Distribution
Per Share
$0.09375
$ 0.1875
$ 0.1875
$ 0.1875
$ 0.1875
$ 0.1875
Payment Date
October 15, 2004(1)
January 15, 2005
April 19, 2005
July 19, 2005
October 18, 2005
January 17, 2006
(1) The distribution paid on October 15, 2004 was pro-rated for the period from the date of our IPO on
August 16, 2004 through September 30, 2004.
We intend to continue to pay regular quarterly distributions to our common shareholders. Future
distributions will be declared and paid at the discretion of our Board of Trustees, and will depend upon cash
generated by operating activities, our financial condition, capital requirements, annual distribution requirements
under the REIT provisions of the Internal Revenue Code of 1986, as amended, and such other factors as our
Board of Trustees deem relevant. We anticipate that for the foreseeable future, cash available for distribution
will be greater than earnings and profits due to non-cash expenses, primarily depreciation and amortization, to
be incurred by us. Distributions by us to the extent of our current and accumulated earnings and profits for federal
income tax purposes will be taxable to shareholders as either ordinary dividend income or capital gain income
if so declared by us. Distributions in excess of earnings and profits generally will be treated as a non-taxable
return of capital. These distributions have the effect of deferring taxation until the sale of a shareholder’s common
shares. In order to maintain our qualification as a REIT, we must make annual distributions to shareholders of
at least 90% of our taxable income. Under certain circumstances, we could be required to make distributions
in excess of cash available for distributions in order to meet such requirements. For the taxable year ended
December 31, 2005, approximately 52.16% of our distributions to shareholders constituted a return of capital,
approximately 42.56% constituted taxable ordinary income dividends and approximately 5.28% constituted
taxable capital gains.
38
Under our revolving credit facility, we are permitted to make distributions to our shareholders not to exceed
95% of our Funds From Operations (“FFO”) provided that no event of default exists. See page 57 for a discussion
of FFO. If an event of default exists, we may only make distributions sufficient to maintain our REIT status.
The Company did not repurchase any of its common shares nor sell any unregistered securities during the
period covered by this report.
39
ITEM 6. SELECTED FINANCIAL DATA
The following tables set forth, on a historical basis, selected financial and operating information. The
financial information has been derived from the consolidated balance sheets and statements of operations of the
Company and the combined statements of operations of the Predecessor. This information should be read in
conjunction with the audited consolidated financial statements of the Company and its Predecessor and
Management’s Discussion and Analysis of Financial Condition and Results of Operations appearing elsewhere
in this Annual Report on Form 10-K.
The Company
The Predecessor
Period
August 16,
2004
through
December 31,
2004
Period
January 1,
2004
through
August 15,
2004
Year Ended
December 31,
2005
Year Ended December 31,
2003
2002
2001
Operating Data:
Revenues:
Rental related revenue and other . . . . . . . . .
Construction and service fees . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
$
Property operating . . . . . . . . . . . . . . . . . . . . . .
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . .
Cost of construction and services . . . . . . . .
Depreciation and amortization . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . .
Loan prepayment penalties and expenses . .
Income tax expense of taxable
REIT subsidiary . . . . . . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest (income) loss . . . . . . . . . . . . .
Equity in earnings of unconsolidated entities
. . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) from continuing operations . . .
Operating income (loss) from
and other, net
discontinued operations . . . . . . . . . . . . . . . . .
Gain on sale of operating property . . . . . . . . .
Limited partners’ interest in
operating partnership . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Income (loss) per common share — basic:
Continuing operations . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . .
Income (loss) per common share — diluted:
Continuing operations . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . .
$
$
$
$
$
72,945
26,420
99,365
12,344
7,459
5,328
21,823
21,791
18,089
—
1,042
87,876
(1,267)
253
10,475
1,078
7,212
(5,329)
13,436
0.35
0.28
0.63
0.35
0.27
0.62
($ in thousands, except share and per share data)
$
19,755
9,334
29,089
$12,935
5,257
18,192
$11,056
14,852
25,908
$ 5,921
22,445
28,366
$ 2,179
8,585
10,764
3,667
1,927
1,781
8,787
7,661
4,449
1,671
4,033
1,409
1,477
4,405
3,270
4,557
—
—
29,943
(126)
—
19,151
215
134
(846)
367
—
164
(580)
388
—
3,603
1,132
2,746
11,536
2,405
3,809
—
—
25,231
(233)
273
717
720
—
2,123
549
1,905
19,509
835
2,206
—
—
27,127
85
1,318
2,642
190
57
1,081
6,437
360
1,249
—
—
9,374
(74)
195
1,511
(404)
—
—
—
147
(332)
—
$ (192)
—
$ 1,437
—
$ 2,238
—
$ 1,511
(0.03)
0.01
(0.02)
(0.03)
0.01
(0.02)
$
$
$
$
$
Weighted average Common Shares
outstanding — basic . . . . . . . . . . . . . . . . . . . .
21,406,980
18,727,977
Weighted average Common Shares
outstanding — diluted . . . . . . . . . . . . . . . . . .
Distributions paid per Common Share . . . . . .
21,520,061
0.75
$
18,727,977
0.09375
$
40
Balance Sheet Data:
Investment properties, net
. . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage and other indebtedness . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Limited partners’ interests in the
operating partnership . . . . . . . . . . . . . . . . . . .
Shareholders’ equity (deficit) . . . . . . . . . . . . . . .
Total liabilities and shareholders’
The Company
The Predecessor
Year Ended December 31,
Year Ended December 31,
2005
2004
2003
2002
2001
($ in thousands)
$738,734
15,209
799,230
375,246
436,106
84,245
278,879
$521,078
10,103
563,544
283,479
336,922
68,423
158,199
$149,346
2,189
171,336
141,498
165,778
$54,022
3,493
71,388
58,711
70,954
$36,673
1,200
49,091
40,540
49,626
—
5,558
—
434
—
(535)
equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . .
799,230
563,544
171,336
71,388
49,091
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in connection with the accompanying historical financial
statements and related notes thereto and the “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 subsidiaries and the Predecessor. Kite Property Group is the
Predecessor to Kite Realty Group Trust.
Overview
We are a full-service, vertically integrated real estate company focused primarily on the development,
construction, acquisition, ownership and operation of high quality neighborhood and community shopping
centers in selected growth markets in the United States. We also provide real estate facility management,
construction, development and other advisory services to third parties.
Kite Realty Group Trust commenced operations on August 16, 2004. Prior to that date, the entities that
owned the properties and service companies that we acquired as part of our formation transactions were under
the common control of Al Kite, John Kite and Paul Kite (the “Principals”). For the purpose of comparing our
operating performance and cash flow results to the same periods of the prior year, we have combined the
Company’s results for the period from August 16, 2004 through December 31, 2004 with the Predecessor’s results
for the period from January 1, 2004 through August 15, 2004.
As of December 31, 2005, we owned interests in a portfolio of 40 operating retail properties totaling
approximately 6.2 million square feet of gross leasable area (including non-owned anchor space) and 14 retail
properties under development that are expected to contain approximately 1.8 million square feet of gross leasable
area (including non-owned anchor space) upon completion. As of December 31, 2005, we also owned interests
in four operating commercial properties totaling approximately 563,000 square feet of net rentable area and a related
parking garage. In addition, at that date we owned interests in land parcels comprising approximately 180 acres
that may be used for expansion of existing properties or future development of new retail or commercial properties.
We derive revenues primarily from rents and reimbursement payments received from tenants under existing
leases at each of our properties. We also derive revenues from providing management, leasing, real estate
development, construction and real estate advisory services through subsidiaries of our taxable REIT
subsidiaries. Our operating results therefore depend materially on the ability of our tenants to make required
payments and overall real estate market conditions.
In the future, we intend to focus on internal growth and pursuing targeted development and acquisitions
of neighborhood and community shopping centers. We expect to incur additional debt in connection with any
future development or acquisitions of real estate.
41
Summary of Critical Accounting Policies
Set forth below is a summary of the accounting policies that management believes are critical to
the preparation of our financial statements. These policies require the application of judgment and assumptions
by management and, as a result, are subject to a degree of uncertainty. Actual results could differ from
these estimates.
Purchase Price Allocation
The purchase price of properties is allocated to tangible and identified intangible assets acquired based on
their fair values in accordance with the provisions of Statement of Financial Accounting Standards No. 141,
“Business Combinations” (“SFAS No. 141”). In making estimates of fair values for the purpose of allocating
purchase price, a number of sources are utilized. We also consider information about each property obtained
as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of
tangible and intangible assets acquired.
A portion of the purchase price is allocated to tangible assets, including:
•
•
•
the fair value of the building on an as-if-vacant basis and to land determined either by real estate tax
assessments, independent appraisals or other relevant data.
above-market and below-market in-place lease values for acquired properties are based on the present
value (using an interest rate which reflects the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii)
management’s estimate of fair market lease rates for the corresponding in-place leases, measured over
the remaining non-cancelable term of the leases. The capitalized above-market and below-market lease
values are amortized as a reduction of or addition to rental income over the remaining non-cancelable
terms of the respective leases. Should a tenant terminate its lease, the unamortized portion of the lease
intangibles would be charged or credited to income.
the value of leases acquired. We utilize independent sources for our estimates to determine the
respective in-place lease values. Our estimates of value are made using methods similar to those used
by independent appraisers. Factors we consider in our analysis include an estimate of costs to execute
similar leases including tenant improvements, leasing commissions and foregone costs and rent
received during the estimated lease-up period as if the space was vacant. The value of in-place leases
is amortized to expense over the remaining initial terms of the respective leases.
We also consider whether a portion of the purchase price should be allocated to in-place leases that have
a related customer relationship intangible value. Characteristics we consider in allocating these values include
the nature and extent of existing business relationships with the tenant, growth prospects for developing new
business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors. To
date, a tenant relationship has not been developed that is considered to have a current intangible value.
Investment Properties
Investment properties are recorded at cost and include costs of acquisitions, development, predevelopment,
construction costs, certain allocated overhead, tenant allowances and improvements, and interest and real estate
taxes incurred during construction. Significant renovations and improvements are capitalized when they extend
the useful life, increase capacity, or improve the efficiency of the asset. Maintenance and repairs that do not extend
the useful lives of the respective assets are reflected in property operating expense.
The Company incurs costs prior to land acquisition including acquisition contract deposits, as well as legal,
engineering and other external professional fees related to evaluating the feasibility of developing a shopping
center. These pre-development costs are included in construction in progress in the accompanying consolidated
balance sheets. If the Company determines that the development of a property is no longer probable, any pre-
development costs previously incurred are immediately expensed.
42
The Company capitalizes costs of properties under development such as construction costs, interest costs,
real estate taxes, salaries and related costs of personnel directly involved in the project and other costs incurred
during the period of development. As a development property becomes operational, the Company expenses
appropriate costs pro rata based on the occupancy of the property. The Company does not capitalize costs on
a project beyond 12 months after substantial completion of the building shell.
In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (“SFAS No. 144”), investment properties
are reviewed for impairment on a property-by-property basis at least annually or whenever events or changes
in circumstances indicate that the carrying value of investment properties may not be recoverable. Impairment
losses for investment properties are recorded when the undiscounted cash flows estimated to be generated by
the investment properties during the expected hold period are less than the carrying amounts of those assets.
Impairment losses are measured as the difference between the carrying value and the fair value of the asset.
In accordance with SFAS No. 144, operating properties held for sale include only those properties available
for immediate sale in their present condition and for which management believes it is probable that a sale of
the property will be completed within one year. Operating properties are carried at the lower of cost or fair value
less costs to sell. Depreciation and amortization are suspended during the held-for-sale period.
The Company’s properties generally have operations and cash flows that can be clearly distinguished from
the rest of the Company. In accordance with SFAS No. 144, the operations reported in discontinued operations
include those operating properties that were sold or were considered held-for-sale and for which operations and
cash flows can be clearly distinguished. The operations from these properties are eliminated from ongoing
operations and the Company will not have a continuing involvement after disposition. Prior periods have been
restated to reflect the operations of these properties as discontinued operations.
Depreciation on buildings and improvements is provided utilizing the straight-line method over estimated
original useful lives ranging from 10 to 35 years. Depreciation on tenant allowances and improvements is
provided utilizing the straight-line method over the term of the related lease. Depreciation on equipment and
fixtures is provided utilizing the straight-line method over 5 to 10 years.
Revenue Recognition
As lessor, we retain substantially all of the risks and benefits of ownership of the investment properties
and account for our leases as operating leases.
Base minimum rents are recognized on a straight-line basis over the terms of the respective leases. Certain
lease agreements contain provisions that grant additional rents based on tenants’ sales volume (contingent
percentage rent). Percentage rents are recognized when tenants achieve the specified targets as defined in their
lease agreements and overage rents are included in other property related revenue in the accompanying
statements of operations.
Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized
as revenues in the period the applicable expense is incurred.
Gains on sales of real estate are recognized in accordance with Statement of Financial Standards
(“SFAS”) No. 66, “Accounting for Real Estate”. In summary, gains from sales are not recognized unless a sale
has been consummated, the buyer’s initial and continuing investment is adequate to demonstrate a commitment
to pay for the property, the Company has transferred to the buyer the usual risks and rewards of ownership, and
the Company does not have a substantial continuing financial involvement in the property.
Development and other advisory services fees are recognized as revenues in the period in which the services
are rendered. Performance-based incentive fees are recorded when the fees are earned.
Revenues from construction contracts are recognized on the percentage-of-completion method, measured
by the percentage of cost incurred to date to the estimated total cost for each contract. Project costs include all
43
direct labor, subcontract, and material costs and those indirect costs related to contract performance costs incurred
to date do not include uninstalled materials. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in job performances, job conditions, and estimated
profitability may result in revisions to costs and income, which are recognized in the period in which the revisions
are determined.
Accounting for Investments in Joint Ventures
In December 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46 (Revised
December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”). FIN 46R replaces
FASB Interpretation No. 46 which was issued in January 2003. FIN 46R explains how to identify variable interest
entities and how to assess whether to consolidate such entities. In general, a variable interest entity (“VIE”) is
a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. Prior to the issuance of FIN 46R, a company generally included
another entity in its consolidated financial statements only if it controlled the entity through voting interests.
FIN 46R changes that by requiring a VIE to be consolidated by a company if that company is subject to a majority
of the risk of loss from the VIE’s activities or entitled to receive a majority of the entity’s residual returns or
both. During 2005, we entered into nine joint venture agreements. Pursuant to the provisions of FIN 46R, all
of these joint ventures have been consolidated in the accompanying financial statements because we control or
the joint venture entities have been deemed to be VIEs and we are the primary beneficiary of the entity.
On March 31, 2004 we consolidated Glendale Mall joint venture as of that date pursuant to FIN 46R. Periods
prior to March 31, 2004 were not restated as a result of the adoption of FIN 46R. As a result of the IPO and
related formation transactions, Glendale Mall is wholly owned.
We account for our investments in unconsolidated joint ventures under the equity method of accounting
as we exercise significant influence over, but do not control, operating and financial policies. These investments
are recorded initially at cost and subsequently adjusted for equity in earnings and cash contributions and
distributions. As of December 31, 2005, we had two entities that were accounted for under the equity method
(Spring Mill Medical and The Centre).
Results of Operations
Comparison of the Year Ended December 31, 2005 to the Year Ended December 31, 2004
Acquisition and Development Activities
The comparability of results of operations is significantly affected by our development and acquisition
activities in 2005 and 2004 and the effects of the IPO and related formation transactions. At December 31, 2005,
we owned interests in 45 operating properties (consisting of 40 retail properties, four commercial operating
properties and a related parking garage) and had 14 properties under development. Of the 59 total properties
held at December 31, 2005, two operating properties (Spring Mill Medical and The Centre) were owned through
joint ventures and accounted for under the equity method.
We acquired and placed in service the following operating properties during the year ended December 31, 2005:
Property Name
Acquisition Date
MSA
Fox Lake Crossing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza Volente . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian River Square . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Bolton Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market Street Village . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fox Lake, IL
Austin, TX
Vero Beach, FL
Jacksonville, FL
Hurst, Texas
February 7
May 16
May 16
November 1
November 17
44
In addition, the following development properties became operational or partially operational during the
year ended December 31, 2005:
Property Name
MSA
Operational Date
Weston Park Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Greyhound Commons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Geist Pavilion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Martinsville Shops . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Red Bank Commons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Traders Point II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indianapolis, IN
Indianapolis, IN
Indianapolis, IN
Martinsville, IN
Evansville, IN
Indianapolis, IN
March 2005
March 2005
March 2005
June 2005
June 2005
June 2005
At December 31, 2004, we owned interests in 36 operating properties (consisting of 30 retail properties,
five commercial properties and a related parking garage) and had nine properties under development. Of the
45 total properties held at December 31, 2004, two operating properties were owned through joint ventures and
were accounted for under the equity method.
We acquired and placed in service the following operating properties during the year ended December 31, 2004:
Property Name
MSA
Acquisition Date
Silver Glen Crossings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cedar Hill Village . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Galleria Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Wal-Mart Plaza(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eagle Creek Pad 2 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fishers Station(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Hamilton Crossing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Waterford Lakes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Publix at Acworth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza at Cedar Hill
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sunland Towne Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centre at Panola . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marsh Supermarket . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eastgate Pavilion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Four Corner Square . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chicago, IL
Dallas, TX
Dallas, TX
Gainesville, FL
Naples, FL
Indianapolis, IN
Indianapolis, IN
Orlando, FL
Atlanta, GA
Dallas, TX
El Paso, TX
Atlanta, GA
Indianapolis, IN
Cincinnati, OH
Seattle, WA
April 1
June 28
June 29
July 1
July 7
July 23
August 19
August 20
August 20
August 31
September 16
September 30
November 24
December 1
December 20
(1)
(2)
This property is owned through a joint venture with a third party. We currently receive 85% of the cash flow from this property,
which percentage may decrease under certain circumstances.
This property is owned through a joint venture with a third party. The joint venture partner is entitled to an annual preferred
payment of $96,000. All remaining cash flow is allocated to us.
The following development properties became operational during the year ended December 31, 2004:
Property Name
MSA
Operational Date
Boulevard Crossing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Circuit City Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50th & 12th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
176th & Meridian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Traders Point
Cool Creek Commons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82nd & Otty . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana State Motor Pool
Kokomo, IN
Ft. Lauderdale, FL
Seattle, WA
Seattle, WA
Indianapolis, IN
Indianapolis, IN
Portland, OR
Indianapolis, IN
February
March
August
August
October
October
November
November
45
Glendale Mall was consolidated on March 31, 2004 in accordance with the provisions of FIN 46R.
Previously, it had been accounted for under the equity method. In connection with our IPO, we acquired the
remaining joint venture and outside partner interests in a total of nine properties, including Glendale Mall. As
a result, these properties are now consolidated in the accompanying financial statements.
Comparison of Operating Results for the Years Ended December 31, 2005 and 2004
The following table reflects key line items from our consolidated and combined statements of operations
for the years ended December 31, 2005 and 2004:
The Company
Combined
The Company and
The Predecessor
Year Ended December 31,
2005
2004
Increase (Decrease)
2004 to 2005
Rental income (including tenant reimbursements) . .
Other property related revenue . . . . . . . . . . . . . . . . . . .
Construction and service fee revenue . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operating expense . . . . . . . . . . . . . . . . . . . . . .
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of construction and services . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . .
General, administrative, and other
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan prepayment penalties and expenses . . . . . . . .
Income tax expense of taxable REIT subsidiary . .
Minority interest (income) loss . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated entities . . . .
Operating income from discontinued operations .
Gain on sale of operating property . . . . . . . . . . . . . . .
Limited Partners’ interest in
$66,936,189
5,793,443
26,419,801
215,422
12,343,345
7,458,563
21,823,278
5,327,735
21,791,136
30,620,798
18,089,421
—
1,041,463
(1,267,122)
252,511
1,077,433
7,212,402
$29,088,083
3,460,759
14,591,069
141,265
7,699,816
3,336,110
13,192,159
3,257,691
10,931,639
8,863,761
9,006,169
1,671,449
—
89,087
297,901
755,199
—
$37,848,106
2,332,684
11,828,732
74,157
4,643,529
4,122,453
8,631,119
2,070,044
10,859,497
21,757,037
9,083,252
(1,671,449)
1,041,463
(1,356,209)
(45,390)
322,234
7,212,402
Operating Partnership . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
(5,329,298)
$13,435,840
146,968
$ (524,702)
(5,476,266)
$13,960,542
130%
67%
81%
52%
60%
124%
65%
64%
99%
101%
–100%
—
—
–15%
43%
—
—
Revenues:
Rental income (including tenant reimbursements) increased from $29.1 million in 2004 to $66.9 million
in 2005, an increase of $37.8 million or 130%. Approximately $23.3 million of this increase was attributable
to properties acquired in 2004 and 2005, approximately $10.5 million of the increase was due to properties that
opened in 2004 or 2005, approximately $0.3 million was due to the consolidation of Glendale Mall as of
March 31, 2004, approximately $3.0 million was attributable to the consolidation of properties following our
acquisition of the joint venture partners’ interests in connection with our IPO and related formation transactions,
approximately $0.4 million was attributable to properties operating for all of 2005 and 2004 and approximately
$0.3 million was due to the conversion of the contractual arrangement at the Union Station Parking Garage from
a daily fee arrangement to a net lease.
Other property related revenue primarily consists of parking revenues, lease settlement income and gains
on land sales before income taxes and minority interests. This category increased from $3.5 million in 2004 to
$5.8 million in 2005, an increase of $2.3 million or 67%. This increase was attributable to incremental 2005
gains on the sale of land parcels and related development rights of approximately $2.5 million and lease
termination and other revenue of $0.1 million, partially offset by a reduction of approximately $0.4 million due
46
to the conversion of the contractual arrangement at the Union Station Parking Garage from a daily fee
arrangement to a net lease.
Construction revenue and service fees increased from $14.6 million in 2004 to $26.4 million in 2005, an
increase of $11.8 million or 81%. Approximately $5.6 million of the increase reflects proceeds from the sale
of a Walgreen’s as part of our merchant building activity, approximately $5.6 of the increase is due to increases
in construction contracts with third parties and approximately $1.3 million represents an increase is fee income
ancillary to our development activities. This increase was partially offset by a decline in advisory fees of
approximately $0.7 million.
Expenses:
Property operating expenses increased from $7.7 million in 2004 to $12.3 million in 2005, an increase of
$4.6 million or 60%. Approximately $3.1 million of this increase was attributable to properties acquired in 2004
and 2005, approximately $1.0 million was due to properties opened in 2004 or 2005, approximately $0.4 million
was due to the consolidation of the Glendale Mall property as of March 31, 2004 and approximately $0.2 million
of the increase was due to the consolidation of properties following our acquisition of the joint venture partners’
interests in connection with our IPO and related formation transactions. Offsetting these increases was a decrease
of approximately $0.2 million due to the conversion of the contractual arrangement at the Union Station Parking
Garage from a daily fee arrangement to a net lease.
Real estate taxes increased from $3.3 million in 2004 to $7.4 million in 2005, an increase of $4.1 million
or 124%. Approximately $3.2 million of this increase was attributable to properties acquired in 2004 and 2005,
approximately $0.9 million was attributable to properties that opened in 2004 or 2005, approximately
$0.3 million was due to the consolidation of properties following our acquisition of the joint venture partners’
interests in connection with our IPO and related formation transactions and approximately $0.1 million was
attributable to properties operating for all of 2005 and 2004. Offsetting the increases was a decrease of
approximately $0.4 million at Glendale Mall from a successful property tax appeal at this property.
Cost of construction and services increased from $13.2 million in 2004 to $21.8 million in 2005, an increase
of $8.6 million or 65%. Approximately $4.1 million of this increase was attributable to costs associated with
the sale of a Walgreen’s as part of our merchant building activity. The remaining increase of approximately
$4.5 million was largely due to an increase in construction contracts with third-party customers.
General, administrative and other expense increased from $3.3 million in 2004 to $5.3 million in 2005,
an increase of $2.0 million or 64%. Approximately $1.5 million of this increase is attributable to incremental
costs of operating as a public company and approximately $0.6 million is attributable to the growth in our
company, resulting in increased salaries, benefits and related costs.
Depreciation and amortization increased from $10.9 million in 2004 to $21.8 million in 2005, an increase
of $10.9 million or 99%. Approximately $7.6 million of the increase was attributable to properties acquired in
2004 and 2005, approximately $2.4 million is attributable to properties that opened in 2004 or 2005, $0.9 million
was due to the consolidation of properties following our acquisition of the joint venture and minority partners’
interests in connection with our IPO and related formation transactions, and $0.1 million was attributable to
properties that were operating for all of 2005 and 2004.
