Kite Realty Group Trust
Annual Report 2009

Plain-text annual report

2009 A N N UA L R E P O R T Kite Realty Group . 30 S. Meridian Street, Suite 1100 . Indianapolis, IN 46204 317.577.5600 www.kiterealty.com Corporate Profile Kite Realty Group Trust, a real estate investment trust (“REIT”), engages in the ownership, operation, leas- ing, management, acquisition, development, expansion, and construction of neighborhood and community shopping centers and commercial real estate properties in the United States. It also provides real estate facility management, construction, development, and other advisory services to third parties. As of December 31, 2009, the Company owned interests in 55 operating properties consisting of 51 retail properties and 4 commercial properties, as well as 7 properties under development or redevelopment. The Company was founded in 1960 and is headquartered in Indianapolis, Indiana. Its common stock is traded on the New York Stock Exchange under the symbol KRG. The Company’s current quarterly divi- dend is $0.06 per share. The Company qualifies as a REIT under the Internal Revenue Code. As a REIT, the Company is not subject to federal tax to the extent that it distributes at least 90 percent of its taxable income to its shareholders and certain other requirements. Financial Highlights ($ in millions except per share amounts) Year ended December 31, 2009 2008 2007 FINANCIAL DATA Revenue Funds from Operations (FFO*) of the Kite Portfolio FFO per diluted share Net (Loss) Income Attributable to Kite Realty Group Trust Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Diluted Weighted Average Common Shares and Units Outstanding (in millions) PROPERTY DATA Properties in operating portfolio Total square feet (in millions) Percent of owned portion under lease Projects in Current Development Pipeline Estimated Company owned gross leasable area (GLA, in thousand square feet) Estimated total cost DIVIDEND DATA Cash dividend paid per share $ 115.3 $ 28.7 $ 0.48 (1.8) $ $142.1 $ 45.1 $ 1.17 $ 6.1 $132.9 $ 47.2 $ 1.26 $ 13.5 $ 62.1 $ 74.1 $ 69.3 60.3 38.6 37.6 55 8.4 90.7 2 56 8.9 91.7 3 55 8.0 94.6 9 297.7 $ 87.0 368.0 $ 91.2 514.1 $145.8 $0.4775 $0.820 $0.800 *FFO is a non-GAAP financial 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 in the accompanying Form 10-K for a definition of FFO, and to pages 67-68 for a reconciliation of net income to FFO. Naperville Marketplace Naperville, Illinois Dear Fellow Shareholders At this time last year, our industry was bracing for the possibility that 2009 could be more challenging than 2008. No one was sure what kind of market transformation to expect or the timing of these unknown changes. During this uncertainty, we wisely chose to con- centrate on a few fundamentals. In my letter last year, I promised to keep our company focused on capital preservation, aggressive leasing, and improving the balance sheet. We posted solid results in these areas which I will address in the coming pages. 2009 was a year defined by uncertainty in most respects, but the lessons learned and the perspectives gained were anything but uncertain. We will combine these lessons with those from the previous 50 years of our business as we shape Kite Realty Group during 2010. I am not satisfied with the performance of our stock last year, and my colleagues and I have much work to do. With 2009 behind us, we have refocused our efforts on maintaining a strong balance sheet and growing the company. As a result of a long history in all facets of the business, strong real estate, and the potential to take advantage of economies of scale, we have the advantage of multiple avenues for growth. Kite Realty Group 2009 Annual Report 1 Delray Marketplace, future development Delray Beach, Florida Managing Debt and Preserving Capital Our May 2009 equity offering provided liquidity for maturing debt and capital for our re-tenanting efforts. This important step allows us to prepare for growth today. The sup- port shown by our existing shareholder base and new investors was a critical component of this offering. Our top priority from that point was to manage our debt maturities and strengthen our balance sheet. We made solid progress on both fronts, and I am proud of our team’s performance. From January 2009 through February 2010, we refinanced, retired, or extended over $170 million in maturing debt without a significant negative impact to our liquidity. By mid-February of this year, we had no remaining 2010 maturi- ties. Deleveraging is a process, but we are making steady improvement. For 2009, we recorded a healthy fixed charge coverage ratio (1) of 2.3 to 1, and at the end of 2009, our ratio of debt to undepreciated real estate assets was 54 percent compared to nearly 60 percent a year earlier. (1)   Fixed  charge  coverage  ratio  defined  as  earnings  before  interest,  taxes,  depreciation,  and  amortization  (EBITDA) divided by interest expense. 2 Kite Realty Group 2009 Annual Report “From January 2009 through February 2010, we refinanced, retired, or extended over $170 million in maturing debt. By mid-February, we had no remaining 2010 maturities.” Tarpon Springs Plaza Naples, Florida We transitioned one development property, South Elgin Commons in Chicago, from the development pipeline to the operating portfolio, and nearly finalized our development efforts on the only two other active developments in our portfolio—Eddy Street Commons at Notre Dame and Cobblestone Plaza near Ft. Lauderdale, Florida. These projects were 73 percent leased at year-end and nearly all the capital outlay during 2009 was funded through existing construction loans. As anticipated, we did not commence any new vertical construction and incurred only pre-development costs on future development projects. The combination of our successful property-level debt management and conservative approach to development spending allowed us to end 2009 with approximately $90 million of combined cash and line of credit availability. Leasing Is Key We are a real estate company which means we are a leasing company. In 2009, we refocused our resources in this area by creating a new executive vice president position, hiring new leasing representatives, revamping compensation structures, and boosting the overall intensity of our efforts. We implemented a more efficient approval process and made every department aware of the heightened importance on leasing space. It paid off with significant leasing activity and positive rent spreads. 2009 was one of the highest levels of annual leasing production in our history and it occurred during one of the worst Kite Realty Group 2009 Annual Report 3 real estate markets in memory. This is a testament to the strength of our Class A portfo- lio and our leasing team. Leasing is the cornerstone of our growth prospects. Existing vacant space represents the most accretive and cost effective form of earnings growth. We cannot and will not let off the gas, and as you will see, the first three growth opportunities are distinct sources of leasing upside. Seven Growth Sources In light of the lessons learned over the last eighteen months, we now have our eyes on the future. In fact, there are seven near term sources of growth for our company. The first and most immediate source is the additional rental revenue generated by anchor tenants that have recently executed leases. Dick’s Sporting Goods, Toys R Us, Academy Sports, Sprouts Farmer’s Market, and LA Fitness are all tenants with executed leases “Leasing is the cornerstone of our growth prospects. Throughout 2009 we took considerable steps to improve the entire leasing process. It paid off with one of the highest levels of annual leasing production in our history during one of the most challenging markets.” who paid little, if any, rent in 2009. These leases will provide rental growth throughout 2010 and 2011. Second, we are in active negotiations with multiple anchor retailers which we expect to announce as signed leases throughout the year. Currently, we have seven vacant junior anchor boxes and five are either in late stage letter of intent or lease negotiations. Third, our small shop leased percentage has been impacted by the recession. Our small shops ended the year at 77 percent leased, approximately 800 basis points below historic levels. While we remain cautious of the ongoing market pressures on small shop space, we are confident that the quality of our real estate and the strength of our leasing team will facilitate a return to normal levels of small shop occupancy. 4 Kite Realty Group 2009 Annual Report Eddy Street Commons at Notre Dame South Bend, Indiana “Our size affords us multiple sources of growth including joint venture capital, but we will keep these arrangements simple and easy to understand.” Traders Point Indianapolis, Indiana Fourth, our two current development projects are leasing steadily. We have been deliber- ate with tenant selection at Eddy Street Commons which ended the year at 72.4 percent leased. Also, we are very pleased to have secured Whole Foods as the anchor to Cobblestone Plaza. This was an important milestone for the project and a solid endorse- ment of the real estate from a highly sought after anchor tenant. A limited amount of capital remains to be spent on these two projects, and tenants will continue to com- mence paying rent throughout the near term. We have been selective and patient on the leasing front in light of temporary market challenges, and we believe this approach will be rewarded with long term economic performance. As we transition these assets into the operating portfolio throughout 2010, we believe we will recognize the benefits of our development, construction, and leasing efforts. Fifth, we anticipate double digit returns on the additional capital we will invest in the redevelopment pipeline. Nearly all of these assets were acquired for their redevelopment potential, and the inherent quality of the real estate is evident in the recently announced leases and strong tenant interest. In select situations, we have seen tenant interest and potential rent levels significantly increase in the last few months. Landlord-retailer discussions are still challenging, but they are occurring in an environment where the balance of negotiating strength is no longer exaggerated to our disadvantage. 6 Kite Realty Group 2009 Annual Report Coming Soon to Cobblestone Plaza Pembroke Pines, Florida Sixth, although we are cautious about starting new development, we are encouraged by the preleasing activity at our future developments. For example, anchor leasing at Delray Marketplace is complete, shop leasing is well underway, and construction could start late this year or early next. We have a high degree of confidence in our future development markets. We chose Raleigh, Delray Beach, Chicago, and Seattle because they are strong markets by almost every metric. Nonetheless, throughout 2009 we exhibited a more pru- dent approach to development, and we will continue to utilize more conservative stan- dards for spending capital on all future development projects. Finally, our seventh potential source of growth is joint venture capital. Although the magnitude and timing for the next wave of investment opportunities in real estate is being widely debated, I am confident there will be opportunity for those who are ready for it. We have limited our joint venture activity up to this point—a strategy which positions us today with more, rather than fewer, options. A discussion of specific wants and needs will be appropriate at a later time, but I will share one thought on this piece of our business. We will keep our joint venture arrangements simple. Our belief is that we can create more shareholder value if our business is easy to understand. Joint venture capital is a natural progression for us a public company and we will remain true to the principle of simplicity in our negotiations. Kite Realty Group 2009 Annual Report 7 Closing Thoughts In keeping with a theme of simplicity, we have an opportunity to improve the quality and predictability of our FFO going forward. In 2008, 59 percent of FFO came from real estate rental operations. In 2009, that percentage increased to 82 percent. The midpoint of our FFO guidance for 2010 assumes 90 percent comes from real estate rental opera- tions. I have laid out a roadmap for growth which supports this progression to a higher percentage of FFO from recurring rent. My efforts as well as those of the entire Kite team will be dedicated to delivering this improved FFO stream. We have always received tremendous guidance and counsel from our Board of Trustees. 2009 was no different, and I know we can expect the same in 2010. I thank them for their time and efforts. 2009 was a very difficult year for our country and American business. Our company felt the pressures and our employees were no different. I want to thank all our employees for their dedication and passion. Those two principles allowed Kite Realty Group to weather the storm and will propel us forward. Last year I wrote this letter with a small sense of optimism in the face of uncertainty. Today, the optimism has grown, the uncertainty is waning, and we are armed with a much clearer path for growth. I thank our fellow shareholders for their continued support, and I look forward to a better 2010. John A. Kite Chairman and Chief Executive Officer 8 Kite Realty Group 2009 Annual Report Form 10K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ⌧ Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 � Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the fiscal year ended December 31, 2009 For the transition period from ___________to___________ Commission File Number: 001-32268 Kite Realty Group Trust (Exact name of registrant as specified in its charter) Maryland (State or other jurisdiction of incorporation or organization) 11-3715772 (IRS Employer Identification No.) 30 S. Meridian Street, Suite 1100 Indianapolis, Indiana 46204 (Address of principal executive offices) (Zip code) (317) 577-5600 (Registrant’s telephone number, including area code) 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 check mark if the Registrant is a well-known seasoned issuer, as defined by Rule 405 of the Securities Act. Yes � No ⌧ Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 of Section 15(d) of the Act. Yes � No ⌧ 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 ⌧ No � Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes � No � 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 definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. � Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. Large accelerated filer � Accelerated filer ⌧ Non-accelerated filer � Smaller reporting company � (do not check if a smaller reporting company) Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Yes � No ⌧ 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 $181.6 million based upon the closing price of $2.92 per share on the New York Stock Exchange on such date. The number of Common Shares outstanding as of March 5, 2010 was 63,186,339 ($.01 par value). Portions of the Proxy Statement relating to the Registrant’s Annual Meeting of Shareholders, scheduled to be held on May 4, 2010, 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, 2009 TABLE OF CONTENTS Page Item No. Part I 1. Business............................................................................................................................................................. 2 1A. Risk Factors ....................................................................................................................................................... 9 1B. Unresolved Staff Comments.............................................................................................................................. 23 2. Properties........................................................................................................................................................... 24 3. Legal Proceedings.............................................................................................................................................. 36 4. Submission of Matters to a Vote of Security Holders ....................................................................................... 36 Part II 5. Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities ........................................................................................................................................................... 37 6. Selected Financial Data ..................................................................................................................................... 40 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations ............................ 41 7A. Quantitative and Qualitative Disclosures about Market Risk ............................................................................ 69 8. Financial Statements and Supplementary Data.................................................................................................. 69 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ............................ 70 9A. Controls and Procedures .................................................................................................................................... 70 9B. Other Information .............................................................................................................................................. 72 Part III 10. Directors, Executive Officers and Corporate Governance................................................................................. 72 11. Executive Compensation ................................................................................................................................... 72 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters .......... 72 13. Certain Relationships and Related Transactions, and Director Independence .................................................. 72 14. Principal Accountant Fees and Services ............................................................................................................ 72 Part IV 15. Exhibits, Financial Statement Schedule............................................................................................................. 73 Signatures ........................................................................................................................................................................... 74 ITEM 1. BUSINESS PART I 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”). References to “Kite Property Group” or the “Predecessor” mean our predecessor businesses. Overview We are a full-service, vertically integrated real estate company engaged in the ownership, operation, management, leasing, acquisition, construction, expansion and development and redevelopment of neighborhood and community shopping centers and certain commercial real estate properties in selected markets in the United States. We also provide real estate facility management, construction, development and other advisory services to third parties. We conduct all of our business through our Operating Partnership, of which we are the sole general partner. As of December 31, 2009, we held an approximate 89% interest in our Operating Partnership. Limited partners owned the remaining 11% of the interests in our Operating Partnership at December 31, 2009. As of December 31, 2009, we owned interests in a portfolio of 51 retail operating properties totaling approximately 7.9 million square feet of gross leasable area (including approximately 2.9 million square feet of non-owned anchor space). Our retail operating portfolio was 90.1% leased as of December 31, 2009 to a diversified retail tenant base, with no single retail tenant accounting for more than 3.3% of our total annualized base rent. In the aggregate, our largest 25 tenants account for approximately 41% of our annualized base rent as of December 31, 2009. See Item 2, “Properties” for a list of our top 25 tenants by annualized base rent. We also own interests in three commercial (office/industrial) operating properties totaling approximately 0.5 million square feet of net rentable area and an associated parking garage, all located in the state of Indiana. The occupancy of our commercial operating portfolio was 96.2% as of December 31, 2009. As of December 31, 2009, we also had an interest in seven retail properties in our development and redevelopment pipelines. Upon completion, our development and redevelopment properties are anticipated to have approximately 1.1 million square feet of gross leasable area (including approximately 0.3 million square feet of non-owned anchor space). In addition to our current development and redevelopment pipelines, we have a “shadow” development pipeline which includes land parcels that are undergoing pre-development activities and are in various stages of preparation for construction to commence, including pre-leasing activity and negotiations for third-party financings. As of December 31, 2009, this shadow pipeline consisted of six projects that are expected to contain approximately 2.8 million square feet of total gross leasable area (including non-owned anchor space) upon completion. In addition, as of December 31, 2009, we owned interests in various land parcels totaling approximately 95 acres. These parcels are classified as “Land held for development” in the accompanying consolidated balance sheets and may be used for future expansion of existing properties, development of new retail or commercial properties or sold to third parties. Our operating portfolio, current development and redevelopment pipelines and land parcels are located in the states of Florida, Georgia, Illinois, Indiana, New Jersey, North Carolina, Ohio, Oregon, Texas and Washington. Difficult economic conditions during the last two years have had a negative impact on consumer confidence and spending. This, in turn, is causing segments of the retail industry to be negatively impacted as retailers struggle to sell goods and services. As an owner and developer of community and neighborhood shopping centers, our performance is directly linked to economic conditions in the retail industry in those markets where our operating centers and development properties are located. See Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” for further discussion of the current economic conditions and their impact on us. 2 Significant 2009 Activities Financing and Capital Raising Activities. As discussed in more detail below in “Business Objectives and Strategies,” our primary business objectives are to generate increasing cash flow, achieve long-term growth and maximize shareholder value primarily through the operation, development, redevelopment and acquisition of well-located community and neighborhood shopping centers. However, as discussed in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” current economic and financial market conditions have created a need for most REITs, including us, to place a significant amount of emphasis on our financing and capital preservation strategy. Therefore, our primary objective recently has been, and in the future will continue to be, the strengthening of our balance sheet, managing of our debt maturities and conservation of cash. We ended the year 2009 with approximately $87 million of combined cash and borrowing capacity on the unsecured revolving credit facility and, as of February 17, 2010, have extended all of our 2010 debt maturities. We will remain focused on 2011 refinancing activity and will continue to aggressively manage our operating portfolio. During 2009, we successfully completed various financing, refinancing and capital-raising activities. As a result of these actions, we reduced the amount outstanding under our unsecured revolving credit facility to $78 million at December 31, 2009 from $105 million at December 31, 2008 and paid down the balances of various other loans. The significant financing, refinancing and capital raising activities completed during 2009 included the following: New Financings in 2009 • Permanent financing of $15.4 million was placed on the Eastgate Pavilion operating property in Cincinnati, Ohio, a previously unencumbered property. This variable rate loan bears interest at LIBOR + 295 basis points and matures in April 2012. We simultaneously hedged this loan to fix the interest rate at 4.84% for the full term; and • A construction loan in the amount of $10.9 million was placed on the Eddy Street Commons development property in South Bend, Indiana to finance the construction of a limited service hotel in which we have a 50% interest. This joint venture entity is unconsolidated in the accompanying consolidated financial statements. The construction loan bears interest at a rate of LIBOR + 315 basis points and matures in August 2014. Refinancings & Maturity Date Extensions in 2009 • The $8.2 million fixed rate loan on the Bridgewater Crossing operating property in Indianapolis, Indiana was refinanced with a variable rate loan bearing interest at LIBOR + 185 basis points and maturing in June 2013; • The maturity date of the $31.4 million variable rate construction loan on the Cobblestone Plaza development property in Ft. Lauderdale, Florida was extended to March 2010 at an interest rate of LIBOR + 250 basis points; • The $4.1 million variable rate loan on the Fishers Station operating property in Indianapolis, Indiana was refinanced at an interest rate of LIBOR + 350 basis points and maturing in June 2011; • The maturity date of the $9.4 million construction loan on our Delray Marketplace development property in Delray Beach, Florida was extended to June 2011 at an interest rate of LIBOR + 300 basis points; • The maturity date of the variable rate loan on the $11.9 million Beacon Hill operating property in Crown Point, Indiana was extended to March 2014 at an interest rate of LIBOR + 125 basis points; • The $15.8 million fixed rate loan on our Ridge Plaza operating property in Oak Ridge, New Jersey was refinanced with a permanent loan in the same amount. This loan has a maturity date of January 2017 and bears interest at a rate of LIBOR + 325 basis points. We simultaneously hedged this loan to fix the interest rate at 6.56% for the full term; • The maturity date of the $17.8 million variable rate loan on our Tarpon Springs Plaza operating property in Naples, Florida was extended to January 2013 at an interest rate of LIBOR + 325 basis points; and • The maturity date of the $14.0 million variable rate loan on our Estero Town Commons operating property in Naples, Florida was extended to January 2013 at an interest rate of LIBOR + 325 basis points. 3 In addition, in the first quarter of 2010, we completed the following financing activities: • The maturity date of the $14.9 million variable rate loan on the Shops at Rivers Edge operating property in Indianapolis, Indiana was extended to February 2013 at an interest rate of LIBOR + 400 basis points; • The maturity date of the $30.9 million variable rate construction loan on the Cobblestone Plaza development property was extended to February 2013 at an interest rate of LIBOR + 350 basis points; and • The maturity date of the $11.0 million construction loan on the South Elgin Commons property in a suburb of Chicago was extended to September 2013 at an interest rate of LIBOR + 325 basis points. Construction Financing • Draws totaling approximately $18.8 million were made on the variable rate construction loan at the Eddy Street Commons development project; and • We used proceeds from our unsecured revolving credit facility, other borrowings and cash totaling approximately $30.0 million for other development and redevelopment activities. Repayments of Outstanding Indebtedness • We used approximately $57 million of proceeds from our May 2009 common share offering to pay down the outstanding balance on our unsecured revolving credit facility; • We repaid the $11.8 million fixed rate loan on our Boulevard Crossing operating property in Kokomo, Indiana and contributed the related asset to the unsecured revolving credit facility collateral pool; and • In addition, we partially paid down the balances of various permanent and construction loans in 2009 in connection with the extensions of their respective maturity dates. The aggregate amount of such paydowns was $32.4 million in 2009. Other Financing-Related Activities • We utilized our unsecured revolving credit facility to contribute approximately $8.8 million of equity to our Parkside Town Commons unconsolidated joint venture property in Raleigh, North Carolina. Our joint venture partner also made a contribution as a means to reduce the joint venture’s outstanding variable rate debt; • We placed an interest rate hedge on the $20.0 million variable rate loan maturing in December 2011 on our Glendale Town Center operating property in Indianapolis, Indiana. This hedge fixed the interest rate at 4.40% for the full term; and • We placed an interest rate hedge on the $19.7 million variable rate loan maturing in December 2011on our Bayport Commons operating property in Oldsmar, Florida. This hedge fixed the interest rate at 4.48% for the full term; Common Equity Offering • In May 2009, we completed an offering of 28,750,000 common shares at an offering price of $3.20 per share for net proceeds of approximately $87.5 million. Approximately $57 million of the net proceeds were used to reduce the outstanding balance on our unsecured revolving credit facility. The remaining proceeds were initially retained and a portion subsequently used to retire outstanding indebtedness as described above. 