Interest expense increased from $9.0 million in 2004 to $18.1 million in 2005, an increase of $9.1 million,
or 101%. Approximately $4.6 million was attributable to properties that opened in 2004 or 2005, approximately
$3.9 million was due to increased borrowings on our line of credit used primarily to finance property acquisition
activities, approximately $3.0 million of the increase was attributable to properties acquired in 2004 and 2005,
approximately $1.1 million was due to the consolidation of properties following our acquisition of the joint
venture partners’ interests in connection with our IPO and related formation transactions, and approximately
$0.2 million was due to the consolidation of the Glendale Mall property as of March 31, 2004. Offsetting these
increases was a reduction of interest expense of approximately $3.9 million from the payoff of indebtedness
in connection with our IPO and 2005 Offering.
47
Loan prepayment penalties and related expenses of approximately $1.7 million were incurred in 2004 in
connection with our IPO and related formation transactions.
Minority interest was income of approximately $1.3 million in 2005 and a loss of approximately $0.1 million
in 2004. The 2005 income is largely attributable to gains on the sale of land parcels and development fees. The
2004 loss is attributable to certain minority interests acquired in connection with our 2004 IPO and related
formation transactions. These interests recognized a loss of $0.1 million in 2004 prior to the date of our IPO
and were consolidated from the date of their acquisition.
Operating income from discontinued operations was $1.1 million in 2005 and $0.8 million in 2004. This
activity relates to the Mid-America Clinical Labs property that we sold on December 30, 2005. All periods have
been restated to reflect the effects of this transaction. The increase between years is attributable to the reduction
in interest expense from the payoff of indebtedness in connection with our IPO and related formation transactions.
Gain on sale of operating property was $7.2 million in 2005. In December, we sold the Mid-America Clinical
Labs property in a like-kind exchange under Section 1031 of the Internal Revenue Code.
Comparison of the Year Ended December 31, 2004 to the Year Ended December 31, 2003
Acquisition and Development Activities
The comparability of our results of operations is significantly affected by our development, redevelopment
and acquisition activities in 2004 and 2003. At December 31, 2004 we owned interests in 36 operating properties
(consisting of 30 retail properties, five commercial operating properties and a related parking garage) and had
nine properties under development. Of the 45 total properties held at December 31, 2004, two development
properties were owned through joint ventures and accounted for under the equity method. On March 13, 2003,
we acquired and placed in service Ridge Plaza Shopping Center; on June 10, 2003, we acquired and placed in
service King’s Lake Shopping Center; and on July 8, 2003 we acquired and placed in service Shops at Eagle
Creek. In December 2004, PEN Products became operational.
At December 31, 2003, we owned interests in 17 operating properties (consisting of 12 retail properties
and four commercial properties and a related parking garage) and had 13 properties under development. Of the
30 total properties held at December 31, 2003, seven operating properties and two development properties were
owned through joint ventures and accounted for under the equity method.
In 2003, four significant development and redevelopment properties were completed. Mid-America Clinical
Labs opened in October, Spring Mill Medical (a joint venture) opened in September, Preston Commons opened
in July and Thirty South opened in April.
48
Comparison of Operating Results for the Years Ended December 31, 2004 and 2003
The following table reflects key line items from our consolidated and combined statements of operations
for the years ended December 31, 2004 and 2003:
Combined
The Company and
The Predecessor
The Predecessor
Year Ended December 31,
2003
2004
Increase (Decrease)
2003 to 2004
Rental income (including tenant reimbursements) . .
Other property related revenue . . . . . . . . . . . . . . . . . . .
Construction and service fee revenue . . . . . . . . . . . .
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operating expense . . . . . . . . . . . . . . . . . . . . . .
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of construction and services . . . . . . . . . . . . . . . .
General, administrative, and other
. . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan prepayment penalties and expenses . . . . . . . .
Income tax expense of taxable REIT subsidiary . .
Minority interest (income) loss . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated entities . . . .
Operating income from discontinued operations . .
Gain on sale of operating property . . . . . . . . . . . . . . .
Limited Partners’ interest in
Operating Partnership . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss)
$29,088,083
3,460,759
14,591,069
141,265
7,699,816
3,336,110
13,192,159
3,257,691
10,931,639
8,863,761
9,006,169
1,671,449
—
89,087
297,901
755,199
—
$ 9,394,529
1,511,914
14,851,925
149,930
3,603,094
1,131,404
11,536,538
2,745,657
2,405,507
4,486,098
3,808,921
—
—
(232,819)
273,118
719,490
—
210%
129%
–2%
–6%
114%
195%
14%
19%
354%
$19,693,554
1,948,845
(260,856)
(8,665)
4,096,722
2,204,706
1,655,621
512,034
8,526,132
4,377,663
5,197,248
1,671,449 —
— —
321,906 —
24,783
35,709 —
— —
136%
9%
146,968
$ (524,702)
—
$ 1,436,966
146,968 —
$ (1,961,668)
Revenues:
Rental income (including tenant reimbursements) increased from $9.4 million in 2003 to $29.1 million in
2004, an increase of $19.7 million or 210%. Approximately $14.1 million of this increase was attributable to
properties acquired in 2003 and 2004 or opened in 2004, approximately $2.9 million was due to the consolidation
of Glendale Mall as of March 31, 2004, approximately $1.8 million was attributable to the consolidation of
properties following our acquisition of the joint venture partners’ interests in connection with our IPO and related
formation transactions, and approximately $0.9 million was attributable to properties that became operational
in 2003 and, therefore, had a full year of rental income in 2004.
Other property related revenue primarily consists of parking revenues, lease settlement income and gains
on land sales. This category increased from $1.5 million in 2003 to $3.4 million in 2004, an increase of
$1.9 million or 129%. This increase was largely due to gains on the sale of two land parcels in 2004 totaling
$1.5 million, along with overage rent of $0.3 million recorded for a property acquired in 2004 and an increase
in lease termination income of $0.3 million.
Construction revenue and service fees decreased from $14.9 million in 2003 to $14.6 million in 2004, a
decrease of $0.3 million or 2.0%. This decrease is due to a decline in advisory fees of approximately $1.0 million
offset by an increase of $0.7 million in construction contracts with third-party customers.
49
Expenses:
Property operating expenses increased from $3.6 million in 2003 to $7.7 million in 2004, an increase of
$4.1 million or 114%. Approximately $2.5 million of this increase was attributable to properties acquired in 2003
and 2004 or opened in 2004, $1.7 million was due to the consolidation of the Glendale Mall property as of
March 31, 2004, and $0.2 million was due to the consolidation of properties following our acquisition of the
joint venture partners’ interests in connection with our IPO and related formation transactions. Offsetting these
increases was a decrease of approximately $0.2 million due to the conversion of the contractual arrangement
at the Union Station Parking Garage from a daily fee arrangement to a net lease.
Real estate taxes increased from $1.1 million in 2003 to $3.3 million in 2004, an increase of $2.2 million
or 195%. Approximately $1.7 million of this increase was attributable to properties acquired in 2003 or opened
in 2004, $0.2 million was due to the consolidation of the Glendale Mall property as of March 31, 2004 and
$0.2 million was attributable to properties that became operational in 2003 and, therefore, had a full year of real
estate tax expense in 2004.
Cost of construction and services increased from $11.5 million in 2003 to $13.2 million in 2004, an increase
of $1.7 million or 14%. Approximately $0.9 million of this increase was due to an increase in construction
contracts with third-party customers. Approximately $0.8 million of the increase is due to higher costs in support
of the Company’s advisory services businesses.
General, administrative and other expense increased from $2.7 million in 2003 to $3.2 million in
2004, an increase of $0.5 million or 19%. This increase is primarily due to incremental costs of operating as
a public company.
Depreciation and amortization increased from $2.4 million in 2003 to $10.9 million in 2004, an increase
of $8.5 million or 354%. Approximately $3.9 million of the increase was attributable to properties acquired in
2003 and 2004 or opened in 2004, approximately $3.2 million was due to the consolidation of the Glendale Mall
property as of March 31, 2004, $0.8 million was due to the consolidation of properties following our acquisition
of the joint venture and minority partners’ interests in connection with our IPO and related formation transactions,
and $0.2 million was attributable to properties that became operational in 2003 and, therefore, had a full year
of depreciation and amortization expense in 2004.
Interest expense increased from $3.8 million in 2003 to $9.0 million in 2004, an increase of $5.2 million,
or 136%. Approximately $2.4 million of the increase was attributable to properties acquired in 2003 and 2004
or opened in 2004, approximately $0.6 million was attributable to incremental financing costs in connection with
our IPO and related formation transactions, approximately $0.6 million was due to the consolidation of properties
following our acquisition of the joint venture partners’ interests in connection with our IPO and related formation
transactions, approximately $0.6 million was due to increased borrowings on our line of credit used primarily
to finance property acquisition activities, approximately $0.5 million was due to the consolidation of the Glendale
Mall property as of March 31, 2004 and approximately $0.1 million was attributable to properties that became
operational in 2003 and, therefore, had a full year of interest expense in 2004
Loan prepayment penalties and related expenses of approximately $1.7 million were incurred in 2004 in
connection with our IPO and related formation transactions.
Minority interest was a loss of approximately $0.1 million in 2004 and income of approximately $0.2 million
in 2003. The 2004 loss is attributable to certain minority interests acquired in connection with our 2004 IPO
and related formation transactions. These interests recognized a loss of $0.1 million in 2004 prior to the date
of our IPO and were consolidated from the date of their acquisition.
Operating income from discontinued operations was $0.8 million in 2004 and $0.7 million in 2003. This
activity relates to the Mid-America Clinical Labs property that we sold on December 30, 2005. All periods have
been restated to reflect the effects of this transaction.
50
Liquidity and Capital Resources
As of December 31, 2005, we had cash and cash equivalents on hand of $15.2 million.
As of December 31, 2005, our borrowing base under the revolving credit facility was approximately
$117.1 million, of which approximately $24.1 million was available for additional borrowings. With the prior
consent of the lenders we have the option to increase our borrowings under the credit facility to a maximum
of $250 million. We may also extend the facility for one year, provided that no events of default exist and subject
to an extension fee of $300,000. Borrowings under the credit facility bear interest at a floating rate of LIBOR
plus 135 to 160 basis points, depending on our leverage ratio. As of December 31, 2005, there are 32 properties
available to be added to the borrowing base (upon completion of the lender’s due diligence process) as additional
funds are required for potential additional borrowing capacity in excess of $150 million.
Our ability to borrow under this credit facility is subject to our ongoing compliance with a number of
financial and other covenants, including with respect to our amount of leverage, minimum interest and fixed
charge coverage ratios, our minimum tangible net worth, the collateral pool properties generating sufficient net
operating income to maintain a certain fixed charge ratio and minimum aggregate occupancy rate. Under the
terms of the credit facility, we are permitted to make distributions to our shareholders of up to 95% of our funds
from operations provided that no event of default exists. If an even of default exists, we may only make
distributions sufficient to maintain our REIT status. As of December 31, 2005, we were in compliance with all
of the financial covenants under the credit facility.
In October 2005, we completed an offering of common shares that provided us with an aggregate of
approximately $133.2 million of net proceeds (including the underwriters’ exercise of their overallotment option
and after deducting underwriting discounts, commissions and other expenses). We used approximately
$112.9 million of these net proceeds to pay down outstanding indebtedness. As a result, we believe that our
balance sheet has been significantly improved, and additional amounts are available for future borrowing to fund
acquisitions and development of properties and other cash needs. As a result of the paydown of debt in connection
with our October 2005 offering, our Traders Point, Eagle Creek Phase II, Weston Park, Shops at Otty, and Circuit
City properties were available to be added to the borrowing base. We also used approximately $14.0 million
of the net proceeds to acquire Bolton Plaza and approximately $6.3 for general corporate purposes, including
acquisition of land, capital expenditures, development costs and working capital.
The nature of our business, coupled with the requirements for qualifying for REIT status (which includes
the requirement that we distribute to shareholders at least 90% of our annual REIT taxable income) and to avoid
paying tax on our income, necessitate that we distribute a substantial majority of our income on an annual basis
which will cause us to have substantial liquidity needs over both the short term and the long term. Our short-term
liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating
properties, interest expense and scheduled principal payments on our debt, expected dividend payments
(including distributions to persons who hold units in our operating partnership) and recurring capital
expenditures. When we lease space to new tenants, or renew leases for existing tenants, we also incur
expenditures for tenant improvements and leasing commissions. This amount, as well as the amount of recurring
capital expenditures that we incur, will vary from year to year. During 2005, we incurred approximately
$0.5 million of costs for recurring capital expenditures and $1.6 million of costs for tenant improvements and
leasing commissions, all exclusive of amounts incurred under construction loans or our revolving credit facility
for our development properties. We expect to meet our short-term liquidity needs through cash generated from
operations and, to the extent necessary, borrowings under the revolving credit facility.
Our long-term liquidity needs consist primarily of funds necessary to pay for development of new
properties, redevelopment of existing properties, non-recurring capital expenditures, acquisitions of properties
and payment of indebtedness at maturity. As of December 31, 2005, we have 14 development projects underway
that are expected to cost approximately $176 million, of which approximately $108 million had been incurred
as of December 31, 2005. In addition, we are actively pursuing the acquisition and development of other
properties, which will require additional capital. We do not expect that we will have sufficient funds on hand
51
to meet these long-term cash requirements. We will have to satisfy these needs through either additional
borrowings, sales of common or preferred shares and/or cash generated through property dispositions and joint
venture transactions.
We believe that we will have access to these sources of capital to fund our long-term liquidity requirements
but we cannot assure that this will be the case. Our ability to access the equity capital markets will be dependent
on a number of factors as well, including general market conditions for REITs and market perceptions about us.
We use derivatives to add stability to interest expense and to manage our exposure to interest rate movements
and other identified risks. To accomplish this objective, we use interest rate swaps as part of our cash flow hedging
strategy. Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in
exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal
amount. During 2005, such derivatives were used to hedge the variable cash flows associated with certain of
our existing variable-rate debt.
We derive the majority of our revenue from tenants who lease space from us at our properties. Therefore,
our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from
our tenants. While we believe that the nature of the properties in which we typically invest — primarily
neighborhood and community shopping centers — provides a relatively stable revenue flow in uncertain
economic times, general economic downturns or downturns in the markets in which we own properties may still
adversely affect the ability of our tenants to meet their lease obligations. In that event, our cash flow from
operations could be materially affected.
In January 2005, Ultimate Electronics filed for Chapter 11 bankruptcy protection to reorganize its business
operations. During the second quarter of 2005 this tenant rejected its leases with us at Galleria Plaza and at Cedar
Hill Plaza. During the third quarter of 2005, we re-leased the former Ultimate Electronics spaces at Galleria
Plaza to Shoe Pavilion and at Cedar Hill Village to 24 Hour Fitness. These two leases represent a total of
approximately 64,000 square feet. We anticipate that both tenants will open in the spring of 2006. We anticipate
investing approximately $1.9 million in tenant improvements in connection with re-leasing these spaces.
In February 2005, Winn-Dixie Stores, Inc. filed for Chapter 11 bankruptcy protection to reorganize its
business operations. This tenant operates in two locations in our portfolio (Shops at Eagle Creek and Waterford
Lakes) totaling approximately 103,400 square feet at an average base rent of $7.80 per square foot, representing
approximately 1.4% of our total annualized base rent as of December 31, 2005. The tenant continues to operate
in both locations and has paid base rent (excluding a portion of common area maintenance and real estate tax
reimbursements) through March 2006 but there can be no assurance of its ability to pay rent prospectively. On
February 28, 2006, Winn-Dixie announced plans to close its store at Shops at Eagle Creek but had not at that
date rejected the lease at this property. The store at Shops at Eagle Creek contains approximately 51,700 square
feet leased to Winn-Dixie at a base rent of $7.69 per square foot. In its announcement, Winn-Dixie included
its store at Waterford Lakes in its list of stores that it intended to retain as of that date.
The delay or failure of Winn-Dixie to make payments under its leases or its rejection of both of the leases
under federal bankruptcy laws could affect our short-term liquidity in the event we are not able to timely identify
a replacement tenant. In addition, Winn-Dixie’s termination of leases or closure of stores could result in lease
terminations or reductions in rent by other tenants in the same shopping centers under the terms of some leases.
Our Glendale Mall property in Indianapolis, Indiana has an annualized base rent of approximately
$2.5 million as of December 31, 2005, or approximately 4.2% of our total annualized base rent. As of
December 31, 2005, Glendale Mall was approximately 81% leased. We are currently evaluating several strategic
alternatives with respect to this property including continuing to lease space in its current configuration and the
possibility of redeveloping or selling the property.
See Item 7A. for a discussion of the impact of inflation on the Company.
52
Cash Flows
Comparison of the Year Ended December 31, 2005 to the Year Ended December 31, 2004
Cash provided by operating activities was $23.5 million for the year ended December 31, 2005, an increase
of $10.6 million over 2004. The increase resulted largely from the addition of eleven operating properties
subsequent to our IPO and was partially offset by cash used through changes in deferred costs and other assets
of $5.5 million, tenant receivables of $2.7 million, and accounts payables and accrued expenses of $2.0 million.
Cash used in our investing activities totaled $206.0 million in 2005, a decrease of $21.9 million from 2004.
We invested $50.4 million and $66.8 million in our development properties in 2005 and 2004, respectively.
During 2005, we acquired five operating properties and various development land parcels for a total net purchase
price of $178.5 million while during 2004 we acquired 15 properties and two land parcels for a total net purchase
price of approximately $155.6 million. In 2004, we also acquired remaining joint venture and outside minority
interests for approximately $12.5 million.
Cash provided by financing activities totaled $187.6 million during 2005, a decrease of $35.3 million from
2004. We had offerings of common shares in both years, raising $133.2 million and $215.5 million in 2005 and
2004, respectively after offering costs. Loan proceeds (net of transaction costs and principal payments) increased
$53.2 million between years. Net loan proceeds were primarily used to finance acquisition and development
activity. We made net distributions to shareholders and unitholders of $22.3 million and $2.6 million in 2005
and 2004, respectively. We also made net distributions in 2004 to the Principals of the Predecessor of $8.1 million.
Comparison of the Year Ended December 31, 2004 to the Year Ended December 31, 2003
Cash provided by operating activities was $12.9 million for the year ended December 31, 2004, an increase
of $7.6 million over 2003. The increase is largely due to cash generated by 18 properties we acquired in 2003
and 2004 of approximately $6.8 million, partially offset by changes in tenant receivables, deferred costs and
other assets and accounts payable and accrued expenses.
Cash used in our investing activities totaled $227.9 million in 2004, an increase of $134.5 million over
2003. During 2004, we acquired 15 properties for a net purchase price of approximately $155.6 million and we
acquired remaining joint venture and outside minority interests for approximately $12.5 million. In addition we
invested approximately $66.8 million in our development properties.
Cash provided by financing activities totaled $222.8 million during 2004, an increase of $136.1 million
from 2003. This cash flow includes $206.3 million in loan proceeds (net of transaction costs), less debt payments
of $186.2 million. We received net proceeds from our IPO of approximately $215.5 million. These proceeds
were used to prepay outstanding indebtedness secured by 13 properties of approximately $100 million, acquire
four properties that were under contract at the date of our IPO for $45 million, repay the credit facility provided
by Lehman Brothers of $48 million, acquire the remaining joint venture and outside minority interests in nine
properties and repay outstanding indebtedness to the Principals. Loan proceeds increased from $112.7 million
in 2003 to $212.3 million in 2004. These proceeds were primarily used to finance acquisition and development
activity. We made net distributions (including minority interest partners) in 2004 of $8.1 million compared to
net contributions of $4.7 million in 2003.
Off-Balance Sheet Arrangements
We do not currently have any off-balance sheet arrangements, other than operating leases, that have, or
are reasonably likely to have, a material current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
Joint venture debt is the liability of the joint venture and is typically secured by the joint venture property
and has limited recourse to us. As of December 31, 2005, our share of joint venture indebtedness was $8.6 million.
53
Contractual Obligations
The following table summarizes our contractual obligations to third parties, excluding interest, as of
December 31, 2005:
Construction
Contracts
Tenant
Improvements
Operating
Leases
Consolidated
Long-term
Debt
Pro rata
Share of
Joint Venture
Debt
Employment
Contracts(1)
Total
2006 . . . . . . . . . . . . . . . . . . . . . . $37,562,133
—
2007 . . . . . . . . . . . . . . . . . . . . . .
—
2008 . . . . . . . . . . . . . . . . . . . . . .
—
2009 . . . . . . . . . . . . . . . . . . . . . .
—
2010 . . . . . . . . . . . . . . . . . . . . . .
—
Thereafter . . . . . . . . . . . . . . . . . .
—
Unamortized Debt Premiums . . .
$
856,800 $ 69,405,389
$3,194,257
104,235,904
906,300
—
23,496,307
918,300
—
30,234,040
920,800
—
—
2,810,776
920,800
142,362,219
— 13,208,370
2,701,202
—
—
$ 191,096
204,530
217,800
2,211,916
96,813
5,643,835
—
$1,545,000 $112,754,675
106,891,734
1,545,000
— 24,632,407
— 33,366,756
—
3,828,389
— 161,214,424
2,701,202
—
Total
. . . . . . . . . . . . . . . . . . . . . . $37,562,133
$3,194,257
$17,731,370 $375,245,837
$8,565,990
$3,090,000 $445,389,587
(1)
In connection with the Company’s IPO and related formation transactions, it entered into employment agreements with seven members
of senior management. Under the agreements, each person receives a stipulated annual salary through December 31, 2007. Each
agreement has an automatic one-year renewal unless the Company or the employee elects not to renew the agreement.
In 2005, we incurred $18,089,421 of interest expense, net of amounts capitalized.
We intend to satisfy the approximately $113 million of contractual obligations that are due in 2006 primarily
with cash generated from operations, draws on our line of credit and, where appropriate, refinancing of
indebtedness coming due.
In connection with our formation at the time of our IPO, we entered into an agreement that restricts our
ability, prior to December 31, 2016, to dispose of six of our properties in taxable transactions and limits the
amount of gain we can trigger with respect to certain other properties without incurring reimbursement
obligations owed to certain limited partners. We have agreed that if we dispose of any interest in six specified
properties in a taxable transaction before December 31, 2016, then we will indemnify the contributors of those
properties for their tax liabilities attributable to the built-in gain that exists with respect to such property interest
as of the time of our IPO (and tax liabilities incurred as a result of the reimbursement payment). In December
2005, we sold Mid-America Clinical Labs and acquired Market Street Village in a non-taxable exchange
transaction under Section 1031 of the Internal Revenue Code.
The six properties to which our tax indemnity obligations relate represented approximately 24% of our
annualized base rent in the aggregate as of December 31, 2005. These six properties are International Speedway
Square, Shops at Eagle Creek, Whitehall Pike, Ridge Plaza Shopping Center, Thirty South and Market Street Village.
54
Outstanding Indebtedness
The following table presents details of outstanding indebtedness as of December 31, 2005:
Property
Fixed Rate Debt — Mortgage:
176th & Meridian . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
50th & 12th . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Boulevard Crossing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Centre at Panola Phase I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fox Lake Crossing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indian River Square . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Indiana State Motor Pool . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International Speedway Square . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza at Cedar Hill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Plaza Volente . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Preston Commons
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ridge Plaza Shopping Center
Sunland Towne Center(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
The Corner Shops
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thirty South . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Whitehall Pike . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating Rate Debt — Hedged:
Collateral Pool Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral Pool Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cool Creek Commons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unamortized premium on assumed debt of acquired properties . . . . .
Total Fixed Rate Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Variable Rate Mortgages:
Balance
Outstanding
Interest
Rate
5.67%
5.67%
5.11%
6.78%
5.16%
5.42%
5.38%
7.17%
7.38%
5.42%
5.90%
5.15%
8.85%
7.65%
6.09%
6.71%
5.65%
5.38%
5.59%
$ 4,212,880
4,637,128
12,486,010
4,311,708
12,125,405
13,300,000
4,063,781
19,694,081
26,994,061
28,680,000
4,591,140
16,728,863
17,417,775
1,866,124
22,982,099
9,691,393
203,782,448
35,000,000
15,000,000
15,000,000
65,000,000
2,701,202
271,483,650
Maturity
11/11/2014
11/11/2014
12/11/2009
1/1/2022
7/1/2012
6/11/2015
3/24/2008
3/11/2011
2/1/2012
6/11/2015
3/11/2013
10/11/2009
1/11/2006
7/1/2011
1/11/2014
7/5/2018
8/1/2007
8/1/2007
5/1/2006
Interest
Rate at
12/31/05
Variable Rate Debt — Mortgages:
Fishers Station . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal Mortgage Notes . . . . . . . . . . . . . . . . . . . . . . . . .