2009 Development and Redevelopment Activities • In the second quarter of 2009, we completed South Elgin Commons, Phase I, a 45,000 square foot LA Fitness facility located in a suburb of Chicago, Illinois, and transitioned it into our operating portfolio; • We partially completed the construction of Cobblestone Plaza, a 138,000 square foot neighborhood shopping center located in Ft. Lauderdale, Florida. This property was 73.9% leased or committed as of December 31, 2009 and is anchored by Whole Foods, Staples, and Party City; and 4 • We substantially completed the construction of the retail and office components of Eddy Street Commons, Phase I, a 465,000 square foot center located in South Bend, Indiana that includes a 300,000 square foot non- owned multi-family component. This project was 72.4% leased or committed as of December 31, 2009 and is anchored by Follett Bookstore and the University of Notre Dame. • No new development projects were commenced in 2009. As of December 31, 2009, we had a redevelopment pipeline that included five properties undergoing various stages of redevelopment: • Bolton Plaza, Jacksonville, Florida. This 173,000 square foot neighborhood shopping center was previously anchored by Wal-Mart. We recently executed a 66,500 square foot lease with Academy Sports & Outdoors to anchor this center and expect this tenant to open during the second half of 2010. We currently estimate the cost of this redevelopment to be approximately $5.7 million; • Coral Springs Plaza, Boca Raton, Florida. In early 2009, Circuit City declared bankruptcy and vacated this center. We recently executed a 47,000 square foot lease with Toys “R” Us/Babies “R” Us to occupy 100% of this center. We expect this tenant to open during the second half of 2010. We currently estimate the cost of this redevelopment to be approximately $4.5 million; • Courthouse Shadows, Naples, Florida. In 2008, we transferred this 135,000 square foot neighborhood shopping center from our operating portfolio to our redevelopment pipeline. We intend to modify the existing facade and pylon signage and upgrade the landscaping and lighting. In 2009, Publix purchased the lease of the former anchor tenant and made certain improvements on the space. We currently anticipate our total investment in the redevelopment at Courthouse Shadows will be approximately $2.5 million; • Four Corner Square, Seattle, Washington. In 2008, we transferred this 29,000 square foot neighborhood shopping center from our operating portfolio to our redevelopment pipeline. In addition to the existing center, we also own an adjacent ten acres of land in our shadow pipeline that may be used as part of the redevelopment. We currently estimate the cost of this redevelopment to be approximately $0.5 million; and • Shops at Rivers Edge, Indianapolis, Indiana. In 2008, we purchased this 111,000 square foot neighborhood shopping center with the intent to redevelop it. The current anchor tenant’s lease at this property expires on March 31, 2010. The tenant may continue to occupy the space for a period of time while the Company markets the space to several potential anchor tenants. We currently estimate the cost of this redevelopment to be approximately $2.5 million which may increase depending on the outcome of current negotiations with potential anchor tenants. • No new redevelopment projects were commenced in 2009. 2009 Property Dispositions In 2009, as part of our regular quarterly review, we determined that it was appropriate to write off the net book value on the Galleria Plaza operating property in Dallas, Texas and recognize a non-cash impairment charge of $5.4 million. Our estimated future cash flows, which considered recent negative property-specific events, were anticipated to be insufficient to recover the carrying value due to significant ground lease obligations and expected future required capital expenditures. We conveyed the title to the property to the ground lessor in the fourth quarter of 2009. 2009 Cash Distributions In 2009, we declared quarterly per share cash distributions for the following periods: First Quarter............................................... $ 0.1525 Second Quarter .......................................... $ 0.0600 Third Quarter ............................................. $ 0.0600 Fourth Quarter (paid in January 2010)....... $ 0.0600 Full Year .............................................. $ 0.3325 5 Business Objectives and Strategies Our primary business objectives are to increase the cash flow and consequently the value of our properties, achieve sustainable long-term growth and maximize shareholder value primarily through the operation, development, redevelopment and select acquisition of well-located community and neighborhood shopping centers. We invest in properties where cost effective renovation and expansion programs, combined with effective leasing and management strategies, can combine to improve the long-term values and economic returns of our properties. The Company believes that certain of its properties represent opportunities for future renovation and expansion. We seek to implement our business objectives through the following strategies, each of which is more completely described in the sections that follow: • Operating Strategy: Maximizing the internal growth in revenue from our operating properties by leasing and re-leasing those properties to a diverse group of retail tenants at increasing rental rates, when possible, and redeveloping certain properties to make them more attractive to existing and prospective tenants or to permit additional or more productive uses of the properties; • Growth Strategy: Using debt and equity capital prudently to redevelop or renovate our existing properties and to selectively acquire and develop additional shopping centers on land parcels that we currently own where we project that investment returns would meet or exceed internal benchmarks for above average returns; and • Financing and Capital Preservation Strategy: Financing our capital requirements with borrowings under our existing credit facility and newly issued secured debt, internally generated funds and proceeds from selling properties that no longer fit our strategy, investment in strategic joint ventures and by accessing the public securities markets when market conditions permit. Operating Strategy. Our primary operating strategy is to maximize rents and maintain or increase occupancy levels by attracting and retaining a strong and diverse tenant base. Most of our properties are in regional and neighborhood trade areas with attractive demographics, which has allowed us to maintain and, in some cases, increase occupancy and rental rates. We seek to implement our operating strategy by, among other things: • maintaining efficient leasing and property management strategies to emphasize and maximize rent growth and cost-effective facilities; • maintaining a diverse tenant mix in an effort to limit our exposure to the financial condition of any one tenant; • maintaining 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; • maximizing the occupancy of our existing operating portfolio; • increasing rental rates upon the renewal of expiring leases or re-leasing space to new tenants while minimizing vacancy to the extent possible; and • taking advantage of under-utilized land or existing square footage, or reconfiguring properties for better use. We employed our operating strategy in 2009 in a number of ways, including maintaining a diverse retail tenant mix with no tenant accounting for more than 3.3% of our annualized base rent. See Item 2, “Properties” for a list of our top tenants by gross leasable area and annualized base rent. We also had a renewed focus on tenant leasing in 2009 and, as a part of that focus, we hired a new executive in April 2009 who has substantial industry experience and is dedicated to developing and managing our leasing strategy. This new leasing executive implemented a number of key initiatives to strengthen our overall leasing program, resulting in the execution of 735,000 square feet of new and renewal leases during 2009, which is the most square feet leased in a single year since we became a public company in 2004. Growth Strategy. While we are focused on conserving capital in the current difficult economic environment, our growth strategy includes the selective deployment of resources to projects that are expected to generate investment returns that meet or exceed our expectations. We intend to implement our investment strategy in a number of ways, including: • evaluating redevelopment and renovation opportunities that we believe will make our properties more attractive for leasing or re-leasing to tenants at increased rental rates where possible; 6 • • disposing of selected assets that no longer meet our long-term investment criteria and recycling the capital into assets that provide maximum returns and upside potential in desirable markets; and selectively pursuing the acquisition of retail properties and portfolios in markets with attractive demographics which we believe can support retail development and therefore attract strong retail tenants. In evaluating opportunities for potential development, redevelopment, acquisition and disposition, we consider a number of factors, including: • • • • • • the expected returns and related risks associated with investments in these potential opportunities relative to our combined cost of capital to make such investments; the current and projected cash flow and market value of the property, and the potential to increase cash flow and market value if the property were to be successfully redeveloped; the price being offered for the property, the current and projected operating performance of the property, the tax consequences of the sale and other related factors; the current tenant mix at the property and the potential future tenant mix that the demographics of the property could support, including the presence of one or more additional anchors (for example, value retailers, grocers, soft goods stores, office supply stores, or sporting goods retailers), as well as an overall diverse tenant mix that includes restaurants, shoe and clothing retailers, specialty shops and service retailers such as banks, dry cleaners and hair salons, some of which provide staple goods to the community and offer a high level of convenience; the configuration of the property, including ease of access, abundance of parking, maximum visibility, and the demographics of the surrounding area; and the level of success of our existing properties, if any, in the same or nearby markets. In 2009, we were successful in executing leases for anchor tenants at two properties in our redevelopment portfolio. We signed a lease for a 47,000 square foot combined Toys “R” Us/Babies “R” Us to occupy 100% of our Coral Springs property in Boca Raton, Florida. We also signed a lease for 66,500 square feet with Academy Sports & Outdoors to anchor our Bolton Plaza property in Jacksonville, Florida. We expect both of these tenants to open for business during the last half of 2010. Financing and Capital Preservation Strategy. We finance our development, redevelopment and acquisition activities seeking to use the most advantageous sources of capital available to us at the time. These sources may include the sale of common or preferred equity through public offerings or private placements, the incurrence of additional indebtedness through secured or unsecured borrowings, investment in real estate joint ventures and the reinvestment of proceeds from the disposition of assets. Our primary finance and capital strategy is to maintain a strong balance sheet with sufficient flexibility to fund our operating and investment activities in a cost-effective way. We consider a number of factors when evaluating our level of indebtedness and when making decisions regarding additional borrowings, including the purchase price of properties to be developed or acquired with debt financing, the estimated market value of our properties and our Company as a whole upon consummation of the refinancing, and the ability of particular properties to generate cash flow to cover expected debt service. As discussed in more detail in Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” the current market conditions have created a necessity for most REITs, including us, to place a significant emphasis on financing and capital preservation strategies. While these conditions continue, along with the current turmoil in the credit markets, our efforts to strengthen our balance sheet are essential to our business. We intend to implement our financing and capital strategies in a number of ways, including: • • prudently managing our balance sheet, including reducing the aggregate amount of indebtedness outstanding under our unsecured revolving credit facility so that we have additional capacity available to fund our development and redevelopment projects and pay down maturing debt if refinancing that debt is not feasible; seeking to extend the maturity dates of and/or refinancing our unsecured revolving credit facility and term loan borrowings, which had a combined aggregate balance of $132.8 million at December 31, 2009 and which both mature in 2011. Our unsecured revolving credit facility has a one-year extension option to February 2012 if we are in compliance with the covenants under the related agreement; 7 • managing our exposure to variable-rate debt through the use of interest rate hedging transactions; • • • entering into new project-specific construction loans, property loans, and other borrowings; investing in joint venture arrangements in order to access less expensive capital and to mitigate risk; and raising additional capital through the issuance of common shares, preferred shares or other securities. In 2009, we implemented our financing and capital strategy in a number of ways, including issuing 28,750,000 common shares at an offering price of $3.20 per common share for net proceeds of $87.5 million. The majority of the net proceeds from this offering were used to repay the borrowings under our unsecured revolving credit facility and pay down other forms of indebtedness. In addition, as discussed above in “Significant 2009 Activities”, we have extended or refinanced all of our 2009 and 2010 debt maturities. We were also able to reduce the amount outstanding under our unsecured revolving credit facility to $78 million, net of additional borrowings, at December 31, 2009 from $105 million at December 31, 2008. Business Segments Our principal business is the ownership, operation, acquisition, development and construction of high-quality neighborhood and community shopping centers in selected markets in the United States. We have aligned our operations into two business segments: (1) real estate operation and development, and (2) construction and advisory services. See Note 14 to the accompanying consolidated financial statements 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 to consolidated net income, and total segment assets to total assets for the years ended December 31, 2009, 2008 and 2007. Competition The United States commercial real estate market continues to be highly competitive. We face competition from institutional investors, other REITs, and owner-operators 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. Some of our competitors may have more resources than we do. We face significant competition in our efforts to lease available space to prospective tenants at our operating, development and redevelopment properties. Generally, the challenging economic conditions have caused a greater than normal amount of space to be available for lease. The nature of the competition for tenants varies depending upon the characteristics of each local market in which we own and manage properties. We believe that the principal competitive factors in attracting tenants in our market areas are location, demographics, rental rates, the presence of anchor stores, competitor shopping centers in the same geographic area and the maintenance and appearance of our properties. There can be no assurance in the future that we will be able to compete successfully with our competitors in our development, acquisition and leasing activities. 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 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 the imposition of fines or an award of damages to private litigants. The obligation to make readily accessible accommodations is an ongoing one, and we will continue to assess our properties and make alterations as appropriate in this respect. Environmental Regulations. Some properties in our portfolio contain, may have contained or are adjacent to or near other properties that have contained or currently contain underground storage tanks for petroleum products or other hazardous or toxic substances. These 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. 8 In general, these tenants have covenanted in their leases with us to use these substances, if any, in compliance with all environmental laws and have agreed to indemnify us for any damages 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 fines and penalties may be imposed on building owners or operators for failure to comply with these requirements. The laws also may allow third parties to seek recovery from owners or operators for personal injury associated with exposure to asbestos fibers. We are not currently 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 that covers all properties in our portfolio. We believe the policy specifications and insured limits are appropriate and adequate given the relative risk of loss, 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 As of December 31, 2009, we had 90 full-time employees. Of these employees, 69 were “home office” executive and administrative personnel and 21 were on-site construction, facilities management and maintenance personnel. 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 from us in print and free of charge to any shareholder upon request. Any person wishing to obtain such copies in print should contact our Investor Relations department by mail at our principal executive office. ITEM 1A. 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. 9 We have separated the risks into three categories: • • • risks related to our operations; risks related to our organization and structure; and risks related to tax matters. RISKS RELATED TO OUR OPERATIONS Ongoing challenging conditions in the United States and global economy, the challenges being faced by our retail tenants and non-owned anchor tenants and the decrease in demand for retail space may have a material adverse affect on our financial condition and results of operations. We are susceptible to adverse economic developments in the United States. The economy of the United States continued to be very challenged during 2009 and early 2010, and these conditions may persist into the future. There can be no assurance that government responses to disruptions in the economy and in the financial markets will restore consumer confidence. General economic factors that are beyond our control, including, but not limited to, recessions, decreases in consumer confidence, reductions in consumer credit availability, increasing consumer debt levels, rising energy costs, tax rates, continued business layoffs, downsizing and industry slowdowns, and/or rising inflation, could have a negative impact on the business of our retail tenants. In turn, this could have a material adverse effect on our business because current or prospective tenants may, among other things (i) have difficulty paying us rent as they struggle to sell goods and services to consumers, (ii) be unwilling to enter into or renew leases with us on favorable terms or at all, (iii) seek to terminate their existing leases with us or seek downward rental adjustment to such leases, or (iv) be forced to curtail operations or declare bankruptcy. We are also susceptible to other developments that, while not directly tied to the economy, could have a material adverse effect on our business. These developments include 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, decreasing valuations of real estate, and other factors. In addition, because our portfolio of properties consists primarily of community and neighborhood shopping centers, a decrease in the demand for retail space, due to the economic factors discussed above or otherwise, 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 continue to 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 negatively affect market rents for retail space and could materially and 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. Further, we continually monitor events and changes in circumstances that could indicate that the carrying value of our real estate assets may not be recoverable. The ongoing challenging market conditions could require us to recognize an impairment charge with respect to one or more of our properties. For example, in the third quarter of 2009, we determined to write off the net book value on the Galleria Plaza operating property in Dallas, Texas, and recognized a non-cash impairment charge of $5.4 million. Because of our geographical concentration in Indiana, Florida and Texas, a prolonged economic downturn in these states could materially and adversely affect our financial condition and results of operations. The United States economy was in a recession during 2009, and challenging economic conditions have continued into 2010. Similarly, the specific markets in which we operate continue to face very challenging economic conditions that will likely persist into the future. In particular, as of December 31, 2009, approximately 40% of our owned square footage and approximately 39% of our total annualized base rent is located in Indiana, approximately 21% of our owned square footage and approximately 22% of our total annualized base rent is located in Florida, and approximately 20% of our owned square footage and approximately 17% of our total annualized base rent is located in Texas. This level of concentration could expose us to greater economic risks than if we owned properties in numerous geographic regions. Many states continue to deal with state fiscal budget shortfalls, rising unemployment rates and home foreclosure rates. Continued adverse economic or real estate trends in Indiana, Florida, Texas, or the surrounding regions, or any continued decrease in demand for retail 10 space resulting from the local regulatory environment, business climate or fiscal problems in these states, could materially and 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. Ongoing disruptions in the financial markets could affect our ability to obtain financing for development of our properties and other purposes on reasonable terms, or at all, and have other material adverse effects on our business. Over the last few years, the United States financial and credit markets have experienced significant price volatility, dislocations and liquidity disruptions, which have caused market prices of many financial instruments to fluctuate substantially and the spreads on prospective debt financings to widen considerably. These circumstances have materially impacted liquidity in the financial markets, making terms for certain financings less attractive, and in some cases have resulted in the unavailability of financing. Continued uncertainty in the stock and credit markets may negatively impact our ability to access additional financing for development of our properties and other purposes at reasonable terms, or at all, which may materially adversely affect our business. A prolonged downturn in the financial markets may cause us to seek alternative sources of potentially less attractive financing, and may require us to adjust our business plan accordingly. In addition, we may be unable to obtain permanent financing on development projects we financed with construction loans or mezzanine debt. Our inability to obtain such permanent financing on favorable terms, if at all, could delay the completion of our development projects and/or cause us to incur additional capital costs in connection with completing such projects, either of which could have a material adverse effect on our business and our ability to execute our business strategy. In addition, if we are not successful in refinancing our outstanding 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. These events also may make it more difficult or costly for us to raise capital through the issuance of our common stock or preferred stock. The disruptions in the financial markets may have a material adverse effect on the market value of our common stock and have other adverse effects on our business. If our tenants are unable to secure financing necessary to continue to operate their businesses and pay us rent, we could be materially and adversely affected. Many of our tenants rely on external sources of financing to operate their businesses. As discussed above, the United States financial and credit markets continue to experience significant liquidity disruptions, resulting in the unavailability of financing for many businesses. If our tenants are unable to secure financing necessary to continue to operate their businesses, they may be unable to meet their rent obligations to us or enter into new leases with us or be forced to declare bankruptcy and reject our leases, which could materially and adversely affect us. We had approximately $658 million of consolidated indebtedness outstanding as of December 31, 2009, which may have a material adverse effect on our financial condition and results of operations and reduce our ability to incur additional indebtedness to fund our growth. Required repayments of debt and related interest may materially adversely affect our operating performance. We had approximately $658 million of consolidated outstanding indebtedness as of December 31, 2009. Approximately $250 million of this debt is scheduled to mature in 2011. At December 31, 2009, approximately $356 million of our debt bore interest at variable rates (approximately $136 million when reduced by our $220 million of interest rate swaps for fixed interest rates). Interest rates are currently low relative to historical levels and may increase significantly in the future. If our interest expense increased significantly, it could materially adversely affect our results of operations. For example, if market rates of interest on our variable rate debt outstanding as of December 31, 2009 increased by 1%, the increase in interest expense on our variable rate debt would decrease future cash flows by approximately $1.4 million annually. We also intend to incur additional debt in connection with projects in our current development, redevelopment and shadow development pipelines, as well as with 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 11 a REIT for federal income tax purposes or otherwise avoid paying taxes that can be eliminated through distributions to our shareholders. Our substantial debt could materially and adversely affect our business in other ways, including by, among other things: • requiring us to use a substantial portion of our funds from operations to pay principal and 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. • Agreements with lenders supporting our unsecured revolving credit facility, unsecured term loan and various other loan agreements contain default provisions which, among other things, could result in the acceleration of principal and interest payments or the termination of the facilities. Our unsecured revolving credit facility, unsecured term loan and various other debt agreements contain certain Events of Default which include, but are not limited to, failure to make principal or interest payments when due, failure to perform or observe any term, covenant or condition contained in the agreements, failure to maintain certain financial and operating ratios and other criteria, misrepresentations and bankruptcy proceedings. In the event of a default under any of these agreements, the lender would have various rights including, but not limited to, the ability to require the acceleration of the payment of all principal and interest due and/or to terminate the agreements, and to foreclose on the properties. The declaration of a default and/or the acceleration of the amount due under any such credit agreement could have a material adverse effect on our business. In addition, certain of our permanent and construction loans contain cross-default provisions which provide that a violation by the Company of any financial covenant set forth in our unsecured revolving credit facility agreement will constitute an event of default under the loans, which could allow the lending institutions to accelerate the amount due under the loans. 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, 2009, a significant amount 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 the loss of our investment. Also, certain of these mortgages contain customary 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. We are subject to risks associated with hedging agreements. We use a combination of interest rate protection agreements, including interest rate swaps and locks, to manage risk associated with interest rate volatility. This may expose us to additional risks, including a risk that a counterparty to a hedging arrangement may fail to honor its obligations. Developing an effective interest rate risk strategy is complex and no strategy can completely insulate us from risks associated with interest rate fluctuations. There can be no assurance that our hedging activities will have the desired beneficial impact on our results of operations or financial condition. Further, should we choose to terminate a hedging agreement, there could be significant costs and cash requirements involved to fulfill our initial obligation under the hedging agreement. 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. Periods of economic slowdown or recession (including the current challenging economic conditions), 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. Such events would materially 12 and 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. In addition, other 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 40% of our owned square footage and 39% of our total annualized base rent is located; Florida, where approximately 21% of our owned square footage and 22% of our total annualized base rent is located; and Texas, where approximately 20% of our owned square footage and 17% of our total annualized base rent is located; tenant bankruptcies; local oversupply, increased competition or reduction in demand for space; inability to collect rent from tenants, or having to provide significant tenant concessions; vacancies or our inability to rent space on favorable terms; 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 (such as decreased attractiveness of our properties to tenants; snow removal costs); costs of complying with changes in governmental regulations, including those governing usage, zoning, the environment and taxes; civil unrest, acts of terrorism, earthquakes, hurricanes 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. • • • • • 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 have a material adverse effect on our results of operations. 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, particularly during periods of economic uncertainty such as what we are currently experiencing. 