Variable Rate Debt — Construction:
Traders Point II
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Geist Pavilion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tarpon Springs Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Estero Towne Centre . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beacon Hill Shopping Center
. . . . . . . . . . . . . . . . . . . . . . .
Cool Creek Commons . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sandifur Plaza . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Naperville Marketplace — Marsh . . . . . . . . . . . . . . . . . . . .
Naperville Marketplace — Shops . . . . . . . . . . . . . . . . . . . .
Red Bank Commons . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Subtotal Construction Notes . . . . . . . . . . . . . . . . . . . . . .
Line of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Floating Rate Debt — Hedged:
Collateral Pool Properties . . . . . . . . . . . . . . . . . . . . . . . . . .
Collateral Pool Properties . . . . . . . . . . . . . . . . . . . . . . . . . .
Cool Creek Commons . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Variable Rate Indebtedness . . . . . . . . . . . . . . . . . . .
Total Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5,159,274
5,159,274
7,595,626
7,761,554
4,747,229
7,804,580
4,110,959
16,894,800
1,219,982
11,622,229
4,470,708
4,425,246
70,652,913
92,950,000
(35,000,000)
(15,000,000)
(15,000,000)
(65,000,000)
103,762,187
$375,245,837
LIBOR+2.75%
9/1/2008
7.136%
LIBOR+1.65%
LIBOR+1.65%
LIBOR+1.75%
LIBOR+1.65%
LIBOR+1.50%
LIBOR+1.75%
LIBOR+1.65%
LIBOR+1.65%
LIBOR+1.75%
LIBOR+1.65%
6/28/2006
4/1/2006
4/1/2008
4/1/2008
9/30/2007
4/30/2006
12/31/2006
6/30/2006
6/30/2007
4/1/2006
6.036%
6.036%
6.636%
6.036%
5.886%
6.136%
6.036%
6.036%
6.136%
6.036%
LIBOR+1.35%
8/31/2007
5.736%
LIBOR+1.35%
LIBOR+1.35%
LIBOR+1.75%
8/31/2007
8/31/2007
4/30/2006
5.736%
5.736%
6.136%
(1) This loan was refinanced subsequent to December 31, 2005 with a bridge loan due April 10, 2006 bearing
an interest rate of LIBOR + 1.85%. We are exploring options to refinance this loan with fixed-rate debt.
55
Funds From Operations
Funds from Operations (“FFO”), is a widely used performance measure for real estate companies and is
provided here as a supplemental measure of operating performance. We calculate FFO in accordance with the
best practices described in the April 2002 National Policy Bulletin of the National Association of Real Estate
Investment Trusts (NAREIT), which we refer to as the White Paper. The White Paper defines FFO as net income
(computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and
amortization, and after adjustments for unconsolidated partnerships and joint ventures.
Given the nature of our business as a real estate owner and operator, we believe that FFO is helpful to
investors as a starting point 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 property and depreciation and amortization, which can make periodic and peer analyses of operating
performance more difficult. FFO should not be considered as an alternative to net income (determined in
accordance with GAAP) as an indicator of our financial performance, is not an alternative to cash flow from
operating activities (determined in accordance with GAAP) as a measure of our liquidity, and is not indicative
of funds available to fund 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 definitions differently than we do.
56
Our calculation of FFO (and reconciliation to net income) is as follows:
Company
Predecessor
Combined
Year Ended
December 31,
2005
August 16,
2004
through
December 31,
2004
January 1,
2004
through
August 15,
2004
January 1,
2004
through
December 31,
2004
$13,435,840
(7,212,402)
5,329,298
$ (332,322)
—
(146,968)
$ (192,380)
—
—
$ (524,702)
—
(146,968)
22,124,355
7,816,339
3,563,176
11,379,515
344,600
—
103,518
(24,106)
493,571
(214,887)
597,089
(238,993)
—
—
—
—
288,675
288,675
519,277
519,277
34,021,691
—
7,416,461
—
4,457,432
214,887
11,873,893
214,887
—
—
— (1,014,248)
(1,014,248)
—
(288,675)
(288,675)
—
(9,629,945)
—
(2,276,853)
(519,277)
—
(519,277)
(2,276,853)
$24,391,746
1.14
$
1.13
$
$ 5,139,608
0.27
$
0.27
$
$ 2,850,119
$ 7,989,727
Funds From Operations:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: gain on sale of operating property . . . . . .
Add Limited Partners’ interests . . . . . . . . . . . . . . .
Add depreciation and amortization of
consolidated entities and discontinued
operations, net of minority interest
Add depreciation and amortization of
. . . . . . . . .
unconsolidated entities . . . . . . . . . . . . . . . . . . . . .
Deduct minority interest* . . . . . . . . . . . . . . . . . . . . .
Add joint venture partners’ interests in net
income of unconsolidated entities* . . . . . . . . .
Add joint venture partners’ interests in
depreciation and amortization of
unconsolidated entities* . . . . . . . . . . . . . . . . . . . .
Funds From Operations of the
Kite Portfolio . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less minority interest . . . . . . . . . . . . . . . . . . . . . . . . .
Less minority interest share of depreciation
and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less joint venture partners’ interests in net
income of unconsolidated entities . . . . . . . . . .
Less joint venture partners’ interests in
depreciation and amortization of
unconsolidated entities . . . . . . . . . . . . . . . . . . . . .
Less Limited Partners’ interests . . . . . . . . . . . . . . .
Funds From Operations allocable to
the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic FFO per Share of the Kite Portfolio . . . .
Diluted FFO per Share of the Kite Portfolio . .
Basic weighted average Common Shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,406,980
18,727,977
Diluted weighted average Common Shares
outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,520,061
18,857,413
Basic weighted average Common Shares and
Units outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . .
29,903,174
27,009,859
Diluted weighted average Common Shares
and Units outstanding . . . . . . . . . . . . . . . . . . . . . .
30,016,255
27,139,295
*
2004 amounts represent the minority and joint venture partners’ interests acquired in connection with the
Company’s initial public offering and related formation transactions.
57
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Our future income, cash flows and fair values relevant to financial instruments depend upon prevailing
interest rates. Market risk refers to the risk of loss from adverse changes in interest rates of debt instruments
of similar maturities and terms.
Market Risk Related to Fixed Rate Debt
We had approximately $375.2 million of outstanding consolidated indebtedness as of December 31, 2005
(inclusive of net premiums on acquired debt of $2.7 million). During 2005, we entered into interest rate swaps
totaling $65 million to hedge variable cash flows associated with existing variable rate debt. Including the effects
of these swaps, our fixed and variable rate debt would have been approximately $268.8 million (72%) and
$103.8 million (28%), respectively, of our total consolidated indebtedness at December 31, 2005. Reflecting our
share of unconsolidated debt, our fixed and variable rate debt is also 72% and 28%, respectively, of total
consolidated and our share of unconsolidated indebtedness at December 31, 2005.
Based on the amount of our fixed rate debt, a 100 basis point increase in market interest rates would result
in a decrease in its fair value of approximately $8.7 million. A 100 basis point decrease in market interest rates
would result in an increase in the fair value of our fixed rate debt of approximately $10.1 million. A 100 basis
point increase or decrease in interest rates on our variable rate debt as of December 31, 2005 would increase
or decrease our annual cash flow by approximately $1.0 million.
As a matter of policy, we do not engage in trading or speculative transactions.
Inflation
Most of our leases contain provisions designed to mitigate the adverse impact of inflation by requiring the
tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and
insurance. This reduces our exposure to increases in costs and operating expenses resulting from inflation.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated and combined financial statements of the Company and its Predecessor, respectively
included in this Report are listed in Part IV, Item 15(a) of this report.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
An evaluation was performed under the supervision and with the participation of the Company’s
management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its
disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and
Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this report.
Based on that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded
that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording,
processing, summarizing and reporting, on a timely basis, information required to be disclosed by the Company
in the reports that it files or submits under the Exchange Act.
Changes in Internal Control Over Financial Reporting
There have been no changes in the Company’s internal control over financial reporting (as such term is
defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the fourth quarter to which this report
58
relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.
Management Report on Internal Control Over Financial Reporting
The Company’s management is responsible for establishing and maintaining adequate internal control over
financial reporting, as that term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision of and
with the participation of our management, including our chief executive officer and chief financial officer, the
Company conducted an evaluation of the effectiveness of the Company’s internal control over financial reporting
based on the framework in Internal Control — Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on the Company’s evaluation under the framework in
Internal Control — Integrated Framework, the Company’s management has concluded that the Company’s
internal control over financial reporting was effective as of December 31, 2005.
The Company’s independent auditors, Ernst & Young, LLP, an independent registered public accounting
firm, have issued a report on management’s assessment of the Company’s internal control over financial reporting
as stated in their report which is included herein.
The Company’s internal control system was designed to provide reasonable assurance to the Company’s
management and Board of Trustees regarding the preparation and fair presentation of published financial
statements. All internal control systems, no matter how well designed, have inherent limitations. Therefore, even
those systems determined to be effective can provide only reasonable assurance with respect to financial
statement preparation and presentation.
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of Kite Realty Group Trust and Subsidiaries:
We have audited management’s assessment, included in the accompanying Management’s Report on
Internal Control Over Financial Reporting included on the previous page of this Form 10-K, that Kite Realty
Group Trust and Subsidiaries maintained effective internal control over financial reporting as of December 31,
2005, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organizations of the Treadway Commission (the COSO criteria). Kite Realty Group Trust’s
management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an
opinion on management’s assessment and an opinion on the effectiveness of the Company’s internal control over
financial reporting based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, evaluating management’s
assessment, testing and evaluating the design and operating effectiveness of internal control, and performing
such other procedures as we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external purposes
in accordance with generally accepted accounting principles. A company’s internal control over financial
reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements
in accordance with generally accepted accounting principles, and that receipts and expenditures of the company
are being made only in accordance with authorizations of management and directors of the company; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or
disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.
In our opinion, management’s assessment that Kite Realty Group Trust and Subsidiaries maintained effective
internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based
on the COSO criteria. Also, in our opinion, Kite Realty Group Trust and Subsidiaries maintained, in all material
respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the consolidated balance sheets of Kite Realty Group Trust and Subsidiaries as of December 31,
2005 and 2004 and Kite Realty Group Trust and Subsidiaries’ consolidated statements of operations, owners’
equity, and cash flows for the year ended December 31, 2005 and for the period from August 16, 2004 through
December 31, 2004, and Kite Property Group’s, see Note 1, combined statements of operations, owners’ equity,
and cash flows from the period January 1, 2004 through August 15, 2004, and for the year ended December 31,
2003 and the related financial statement schedule listed in the Index at Item 15, and our report dated March 15,
2006 expressed an unqualified opinion thereon.
ERNST & YOUNG LLP
Indianapolis, Indiana
March 15, 2006
60
ITEM 9B. OTHER INFORMATION
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
We have adopted a code of ethics that applies to our principal executive officer and senior financial officers,
which is available on our Internet website at: www.kiterealty.com. Any amendment to, or waiver from, a
provision of this code of ethics will be posted on our Internet website.
This information required by this Item is hereby incorporated by reference to the material appearing in our
2006 Annual Meeting Proxy Statement (the “Proxy Statement”), which we intend to file within 120 days after
our fiscal year-end, under the captions “Proposal 1: Election of Trustees”, “Executive Officers”, “Information
Regarding Corporate Governance and Board and Committee Meetings — Board Committees” and “Other
Matters — Section 16(a) Beneficial Ownership Reporting Compliance”.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is hereby incorporated by reference to the material appearing in our
Proxy Statement, under the captions “Executive Compensation and Other Information, “Information Regarding
Corporate Governance and Board and Committee Meetings — Trustee Compensation”, “Compensation
Committee Interlocks and Insider Participation”, “Compensation Committee Report on Executive
Compensation” and “Performance Graph”.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
AND RELATED SHAREHOLDER MATTERS
The information required by this Item is hereby incorporated by reference to the material appearing in our
Proxy Statement, under the captions “Equity Compensation Plan Information” and “Principal Shareholders”.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is hereby incorporated by reference to the material appearing in our
Proxy Statement, under the caption “Certain Relationships and Related Transactions”.
ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
The information required by this Item is hereby incorporated by reference to the material appearing in our
Proxy Statement, under the caption “Proposal 2: Ratification of Appointment of Independent Registered
Accounting Firm — Relationship with Independent Accountants”.
61
PART IV
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULE
(a) Documents filed as part of this report:
(1) Financial Statements:
Consolidated and combined financial statements for the Company and its Predecessor listed on the
index immediately preceeding the financial statements at the end of this report.
(2) Financial Statement Schedule:
Financial statement schedule for the Company listed on the index immediately preceding the financial
statements at the end of this report.
(3) Exhibits:
The Company files as part of this report the exhibits listed on the Exhibit Index.
(b) Exhibits:
The Company files as part of this report the exhibits listed on the Exhibit Index.
(c) Financial Statement Schedule:
The Company files as part of this report the financial statement schedule listed on the index immediately
preceding the financial statements at the end of this report.
62
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
SIGNATURES
March 15, 2006
(Date)
March 15, 2006
(Date)
KITE REALTY GROUP TRUST
(Registrant)
/s/ JOHN A. KITE
John A. Kite
Chief Executive Officer and President
(Principal Executive Officer)
/s/ DANIEL R. SINK
Daniel R. Sink
Chief Financial Officer
(Principal Financial Officer and
Principal Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below
by persons on behalf of the Registrant and in the capacities and on the dates indicated.
Signature
/s/ ALVIN E. KITE, JR.
(Alvin E. Kite, Jr.)
/s/ JOHN A. KITE
(John A. Kite)
/s/ WILLIAM E. BINDLEY
(William E. Bindley)
/s/ RICHARD A. COSIER
(Richard A. Cosier)
/s/ EUGENE GOLUB
(Eugene Golub)
/s/ GERALD L. MOSS
(Gerald L. Moss)
/s/ MICHAEL L. SMITH
(Michael L. Smith)
/s/ DANIEL R. SINK
(Daniel R. Sink)
Date
March 13, 2006
March 15, 2006
March 13, 2006
March 13, 2006
March 13, 2006
March 13, 2006
March 13, 2006
March 15, 2006
Chairman of the Board and Trustee
Title
Chief Executive Officer, President and Trustee
(Principal Executive Officer)
Trustee
Trustee
Trustee
Trustee
Trustee
Senior Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
63
(This page intentionally left blank.)
Kite Realty Group Trust
Index to Financial Statements
Consolidated and Combined Financial Statements:
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance Sheets for the Company as of December 31, 2005 and 2004 . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Operations for the Company for the Year Ended December 31, 2005, the Period
From August 16, 2004 Through December 31, 2004 and for the Predecessor for the Period
From January 1, 2004 Through August 15, 2004 and the Year Ended December 31, 2003 . .
Statements of Owners’ Equity for the Company for the Year Ended December 31, 2005,
the Period From August 16, 2004 Through December 31, 2004 and for the Predecessor
for the Period From January 1, 2004 Through August 15, 2004 and the Year Ended
December 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Statements of Cash Flows for the Company for the Year Ended December 31, 2005,
the Period From August 16, 2004 Through December 31, 2004 and for the Predecessor
for the Period From January 1, 2004 Through August 15, 2004 and the Year Ended
December 31, 2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated and Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Page
F-2
F-3
F-4
F-5
F-6
F-7
Financial Statement Schedule:
Schedule III — Real Estate and Accumulated Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Schedule III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-35
F-38
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees and Shareholders of Kite Realty Group Trust and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Kite Realty Group Trust and Subsidiaries
(the “Company”) as of December 31, 2005 and 2004 and the Company’s consolidated statements of operations,
owners’ equity, and cash flows for the year ended December 31, 2005 and for the period from August 16, 2004
through December 31, 2004, and Kite Property Group’s (the “Predecessor”), as defined in Note 1, combined
statements of operations, owners’ equity, and cash flows from the period January 1, 2004 through August 15, 2004,
and for the year ended December 31, 2003. Our audits also included the financial statement schedule listed in the
Index at Item 15. These financial statements and schedule are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements and schedule based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An audit also includes examining, on
a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the
consolidated financial position of the Company at December 31, 2005 and 2004 and the Company’s consolidated
results of operations and cash flows for the year ended December 31, 2005 and for the period from August 16,
2004 through December 31, 2004 and the Predecessor’s combined results of operations and cash flows for the
period from January 1, 2004 through August 15, 2004 and for the year ended December 31, 2003, in conformity
with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken as a whole, presents fairly in all material
respects the information set forth therein.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board
(United States), the effectiveness of Kite Realty Group Trust and Subsidiaries’ internal control over financial
reporting as of December 31, 2005, based on criteria established in Internal Control-Integrated Framework issued
by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated March 15,
2006, expressed an unqualified opinion thereon.
Indianapolis, Indiana
March 15, 2006
Ernst & Young LLP
F-2
KITE REALTY GROUP TRUST
CONSOLIDATED BALANCE SHEETS
Assets:
Investment properties, at cost:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Land held for development
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture, equipment and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction in progress . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tenant receivables, including accrued straight-line rent, net of
allowance for bad debts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investments in unconsolidated entities, at equity . . . . . . . . . . . . . . . . . . . . . .
Escrow deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and Shareholders’ Equity:
Mortgage and other indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash distributions and losses in excess of net investment in
unconsolidated entities, at equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Commitments and contingencies
Limited Partners’ interests in operating partnership . . . . . . . . . . . . . . . . . . .
Shareholders’ Equity:
Preferred Shares, $.01 par value, 40,000,000 shares authorized,
December 31,
2005
December 31,
2004
$172,509,684
51,340,820
485,129,649
5,675,980
65,903,868
780,560,001
(41,825,911)
738,734,090
15,208,835
11,302,923
6,082,511
1,303,919
6,718,198
17,380,288
2,499,042
$799,229,806
$115,806,345
10,454,246
365,043,023
5,587,052
48,321,482
545,212,148
(24,133,716)
521,078,432
10,103,176
5,763,831
5,588,053
155,495
4,497,337
15,264,271
1,093,176
$563,543,771
$375,245,837
$283,479,363
—
30,642,822
25,369,152
4,847,801
436,105,612
837,083
23,919,949
28,625,368
59,735
336,921,498
84,244,814
68,423,213
no shares issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common Shares, $.01 par value, 200,000,000 shares authorized,
28,555,187 shares and 19,148,267 shares issued and outstanding
at December 31, 2005 and 2004, respectively . . . . . . . . . . . . . . . . . . . . . .
Additional paid in capital and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities and Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . .
285,552
288,976,563
(808,015)
427,057
(10,001,777)
278,879,380
$799,229,806
191,483
164,532,228
(806,879)
—
(5,717,772)
158,199,060
$563,543,771
The accompanying notes are an integral part of these consolidated financial statements.
F-3
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
The Company
The Predecessor
Year Ended
December 31,
2005
Period
August 16,
2004 through
December 31, 2004
Period
January 1,
2004 through
August 15, 2004
Year Ended
December 31,
2003
Revenue:
Minimum rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tenant reimbursements . . . . . . . . . . . . . . . . . . . . . . . .
Other property related revenue . . . . . . . . . . . . . . . . .
Construction and service fee revenue . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other income, net
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$54,984,632
11,951,557
5,793,443
26,419,801
215,422
$15,000,146
2,637,230
2,087,256
9,333,868
30,446
$ 9,788,131
1,662,576
1,373,503
5,257,201
110,819
$ 8,194,644
1,199,885
1,511,914
14,851,925
149,930
99,364,855
29,088,946
18,192,230
25,908,298
Expenses:
Property operating . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of construction and services . . . . . . . . . . . . . .
General, administrative, and other . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan prepayment penalties and expenses . . . . . . .
Income tax expense of taxable REIT subsidiary .
Minority interest (income) loss . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated entities . . . .
Income (loss) from continuing operations . . . . . . .
Operating income from discontinued operations .
Gain on sale of operating property . . . . . . . . . . . . .
Limited Partners’ interest in operating
12,343,345
7,458,563
21,823,278
5,327,735
21,791,136
68,744,057
30,620,798
18,089,421
—
1,041,463
(1,267,122)
252,511
10,475,303
1,077,433
7,212,402
3,666,845
1,927,252
8,786,997
1,780,579
7,661,113
4,032,971
1,408,858
4,405,162
1,477,112
3,270,526
3,603,094
1,131,404
11,536,538
2,745,657
2,405,507
23,822,786
14,594,629
21,422,200
5,266,160
4,449,268
1,671,449
—
(125,800)
134,097
(846,260)
366,970
—
3,597,601
4,556,901
—
—
214,887
163,804
(580,609)
388,229
—
4,486,098
3,808,921
—
—
(232,819)
273,118
717,476
719,490
—
partnership . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5,329,298)
146,968
—
—
Net income (loss)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$13,435,840
$ (332,322)
$ (192,380)
$ 1,436,966
Income (loss) per common share — basic:
Continuing operations . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . .
Income (loss) per common share — diluted: . . . .
Continuing operations . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations . . . . . . . . . . . . . . . . . . . . .
$
$
$
$
$
—
(0.03)
0.01
(0.02)
(0.03)
0.01
(0.02)
$
$
$
$
0.35
0.28
0.63
0.35
0.27
0.62
Weighted average Common Shares
outstanding — basic . . . . . . . . . . . . . . . . . . . . . . . . .
21,406,980
18,727,977
Weighted average Common Shares
outstanding — diluted . . . . . . . . . . . . . . . . . . . . . . .
21,520,061
18,727,977
The accompanying notes are an integral part of these consolidated financial statements.
F-4
e
h
T
r
o
s
s
e
c
e
d
e
r
P
l
a
t
o
T
’
s
r
e
n
w
O
t
i
c
fi
e
D
d
e
n
r
a
e
n
U
n
o
i
t
a
s
n
e
p
m
o
C
e
v
i
s
n
e
h
e
r
p
m
o
C
e
m
o
c
n
I
r
e
h
t
O
y
n
a
p
m
o
C
e
h
T
d
e
t
a
l
u
m
u
c
c
A
d
n
a
t
i
c
fi
e
D
s
d
n
e
d
i
v
i
D
l
a
n
o
i
t
i
d
d
A
n
i
-
d
i
a
P
l
a
t
i
p
a
C
s
e
r
a
h
S
n
o
m
m
o
C
t
n
u
o
m
A
s
e
r
a
h
S
D
N
A
T
S
U
R
T
P
U
O
R
G
Y
T
L
A
E
R
E
T
I
K
)
R
O
S
S
E
C
E
D
E
R
P
E
H
T
(
P
U
O
R
G
Y
T
R
E
P
O
R
P
E
T
I
K
Y
T
I
U
Q
E
’
S
R
E
N
W
O
N
I
S
E
G
N
A
H
C
F
O
S
T
N
E
M
E
T
A
T
S
D
E
N
I
B
M
O
C
D
N
A
D
E
T
A
D
I
L
O
S
N
O
C
)
3
8
2
,
5
4
0
,
8
(
,
)
3
8
2
5
4
0
8
(
,
,
7
7
1
1
3
7
1
1
,
,
7
7
1
1
3
7
1
1
,
,
9
4
6
4
3
4
$
9
4
6
4
3
4
,
$
,
6
6
9
6
3
4
1
,
,
6
6
9
6
3
4
1
,
,
9
0
5
7
5
5
5
,
,
9
0
5
7
5
5
5
,
,
3
7
8
2
3
3
2
,
,
3
7
8
2
3
3
2
,
)
0
8
3
2
9
1
(
,
)
0
8
3
2
9
1
(
,
,
)
9
3
9
2
9
9
8
(
,
,
)
9
3
9
2
9
9
8
(
,
—
,
)
7
3
9
4
9
2
1
(
,
,
)
7
3
9
4
9
2
1
(
,
,
7
3
9
4
9
2
1
,
,
0
0
0
0
0
9
7
3
2
,
—
1
7
0
0
6
2
,
,
)
8
8
9
7
2
4
2
2
(
,
,
)
0
5
4
5
8
3
5
(
,
)
2
2
3
2
3
3
(
,
,
)
4
1
3
0
2
5
0
5
(
,
,
0
6
0
9
9
1
8
5
1
,
5
6
0
5
0
1
,
7
5
0
7
2
4
,
)
8
3
3
,
5
5
8
,
7
(
0
0
0
,
4
9
0
,
1
4
1
,
)
5
4
8
9
1
7
7
1
(
,
,
0
4
8
5
3
4
3
1
,
)
9
5
4
,
6
0
8
,
8
(
,
0
8
3
9
7
8
8
7
2
$
,
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
9
7
8
6
0
8
(
,
—
—
)
6
3
1
,
1
(
)
9
7
8
6
0
8
(
,
—
—
—
—
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
7
5
0
,
7
2
4
$
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
)
2
2
3
,
2
3
3
(
)
0
5
4
,
5
8
3
,
5
(
—
)
2
7
7
,
7
1
7
,
5
(
)
5
4
8
,
9
1
7
,
7
1
(
0
4
8
,
5
3
4
,
3
1
$
—
—
—
—
—
—
—
—
—
$
—
—
)
7
3
9
,
4
9
2
,
1
(
0
0
0
,
7
1
7
,
7
3
2
)
3
3
3
,
8
(
0
0
8
,
6
6
0
,
1
)
8
8
9
,
7
2
4
,
2
2
(
)
4
1
3
,
0
2
5
,
0
5
(
2
3
1
,
6
0
1
)
8
3
3
,
5
5
8
,
7
(
8
2
2
,
2
3
5
,
4
6
1
0
0
0
,
0
0
0
,
1
4
1
—
—
—
—
—
—
—
—
—
—
—
—
—
$
—
—
—
—
—
—
—
—
—
—
0
0
0
,
3
8
1
0
0
0
,
0
0
3
,
8
1
—
—
—
—
0
5
1
3
3
3
,
8
—
—
—
—
0
0
0
,
5
1
7
6
2
,
3
3
8
0
0
0
,
4
9
3
8
4
,
1
9
1
0
0
0
,
0
0
4
,
9
7
6
2
,
8
4
1
,
9
1
—
9
6
—
—
—
—
—
—
—
—
—
0
2
9
,
6
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
2
0
0
2
,
1
3
r
e
b
m
e
c
e
D
,
y
t
i
u
q
E
’
s
r
e
n
w
O
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
n
o
i
t
u
b
i
r
t
n
o
C
s
n
o
i
t
u
b
i
r
t
s
i
D
.
e
m
o
c
n
i
t
e
N
3
0
0
2
,
1
3
r
e
b
m
e
c
e
D
,
y
t
i
u
q
E
’
s
r
e
n
w
O
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
n
o
i
t
u
b
i
r
t
n
o
C
s
n
o
i
t
u
b
i
r
t
s
i
D
.