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 because of contractual co-tenancy termination or rent reduction rights 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 ground leases in multiple locations, could have a material adverse effect on our results of operations. As of December 31, 2009, the five largest tenants in our operating portfolio in terms of annualized base rent were Publix, PetSmart, Lowe’s Home Improvement, Ross Stores and Dick’s Sporting Goods, representing 3.3%, 2.9%, 2.5%, 2.4%, and 2.3%, respectively, of our total annualized base rent. 13 We face potential material adverse effects from increasing numbers of tenant bankruptcies, and we may be unable to collect balances due from any tenant bankruptcy. Bankruptcy filings by our retail tenants occur from time to time. Such bankruptcies may increase in times of economic uncertainty such as what we are currently experiencing. The number of bankruptcies among United States companies increased in 2009 and current economic conditions suggest this trend could continue. Similarly, bankruptcies of tenants renting space at properties in our portfolio continue to be well above historical levels. We cannot make any assurance that any tenant who 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. We are continually re-leasing vacant spaces resulting from tenant lease terminations. The bankruptcy of a tenant, particularly an anchor tenant, may make it more difficult to lease the remainder of the affected properties. Future tenant bankruptcies could materially adversely affect our properties or impact our ability to successfully execute our re-leasing strategy. Our financial covenants may restrict our operating and acquisition activities. Our unsecured revolving credit facility and unsecured term loan contain 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 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. We are closely monitoring all of our debt covenants. Maintaining our covenant compliance is an integral aspect of our capital decision making. 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, 2009, we owned eight of our operating properties through joint ventures. For the twelve months ended December 31, 2009, the eight properties represented approximately 10.5% of our annualized base rent. In addition, one of the properties and a component of another property in our current development pipeline and two properties in our shadow pipeline are currently owned through joint ventures, two of which are accounted for under the equity method as of December 31, 2009 as we do not exercise requisite control for consolidation treatment. We have also entered into an agreement with Prudential Real Estate Investors to pursue joint venture opportunities for the development and selected acquisition of community shopping centers in the United States. 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; 14 • • 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. In the future, we intend to co-invest with third parties through joint ventures that may involve similar or additional risks. 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 materially adversely affected. As of December 31, 2009, leases were scheduled to expire on a total of approximately 5.9% of the space at our properties in 2010. 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. Our future developments and acquisitions may not yield the returns we expect or may result in shareholder dilution. We have two properties in our current development pipeline and six properties in our shadow pipeline. New developments and acquisitions 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; failure to receive required zoning, occupancy, land use and other governmental permits and authorizations and changes in applicable zoning and land use laws; and the consent of third parties such as tenants, mortgage lenders and joint venture partners may be required, and those consents may be difficult to obtain or be withheld. In addition, if a project is delayed or if we are unable to lease designated space to anchor tenants, certain tenants may have the right to terminate their leases. If any of these situations 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 15 do not perform as expected, our financial performance may be materially and adversely affected. In addition, the issuance of equity securities as consideration for any acquisitions could be substantially dilutive to our shareholders. We may not be successful in identifying suitable acquisitions or development and redevelopment projects that meet our investment criteria, which may impede our growth. Part of our business strategy is expansion through acquisitions and development and redevelopment projects, 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 we may fail to complete developments, acquisitions or investments on satisfactory terms. Failure to identify or complete developments or acquisitions could slow our growth, which could in turn materially adversely affect our operations. Redevelopment activities may be delayed or otherwise may not perform as expected and, in the case of an unsuccessful redevelopment project, our entire investment could be at risk for loss. We currently have five properties in our redevelopment pipeline. We expect to redevelop certain of our other properties in the future. In connection with any redevelopment of our properties, we will bear certain risks, including the risk 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 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 the case of an unsuccessful redevelopment project, our entire investment could be at risk for loss. We may not be able to sell properties when appropriate and could, under certain circumstances, be required to pay certain tax indemnities related to the properties we sell. 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, 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 18% of our annualized base rent in the aggregate as of December 31, 2009. 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 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 take certain other steps to help them avoid incurring taxes that were deferred in connection with the formation transactions. The agreement described above is extremely complicated and imposes a number of procedural requirements on us, which makes 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 adjust our portfolio mix 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. 16 Potential losses may not be covered by insurance. 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 all 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. Insurance coverage on our properties may be expensive or difficult to obtain, exposing us to potential risk of loss. In the future, we may be unable to renew or duplicate our current insurance coverage in adequate amounts or at reasonable prices. In addition, insurance companies may no longer offer coverage against certain types of losses, such as losses due to terrorist acts, environmental liabilities, or other catastrophic events including hurricanes and floods, or, if offered, the expense of obtaining these types of insurance may not be justified. We therefore may cease to have insurance coverage against certain types of losses and/or there may be decreases in the limits of insurance available. If an uninsured loss or a loss in excess of our insured limits occurs, we could lose all or a portion of the capital we have invested in a property, as well as the anticipated future revenue from the property, but still remain obligated for any mortgage debt or other financial obligations related to the property. We cannot guarantee that material losses in excess of insurance proceeds will not occur in the future. If any of our properties were to experience a catastrophic loss, it could seriously disrupt our operations, delay revenue and result in large expenses to repair or rebuild the property. Events such as these could adversely affect our results of operations and our ability to meet our obligations. Rising operating expenses could reduce our cash flow and funds available for future distributions, particularly if such expenses are not offset by corresponding revenues. 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, we could be required to expend funds for that property’s operating expenses. As of December 31, 2009, our retail operating portfolio was approximately 90% leased compared to approximately 91% as of December 31, 2008. Our properties continue to be subject to increases in real estate and other tax rates, utility costs, operating expenses, insurance costs, repairs and maintenance and administrative expenses, regardless of such properties’ occupancy rates. Therefore, rising operating expenses could reduce our cash flow and funds available for future distributions, particularly if such expenses are not offset by corresponding revenues. 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 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. We may also be liable to third parties for damage and injuries resulting from environmental contamination emanating from the real estate. 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 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 that may use hazardous or toxic substances in the routine course of their businesses. In general, these tenants have covenanted in their leases with us to use these substances, if any, in compliance 17 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 efforts to identify environmental liabilities may not be successful. We test our properties for compliance with applicable environmental laws on a limited basis. We cannot give assurance that: • • • • existing environmental studies with respect to our properties reveal all potential environmental liabilities; any previous owner, occupant or tenant of one of our properties did not create any material environmental condition not known to us; the current environmental condition of our properties will not be affected by tenants and occupants, by the condition of nearby properties, or by other unrelated third parties; or future uses or conditions (including, without limitation, changes in applicable environmental laws and regulations or the interpretation thereof) will not result in environmental liabilities. Inflation may adversely affect our financial condition and results of operations. Most of our leases contain provisions requiring the tenant to pay its share of operating expenses, including common area maintenance, real estate taxes and insurance. However, increased inflation could have a more pronounced negative impact on our mortgage and debt interest and general and administrative expenses, as these costs could increase at a rate higher than our rents. Also, inflation may adversely affect tenant leases with stated rent increases or limits on such tenant’s obligation to pay its share of operating expenses, which could be lower than the increase in inflation at any given time. Inflation could also have an adverse effect on consumer spending, which could impact our tenants’ sales and, in turn, our average rents, and in some cases, our percentage rents, where applicable. 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, or the “NYSE,” on which we list our common shares) have experienced significant price and volume fluctuations. 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 by securities analysts of research reports about us or our industry; 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; 18 • • • • • • • • 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; 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, 2009, we had outstanding 63,062,083 common shares. Of these shares, approximately 62,416,712 are freely tradable, and the remainder of which are mostly held by our “affiliates,” as that term is defined by Rule 144 under the Securities Act. In addition, 7,978,498 units of our Operating Partnership are owned by certain of our executive officers and other individuals, and are 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 (or issuable upon redemption of units in our Operating Partnership) in our formation transactions. As 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 28.5% of our common shares, no three excepted holders treated as individuals would own more than 35.5% of 19 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. 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 20 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. 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 partner 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. Departure or loss of our key officers could have an adverse effect on us. Our future success depends, to a significant extent, upon the continued services of our existing executive officers. Our executive officers’ experience in real estate acquisition, development and finance are critical elements of our future success. We have employment agreements with each of our executive officers that provided for a term that ended in December 2009, with automatic one-year renewals unless either we or the officer elects not to renew the agreement. These agreements were automatically renewed for our three executive officers through December 31, 2010. If one or more of our key executives were to die, become disabled or otherwise leave the company's employ, we may not be able to replace this person with an executive officer of equal skill, ability, and industry expertise. Until suitable replacements could be identified and hired, if at all, our operations and financial condition could be impaired. We depend on external capital to fund our capital needs. 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. Partly because of these distribution requirements, we 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. 21 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 believe that we have qualified for taxation as a REIT for federal income tax purposes commencing with our taxable year ended December 31, 2004. We intend to continue to meet the requirements for qualification and taxation as a REIT, but we cannot assure shareholders that we will qualify 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 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. If we fail to qualify as a REIT, such failure would cause an event of default under our unsecured revolving credit facility and may adversely affect our ability to raise capital and to service our debt. 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 22 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 way they are treated 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. REIT distribution requirements may increase our indebtedness. We may be required from time to time, under certain circumstances, to accrue income for tax purposes that has not yet been received. In such event, or upon our repayment of principal on debt, we could have taxable income without sufficient cash to enable us to meet the distribution requirements of a REIT. Accordingly, we could be required to borrow funds or liquidate investments on adverse terms in order to meet these distribution requirements. We may in the future choose to pay dividends in our own common shares, in which case shareholders may be required to pay income taxes in excess of the cash dividends they receive. We may in the future distribute taxable dividends that are payable partly in cash and partly in our common shares. Under existing IRS guidance with respect to taxable years ending on or before December 31, 2011, up to 90% of such a dividend could be payable in our common shares. Taxable shareholders receiving such dividends will be required to include the full amount of the dividend as ordinary income to the extent of our current and accumulated earnings and profits for U.S. federal income tax purposes, regardless of whether such shareholder receives cash, REIT shares or a combination of cash and REIT shares. As a result, a shareholder may be required to pay income tax with respect to such dividends in excess of the cash dividend. If a shareholder sells the REIT shares it receives in order to pay this tax, the sales proceeds may be less than the amount included in income with respect to the dividend, if the market value of our shares decreases following the distribution. Furthermore, with respect to certain non-U.S. stockholders, we may be required to withhold U.S. federal income tax with respect to dividends paid in our common shares. In addition, if a significant number of our shareholders determine to sell shares of our common stock in order to pay taxes owed on dividends, it may put downward pressure on the trading price of our common shares. Dividends paid by REITs generally do not qualify for reduced tax rates. The maximum U.S. federal income tax rate applicable to income from “qualified dividends” payable to U.S. shareholders that are individuals, trusts and estates has been reduced by legislation to 15% (through 2010). Unlike dividends received from a corporation that is not a REIT, the Company’s distributions to individual shareholders generally are not eligible for the reduced rates. Although this legislation does not adversely affect the taxation of REITs or dividends payable by REITs, the more favorable rates applicable to regular corporate qualified dividends could cause investors who are individuals, trusts and estates to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT corporations that pay dividends, which could adversely affect the value of the shares of REITs, including our common shares. ITEM 1.B. UNRESOLVED STAFF COMMENTS None 23 ITEM 2. PROPERTIES Retail Operating Properties As of December 31, 2009, we owned interests in a portfolio of 51 retail operating properties totaling approximately 7.9 million square feet of gross leasable area (“GLA”) (including non-owned anchor space). The following tables set forth more specific information with respect to the Company’s retail operating properties as of December 31, 2009: OPERATING RETAIL PROPERTIES - TABLE I Property1 Bayport Commons6 Estero Town Commons6 Indian River Square International Speedway Square King's Lake Square Pine Ridge Crossing Riverchase Plaza Shops at Eagle Creek Tarpon Springs Plaza Wal-Mart Plaza Waterford Lakes Village Kedron Village Publix at Acworth The Centre at Panola Fox Lake Crossing Naperville Marketplace South Elgin Commons 50 South Morton 54th & College Beacon Hill6 Boulevard Crossing Bridgewater Marketplace Cool Creek Commons Fishers Station4 Geist Pavilion Glendale Town Center Greyhound Commons Hamilton Crossing Centre Martinsville Shops Red Bank Commons Stoney Creek Commons The Centre5 The Corner Traders Point Traders Point II Whitehall Pike Zionsville Place Ridge Plaza Eastgate Pavilion Cornelius Gateway6 Shops at Otty7 Burlington Coat Factory8 Cedar Hill Village Market Street Village Plaza at Cedar Hill Plaza Volente Preston Commons Sunland Towne Centre 50th & 12th Gateway Shopping Center9 Sandifur Plaza6 MSA State Oldsmar FL Naples FL Vero Beach FL Daytona FL Naples FL Naples FL Naples FL Naples FL Naples FL Gainesville FL Orlando FL Atlanta GA Atlanta GA Atlanta GA Chicago IL Chicago IL Chicago IL Indianapolis IN Indianapolis IN Crown Point IN Kokomo IN Indianapolis IN Indianapolis IN Indianapolis IN Indianapolis IN Indianapolis IN Indianapolis IN IN Indianapolis IN Martinsville Evansville IN Indianapolis IN Indianapolis IN Indianapolis IN Indianapolis IN Indianapolis IN Bloomington IN Indianapolis IN Oak Ridge NJ Cincinnati OH Portland OR Portland OR San Antonio TX Dallas TX Hurst TX Dallas TX Austin TX Dallas TX El Paso TX Seattle WA Seattle WA Pasco WA Year Built/Renovated 2008 2006 1997/2004 1999 1986 1993 1991/2001 1983 2007 1970 1997 2006 1996 2001 2002 2008 2009 1999 2008 2006 2004 2008 2005 1989 2006 1958/2008 2005 1999 2005 2005 2000 1986 1984/2003 2005 2005 1999 2006 2002 1995 2006 2004 1992/2000 2002 1970/2004 2000 2004 2002 1996 2004 2008 2008 Year Added to Operating Portfolio 2008 2007 2005 1999 2003 2006 2006 2003 2007 2004 2004 2006 2004 2004 2005 2008 2009 1999 2008 2007 2004 2008 2005 2004 2006 2008 2005 2004 2005 2006 2000 1986 1984 2005 2005 1999 2006 2003 2004 2007 2004 2000 2004 2005 2004 2005 2002 2004 2004 2008 2008 Acquired, Redeveloped, or Developed Developed Developed Acquired Developed Acquired Acquired Acquired Redeveloped Developed Acquired Acquired Developed Acquired Acquired Acquired Developed Developed Developed Developed Developed Developed Developed Developed Acquired Developed Redeveloped Developed Acquired Developed Developed Developed Developed Developed Developed Developed Developed Developed Acquired Acquired Developed Developed Redeveloped Acquired Acquired Acquired Acquired Developed Acquired Developed Developed Developed TOTAL Total GLA2 Owned GLA2 97,112 25,631 144,246 229,995 85,497 105,515 78,380 72,271 82,547 177,826 77,948 157,409 69,628 73,079 99,072 83,758 45,000 2,000 — 57,191 123,696 25,975 124,578 114,457 64,114 403,198 — 82,424 10,986 34,308 49,330 80,689 42,612 279,674 46,600 128,997 12,400 115,063 236,230 21,324 9,845 107,400 44,262 156,625 299,847 156,333 27,539 307,474 14,500 99,444 12,552 4,996,581 268,556 206,600 379,246 242,995 85,497 258,874 78,380 72,271 276,346 177,826 77,948 282,125 69,628 73,079 99,072 169,600 45,000 2,000 20,100 127,821 213,696 50,820 137,107 114,457 64,114 685,827 153,187 87,424 10,986 324,308 189,527 80,689 42,612 348,835 46,600 128,997 12,400 115,063 236,230 35,800 154,845 107,400 139,092 163,625 299,847 160,333 142,539 312,450 14,500 285,200 12,552 7,884,026 Percentage of Owned GLA Leased3 90.2% 69.5% 97.6% 98.3% 92.0% 95.4% 100.0% 55.2% 93.3% 98.0% 92.6% 89.4% 98.3% 100.0% 81.4% 89.6% 100.0% 100.0% * 50.4% 87.0% 53.1% 98.6% 75.2% 83.6% 94.1% * 92.3% 58.2% 74.2% 100.0% 96.5% 88.4% 98.2% 54.5% 100.0% 100.0% 82.6% 100.0% 62.3% 100.0% 100.0% 87.7% 77.6% 79.2% 85.1% 92.5% 91.2% 100.0% 91.9% 82.5% 90.1% 24 OPERATING RETAIL PROPERTIES - TABLE I (continued) ____________________ * Property consists of ground leases only and, therefore, no Owned GLA. 54th & College is a single ground lease property; Greyhound Commons has two of four outlots leased. 1 2 3 4 5 6 7 8 9 All properties are wholly owned, except as indicated. Unless otherwise noted, each property is owned in fee simple by the Company. Owned GLA represents gross leasable area that is owned by the Company. Total GLA includes Owned GLA, square footage attributable to non-owned anchor space, and non-owned structures on ground leases. Percentage of Owned GLA Leased reflects Owned GLA/NRA leased as of December 31, 2009, except for Greyhound Commons and 54th & College (see * ). This property is divided into two parcels: a grocery store and small shops. The Company owns a 25% interest in the small shops parcel through 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 the Company. The Company owns a 60% interest in this property through a joint venture with a third party that manages the property. The Company owns and manages the following properties through joint ventures with third parties: Bayport Commons (60%); Beacon Hill (50%); Cornelius Gateway (80%); Estero Town Commons (40%); and Sandifur Plaza (95%). The Company does not own the land at this property. It has leased the land pursuant to two ground leases that expire in 2017. The Company has six five-year options to renew this lease. The Company does not own the land at this property. It has leased the land pursuant to a ground lease that expires in 2012. The Company has six five-year renewal options and a right of first refusal to purchase the land. The Company owns a 50% interest in Gateway Shopping Center through a joint venture with a third party. The joint venture partner and manages the property. 25 - n o n ( t n e m e v o r p m I e m o H s e w o L ' , ) d e n w o - n o n ( t e g r a T , s ' l l a e B t n a i G s s e r t t a M , t n e m e v o r p m I e m o H s e w o L ' s l e a h c i M , y u B t s e B , t r a m s t e P 5 0 . 0 3 8 1 . 8 1 $ % 5 6 . 2 % 4 1 . 2 5 2 2 , 5 8 2 , 1 0 4 8 , 2 9 5 , 1 $ 0 0 0 , 0 5 7 — $ 5 2 2 , 5 3 5 0 4 8 , 2 9 5 , 1 $ 6 1 9 , 8 7 0 , 0 2 0 0 0 , 0 0 5 , 0 1 $ 3 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 t n e R e s a B f o e g a t n e c r e P 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 l i a t e R l a t o T e u n e v e R d e z i l a u n n A l i a t e R l a t o T e u n e v e R d e z i l a u n n A e s a e L d n u o r G e u n e v e R t n e R e s a B 1 e u n e v e R s e c n a r b m u c n E A S M a p m a T s e l p a N t o p e D e c i f f O , ) d e n w o 5 2 . 0 1 % 0 4 . 2 4 8 1 , 2 4 4 , 1 — 4 8 1 , 2 4 4 , 1 9 8 3 , 6 1 2 , 3 1 h c a e B o r e V , s l e a h c i M , s e l p a t S , y v a N d l O , t r a M n i e t S , d n o y e B & h t a B , d e B ) d e n w o - n o n ( s ' l l a e B , ) d e n w o - n o n ( t e g r a T , x i l b u P t r a M - l a W , t o L - A - e v a S , n o i l l i - M A - s k o o B e i x i D - n n i W ) d e n w o - n o n ( s ’ e w o L , s e l p a t S s e l p a t S , e r o o M C A , s u l P t s o C x i l b u P s d o o G g n i t r o p S s ’ k c i D s s e n t i F o r t e R , x i l b u P , s s e L r o f s s e r D s s o R , d n o y e B & h t a B d e B , ) d e n w o - n o n ( t e g r a T s d o o F r e n i F s k c i n i m o D ' t r a m S t e P , x x a M J T s s e n t i F A L O C T E P x i l b u P x i l b u P 4 8 . 9 6 3 . 3 1 6 9 . 4 1 2 3 . 4 1 9 2 . 6 1 1 9 . 1 2 8 4 . 5 4 7 . 1 1 9 9 . 6 1 6 0 . 1 1 6 0 . 2 1 5 8 . 3 1 7 9 . 2 1 5 7 . 8 1 0 0 . 7 5 s i l o p a n a i d n I , s e l p a t S , r e t a e h T s e t o s a r e K , e r o t S t p e D d e t a r e d e F , ) d e n w o - n o n ( r e t n e C t n e m e v o r p m I e m o H s e w o L ' , y r a r b i L ) d e n w o - n o n ( r e t n e C t n e m e v o r p m I e m o H s e w o L ' — ) d e n w o - n o n ( s n e e r g l a W , ) d e n w o - n o n ( t e g r a T 8 7 . 5 s s e n t i F l a n i d r a C , t r a M n i e t S , t e k r a M h s e r F e h T e r a w d r a H e c A , e r o t s r e p u S e e r t y t r a P s t e k r a m r e p u S h s r a M ) d e n w o - n o n ( s ' l h o K , x x a M J T , O C T E P ) d e n w o - n o n ( l l i T n a V & k c a r t S ) d e n w o - n o n ( s n e e r g l a W 7 9 . 7 1 3 7 . 3 1 1 0 . 8 1 5 3 . 6 1 3 6 . 1 1 7 1 . 7 1 ) d e n w o - n o n ( t e k r a M h s e r F e h T — e c i f f O , g g e r G H H , ) d e n w o - n o n ( t n e m e v o r p m I e m o H s e w o L ' ) 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 ) d e n w o - n o n ( s n e e r g l a W t o p e D e c i f f O s c i r b a F k c o c n a H g u r D o c s O t o p e D & h t a B , d e B , h s r a M , r e t a e h T s e t o s a r e K , s d o o G g n i t r o p S s k c i D ' t r a m s t e P , y v a N d l O , s l e a h c i M , d n o y e B , 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 , y r e c o r G P & A r e t n e C t n e m e v o r p m I e m o H s e w o L ' 3 2 . 7 1 0 5 . 5 1 4 7 . 4 1 2 4 . 9 9 5 . 3 1 6 1 . 5 1 4 4 . 4 1 6 6 . 7 2 $ 6 8 . 7 6 0 . 9 1 5 4 . 6 1 % 8 5 . 4 % 5 7 . 1 % 1 5 . 2 % 7 8 . 1 % 8 0 . 1 % 9 1 . 3 % 9 5 . 1 % 1 4 . 1 % 8 9 . 3 % 6 2 . 1 % 7 4 . 1 % 6 8 . 1 % 2 6 . 1 % 0 4 . 1 % 9 1 . 0 % 3 4 . 0 % 6 8 . 0 % 6 4 . 2 % 1 4 . 0 % 4 3 . 3 % 7 6 . 1 % 3 5 . 1 % 5 6 . 3 % 4 3 . 0 % 0 3 . 2 % 6 1 . 0 % 2 6 . 0 % 7 7 . 0 % 6 7 . 1 % 5 9 . 0 % 2 3 . 7 % 7 1 . 1 % 9 6 . 1 % 9 3 . 0 % 0 6 . 2 2 8 0 , 4 5 7 , 2 9 3 2 , 1 5 0 , 1 9 9 5 , 6 0 5 , 1 6 2 3 , 2 2 1 , 1 9 7 9 , 9 4 6 6 7 2 , 6 1 9 , 1 4 0 7 , 4 5 9 8 5 9 , 6 4 8 7 8 9 , 6 5 7 9 6 6 , 1 8 8 0 9 4 , 1 9 3 , 2 1 0 5 , 7 1 1 , 1 2 9 3 , 3 7 9 0 5 7 , 3 4 8 0 0 0 , 4 1 1 0 0 0 , 0 6 2 1 2 0 , 8 1 5 7 9 5 , 8 4 2 2 4 1 , 8 7 4 , 1 9 3 5 , 8 0 0 , 2 7 5 6 , 0 0 0 , 1 2 4 3 , 0 2 9 1 1 2 , 2 9 1 , 2 0 0 5 , 2 0 2 4 2 8 , 2 8 3 , 1 9 0 0 , 9 9 8 2 3 , 5 7 3 5 5 7 , 4 6 4 6 3 9 , 0 7 5 0 7 1 , 8 5 0 , 1 4 2 7 , 2 0 7 2 8 6 , 0 0 4 , 4 0 0 0 , 4 1 0 , 1 4 0 4 , 6 3 2 0 3 5 , 3 6 5 , 1 t r a m s t e P 3 1 . 0 1 % 8 9 . 3 6 5 0 , 2 9 3 , 2 — — — — 3 4 6 , 4 9 3 0 2 8 , 8 2 2 — — — — — — — — — — — — — — — — 0 0 0 , 0 6 2 — — — — — 0 0 5 , 1 7 0 0 5 , 2 0 2 0 0 0 , 5 3 4 — — — — — 6 2 d e z i l a u n n A 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 9 3 4 , 9 5 3 , 2 9 3 2 , 1 5 0 , 1 9 9 5 , 6 0 5 , 1 6 2 3 , 2 2 1 , 1 9 7 9 , 9 4 6 6 5 4 , 7 8 6 , 1 4 0 7 , 4 5 9 8 5 9 , 6 4 8 7 8 9 , 6 5 7 9 6 6 , 1 8 8 0 9 4 , 1 9 3 , 2 1 0 5 , 7 1 1 , 1 — 2 9 3 , 3 7 9 0 5 7 , 3 4 8 0 0 0 , 4 1 1 1 2 0 , 8 1 5 2 4 1 , 8 7 4 , 1 7 9 5 , 8 4 2 9 3 5 , 8 0 0 , 2 7 5 6 , 0 0 0 , 1 2 4 3 , 0 2 9 — — 4 5 9 , 6 9 5 , 8 1 — 0 0 0 , 0 0 5 , 7 1 0 0 0 , 0 0 5 , 0 1 — 0 0 0 , 0 0 0 , 4 1 — 0 0 0 , 0 0 7 , 9 2 7 6 0 , 8 5 6 , 3 3 5 7 , 8 8 2 , 1 1 — 9 1 4 , 3 6 0 , 1 1 — — — 9 4 3 , 5 6 5 , 7 0 0 0 , 0 0 0 , 7 4 4 4 , 7 3 9 , 3 9 0 7 , 2 6 8 , 7 1 0 0 0 , 5 2 1 , 1 1 1 1 2 , 2 9 1 , 2 0 0 0 , 3 5 5 , 0 2 — 9 0 0 , 9 9 8 2 3 , 5 7 3 4 2 3 , 1 1 3 , 1 5 5 7 , 4 6 4 6 3 9 , 0 7 5 0 7 1 , 8 5 0 , 1 4 2 7 , 2 0 7 2 8 6 , 5 6 9 , 3 0 0 0 , 4 1 0 , 1 4 0 4 , 6 3 2 0 3 5 , 3 6 5 , 1 — — — — — — 2 1 4 , 4 7 5 , 1 — — 2 2 6 , 5 1 4 , 8 0 0 0 , 0 0 0 , 8 4 0 0 0 , 0 0 0 , 5 1 a n o t y a D s e l p a N s e l p a N s e l p a N s e l p a N s e l p a N e l l i v s e n i a G o d n a l r O a t n a l t A 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 o g a c i h C s i l o p a n a i d n I s i l o p a n a i d n I t n i o P n w o r C o m o k o K 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 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 e l l i v s n a v E 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 n o t g n i m o o l B s i l o p a n a i d n I e g d i R k a O e t a t S y t r e p o r P L F L F L F L F L F L F L F L F L F L F L F A G A G A G L I L I L I N I N I N I N I N I N I N I N I N I N I N I N I N I N I N I N I N I N I N I N I J N 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 e r a u q S r e v i R n a i d n I e r a u q S e k a L s g n i K ' g n i s s o r C e g d i R e n i P a z a l P e s a h c r e v i R k e e r C e l g a E t a s p o h S a z a l P s g n i r p S n o p r a T a z a l P t r a M - l a W e g a l l i V s e k a L d r o f r e t a W a l o n a P t a e r t n e C e h T g n i s s o r C e k a L x o F h t r o w c A t a x i l b u P e g a l l i V n o r d e K e c a l p t e k r a M e l l i v r e p a N s n o m m o C n i g l E h t u o S n o t r o M h t u o S 0 5 e g e l l o C & h t 4 5 l l i H n o c a e B e c a l p t e k r a M r e t a w e g d i r B 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 n o i t a t S s r e h s i F n o i l i v a P t s i e G e r t n e C g n i s s o r C n o t l i m a H r e t n e C n w o T e l a d n e l G s n o m m o C d n u o h y e r G s n o m m o C k n a B d e R s p o h S e l l i v s n i t r a M s n o m m o C k e e r C y e n o t S 4 e r t n e C e h T I I t n i o P s r e d a r T e k i P l l a h e t i h W e c a l P e l l i v s n o i Z t n i o P s r e d a r T a z a l P e g d i R r e n r o C e h T 4 s n o m m o C n w o T o r e t s E s n o m m o C t r o p y a B 6 5 0 , 2 9 3 , 2 0 7 6 , 9 0 2 , 5 1 i t a n n i c n i C H O n o i l i v a P e t a g t s a E , s l l a h s r a M , s s e L r o f s s e r D s s o R , x a M e c i f f O , y b b o L y b b o H t o p e D e c i f f O , s s e L r o f s s e r D s s o R , c i r b a F n n A - o J ) d e n w o - n o n ( y n n e P C J , s s e n t i F r u o H 4 2 t e k r a M s r e m r a F s t u o r p S y r e c o r G B - E - H d e B , t r a m K , e r o t s m o o R Y M H , s s e L r o f s s e r D s s o R , t r a m s t e P ) d e n w o - n o n ( t n e m e v o r p m I e m o H s e w o L ' s ’ l h o K , y t i C y t r a P , d i A e t i R , s s e L r o f s s e r D s s o R , t r a m s t e P y r o t c a F e r u t i n r u F , d n o y e B & h t a B s n e e r g l a W ) d e n w o - n o n ( s n e e r g l a W ) d e n w o - n o n ( 3 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 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 ( t r a M - l a W s o k n i K / x e d e F t n e R e s a B f o e g a t n e c r e P 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 l i a t e R l a t o T e u n e v e R d e z i l a u n n A l i a t e R l a t o T e u n e v e R d e z i l a u n n A e s a e L d n u o r G e u n e v e R t n e R e s a B 1 e u n e v e R s e c n a r b m u c n E 4 4 . 