.
.
.
s
s
o
l
t
e
N
4
0
0
2
,
5
1
t
s
u
g
u
A
,
t
i
c
fi
e
D
’
s
r
e
n
w
O
.
.
.
.
.
.
.
.
.
t
i
c
fi
e
d
’
s
r
e
n
w
o
r
o
s
s
e
c
e
d
e
r
P
y
f
i
s
s
a
l
c
e
R
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
l
a
s
m
o
r
f
s
d
e
e
c
o
r
p
s
s
o
r
G
r
o
f
e
g
n
a
h
c
x
e
n
i
s
l
a
p
i
c
n
i
r
P
o
t
s
e
r
a
h
s
f
o
e
c
n
a
u
s
s
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
e
r
e
t
n
i
d
e
t
u
b
i
r
t
n
o
c
.
.
.
.
.
.
.
s
t
s
o
c
g
n
i
r
e
f
f
O
y
t
i
v
i
t
c
a
n
o
i
t
a
s
n
e
p
m
o
c
k
c
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
s
o
l
t
e
N
d
e
r
a
l
c
e
d
s
n
o
i
t
u
b
i
r
t
s
i
D
m
o
r
f
s
t
s
e
r
e
t
n
i
’
s
r
e
n
t
r
a
P
d
e
t
i
m
L
i
o
t
t
n
e
m
t
s
u
j
d
A
:
t
s
u
r
T
p
u
o
r
G
y
t
l
a
e
R
e
t
i
K
p
i
h
s
r
e
n
t
r
a
P
g
n
i
t
a
r
e
p
O
e
h
t
n
i
p
i
h
s
r
e
n
w
o
d
e
s
a
e
r
c
n
i
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
4
0
0
2
,
1
3
r
e
b
m
e
c
e
D
,
s
e
c
n
a
l
a
B
s
e
r
a
h
s
n
o
m
m
o
c
f
o
e
l
a
s
m
o
r
f
s
d
e
e
c
o
r
p
s
s
o
r
G
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
t
s
o
c
g
n
i
r
e
f
f
O
e
m
o
c
n
i
e
v
i
s
n
e
h
e
r
p
m
o
c
r
e
h
t
O
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
m
o
c
n
i
t
e
N
d
e
r
a
l
c
e
d
s
n
o
i
t
u
b
i
r
t
s
i
D
y
t
i
v
i
t
c
a
n
o
i
t
a
s
n
e
p
m
o
c
k
c
o
t
S
m
o
r
f
s
t
s
e
r
e
t
n
i
’
s
r
e
n
t
r
a
P
d
e
t
i
m
L
i
o
t
t
n
e
m
t
s
u
j
d
A
p
i
h
s
r
e
n
t
r
a
P
g
n
i
t
a
r
e
p
O
e
h
t
n
i
p
i
h
s
r
e
n
w
o
d
e
s
a
e
r
c
n
i
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
,
s
e
c
n
a
l
a
B
:
p
u
o
r
G
y
t
r
e
p
o
r
P
e
t
i
K
F-5
$
)
5
1
0
,
8
0
8
(
$
,
7
5
0
7
2
4
$
)
7
7
7
,
1
0
0
,
0
1
(
$
3
6
5
,
6
7
9
,
8
8
2
$
2
5
5
,
5
8
2
$
7
8
1
,
5
5
5
,
8
2
—
)
9
5
4
,
6
0
8
,
8
(
.
s
t
n
e
m
e
t
a
t
s
l
a
i
c
n
a
n
fi
d
e
t
a
d
i
l
o
s
n
o
c
e
s
e
h
t
f
o
t
r
a
p
l
a
r
g
e
t
n
i
n
a
e
r
a
s
e
t
o
n
g
n
i
y
n
a
p
m
o
c
c
a
e
h
T
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
Cash flow from operating activities:
Net income (loss)
Adjustments to reconcile net income (loss) to net cash
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
provided by operating activities:
Gain on sale of operating property . . . . . . . . . . . . . . . . . . . . . .
Minority interest income (loss) . . . . . . . . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated entities . . . . . . . . . . . . .
Limited Partners’ interest in Operating Partnership . . . . . . . . .
Distributions of income from unconsolidated entities . . . . . . .
Straight-line rent
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Compensation expense for equity awards . . . . . . . . . . . . . . . .
Amortization of debt fair value adjustment . . . . . . . . . . . . . . .
Amortization of in-place lease liabilities . . . . . . . . . . . . . . . . .
Distributions (including minority interest share) . . . . . . . . . . .
Changes in assets and liabilities:
Tenant receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs and other assets
. . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . .
Net cash provided by operating activities . . . . . . . . . . . . . . . .
Cash flow from investing activities:
Acquisitions of interests in properties and land held for
development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net proceeds from sale of operating property . . . . . . . . . . . . .
Acquisition of joint venture and outside minority interest
. . .
. . . . . . . . . . . . . . .
Capital and construction expenditures, net
Change in construction payables . . . . . . . . . . . . . . . . . . . . . . .
Distributions of capital from unconsolidated entities . . . . . . .
Contributions to unconsolidated entities
. . . . . . . . . . . . . . . . .
Consolidation of acquired joint venture and outside minority
interests’ cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidation of Glendale Mall’s cash as of March 31, 2004
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . .
Cash flow from financing activities:
Offering proceeds, net of issuance costs . . . . . . . . . . . . . . . . .
Loan proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan transaction costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan payments
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Payments and advances to/from Principals . . . . . . . . . . . . . . .
Distributions paid — shareholders . . . . . . . . . . . . . . . . . . . . . .
Distributions paid — unitholders . . . . . . . . . . . . . . . . . . . . . . .
Contributions (including minority interest share)
. . . . . . . . . .
Distributions (including minority interest share) . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . .
Increase (decrease) in cash and cash equivalents . . . . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . . . . . .
Company
Predecessor
Year Ended
December 31,
2005
Period
August 16,
2004 through
December 31, 2004
Period
January 1,
2004 through
August 15, 2004
Year Ended
December 31,
2003
$ 13,435,840
$
(332,322)
$
(192,380)
1,436,966
(7,212,402)
1,267,122
(252,511)
5,329,298
271,647
(1,672,710)
23,648,819
1,163,204
281,782
(1,437,545)
(3,488,609)
(1,041,367)
(5,381,995)
(3,180,789)
1,793,396
—
125,800
(134,097)
(146,968)
80,710
(373,944)
8,345,829
(214,053)
65,071
(394,617)
(1,093,620)
(143,864)
(1,641,334)
3,265,736
3,102,015
—
(214,887)
(163,804)
—
343,687
(311,899)
3,987,945
658,052
—
—
(452,564)
—
—
232,819
(273,118)
—
891,318
(324,383)
3,017,579
30,000
—
—
(260,899)
—
(1,046,616)
(908,837)
737,697
(786,814)
(4,599,074)
5,976,650
23,523,180
10,510,342
2,436,394
5,341,044
(178,489,599)
20,785,323
—
(50,414,673)
2,101,895
44,353
—
(108,805,259)
—
(12,451,155)
(31,847,935)
2,824,764
—
—
(46,770,356)
—
—
(34,999,943)
3,170,506
173,546
—
(45,616,460)
—
—
(48,550,943)
532,379
484,182
(242,506)
—
—
665,604
—
82,778
108,822
—
—
(205,972,701)
(149,613,981)
(78,234,647)
(93,393,348)
133,238,662
265,596,255
(1,275,407)
(188,560,885)
—
(15,956,049)
(6,354,828)
867,432
—
187,555,180
5,105,659
10,103,176
215,472,012
123,162,602
(5,373,864)
(176,113,029)
(9,000,000)
(1,795,150)
(776,426)
—
—
145,576,145
6,472,506
3,630,670
—
89,185,669
(655,263)
(10,105,596)
6,902,818
—
—
2,681,036
(10,769,219)
77,239,445
1,441,192
2,189,478
—
112,708,871
(709,043)
(29,921,150)
—
—
—
14,579,103
(9,908,843)
86,748,938
(1,303,366)
3,492,844
Cash and cash equivalents, end of period . . . . . . . . . . . . . . . .
$ 15,208,835
$ 10,103,176
$ 3,630,670
$ 2,189,478
The accompanying notes are an integral part of these consolidated financial statements.
F-6
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 1. Organization and Basis of Presentation
Organization
Kite Realty Group Trust (the “Company” or “REIT”) was organized in Maryland on March 29, 2004 to
succeed to the development, acquisition, construction and real estate businesses of Kite Property Group (the
“Predecessor”). The Predecessor was owned by Al Kite, John Kite and Paul Kite (the “Principals”) and certain
executives and other family members and consisted of the properties, entities and interests contributed to the
Company or its subsidiaries by its founders and is the predecessor of Kite Realty Group Trust. The Company
began operations on August 16, 2004 when it completed its initial public offering (“IPO”) and concurrently
consummated certain other formation transactions. The IPO consisted of the sale of 16,300,000 common shares
sold to the public at $13.00 per share, resulting in net proceeds to the Company of $191.3 million. The net
proceeds were contributed in exchange for a 67.4% controlling interest in Kite Realty Group, L.P., the “Operating
Partnership”. A total of 833,267 shares were issued to the Principals of the Predecessor in exchange for their
interests of certain properties and service companies. Also, a total of 15,000 restricted shares were awarded to
the members of the Company’s Board of Trustees. On September 14, 2004, the underwriters exercised their over-
allotment option to purchase an additional 2,000,000 common shares at $13.00 per share, resulting in additional
net proceeds of $24.2 million. The exercise of the overallotment option increased the controlling interest in the
Operating Partnership to 69.8%. In total, 19,148,267 shares were issued in connection with the Company’s IPO
and related formation transactions. In addition, a total of 8,281,882 units of the Operating Partnership were issued
to the Principals and certain of our executive officers and other individuals in exchange for their interests in
certain properties.
Concurrent with the Company’s formation, the Company utilized the net proceeds from the IPO to prepay
mortgage indebtedness ($100 million), to repay a credit facility provided by affiliates of Lehman Brothers
($48 million), to acquire four properties that were under contract ($45 million), to acquire joint venture and
outside minority interests in nine properties ($13 million) and to repay existing indebtedness due to the Principals
($9 million).
As a result of the IPO and related formation transactions and several subsequent acquisitions, the Company,
through the Operating Partnership, is engaged in the ownership, operation, management, leasing, acquisition,
expansion and development of neighborhood and community shopping centers and certain commercial real estate
properties. As of December 31, 2005, 43 of the 45 entities which own properties in which the Company has
an interest were consolidated. The Company also provides real estate facilities management, construction,
development and other advisory services to third parties through its taxable REIT subsidiaries.
Basis of Presentation
The accompanying financial statements of Kite Realty Group Trust are presented on a consolidated basis and
include all of the accounts of the Company, the Operating Partnership, the taxable REIT subsidiaries of the
Operating Partnership and any variable interest entities (“VIEs”) in which the Company is the primary beneficiary.
The exchange of entities or interests held by the Principals for common shares of the REIT and limited partnership
interests in the Operating Partnership was accounted for as a reorganization of entities under common control and,
accordingly, related assets and liabilities were reflected at their historical cost basis. The acquisition of the joint
venture and minority partners’ interests in the properties has been accounted for as a purchase.
F-7
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 1. Organization and Basis of Presentation (Continued)
The Company consolidates properties that are wholly-owned and properties in which it owns less than 100%
but it controls. Control of a property is demonstrated by our ability to:
• manage day-to-day operations,
•
•
refinance debt and sell the property without the consent of any other partner or owner, and
the inability of any other partner or owner to replace us.
The Company allocates net operating results of the Operating Partnership based on the partners’ respective
weighted average ownership interest. The Company adjusts the limited partners’ interests in the Operating
Partnership at the end of each period to reflect their interest in the Operating Partnership. This adjustment is
reflected in the Company’s shareholders’ equity. The Company’s and the limited partners’ interests in the
Operating Partnership for the year ended December 31, 2005 and for the period from August 16, 2004 through
December 31, 2004 were as follows:.
Company’s weighted average interest in Operating Partnership . . . . . . .
Limited Partners’ weighted average interest in Operating Partnership. .
Company’s interest in Operating Partnership at December 31 . . . . . . . . .
Limited Partners’ interest in Operating Partnership at December 31 . .
For the
year ended
December 31,
2005
71.6%
28.4%
76.8%
23.2%
For the
period from
August 16,
2004 Through
December 31,
2004
69.3%
30.7%
69.8%
30.2%
The accompanying financial statements of the Predecessor are presented on a combined historical cost basis
because of the affiliated ownership and common management and because the assets and liabilities were the
subject of a business combination with the Operating Partnership and the REIT, which was completed on
August 16, 2004. The Principals have operations that were not contributed to the Operating Partnership and,
therefore, the accompanying financial statements of the Predecessor are not intended to represent the financial
position and results of operations of the Principals.
In management’s opinion, the combined financial statements include all the assets, liabilities, revenues and
expenses associated with the operations of the entities or interests therein transferred to the Operating Partnership
or the REIT. All significant inter-entity balances and transactions have been eliminated.
Investment in Portfolio Properties
At December 31, 2005, we owned interests in 45 operating properties (consisting of 40 retail properties,
four commercial operating properties and a related parking garage) and had 14 properties under development.
Of the 59 total properties held at December 31, 2005, the Company owned a non-controlling interest in two
operating properties (Spring Mill Medical and The Centre) which were accounted for under the equity method.
Prior to the completion of the Company’s IPO and related formation transactions, the Predecessor’s
investments in certain of the properties were accounted for under the equity method. These investments, which
represented non-controlling 33% to 73% ownership interests, were recorded initially at cost and subsequently
adjusted for net equity in income (loss) and cash contributions and distributions.
F-8
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 2. Summary of Significant Accounting Policies (Continued)
Use of Estimates
The accompanying financial statements have been prepared in accordance with accounting principles
generally accepted in the United States (“GAAP”). GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities
at the date of the financial statements, and revenues and expenses during the reported period. Actual results could
differ from these estimates.
Purchase Accounting
The purchase price of properties is allocated to tangible and identified intangible assets acquired based on
their fair values in accordance with the provisions of Statement of Financial Accounting Standards No. 141,
“Business Combinations” (“SFAS No. 141”). In making estimates of fair values for the purpose of allocating
purchase price, a number of sources are utilized. We also consider information about each property obtained
as a result of its pre-acquisition due diligence, marketing and leasing activities in estimating the fair value of
tangible and intangible assets acquired.
A portion of the purchase price is allocated to tangible assets, including:
•
the fair value of the building on an as-if-vacant basis and to land determined either by real estate tax
assessments, independent appraisals or other relevant data.
•
•
above-market and below-market in-place lease values for acquired properties are based on the present
value (using an interest rate which reflects the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid pursuant to the in-place leases and
(ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured
over the remaining non-cancelable term of the leases. The capitalized above-market and below-market
lease values are amortized as a reduction of or addition to rental income over the remaining non-
cancelable terms of the respective leases. Should a tenant terminate its lease, the unamortized portion
of the lease intangibles would be charged or credited to income.
the value of leases acquired. The Company utilizes independent sources for our estimates to determine
the respective in-place lease values. Our estimates of value are made using methods similar to those
used by independent appraisers. Factors we consider in our analysis include an estimate of costs to
execute similar leases including tenant improvements, leasing commissions and foregone costs and
rent received during the estimated lease-up period as if the space was vacant. The value of in-place
leases is amortized to expense over the remaining initial terms of the respective leases.
The Company also considers whether a portion of the purchase price should be allocated to in-place leases
that have a related customer relationship intangible value. Characteristics we consider in allocating these values
include the nature and extent of existing business relationships with the tenant, growth prospects for developing
new business with the tenant, the tenant’s credit quality and expectations of lease renewals, among other factors.
To date, a tenant relationship has not been developed that is considered to have a current intangible value.
Investment Properties
Investment properties are recorded at cost and include costs of acquisitions, development, predevelopment,
construction costs, certain allocated overhead, tenant allowances and improvements, and interest and real estate
taxes incurred during construction. Significant renovations and improvements are capitalized when they extend
F-9
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 2. Summary of Significant Accounting Policies (Continued)
the useful life, increase capacity, or improve the efficiency of the asset. Maintenance and repairs that do not extend
the useful lives of the respective assets are reflected in property operating expense.
The Company incurs costs prior to land acquisition including acquisition contract deposits, as well as legal,
engineering and other external professional fees related to evaluating the feasibility of developing a shopping
center. These pre-development costs are included in construction in progress in the accompanying consolidated
balance sheets. If the Company determines that the development of a property is no longer probable, any pre-
development costs previously incurred are immediately expensed.
The Company capitalizes costs of properties under development such as construction costs, interest costs,
real estate taxes, salaries and related costs of personnel directly involved in the project and other costs incurred
during the period of development. As a development property becomes operational, the Company expenses
appropriate costs pro rata based on the occupancy of the property. The Company does not capitalize costs on
a project beyond 12 months after substantial completion of the building shell.
In accordance with Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of” (“SFAS No. 144”), investment properties
and intangible assets are reviewed for impairment on a property-by-property basis at least annually or whenever
events or changes in circumstances indicate that the carrying value of investment properties may not be
recoverable. Impairment losses for investment properties are recorded when the undiscounted cash flows
estimated to be generated by the investment properties during the expected hold period are less than the carrying
amounts of those assets. Impairment losses are measured as the difference between the carrying value and the
fair value of the asset.
In accordance with SFAS No. 144, operating properties held for sale includes only those properties available
for immediate sale in their present condition and for which management believes it is probable that a sale of
the property will be completed within one year. Operating properties are carried at the lower of cost or fair value
less costs to sell. Depreciation and amortization are suspended during the held-for-sale period.
The Company’s properties generally have operations and cash flows that can be clearly distinguished from
the rest of the Company. In accordance with SFAS No. 144, the operations reported in discontinued operations
include those operating properties that were sold or considered held-for-sale and for which operations and cash
flows can be clearly distinguished. The operations from these properties are eliminated from ongoing operations
and the Company will not have a continuing involvement after disposition. Prior periods have been restated to
reflect the operations of these properties as discontinued operations.
Depreciation on buildings and improvements is provided utilizing the straight-line method over an estimated
original useful lives ranging from 10 to 35 years. Depreciation on tenant allowances and improvements is
provided utilizing the straight-line method over the term of the related lease. Depreciation on equipment and
fixtures is provided utilizing the straight-line method over 5 to 10 years.
Escrow Deposits
Escrow deposits generally consist of escrowed cash held for real estate taxes, property maintenance,
insurance, minimum occupancy and property operating income requirements at specific properties as required.
F-10
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 2. Summary of Significant Accounting Policies (Continued)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of 90 days or
less to be cash and cash equivalents.
Cash paid for interest, including capitalized interest, for the year ended December 31, 2005, for the period
from August 16, 2004 through December 31, 2004, for the period from January 1, 2004 through August 15,
2004 and for the year ended December 31, 2003 was as follows:
The Company
The Predecessor
Cash Paid for Interest . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized Interest
$20,656,637
3,507,372
For the
year ended
December 31,
2005
For the
period from
August 16,
2004
through
December 31,
2004
$5,174,446
823,502
For the
period from
January 1,
2004
through
August 15,
2004
$5,458,980
1,400,774
For the
year ended
December 31,
2003
$4,805,933
610,756
Accrued but unpaid distributions were $6,970,097 and $5,143,153 as of December 31, 2005 and 2004,
respectively and are included in accounts payable and accrued expenses in the accompanying consolidated
balance sheet.
Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, accounts receivable, escrows and deposits, and
accounts payable and accrued expenses approximate fair value because of the relatively short maturity of
these instruments.
Revenue Recognition
As lessor, the Company retains substantially all of the risks and benefits of ownership of the investment
properties and account for our leases as operating leases.
Base minimum rents are recognized on a straight-line basis over the terms of the respective leases. Certain
lease agreements contain provisions that grant additional rents based on tenants’ sales volume (contingent
percentage rent). Percentage rents are recognized when tenants achieve the specified targets as defined in their
lease agreements and overage rents are included in other property related revenue in the accompanying
statements of operations.
Reimbursements from tenants for real estate taxes and other recoverable operating expenses are recognized
as revenues in the period the applicable expense is incurred.
Gains on sales of real estate are recognized in accordance with Statement of Financial Standards (“SFAS”)
No. 66, “Accounting for Real Estate”. In summary, gains from sales are not recognized unless a sale has been
consummated, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay
for the property, the Company has transferred to the buyer the usual risks and rewards of ownership, and the
Company does not have a substantial continuing financial involvement in the property.
F-11
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 2. Summary of Significant Accounting Policies (Continued)
Development and other advisory services fees are recognized as revenues in the period in which the services
are rendered. Performance-based incentive fees are recorded when the fees are earned.
Revenues from construction contracts are recognized on the percentage-of-completion method, measured
by the percentage of cost incurred to date to the estimated total cost for each contract. Project costs include all
direct labor, subcontract, and material costs and those indirect costs related to contract performance costs incurred
to date do not include uninstalled materials. Provisions for estimated losses on uncompleted contracts are made
in the period in which such losses are determined. Changes in job performances, job conditions, and estimated
profitability may result in revisions to costs and income, which are recognized in the period in which the revisions
are determined.
Accounting for Investments in Joint Ventures
In December 2003, the Financial Accounting Standards Board issued FASB Interpretation No. 46 (Revised
December 2003), “Consolidation of Variable Interest Entities” (“FIN 46R”). FIN 46R replaces
FASB Interpretation No. 46 which was issued in January 2003. FIN 46R explains how to identify variable interest
entities and how to assess whether to consolidate such entities. In general, a variable interest entity (“VIE”) is
a corporation, partnership, trust or any other legal structure used for business purposes that either (a) does not
have equity investors with voting rights or (b) has equity investors that do not provide sufficient financial
resources for the entity to support its activities. Prior to the issuance of FIN 46R, a company generally included
another entity in its consolidated financial statements only if it controlled the entity through voting interests.
FIN 46R changes that by requiring a VIE to be consolidated by a company if that company is subject to a majority
of the risk of loss from the VIE’s activities or entitled to receive a majority of the entity’s residual returns or
both. During 2005, the Company entered into nine joint venture agreements to acquire land for future
development. Five of the joint ventures with total assets of approximately $62.8 million and construction debt
of approximately $11.9 million have been consolidated because the entities have been deemed to be VIEs, the
Company guarantees the debt of the joint ventures and the Company is the primary beneficiary.