9 1 3 7 . 7 2 5 7 . 4 9 1 . 6 1 5 0 . 2 1 4 3 . 3 1 5 4 . 4 1 1 9 . 4 2 8 3 . 9 6 7 . 2 3 4 0 . 2 2 6 9 . 8 1 6 6 . 2 1 $ % 3 4 . 0 % 8 6 . 0 % 5 8 . 0 % 5 0 . 1 % 4 6 . 2 % 7 2 . 5 % 8 3 . 3 % 6 0 . 1 % 5 5 . 4 % 9 7 . 0 % 9 5 . 3 % 3 3 . 0 % 0 0 1 5 6 3 , 8 5 2 2 6 2 , 9 0 4 0 5 1 , 0 1 5 7 4 2 , 8 2 6 — — — 0 0 3 , 6 3 1 5 6 3 , 8 5 2 2 6 9 , 2 7 2 0 5 1 , 0 1 5 7 4 2 , 8 2 6 1 6 9 , 4 8 5 , 1 0 0 0 , 0 2 1 1 6 9 , 4 6 4 , 1 — — — — — 0 3 5 , 7 6 1 , 3 0 7 6 , 2 3 0 , 2 9 7 5 , 4 3 6 0 0 0 , 5 7 4 5 6 9 , 4 3 7 , 2 0 2 3 , 6 9 1 8 0 9 , 7 5 1 , 2 — — 0 0 0 , 0 1 1 — 9 0 8 , 4 0 1 — 0 0 0 , 4 4 1 0 3 5 , 7 6 1 , 3 0 7 6 , 2 2 9 , 1 9 7 5 , 4 3 6 0 0 0 , 5 7 4 6 5 1 , 0 3 6 , 2 0 2 3 , 6 9 1 8 0 9 , 3 1 0 , 2 1 1 6 , 6 9 5 , 5 2 3 0 7 , 9 9 4 , 8 2 4 6 9 , 5 0 3 , 4 3 0 1 , 0 7 3 , 4 0 0 0 , 0 0 0 , 5 2 — 6 6 8 , 2 4 0 , 1 2 5 8 5 , 0 8 0 , 0 6 $ 2 7 5 , 7 5 9 , 2 $ 3 1 0 , 3 2 1 , 7 5 $ 1 5 9 , 0 6 1 , 5 2 4 $ d e z i l a u n n A ) 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 A S M d n a l t r o P d n a l t r o P o i n o t n A n a S s a l l a D t s r u H s a l l a D n i t s u A s a l l a D o s a P l E e l t t a e S e l t t a e S o c s a P L A T O T e t a t S y t r e p o r P R O R O X T X T X T X T X T X T X T A W A W A W y r o t c a F t a o C n o t g n i l r u B e g a l l i V t e e r t S t e k r a M e g a l l i V l l i H r a d e C y a w e t a G s u i l e n r o C 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 s n o m m o C n o t s e r P e t n e l o V a z a l P 4 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 e r t n e C e n w o T d n a l n u S h t 2 1 & h t 0 5 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 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 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 9 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 e u n e v e R t n e R e s a B d e z i l a u n n A . 9 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 . s e s a e l d n u o r g n o 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 . y n a p m o C e h t 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 . 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 1 2 3 4 7 2 ) ” A R N “ ( a e r a e l b a t n e r t e n f o t e e f e r a u q s n o i l l i m 5 . 0 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 e e r h t n i s t s e r e t n i d e n w o e w , 9 0 0 2 , 1 3 r e b m e c e D f o s A : 9 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 i f 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 i c o s s a n a d n 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 d e s a e L r e P . t F . q S e g a t n e c r e P f o 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 A R N d e s a e L d e n w O A R N s e c n a r b m u c n E , d e r i u q c A d e p o l e v e d e R 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 y t r e p o r P 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 t n e m e e r g A t n e m e g a n a M g n i k r a P n o s i n e D n o i t a r t s i n i m d A 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 f o . t p e D a n a i d n I 2 7 . 9 A N / 6 5 . 5 3 4 . 3 1 e t i K , s e i t i r u c e S y t i C , t r u o C e m e r p u S a n a i d n I p u o r G y t l a e R 0 8 . 7 1 $ % 1 . 7 7 % 9 . 2 1 A N / % 9 . 9 $ % 0 . 0 0 1 8 2 . 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 9 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 . 9 0 0 2 , 1 3 r e b m e c e D f o s a s e i r a i d i s b u s d n a y n a p m o C e h t m o r f 7 0 5 , 9 7 7 $ s e d u l c n i t n e R e s a B d e z i l a u n n A . y t r a p d r i h t a y b d e g a n a m s i e g a r a g e h T 1 2 3 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5 0 7 , 4 3 8 9 0 5 , 2 7 9 , 4 A N / 0 0 4 , 9 3 6 4 1 6 , 6 4 4 , 6 $ % 6 . 3 9 % 0 . 0 0 1 A N / % 0 . 0 0 1 $ % 2 . 6 9 5 7 8 , 5 8 6 4 3 , 8 9 2 A N / 0 0 0 , 5 1 1 1 2 2 , 9 9 4 — — 0 4 4 , 2 5 6 , 3 6 4 3 , 5 3 3 , 5 2 $ d e p o l e v e D d e r i u q c A d e p o l e v e D L A T O T 3 0 0 2 6 8 9 1 4 0 0 2 6 0 9 , 2 8 6 , 1 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 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 3 e g a r a G g n i k r a P 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 s t c u d o r P n e P 2 h t u o S 0 3 a n a i d n I t s o C d e r r u c n I f o s a l a t o T d e t a m i t s E t n e c r e P d e n w O f 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 / l a u t c A d e t c e j o r P 6 . 0 e h t y l e t a m i x o r p p a 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 o w t d e n w o e w , 9 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 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 i f 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 : 9 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 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 r o h c n A d e n w o - n o N d n a s t n a n e T r o j a M , 1 3 7 9 0 0 2 r e b m e c e D y t i C y t r a P , s d o o F e l o h W , s e l p a t S , l i a t e R r e h t O , e r o t s k o o B t t e l l o F e m a D e r t o N f o y t i s r e v i n U 5 3 3 , 5 4 6 7 4 , 7 2 1 1 8 , 2 7 6 8 5 , 1 5 $ $ $ t c e j o r P 7 t s o C / d e s a e L - e r P 6 d e t t i m m o C A L G 5 d e i p u c c O l a t o T 4 A L G d e n w O 3 A L G g n i n e p O 2 e t a D s e c n a r b m u c n E A S M 1 y n a p m o C % p i h s r e n w O s t c e j o r P t n e m p o l e v e D t n e r r u C 0 0 0 , 2 5 0 0 0 , 5 3 0 0 0 , 7 8 $ $ % 9 . 3 7 % 4 . 2 7 % 1 . 3 7 % 7 . 7 1 % 3 . 1 4 % 8 . 0 3 6 8 3 , 8 3 1 3 4 7 , 2 3 1 9 0 0 2 2 Q 2 5 2 , 3 5 8 , 0 3 0 0 0 , 5 6 4 6 8 3 , 3 0 6 0 0 0 , 5 6 1 3 4 7 , 7 9 2 9 0 0 2 3 Q 4 9 1 , 2 0 8 , 8 1 6 4 4 , 5 5 6 , 9 4 $ $ . t F e l a d r e d u a L % 0 5 1 L F , a z a l P e n o t s e l b b o C d n e B h t u o S % 0 0 1 8 I – N I , s n o m m o C t e e r t S y d d E s t c e j o r P t n e m p o l e v e D t n e r r u C l a t o T 9 t e e h s e c n a l a b d e t a d i l o s n o c n o s s e r g o r p n i n o i t c u r t s n o C n i d e d u l c n i 9 0 0 2 / 1 3 / 2 1 f o s a d e r r u c n i t s o C g n i n e p o e h t r e t f a s h t n o m e v l e w t o t x i s n i h t i w s r u c c o y l l a c i p y t ) d e i p u c c o % 5 8 , . e . i ( n o i t a z i l i b a t S . e d a m s i t n e m y a p 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 i f e h t s a d e n i f e d s i e t a D g n i n e p O . e t a d d n a s u y b d e n w o 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 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 . n w o l l i w e w t c e j o r p e w 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 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 d e s a e l d n u o r g e b o t d e t c e p x e s i r o s t s i x e y l t n e r r u c t a h t e c a p s r o h c n a d e n w o - n o n d n a , n w o e w 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 . e r u t n e v t n i o j a h g u o r h t a z a l P e n o t s e l b b o C s n w o y n a p m o C e h T . t n e r g n i y a p n u g e b e v a h r o e c a p s r i e h t f o n o i s s e s s o p n e k a t e v a h t a h t s t n a n e t s e d u l c n I . n o i t c u r t s n o c r e d n u g n i d n i b - n o n d e n g i s s a h y n a p m o C e h t h c i h w r o f t e e f e r a u q s 1 1 4 , 8 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 l t o l t u o s e d u l c x E . t n e t n i f o s r e t t e l . ) 8 e t o N e e s ( s n o m m o C t e e r t S y d d E r o f t p e c x e , s t s o c f o e r a h s ’ s r e n t r a p d n a s ’ y n a p m o C e h t h t o b s t c e l f e R . s d n a s u o h t n i s r a l l o D 5 3 $ y l e t a m i x o r p p a s i h c i h w f o e r a h s s ’ y n a p m o C e h t , n o i l l i m 0 7 $ y l e t a m i x o r p p a s i t c e j o r p e h t f o t n e n o p m o c e s u - d e x i m e h t f o t s o c d e t a m i t s e l a t o t e h T . t c e j o r p s i h t r o f r e p o l e v e d r e t s a m e h t s i y n a p m o C e h T e t i h W h t i w e r u t n e v t n i o j 0 5 / 0 5 a o t n i d e r e t n e o s l a s a h y n a p m o C e h T . y t r a p d r i h t a y b d e n w o d n a d e d n u f e b l l i w h c i h w s t n e m t r a p a o t e l b a t u b i r t t a s i t s o c t c e j o r p e h t f o n o i l l i m 5 3 $ g n i n i a m e r e h T . n o i l l i m h c i h w n o i l l i m 5 . 5 $ y l e t a m i x o r p p a s i l e t o h s i h t f o t s o c e h t f o e r a h s s ’ y n a p m o C e h T . l e t o h e c i v r e s d e t i m i l , s e t i u S d n a n n I d l e i f r i a F m o o r 9 1 1 a f o n o i t c u r t s n o c d e c n e m m o c d n a n o i t a r o p r o C s e c i v r e S g n i g d o L . n a o l n o i t c u r t s n o c y t r a p - d r i h t a y b d e d n u f e b l l i w 1 2 3 4 5 6 7 8 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ . e c i v r e s n i d e c a l p e r a t e s s a e h t f o s n o i t r o p s a s i s a b a t a r - o r p a n o t e e h s e c n a l a b d e t a d i l o s n o c e h t n o s t e s s a d e x i f o t d e i f i s s a l c e r s i d e r r u c n i t s o C 9 9 2 t s o C d e r r u c n I l a t o T d e t a m i t s E d e t c e j o r P d e t c e j o r P 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 e r l i a t e r e v i f d e n w o e w , 9 0 0 2 , 1 3 r e b m e c e D f o s a , e v o b a e l b a t e h t n i d e y a l p s i d s a , e n i l e p i p t n e m p o l e v e d t n e r r u c r u o o t n o i t i d d a n I 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 c i f 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 . 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 5 . 0 y l e t a m i x o r p p a n i a t n o c : 9 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 e r s e i t r e p o r P t n e m p o l e v e d e R s r o o d t u O & s t r o p S y m e d a c A 7 9 3 s U ” R “ s e i b a B / s U ” R “ s y o T 5 2 2 e r o t S e r a w d r a H n o s n h o J 0 4 x a M e c i f f O , x i l b u P 7 0 3 d e n w o - n o N d n a s t n a n e T r o j a M s r o h c n A 4 9 0 0 2 , 1 3 f o s a r e b m e c e D g n i d n e P 9 3 $ 0 0 5 , 2 0 0 7 , 5 0 0 5 , 2 0 0 5 0 0 5 , 4 $ 5 7 8 , 0 1 1 8 3 9 , 2 7 1 7 6 8 , 4 3 1 7 7 1 , 9 2 6 0 9 , 5 4 t c e j o r P 4 t s o C l a t o T 3 A L G 8 0 0 , 1 $ 0 0 7 , 5 1 $ 3 6 7 , 3 9 4 d e n w O 2 A L G d e n w O g n i t s i x E A L G s e c n a r b m u c n E A S M y n a p m o C % p i h s r e n w O 1 s t c e j o r P t n e m p o l e v e d e R 5 7 8 , 0 1 1 8 3 9 , 2 7 1 7 6 8 , 4 3 1 7 7 1 , 9 2 6 0 9 , 5 4 3 6 7 , 3 9 4 5 7 8 , 0 1 1 8 3 9 , 2 7 1 7 6 8 , 4 3 1 7 7 1 , 9 2 6 0 9 , 5 4 3 6 7 , 3 9 4 0 0 0 , 0 4 9 , 4 1 $ s i l o p a n a i d n I — — — — e l l i v n o s k c a J s e l p a N e l t t a e S n o t a R a c o B % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 N I , e g d E s r e v i R t a s p o h S L F , s w o d a h S e s u o h t r u o C A W , e r a u q S r e n r o C r u o F L F , a z a l P s g n i r p S l a r o C L F , a z a l P n o t l o B 0 0 0 , 0 4 9 , 4 1 $ s t c e j o r P t n e m p o l e v e d e R l a t o T d n u o r g e b o t d e t c e p x e d n a s u y b d e n w o 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 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 . n w o l l i w e w t c e j o r p e w 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 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 d e s a e l . n o i t c u r t s n o c r e d n u s i r o s t s i x e y l t n e r r u c t a h t e c a p s r o h c n a d e n w o - n o n d n a , n w o e w 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 . s c i t s i t a t s o i l o f t r o p g n i t a r e p o e h t m o r f d e v o m e r n e e b e v a h s e i t r e p o r p t n e m p o l e v e d e R . s t s o c f o e r a h s ’ s r e n t r a p d n a s ’ y n a p m o C e h t h t o b s t c e l f e R . s d n a s u o h t n i s r a l l o D 1 2 3 4 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 0 3 h c i h w , e n i l e p i p t n e m p o l e v e d ” w o d a h s “ a e v a h e w , e v o b a s e l b a t e h t n i d e y a l p s i d s a , e n i l e p i p t n e m p o l e v e d e r d n a t n e m p o l e v e d l i a t e r t n e r r u c r u o o t n o i t i d d a n I . s g n i c n a n i f y t r a p d r i h t r o f s n o i t a i t o g e n d n a y t i v i t c a g n i s a e l - e r p g n i d u l c n i , e c n e m m o c o t n o i t c u r t s n o c r o f n o i t a r a p e r p f o s e g a t s s u o i r a v n i e r a t a h t s l e c r a p d n a l s e d u l c n i d e t a m i t s e l a t o t a t a t e e f e r a u q s n o i l l i m 8 . 2 y l e t a m i x o r p p a 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 t c e j o r p x i s f o d e t s i s n o c e n i l e p i p w o d a h s e l b i s i v s i h t , 9 0 0 2 , 1 3 r e b m e c e D f o s A . t c e j o r p d e t a d i l o s n o c n u e h t f o e r a h s r u o g n i d u l c n i , n o i l l i m 5 . 1 4 1 $ y l e t a m i x o r p p a e b o t d e t c e p x e s i h c i h w f o e r a h s r u o , n o i l l i m 9 . 4 0 3 $ y l e t a m i x o r p p a f o t s o c t c e j o r p y t i v i t c A t n e m p o l e v e D r e h t O y c n a n e T l a i t n e t o P , e r o t S t n e m t r a p e D t n u o c s i D , s e r t a e h T k n a r F s t n a r u a t s e R , s e x o B . r J % 0 4 7 2 0 , 0 6 1 1 0 , 4 2 d a P , s p o h S , ) d e n w o - n o n ( t r a M - l a W r e p u S , s p o h S , s e x o B . r J , s e r t a e h T k n a r F , x i l b u P s p o h S , e r o t S e r a w d r a H 3 7 0 , 0 1 s t n a r u a t s e R 8 9 8 , 3 4 A L , ) d e n w o - n o n ( t e g r a T r e p u S , s e x o B . r J s e x o B . r J , s e l a S 5 2 8 , 2 1 s s e n t i F 7 4 3 , 6 s e r t a e h T k n a r F , t e g r a T 4 6 2 , 3 1 7 0 4 , 6 8 8 5 4 , 4 6 s a d e r r u c n I t s o C 2 9 0 0 2 , 1 3 . c e D f o d e t a m i t s E l a t o T 2 , 1 t s o C t c e j o r P l a t o T d e t a m 1 A L G i t s E d e t a m i t s E e t a D t r a t S G R K s e c n a r b m u c n E i % p h s r e n w O A S M t c e j o r P – d e t a d i l o s n o c n U $ $ $ $ % 0 2 0 0 6 , 9 2 0 0 0 , 8 4 1 $ $ 0 0 0 , 0 0 5 , 1 D B T 0 0 0 , 3 7 8 , 3 3 0 0 2 , 9 4 5 , 3 1 $ $ . . . . . . . . . . . . . . . . . . . % 0 4 3 t s o C t c e j o r P d e t a d i l o s n o c n U f o e r a h S t n e r r u C G R K h g i e l a R . . . . . . . . . . . . . 3 C N , s n o m m o C n w o T e d i s k r a P – d e t a d i l o s n o C 0 0 0 , 0 9 $ 0 0 0 , 6 9 2 0 0 0 , 1 1 0 0 1 , 9 1 0 0 8 , 6 0 0 0 , 0 3 0 0 9 , 6 5 1 0 0 9 , 1 1 1 $ 0 0 0 , 7 2 1 0 0 0 , 5 4 3 0 0 0 , 3 6 2 0 0 0 , 0 1 3 0 0 0 , 1 4 3 , 1 D B T D B T D B T D B T D B T — — — — 0 0 0 , 5 2 4 , 9 $ % 0 5 % 0 0 1 % 0 0 1 % 0 0 1 % 0 0 1 h c a e B y a r l e D . . . . . . . . . . . . . . . . . . . . 4 L F , e c a l p t e k r a M y a r l e D e l t t a e S . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 A W , y e l l a V e l p a M h g i e l a R . . . . . . . . . . . . . . . . . . . . . . C N , n o i t a t S e n o t s d a o r B o g a c i h C . . . . . . . . . . . I I – L I , s n o m m o C n i g l E h t u o S h g i e l a R . . . . . . . . . . . . . . . . . . . . . 6 I – C N , e c a l P l l i H w e N 0 0 0 , 5 2 4 , 9 $ . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . L A T O T . . . . . . . . . . . . . . . . . . . . . . . . t s o C t c e j o r P d e t a d i l o s n o C f o e r a h S t n e r r u C G R K e h t t a % 0 2 o t d e c u d e r e b l l i w d n a 9 0 0 2 , 1 3 r e b m e c e D f o s a % 0 4 s i e r u t n e v t n i o j s i h t n i t s e r e t n i s ’ y n a p m o C e h T . s r o t s e v n I e t a t s E l a e R l a i t n e d u r P h t i w e r u t n e v t n i o j a h g u o r h t d e n w o s i s n o m m o C n w o T e d i s k r a P . n o i t c u r t s n o c r e d n u y l t n e r r u c s i r o s t s i x e t a h t 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 n i d n a s 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 A L G l a t o T d e t a m i t s E d n a t s o C t c e j o r P d e t a m i t s E l a t o T . s t s o c f o e r a h s ’ s r e n t r a p d n a s ’ y n a p m o C e h t h t o b s t c e l f e R . s d n a s u o h t n i s r a l l o D . t n e m p o l e v e d e r y e l l a V e l p a M e h t f o t n e n o p m o c a s i h c i h w r e t n e c g n i p p o h s e r a u q S r e n r o C r u o F e h t f o t s o c n o i t i s i u q c a e h t f o n o i t r o p a s e d u l c n i ” t s o C t c e j o r P d e t a m i t s E l a t o T “ . ) % 0 5 n e h t , n r u t e r d e r r e f e r p ( e r u t n e v t n i o j a h g u o r h t e c a l p t e k r a M y a r l e D s n w o y n a p m o C e h T . g n i c n a n i f n o i t c u r t s n o c c i f i c e p s t c e j o r p f o e m i t 1 2 3 4 5 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 1 3 Land Held for Future Development As of December 31, 2009, we owned interests in land parcels comprising approximately 95 acres that may be used for future expansion of existing properties, development of new retail or commercial properties or sold to third parties. 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, 2009. The following table sets forth certain information for the largest 10 tenants and non-owned anchor tenants (based on total GLA) open for business or for which ground lease payments are being made at the Company’s retail properties based on minimum rents in place as of December 31, 2009: TOP 10 RETAIL TENANTS BY GROSS LEASABLE AREA Tenant Lowe's Home Improvement3 Target Wal-Mart Publix Federated Department Stores Dick's Sporting Goods Ross Stores Petsmart Home Depot Bed Bath & Beyond Number of Locations 8 6 4 6 1 3 5 6 1 5 45 Total GLA 1,082,630 665,732 618,161 289,779 237,455 171,737 147,648 147,069 140,000 134,298 3,634,509 Number of Leases 2 0 1 6 1 3 5 6 0 5 29 Company Owned GLA1 128,997 0 103,161 289,779 237,455 171,737 147,648 147,069 0 134,298 1,360,144 Number of Anchor Owned Locations 6 6 3 0 0 0 0 0 1 0 16 Anchor Owned GLA2 953,633 665,732 515,000 0 0 0 0 0 140,000 0 2,274,365 ____________________ 1 Excludes the estimated size of the structures located on land owned by the Company and ground leased to tenants. 2 3 Includes the estimated size of the structures located on land owned by the Company and ground leased to tenants. The Company has entered into one ground lease with Lowe’s Home Improvement for a total of 163,000 square feet, which is included in Anchor Owned GLA. 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, 2009: TOP 25 TENANTS BY ANNUALIZED BASE RENT 1, 2 Tenant Publix Petsmart Lowe's Home Improvement Ross Stores Dick's Sporting Goods State of Indiana Marsh Supermarkets Bed Bath & Beyond Office Depot Indiana Supreme Court Staples HEB Grocery Company Best Buy Kmart LA Fitness Michaels TJX Companies Kerasotes Theaters4 Dominick's City Securities Corporation The Great Atlantic & Pacific Tea Co. Petco Beall's Old Navy Burlington Coat Factory TOTAL Type of Property Retail Retail Retail Retail Retail Commercial Retail Retail Retail Commercial Retail Retail Retail Retail Retail Retail Retail Retail Retail Commercial Retail Retail Retail Retail Retail Number of Locations 6 6 2 5 3 3 2 5 5 1 4 1 2 1 1 3 3 2 1 1 1 3 2 2 1 Leased GLA/NRA3 289,779 147,069 128,997 147,648 171,737 210,393 124,902 134,298 129,099 75,488 89,797 105,000 75,045 110,875 45,000 68,989 88,550 43,050 65,977 38,810 58,732 40,778 79,611 39,800 107,400 % of Owned GLA/NRA of the Portfolio 5.2% 2.6% 2.3% 2.6% 3.1% 3.8% 2.2% 2.4% 2.3% 1.3% 1.6% 1.9% 1.3% 2.0% 0.8% 1.2% 1.6% 0.8% 1.2% 0.7% 1.0% 0.7% 1.4% 0.7% 1.9% Annualized Base Rent1,2 Annualized Base Rent per Sq. Ft. $ 2,366,871 $ 2,045,138 1,764,000 1,681,504 1,666,152 1,635,911 1,633,958 1,581,884 1,353,866 1,339,164 1,220,849 1,155,000 934,493 850,379 843,750 823,544 818,313 776,496 775,230 771,155 763,516 595,945 588,000 511,800 510,150 8.17 13.91 6.04 11.39 9.70 7.78 13.08 11.78 10.49 17.74 13.60 11.00 12.45 7.67 18.75 11.94 9.24 18.04 8.91 19.87 13.00 14.61 7.39 12.86 4.75 % of Total Portfolio Annualized Base Rent 3.3% 2.9% 2.5% 2.4% 2.3% 2.3% 2.3% 2.2% 1.9% 1.9% 1.7% 1.6% 1.3% 1.2% 1.2% 1.2% 1.2% 1.1% 1.1% 1.1% 1.1% 0.8% 0.8% 0.7% 0.7% 2,616,824 46.8% $ 29,007,066 $ 10.27 40.8% ____________________ 1 Annualized base rent represents the monthly contractual rent for December 2009 for each applicable tenant multiplied by 12. 2 3 4 Excludes tenants at development properties that are designated as Build-to-Suits for sale. Excludes the estimated size of the structures located on land owned by the Company and ground leased to tenants. Annualized Base Rent per square foot is adjusted to account for the estimated square footage attributed to structures on land owned by the Company and ground leased to tenants. 33 Geographic Information The Company owns 51 operating retail properties, totaling approximately 5.0 million of owned square feet in nine states. As of December 31, 2009, the Company owned interests in three operating commercial properties, totaling approximately 0.5 million square feet of net rentable area, and an associated 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, 2009: Indiana • Retail • Commercial Florida Texas Georgia Washington Ohio Illinois New Jersey Oregon Number of Operating Properties1 24 20 4 11 7 3 3 1 3 1 2 55 Owned GLA/NRA2 2,182,450 1,683,229 499,221 1,180,641 1,099,480 300,116 126,496 236,230 227,830 115,063 31,169 5,499,475 Percent of Owned GLA/NRA 39.7% 30.6% 9.1% 21.4% 20.0% 5.5% 2.3% 4.3% 4.1% 2.1% 0.6% 100.0% Total Number of Leases 222 208 14 153 76 58 18 7 18 13 13 578 Annualized Base Rent3 $ $ 24,725,455 18,278,841 6,446,614 13,748,950 10,958,292 4,030,147 2,685,228 2,392,056 2,934,643 1,563,530 531,327 63,569,628 Percent of Annualized Base Rent 38.9% 28.8% 10.1% 21.6% 17.2% 6.4% 4.2% 3.8% 4.6% 2.5% 0.8% 100.0% $ Annualized Base Rent per Leased Sq. Ft. 12.43 12.12 13.43 12.58 11.60 14.28 23.10 10.13 14.62 16.45 22.97 12.77 $ ____________________ 1 This table includes operating retail properties, operating commercial properties, and ground lease tenants who commenced paying rent as of December 31, 2009. 2 3 Owned GLA/NRA represents gross leasable area or net leasable area owned by the Company. It does not include 30 parcels or outlots owned by the Company and ground leased to tenants, which contain 20 non-owned structures totaling approximately 466,604 square feet. It also excludes the square footage of Union Station Parking Garage. Annualized Base Rent excludes $2,957,572 in annualized ground lease revenue attributable to parcels and outlots owned by the Company and ground leased to tenants. Lease Expirations Approximately 6.4% of total annualized base rent and approximately 5.9% of total GLA/NRA expire in 2010. The following tables show scheduled lease expirations for retail and commercial tenants and development and redevelopment property tenants open for business as of December 31, 2009, 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, 2009. 1 LEASE EXPIRATION TABLE – OPERATING PORTFOLIO 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Beyond Number of Expiring Leases1,2 84 106 106 73 76 62 25 27 22 19 32 632 Expiring GLA/NRA3 314,153 722,828 423,350 509,346 553,125 678,791 231,304 400,300 336,523 202,657 946,141 5,318,518 % of Total GLA/NRA Expiring 5.9% 13.6% 8.0% 9.6% 10.4% 12.8% 4.3% 7.5% 6.3% 3.8% 17.8% 100.0% % of Total Annualized Base Rent 6.4% 10.4% 10.1% 8.9% 10.8% 12.2% 4.3% 8.4% 6.6% 4.3% 17.7% 100.0% $ Expiring Annualized Base Rent per Sq. Ft. 14.05 9.88 16.42 12.00 13.34 12.28 12.68 14.40 13.43 14.41 12.83 12.90 $ Expiring Ground Lease Revenue 0 $ 0 0 0 459,643 181,504 0 266,300 128,820 273,000 1,888,305 $ 3,197,572 $ Expiring Annualized Base Rent4 4,412,681 7,140,454 6,949,465 6,112,357 7,377,971 8,336,360 2,933,242 5,763,091 4,518,666 2,920,014 12,136,831 68,601,130 $ 34 LEASE EXPIRATION TABLE – OPERATING PORTFOLIO (continued) ____________________ 1 Excludes tenants at development properties that are designated as Build-to-Suits for sale. 2 3 4 Lease expiration table reflects rents in place as of December 31, 2009, and does not include option periods; 2010 expirations include 21 month-to- month tenants. This column also excludes ground leases. Expiring GLA excludes estimated square footage attributable to non-owned structures on land owned by the Company and ground leased to tenants. Annualized base rent represents the monthly contractual rent for December 2009 for each applicable tenant multiplied by 12. Excludes ground lease revenue. LEASE EXPIRATION TABLE – RETAIL ANCHOR TENANTS 1 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Beyond Number of Expiring Leases1,2 5 9 8 3 9 18 5 11 8 7 21 104 Expiring GLA/NRA3 131,269 480,134 179,471 222,521 236,834 508,219 153,782 277,102 300,576 160,999 880,778 3,531,685 % of Total GLA/NRA Expiring 2.5% 9.0% 3.4% 4.2% 4.5% 9.6% 2.9% 5.2% 5.7% 3.0% 16.6% 66.4% $ Expiring Annualized Base Rent4 1,214,584 2,487,357 1,678,862 993,053 2,355,657 4,863,562 1,318,562 3,381,502 3,580,504 2,048,256 10,819,453 $ 34,741,351 % of Total Annualized Base Rent 1.8% 3.6% 2.5% 1.5% 3.4% 7.1% 1.9% 4.9% 5.2% 3.0% 15.8% 50.7% Expiring Annualized Base Rent per Sq. Ft. $ $ 9.25 5.18 9.35 4.46 9.95 9.57 8.57 12.20 11.91 12.72 12.28 9.84 Expiring Ground Lease Revenue 0 $ 0 0 0 0 0 0 0 0 0 990,000 990,000 $ ____________________ 1 Retail anchor tenants are defined as tenants that occupy 10,000 square feet or more. Excludes tenants at development properties that are designated as Build-to-Suits for sale. 2 3 4 Lease expiration table reflects rents in place as of December 31, 2009, and does not include option periods; 2010 expirations include one month- to-month tenant. This column also excludes ground leases. Expiring GLA excludes square footage for non-owned ground lease structures on land we own and ground leased to tenants. Annualized base rent represents the monthly contractual rent for December 2009 for each applicable property multiplied by 12. Excludes ground lease revenue. LEASE EXPIRATION TABLE – RETAIL SHOPS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Beyond Number of Expiring Leases1 76 96 97 66 65 43 20 15 14 12 10 514 Expiring GLA/NRA1,2 170,544 225,656 234,361 152,606 162,481 125,471 77,522 47,710 35,947 41,658 32,692 1,306,648 % of Total GLA/NRA Expiring 3.2% 4.2% 4.4% 2.9% 3.1% 2.4% 1.5% 0.9% 0.7% 0.8% 0.6% 24.6% $ Expiring Annualized Base Rent3 2,970,822 4,359,181 5,108,797 3,399,481 3,611,759 2,693,291 1,614,680 1,042,425 938,162 871,758 802,809 $ 27,413,165 % of Total Annualized Base Rent 4.3% 6.4% 7.5% 5.0% 5.3% 3.9% 2.4% 1.5% 1.4% 1.3% 1.2% 40.0% 35 $ Expiring Annualized Base Rent per Sq. Ft. 17.42 19.32 21.80 22.28 22.23 21.47 20.83 21.85 26.10 20.93 24.56 20.98 $ Expiring Ground Lease Revenue $ 0 0 0 0 459,643 181,504 0 266,300 128,820 273,000 898,305 2,207,572 $ LEASE EXPIRATION TABLE – RETAIL SHOPS (continued) ____________________ 1 Lease expiration table reflects rents in place as of December 31, 2009, and does not include option periods; 2010 expirations include 20 month-to- month tenants. This column also excludes ground leases. 2 3 Expiring GLA excludes estimated square footage to non-owned structures on land we own and ground leased to tenants. Annualized base rent represents the monthly contractual rent for December 2009 for each applicable property multiplied by 12. Excludes ground lease revenue. LEASE EXPIRATION TABLE – COMMERCIAL TENANTS 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 Beyond Number of Expiring Leases1 3 1 1 4 2 1 0 1 0 0 1 14 Expiring NLA1 12,340 17,038 9,518 134,219 153,810 45,101 0 75,488 0 0 32,671 480,185 % of Total NRA Expiring 0.2% 0.3% 0.2% 2.5% 2.9% 0.9% 0.0% 1.4% 0.0% 0.0% 0.6% 9.0% Expiring Annualized Base Rent2 $ 227,276 293,916 161,806 1,719,822 1,410,555 779,507 0 1,339,164 0 0 514,568 6,446,614 $ % of Total Annualized Base Rent 0.3% 0.4% 0.2% 2.5% 2.1% 1.1% 0.0% 2.0% 0.0% 0.0% 0.8% 9.4% $ Expiring Annualized Base Rent per Sq. Ft. 18.42 17.25 17.00 12.81 9.17 17.28 0.00 17.74 0.00 0.00 15.75 13.43 $ ____________________ 1 Lease expiration table reflects rents in place as of December 31, 2009, and does not include option periods. This column also excludes ground leases. 2 Annualized base rent represents the monthly contractual rent for December 2009 for each applicable property multiplied by 12. 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 MATTERS TO A VOTE OF SECURITY HOLDERS Reserved 36 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 5, 2010, the last reported sales price of our common shares on the NYSE was $4.92. The following table sets forth, for the periods indicated, the high and low sales prices and the closing prices for our common shares: Quarter Ended December 31, 2009............. $ Quarter Ended September 30, 2009 ............ $ Quarter Ended June 30, 2009...................... $ Quarter Ended March 31, 2009................... $ Quarter Ended December 31, 2008............. $ Quarter Ended September 30, 2008 ............ $ Quarter Ended June 30, 2008...................... $ Quarter Ended March 31, 2008................... $ High Low Closing 4.40 $ 4.28 $ 4.77 $ 6.46 $ 11.67 $ 13.44 $ 15.52 $ 15.65 $ 2.95 $ 2.60 $ 2.25 $ 2.03 $ 1.94 $ 9.78 $ 12.49 $ 11.50 $ 4.07 4.17 2.92 2.45 5.56 11.00 12.50 14.00 Holders The number of registered holders of record of our common shares was 142 as of March 5, 2010. This total excludes beneficial or non-registered holders that held their shares through various brokerage firms. Distributions Our Board of Trustees declared the following cash distributions per share to our common shareholders for the periods indicated: Distribution Per Share Quarter 4th 2009 .......... 3rd 2009 .......... 2nd 2009.......... 1st 2009 .......... 4th 2008 .......... 3rd 2008 .......... 2nd 2008.......... 1st 2008 .......... Record Date January 7, 2010 $ October 7, 2009 $ $ July 7, 2009 April 7, 2009 $ January 7, 2009 $ October 7, 2008 $ $ July 7, 2008 $ April 4, 2008 Payment Date January 18, 2010 October 16, 2009 July 17, 2009 April 17, 2009 January 16, 2009 October 17, 2008 July 17, 2008 April 17, 2008 0.0600 0.0600 0.0600 0.1525 0.2050 0.2050 0.2050 0.2050 Our management and Board of Trustees will continue to evaluate our distribution policy on a quarterly basis as they monitor the capital markets and the impact of the economy on our operations. Future distributions will be declared and paid at the discretion of our Board of Trustees, and will depend upon a number of factors, including 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. 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, to the extent that they do not exceed the shareholder’s adjusted tax basis in its common shares, have the effect of deferring taxation until the sale of a shareholder’s common shares. To the extent that distributions are both in excess of earnings and profits and in excess of the shareholder’s adjusted tax basis in its common shares, the distribution will be treated as gain from the sale of common shares. In order to maintain our qualification as a REIT, we must make annual distributions to 37 shareholders of at least 90% of our REIT taxable income and we must make distributions to shareholders equal to 100% of our net taxable income to eliminate federal income tax liability. 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, 2009, approximately 93% of our distributions to shareholders constituted a return of capital, and approximately 7% constituted taxable ordinary income dividends. Under our unsecured revolving credit facility, we are permitted to make distributions to our shareholders that do not exceed 95% of our Funds From Operations (“FFO”) provided that no event of default exists. See pages 67-68 for a discussion of FFO. If an event of default exists, we may only make distributions sufficient to maintain our REIT status. However, we may not make any distributions if any event of default resulting from nonpayment or bankruptcy exists, or if our obligations under the unsecured revolving credit facility are accelerated. Issuer Repurchases; Unregistered Sales of Securities We did not repurchase any of our common shares or sell any unregistered securities during the period covered by this report. Performance Graph Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, that might incorporate Securities and Exchange Commission filings, in whole or in part, the following performance graph will not be incorporated by reference into any such filings. The following graph compares the cumulative total shareholder return of our common shares for the period from December 31, 2004 to December 31, 2009, to the S&P 500 Index and to the published NAREIT All Equity REIT Index over the same period. The graph assumes that the value of the investment in our common shares and each index was $100 at December 31, 2004 and that all cash distributions were reinvested. The shareholder return shown on the graph below is not indicative of future performance. 38 COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* Among Kite Realty Group Trust, The S&P 500 Index And The FTSE NAREIT Equity REITs Index $160 $140 $120 $100 $80 $60 $40 $20 $0 12/04 6/05 12/05 6/06 12/06 6/07 12/07 6/08 12/08 6/09 12/09 Kite Realty Group Trust S&P 500 FTSE NAREIT Equity REITs *$100 invested on 12/31/04 in stock or index, including reinvestment of dividends. Fiscal year ending December 31. Copyright© 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved. 12/04 6/05 12/05 6/06 12/06 6/07 12/07 6/08 12/08 6/09 12/09 Kite Realty Group Trust S&P 500 FTSE NAREIT Equity REITs 100.00 100.00 100.00 100.72 99.19 106.38 105.18 104.91 112.16 108.61 107.75 126.65 132.81 121.48 151.49 138.40 129.94 142.57 113.44 128.16 127.72 95.45 112.89 123.13 44.03 80.74 79.53 25.45 83.30 69.82 36.80 102.11 101.79 39 ITEM 6. SELECTED FINANCIAL DATA The following tables set forth, on a historical basis, selected financial and operating information. The financial information has been derived from our consolidated balance sheets and statements of operations. Periods prior to 2009 have been reclassified pursuant to the provisions of SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements,” which was primarily codified into Topic 810—“Consolidation” in the ASC. This information should be read in conjunction with our audited consolidated financial statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. Year Ended December 31 20091 20081,2 ($ in thousands, except share and per share data) 20071,2,3 20061,2,3 20051,2,3 Operating Data: Revenues: Rental related revenue .............................................. Construction and service fee revenue ....................... Total revenue ................................................................ Expenses: Property operating..................................................... Real estate taxes........................................................ Cost of construction and services ............................. General, administrative, and other............................ Depreciation and amortization.................................. Total expenses........................................................................ Operating income Interest expense......................................................... Income tax benefit (expense) of taxable REIT subsidiary ............................................................................ Income from unconsolidated entities........................ Non-cash gain from consolidation of subsidiary...... Gain on sale of unconsolidated property .................. Loss on sale of asset.................................................. Other income, net...................................................... Income from continuing operations....................................... Discontinued operations: ....................................................... Discontinued operations............................................ Non-cash loss on impairment of discontinued operation ............................................................................ (Loss) gain on sale of operating property ................. (Loss) income from discontinued operations ........................ Consolidated net (loss) income.............................................. Net income attributable to noncontrolling interests Net (loss) income attributable to Kite Realty Group Trust ... (Loss) income per common share – basic: Income from continuing operations attributable to Kite Realty Group Trust common shareholders ........ (Loss) income from discontinued operations attributable to Kite Realty Group Trust common shareholders ............................................................................ Net (loss) income attributable to Kite Realty Group Trust common shareholders.................................................. (Loss) income per common share – diluted: Income from continuing operations attributable to Kite Realty Group Trust common shareholders ........ (Loss) income from discontinued operations attributable to Kite Realty Group Trust common shareholders ............................................................................ Net (loss) income attributable to Kite Realty Group Trust common shareholders.................................................. Weighted average Common Shares outstanding – basic ...... Weighted average Common Shares outstanding – diluted... Distributions declared per Common Share ........................... Net income attributable to Kite Realty Group Trust common shareholders: Income from continuing operations Discontinued operations Net (loss) income attributable to Kite Realty Group Trust common shareholders $ $ 95,841 19,451 115,292 $ 102,960 39,103 142,063 95,604 37,260 132,864 $ $ 85,651 41,447 127,098 68,759 26,420 95,179 18,189 12,069 17,192 5,712 32,148 85,310 29,982 (27,151) 22 226 1,635 — — 225 4,939 16,388 11,865 33,788 5,880 34,893 102,814 39,249 (29,372) (1,928) 843 — 1,233 — 158 10,183 14,171 11,066 32,077 6,285 29,731 93,330 39,534 (25,965 ) (762 ) 291 — — — 778 13,876 12,687 10,687 35,901 5,323 28,578 93,176 33,922 (21,222 ) (965 ) 286 — — (764 ) 345 11,602 11,082 6,950 21,823 5,328 20,788 65,971 29,208 (17,836) (1,041) 252 — — — 215 10,798 (732) 331 2,079 1,685 2,022 (5,385) — (6,117) (1,178) (604) (1,782) 0.07 $ $ — (2,690) (2,359) 7,824 (1,731) 6,093 0.26 (0.10) (0.06 ) (0.03) $ 0.20 0.07 $ 0.26 $ $ $ $ — 2,036 4,115 17,991 (4,468 ) 13,523 $ — — 1,685 13,287 (3,107 ) 10,180 0.36 $ 0.31 0.11 0.04 0.47 $ 0.35 0.35 $ 0.31 $ $ $ $ — 7,212 9,234 20,032 (6,596 ) 13,436 0.32 0.31 0.63 0.31 (0.10) (0.06) 0.11 0.04 0.31 (0.03) $ 0.20 $ 0.46 $ 0.35 $ 0.62 30,328,408 30,340,449 0.8200 28,908,274 29,180,987 0.8000 $ 28,733,228 28,903,114 0.7650 $ 21,406,980 21,520,061 0.7500 $ 7,945 (1,852) 6,093 $ $ 10,325 3,198 $ 8,878 1,302 13,523 $ 10,180 $ $ 6,815 6,621 13,436 $ $ $ 52,146,454 52,146,454 0.3325 3,516 (5,298) (1,782) 40 $ $ $ $ $ $ $ $ 1 2 In December 2009, we conveyed the title to our Galleria Plaza operating property to the ground lessor. We had determined during the third quarter of 2009 that there was no value to the improvements and intangibles related to Galleria Plaza and recognized a non-cash impairment charge of $5.4 million to write off the net book value of the property. Since we ceased operating this property during the fourth quarter of 2009, it was appropriate to reclassify the non-cash impairment loss and the operating results related to this property to discontinued operations for each of the fiscal years presented above. In December 2008, we sold our Silver Glen Crossing operating property for net proceeds of approximately $17.2 million and recognized a loss on the sale of $2.7 million. The loss on sale and operating results for this property have been reflected as discontinued operations for each of the fiscal years presented above. Amounts related to this particular property had not previously been reclassified for fiscal years 2007 or prior as they were not considered material to the financial statements. However, when considered together with the results of the Galleria Plaza property, it was determined that collectively the results of the properties which qualify as discontinued operations are material. Thus, all fiscal years reflect the presentation of discontinued operations. 3 In November 2007, we sold our 176th & Meridian property for net proceeds of $7.0 million and a gain of $2.0 million. 176th & Meridian was a development property that was added to the operating portfolio in the third quarter of 2004. The gain and the operating results related to this property have been reflected as discontinued operations for fiscal years ended December 31, 2007, 2006, and 2005. Balance Sheet Data: Investment properties, net ......................................................... $ Cash and cash equivalents......................................................... $ Total assets ................................................................................ $ Mortgage and other indebtedness.............................................. $ Total liabilities........................................................................... $ Redeemable noncontrolling interests in the Operating Partnership ........................................................................... $ Kite Realty Group Trust shareholders’ equity .......................... $ Noncontrolling interests ............................................................ $ Total liabilities and equity......................................................... $ Year Ended December 31 2009 2008 2007 ($ in thousands) 2006 2005 1,044,799 $ 19,958 $ 1,140,685 $ 658,295 $ 710,929 $ 1,035,454 $ 9,918 $ 1,112,052 $ 677,661 $ 755,400 $ 965,583 $ 19,002 $ 1,048,235 $ 646,834 $ 709,369 $ 892,625 $ 23,953 $ 983,161 $ 566,976 $ 630,139 $ 738,734 15,209 799,230 375,246 431,258 $ 47,307 375,078 $ 7,371 $ 1,140,685 $ 67,277 $ 284,958 $ 4,417 $ 1,112,052 $ 127,325 $ 206,810 $ 4,731 $ 1,048,235 $ 156,457 $ 192,269 $ 4,296 $ 983,161 $ 133,331 229,793 4,848 799,230 ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the accompanying audited consolidated financial statements and related notes thereto and Item 1A, “Risk Factors,” appearing elsewhere in this Annual Report on Form 10- K. In this discussion, unless the context suggests otherwise, references to the “Company,” “we,” “us” and “our” mean Kite Realty Group Trust and its subsidiaries. Overview In the following overview, we discuss, among other things, the status of our business and properties, the effect that current United States economic conditions is having on our retail tenants and us, and the current state of the financial markets as pertaining to our debt maturities and our ability to secure financing. Our Business and Properties Kite Realty Group Trust, through its majority-owned subsidiary, Kite Realty Group, L.P., is engaged in the ownership, operation, management, leasing, acquisition, construction, expansion and development of neighborhood and community shopping centers and certain commercial real estate properties in selected markets in the United States. 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 our taxable REIT subsidiary. Our operating results therefore depend materially on the ability of our tenants to make required rental payments, our ability to provide such services to third parties, conditions in the United States retail sector and overall real estate market conditions. As of December 31, 2009, we owned interests in a portfolio of 51 operating retail properties totaling approximately 7.9 million square feet of gross leasable area (including non-owned anchor space) and also owned interests in three operating commercial properties totaling approximately 0.5 million square feet of net rentable area and an associated 41 parking garage. Also, as of December 31, 2009, we had an interest in seven properties in our development and redevelopment pipelines. Upon completion, we anticipate our development and redevelopment properties will have approximately 1.1 million square of total gross leasable area. Finally, as of December 31, 2009, we also owned interests in other land parcels comprising approximately 95 acres that we expect to be used for future expansion of existing properties, development of new retail or commercial properties or sold to third parties. These land parcels are classified as “Land held for development” in the accompanying consolidated balance sheets. Current Economic Conditions and Impact on Our Retail Tenants The difficult economic conditions for the United States economy, businesses, consumers, housing and credit markets continued throughout 2009. These difficult conditions had a negative impact on consumer spending during 2009, and we expect these conditions to continue into 2010, and possibly longer. Factors contributing to consumers spending less at stores owned and/or operated by our retail tenants include, among others: • Shortage or Unavailability of Financing: Lending institutions continue to maintain very tight credit standards, making it difficult for individuals and companies (including our tenants) to obtain financing. The shortage of financing has caused, among other things, consumers to have less disposable income available for retail spending. The shortage of financing has also made it difficult for some of our tenants to obtain capital to operate their businesses. • Decreased Home Values and Increased Home Foreclosures: U.S. home values have decreased sharply over the last few years, and difficult economic conditions have also contributed to a record number of home foreclosures. The U.S. continues to experience historically high levels of delinquencies and foreclosures, particularly among sub-prime mortgage borrowers. • Rising Unemployment Rates: The U.S. unemployment rate continues to be much higher than historical norms. Unemployment reached 10.2% in November 2009, the highest level in 26 years. High unemployment rates could cause further decreases in consumer spending, thereby negatively affecting the businesses of our retail tenants. • Deceasing Consumer Confidence: Consumer confidence continues to be at low levels, leading to consumers spending less money on discretionary purchases. The significant increases in both personal and business bankruptcies during 2009 reflect an economy that continues to be challenged, with financially over-extended consumers less likely to purchase goods and/or services from our retail tenants. During 2009, decreasing consumer spending had a negative impact on the businesses of our retail tenants, as reflected in weak retail sales for much of the year 2009. As discussed below, these conditions in turn had a negative impact on our business. While we did experience an increase in leasing activity in the fourth quarter of 2009, to the extent these conditions persist or deteriorate further, our tenants may be required to curtail or cease their operations, which could materially and negatively affect our business in general and our cash flow in particular. Impact of Economy on REITs, Including Us As an owner and developer of community and neighborhood shopping centers, our operating and financial performance is directly affected by economic conditions in the retail sector of those markets in which our operating centers and development properties are located. This is particularly true in the states of Indiana, Florida and Texas, where the majority of our properties are located, and in North Carolina, where a significant portion of our development projects and land parcels held for development are located. As discussed above, due to the challenges facing U.S. consumers, the operations of many of our retail tenants are being negatively affected. In turn, this has a negative impact on our business, including in the following ways: • Difficulty in Collecting Rent; Rent Adjustments. When consumers spend less, our tenants typically experience decreased revenues and cash flows. This makes it more difficult for some of our tenants to pay their rent obligations, which is the primary source of our revenues. Our tenants’ decreased cash flows may 42 be even more pronounced if, given the tight credit markets, they are unable to obtain financing to operate their businesses. The number of tenants requesting decreases or deferrals in their rent obligations continued to be above historical norms in 2009, although such requests leveled off in the second half of the year. If granted, such decreases or deferrals negatively affect our cash flows. • Termination of Leases. If our tenants continue to struggle to meet their rental obligations, they may be forced to terminate their leases with us. During 2009, tenants at some of our properties terminated their leases with us. In some cases we were able to negotiate lease termination fees from these tenants but in other cases our negotiations were unsuccessful. • Tenant Bankruptcies. The number of bankruptcies by U.S. businesses continued to be at elevated levels during 2009. This trend has continued into 2010 and may continue into the foreseeable future. Likewise, bankruptcies of our retail tenants were also higher than historical norms during 2009. • Decrease in Demand for Retail Space. Reflecting the extremely difficult current market conditions, demand for retail space at our shopping centers continued to be low while availability has increased due to tenant terminations and bankruptcies. While our leasing activity did see an increase in the fourth quarter of 2009, the overall tenancy at our shopping centers declined over the last 12 months and may continue to decline in the future until financial markets, consumer confidence, and the economy stabilize. In addition, these conditions have made it significantly more difficult for us to lease space in our development projects, which may adversely affect the expected returns from these projects or delay their completion. The factors discussed above, among others, had a negative impact on our business during 2009. We expect that these conditions may continue well into the foreseeable future. Financing Strategy; 2010 and 2011 Maturities Our ability to obtain financing on satisfactory terms and to refinance borrowings as they mature has also been affected by the condition of the economy in general and by the current instability of the financial markets in particular. As of February 17, 2010, we had refinanced or extended the maturity dates for all of our 2010 debt maturities, as discussed below. Currently, approximately $250 million of our consolidated indebtedness is scheduled to mature in 2011. In particular, (i) our unsecured term loan, which had a balance of $55 million as of December 31, 2009, will mature on July 15, 2011 and (ii) our unsecured revolving credit facility, which had a balance of approximately $78 million as of December 31, 2009, will mature on February 20, 2011 (with a one-year extension option to February 20, 2012 available if we are in compliance with all applicable covenants under the related agreement). We are conducting negotiations with our existing and potential replacement lenders to refinance or obtain extensions on our term loan and unsecured revolving credit facility. We believe we have good relationships with a number of banks and other financial institutions that will allow us to continue our strategy of refinancing our borrowings with the existing lenders or replacement lenders. However, in this current challenging environment, it is imperative that we identify alternative sources of financing and other capital in the event we are not able to refinance these loans on satisfactory terms, or at all. If we are not able to refinance or extend these loans, particularly our unsecured term loan, our financial condition and liquidity could be adversely impacted. It is also important for us to obtain additional financing in order to complete our development and redevelopment projects. To strengthen our balance sheet, we continued to consider appropriate financing transactions in 2009. For example, in May 2009, we completed an equity offering of 28,750,000 common shares at an offering price of $3.20 per share for aggregate gross and net proceeds of $92.0 million and $87.5 million, respectively. Approximately $57 million of the net proceeds were used to repay borrowings under our unsecured revolving credit facility and the remainder was retained as cash, which we used to address future debt maturities and capital needs. In addition, in December 2009 we entered into an Equity Distribution Agreement pursuant to which we may sell, from time to time, up to an aggregate amount of $25 million of our common shares. To date, we have not utilized this program. As of December 31, 2009, we had combined approximately $87 million of available liquidity in the form of cash and cash equivalents ($20 million) and availability under our unsecured revolving credit facility ($67 million). In addition to raising new capital, we have also been successful in extending the maturity dates or refinancing loans originally maturing in 2010. For example, during the fourth quarter of 2009, we extended the maturity date or refinanced the debt at three of our properties (Ridge Plaza, to January 2017; Tarpon Springs Plaza, to January 2013; and Estero Town Commons, to January 2013). Further, in the first quarter of 2010, we negotiated the extension of the maturity dates on the 43 debt at three other properties (South Elgin Commons, to September 2013; Cobblestone Plaza, to February 2013; and Shops at Rivers Edge, to February 2013). As a result of these actions and others, we refinanced or extended the maturity dates to 2013 on approximately $57 million of indebtedness originally due in 2010. A schedule of our maturities (excluding regular principal payments) after consideration of these early 2010 refinancing actions follows: $ Balances As of December 31, 2009 60,001,404 252,871,911 54,114,603 39,084,352 34,802,465 216,442,008 657,316,743 977,770 658,294,513 $ $ 2010 2011 2012 2013 2014 Thereafter Unamortized Premiums Total Amounts Due At Maturity After 2010 Maturity Date Extensions $ - 249,747,214 50,565,066 92,384,162 31,539,567 208,676,228 632,912,237 $ Subsequent Activity (56,856,671) $ - - 56,856,671 - - $ - $ Annual Maturities (3,144,733) (3,124,697) (3,549,537) (3,556,861) (3,262,898) (7,765,780) (24,404,506) $ We will continue to assess and engage in negotiations with existing and alternative lenders for our near-term maturing indebtedness, with a view toward extending, refinancing or repaying debt to strengthen our balance sheet. Obtaining new financing is also important to our business due to the capital needs of our existing development and redevelopment projects. As of December 31, 2009, our unfunded share of the total estimated cost of the properties in our current development and redevelopment pipelines was approximately $26 million. While we believe we will have access to sufficient funding to be able to fund our investments in these projects through a combination of new and existing construction loans and draws on our unsecured revolving credit facility (which, as noted above, has $67 million of availability as of December 31, 2009), a prolonged credit crisis will make it more costly and difficult to raise additional capital, if necessary. Summary of Critical Accounting Policies and Estimates Our significant accounting policies are more fully described in Note 2 to the accompanying consolidated financial statements. As disclosed in Note 2, the preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions about future events that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. We believe that the following discussion addresses our most critical accounting policies, which are those that are most important to the compilation of our financial condition and results of operations and require management’s most difficult, subjective, and complex judgments. Purchase Accounting In accordance with Topic 805—“Business Combinations” in the ASC, we measure identifiable assets acquired, liabilities assumed, and any non-controlling interests in an acquiree at fair value on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. In making estimates of fair values for the purpose of allocating purchase price, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities. A portion of the purchase price is allocated to tangible assets and intangibles, 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; 44 • • 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 vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income; and the value of leases acquired. We utilize independent sources for 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 their 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. Due to the January 1, 2009 adoption of new accounting guidance regarding business combinations, the costs of an acquisition are expensed in the period incurred. Capitalization of Certain Pre-Development and Development Costs We incur costs prior to land acquisition and for certain land held for development, including acquisition contract deposits as well as legal, engineering and other external professional fees related to evaluating the feasibility of developing a shopping center or other project. These pre-development costs are capitalized and included in construction in progress in the accompanying consolidated balance sheets. If we determine that the completion of a development project is no longer probable, all previously incurred pre-development costs are immediately expensed. We also capitalize costs such as construction, interest, real estate taxes, and salaries and related costs of personnel directly involved with the development of our properties. As a portion of the development property becomes operational, we expense appropriate costs on a pro rata basis. Impairment of Investment Properties Management reviews investment properties, land parcels and intangible assets within the real estate operation and development segment for impairment on at least a quarterly basis or whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable. The review for possible impairment requires management to make certain assumptions and estimates and requires significant judgment. Impairment losses for investment properties are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets. Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset. Our impairment review for land and development properties assumes we have the intent and the ability to complete the developments or projected uses for the land parcels. If we determine those plans will not be completed, an impairment loss may be appropriate. In the third quarter of 2009, as part of our regular quarterly review, we determined that it was appropriate to write off the net book value on the Galleria Plaza operating property in Dallas, Texas and recognize a non-cash impairment charge of $5.4 million. Our estimated future cash flows, which considered recent negative property-specific events, were anticipated to be insufficient to recover the carrying value due to significant ground lease obligations and expected future required capital expenditures. We conveyed the title to the center to the ground lessor in the fourth quarter of 2009. Management does not believe any other investment properties or development assets are impaired as of December 31, 2009. 45 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. Our properties have operations and cash flows that can be clearly distinguished from the rest of our activities. 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 we will not have a continuing involvement after disposition. When material, prior periods are reclassified to reflect the operations of these properties as discontinued operations. 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 a tenant’s sales volume (contingent percentage rent). Percentage rent is recognized when tenants achieve the specified targets as defined in their lease agreements. Percentage rent is included in other property related revenue in the accompanying statements of operations. Reimbursements from tenants for real estate taxes and other operating expenses are recognized as revenue in the period the applicable expense is incurred. Gains and losses 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, we have transferred to the buyer the usual risks and rewards of ownership, and we do not have a substantial continuing financial involvement in the property. 