On March 31, 2004 the Company consolidated Glendale Mall joint venture as of that date pursuant to
FIN 46R. Periods prior to March 31, 2004 were not restated as a result of the adoption of FIN 46R. As a result
of the IPO and related formation transactions, Glendale Mall is wholly owned.
The Company accounts for its investments in unconsolidated joint ventures under the equity method of
accounting as we exercises significant influence over, but do not control, operating and financial policies. These
investments are recorded initially at cost and subsequently adjusted for equity in earnings and cash contributions
and distributions. As of December 31, 2005, the Company had two entities that were accounted for under the
equity method (Spring Mill Medical and The Centre).
Tenant Receivables and Allowance for Doubtful Accounts
Tenant receivables consist primarily of billed minimum rent, accrued and billed tenant reimbursements and
accrued straight-line rent. The Company generally does not require collateral from its tenants.
An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of certain
tenants or others to meet contractual obligations under their lease or other agreements. Accounts are written off
when, in the opinion of management, the balance is uncollectible.
F-12
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 2. Summary of Significant Accounting Policies (Continued)
Balance, beginning of year
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidation of joint venture interests . . . . . . . . . . . . . . . . . . .
Provision for credit losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts written off, net of recoveries . . . . . . . . . . . . . . . . . . .
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005
2004
$ 511,974
—
1,163,204
(645,158)
$1,030,020
$
30,000
1,210,942
443,999
(1,172,967)
511,974
$
2003
$ —
—
30,000
—
$30,000
Concentration of Credit Risk
The Company’s accounts receivable from tenants potentially subjects it to a concentration of credit risk
is its accounts receivable. At December 31, 2005, approximately 27% of property accounts receivable was from
tenants leasing space in the state of Indiana.
Earnings Per Share
Basic earnings per share is calculated based on the weighted average number of shares outstanding during
the period. Diluted earnings per share is determined based on the weighted average number of shares outstanding
combined with the incremental average shares that would have been outstanding assuming all potentially dilutive
shares were converted into common shares as of the earliest date possible. Share options are accounted for based
on their fair market value at the date of grant. Expense related to share options was $193,969 and $65,071 for the
year ended December 31, 2005 and for the period from August 16, 2004 through December 31, 2004, respectively.
Potential dilutive securities include outstanding share options and units of limited partnership of the
Operating Partnership which may be exchanged for shares under certain circumstances. The only potentially
dilutive securities that had a dilutive effect for the year ended December 31, 2005 were outstanding share options.
The outstanding share options did not have a dilutive effect for the period from August 16, 2004 through
December 31, 2004 as the Company recorded a net loss. Since the Company’s IPO and related formation
transactions occurred on August 16, 2004, earnings per share is not presented for periods prior to this date.
The effect of conversion of units of the Operating Partnership is not reflected in diluted shares as they are
exchangeable for Common Shares on a one-for-one basis. The income allocable to such units is allocated on
the same basis and reflected as Limited Partners’ interests in the Operating Partnership in the accompanying
consolidated statements of operations. Therefore, the assumed conversion of these units would have no effect
on the determination of earnings per share.
F-13
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 2. Summary of Significant Accounting Policies (Continued)
The following table sets forth the computations of our basic and diluted earnings per share.
For the
year ended
December 31, 2005
$ 7,500,318
5,935,522
$13,435,840
21,406,980
113,081
21,520,061
For the
period from
August 16, 2004
through
December 31, 2004
$ (587,366)
255,044
$ (332,322)
18,727,977
—
18,727,977
Income (loss) from continuing operations(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discontinued operations(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average Common Shares Outstanding — Basic . . . . . . . . . . . .
Effect of outstanding stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted Average Shares Outstanding — Diluted . . . . . . . . . . . . . . . . . . . .
(1) Reflects the Company’s share of income.
Derivative Financial Instruments
The Company applies SFAS No. 133 “Accounting for Derivative Instruments and Hedging Activities”
which requires that all derivative instruments be recorded on the balance sheet at their fair value. Gains or losses
resulting from changes in the values of those derivatives are accounted for depending on the use of the derivative
and whether it qualifies for hedge accounting. The Company uses derivative financial instruments to mitigate
its interest rate risk on a related financial instrument through the use of interest rate swaps or rate locks.
Statement No. 133 requires that changes in fair value of derivatives that qualify as cash flow hedges be
recognized in other comprehensive income (“OCI”) while any ineffective portion of the derivative’s change in
fair value be recognized immediately in earnings. Upon settlement of the hedge, gains and losses associated with
the transaction are recorded in OCI and amortized over the underlying term of the hedge transaction. All of the
Company’s derivative instruments qualify for hedge accounting.
Income Taxes
The Company has elected to be taxed as a REIT pursuant to the Internal Revenue Code as amended (the
“Code”), beginning with the taxable year ended December 31, 2004. To maintain its status as a REIT, the
Company is obligated to distribute 90% of its ordinary taxable income annually to its shareholders. The Company
intends to make timely distributions sufficient to satisfy the annual distribution requirements and to avoid
corporate income taxes.
Prior to our IPO, Kite Development Corporation, Kite Construction, Inc. and all of the properties were held
by entities where the owners were required to include their respective share of profits or losses generated by
these entities in their individual tax returns. Accordingly, no Federal income tax provision has been reflected
for periods prior to the IPO.
The Company has elected taxable REIT subsidiary (“TRS”) status for some of its subsidiaries under
Section 856(1) of the Code. This enables the Company to receive income and provide services that would otherwise
F-14
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 2. Summary of Significant Accounting Policies (Continued)
be impermissible for REITs. In accordance with Statement of Financial Accounting Standards No. 109,
“Accounting for Income Taxes” (“SFAS No. 109”), deferred tax assets and liabilities are established for temporary
differences between the financial reporting bases and the tax bases of assets and liabilities at the enacted rates
expected to be in effect when the temporary differences reverse. SFAS No. 109 also requires that deferred tax assets
be reduced by a valuation allowance if it is more likely than not that some portion or all of the deferred tax asset
will not be realized.
Income tax provisions for the 2005, 2004 and 2003 were approximately $1,041,000, $57,000 and $40,000,
respectively. The income tax provision is included in other expenses in the accompanying consolidated and
combined statements of operations.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year presentation. Such
reclassifications had no effect on net income previously reported.
Note 3. Deferred Costs
Deferred costs consist primarily of financing fees incurred to obtain long-term financing and broker fees
and capitalized salaries and related benefits incurred in connection with lease originations. Deferred financing
costs are amortized on a straight-line basis over the terms of the respective loan agreements. Deferred leasing
costs include lease intangibles and other and are amortized on a straight-line basis over the terms of the related
leases. At December 31, 2005 and 2004, deferred costs consisted of the following:
Deferred financing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred leasing costs and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less — accumulated amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
2005
2004
$ 6,046,408
7,472,207
9,395,983
22,914,598
(5,534,310)
$17,380,288
$ 4,958,167
4,858,405
8,391,347
18,207,919
(2,943,648)
$15,264,271
The estimated aggregate amortization amounts from acquired lease intangibles for each of the next five
years are as follows:
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$1,014,163
911,151
753,398
669,342
574,024
2,424,062
$6,346,140
F-15
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 3. Deferred Costs (Continued)
The accompanying consolidated and combined statements of operations include amortization expense
as follows:
The Company
The Predecessor
For the
year ended
December 31,
2005
For the
period from
August 16, 2004
through
December 31, 2004
For the
period from
January 1, 2004
through
August 15, 2004
For the
year ended
December 31, 2003
Amortization of deferred financing costs . . . . . . $1,340,259
Amortization of deferred leasing costs,
$ 481,150
$403,655
$125,073
leasing intangibles and other . . . . . . . . . . . . . . .
1,989,378
1,522,110
577,335
567,655
Amortization of deferred leasing costs, leasing intangibles and other is included in depreciation and
amortization expense, and amortization of deferred financing costs is included in interest expense.
Note 4. Deferred Revenue and Other Liabilities
Deferred revenue and other liabilities consist of the unamortized in-place lease liabilities, construction
billings in excess of costs, construction retainages payable, tenant rents received in advance and deferred income
taxes. The amortization of in-place lease liabilities is recognized as revenue over the remaining life of the leases
through 2027. Construction contracts are recognized as revenue using the percentage of completion method.
Tenant rents received in advance are recognized as revenue in the period to which they apply, usually the month
following their receipt.
At December 31, 2005 and 2004, deferred revenue and other liabilities consisted of the following:
Unamortized in-place lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction billings in excess of cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Construction retainages payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tenant rents received in advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$20,093,876
1,199,386
2,538,575
1,440,779
96,536
$25,369,152
$23,185,751
375,444
4,083,741
921,390
59,042
$28,625,368
2005
2004
The estimated aggregate amortization amounts from acquired lease intangibles (unamortized in-place lease
liabilities) for each of the next five years are as follows:
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$ 3,201,742
2,850,964
2,240,420
2,006,252
1,827,816
7,966,682
$20,093,876
F-16
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 5. Investments in Unconsolidated Entities
As of December 31, 2005, the Company had equity interests in two unconsolidated entities that own and
operate rental properties. The Company owned a 60% interest in The Centre and a 50% interest in Spring Mill
Medical representing a sufficient interest in each of these investments in order to exercise significant influence,
but not control, over operating and financial policies. Accordingly, these investments are accounted for using
the equity method.
In connection with the Company’s IPO, it acquired the remaining joint venture interests ranging from 42%
to 73% in Glendale Mall, 50 S. Morton, The Corner, International Speedway Square, Burlington Coat,
Martinsville Shops, 50th & 12th, 176th & Meridian and noncontrolling minority interests in various properties.
The Predecessor accounted for these entities using the equity method.
On March 31, 2004, the Predecessor adopted the provisions of FIN No. 46R and consolidated Glendale Mall
as of that date. Periods prior to March 31, 2004 were not restated as a result of the adoption of FIN No. 46R.
The Company subsequently purchased the third party interest in Glendale Mall in connection with its IPO and
related formation transactions.
Combined summary financial information of entities accounted for using the equity method of accounting
and a summary of the Company’s investment in and share of income from these entities follows:
Assets:
Investment properties, at cost, net
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tenant receivables, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred costs and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities and Members’ Equity:
Mortgage and other indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Members’ equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and Members’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005
2004
$14,328,872
902,443
140,124
670,319
$16,041,758
$16,299,855
524,792
16,824,647
(782,889)
$16,041,758
$14,707,045
601,423
254,883
779,356
$16,342,707
$16,609,675
458,289
17,067,964
(725,257)
$16,342,707
Company share of total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ 8,352,729
$ 8,518,002
Company share of Members’ equity (deficit) . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: Excess investment
Company investment in joint ventures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$ (667,017)
1,970,936
$ 1,303,919
$ (681,588)
—
$ (681,588)
Company share of mortgage and other indebtedness . . . . . . . . . . . . . . . . . .
$ 8,565,990
$ 8,738,897
“Excess investment” represents the unamortized difference of our investment over our share of the equity
in the underlying net assets of the joint ventures acquired. We amortize excess investment over the life of the
related property of no more than 35 years and the amortization is included in equity in earnings from
unconsolidated entities. We periodically review our ability to recover the carrying values of our investments in
F-17
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 5. Investments in Unconsolidated Entities (Continued)
joint venture properties. If we were to determine that any portion of our investment, including excess investment,
is not recoverable, we would record an adjustment to write off the unrecoverable amounts.
As of December 31, 2005, scheduled principal repayments on joint venture indebtedness were as follows:
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
Total
$
343,376
367,444
390,979
3,716,761
193,626
11,287,669
$16,299,855
Company
Share
$ 191,096
204,530
217,800
2,211,916
96,813
5,643,835
$8,565,990
Revenue:
Minimum rent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tenant reimbursements . . . . . . . . . . . . . . . . . . . . .
Other property related revenue . . . . . . . . . . . . .
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Expenses:
Property operating . . . . . . . . . . . . . . . . . . . . . . . . . .
Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of assets . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third-party investors’ share of net income . . . .
Company (Predecessor) share of net income . .
Amortization of excess investment . . . . . . . . . . . .
Income from joint ventures . . . . . . . . . . . . . . . . . . .
The Company
The Predecessor
Year ended
December 31,
2005
Period
August 16, 2004
Through
December 31,
2004
Period
January 1, 2004
Through
August 15,
2004
$2,417,126
880,342
53,262
3,350,730
$1,013,283
257,064
(7,257)
1,263,090
899,629
253,411
510,127
1,663,167
1,687,563
1,116,199
—
571,364
240,794
330,570
(78,059)
$ 252,511
377,556
79,258
198,407
655,221
607,869
436,173
—
171,696
37,599
134,097
—
$ 134,097
$4,782,846
1,030,909
149,909
5,963,664
1,597,348
470,470
1,171,243
3,239,061
2,724,603
2,244,113
—
480,490
316,686
163,804
—
$ 163,804
Year ended
December 31,
2003
$ 9,594,584
2,025,221
899,148
12,518,953
3,849,982
1,087,605
4,283,981
9,221,568
3,297,385
4,107,454
1,610,000
799,931
526,813
273,118
—
273,118
$
F-18
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 6. Property Acquisitions and Pro Forma Information (Continued)
2005 Acquisitions:
During 2005, the Company acquired and placed into service the following shopping center properties:
Property Name
Location
Acquisition Date
Fox Lake, IL
February 7
Fox Lake Crossing . . . . . . . . . .
Plaza Volente . . . . . . . . . . . . . . . Austin, TX
May 16
Indian River Square . . . . . . . . Vero Beach, FL May 16
Bolton Plaza . . . . . . . . . . . . . . . . Orange Park, FL November 1
November 17
Market Street Village . . . . . . . Hurst, TX
Acquisition Cost
(Millions)
$15.5(1)
35.9(2)
16.5(3)
14.0(4)
29.0(5)
Financing Method
Debt
Debt
Debt
Offering Proceeds
Debt(6)
(1)
(2)
(3)
Inclusive of debt assumed of $12.3 million and tax increment financing (“TIF”) receivable of $1.5 million.
Inclusive of $28.7 million of new debt and $7.2 million of borrowings under the Company’s revolving credit
facility incurred in connection with the acquisition.
Inclusive of $13.3 million of new debt and $3.2 million of borrowings under the Company’s revolving credit
facility incurred in connection with the acquisition.
(4) This property is owned through a joint venture with a third party. The Company currently receives 85%
of the cash flow from this property, which percentage may decrease under certain circumstances.
(5) Excludes escrow of $1.7 million subject to completion of the development of an additional 7,000 square
foot parcel.
(6) Financed with borrowings under the Company’s revolving credit facility and subsequently partially paid
down with the proceeds from the sale of Mid-America Clinical Labs.
Following is a combined condensed balance sheet for the properties acquired in 2005 as of the dates of
their respective acquisitions.
Assets
Investment Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Loans payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Working capital assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-place lease liabilities and deferred revenue . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$110,082,265
2,879,960
360,069
$113,322,294
$ 12,281,185
396,815
1,761,067
$ 14,439,067
Also during 2005, the Company acquired interests in various parcels of land for a total acquisition cost
of approximately $86.9 million including debt assumed of $3.9 million. The Company acquired these parcels
for future development.
Amounts allocated to intangible assets in connection with these acquisitions totaled $2.9 million and are
included in land, buildings and improvements and deferred costs in the accompanying consolidated balance
F-19
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 6. Property Acquisitions and Pro Forma Information (Continued)
sheets. Amounts allocated to intangible liabilities representing the adjustment of acquired leases to market value
totaled $1.8 million and are included in deferred revenue in the accompanying consolidated balance sheets. The
intangible assets and liabilities are amortized over the remaining lease term ranging from 0.5 to 22.1 years. In
the accompanying consolidated and combined statements of operations, the operating results of the acquired
properties are included in results of operations from their respective dates of purchase. Purchase price allocations
for all of the above 2005 property acquisitions are preliminary until finalized in 2006. Any adjustment to the
values assigned to identified assets and liabilities in finalizing the purchase price allocation for the above
acquisitions are not expected to have a material effect on net income.
2004 Acquisitions:
During 2004, the Company or its Predecessor acquired and placed into service the following shopping
center properties:
Property Name
Location
Acquisition Date
Acquisition Cost
(Millions)
Silver Glen Crossings . . . . . . .
Cedar Hill Village . . . . . . . . . .
Galleria Plaza . . . . . . . . . . . . . . .
Wal-Mart Plaza(1)
. . . . . . . . . . .
Eagle Creek Pad 2 . . . . . . . . . .
Fishers Station(2) . . . . . . . . . . . .
Hamilton Crossing . . . . . . . . . .
Waterford Lakes . . . . . . . . . . . .
Publix at Acworth . . . . . . . . . .
Plaza at Cedar Hill
. . . . . . . . .
Sunland Towne Centre . . . . . .
Centre at Panola . . . . . . . . . . . .
Marsh Supermarket(7) . . . . . . .
Eastgate Pavilion . . . . . . . . . . .
Four Corner Square . . . . . . . . .
South Elgin, IL
Cedar Hill, TX
Dallas, TX
Gainesville, FL
Naples, FL
Fishers, IN
Carmel, IN
Orlando, FL
Acworth, GA
Cedar Hill, TX
El Paso, TX
Lithonia, GA
Fishers, IN
Cincinnati, OH
Seattle, WA
April 1
June 28
June 29
July 1
July 7
July 23
August 19
August 20
August 20
August 31
September 16
September 30
November 24
December 1
December 20
$23.4
6.8
6.2
8.5
1.1
2.1(3)
15.5
9.1
9.2
38.6(4)
32.1(5)
9.4(6)
5.0
27.6
10.5
Financing Method
Debt(8)
Debt(8)
Debt(8)
Debt(8)
Debt(8)
Debt(8)
IPO Proceeds
IPO Proceeds
IPO Proceeds
IPO Proceeds
Debt
Debt
Debt
Debt
Debt
(1) This property is owned through a joint venture with a third party. The Company currently receives 85%
of the cash flow from this property, which percentage may decrease under certain circumstances.
(2) This property is owned through a joint venture with a third party. The Company is the primary beneficiary
and, therefore, this property is consolidated in the accompanying statements of operations. The joint venture
partner is entitled to an annual preferred payment of $96,000. All remaining cash flow is distributed to
the Company.
(3)
(4)
(5)
(6)
Inclusive of debt assumed of $1.4 million.
Inclusive of debt assumed of $27.4 million.
Inclusive of debt assumed of $17.8 million.
Inclusive of debt assumed of $4.5 million.
F-20
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 6. Property Acquisitions and Pro Forma Information (Continued)
(7) Part of the Fishers Station property.
(8) This acquisition was initially financed with debt, which was repaid with proceeds from the Company’s IPO.
Following is a combined condensed balance sheet for the acquired properties as of the dates of their
respective acquisitions.
Assets
Investment Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Loans payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-place lease liabilities and deferred revenue . . . . . . . . . .
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$228,937,093
82,778
23,188
3,460,024
3,042,734
$235,545,817
$ 55,195,064
19,303,602
6,339,888
$ 80,838,554
In addition, during 2004 the Company acquired various parcels of land for a total acquisition cost of
approximately $2.7 million. The Company acquired these parcels for future development.
The Company has entered into master lease agreements with the seller in connection with certain of the
above property acquisitions. These payments are due when tenant occupancy is below the level specified in the
purchase agreement. The payments are accounted for as a reduction of the purchase price of the acquired property
and totaled $241,984 and $460,318 in 2005 and 2004, respectively. Future amounts receivable through 2009
total $175,296 unless the space is leased during the period in which case the payments cease.
2004 Acquisition of Remaining Joint Venture Interests:
In connection with its IPO and related formation transactions, the Company acquired remaining joint
venture interests in 50 S. Morton, The Corner, International Speedway Square, Burlington Coat, Martinsville
Shops, Glendale Mall, Red Bank Commons and the other noncontrolling minority interests in certain properties
for cash and units of the operating partnership.
Amounts allocated in 2004 to intangible assets in connection with the acquisition of these joint venture
interests totaled $5.5 million and are included in land, buildings and improvements and deferred costs in the
accompanying consolidated balance sheets. Amounts allocated to intangible liabilities representing the
adjustment of acquired leases to market value totaled $2.1 million and are included in deferred revenue in the
accompanying consolidated balance sheet. The intangible assets and liabilities are amortized over the average
lease term for each property over periods ranging from 3.1 to 10.7 years.
F-21
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 6. Property Acquisitions and Pro Forma Information (Continued)
Following is a combined condensed balance sheet for the acquired joint venture and minority interests as
of the dates of their respective acquisitions. This balance sheet excludes Glendale Mall since it was consolidated
as of March 31, 2004 pursuant to FIN 46R.
Assets
. . . . . . . . . . . . . . . . . . . . . . . . . .
Investment Properties, at cost
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired lease intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Liabilities:
Loans payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
In-place lease liabilities and deferred revenue . . . . . . . . . .
Other Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$56,217,774
665,604
416,545
833,988
300,349
$58,434,260
$24,172,783
2,178,310
1,328,857
$27,679,950
The following table summarizes, on an unaudited pro forma basis, the results of operations for the years
ended December 31, 2005 and 2004 as if the Company’s IPO and related formation transactions and the 2005
and 2004 property acquisitions described above occurred on January 1, 2004:
Pro forma revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Pro forma net income per share
Twelve Months Ended
December 31,
2005
2004
$105,236,326
$ 13,971,404
$76,990,734
$ 3,891,733
— basic and diluted(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
0.65
$
0.20
Pro forma weighted average number of shares outstanding:
— basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
— diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
21,406,980
21,520,061
19,148,267
19,277,703
(1) Pro Forma net income for year ended December 31, 2004 excludes our share of direct costs of approximately
$1.5 million incurred in connection with the IPO and related formation transactions.
Note 7. Discontinued Operations
In accordance with Statement of Financial Accounting Standards No. 144 “Accounting for the Impairment
or Disposal of Long-Lived Assets”, the Company reflects the historical results of properties sold or held for sale,
as well as the gain or loss on sale of these properties, as discontinued operations in the consolidated statements
of operations for period prior to sale. In December 2005, the Company sold 100% of its interest in Mid-America
Clinical Labs for net proceeds of $20.8 million and a gain of $7.2 million. The results of discontinued operations
related to the Mid-America Clinical Labs property were comprised of the following for the year ended
F-22
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 7. Discontinued Operations (Continued)
December 31, 2005, for the period from August 16, 1004 through December 31, 2004, for the period from
January 1, 2004 through August 15, 2004 and for the year ended December 31, 2003:
Company
Predecessor
Combined
Year ended
December 31,
2005
$1,819,367
258,502
517,424
775,926
1,043,441
33,992
1,077,433
7,212,402
$8,289,835
For the
period from
August 16, 2004
through
December 31, 2004
For the
period from
January 1, 2004
through
August 15, 2004
$558,679
(23,065)
203,566
180,501
378,178
(11,208)
366,970
—
$366,970
$1,258,476
284,496
313,764
598,260
660,216
(271,987)
388,229
—
$ 388,229
Year ended
December 31,
2003
$1,849,204
244,422
487,000
731,422
1,117,782
(398,292)
719,490
—
$ 719,490
Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization . . . . . . . . . . . . . . . .
Total expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Interest income (expense) . . . . . . . . . . . . . . . . . . . . .
Income from discontinued operations . . . . . . . . .
Gain on sale of property . . . . . . . . . . . . . . . . . . . . . .
Total income from discontinued operations . .
Note 8. Mortgage Loans and Line of Credit
Mortgage and other indebtedness consist of the following at December 31, 2005 and 2004:
Description
Line of credit
Maximum borrowing level of $150 million available through
August 30, 2007; interest at LIBOR + 1.35% (5.74% and 3.75%
at December 31, 2005 and 2004, respectively) . . . . . . . . . . . . . . . . . . . . .
Construction Notes Payable — Variable Rate
Generally due in monthly installments of principal and interest;
maturing at various dates through 2008; interest at
LIBOR+1.50%–1.75%, ranging from 5.89% to 6.14% at
December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Notes Payable — Fixed Rate
Generally due in monthly installments of principal and interest;
maturing at various dates through 2022; interest rates ranging
from 5.11% to 8.85% at December 31, 2005 . . . . . . . . . . . . . . . . . . . . . . .
Mortgage Note Payable — Variable Rate
Due in monthly installments of principal and interest; maturing
September 2008; interest at LIBOR + 2.75% (7.14% at
December 31, 2005) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premium on acquired indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total mortgage and other indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
F-23
Balance at December 31,
2005
2004
$ 92,950,000
$ 56,200,000
70,652,913
59,521,968
203,782,448
152,832,891
5,159,274
2,701,202
$375,245,837
10,785,757
4,138,747
$283,479,363
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 8. Mortgage Loans and Line of Credit (Continued)
LIBOR was 4.39% and 2.40% as of December 31, 2005 and 2004, respectively. Prime was 5.15% as of
December 31 2004. The Company had no Prime-based loans as of December 31, 2005.
Line of Credit
In August 2004, the Company and the Operating Partnership entered into a three-year, $150 million secured
revolving credit agreement with Lehman Commercial Paper, Inc. and Wachovia Bank, N.A. Borrowings under this
facility bear interest at a floating rate of LIBOR plus 135 to 160 basis points, depending on the Company’s leverage
ratio and are secured by certain of the Company’s properties. With the prior consent of the lenders we have the
option to increase our borrowings under the credit facility to a maximum of $250 million. The Company may also
extend the facility for one year, provided that no events of default exist and subject to an extension fee of $300,000.
The line of credit has a 0.125% to 0.25% commitment fee applicable to the unused amount at the end of each
calendar month. The amount that the Company may borrow under this facility is dependent on it maintaining a
minimum “borrowing base” of properties. As of December 31, 2005, approximately $117.1 million was available
for draw under the facility, of which approximately $93.0 million was outstanding. There are 32 properties available
to be added to the borrowing base (upon completion of the lender’s due diligence process) as additional funds are
required for potential additional borrowing capacity of in excess of $150 million. This facility will be used
principally to fund growth opportunities including acquisitions and development activities.
With the prior consent of the lenders, the Company has the option to increase its borrowings under the credit
facility to a maximum of $250 million. The credit facility also includes a short-term borrowing line of $20 million
available for same day borrowings. Borrowings under the short-term line may be outstanding for no more than
five days.
The following properties are encumbered by the line of credit as of December 31, 2005: Silver Glen
Crossing, Glendale Mall, Hamilton Crossing, Kings Lake Square, Waterford Lakes, Publix at Acworth, PEN
Products, Union Station Parking Garage, Galleria Plaza, Cedar Hill Village, Shops at Eagle Creek, Burlington
Coat, Stoney Creek Commons, Four Corner Square and Eastgate Pavilion.
The Company’s ability to borrow under this new credit facility will be subject to our ongoing compliance
with a number of financial and other covenants, including:
•
•
•
•
•
•
the Company’s amount of leverage;
a minimum interest coverage ratio;
the Company’s minimum tangible net worth;
a minimum fixed charge coverage ratio;
the collateral pool properties generating sufficient net operating income to maintain a certain fixed
charge ratio; and
the collateral pool properties maintaining a minimum aggregate occupancy rate.
Under the credit facility, the Company is permitted to make distributions to our shareholders of 95% of
its Funds From Operations provided that no event of default exists. If an event of default exists, we may only
make distributions sufficient to maintain our REIT status. As of December 31, 2005, the Company was in
compliance with all of the financial covenants under the credit facility.
F-24
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 8. Mortgage Loans and Line of Credit (Continued)
Mortgage and Construction Loans
Mortgage and construction loans are secured by certain real estate, are generally due in monthly installments
of interest and principal and mature over various terms through 2022. The range of interest rates on fixed rate
debt is 5.11% to 8.85%.
As of December 31, 2005, scheduled principal repayments on mortgage and other indebtedness were
as follows:
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized Premiums . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$ 69,405,389
104,235,904
23,496,307
30,234,040
2,810,776
142,362,219
372,544,635
2,701,202
$375,245,837
The carrying value of our variable rate construction notes payable, line of credit and mortgage notes payable
approximates their fair values. As of December 31, 2005, the fair value of fixed rate debt was approximately
$204.3 million compared to the book value of $203.8 million. The fair value was estimated using cash flows
discounted at current borrowing rates for similar instruments which ranged from 5.72% to 6.42%.
Debt Paid Off In Connection With the 2005 Equity Offering
In connection with the Company’s 2005 equity offering, the Company paid off a total of $112.6 million
of variable rate indebtedness bearing interest at rates ranging from LIBOR plus 135 to 250 basis points and Prime
plus accrued interest of $0.3 million.
Note 9. Derivative Financial Instruments
The Company is exposed to capital market risk, including changes in interest rates. In order to manage
volatility relating to interest rate risk, the Company may enter into interest rate hedging transactions from time
to time. The Company does not utilize derivative financial instruments for trading or speculative purposes.
During 2005, the Company entered into three interest rate swaps, totaling $65 million. The Company
designated these swaps as cash flow hedges to fix the rates on one of its variable rate construction loans and
on a portion of its revolving line of credit. These interest rate swaps qualify for hedge accounting under Statement
No. 133. At December 31, 2005, derivatives with a fair value of $427,057 were included in other assets. The
change in net unrealized income loss for the year ended December 31, 2005 was $427,057 and is recorded in
shareholders’ equity as other comprehensive income in 2006. We expect approximately $283,000 to be an offset
to interest expense as the hedged forecasted interest payments occur. No hedge ineffectiveness on cash flow
hedges was recognized during 2005.
F-25
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 9. Derivative Financial Instruments (Continued)
The following sets forth comprehensive income for the year ended December 31, 2005, for the period from
August 16, 1004 through December 31, 2004, for the period from January 1, 2004 through August 15, 2004
and for the year ended December 31, 2003:
Company
Company
Predecessor
Predecessor
Year ended
December 31,
2005
Period
August 16, 2004
through
December 31, 2004
Period
January 1, 2004
through
August 15, 2004
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $13,435,840
Other comprehensive income(1)
427,057
Comprehensive income (loss) . . . . . . . . . . . . . . . . . $13,862,897
. . . . . . . . . . . . . . .
$(332,322)
—
$(332,322)
$(192,380)
—
$(192,380)
Year ended
December 31,
2003
$1,436,966
—
$1,436,966
(1) Reflects the net change in the fair value of derivative instruments accounted for as cash flow hedges.
Note 10. Lease Information
Tenant Leases
The Company receives rental income from the leasing of retail and commercial space under operating leases.
The leases generally provide for certain increases in base rent, reimbursement for certain operating expenses
and may require tenants to pay contingent rentals to the extent their sales exceed a defined threshold. The
weighted average initial term of the lease agreements is approximately 16 years. Future minimum rentals to be
received under noncancellable operating leases for each of the next five years and thereafter, excluding tenant
reimbursements of operating expenses and percentage rent based on sales volume, as of December 31, 2005,
are as follows:
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$ 56,114,897
53,771,036
50,481,805
48,672,636
44,606,991
320,827,363
$574,474,728
Lease Commitments
The Company is obligated under six ground leases for approximately 35 acres of land with three landowners
which require fixed annual rent. The expiration dates of the initial terms of these ground leases range from 2012
to 2027. These leases have five to ten year extension options ranging in total from 20 to 30 years.
F-26
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 10. Lease Information (Continued)
Ground lease expense incurred by the Company for the year ended December 31, 2005, for the period from
January 1, 2004 through August 15, 2004 and for the period from August 16, 2004 through December 31, 2004
and in 2003 was $873,467, $144,176, $287,586 and $135,000, respectively. Future minimum lease payments
due under such leases for the next five years ending December 31 and thereafter are as follows:
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
$
856,800
906,300
918,300
920,800
920,800
13,208,370
$17,731,370
Note 11. Shareholders’ Equity and Limited Partner Interests
Common Equity
On October 3, 2005, the Company completed an offering of 8,500,000 common shares at a price of
$15.01 per share for gross proceeds of approximately $127.6 million. On October 28, 2005, the underwriters
of the offering exercised a portion of their overallotment option and purchased an additional 900,000 common
shares at the public offering price of $15.01 per share, which resulted in additional gross proceeds of
approximately $13.5 million. The Company used the net proceeds of this offering of approximately
$133.2 million, after deducting underwriting discounts, commissions and other expenses as follows:
•
•
•
•
•
to repay outstanding construction indebtedness of approximately $38.6 million and acquisition
indebtedness of approximately $0.5 million on our Traders Point properties;
to repay outstanding indebtedness on our Eagle Creek II development property and our Weston Park,
Shops at Otty and Circuit City operating properties totaling approximately $13.6 million;
to pay down our secured revolving credit facility by approximately $60.2 million;
to acquire an 85% interest in Bolton Plaza Shopping Center in Orange Park, Florida for approximately
$14.0 million; and
for general corporate purposes, including acquisition of land, capital expenditures, development costs
and working capital of approximately $6.3 million.
On July 29, 2005, the Company contributed approximately $4.0 million and 122,733 units of the Operating
Partnership valued at approximately $1.9 million for a 50% interest in a joint venture that owned 82 acres of
undeveloped land. Beacon Hill Shopping Center, Phase I consists of 36 acres and will be an estimated 161,000
square foot community shopping center (including 105,000 square feet of non-owned space). This project has
an estimated total cost of approximately $17.0 million and a projected opening date of the third quarter of 2006.
The remaining 46 acres is being marketed to a big box retailer.
On March 31, 2005, the Company acquired 32.7 acres of undeveloped land in Naples, Florida (Tarpon
Springs Plaza) at a price equal to Messrs. Al Kite, John Kite, Paul Kite and Tom McGowan’s net equity in the
F-27
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 11. Shareholders’ Equity and Limited Partner Interests (Continued)
property at cost plus the assumption of certain liabilities and the obligation to repay certain indebtedness. The
equity portion of the purchase price was paid through the issuance of 214,049 units of the Operating Partnership
valued at approximately $3.1 million.
In 2005, 4,820 restricted shares at a price of $15.55 per share were awarded to the members of our Board
of Trustees which vest over a four year period. The Company recognizes compensation expense related to
restricted share awards on a straight-line basis over the vesting period. Also in 2005, the Company issued 2,100
non-restricted shares at prices ranging from $14.59 to $15.15 per share to members of our Board of Trustees
in lieu of 50% of their annual retainer compensation.
The Company’s Board of Trustees has approved the 2004 Equity Incentive Plan. A total of 2,000,000 shares
have been reserved under this plan. During 2005, options to purchase a total of 105,000 shares were granted
under the Plan at exercise prices ranging from $14.68 to $15.29 per share. None of these share options were
exercisable as of December 31, 2005. During 2004, options to purchase 871,950 shares were granted under the
Plan at an exercise price of $13.00 per share. The options vest over a period of five years and expire 10 years
from the grant date. As of December 31, 2005, approximately 171,000 of these share options were exercisable.
Compensation expense is determined based on the fair market value of the options and is recognized over the
vesting period in accordance with the provisions of Statement No. 123(R). The fair market value of the options
at the dates of grant was $1.00 per share based on the following assumptions.
Dividend Yield . . . . . . . . . . . . . . . . . . . .
Expected life of option . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . .
Expected stock price volatility . . . .
5.77%
5 years
3.0%
15.0%
As of December 31, 2005, there are 1,023,050 shares available for grant under the Plan.
Limited Partner Interests
Concurrent with the Company’s IPO and related formation transactions, certain individuals received units of
the Operating Partnership in exchange for their interests in certain properties. Limited Partners were granted the
right to redeem Operating Partnership units on or after August 16, 2005 for cash in an amount equal to the market
value of an equivalent number of Common Shares at the time of redemption. The Company also has the right to
redeem the Operating Partnership units directly from the limited partner in exchange for either cash in the amount
specified above or a number of Common Shares equal to the number of units being redeemed. As of December 31,
2005, no Operating Partnership units were redeemed for cash or converted into Common Shares.
F-28
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 12. Segment Information
The Company and its Predecessor’s operations are aligned into two business segments: (i) real estate
operation and development and (ii) construction and advisory services. The Company’s segments operate in the
United States. Combined segment data of the Company and its Predecessor for the years ended December 31,
2005, 2004 and 2003 are as follows:
Year Ended
December 31, 2005
Real Estate
Operation and
Development
Construction
and
Advisory Services
Subtotal
Intersegment
Eliminations
Total
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,055,405
Operating expenses, cost of
$50,528,158
$122,583,563 $(23,218,708) $ 99,364,855
construction and services, general,
administrative and other . . . . . . . . . . .
Depreciation and amortization . . . . . . .
Operating income . . . . . . . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . . . . .
Income tax expense of taxable
REIT subsidiary . . . . . . . . . . . . . . . . . .
Equity in earnings of unconsolidated
23,801,274
21,611,586
26,642,545
17,915,170
(249,378)
45,470,595
179,550
4,878,013
530,830
(1,017,744)
69,271,869
21,791,136
31,520,558
18,446,000
(1,267,122)
(22,318,948)
46,952,921
— 21,791,136
(899,760)
(356,579)
—
30,620,798
18,089,421
(1,267,122)
—
1,041,463
1,041,463
252,511
—
—
1,041,463
252,511
entities . . . . . . . . . . . . . . . . . . . . . . . . . .
252,511
Operating income from discontinued
operations . . . . . . . . . . . . . . . . . . . . . . . .
Gain on sale of operating property . . .
Limited partners’ interests in
1,077,433
7,212,402
Operating Partnership . . . . . . . . . . . . .
(5,329,298)
—
—
—
—
1,077,433
7,212,402
1,077,433
—
7,212,402
(5,329,298)
—
(5,329,298)
Net income (loss) . . . . . . . . . . . . . . . . . . . $ 11,691,045
$ 2,287,976
$ 13,979,021 $
(543,181) $ 13,435,840
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $780,934,227
$36,472,950
$817,407,177 $(18,177,371) $799,229,806
F-29
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 12. Segment Information (Continued)
Year Ended
December 31, 2004
Real Estate
Operation and
Development
Construction
and
Advisory Services
Subtotal
Intersegment
Eliminations
Total
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 33,536,197
Operating expenses, cost of
$67,874,686
$101,410,883 $(54,129,707) $ 47,281,176
12,623,178
10,879,362
10,033,657
8,945,086
67,956,031
52,277
(133,622)
61,083
80,579,209
10,931,639
(53,093,433)
27,485,776
— 10,931,639
9,900,035
9,006,169
(1,036,274)
—
8,863,761
9,006,169
construction and services, general,
administrative and other . . . . . . . . . . .
Depreciation and amortization . . . . . . .
Operating income (loss) . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Loan prepayment penalties
and expenses . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . . . . .
Equity in earnings of
1,671,449
89,087
1,671,449
—
1,671,449
89,087
—
—
—
—
89,087
297,901
755,199
146,968
unconsolidated entities . . . . . . . . . . . .
297,901
Operating income from
discontinued operations . . . . . . . . . . .
755,199
Limited partners’ interests in
Operating Partnership . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . $
146,968
706,277
—
—
—
297,901
755,199
146,968
$ (194,705)
$
511,572 $ (1,036,274) $
(524,702)
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $563,861,792
$10,692,117
$574,553,909 $(11,010,138) $563,543,771
Year Ended
December 31, 2003
Real Estate
Operation and
Development
Construction
and
Advisory Services
Subtotal
Intersegment
Eliminations
Total
Revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10,906,923
Operating expenses, cost of
$30,563,597
$ 41,470,520 $(15,562,222) $ 25,908,298
construction and services, general,
administrative and other . . . . . . . . . . .
Depreciation and amortization . . . . . . .
Operating income (loss) . . . . . . . . . . . . .
Interest expense . . . . . . . . . . . . . . . . . . . .
Minority interest . . . . . . . . . . . . . . . . . . . .
Equity in earnings of
4,651,268
2,401,078
3,854,577
3,746,353
(232,819)
29,417,647
4,429
1,141,521
62,568
—
34,068,915
2,405,507
(15,052,222)
—
4,996,098
3,808,921
(232,819)
(510,000)
3,808,921
—
19,016,693
2,405,507
4,486,098
(232,819)
unconsolidated entities . . . . . . . . . . . .
273,118
—
273,118
—
273,118
Operating income from
discontinued operations . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . $
719,490
868,013
$ 1,078,953
$
1,946,966 $
(510,000) $
1,436,966
719,490
719,490
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . $160,279,464
$13,029,371
$173,308,835 $ (1,973,129) $171,335,706
F-30
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 13. Quarterly Financial Data (Unaudited)
Presented below is a summary of the consolidated and combined quarterly financial data for the years ended
December 31, 2005 and 2004. Certain prior period amounts have been reclassified from previously disclosed
amounts to conform with the current presentation including revenues and expenses reflecting the sale of
Mid-America Clinical Labs. Such reclassifications had no effect on net income previously reported.
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income from continuing operations . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common share — basic:
Income from continuing operations . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income per common share — diluted:
Income from continuing operations . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average Common Shares
The Company
Quarter Ended
March 31,
2005
Quarter Ended
June 30,
2005
Quarter Ended
September 30,
2005
Quarter Ended
December 31,
2005
$19,203,856
$ 2,293,741
$ 1,814,660
$22,296,468
$ 2,277,475
$ 1,750,939
$23,963,589
$ 2,596,578
$ 1,982,241
$33,900,942
$ 3,307,509
$ 7,888,000
$
$
$
$
0.08
0.09
0.08
0.09
$
$
$
$
0.08
0.09
0.08
0.09
$
$
$
$
0.09
0.10
0.09
0.10
$
$
$
$
0.09
0.28
0.09
0.28
outstanding — basic . . . . . . . . . . . . . . . . . . . . . . . . . .
— diluted . . . . . . . . . . . . . . . . . . . . . . . .
19,148,267
19,231,484
19,148,267
19,262,581
19,151,910
19,289,737
28,105,820
28,219,941
The Predecessor
The Company
Quarter
Ended
March 31,
2004
Quarter
Ended
June 30,
2004
Period July 1,
2004
through
August 15,
2004
Period August 16,
2004
through
September 30,
2004
$4,588,760
Total revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $6,322,960 $7,280,510
Income (loss) from continuing operations . . . $ 163,856 $ (535,101) $ (209,364)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . $ 331,076 $ (381,462) $ (141,994)
Net income (loss) per common
$ 6,881,300
$ (1,779,000)
$ (1,153,797)
Quarter
Ended
December 31,
2004
$22,207,646
932,740
$
821,475
$
share — basic:
Income (loss) from continuing operations . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) per common
share — diluted:
Income (loss) from continuing operations . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . .
Weighted average Common Shares
outstanding — basic . . . . . . . . . . . . . . . . . . . .
— diluted . . . . . . . . . . . . . . . . . .
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
$
$
$
$
(0.07)
(0.06)
(0.07)
(0.06)
$
$
$
$
0.03
0.04
0.03
0.04
17,800,441
17,800,441
19,148,267
19,277,703
F-31
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 14. Commitments and Contingencies (Continued)
The Company is not subject to any material litigation nor, to management’s knowledge, is any material
litigation currently threatened against the Company other than routine litigation, claims and administrative
proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims
and administrative proceedings will not have a material adverse impact on the Company’s consolidated financial
position or consolidated results of operations.
As of December 31, 2005, the Company had outstanding letters of credit totaling $2.9 million. At that date,
there were no amounts advanced against these instruments.
Joint venture debt is the liability of the joint venture and is typically secured by the joint venture property
and has limited recourse to us. As of December 31, 2005, the Company’s share of joint venture indebtedness
was approximately $8.6 million.
Note 15. Employee 401(k) Plan
The Company maintains a 401(k) plan for employees under which it matches 25% of the employee’s
contribution up to 3% of the employee’s salary not to exceed an annual maximum of $750. Effective January 1,
2006, this plan was amended to provide for a Company match of 100% of the employee’s contribution up to
3% of the employee’s salary and 50% of the employee’s contribution up to 5% of the employee’s salary. The
Company and the Predecessor contributed to this plan $30,345, $27,633 and $25,608 for the years ended
December 31, 2005, 2004 and 2003, respectively.
Note 16. Transactions With Related Parties
Common costs for management,
leasing, development, consulting, accounting,
legal, marketing and
management information systems are allocated to the various Company entities and certain other entities owned
by the Principals and not included as part of the Company (“Excluded Entities”). Common payroll and other related
costs are allocated proportionately based on an estimate of time spent on behalf of each entity. Management believes
the methodologies and assumptions used are reasonable. Common costs recovered from the Excluded Entities were
$1,739,124 for the period from January 1, 2004 through August 15, 2004 and $0 for the period from August 16,
2004 through December 31, 2004 and for the year ended December 31, 2005. Common costs totaling $1,461,128
were recovered from the Excluded Entities for the year ended December 31, 2003.
The Company received subcontractor interior construction services totaling $42,650, $3,131,471 and
$3,017,162 from Kite, Inc. (one of the Excluded Entities) during 2005, 2004 and 2003, respectively. The amounts
payable to Kite, Inc. as of December 31, 2005 and 2004 were $166,812 and $157,252, respectively and are
included in accounts payable in the accompanying consolidated balance sheets.
The Company received rental income from three Excluded Entities of $366,057 in 2005, $55,523 for the
period from January 1, 2004 through August 15, 2004, $43,502 for the period from August 16, 2004 through
December 31, 2004 and $12,170 for the year ended December 31, 2003.
In 2005, the Company entered into fee-based construction management contracts totaling $7,288,954 with
an Excluded Entity, Circle Block Partners, LLC.
On March 31, 2005, the Company acquired 32.7 acres of undeveloped land in Naples, Florida (Tarpon
Springs Plaza) at a price equal to Messrs. Al Kite, John Kite, Paul Kite and Tom McGowan’s net equity in the
F-32
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 16. Transactions With Related Parties (Continued)
property at cost plus the assumption of certain liabilities and the obligation to repay certain indebtedness. The
equity portion of the purchase price was paid through the issuance of 214,049 units of the Operating Partnership
valued at approximately $3.1 million.
Note 17. Recent Accounting Pronouncements
During 2005, the FASB issued FASB Interpretation No. 47, “Accounting for Conditional Asset Retirement
Obligations,” an interpretation of Statement of Financial Accounting Standards “FASB” Statement No. 143,
Asset Retirement Obligations (“FIN 47”). FIN 47 provides clarification of the term “conditional asset retirement
obligation” as used in SFAS 143, defined as a legal obligation to perform an asset retirement activity in which
the timing or method of settlement are conditional on a future event that may or may not be within the control
of the Company. Under this standard, a company must record a liability for a conditional asset retirement
obligation if the fair value of the obligation can be reasonably estimated. FIN 47 became effective for the
Company’s year ended December 31, 2005. The adoption of FIN 47 did not have a material effect on the
Company’s consolidated financial statements. Certain of the Company’s real estate assets contain asbestos. The
asbestos is appropriately contained, in accordance with current environmental regulations, and the Company has
no current plans to remove the asbestos. If these properties were demolished, certain environmental regulations
are in place which specify the manner in which the asbestos must be handled and disposed. Because the obligation
to remove the asbestos has an indeterminable settlement date, the Company is not able to reasonably estimate
the fair value of this asset retirement obligation.
In June 2005, the FASB ratified the consensus of the Emerging Issues Task Force (“EITF”) on Issue No. 04-5
“Determining Whether a General Partner, or the General Partners as a Group, controls a Limited Partnership
or Similar Entity When the Limited Partners Have Certain Rights”. This consensus establishes the presumption
that general partners in a limited partnership control that limited partnership regardless of the extent of the general
partners’ ownership interest in the limited partnership. The consensus further establishes that the rights of the
limited partners can overcome the presumption of control by the general partners if the limited partners have
either (a) the substantive ability to dissolve (liquidate) the limited partnership or otherwise remove the general
partners without cause or (b) substantive participating rights. Whether the presumption of control is overcome
is a matter of judgment based on the facts and circumstances, for which the consensus provides additional
guidance. The consensus is currently applicable to the Company for new or modified partnerships and will
otherwise be applicable to existing partnerships in 2006. This consensus applies to limited partnerships or similar
entities, such as limited liability companies that have governing provisions that are the functional equivalent
of a limited partnership. The Company will adopt this consensus as of January 1, 2006 and does not expect a
material effect on its consolidated financial position or results of operations.
In December 2004, the FASB issued Statement of Financial Accounting Standards No. 123 (revised 2004)
“Share-Based Payments” (“SFAS No. 123(R)”), which supersedes APB Opinion No. 25, Accounting for Stock Issued
to Employees and its related implementation guidance. SFAS No. 123(R) establishes standards for the accounting
for transactions in which an entity exchanges its equity instruments for goods and services. SFAS No 123(R) is
effective for fiscal years beginning after June 15, 2005. The impact of adopting SFAS No. 123(R) is not expected
to have a material impact on the Company’s financial condition or results of operations.