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 incurred to date. Project costs 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 performance, 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. Development fees and fees from advisory services are recognized as revenue in the period in which the services are rendered. Performance-based incentive fees are recorded when the fees are earned. Fair Value Measurements Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs for identical instruments that are classified within Level 1 and observable inputs for similar instruments that are classified within Level 2) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3). As further discussed in Note 11 to the accompanying consolidated financial statements, the only assets or liabilities that we record at fair value on a recurring basis are interest rate hedge agreements. The valuation is determined using widely accepted techniques including discounted cash flow analysis, which considers the contractual terms of the derivatives (including the period to maturity) and uses observable market-based inputs such as interest rate curves and implied volatilities. We also incorporate credit valuation adjustments to appropriately reflect both our own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. Although we have determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as 46 estimates of current credit spreads to evaluate the likelihood of default by ourselves and our counterparties. However, as of December 31, 2009, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and have determined that the credit valuation adjustments are not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. Income Taxes and REIT Compliance We are considered a corporation for federal income tax purposes and qualify as a REIT. As such, we generally will not be subject to federal income tax to the extent we distribute our REIT taxable income to our shareholders and meet certain other requirements on a recurring basis. REITs are subject to a number of organizational and operational requirements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates. We may also be subject to certain federal, state and local taxes on our income and property and to federal income and excise taxes on our undistributed income even if we do qualify as a REIT. For example, we will be subject to income tax to the extent we distribute less than 90% of our REIT taxable income (including capital gains). Results of Operations At December 31, 2009, we owned interests in 55 operating properties (consisting of 51 retail properties, three operating commercial (office/industrial) properties and an associated parking garage) and seven entities that held development or redevelopment properties in which we have an interest. These redevelopment properties include Bolton Plaza, Coral Springs Plaza, Courthouse Shadows, Shops at Rivers Edge and Four Corner Square, all of which are undergoing major redevelopment. Of the 62 total properties held at December 31, 2009, a component of a development parcel was owned through an unconsolidated joint venture and accounted for under the equity method. At December 31, 2008, we owned interests in 56 operating properties (consisting of 52 retail properties, three operating commercial properties and an associated parking garage) and eight entities that held development or redevelopment properties in which we have an interest. Of the 64 total properties held at December 31, 2008, one operating property was owned through an unconsolidated joint venture and accounted for under the equity method. At December 31, 2007, we owned interests in 55 operating properties (consisting of 50 retail properties, four commercial operating properties and an associated parking garage) and had interests in 11 entities that held development or redevelopment properties. These redevelopment properties included our Glendale Town Center and Shops at Eagle Creek properties, which were both undergoing major redevelopment. Of the 66 total properties held at December 31, 2007, two operating properties were owned through joint ventures that were accounted for under the equity method. The comparability of results of operations is significantly affected by our development, redevelopment, and operating property acquisition and disposition activities in 2007, 2008 and 2009. Therefore, we believe it is most useful to review the comparisons of our 2007, 2008 and 2009 results of operations (as set forth below under “Comparison of Operating Results for the Years Ended December 31, 2009 and 2008” and “Comparison of Operating Results for the Years Ended December 31, 2008 and 2007”) in conjunction with the discussion of our development, redevelopment, and operating property acquisition and disposition activities during those periods, which is set forth directly below. Development Activities During the years ended December 31, 2009, 2008 and 2007, the following development properties became operational or partially operational: 47 Property Name MSA Chicago, IL Eddy Street Commons, Phase I2....................... South Bend, IN South Elgin Commons, Phase I2 Cobblestone Plaza2 ........................................... Ft. Lauderdale, FL 54th & College .................................................. Indianapolis, IN Beacon Hill Phase II......................................... Crown Point, IN Bayport Commons............................................ Tampa, FL Cornelius Gateway ........................................... Portland, OR Tarpon Springs Plaza........................................ Naples, FL Gateway Shopping Center................................ Seattle, WA Bridgewater Marketplace ................................. Indianapolis, IN Sandifur Plaza ................................................. Pasco, WA Economic 1 Occupancy Date September 2009 June 2009 March 2009 June 2008 December 2007 September 2007 September 2007 July 2007 April 2007 January 2007 January 2007 Owned GLA 165,000 45,000 157,957 N/A 3 19,160 94,756 21,000 82,546 100,949 26,000 12,552 1 2 3 Represents the date in which we started receiving rental payments under tenant leases or ground leases at the property or the tenant took possession of the property, whichever was sooner. Construction of these properties was completed in phases. The Economic Occupancy Dates indicated for these properties refers to its initial phase, Property is ground leased to a single tenant. Property Acquisition Activities During the year ended December 31, 2008, we acquired the property below. We did not acquire any properties for the years ending December 31, 2009 and 2007. Property Name MSA Acquisition Date Acquisition Cost (Millions) Shops at Rivers Edge1.................... Indianapolis, IN February 2008 $ 18.3 Financing Method Primarily Debt Owned GLA 110,875 1 This property was purchased with the intent to redevelop; therefore, it is included in our redevelopment pipeline, as discussed below. However, for purposes of the comparison of operating results, this property is classified as property acquired during 2008 in the comparison of operating results tables below. Operating Property Disposition Activities During the years ended December 31, 2008 and 2007, we sold the operating properties listed in the table below. We did not sell any operating properties in the year ended December 31, 2009. However, as part of our regular quarterly review for possible asset impairments, we determined that it was appropriate to write off the net book value on the Galleria Plaza operating property in Dallas, Texas and recognize a non-cash impairment charge of $5.4 million. Our estimated future cash flows, which considered recent negative property-specific events, were anticipated to be insufficient to recover the carrying value due to significant ground lease obligations and expected future required capital expenditures. We conveyed the title to the property to the ground lessor in the fourth quarter of 2009. The operating results of Galleria Plaza are reflected as discontinued operations in the accompanying consolidated statements of operations. . Property Name Spring Mill Medical, Phase I1.................... Silver Glen Crossing2................................. Chicago, IL 176th & Meridian3 ...................................... Seattle, WA MSA Indianapolis, IN Disposition Date December 2008 December 2008 November 2007 Owned GLA 63,431 132,716 14,560 48 ____________________ 1 We held a 50% interest in this unconsolidated joint venture. In December 2008, the joint venture sold this property for $17.5 million, resulting in a total gain on sale of approximately $3.5 million. Net proceeds of approximately $14.4 million from the sale of this property were utilized to defease the related mortgage loan. Our share of the gain on sale was approximately $1.2 million, net of our excess investment. We used the majority of our share of the net proceeds to pay down borrowings under our unsecured revolving credit facility. Prior to the sale of this property, the joint venture sold a parcel of land for net proceeds of approximately $1.1 million, of which our share was $0.6 million. 2 3 We realized net proceeds of approximately $17.2 million from the sale of this property and recognized a loss on the sale of $2.7 million. The majority of the net proceeds from the sale of this property were used to pay down borrowings under our unsecured revolving credit facility. The sale of this property and the property’s operating results are reflected as discontinued operations in the accompanying consolidated statements of operations. This property was sold for net proceeds of $7.0 million and a gain of $2.0 million. We utilized the proceeds from the sale with the intention to execute a like-kind exchange under Section 1031 of the Internal Revenue Code and, in February 2008 we did so by purchasing Shops at Rivers Edge, as discussed above. The sale of this property and the property’s operating results are reflected as discontinued operations in the accompanying consolidated statements of operations. Redevelopment Activities During the years ended December 31, 2009, 2008 and 2007, we transitioned the following properties from our operating portfolio to our redevelopment pipeline: Property Name Coral Springs Plaza2 ............................... Courthouse Shadows3............................... Four Corner Square4................................. Bolton Plaza5............................................ Shops at Rivers Edge6 .............................. MSA Boca Raton, FL Naples, FL Seattle, WA Jacksonville, FL Indianapolis, IN Transition Date1 March 2009 September 2008 September 2008 June 2008 June 2008 Owned GLA 45,906 134,867 29,177 172,938 110,875 1 2 3 4 5 6 Transition date represents the date the property was transitioned from our operating portfolio to our redevelopment pipeline. In December 2009, we executed a lease with a combined Toys “R” Us/Babies “R” Us for 100% of the available square feet of this center. We expect this tenant to open in the second half of 2010. In 2009, Publix purchased the lease of the former anchor tenant and made certain improvements on the space. In addition to the existing center, we also own approximately ten acres of adjacent land which may be utilized in the redevelopment. We anticipate the majority of the existing center will remain open during the redevelopment. The former anchor tenant’s lease at the shopping center expired in May 2008 and was not renewed. We recently executed a 66,500 square foot lease with Academy Sports & Outdoors to anchor this center and expect this tenant to open during the second half of 2010. We purchased this property in February 2008 with the intent to redevelop. The existing anchor tenant’s lease at this property will expire in March 2010 and we are currently in discussion with several prospective anchor tenants. 49 Comparison of Operating Results for the Years Ended December 31, 2009 and 2008 The following table reflects income statement line items from our consolidated statements of operations for the years ended December 31, 2009 and 2008: Revenue: Rental income (including tenant reimbursements) Other property related revenue Construction and service fee revenue $ Total revenue Expenses: Property operating Real estate taxes Cost of construction and services General, administrative, and other Depreciation and amortization Total expenses Operating income Interest expense Income tax benefit (expense) of taxable REIT subsidiary Income from unconsolidated entities Gain on sale of unconsolidated property Non-cash gain from consolidation of subsidiary Other income, net Income from continuing operations Discontinued operations: Discontinued operations Non-cash loss on impairment of discontinued operation Loss on sale of operating property (Loss) income from discontinued operations Consolidated net (loss) income Less: Net (loss) income attributable to noncontrolling interests Net (loss) income attributable to Kite Realty Group Trust Year Ended December 31, 2009 2008 Increase (Decrease) 2009 to 2008 $ 89,775,606 6,065,708 19,450,789 115,292,103 $ 89,043,270 13,916,680 39,103,151 142,063,101 18,188,710 12,068,903 17,192,267 5,711,623 32,148,318 85,309,821 16,388,515 11,864,552 33,788,008 5,879,702 34,892,975 102,813,752 29,982,282 (27,151,054) 39,249,349 (29,372,181) 22,293 226,041 - 1,634,876 224,927 4,939,365 (1,927,830) 842,425 1,233,338 - 157,955 10,183,056 732,336 (7,850,972) (19,652,362) (26,770,998) 1,800,195 204,351 (16,595,741) (168,079) (2,744,657) (17,503,931) (9,267,067) (2,221,127) (1,950,123) (616,384) (1,233,338) 1,634,876 66,972 (5,243,691) (732,621) 330,482 (1,063,103) (5,384,747) - - (6,117,368) (1,178,003) (2,689,888) (2,359,406) 7,823,650 5,384,747 (2,689,888) 3,757,962 (9,001,653) (603,763) (1,730,524) (1,126,761) $ (1,781,766) $ 6,093,126 $ (7,874,892) Rental income (including tenant reimbursements) increased approximately $0.7 million, or 1%, due to the following: 50 Property acquired during 2008 Development properties that became operational or were partially operational in 2008 and/or 2009 Properties under redevelopment during 2008 and/or 2009 Properties fully operational during 2008 and 2009 & other Total Increase (Decrease) 2009 to 2008 90,910 4,086,790 (1,209,450) (2,235,914) 732,336 $ $ The $2.2 million decrease in rental income for properties fully operational in 2009 and 2008 was primarily related to the following: • $0.8 million reduction in base rent from the 2008 bankruptcy of Circuit City, offset by increases of $1.2 million from the 2008 write off to rental income of straight-line rent receivables and in-place lease liabilities; • $2.3 million net reduction in minimum rent at a number of our properties due to the termination of other leases with tenants in 2009 and 2008, which includes the write off to rental income of straight-line rent receivables and in-place lease liabilities; • $0.4 million reduction as a result of the 2009 sale of a parcel of land adjacent to our Shops at Eagle Creek operating property; and • $0.2 million net decrease in reimbursements due to a decline in recoverable operating expenses. Offsetting these decreases is $0.3 million of rental income from the consolidation of The Centre operating property as of September 30, 2009. Other property related revenue primarily consists of parking revenues, percentage rent, lease settlement income and gains on land sales. This revenue decreased approximately $7.9 million, or 57%, primarily as a result of lower gains on land sales of $7.0 million and lease settlement income of $1.3 million. This revenue decrease was partially offset by a $0.4 million reversal of an estimated liability for which we are no longer obligated. Construction service fee revenue decreased approximately $19.7 million, or 50%. This decrease reflects 2008 proceeds of $10.6 million from the sale of our Spring Mill Medical, Phase II build-to-suit commercial development asset and net declines in the level of third-party construction and services activity of $9.1 million. Property operating expenses increased approximately $1.8 million, or 11%, due to the following: Property acquired during 2008 Development properties that became operational or were partially operational in 2008 and/or 2009 Properties under redevelopment during 2008 and/or 2009 Properties fully operational during 2008 and 2009 & other Total Increase (Decrease) 2009 to 2008 148,210 688,617 (232,616) 1,195,984 1,800,195 $ $ The $1.2 million increase in property operating expense for properties fully operational in 2009 and 2008 was primarily related to the following: • $1.0 million net increase in bad debt expense at a number of our operating properties which is reflective of financial difficulties (including bankruptcies) experienced by a number of our tenants; and • $0.5 million net increase in landscaping and parking lot expense, the majority of which is recoverable from tenants. 51 These increases in property operating expenses were partially offset by a $0.3 million decrease in repairs and maintenance expense. Real estate taxes increased approximately $0.2 million, or 0.2%, due to the following: Property acquired during 2008 Development properties that became operational or were partially operational in 2008 and/or 2009 Properties under redevelopment during 2008 and/or 2009 Properties fully operational during 2008 and 2009 & other Total Increase (Decrease) 2009 to 2008 (22,689) 608,602 (172,830) (208,732) 204,351 $ $ The $0.2 million decrease in real estate tax expense for properties fully operational in 2009 and 2008 was primarily related to the timing of property reassessments by the taxing authorities and our related appeals of these assessments. The appeals process can last many months, resulting in the assessments and appeals settlements occurring in different periods. Typically, the majority of any increase (decrease) in our real estate tax expense is recoverable from (refundable to) our tenants. Cost of construction and services decreased approximately $16.6 million, or 49%. This decrease is due to 2008 cost of $9.4 million associated with the sale of our Spring Mill Medical, Phase II build-to-suit commercial development asset and net declines in the level of third-party construction and services activity of $7.2 million. General, administrative and other expenses decreased approximately $0.2 million, or 3% due to small declines in personnel-related expenses and various costs of operating as a public company. General, administrative and other expenses were 5.0% and 4.1% of total revenue in 2009 and 2008, respectively. Depreciation and amortization expense decreased approximately $2.7 million, or 8%, due to the following: Property acquired during 2008 Development properties that became operational or were partially operational in 2008 and/or 2009 Properties under redevelopment during 2008 and/or 2009 Properties fully operational during 2008 and 2009 & other Total Increase (Decrease) 2009 to 2008 (107,604) 1,078,122 (2,593,484) (1,121,691) (2,744,657) $ $ The $1.1 million decrease in depreciation and amortization expense for properties fully operational in 2009 and 2008 was primarily related to the following: • • $1.5 million decline from accelerated depreciation and amortization on tangible and intangible assets associated with the 2008 bankruptcy of Circuit City involving three of our properties; and $0.4 million decrease in accelerated depreciation and amortization on tangible and intangible assets at a number of our other properties resulting from the termination of other tenant leases with us. These decreases in depreciation and amortization expenses were partially offset by the following increases: • • $0.4 million from the consolidation of The Centre operating property as of September 30, 2009; and $0.3 million as a result of the 2009 sale of a parcel of land adjacent to our Shops at Eagle Creek operating property. 52 Interest expense decreased approximately $2.2 million, or 8%, primarily as a result of lower average borrowings (proceeds from our October 2008 and May 2009 common equity offerings were used to pay down borrowings), and an average decrease in the LIBOR interest rate of approximately 230 basis points. Income taxes on our taxable REIT subsidiary changed from an expense of $1.9 million in 2008 to a minor benefit (credit) in 2009. This change is primarily caused by taxable gains on the sales of a land parcel and our Spring Mill Medical, Phase II build-to-suit commercial development asset in 2008 and lower taxable third-party construction and services activity in 2009. Income from unconsolidated entities decreased $0.6 million due to the 2008 sale of a land parcel, our share of which was $0.6 million. Gain on sale of unconsolidated property in 2008 of $1.2 million represents the gain from the sale of our interest in Spring Mill Medical, Phase I, one of our unconsolidated commercial operating properties. The $1.6 million non-cash gain from consolidation of subsidiary in 2009 represents a gain that was recognized upon the consolidation of The Centre operating property which is owned in a joint venture. We paid off a third-party loan on this previously unconsolidated entity and contributed approximately $2.1 million of capital to the entity. In accordance with the provisions of Topic 810 – “Consolidation” of the ASC, the financial statements of The Centre were consolidated as of September 30, 2009, and its assets and liabilities were recorded at fair value, resulting in a non-cash gain of $1.6 million, of which our share was approximately $1.0 million. Discontinued operations changed from income of $0.3 million in 2008 to a loss of $0.7 million in 2009. Discontinued operations result from the 2008 sale of our Silver Glen Crossings operating property and the 2009 transfer of our Galleria Plaza property to the ground lessor. Galleria Plaza had a net loss in both 2009 and 2008 while Silver Glen Crossings had net income in 2008. The $5.4 million non-cash loss on impairment of a real estate asset in 2009 relates to the write-off of the net book value of our Galleria Plaza property in Dallas, Texas, which was transferred to the ground lessor. The 2008 loss on sale of operating property of $2.7 million results from the sale of our Silver Glen Crossings property, located in Chicago, Illinois. Net income attributable to noncontrolling interests decreased $1.1 million from $1.7 million in 2008 to $0.6 million in 2009. In 2009, noncontrolling interests includes the minority interest in the non-cash gain from consolidation of The Centre of $0.7 million and the minority interest from the sale of an outlot parcel of $0.2 million, offset by our operating partnership limited partners’ share of the consolidated net loss of $0.3 million. 53 Comparison of Operating Results for the Years Ended December 31, 2008 and 2007 The following table reflects income statement line items from our consolidated statements of operations for the years ended December 31, 2008 and 2007: Revenue: Rental income (including tenant reimbursements) Other property related revenue Construction and service fee revenue Total revenue Expenses: Property operating Real estate taxes Cost of construction and services General, administrative, and other Depreciation and amortization Total expenses Operating income Interest expense Income tax benefit (expense) of taxable REIT subsidiary Income from unconsolidated entities Gain on sale of unconsolidated property Other income, net Income from continuing operations Discontinued operations: Discontinued operations (Loss) gain on sale of operating properties (Loss) income from discontinued operations Consolidated net (loss) income Net income attributable to noncontrolling interests Net income attributable to Kite Realty Group Trust Year Ended December 31, 2008 2007 Increase (Decrease) 2008 to 2007 $ $ 89,043,270 13,916,680 39,103,151 142,063,101 85,590,681 $ 10,012,934 37,259,934 132,863,549 16,388,515 11,864,552 33,788,008 5,879,702 34,892,975 102,813,752 39,249,349 (29,372,181) (1,927,830) 842,425 1,233,338 157,955 10,183,056 330,482 (2,689,888) (2,359,406) 7,823,650 (1,730,524) 14,171,192 11,065,723 32,077,014 6,285,267 29,730,654 93,329,850 39,533,699 (25,965,141) (761,628) 290,710 - 778,434 13,876,074 2,078,860 2,036,189 4,115,049 17,991,123 (4,468,440) 3,452,589 3,903,746 1,843,217 9,199,552 2,217,323 798,829 1,710,994 (405,565) 5,162,321 9,483,902 (284,350) 3,407,040 1,166,202 551,715 1,233,338 (620,479) (3,693,018) (1,748,378) (4,726,077) (6,474,455) (10,167,473) (2,737,916) $ 6,093,126 $ 13,522,683 $ (7,429,557) Rental income (including tenant reimbursements) increased approximately $3.5 million, or 4%, due to the following: Increase (Decrease) 2008 to 2007 $ 1,780,008 5,863,617 322,686 (4,513,722) 3,452,589 $ Property acquired during 2008 Development properties that became operational or were partially operational in 2007 and/or 2008 Properties under redevelopment during 2007 and/or 2008 Properties fully operational during 2007 and 2008 & other Total 54 Excluding the changes due to the acquisition of properties, transitioned development properties, and properties under redevelopment, the net $4.5 million decrease in rental income was primarily related to the following: • $1.9 million net decrease at a number of our properties primarily due to the termination of leases with tenants in 2007 and 2008, which includes the loss of rent as well as the write off to income of intangible lease related amounts; • $1.2 million net decrease in real estate tax recoveries from tenants primarily due to real estate tax refunds at a number of our operating properties in 2008 related to decreased assessments; most of the refunds were reimbursed to our tenants; • $0.9 million net write off of rental income amounts in connection with the bankruptcy and liquidation of Circuit City stores at three of our properties; • $0.3 million decrease at our Union Station parking garage related to the change in structure of our agreement from a lease to a management agreement with a third party; and • $0.3 million decrease in common area maintenance and property insurance recoveries at a number of our operating properties due to a decrease in the related recoverable expenses. Other property related revenue primarily consists of parking revenues, percentage rent, lease settlement income and gains from land sales. This revenue increased approximately $3.9 million, or 39%, primarily as a result of the following: • $3.2 million increased gains on land sales in 2008 compared to 2007; and • $1.5 million net increase in parking revenue at our Union Station parking garage related to the change in structure of our agreement from a lease to a management agreement with a third party. These increases were partially offset by a $0.7 million decrease in percentage rent from our retail operating tenants in 2008 compared to 2007. Construction and service fee revenue increased approximately $1.8 million, or 5%. This increase is primarily due to the net increase in proceeds from the sale of build-to-suit assets, partially offset by the level and timing of third-party construction contracts during 2008 compared to 2007. In 2008, we realized proceeds of $10.6 million from the sale of our Spring Mill Medical, Phase II build-to-suit commercial development asset and in 2007 we realized proceeds of $6.1 million from the sale of a build-to-suit asset at Sandifur Plaza. Property operating expenses increased approximately $2.2 million, or 16%, due to the following: Property acquired during 2008 Development properties that became operational or were partially operational in 2007 and/or 2008 Properties under redevelopment during 2007 and/or 2008 Properties fully operational during 2007 and 2008 & other Total Increase (Decrease) 2008 to 2007 314,322 1,257,519 227,433 418,049 2,217,323 $ $ Excluding the changes due to the acquisition of properties, transitioned development properties, properties under redevelopment, and the property sold, the net $0.4 million increase in property operating expenses was primarily due the following: • • $0.5 million net increase in bad debt expense at a number of our operating properties which is reflective of financial difficulties (including bankruptcies) experienced by a number of our tenants; and $0.5 million increase in expenses at our Union Station parking garage property related to a change in the structure of our agreement from a lease to a management agreement with a third party. 55 This increase in operating expenses was partially offset by a net decrease of $0.5 million in insurance and landscaping expenses at a number of our properties. Real estate taxes increased approximately $0.8 million, or 7%, due to the following: Property acquired during 2008 Development properties that became operational or were partially operational in 2007 and/or 2008 Properties under redevelopment during 2007 and/or 2008 Properties fully operational during 2007 and 2008 & other Total Increase (Decrease) 2008 to 2007 197,623 702,284 140,173 (241,251) 798,829 $ $ Excluding the changes due to the acquisition of properties, transitioned development properties, properties under redevelopment, the net $0.2 million decrease in real estate taxes was primarily due to approximately $0.7 million of real estate tax refunds received in 2008, net of related professional fees, at our Market Street Village, Galleria Plaza, and Cedar Hill Plaza properties, most of which was reimbursed to tenants. This decrease was partially offset by a $0.5 million net increase in real estate tax assessments at a number of our operating properties. Cost of construction and services increased approximately $1.7 million, or 5%. This increase was primarily due to the increased costs associated with the sale of build-to-suit assets, partially offset by the level and timing of third-party construction contracts during 2008 compared to 2007. In 2008, we had costs associated with the sale of our Spring Mill Medical, Phase II, build-to-suit commercial development asset of $9.4 million, while in 2007 we had costs associated with the sale of a build-to-suit asset at Sandifur Plaza of $4.1 million. General, administrative and other expenses decreased approximately $0.4 million, or 6%. General, administrative and other expenses were 4.1% and 4.5% of total revenue in 2008 and 2007, respectively. This decrease in general, administrative and other expenses was primarily due to decreased salary, benefits and incentive compensation expense as a result of a decrease in overall headcount. Depreciation and amortization expense increased approximately $5.2 million, or 17%, due to the following: Property acquired during 2008 Development properties that became operational or were partially operational in 2007 and/or 2008 Properties under redevelopment during 2007 and/or 2008 Properties fully operational during 2007 and 2008 & other Total Increase (Decrease) 2008 to 2007 910,235 3,137,576 (1,894,435) 3,008,945 5,162,321 $ $ Excluding the changes due to the acquisition of properties, transitioned development properties, properties under redevelopment, the net $3.0 million increase in depreciation and amortization expense was primarily attributable to the acceleration of depreciable assets, including intangible lease assets, related to the termination of tenants, including the termination of leases with Circuit City stores at three of our properties that was recognized in 2008 in connection with Circuit City’s bankruptcy and liquidation. 