F-33
KITE REALTY GROUP TRUST AND
KITE PROPERTY GROUP (THE PREDECESSOR)
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
December 31, 2005
Note 18. Supplemental Schedule of Non-Cash Investing/Financing Activities
The following schedule summarizes the non-cash investing and financing activities of the Company for
the year ended December 31, 2005, for the period from August 16, 2004 through December 31, 2004, for the
period from January 1, 2004 through August 15, 2004 and for the year ended December 31, 2003:
Year Ended
December 31,
2005
Period
August 16, 2004
through
December 31,
2004
Period
January 1, 2004
through
August 15,
2004
Year Ended
December 31,
2003
Acquisition of real estate interests by
assumption of mortgage debt . . . . . . . . . . . . . . .
Acquisition of real estate interests by issuance
of Operating Partnership units . . . . . . . . . . . . . .
$16,168,557
$49,550,510
$5,644,553
5,054,818
—
—
$—
—
Note 19. Subsequent Events
On January 11, 2006, the Company refinanced its $17.4 million Sunland Towne Center mortgage loan
bearing a fixed interest rate of 8.85% with a bridge loan due April 11, 2006 and bearing interest at LIBOR plus
1.85%. The Company is exploring options to refinance this loan with fixed-rate debt.
F-34
T
S
U
R
T
P
U
O
R
G
Y
T
L
A
E
R
E
T
I
K
I
I
I
E
L
U
D
E
H
C
S
N
O
I
T
A
I
C
E
R
P
E
D
D
E
T
A
L
U
M
U
C
C
A
D
N
A
E
T
A
T
S
E
L
A
E
R
D
E
N
I
B
M
O
C
r
a
e
Y
d
e
r
i
u
q
c
A
/
t
l
i
u
B
r
a
e
Y
d
e
t
a
v
o
n
e
R
d
e
t
a
l
u
m
u
c
c
A
n
o
i
t
a
i
c
e
r
p
e
D
l
a
t
o
T
t
n
u
o
m
A
y
r
r
a
C
s
s
o
r
G
d
o
i
r
e
P
f
o
e
s
o
l
C
&
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
I
d
e
z
i
l
a
t
i
p
a
C
t
s
o
C
o
t
t
n
e
u
q
e
s
b
u
S
t
n
e
m
p
o
l
e
v
e
D
/
n
o
i
t
i
s
i
u
q
c
A
t
s
o
C
l
a
i
t
i
n
I
d
n
a
L
s
t
n
e
m
e
v
o
r
p
m
I
d
n
a
L
&
g
n
i
d
l
i
u
B
&
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
I
d
n
a
L
s
e
c
n
a
r
b
m
u
c
n
E
n
o
i
t
a
c
o
L
,
e
m
a
N
A
N
A
N
A
N
0
0
0
2
4
0
0
2
A
N
4
8
9
1
4
0
0
2
9
9
9
1
4
0
0
2
3
0
0
2
3
0
0
2
A
N
3
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
4
0
0
2
0
0
0
2
A
N
A
N
A
N
A
N
5
0
0
2
5
0
0
2
5
0
0
2
5
0
0
2
5
0
0
2
A
N
A
N
A
N
A
N
A
N
4
0
0
2
4
0
0
2
4
0
0
2
0
0
0
2
/
2
9
9
1
2
0
0
2
4
0
0
2
3
0
0
2
/
4
8
9
1
5
9
9
1
0
0
0
2
/
8
5
9
1
7
9
9
1
8
9
9
1
6
8
9
1
4
0
0
2
2
0
0
2
2
0
0
2
0
9
9
1
0
0
0
2
5
9
9
1
8
9
9
1
/
0
7
9
1
2
0
0
2
9
9
9
1
2
0
0
2
6
9
9
1
7
9
9
1
9
9
9
1
0
0
0
2
2
0
0
2
8
9
9
1
0
0
0
2
6
8
9
1
4
0
0
2
/
7
9
9
1
2
0
0
2
4
0
0
2
4
0
0
2
/
0
7
9
1
5
0
0
2
5
0
0
2
5
0
0
2
5
0
0
2
5
0
0
2
)
d
e
u
n
i
t
n
o
C
(
3
2
7
0
1
1
,
7
9
5
,
5
2
1
1
5
1
6
6
,
2
1
3
9
2
4
,
5
3
7
6
4
2
,
0
4
0
5
1
3
,
$
,
9
8
6
5
5
9
1
,
,
0
8
9
7
1
0
1
,
,
1
1
3
8
1
2
3
,
,
3
1
2
1
4
9
7
,
,
2
4
1
2
8
3
7
,
,
3
1
6
6
2
5
4
,
,
2
0
4
8
7
9
9
2
,
,
8
2
7
5
9
2
8
,
,
3
6
1
4
2
1
1
3
,
3
1
4
5
0
4
,
5
6
3
,
6
7
5
2
8
7
2
4
7
,
1
9
7
,
5
5
5
,
9
3
6
8
5
7
1
,
,
5
2
3
8
2
8
9
,
2
0
0
,
9
4
5
,
5
1
,
9
6
0
9
4
6
2
1
,
4
9
9
,
7
2
9
,
2
1
,
4
9
4
4
8
9
2
2
,
5
9
9
,
5
9
0
,
1
9
7
8
,
3
9
3
,
2
3
6
3
,
9
3
3
,
2
6
9
7
,
9
8
3
9
6
7
3
3
5
,
3
0
7
1
3
3
,
6
6
2
,
5
7
5
8
3
5
0
0
4
,
2
6
1
,
3
7
3
,
4
2
0
6
6
,
1
1
5
,
3
1
2
8
1
,
3
4
7
,
5
4
,
4
8
8
1
4
0
1
1
,
,
0
7
0
5
9
8
9
,
,
1
7
9
2
7
4
6
,
7
2
7
,
4
3
9
,
5
1
,
2
0
7
4
4
3
0
1
,
,
0
7
7
2
4
6
5
3
,
,
3
6
4
3
4
6
9
,
,
7
9
1
7
6
4
7
2
,
,
1
1
3
8
1
2
3
,
8
6
5
9
0
6
,
,
6
2
4
1
,
2
8
4
,
5
7
9
6
,
2
2
2
,
4
5
4
2
,
6
4
0
,
1
2
3
1
6
,
6
8
9
,
8
2
6
4
9
,
6
3
4
,
8
5
5
1
1
9
0
,
,
7
9
6
0
,
7
5
1
,
8
,
9
6
4
5
6
7
8
,
,
4
9
4
9
1
4
8
1
,
,
0
9
9
5
2
6
3
1
,
,
3
5
8
8
1
8
9
,
,
8
7
8
8
0
0
0
4
,
,
4
9
8
4
8
2
6
,
,
7
9
6
4
1
0
5
,
,
1
7
9
2
7
4
6
,
7
2
7
,
8
5
3
,
8
0
5
2
9
6
2
,
,
0
1
,
4
3
2
0
3
0
1
2
,
9
8
7
,
4
9
3
,
7
,
7
9
1
7
0
9
0
2
,
,
4
4
7
6
6
7
5
,
7
1
5
,
3
3
9
,
4
$
,
3
1
8
8
7
7
2
,
,
7
1
5
3
3
0
3
,
,
6
1
4
0
3
2
2
,
,
6
1
4
0
3
2
2
,
,
5
1
5
7
6
3
1
,
2
0
7
2
5
4
,
,
2
4
5
3
7
6
3
,
6
4
9
,
8
6
1
6
2
8
7
0
6
,
,
5
9
2
2
4
0
2
,
–
6
5
0
,
6
3
2
6
8
6
,
2
7
6
2
5
3
,
9
0
4
1
0
7
,
5
3
6
1
2
6
8
6
,
5
6
0
,
4
1
5
0
2
3
6
8
9
,
4
0
8
3
3
,
9
8
8
0
4
,
9
6
9
8
2
,
5
1
6
,
9
0
6
6
5
1
,
1
1
2
,
7
3
7
1
9
,
8
7
9
,
9
8
1
1
3
0
4
,
3
2
2
,
0
0
7
,
9
3
0
6
,
3
4
0
,
1
7
3
8
,
5
9
0
,
4
1
0
7
0
,
5
7
6
,
6
1
5
5
7
,
0
1
3
,
5
1
4
0
6
,
0
2
2
,
5
3
,
4
6
6
6
5
8
8
2
,
6
3
3
,
9
7
4
,
0
2
,
0
0
1
7
4
2
1
4
,
,
2
6
3
6
6
3
3
,
,
0
5
8
9
4
6
1
,
,
6
0
5
6
3
8
1
,
8
1
8
,
0
8
3
,
8
1
–
5
0
7
,
8
7
8
9
8
1
,
5
9
0
,
3
6
6
3
,
2
0
1
,
6
8
4
4
5
3
5
,
,
0
1
0
7
0
,
5
9
4
,
1
1
9
4
4
,
1
2
0
,
0
1
4
0
6
,
0
2
6
,
0
3
9
1
8
,
4
5
3
,
8
1
0
0
3
,
5
0
2
,
4
1
1
6
6
,
6
9
8
,
0
3
5
8
0
,
5
0
5
,
1
1
6
2
,
3
6
7
9
3
9
,
8
9
1
,
1
4
5
6
4
0
7
,
,
4
1
$
1
3
9
,
7
8
9
,
2
0
0
0
,
0
0
9
,
1
$
–
—
–
–
6
1
9
,
3
0
3
5
4
6
,
1
3
3
,
1
0
0
0
,
0
0
9
,
1
7
5
1
,
2
3
9
,
8
0
5
5
,
7
3
1
,
2
9
7
3
,
1
9
3
,
1
7
4
8
,
7
5
4
,
8
0
0
0
,
2
9
4
,
4
5
2
5
,
2
6
1
,
4
0
0
0
,
5
6
5
,
4
–
7
0
8
,
2
9
6
,
3
4
0
3
,
4
3
7
,
5
0
9
9
,
6
5
7
,
4
3
7
3
,
0
8
8
,
4
2
7
1
,
7
4
7
,
0
1
7
7
4
,
5
6
6
,
5
5
7
9
,
5
8
9
,
1
6
3
5
,
2
1
6
,
4
1
4
7
6
,
8
4
2
,
2
0
0
0
,
0
6
5
,
6
2
1
2
,
0
0
1
0
0
0
,
6
3
9
7
5
8
,
7
9
5
,
3
3
0
6
,
3
4
0
,
1
9
8
3
,
0
6
5
,
3
0
0
0
,
0
8
1
,
5
6
0
3
,
9
8
2
,
5
0
0
0
,
0
0
6
,
4
6
3
0
,
4
7
2
,
6
5
4
8
,
1
0
5
,
0
1
7
7
2
,
1
6
8
,
1
9
3
4
,
0
5
3
,
0
1
9
8
5
,
6
8
8
7
6
5
,
7
3
6
4
6
1
,
6
7
6
,
3
–
–
–
–
2
9
1
,
3
7
1
–
1
9
4
,
8
5
2
8
1
,
3
3
9
1
5
3
,
9
6
2
5
1
3
,
2
2
4
–
8
1
7
,
0
6
9
–
7
1
7
,
4
5
2
–
–
–
–
0
0
4
,
8
9
1
9
0
0
0
,
1
–
–
–
6
2
4
,
0
6
7
1
8
,
2
6
4
–
–
–
–
–
–
–
–
–
–
–
–
$
—
$
–
–
–
–
–
–
–
–
–
7
8
0
,
0
0
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3
1
8
,
8
7
7
,
2
7
1
5
,
3
3
0
,
3
4
2
2
,
7
5
0
,
2
1
1
3
,
8
1
2
,
3
6
8
3
,
6
7
6
,
5
2
4
1
,
2
8
4
,
5
6
0
2
,
4
6
1
,
4
5
4
2
,
6
4
0
,
1
2
3
1
6
,
6
8
9
,
8
2
6
4
9
,
6
3
4
,
8
4
0
8
,
1
2
8
,
6
4
5
7
,
4
3
7
,
7
9
6
4
,
5
6
7
,
8
6
7
7
,
8
5
4
,
7
1
0
9
9
,
5
2
6
,
3
1
6
3
1
,
4
6
5
,
9
8
7
8
,
8
0
0
,
0
4
4
9
8
,
4
8
2
,
6
7
9
2
,
6
0
0
,
5
1
7
9
,
2
7
4
,
6
7
2
7
,
7
5
3
,
8
0
5
2
,
9
6
2
,
0
1
9
8
7
,
4
9
3
,
7
5
1
3
,
9
2
0
,
1
2
7
9
1
,
7
0
9
,
0
2
5
0
7
,
8
7
8
2
7
3
,
2
3
6
,
2
0
4
9
,
1
4
0
,
6
–
8
4
4
,
5
3
5
,
0
1
0
7
0
,
5
9
4
,
1
1
9
4
4
,
1
2
0
,
0
1
4
0
6
,
0
2
6
,
0
3
9
1
8
,
4
5
3
,
8
1
0
0
3
,
5
0
2
,
4
1
1
6
6
,
6
9
8
,
0
3
5
8
0
,
5
0
5
,
1
1
6
2
,
3
6
7
9
3
9
,
8
9
1
,
1
4
5
6
,
4
0
7
,
4
1
$
1
3
9
,
7
8
9
,
2
0
0
0
,
0
0
9
,
1
$
8
2
1
,
7
3
6
,
4
0
8
8
,
2
1
2
,
4
$
–
–
6
1
9
,
3
0
3
5
4
6
,
1
3
3
,
1
0
0
0
,
0
0
9
,
1
7
5
1
,
2
3
9
,
8
0
5
5
,
7
3
1
,
2
9
7
3
,
1
9
3
,
1
0
6
7
,
7
5
2
,
8
0
0
0
,
2
9
4
,
4
5
2
5
,
2
6
1
,
4
0
0
0
,
5
6
5
,
4
–
–
–
–
–
–
–
–
–
4
2
1
,
6
6
8
,
1
0
1
0
,
6
8
4
,
2
1
3
6
8
,
8
2
7
,
6
1
2
7
1
,
7
4
7
,
0
1
–
–
7
0
8
,
2
9
6
,
3
4
0
3
,
4
3
7
,
5
0
9
9
,
6
5
7
,
4
3
7
3
,
0
8
8
,
4
7
7
4
,
5
6
6
,
5
5
7
9
,
5
8
9
,
1
6
3
5
,
2
1
6
,
4
1
4
7
6
,
8
4
2
,
2
0
0
0
,
0
6
5
,
6
2
1
2
,
0
0
1
0
0
0
,
6
3
9
7
5
8
,
7
9
5
,
3
3
0
6
,
3
4
0
,
1
9
8
3
,
0
6
5
,
3
0
0
0
,
0
8
1
,
5
6
0
3
,
9
8
2
,
5
0
0
0
,
0
0
6
,
4
5
4
8
,
1
0
5
,
0
1
6
3
0
,
4
7
2
,
6
7
7
2
,
1
6
8
,
1
9
3
4
,
0
5
3
,
0
1
9
8
5
,
6
8
8
7
6
5
,
7
3
6
4
6
1
,
6
7
6
,
3
–
–
–
–
4
7
2
,
9
5
1
,
5
1
6
0
,
4
9
9
,
6
2
–
–
8
0
7
,
1
1
3
,
4
5
7
7
,
7
1
4
,
7
1
–
–
0
4
1
,
1
9
5
,
4
3
9
3
,
1
9
6
,
9
1
8
0
,
4
9
6
,
9
1
0
0
0
,
0
0
3
,
3
1
5
0
4
,
5
2
1
,
2
1
0
0
0
,
0
8
6
,
8
2
–
0
0
8
,
4
9
8
,
6
1
–
–
–
–
—
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
r
e
t
n
e
C
g
n
i
p
p
o
h
S
.
.
.
.
.
h
t
2
1
&
h
t
0
5
n
a
i
d
i
r
e
M
&
.
.
.
.
y
t
t
O
&
h
t
6
7
1
d
n
2
8
*
t
a
o
C
n
o
t
g
n
i
l
r
u
B
*
e
g
a
l
l
i
V
l
l
i
H
r
a
d
e
C
.
.
.
.
.
.
a
z
a
l
P
y
t
i
C
t
i
u
c
r
i
C
.
.
.
.
.
r
e
n
r
o
C
e
h
T
*
.
.
n
o
i
l
i
v
a
P
e
t
a
g
t
s
a
E
*
l
l
a
M
e
l
a
d
n
e
l
G
*
k
e
e
r
C
e
l
g
a
E
t
a
*
e
r
a
u
q
S
e
k
a
L
*
h
t
r
o
w
c
A
t
a
x
i
l
b
u
P
s
p
o
h
S
s
’
g
n
i
K
g
n
i
s
s
o
r
C
d
r
a
v
e
l
u
o
B
*
s
g
n
i
s
s
o
r
C
n
e
l
G
.
.
.
.
.
.
.
a
z
a
l
P
e
g
d
i
R
r
e
v
l
i
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
i
t
a
t
S
s
r
e
h
s
i
F
l
l
i
H
r
a
d
e
C
t
a
a
z
a
l
P
*
e
r
a
u
q
S
r
e
n
r
o
C
r
u
o
F
.
.
.
.
.
.
.
.
.
a
z
a
l
P
t
r
a
M
-
l
a
W
*
a
z
a
l
P
a
i
r
e
l
l
a
G
.
.
.
.
a
l
o
n
a
P
t
a
e
r
t
n
e
C
*
g
n
i
s
s
o
r
C
n
o
t
l
i
m
a
H
e
r
t
n
e
C
e
n
w
o
T
d
n
a
l
n
u
S
.
.
.
*
s
e
k
a
L
d
r
o
f
r
e
t
a
W
e
r
a
u
q
S
y
a
w
d
e
e
p
S
l
a
n
o
i
t
a
n
r
e
t
n
I
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
n
o
t
r
o
M
h
t
u
o
S
0
5
.
.
.
e
k
i
P
l
l
a
h
e
t
i
h
W
s
n
o
m
m
o
C
n
o
t
s
e
r
P
*
s
n
o
m
m
o
C
k
e
e
r
C
y
e
n
o
t
S
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
a
z
a
l
P
n
o
t
l
o
B
e
r
a
u
q
S
r
e
v
i
R
n
a
i
d
n
I
.
.
g
n
i
s
s
o
r
C
e
k
a
L
x
o
F
.
.
.
.
e
t
n
e
l
o
V
a
z
a
l
P
e
g
a
l
l
i
V
t
e
e
r
t
S
t
e
k
r
a
M
.
s
n
o
m
m
o
C
k
e
e
r
C
l
o
o
C
.
.
.
.
.
.
.
.
.
.
.
.
t
n
i
o
P
s
r
e
d
a
r
T
s
n
o
m
m
o
C
d
n
u
o
h
y
e
r
G
.
.
.
.
.
.
.
.
.
.
.
.
k
r
a
P
n
o
t
s
e
W
.
s
p
o
h
S
e
l
l
i
v
s
n
i
t
r
a
M
.
.
.
.
.
.
.
.
.
.
.
r
e
h
t
O
s
r
e
t
n
e
C
g
n
i
p
p
o
h
S
l
a
t
o
T
F-35
,
7
2
0
4
8
9
3
9
5
,
5
8
4
,
2
4
0
,
2
3
4
2
4
5
,
1
4
9
,
1
6
1
8
2
5
,
5
0
6
,
3
7
8
0
,
0
0
2
7
5
9
,
6
3
4
,
8
2
4
5
5
4
,
1
4
7
,
1
6
1
2
4
6
,
0
9
7
,
8
9
1
r
a
e
Y
d
e
r
i
u
q
c
A
/
t
l
i
u
B
r
a
e
Y
d
e
t
a
v
o
n
e
R
d
e
t
a
l
u
m
u
c
c
A
n
o
i
t
a
i
c
e
r
p
e
D
l
a
t
o
T
t
n
u
o
m
A
y
r
r
a
C
s
s
o
r
G
d
o
i
r
e
P
f
o
e
s
o
l
C
&
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
I
d
e
z
i
l
a
t
i
p
a
C
t
s
o
C
o
t
t
n
e
u
q
e
s
b
u
S
t
n
e
m
p
o
l
e
v
e
D
/
n
o
i
t
i
s
i
u
q
c
A
t
s
o
C
l
a
i
t
i
n
I
d
n
a
L
&
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
I
&
g
n
i
d
l
i
u
B
d
n
a
L
s
t
n
e
m
e
v
o
r
p
m
I
d
n
a
L
s
e
c
n
a
r
b
m
u
c
n
E
)
d
e
u
n
i
t
n
o
C
(
N
O
I
T
A
I
C
E
R
P
E
D
D
E
T
A
L
U
M
U
C
C
A
D
N
A
E
T
A
T
S
E
L
A
E
R
D
E
N
I
B
M
O
C
T
S
U
R
T
P
U
O
R
G
Y
T
L
A
E
R
E
T
I
K
I
I
I
E
L
U
D
E
H
C
S
5
0
0
2
5
0
0
2
5
0
0
2
5
0
0
2
–
–
6
8
5
8
2
,
2
9
6
7
5
,
4
8
2
6
3
,
–
–
–
–
–
–
–
–
–
–
)
d
e
u
n
i
t
n
o
C
(
2
6
5
,
2
2
1
7
6
9
,
2
4
9
2
6
1
,
9
1
2
,
2
–
–
,
2
2
5
3
5
4
9
,
,
9
5
5
4
5
4
5
,
4
3
2
,
4
1
3
,
8
1
3
2
,
6
4
0
,
4
,
4
6
7
0
5
1
8
,
4
6
7
,
0
0
0
,
6
8
6
4
7
1
5
,
–
,
2
9
5
1
4
8
2
,
,
8
4
3
8
0
6
0
1
,
,
8
2
5
9
4
3
1
1
,
2
0
8
,
0
4
2
,
1
8
1
0
,
8
6
3
,
4
8
3
8
,
4
6
2
,
1
3
2
4
,
9
1
5
,
5
9
5
4
,
5
3
6
,
9
3
1
7
,
2
2
3
,
5
6
6
7
8
7
1
,
,
0
4
8
1
4
9
1
,
,
7
7
6
5
8
7
3
,
1
4
4
5
6
4
,
,
3
1
1
8
0
2
1
,
–
6
8
7
,
6
7
6
3
5
6
,
4
1
6
,
6
5
6
8
7
0
,
2
3
1
1
8
,
8
3
7
,
8
8
2
1
4
4
,
5
6
4
0
3
2
,
6
8
5
,
2
1
6
7
,
2
9
2
,
1
2
,
8
0
8
0
4
8
,
1
1
8
8
2
,
9
3
1
,
1
8
2
3
,
8
0
4
,
1
2
6
1
,
9
1
2
,
2
7
6
9
,
2
4
9
0
0
0
,
0
5
1
,
2
8
6
4
,
7
1
5
0
9
7
,
0
0
6
,
1
0
3
3
,
0
4
2
,
6
0
9
6
,
4
8
0
,
0
1
3
5
9
,
1
5
4
,
9
7
3
6
,
2
4
8
,
4
3
0
8
,
6
5
5
,
7
0
6
0
,
8
0
7
,
4
6
6
7
,
8
7
1
2
0
1
,
3
5
6
,
1
7
4
4
,
9
9
1
,
1
–
0
0
0
,
0
0
2
,
1
,
3
0
1
8
8
8
0
0
1
,
2
1
3
,
4
9
7
,
3
4
1
9
7
,
3
9
0
,
7
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
A
N
A
N
1
0
0
2
1
0
0
2
4
0
0
2
3
0
0
2
1
0
0
2
/
9
2
9
1
/
5
0
9
1
6
8
9
1
2
7
3
0
4
1
,
9
0
9
2
7
4
,
8
7
3
,
1
7
2
1
0
1
,
3
3
8
,
1
,
8
9
1
8
7
3
4
,
9
9
0
,
2
7
5
,
5
8
9
4
,
5
0
2
,
3
,
6
8
0
4
3
9
6
1
,
8
9
1
,
8
7
3
,
4
,
9
9
0
2
7
5
,
5
,
1
7
8
1
2
4
,
2
,
0
4
6
4
3
0
,
6
1
–
–
6
4
4
,
9
9
8
7
2
6
,
3
8
7
–
3
7
2
,
8
5
2
7
1
7
,
2
0
2
6
0
1
,
6
7
8
,
4
0
6
7
,
7
1
7
,
2
1
8
8
,
9
8
0
,
0
3
,
8
0
8
6
0
4
,
8
2
3
7
0
,
3
8
6
,
1
6
9
0
,
7
3
3
,
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8
9
1
,
8
7
3
,
4
2
8
3
,
9
6
3
,
5
8
9
5
,
3
6
1
,
2
4
3
5
,
8
5
1
,
1
1
–
–
6
4
4
,
9
9
8
7
2
6
,
3
8
7
–
1
8
7
,
3
6
0
,
4
9
9
0
,
2
8
9
,
2
2
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
–
*
e
g
a
r
a
G
g
n
i
k
r
a
P
n
o
i
t
a
t
S
2
1
7
,
9
6
0
,
3
2
3
7
0
,
3
8
6
,
1
0
8
8
,
5
4
0
,
7
2
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
r
e
p
o
r
P
l
a
i
c
r
e
m
m
o
C
l
a
t
o
T
l
o
o
P
r
o
t
o
M
e
t
a
t
S
a
n
a
i
d
n
I
s
e
i
t
r
e
p
o
r
P
l
a
i
c
r
e
m
m
o
C
n
o
i
t
a
c
o
L
,
e
m
a
N
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
h
t
u
o
S
*
s
t
c
u
d
o
r
P
N
E
P
y
t
r
i
h
T
n
o
i
n
U
–
–
4
3
2
,
4
1
3
,
8
1
3
2
,
6
4
0
,
4
–
4
6
7
,
0
0
0
,
6
2
0
8
,
0
4
2
,
1
8
1
0
,
8
6
3
,
4
8
3
8
,
4
6
2
,
1
8
0
8
,
0
4
8
,
1
1
3
5
6
,
4
1
6
6
8
7
,
6
7
6
6
5
6
,
8
7
0
,
2
–
3
1
1
,
8
8
3
7
,
8
8
2
1
4
4
,
5
6
4
0
3
2
,
6
8
5
,
2
8
8
2
,
9
3
1
,
1
8
2
3
,
8
0
4
,
1
2
6
1
,
9
1
2
,
2
7
6
9
,
2
4
9
0
0
0
,
0
5
1
,
2
8
6
4
,
7
1
5
0
9
7
,
0
0
6
,
1
0
3
3
,
0
4
2
,
6
0
9
6
,
4
8
0
,
0
1
3
5
9
,
1
5
4
,
9
7
3
6
,
2
4
8
,
4
3
0
8
,
6
5
5
,
7
0
6
0
,
8
0
7
,
4
6
6
7
,
8
7
1
2
0
1
,
3
5
6
,
1
7
4
4
,
9
9
1
,
1
–
0
0
0
,
0
0
2
,
1
–
–
4
5
5
,
1
6
7
,
7
6
4
2
,
5
2
4
,
4
–
–
6
2
6
,
5
9
5
,
7
9
2
2
,
7
4
7
,
4
0
8
5
,
4
0
8
,
7
7
3
9
,
2
9
0
,
6
1
–
9
5
9
,
0
1
1
,
4
–
–
2
8
9
,
9
1
2
,
1
–
–
–
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
r
e
t
n
e
C
g
n
i
p
p
o
h
S
.
.
e
c
a
l
p
t
e
k
r
a
M
l
l
i
H
n
o
c
a
e
B
r
e
t
a
w
e
g
d
i
r
B
r
e
t
n
e
C
g
n
i
p
p
o
h
S
y
a
w
e
t
a
G
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
a
z
a
l
P
r
u
f
i
d
n
a
S
y
a
w
e
t
a
G
s
u
i
l
e
n
r
o
C
.
t
n
e
m
p
o
l
e
v
e
D
R
K
t
n
e
m
p
o
l
e
v
e
D
G
R
K
I
I
s
n
o
m
m
o
C
k
e
e
r
C
y
e
n
o
t
S
t
n
e
m
p
o
l
e
v
e
D
l
a
t
o
T
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
r
e
p
o
r
P
t
n
e
m
p
o
l
e
v
e
D
.
.
.
.
.
*
*
n
o
i
l
i
v
a
P
t
s
i
e
G
*
*
s
n
o
m
m
o
C
k
n
a
B
d
e
R
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
I
I
I
I
I
k
e
e
r
C
e
l
g
a
E
k
e
e
r
C
e
l
g
a
E
*
*
I
I
I
I
I
t
n
i
o
P
t
n
i
o
P
s
r
e
d
a
r
T
s
r
e
d
a
r
T
e
c
a
l
P
e
l
l
i
v
s
n
o
i
Z
s
n
o
m
m
o
C
n
w
o
T
o
r
e
t
s
E
e
c
a
l
p
t
e
k
r
a
M
e
l
l
i
v
r
e
p
a
N
a
z
a
l
P
s
g
n
i
r
p
S
n
o
p
r
a
T
F-36
2
1
3
,
4
9
7
,
3
4
1
9
7
,
3
9
0
,
7
5
3
1
1
,
8
5
7
,
3
5
.
.
.
.
.
.
.
.
.
.
.
.
s
e
i
t
r
e
p
o
r
P
r
a
e
Y
d
e
r
i
u
q
c
A
/
t
l
i
u
B
r
a
e
Y
d
e
t
a
v
o
n
e
R
d
e
t
a
l
u
m
u
c
c
A
n
o
i
t
a
i
c
e
r
p
e
D
l
a
t
o
T
t
n
u
o
m
A
y
r
r
a
C
s
s
o
r
G
d
o
i
r
e
P
f
o
e
s
o
l
C
&
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
I
d
e
z
i
l
a
t
i
p
a
C
t
s
o
C
o
t
t
n
e
u
q
e
s
b
u
S
t
n
e
m
p
o
l
e
v
e
D
/
n
o
i
t
i
s
i
u
q
c
A
t
s
o
C
l
a
i
t
i
n
I
d
n
a
L
s
t
n
e
m
e
v
o
r
p
m
I
d
n
a
L
&
g
n
i
d
l
i
u
B
&
g
n
i
d
l
i
u
B
s
t
n
e
m
e
v
o
r
p
m
I
d
n
a
L
s
e
c
n
a
r
b
m
u
c
n
E
)
d
e
u
n
i
t
n
o
C
(
N
O
I
T
A
I
C
E
R
P
E
D
D
E
T
A
L
U
M
U
C
C
A
D
N
A
E
T
A
T
S
E
L
A
E
R
D
E
N
I
B
M
O
C
T
S
U
R
T
P
U
O
R
G
Y
T
L
A
E
R
E
T
I
K
I
I
I
E
L
U
D
E
H
C
S
–
–
7
0
5
7
8
1
,
5
9
7
0
0
1
,
0
0
0
6
8
1
,
6
2
9
,
5
3
2
,
3
4
8
4
,
8
5
1
,
1
5
9
5
3
9
2
,
0
5
4
,
6
5
5
,
2
8
6
4
,
7
2
2
,
1
1
6
6
,
3
6
8
,
1
1
0
0
6
,
6
8
2
,
9
1
,
6
0
0
4
6
2
1
,
,
0
7
0
8
6
9
2
,
,
8
4
4
3
9
5
5
,
,
0
1
0
2
2
9
9
4
,
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7
0
5
,
7
8
1
5
9
7
,
0
0
1
0
0
0
,
6
8
1
6
2
9
,
5
3
2
,
3
4
8
4
,
8
5
1
,
1
5
9
5
,
3
9
2
0
5
4
,
6
5
5
,
2
8
6
4
,
7
2
2
,
1
1
6
6
,
3
6
8
,
1
1
0
0
6
,
6
8
2
,
9
1
6
0
0
,
4
6
2
,
1
0
7
0
,
8
6
9
,
2
8
4
4
,
3
9
5
,
5
0
1
0
,
2
2
9
,
9
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7
0
5
,
7
8
1
5
9
7
,
0
0
1
0
0
0
,
6
8
1
6
2
9
,
5
3
2
,
3
4
8
4
,
8
5
1
,
1
5
9
5
,
3
9
2
0
5
4
,
6
5
5
,
2
8
6
4
,
7
2
2
,
1
1
6
6
,
3
6
8
,
1
1
0
0
6
,
6
8
2
,
9
1
6
0
0
,
4
6
2
,
1
0
7
0
,
8
6
9
,
2
8
4
4
,
3
9
5
,
5
0
1
0
,
2
2
9
,
9
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0
0
0
,
0
5
9
,
2
9
7
7
4
,
1
5
0
,
0
4
$
1
2
0
,
4
8
8
,
4
7
7
$
5
0
6
,
3
4
2
,
4
0
5
$
6
1
4
,
0
4
6
,
0
7
2
$
4
2
6
,
2
4
9
,
8
$
7
8
0
,
0
0
2
$
1
8
9
,
0
0
3
,
5
9
4
$
9
2
3
,
0
4
4
,
0
7
2
$
5
3
6
,
4
4
5
,
2
7
3
$
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
.
e
v
A
n
o
t
g
n
i
t
n
u
H
.
.
I
I
I
d
n
u
o
h
y
e
r
G
I
I
l
l
i
M
g
n
i
r
p
S
s
e
g
d
i
r
B
o
c
s
i
r
F
.
.
.
.
k
r
a
P
n
o
t
s
e
W
s
p
o
h
S
e
l
l
i
v
s
n
i
t
r
a
M
n
o
t
r
o
M
n
o
s
r
e
f
f
e
J
)
*
*
*
(
r
e
h
t
O
n
o
i
t
a
c
o
L
,
e
m
a
N
.
.
.
.
.
.
.
.
.
.
S
S
I
G
R
K
s
e
n
i
P
e
k
o
r
b
m
e
P
.
.
.
.
.
.
o
i
l
O
&
h
t
6
9
h
c
a
e
B
y
a
r
l
e
D
I
I
g
n
i
s
s
o
r
C
e
k
a
L
x
o
F
.
.
.
.
.
.
.
.
r
e
h
t
O
l
a
t
o
T
.
.
.
.
.
1
4
&
1
5
9
.
.
.
.
.
.
.
l
a
t
o
T
d
n
a
r
G
*
e
e
s
—
t
i
d
e
r
c
f
o
e
n
i
L
F-37
g
n
i
d
n
a
t
s
t
u
o
s
a
w
n
o
i
l
l
i
m
0
3
9
$
.
y
l
e
t
a
m
i
x
o
r
p
p
A
.
c
n
I
,
r
e
p
a
P
l
a
i
c
r
e
m
m
o
C
n
a
m
h
e
L
d
n
a
C
L
L
,
s
t
e
k
r
a
M
l
a
t
i
p
a
C
a
i
v
o
h
c
a
W
h
t
i
w
t
i
d
e
r
c
f
o
e
n
i
l
s
’
y
n
a
p
m
o
C
e
h
t
r
e
d
n
u
d
e
r
e
b
m
u
c
n
e
s
i
y
t
r
e
p
o
r
p
s
i
h
T
*
.
5
0
0
2
,
1
3
r
e
b
m
e
c
e
D
f
o
s
a
t
i
d
e
r
c
f
o
e
n
i
l
s
i
h
t
r
e
d
n
u
.
5
0
0
2
g
n
i
r
u
d
d
e
n
e
p
o
y
l
l
a
i
t
r
a
p
y
t
r
e
p
o
r
p
s
i
h
T
*
*
d
e
d
u
l
c
n
i
e
r
a
s
t
n
u
o
m
a
h
c
i
h
w
,
s
e
i
t
r
e
p
o
r
p
g
n
i
t
a
r
e
p
o
d
n
a
t
n
e
m
p
o
l
e
v
e
d
s
t
i
t
a
s
l
e
c
r
a
p
d
n
a
l
l
a
n
o
i
t
i
d
d
a
n
i
a
t
r
e
c
s
a
h
o
s
l
a
y
n
a
p
m
o
C
e
h
T
.
t
n
e
m
p
o
l
e
v
e
d
r
o
f
d
l
e
h
d
n
a
l
s
e
d
u
l
c
n
i
y
l
l
a
r
e
n
e
g
y
r
o
g
e
t
a
c
s
i
h
T
*
*
*
.
e
l
b
a
t
s
i
h
t
n
i
e
r
e
h
w
e
s
l
e
Kite Realty Group Trust
NOTES TO SCHEDULE III
Combined Real Estate and Accumulated Depreciation
Note 1. Reconciliation of Investment Properties
The changes in investment properties of the Company and its Predecessor for the years ended December 31,
2005, 2004 and 2003 are as follows:
Balance, beginning of year . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Balance, end of year
2005
2004
2003
$539,625,096
198,104,896
52,217,273
(15,063,244)
$774,884,021
$152,215,128
325,705,031
63,668,337
(1,963,400)
$539,625,096
$ 54,745,885
49,247,383
48,332,045
(110,185)
$152,215,128
The unaudited aggregate cost of investment properties for federal tax purposes as of December 31, 2005
was $764,135,035.
Note 2. Reconciliation of Accumulated Depreciation
The changes in accumulated depreciation of the Company and its Predecessor for the years ended
December 31, 2005, 2004 and 2003 are as follows:
Balance, beginning of year . . . . . . . . . . . . . . .
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciation and amortization expense . . .
Disposals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .
Balance, end of year
2005
$23,375,292
—
19,199,756
(2,523,571)
$40,051,477
2004
$ 4,146,121
11,362,675
8,936,159
(1,069,663)
$23,375,292
2003
$2,022,087
—
2,145,696
(21,662)
$4,146,121
Depreciation of investment properties reflected in the statements of operations is calculated over the
estimated original lives of the assets as follows:
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15–35 years
Building improvements . . . . . . . . . . . . . . . . . . . . . . . 10–35 years
Tenant improvements . . . . . . . . . . . . . . . . . . . . . . . . . Term of related lease
F-38
EXHIBIT INDEX
Description
Location
Exhibit
No.
3.1
Articles of Amendment and Restatement of
Declaration of Trust of the Company
3.2
Amended and Restated Bylaws of the
Company, as amended
4.1
Form of common share certificate
10.1
10.2
10.3
10.4
10.5
10.6
10.7
10.8
10.9
10.10
10.11
Amended and Restated Agreement of
Limited Partnership of Kite Realty Group,
L.P., dated as of August 16, 2004
Agreement and Plan of Merger, dated as of
April 5, 2004, by and between the
Company, KRG Construction, LLC and
Kite Construction, Inc.
Amendment to Agreement and Plan of
Merger, dated as of August 10, 2004, by and
between the Company, KRG Construction,
LLC and Kite Construction, Inc.
Agreement and Plan of Merger, dated as of
April 5, 2004, by and between the
Company, KRG Development, LLC and
Kite Development Corporation
Amendment to Agreement and Plan of
Merger, dated as of August 10, 2004,
by and between the Company,
KRG Development, LLC and Kite
Development Corporation
Agreement and Plan of Merger dated as
of April 5, 2004 by and between the
Company, KRG Realty Advisors, LLC and
KMI Realty Advisors, Inc.
Amendment to Agreement and Plan of
Merger, dated as of August 10, 2004,
by and between the Company, KRG
Realty Advisors, LLC and KMI Realty
Advisors, Inc.
Employment Agreement, dated as of
August 16, 2004, by and between the
Company and Alvin E. Kite, Jr.*
Employment Agreement, dated as of
August 16, 2004, by and between the
Company and John A. Kite*
Employment Agreement, dated as of
August 16, 2004, by and between the
Company and Thomas K. McGowan*
Employment Agreement, dated as of
August 16, 2004, by and between the
Company and Daniel R. Sink*
Incorporated by reference to Exhibit 3.1 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 3.2 of the
Annual Report on Form 10-K of Kite Realty Group
Trust for the period ended December 31, 2004
Incorporated by reference to Exhibit 4.1 to Kite
Realty Group Trust’s registration statement on
Form S-11 (File No. 333-114224) declared effective
by the SEC on August 10, 2004
Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.2 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.3 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.4 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.5 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.6 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.7 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.8 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.9 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.10 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.11 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
10.12
10.13
10.14
10.15
10.16
10.17
10.18
10.19
10.20
10.21
10.22
10.23
10.24
10.25
10.26
10.27
Noncompetition Agreement, dated as of
August 16, 2004, by and between the
Company and Alvin E. Kite, Jr.*
Noncompetition Agreement, dated as of
August 16, 2004, by and between the
Company and John A. Kite*
Noncompetition Agreement, dated as of
August 16, 2004, by and between the
Company and Thomas K. McGowan*
Noncompetition Agreement, dated as of
August 16, 2004, by and between the
Company and Daniel R. Sink*
Indemnification Agreement, dated as of
August 16, 2004, by and between Kite
Realty Group, L.P. and Alvin E. Kite*
Indemnification Agreement, dated as of
August 16, 2004, by and between Kite
Realty Group, L.P. and John A. Kite*
Indemnification Agreement, dated as of
August 16, 2004, by and between
Kite Realty Group, L.P. and
Thomas K. McGowan*
Indemnification Agreement, dated as of
August 16, 2004, by and between Kite
Realty Group, L.P. and Daniel R. Sink*
Indemnification Agreement, dated as of
August 16, 2004, by and between
Kite Realty Group, L.P. and
William E. Bindley*
Indemnification Agreement, dated as of
August 16, 2004, by and between Kite
Realty Group, L.P. and Michael L. Smith*
Indemnification Agreement, dated as of
August 16, 2004, by and between Kite
Realty Group, L.P. and Eugene Golub*
Indemnification Agreement, dated as of
August 16, 2004, by and between Kite
Realty Group, L.P. and Richard A. Cosier*
Indemnification Agreement, dated as of
August 16, 2004, by and between Kite
Realty Group, L.P. and Gerald L. Moss*
Contributor Indemnity Agreement, dated
August 16, 2004, by and among Kite
Realty Group, L.P., Alvin E. Kite, Jr.,
John A. Kite, Paul W. Kite, Thomas K.
McGowan, Daniel R. Sink, George F.
McMannis, IV, and Mark Jenkins*
Kite Realty Group Trust 2004 Equity
Incentive Plan*
Kite Realty Group Trust Executive
Bonus Plan*
Incorporated by reference to Exhibit 10.12 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.13 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.14 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.15 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.16 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.17 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.18 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.19 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.20 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.21 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.22 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.23 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.24 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.25 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.26 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.27 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
10.28
10.29
10.30
10.31
10.32
10.33
10.34
10.35
10.36
Option Agreement (Tarpon Spring Plaza),
dated as of August 16, 2004, by and
among Kite Realty Group, L.P.,
Brentwood Land Partners, LLC, Alvin E.
Kite, Jr., John A. Kite, Paul W. Kite and
Thomas K. McGowan
Option Agreement (Erskine Village), dated
as of August 16, 2004, by and among Kite
Realty Group, L.P., Kite South Bend, LLC,
Alvin E. Kite, Jr., John A. Kite, Paul W.
Kite and Thomas K. McGowan
Option Agreement (126th Street &
Meridian Medical Complex), dated as of
August 16, 2004, by and among Kite
Realty Group, L.P., Kite 126th Street
Medical, LLC, Alvin E. Kite, Jr.,
John A. Kite, Paul W. Kite and
Thomas K. McGowan
Option Agreement (126th Street &
Meridian II Medical Complex), dated
as of August 16, 2004, by and among Kite
Realty Group, L.P., Kite 126th Street
Medical II, LLC, Alvin E. Kite, Jr.,
John A. Kite, Paul W. Kite and
Thomas K. McGowan
Registration Rights Agreement, dated as of
August 16, 2004, by and among the
Company, Alvin E. Kite, Jr., John A. Kite,
Paul W. Kite, Thomas K. McGowan,
Daniel R. Sink, George F. McMannis,
Mark Jenkins, Ken Kite, David Grieve and
KMI Holdings, LLC
Amendment No. 1 to Registration Rights
Agreement, dated August 29, 2005, by and
among the Company and the other parties
listed on the signature page thereto
Tax Protection Agreement, dated
August 16, 2004, by and among the
Company, Kite Realty Group, L.P., Alvin
E. Kite, Jr., John A. Kite, Paul W. Kite,
Thomas K. McGowan and C. Kenneth Kite
Consulting Agreement, dated August 16,
2004, by and between Kite Realty
Group, L.P and Paul W. Kite
Credit Agreement, dated as of August 31,
2004, by and among Kite Realty Group,
L.P., as Borrower, Kite Realty Group Trust,
Wachovia Capital Markets, LLC and
Lehman Brothers Inc., as Joint Lead
Arrangers and Joint Book Runners,
Wachovia Bank, National Association, as
Agent, Lehman Commercial Paper Inc., as
Syndication Agent, and the Financial
Institutions signatory thereto, as Lenders
Incorporated by reference to Exhibit 10.28 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.29 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.30 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.31 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.32 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q of Kite Realty
Group Trust for the period ended September 30,
2005
Incorporated by reference to Exhibit 10.33 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.34 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on August 20, 2004
Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on September 7, 2004
10.37
10.38
10.39
10.40
10.41
10.42
10.43
10.44
10.45
10.46
10.47
10.48
21.1
23.1
First Amendment to Credit Agreement,
dated as of December 15, 2004, by and
among Kite Realty Group, L.P., Kite Realty
Group Trust, the financial institutions
signatory thereto and Wachovia Bank,
National Association, as Agent
Third Amendment to Credit Agreement,
dated as of June 30, 2005, by and among
Kite Realty Group, L.P., Kite Realty Group
Trust, the financial institutions signatory
thereto and Wachovia Bank, National
Association, as Agent
Contribution Agreement dated as of
April 5, 2004 by and among Kite Realty
Group, L.P., Alvin E. Kite, Jr., John A.
Kite, Paul W. Kite, Thomas K. McGowan,
Daniel R. Sink, George F. McMannis and
Mark Jenkins
Schedule of 2005 Bonus Benchmarks for
Executive Officers*
Form of Share Option Agreement under
2004 Equity Incentive Plan*
Form of Restricted Share Agreement under
2004 Equity Incentive Plan*
Schedule of Non-Employee Trustee Fees
and Other Compensation*
Contribution Agreement, dated as of
March 31, 2005, by and among Kite Realty
Group, L.P., Brentwood Holdings, LLC and
Alvin E. Kite, Jr., John A. Kite, Paul W.
Kite and Thomas K. McGowan
Purchase and Sale Agreement, dated as of
March 3, 2005, by and among Kite Realty
Group Trust and U.S. Retail Income Fund
VIII-E, Limited Partnership
Purchase and Sale Agreement, dated as of
March 3, 2005, by and among Kite Realty
Group Trust and U.S. Retail Income Fund
IV, Limited Partnership
Purchase and Sale Agreement, dated as of
March 3, 2005, by and among Kite Realty
Group Trust and U.S. Retail Income Fund
VIII-D, Limited Partnership
Underwriting Agreement, dated
September 27, 2005, by and among the
Company, Kite Realty Group, L.P. and the
underwriters named therein
List of Subsidiaries
Consent of Ernst & Young LLP
Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on December 20, 2004
Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on July 7, 2005
Incorporated by reference to Exhibit 10.2 to Kite
Realty Group Trust’s registration statement on Form
S-11 (File No. 333-114224) declared effective by
the SEC on August 10, 2004
Incorporated by reference to Exhibit 10.38 to the
Annual Report on Form 10-K of Kite Realty Group
Trust for the period ended December 31, 2004
Incorporated by reference to Exhibit 10.39 to the
Annual Report on Form 10-K of Kite Realty Group
Trust for the period ended December 31, 2004
Incorporated by reference to Exhibit 10.40 of the
Annual Report on Form 10-K of Kite Realty Group
Trust for the period ended December 31, 2004
Incorporated by reference to Exhibit 10.2 to the
Quarterly Report on Form 10-Q of Kite Realty
Group Trust for the period ended June 30, 2005
Incorporated by reference to Exhibit 10.1 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on April 5, 2005
Incorporated by reference to Exhibit 10.4 to the
Quarterly Report on Form 10-Q/A of Kite Realty
Group Trust for the period ended March 31, 2005
Incorporated by reference to Exhibit 10.5 to the
Quarterly Report on Form 10-Q of Kite Realty
Group Trust for the period ended March 31, 2005
Incorporated by reference to Exhibit 10.6 to the
Quarterly Report on Form 10-Q of Kite Realty
Group Trust for the period ended March 31, 2005
Incorporated by reference to Exhibit 1.1 to the
Current Report on Form 8-K of Kite Realty Group
Trust filed with the SEC on September 29, 2005
Filed herewith
Filed herewith
31.1
31.2
32.1
Certification of principal executive officer
required by Rule 13a-14(a)/15d-14(a)
under the Exchange Act, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of principal financial officer
required by Rule 13a-14(a)/15d-14(a)
under the Exchange Act, as adopted
pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002
Certification of Chief Executive Officer
and Chief Financial Officer pursuant to
18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002
Filed herewith
Filed herewith
Filed herewith
* Denotes a management contract or compensatory, plan contract or arrangement.
(This page intentionally left blank.)
3 0 S o u t h M e r i d i a n
S u i t e 11 0 0
I n d i a n a p o l i s , I n d i a n a 4 6 2 0 4
317. 57 7. 5 6 0 0
w w w . k i t e r e a l t y. c o m