56 Interest expense increased approximately $3.4 million, or 13%, due to the following: Property acquired during 2008 Development properties that became operational or were partially operational in 2007 and/or 2008 Properties under redevelopment during 2007 and/or 2008 Properties fully operational during 2007 and 2008 & other Total Increase (Decrease) 2008 to 2007 593,808 2,609,255 (112,367) 316,344 3,407,040 $ $ Excluding the changes due to the acquisition of properties, transitioned development properties and properties under redevelopment, the net $0.3 million increase in interest expense was primarily due to higher interest related to the $55 million outstanding on our term loan, which was entered into in July 2008. This was partially offset by lower LIBOR rates on our variable rate debt, including the line of credit, during fiscal year 2008 compared to 2007. Income tax expense of our taxable REIT subsidiary increased $1.2 million, or 153%, primarily due to the income taxes incurred by our taxable REIT subsidiary associated with the gain on the sale of land in the first quarter of 2008 as well as the sale of Spring Mill Medical, Phase II, a consolidated joint venture property. This build-to-suit commercial asset that we sold was adjacent to Spring Mill Medical I and was owned in our taxable REIT subsidiary through a 50% owned joint venture with a third party. Our proceeds from this sale were approximately $10.6 million, and our associated construction costs were approximately $9.4 million, including a $0.9 million payment to our joint venture partner to acquire their partnership interest prior to the sale to a third party. Our share of net proceeds of approximately $1.2 million from this sale was primarily used to pay down borrowings under our unsecured revolving credit facility. Income from unconsolidated entities increased approximately $0.6 million, or 100%. This increase is due to a gain from the sale of a land parcel, our share of which was $0.6 million. Gain on sale of unconsolidated property was $1.2 million in 2008 and resulted from the sale of our interest in Spring Mill Medical, Phase I, one of our unconsolidated commercial operating properties. This property is located in Indianapolis, Indiana and was owned 50% through a joint venture. The joint venture sold the property for approximately $17.5 million, resulting in a gain on the sale of approximately $3.5 million. Net proceeds of approximately $14.4 million from the sale of this property were utilized to defease the related mortgage loan. Our share of the gain on the sale of Spring Mill Medical, Phase I, was approximately $1.2 million, net of our excess investment. We used the majority of our share of the net proceeds to pay down borrowings under our unsecured revolving credit facility. Other income, net, decreased approximately $0.6 million, or 80%, primarily as a result of a $0.5 million payment received from a lender in consideration for our agreement to terminate a loan commitment in 2007. Discontinued operations decreased approximately $1.8 million to $0.3 million, largely due to the operations of our Galleria Plaza property which had net income of $0.3 million in 2007 and a net loss of $0.8 million is 2008 due to the loss of its anchor tenant. The remaining decrease reflects the write off to income of a market rent adjustment of $0.9 million upon the loss of the anchor tenant at our Silver Glen operating property in 2008. (Loss) gain on sale of operating properties reflects the 2008 sale of our Silver Glen Crossings property at a loss of $2.7 million and the 2007 sale of our 176th & Meridian property for a gain of $2.0 million. Net income attributable to noncontrolling interests decreased $2.8 million from $4.5 million in 2007 to $1.7 million in 2008. This decrease reflects the decrease on our consolidated net income from $18.0 million in 2007 to $7.8 million in 2008. The weighted average limited partners’ interest in our operating partnership remained relatively unchanged between years. 57 Liquidity and Capital Resources Current State of Capital Markets and Our Financing Strategy Our primary finance and capital strategy is to maintain a strong balance sheet with sufficient flexibility to fund our operating and investment activities in a cost-effective manner. We consider a number of factors when evaluating our level of indebtedness and when making decisions regarding additional borrowings, including the purchase price of properties to be developed or acquired with debt financing, the estimated market value of our properties and our Company as a whole upon consummation of the refinancing, and the ability of particular properties to generate cash flow to cover expected debt service. As discussed in more detail above in “Overview,” the challenging market conditions that currently exist have created a need for most REITs, including us, to place a significant amount of emphasis on financing and capital strategies. In October 2008 and May 2009, we received aggregate net proceeds of $135.3 million from offerings of our common shares. We used a portion of the proceeds from these offerings to reduce the amounts of indebtedness outstanding under our unsecured revolving credit facility and other borrowings. As a result, approximately $78 million was outstanding under our unsecured revolving credit facility as of December 31, 2009 as compared to $105 million as of the end of the prior year. In addition to raising new capital, we have also been successful in refinancing or extending the maturities of our debt that was originally scheduled to mature in 2009 and 2010. As of February 17, 2010, all of our maturities for 2010 were successfully extended or refinanced into future years. Our unsecured revolving credit facility and $55 million unsecured term loan are both scheduled to mature in 2011, although the unsecured revolving credit facility has a one-year extension to February 20, 2012 available if we are in compliance with all applicable covenants under the related agreement. The aggregate amount of outstanding indebtedness under both of these agreements is $132.8 million as of December 31, 2009. We discuss both of these borrowings in more detail below. We are conducting negotiations with our existing and potential replacement lenders to refinance or obtain extensions on both of these borrowings. We were also able to effectively recycle capital by selling outlot and unoccupied land parcels. During 2009, we generated gross proceeds from such sales of $17.0 million, a portion of which was used to pay down outstanding indebtedness. In the future, we may raise additional capital by pursuing joint venture capital partners and/or disposing of additional properties, land parcels or other assets that are no longer core components of our growth strategy. We will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. As of December 31, 2009, we had cash and cash equivalents on hand of approximately $20 million. We may be subject to concentrations of credit risk with regards to our cash and cash equivalents. We place our cash and short-term cash investments with high-credit-quality financial institutions. As of December 31, 2009, the majority of our cash and cash equivalents were held in deposit accounts that are 100% insured by the federal government’s Temporary Liquidity Guarantee Program. From time to time, such investments may temporarily be held in accounts that are not insured under this program and which are in excess of FDIC and SIPC insurance limits; however we attempt to limit our exposure at any one time. We also maintain certain compensating balances in several financial institutions in support of borrowings from those institutions. Such compensating balances were not material to the consolidated balance sheets. Our Principal Capital Resources Our Unsecured Revolving Credit Facility Our Operating Partnership has entered into an amended and restated four-year $200 million unsecured revolving credit facility with a group of lenders and Key Bank National Association, as agent (the “unsecured facility”). We and several of the Operating Partnership’s subsidiaries are guarantors of the Operating Partnership’s obligations under the unsecured facility. The unsecured facility has a maturity date of February 20, 2011, with a one-year extension option to February 2012 available if we are in compliance with all applicable covenants under the related agreement. We were in compliance with all applicable covenants under the unsecured facility as of December 31, 2009. 58 Borrowings under the unsecured facility bear interest at a variable interest rate of LIBOR + 115 to 135 basis points, depending on our leverage ratio. The unsecured facility has a 0.125% to 0.200% commitment fee applicable to the average daily unused amount. Subject to certain conditions, including the prior consent of the lenders, we have the option to increase our borrowings under the unsecured facility to a maximum of $400 million if there are sufficient unencumbered assets to support the additional borrowings. The unsecured facility also includes a short-term borrowing line of $25 million with a variable interest rate. Borrowings under the short-term line may not be outstanding for more than five days. As of December 31, 2009, our outstanding indebtedness under the unsecured facility was approximately $78 million, bearing interest at a rate of LIBOR + 125 basis points. Factoring in our hedge agreements, at December 31, 2009, our weighted average interest rate on our unsecured revolving credit facility was approximately 6.10%. As of December 31, 2009, the amount available to us for future draws was approximately $67 million. The amount that we may borrow under the unsecured facility is based on the value of assets in the unencumbered property pool. We currently have 51 unencumbered properties and other assets, 48 of which are wholly owned and used to calculate the amount available for borrowing under the unsecured credit facility and three of which are owned through joint ventures. The major unencumbered assets include: Boulevard Crossing, Broadstone Station, Coral Springs Plaza, Courthouse Shadows, Four Corner Square, Hamilton Crossing, King’s Lake Square, Market Street Village, Naperville Marketplace, PEN Products, Publix at Acworth, Red Bank Commons, Shops at Eagle Creek, Traders Point II, Union Station Parking Garage, Wal-Mart Plaza, and Waterford Lakes. Our ability to borrow under the unsecured facility is subject to ongoing compliance with various restrictive covenants, including with respect to liens, indebtedness, investments, dividends, mergers and asset sales. In addition, the unsecured facility requires us to satisfy certain financial covenants, including: • a maximum leverage ratio of 65% (or up to 70% in certain circumstances); • Adjusted EBITDA (as defined in the unsecured facility) to fixed charges coverage ratio of at least 1.50 to 1; • minimum tangible net worth (defined as Total Asset Value less Total Indebtedness) of $300 million (plus 75% of the net proceeds of any future equity issuances); • ratio of net operating income of unencumbered property to debt service under the unsecured facility of at least 1.50 to 1; • minimum unencumbered property pool occupancy rate of 80%; • • ratio of variable rate indebtedness to total asset value of no more than 0.35 to 1; and ratio of recourse indebtedness to total asset value of no more than 0.30 to 1. We were in compliance with all applicable covenants under the unsecured facility as of December 31, 2009. Under the terms of the unsecured 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 event of default exists, we may only make distributions sufficient to maintain our REIT status. However, we may not make any distributions if an event of default resulting from nonpayment or bankruptcy exists, or if our obligations under the credit facility are accelerated. Capital Markets We have filed a registration statement, and subsequent prospectus supplements related thereto, with the Securities and Exchange Commission allowing us to offer, from time to time, common shares or preferred shares for an aggregate initial public offering price of up to $500 million. In May 2009, we issued 28,750,000 common shares for offering proceeds, net of offering costs, of approximately $87.5 million. In addition, in December 2009, we entered into an Equity Distribution Agreement pursuant to which we may sell, from time to time, up to an aggregate amount of $25 million of our common shares. We will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. 59 Short and Long-Term Liquidity Needs Overview 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, the current general economic downturn is adversely affecting the ability of some of our tenants to meet their lease obligations, as discussed in more detail above in “Overview” on page 41. These conditions, in turn, are having a negative impact on our business. If the downturn in the financial markets and economy is prolonged, our cash flow from operations could be significantly affected. Short-Term Liquidity Needs The nature of our business, coupled with the requirements to qualify for REIT status and avoid paying tax on our income, necessitate that we distribute 90% of our taxable 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. In May 2009, our Board of Trustees (the “Board”) declared a quarterly cash distribution of $0.06 per common share for the quarter ended June 30, 2009. This per share distribution was continued for the quarters ended September 30, 2009 and December 31, 2009. These distributions were lower than in prior periods which allowed us to conserve cash. Each quarter we discuss with our Board our liquidity requirements along with other relevant factors before the Board decides whether and in what amount to declare a distribution. When we lease space to new tenants, or renew leases for existing tenants, we also incur expenditures for tenant improvements and external leasing commissions. This amount, as well as the amount of recurring capital expenditures that we incur, will vary from year to year. During the year ended December 31, 2009, we incurred approximately $0.8 million of costs for recurring capital expenditures on operating properties and also incurred approximately $1.6 million of costs for tenant improvements and external leasing commissions. We currently anticipate incurring approximately $1.0 million in capital expenditures at our operating properties and approximately $15.7 million of additional major tenant improvements and renovation costs within the next twelve months at several properties in our redevelopment pipeline. We expect to meet our short-term liquidity needs through borrowings under the unsecured facility, new construction loans, cash generated from operations and, to the extent necessary, accessing the public equity and debt markets to the extent that we are able to do so. 2010 Debt Maturities As of December 31, 2009, approximately $56.9 million of our outstanding indebtedness was scheduled to mature in 2010, excluding scheduled monthly principal payments. Subsequent to year-end, we refinanced or extended the maturity dates of 100% of this indebtedness as follows: • The maturity date of the $14.9 million variable rate loan on the Shops at Rivers Edge property was extended to February 2013 at an interest rate of LIBOR + 400 basis points. We funded a $0.6 million paydown on this loan with cash; • The maturity date of the $30.9 million variable rate construction loan on the Cobblestone Plaza property was extended to February 2013 at an interest rate of LIBOR + 350 basis points. We funded a $2.9 million paydown on this loan with cash and draws from our unsecured facility; and • The maturity date of the $11.0 million South Elgin Commons construction loan was extended to September 2013 at an interest rate of LIBOR + 325 basis points. We funded a $1.6 million paydown on this loan with cash and draws from our unsecured facility. 60 Long-Term Liquidity Needs Our long-term liquidity needs consist primarily of funds necessary to pay for the development of new properties, redevelopment of existing properties, non-recurring capital expenditures, acquisitions of properties, and payment of indebtedness at maturity. Unsecured Facility and Term Loan. As discussed above, our unsecured term loan, which had a balance of $55 million as of December 31, 2009, will mature on July 15, 2011 and our unsecured facility, which had a balance of approximately $78 million as of December 31, 2009, will mature on February 20, 2011 (with a one-year extension option to February 20, 2012 available if we are in compliance with all applicable covenants under the related agreement). We are conducting negotiations with our existing and potential replacement lenders to refinance or obtain extensions on our term loan and credit facility. Redevelopment Properties. As of December 31, 2009, five of our properties (Coral Springs Plaza, Bolton Plaza, Shops at Rivers Edge, Courthouse Shadows and Four Corner Square) were undergoing major redevelopment activities. We currently anticipate our investment in these redevelopment projects will be a total of approximately $16 million. We currently have sufficient financing in place to fund our investment in these projects through borrowings on our unsecured credit facility. In certain circumstances, we may seek to place specific construction financing on these redevelopment projects. Development Properties. As of December 31, 2009, we had two projects in our development pipeline. The total estimated cost, including our share and our joint venture partners’ share, for these projects is approximately $87 million, of which approximately $73 million had been incurred as of December 31, 2009. Our share of the total estimated cost of these projects is approximately $61 million, of which we have incurred approximately $50 million as of December 31, 2009. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through existing construction loans, including the construction loan on the Eddy Street Commons development project. This loan has a total commitment of approximately $29.5 million, of which $18.8 million was outstanding at December 31, 2009. In addition, if necessary, we may make draws on our unsecured facility. The Eddy Street Commons project is expected to include retail, office, hotels, a parking garage, apartments and residential units and is discussed in more detail below under “Contractual Obligations – Obligations in Connection with Our Development, Redevelopment and Shadow Pipeline”. Shadow Development Pipeline. In addition to our current development pipeline, we have a “shadow” development pipeline which includes land parcels that are in various stages of preparation for construction to commence, including pre- leasing activity and negotiations for third-party financing. As of December 31, 2009, this shadow pipeline consisted of six projects that are expected to contain approximately 2.9 million square feet of total leasable area. We currently anticipate the total estimated cost of these projects will be approximately $305 million, of which our share is currently expected to be approximately $187 million. Although we intend to develop these properties, which is a key assumption in our impairment review, we are generally not contractually obligated to complete any developments in our shadow pipeline, as these projects consist of land parcels on which we have not yet commenced construction. With respect to each asset in the shadow pipeline, our policy is to not commence vertical construction until pre-established leasing thresholds are achieved and the requisite third-party financing is in place. Once these projects are transferred to the current development pipeline, we intend to fund our investment in these developments primarily through new construction loans and joint ventures, as well as borrowings on our unsecured facility, if necessary. Selective Acquisitions, Developments and Joint Ventures. We may selectively pursue the acquisition and development of other properties, which would require additional capital. It is unlikely we would have sufficient funds on hand to meet these long-term capital requirements. We would have to satisfy these needs through participation in joint venture arrangements, additional borrowings, sales of common or preferred shares and/or cash generated through property dispositions. We cannot be certain that we would have access to these sources of capital on satisfactory terms, if at all, to fund our long-term liquidity requirements. Our ability to access the capital markets will be dependent on a number of factors, including general capital market conditions, which is discussed in more detail above in “Overview” on page 41. We have entered into an agreement (the “Venture”) with Prudential Real Estate Investors (“PREI”) to pursue joint venture opportunities for the development and selected acquisition of community shopping centers in the United States. The agreement allows for the Venture to develop or acquire up to $1.25 billion of well-positioned community shopping centers in strategic markets in the United States. Under the terms of the agreement, we have agreed to present to PREI opportunities to develop or acquire community shopping centers, each with estimated project costs in excess of $50 61 million. We have the option to present to PREI additional opportunities with estimated project costs under $50 million. The agreement allows for equity capital contributions of up to $500 million to be made to the Venture for qualifying projects. We expect contributions would be made on a project-by-project basis with PREI contributing 80% and us contributing 20% of the equity required. Our first project with PREI is Parkside Town Commons, which is currently in our shadow development pipeline. As of December 31, 2009, we owned a 40% interest in this joint venture which, under the terms of this joint venture, will be reduced to 20% upon construction financing. Cash Flows Comparison of the Year Ended December 31, 2009 to the Year Ended December 31, 2008 Cash provided by operating activities was $21.0 million for the year ended December 31, 2009, a decrease of $20.0 million from 2008. The decrease was primarily due to higher cash outflows for accounts payable and accrued expenses in 2009, the majority of which reflects declining third-party construction activity. Cash used in our investing activities totaled $54.8 million in 2009, a decrease of $40.9 million from 2008. The decrease in cash used in investing activities was primarily a result of a decline of $81.0 million in acquisitions of interests in properties and capital expenditures. As part of our cash conservation strategy, we significantly reduced our acquisition, development and construction activities. Offsetting this decrease were $17.2 million of 2008 net proceeds from the sale of our Silver Glen Crossings operating property, $12.0 million of 2009 contributions to our Parkside Town Commons development property and The Centre operating property and a $5.0 million change in construction payables. Cash provided by financing activities totaled $43.9 million during 2009, a decrease of $1.6 million from 2008. In 2009, we had lower borrowings of $26.2 million due to a decline in our construction activity. Among the more significant changes in financing activities between years are the following: In 2008, we had borrowings totaling $41.8 million in connection with the 2008 acquisition of our Shops at Rivers Edge operating property and New Hill Place development property, offset by proceeds totaling $32.3 million from the sales of our Silver Glen Crossings and Spring Mill operating properties and outlot and land parcels. Net loan paydowns were $20.5 million higher in 2009 compared to 2008 as a result of the use of common share offering proceeds to reduce our levels of indebtedness. These net changes were partially offset by $39.2 million higher proceeds from our 2009 common share offering compared to our 2008 offerings and $8.1 million lower cash distribution payments to common shareholders and operating partnership unitholders as a result of a lowering of our per share rate of distribution. Comparison of the Year Ended December 31, 2008 to the Year Ended December 31, 2007 Cash provided by operating activities was $41.1 million for the year ended December 31, 2008, an increase of $2.9 million from 2007 The increase was primarily due to a change in accounts payable, accrued expenses, deferred revenue and other liabilities of $6.9 million between years, which was primarily due to construction related expenses as well as the conservation of cash. This increase was partially offset by a change in deferred costs and other assets of $4.3 million between years. Cash used in our investing activities totaled $95.7 million in 2008, a decrease of $1.0 million from 2007. The decrease in cash used in investing activities was primarily a result of an increase of $17.0 million in net proceeds from the sale of an operating property, which was the result of the net proceeds from the 2008 sale of Silver Glen Crossings compared to the 2007 sale of 176th & Meridian. This was partially offset by an increase of $12.4 million in acquisitions of interests in properties and capital expenditures. Cash provided by financing activities totaled $45.5 million during 2008, a decrease of $8.1 million from 2007. The net of loan proceeds, transaction costs and payments decreased $53.7 million between years primarily due to the $118.1 million draw from the unsecured facility in 2007 compared to the $55 million proceeds received under the unsecured term loan in 2008, both of which were used to repay previously outstanding indebtedness. This was partially offset by the $48.3 million of offering proceeds, the majority of which was received in October 2008 when we completed an equity offering of 4,750,000 common shares at an offering price of $10.55 per share. 62 Off-Balance Sheet Arrangements We do not currently have any off-balance sheet arrangements 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. We do, however, have certain obligations to some of the projects in our current development pipeline, including our obligations in connection with our Eddy Street Commons development, as discussed below in “Contractual Obligations”, as well as our joint venture with PREI with respect to our Parkside Town Commons development, as discussed above. As of December 31, 2009, we owned a 40% interest in this joint venture which, under the terms of this joint venture, will be reduced to 20% upon construction financing. As of December 31, 2009, our share of unconsolidated joint venture indebtedness was $14.5 million. Unconsolidated joint venture debt is the liability of the joint venture and is typically secured by the assets of the joint venture. As of December 31, 2009, the Operating Partnership had guaranteed its $13.5 million share of the unconsolidated joint venture debt related to the Parkside Town Commons development in the event the joint venture partnership defaults under the terms of the underlying arrangement. Mortgages which are guaranteed by the Operating Partnership are secured by the property of the joint venture and the joint venture could sell the property in order to satisfy the outstanding obligation. See Note 6 to the accompanying consolidated financial statements for information on our unconsolidated joint ventures for the years ended December 31, 2009, 2008 and 2007. Contractual Obligations The following table summarizes our contractual obligations to third parties, excluding interest, based on contracts executed as of December 31, 2009. Construction Contracts Tenant Allowances1 2010 ...................................... $ 1,481,316 $ 10,613,381 $ 735,075 — 2011 ...................................... — 3,585,980 2012 ...................................... — — 2013 ...................................... — — 2014 ...................................... Thereafter ............................. — — Unamortized Debt Operating Leases 389,300 $ 326,800 326,800 212,500 220,000 715,000 Pro rata Share of Joint Venture Debt Consolidated Long-term Debt2 60,001,404 $ 252,871,911 13,549,200 — — 981,593 — 39,084,352 34,802,465 216,442,008 54,114,603 — $ Premiums........................ — Total...................................... $ 1,481,316 $ 14,934,436 $ 2,190,400 $ 658,294,513 $ 14,530,793 $ 977,770 — — — Employment Contracts3 Other Total 1,417,000 — — — — — $ 2,397,171 $ 76,299,572 4,471,394 271,954,380 58,027,383 39,296,852 36,004,058 217,157,008 — — — — — 1,417,000 977,770 $ 6,868,565 $ 699,717,023 — ____________________ 1 Tenant allowances include commitments made to tenants at our operating, development and redevelopment properties. 2 In February 2010, we extended the maturity dates of all of our 2010 maturities to 2013. See table reflecting these refinancing activities on page 44. 3 We have entered into employment agreements with certain members of senior management. Under these agreements, each individual received a stipulated annual base salary through December 31, 2009. Each agreement has an automatic one-year renewal unless we or the individual elects not to renew the agreement. The contracts have been extended through December 31, 2010. In 2009, we incurred $27.2 million of interest expense, net of amounts capitalized of $8.9 million. In connection with the construction of the Eddy Street Commons parking garage and certain infrastructure improvements, we are obligated to fund payments under Tax Increment Financing (TIF) Bonds issued by the City of South Bend, Indiana. The majority of the bonds will be funded by real estate tax payments made by us and subject to reimbursement from the tenants of the property. If there are delays in the development, we are obligated to pay certain delay fees. However, we have an agreement with the City of South Bend to limit our exposure to a maximum of $1 million as to such fees. In addition, we will not be in default concerning other obligations under the agreement with the City of South Bend so long as we commence and diligently pursue the completion of our obligations under that agreement. 63 See “2010 Maturities” on page 60 for additional information with respect to our current plan to address our indebtedness maturing in fiscal year 2010 and beyond. 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 their 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 18% of our annualized base rent in the aggregate as of December 31, 2009. These six properties are International Speedway Square, Shops at Eagle Creek, Whitehall Pike, Ridge Plaza Shopping Center, Thirty South, and Market Street Village. Construction Contracts Construction contracts in the table above represent commitments for contracts executed as of December 31, 2009 related to new developments, redevelopments and third-party construction. Obligations in Connection with Our Current Development, Redevelopment and Shadow Pipeline We are obligated under various contractual arrangements to complete the projects in our current development pipeline. We currently anticipate our share of the total cost of the two projects in our current development pipeline will be approximately $61 million (including $35 million of costs associated with Phase I of our Eddy Street Commons development discussed below), of which approximately $11 million of our share was unfunded as of December 31, 2009. In addition, we have commenced with the construction of a limited service hotel component of this project of which we will own 50% in a joint venture. We currently estimate that our share of the total cost of this hotel will be approximately $5.5 million. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through existing construction loans, including the construction loan on Eddy Street Commons that closed in December 2009, with a total loan commitment of approximately $29.5 million, of which $18.8 million was outstanding at December 31, 2009. In addition, if necessary, we may make draws on our unsecured facility. In addition to our current development pipeline, we also have a redevelopment pipeline and a “shadow” development pipeline, which includes land parcels that are undergoing pre-development activity and are in various stages of preparation for construction to commence, including pre-leasing activity and negotiations for third-party financings. Although we currently intend to develop the shadow pipeline, we are not contractually obligated to complete any projects in our redevelopment or shadow pipelines, as these consist of land parcels on which we have not yet commenced construction. With respect to each asset in the shadow pipeline, our policy is to not commence vertical construction until appropriate pre- leasing thresholds are met and the requisite third-party financing is in place. Eddy Street Commons at the University of Notre Dame The most significant project in our current development pipeline is Eddy Street Commons at the University of Notre Dame located adjacent to the university in South Bend, Indiana, that is expected to include retail, office, hotels, a parking garage, apartments and residential units. A majority of the office space will be leased to the University of Notre Dame. The City of South Bend has contributed approximately $35 million to the development, funded by tax increment financing (TIF) bonds issued by the City and a cash commitment from the City, both of which are being used for the construction of a parking garage and infrastructure improvements in this project. The majority of the bonds will be funded by real estate tax payments made by us and subject to reimbursement from the tenants of the property. If there are delays in the development, we are obligated to pay certain delay fees. However, we have an agreement with the City of South Bend to limit our exposure to a maximum of $1 million as to such fees. In addition, we will not be in default concerning other obligations under the agreement with the City of South Bend so long as we commence and diligently pursue the completion of our obligations under that agreement. 64 This development will be completed in several phases. The initial phase of the project opened in October 2009 and consists of the retail, office and apartment and residential units with an estimated total cost of $70 million (net of amounts funded by the TIF bonds) of which our share is estimated to be $35 million. This phase is 72.4% leased as of December 31, 2009. The ground beneath the initial phase of the development is leased from the University of Notre Dame over a 75 year term at a fixed rate for first two years and based on a percentage of certain revenues thereafter. The total estimated project costs for all phases of this development are currently estimated to be approximately $200 million, our share of which is currently expected to be approximately $64 million. Our exposure to this amount may be limited under certain circumstances. We own the retail and office components while the apartments are owned by a third party. The hotel components of the project will be owned through joint ventures while the apartments and residential units are planned to be sold or operated through relationships with developers, owners and operators that specialize in residential real estate. We do not expect to own either the residential or the apartment complex components of the project, although we have jointly guaranteed the apartment developer’s construction loan. The first phase of the apartments opened during the second half of 2009 with the second phase expected to open in the second half of 2010. Construction on the residential units will commence as demand warrants. Vertical construction commenced on a limited service hotel in September and the opening of this project is expected to occur in the second half of 2010. In 2009 we received, and we expect to receive in the future, development, construction management, and other fees from various aspects of this project. We have a contractual obligation in the form of a completion guarantee to the University of Notre Dame and a similar contractual agreement in favor of the City of South Bend to complete all phases of the project, with the exception of certain of the residential units, consistent with commitments we typically make in connection with other bank-funded development projects. To the extent the hotel joint venture partner, the apartment developer/owner or the residential developer/owner fail to complete those aspects of the project, we will be required to complete the construction, at which time we expect that we would have the right to seek title to the assets and assume any construction borrowings related to the assets. We will have certain remedies against the developers if they were to fail to complete the construction. If we fail to fulfill our contractual obligations in connection with the project, but are timely commencing and pursuing a cure, we will not be in default to either the University of Notre Dame or the City of South Bend. 65 Outstanding Indebtedness The following table presents details of outstanding indebtedness as of December 31, 2009: $ Property Fixed Rate Debt - Mortgage: 50th & 12th................................................................ The Centre at Panola ................................................ Cool Creek Commons .............................................. The Corner................................................................ Fox Lake Crossing ................................................... Geist Pavilion ........................................................... Indian River Square.................................................. International Speedway Square................................ Kedron Village ......................................................... Pine Ridge Crossing ................................................. Plaza at Cedar Hill.................................................... Plaza Volente............................................................ Preston Commons .................................................... Riverchase Plaza ...................................................... Sunland Towne Centre ............................................. 30 South.................................................................... Traders Point ............................................................ Whitehall Pike .......................................................... Floating Rate Debt - Hedged: Unsecured Credit Facility ....................................... Unsecured Credit Facility ........................................ Unsecured Term Loan.............................................. Bayport Commons.................................................... Eastgate Pavilion ...................................................... Gateway Shopping Center........................................ Glendale Town Center ............................................. Ridge Plaza............................................................... Net unamortized premium on assumed debt of acquired properties ............................................. Total Fixed Rate Indebtedness..................... $ Balance Outstanding Interest Rate Maturity 5.67 % 6.78 % 5.88 % 7.65 % 5.16 % 5.78 % 5.42 % 7.17 % 5.70 % 6.34 % 7.38 % 5.42 % 5.90 % 6.34 % 6.01 % 6.09 % 5.86 % 6.71 % 6.32 % 6.17 % 5.92 % 4.48 % 4.84 % 4.88 % 4.40 % 6.56 % 11/11/2014 1/1/2022 4/11/2016 7/1/2011 7/1/2012 1/1/2017 6/11/2015 3/11/2011 1/11/2017 10/11/2016 2/1/2012 6/11/2015 3/11/2013 10/11/2016 7/1/2016 1/11/2014 10/11/2016 7/5/2018 2/20/2011 2/18/2011 7/15/2011 12/27/2011 4/30/2012 10/31/2011 12/19/2011 1/3/2017 4,370,103 3,658,067 17,862,709 1,574,412 11,288,753 11,125,000 13,216,389 18,596,954 29,700,000 17,500,000 25,596,611 28,499,703 4,305,964 10,500,000 25,000,000 21,682,906 48,000,000 8,415,622 300,893,193 50,000,000 25,000,000 55,000,000 19,700,000 15,182,480 20,000,000 20,000,000 15,000,000 219,882,480 977,770 521,753,443 66 Balance Outstanding Interest Rate Maturity Interest Rate at 12/31/09 Property Variable Rate Debt - Mortgage: Bayport Commons2................................................... $ Beacon Hill ............................................................... Eastgate Pavilion2 ..................................................... Estero Town Commons ............................................ Fishers Station........................................................... Gateway Shopping Center2....................................... Glendale Town Center2............................................. Indiana State Motor Pool .......................................... Ridge Plaza2 .............................................................. Shops at Rivers Edge3............................................... Tarpon Springs Plaza ................................................ Subtotal Mortgage Notes .............................. Variable Rate Debt - Secured by Properties under Construction: Bridgewater Marketplace1 ........................................ Cobblestone Plaza3 ................................................... Delray Marketplace................................................... Eddy Street Commons .............................................. South Elgin Commons3............................................. Subtotal Construction Notes......................... 20,078,916 7,565,349 15,209,670 10,500,000 3,937,444 21,042,866 20,553,000 3,652,440 15,000,000 14,940,000 14,000,000 146,479,685 7,000,000 30,853,252 9,425,000 18,802,194 11,063,419 77,143,865 LIBOR + 2.75% LIBOR + 1.25% LIBOR + 2.95% LIBOR + 3.25% LIBOR + 3.50% LIBOR + 1.90% LIBOR + 2.75% LIBOR + 1.35% LIBOR + 3.25% LIBOR + 1.25% LIBOR + 3.25% LIBOR + 1.85% LIBOR + 2.50% LIBOR + 3.00% LIBOR + 2.30% LIBOR + 1.90% 12/27/2011 3/30/2014 4/30/2012 1/15/2013 6/6/2011 10/31/2011 12/19/2011 2/4/2011 1/3/2017 2/3/2010 1/15/2013 6/29/2013 3/31/2010 6/30/2011 12/30/2011 9/30/2010 Unsecured Credit Facility2..................................... 77,800,000 LIBOR + 1.25% 2/20/2011 Unsecured Term Loan2 .......................................... 55,000,000 LIBOR + 2.65% 7/15/2011 Floating Rate Debt - Hedged: Unsecured Credit Facility ......................................... Unsecured Credit Facility ......................................... Unsecured Term Loan .............................................. Bayport Commons .................................................... Eastgate Pavilion....................................................... Gateway Shopping Center ........................................ Glendale Town Center.............................................. Ridge Plaza ............................................................... (50,000,000) (25,000,000) (55,000,000) (19,700,000) (15,182,480) (20,000,000) (20,000,000) (15,000,000) (219,882,480) LIBOR + 1.25% LIBOR + 1.25% LIBOR + 2.65% LIBOR + 2.75% LIBOR + 2.95% LIBOR + 1.90% LIBOR + 2.75% LIBOR + 3.25% 2/20/2011 2/18/2011 7/15/2011 12/27/2011 4/30/2012 10/31/2011 12/19/2011 1/3/2017 Total Variable Rate Indebtedness................. Total Indebtedness.......................... $ 136,541,070 658,294,513 2.98% 1.48% 3.18% 3.48% 3.73% 2.13% 2.98% 1.58% 3.48% 1.48% 3.48% 5.00% 2.73% 3.23% 2.53% 2.13% 1.48% 2.88% 1.48% 1.48% 2.88% 2.98% 3.18% 2.13% 2.98% 3.48% ____________________ 1 This loan has a LIBOR floor of 3.15%. 2 3 We entered into a cash flow hedge agreement on this debt instrument to fix the interest rate. See fixed rate within the fixed rate hedged details in the table above. Subsequent to December 31, 2009, the maturity date on this loan was extended to the year 2013. 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 consolidated net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for third-party shares of appropriate items. 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 consolidated net income that do not relate to or are not indicative of our operating performance, such as gains (or losses) from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we have also provided FFO adjusted for a non-cash impairment 67 charge recorded in 2009. We believe this supplemental information provides a meaningful measure of our operating performance. FFO should not be considered as an alternative to consolidated 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 satisfy our cash needs, including our ability to make distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definitions differently than we do. Our calculation of FFO (and reconciliation to consolidated net (loss) income) is as follows: Balance Outstanding Interest Rate Maturity Interest Rate at 12/31/09 Interest Rate at 12/31/09 2.98% 1.48% 3.18% 3.48% 3.73% 2.13% 2.98% 1.58% 3.48% 1.48% 3.48% 2.98% 1.48% 3.18% 3.48% 3.73% 2.13% 2.98% 1.58% 3.48% 1.48% 3.48% 5.00% 2.73% 3.23% 2.53% 2.13% 1.48% 5.00% 2.73% 3.23% 2.53% 2.13% 2.88% 1.48% 1.48% 1.48% 2.88% 2.98% 3.18% 2.13% 2.98% 3.48% 2.88% 1.48% 1.48% 2.88% 2.98% 3.18% 2.13% 2.98% 3.48% 2.98% 1.48% 3.18% 3.48% 3.73% 2.13% 2.98% 1.58% 3.48% 1.48% 3.48% 5.00% 2.73% 3.23% 2.53% 2.13% 1.48% 2.88% 1.48% 1.48% 2.88% 2.98% 3.18% 2.13% 2.98% 3.48% Funds From Operations: Variable Rate Debt - Secured by Properties Less redeemable noncontrolling interests in Funds From Operations under Construction: Funds From Operations of the Kite Portfolio Property Variable Rate Debt - Mortgage: Bayport Commons2................................................... $ Beacon Hill ............................................................... Eastgate Pavilion2 ..................................................... Estero Town Commons ............................................ Fishers Station........................................................... Gateway Shopping Center2....................................... Glendale Town Center2............................................. Indiana State Motor Pool .......................................... Ridge Plaza2 .............................................................. Shops at Rivers Edge3............................................... Tarpon Springs Plaza ................................................ Subtotal Mortgage Notes .............................. Property Variable Rate Debt - Mortgage: Bayport Commons2................................................... $ Beacon Hill ............................................................... Eastgate Pavilion2 ..................................................... Estero Town Commons ............................................ Fishers Station........................................................... Gateway Shopping Center2....................................... Glendale Town Center2............................................. Indiana State Motor Pool .......................................... Ridge Plaza2 .............................................................. Shops at Rivers Edge3............................................... Tarpon Springs Plaza ................................................ Subtotal Mortgage Notes .............................. Consolidated net (loss) income Property Add loss (deduct gain) on sale of operating property Variable Rate Debt - Mortgage: Less non-cash gain from consolidation of subsidiary, net of noncontrolling Bayport Commons2................................................... $ interests Beacon Hill ............................................................... Eastgate Pavilion2 ..................................................... Less gain on sale of unconsolidated property Estero Town Commons ............................................ Fishers Station........................................................... Gateway Shopping Center2....................................... Glendale Town Center2............................................. Variable Rate Debt - Secured by Properties Indiana State Motor Pool .......................................... Ridge Plaza2 .............................................................. Bridgewater Marketplace1 ........................................ Shops at Rivers Edge3............................................... Cobblestone Plaza3 ................................................... Tarpon Springs Plaza ................................................ under Construction: Delray Marketplace................................................... Subtotal Mortgage Notes .............................. Funds From Operations allocable to the Company Eddy Street Commons .............................................. South Elgin Commons3............................................. Subtotal Construction Notes......................... $ Less net income attributable to noncontrolling interests in properties Add depreciation and amortization of consolidated entities, net of noncontrolling interests Add depreciation and amortization of unconsolidated entities Bridgewater Marketplace1 ........................................ Cobblestone Plaza3 ................................................... Delray Marketplace................................................... Eddy Street Commons .............................................. South Elgin Commons3............................................. Subtotal Construction Notes......................... under Construction: Bridgewater Marketplace1 ........................................ Funds From Operations of the Kite Portfolio Cobblestone Plaza3 ................................................... Add back: Non-cash loss on impairment of real estate asset Delray Marketplace................................................... Funds From Operations of the Kite Portfolio excluding non-cash loss on Eddy Street Commons .............................................. impairment of real estate asset South Elgin Commons3............................................. Subtotal Construction Notes......................... Floating Rate Debt - Hedged: Unsecured Credit Facility ......................................... Unsecured Credit Facility ......................................... Unsecured Term Loan .............................................. Bayport Commons .................................................... Eastgate Pavilion....................................................... Gateway Shopping Center ........................................ Glendale Town Center.............................................. Ridge Plaza ............................................................... Unsecured Credit Facility2..................................... Floating Rate Debt - Hedged: Unsecured Credit Facility ......................................... Unsecured Credit Facility ......................................... Unsecured Term Loan .............................................. Bayport Commons .................................................... Eastgate Pavilion....................................................... Gateway Shopping Center ........................................ Glendale Town Center.............................................. Ridge Plaza ............................................................... ____________________ 1 Unsecured Credit Facility2..................................... Unsecured Credit Facility2..................................... Unsecured Term Loan2 .......................................... Unsecured Term Loan2 .......................................... Unsecured Term Loan2 .......................................... Variable Rate Debt - Secured by Properties $ $ Interest Rate at 12/31/09 12/27/2011 Maturity 3/30/2014 4/30/2012 12/27/2011 1/15/2013 3/30/2014 6/6/2011 4/30/2012 10/31/2011 1/15/2013 12/19/2011 6/6/2011 — 2/4/2011 10/31/2011 — 1/3/2017 12/19/2011 2/3/2010 2/4/2011 1/15/2013 1/3/2017 2/3/2010 1/15/2013 $ Year Ended Balance 20,078,916 December 31, Outstanding 7,565,349 2009 15,209,670 Balance $ (1,178,003) 10,500,000 Outstanding 3,937,444 — 21,042,866 20,078,916 20,553,000 (980,926) 7,565,349 3,652,440 15,209,670 — 15,000,000 10,500,000 14,940,000 (879,463) 3,937,444 14,000,000 21,042,866 146,479,685 20,553,000 31,601,550 3,652,440 157,623 15,000,000 28,720,781 14,940,000 (3,848,585) 14,000,000 146,479,685 24,872,196 20,078,916 7,565,349 15,209,670 10,500,000 3,937,444 21,042,866 20,553,000 3,652,440 15,000,000 14,940,000 14,000,000 146,479,685 Year Ended Interest LIBOR + 2.75% December 31, Year Ended Rate LIBOR + 1.25% 2008 December 31, 2007 LIBOR + 2.95% LIBOR + 2.75% Interest $ 7,823,650 17,991,123 LIBOR + 3.25% Maturity Rate LIBOR + 1.25% LIBOR + 3.50% (2,036,189) 2,689,888 LIBOR + 2.95% LIBOR + 1.90% LIBOR + 2.75% LIBOR + 3.25% LIBOR + 2.75% — LIBOR + 1.25% LIBOR + 3.50% LIBOR + 1.35% LIBOR + 2.95% LIBOR + 1.90% (1,233,338) LIBOR + 3.25% LIBOR + 3.25% LIBOR + 2.75% LIBOR + 1.25% (61,707) LIBOR + 3.50% LIBOR + 1.35% LIBOR + 3.25% LIBOR + 1.90% LIBOR + 3.25% LIBOR + 2.75% 35,438,229 LIBOR + 1.25% LIBOR + 1.35% LIBOR + 3.25% 406,623 LIBOR + 3.25% 45,063,345 LIBOR + 1.85% LIBOR + 1.25% LIBOR + 2.50% (9,688,619) LIBOR + 3.25% LIBOR + 3.00% 7,000,000 $ 35,374,726 $ LIBOR + 1.85% LIBOR + 2.30% 30,853,252 LIBOR + 2.50% LIBOR + 1.90% 9,425,000 LIBOR + 3.00% 18,802,194 $ $ 45,063,345 LIBOR + 1.85% LIBOR + 2.30% 11,063,419 LIBOR + 2.50% LIBOR + 1.90% — LIBOR + 1.25% LIBOR + 3.00% 77,143,865 LIBOR + 2.30% $ 45,063,345 LIBOR + 1.90% 12/27/2011 3/30/2014 4/30/2012 1/15/2013 (614,836) 6/6/2011 10/31/2011 12/19/2011 31,475,146 2/4/2011 403,799 1/3/2017 47,219,043 2/3/2010 (10,529,847) 1/15/2013 36,689,196 6/29/2013 3/31/2010 6/30/2011 12/30/2011 9/30/2010 7,000,000 30,853,252 9,425,000 18,802,194 11,063,419 77,143,865 $ LIBOR + 2.65% LIBOR + 1.25% 7,000,000 28,720,781 30,853,252 5,384,747 9,425,000 18,802,194 34,105,528 11,063,419 77,143,865 77,800,000 77,800,000 55,000,000 47,219,043 6/29/2013 3/31/2010 6/30/2011 12/30/2011 9/30/2010 6/29/2013 3/31/2010 6/30/2011 12/30/2011 47,219,043 9/30/2010 — 2/20/2011 7/15/2011 2/20/2011 55,000,000 LIBOR + 2.65% 77,800,000 LIBOR + 1.25% 2/20/2011 55,000,000 “Funds From Operations of the Kite Portfolio” measures 100% of the operating performance of the Operating Partnership’s real estate properties and construction and service subsidiaries in which the Company owns an interest. “Funds From Operations allocable to the Company” reflects a reduction for the noncontrolling weighted average 2/20/2011 diluted interest in the Operating Partnership. 2/18/2011 7/15/2011 12/27/2011 4/30/2012 10/31/2011 12/19/2011 1/3/2017 Floating Rate Debt - Hedged: Unsecured Credit Facility ......................................... Unsecured Credit Facility ......................................... Unsecured Term Loan .............................................. Bayport Commons .................................................... Eastgate Pavilion....................................................... Gateway Shopping Center ........................................ Glendale Town Center.............................................. Ridge Plaza ............................................................... LIBOR + 1.25% LIBOR + 1.25% LIBOR + 2.65% LIBOR + 2.75% LIBOR + 2.95% LIBOR + 1.90% LIBOR + 2.75% LIBOR + 3.25% LIBOR + 1.25% LIBOR + 1.25% LIBOR + 2.65% LIBOR + 2.75% LIBOR + 2.95% LIBOR + 1.90% LIBOR + 2.75% LIBOR + 3.25% (50,000,000) (25,000,000) (55,000,000) (19,700,000) (15,182,480) (20,000,000) (20,000,000) (15,000,000) (219,882,480) Total Variable Rate Indebtedness................. Total Indebtedness.......................... $ 136,541,070 658,294,513 Total Variable Rate Indebtedness................. LIBOR + 2.65% 7/15/2011 (50,000,000) (25,000,000) (55,000,000) (19,700,000) (15,182,480) (20,000,000) (20,000,000) (15,000,000) (219,882,480) 136,541,070 658,294,513 Forward-Looking Statements (50,000,000) (25,000,000) (55,000,000) (19,700,000) (15,182,480) (20,000,000) (20,000,000) (15,000,000) (219,882,480) LIBOR + 1.25% LIBOR + 1.25% LIBOR + 2.65% LIBOR + 2.75% LIBOR + 2.95% LIBOR + 1.90% LIBOR + 2.75% LIBOR + 3.25% 7/15/2011 2/20/2011 2/18/2011 7/15/2011 12/27/2011 4/30/2012 10/31/2011 12/19/2011 1/3/2017 2/20/2011 2/18/2011 7/15/2011 12/27/2011 4/30/2012 10/31/2011 12/19/2011 1/3/2017 Total Indebtedness.......................... $ Total Variable Rate Indebtedness................. ____________________ 1 This Annual Report on Form 10-K, together with other statements and information publicly disseminated by Kite Realty Group Trust (the “Company”), 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: This loan has a LIBOR floor of 3.15%. Total Indebtedness.......................... $ ____________________ 1 ____________________ 1 This loan has a LIBOR floor of 3.15%. We entered into a cash flow hedge agreement on this debt instrument to fix the interest rate. See fixed rate within the fixed rate hedged details in the table above. We entered into a cash flow hedge agreement on this debt instrument to fix the interest rate. See fixed rate within the fixed rate hedged details in the table above. Subsequent to December 31, 2009, the maturity date on this loan was extended to the year 2013. This loan has a LIBOR floor of 3.15%. 136,541,070 658,294,513 2 2 3 • • • • • 2 national and local economic, business, real estate and other market conditions, particularly in light of the current recession; We entered into a cash flow hedge agreement on this debt instrument to fix the interest rate. See fixed rate within Subsequent to December 31, 2009, the maturity date on this loan was extended to the year 2013. the fixed rate hedged details in the table above. Funds From Operations 3 3 financing risks, including the availability of and costs associated with sources of liquidity; Funds From Operations Funds From Operations the level and volatility of interest rates; the Company’s ability to refinance, or extend the maturity dates of, its indebtedness; the financial stability of tenants, including their ability to pay rent and the risk of tenant bankruptcies; Subsequent to December 31, 2009, the maturity date on this loan was extended to the year 2013. 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 consolidated net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, Funds From Operations (“FFO”), is a widely used performance measure for real estate companies and is provided and after adjustments for third-party shares of appropriate items. 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 consolidated net income (computed in accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for third-party shares of appropriate items. 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 consolidated net income (computed in 68 accordance with GAAP), excluding gains (or losses) from sales of depreciated property, plus depreciation and amortization, and after adjustments for third-party shares of appropriate items. 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 consolidated net income that do not relate to or are not indicative of our operating performance, such as gains (or losses) from sales of depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating 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 consolidated net performance more difficult. For informational purposes, we have also provided FFO adjusted for a non-cash impairment income that do not relate to or are not indicative of our operating performance, such as gains (or losses) from sales of 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 consolidated net depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating income that do not relate to or are not indicative of our operating performance, such as gains (or losses) from sales of performance more difficult. For informational purposes, we have also provided FFO adjusted for a non-cash impairment 67 depreciated property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we have also provided FFO adjusted for a non-cash impairment 67 67 • • • • • • • • • the competitive environment in which the Company operates; acquisition, disposition, development and joint venture risks; property ownership and management risks; the Company’s ability to maintain its status as a real estate investment trust (“REIT”) for federal income tax purposes; potential environmental and other liabilities; impairment in the value of real estate property the Company owns; risks related to the geographical concentration of our properties in Indiana, Florida and Texas; 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 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 and Variable Rate Debt We had approximately $658.3 million of outstanding consolidated indebtedness as of December 31, 2009 (inclusive of net premiums on acquired debt of $1.0 million). As of December 31, 2009, we were party to eight consolidated interest rate hedge agreements for a total of $219.9 million, with interest rates ranging from 4.40% to 6.56% and maturities over various terms from 2011 through 2017. Including the effects of these hedge agreements, our fixed and variable rate debt would have been approximately $520.8 million (79%) and $136.5 million (21%), respectively, of our total consolidated indebtedness at December 31, 2009. Including our $14.5 million share of unconsolidated variable debt and the effect of related hedge agreements, our fixed and variable rate debt is 78% and 22%, respectively, of the total of consolidated and our share of unconsolidated indebtedness at December 31, 2009. Based on the amount of our fixed rate debt at December 31, 2009, a 100 basis point increase in market interest rates would result in a decrease in its fair value of approximately $12.2 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 $13.0 million. A 100 basis point increase or decrease in interest rates on our consolidated variable rate debt as of December 31, 2009 would increase or decrease our annual cash flow by approximately $1.4 million. As a matter of policy, we do not utilize financial instruments for 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 helps reduce our exposure to increases in costs and operating expenses resulting from inflation. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The consolidated financial statements of the Company included in this Report are listed in Part IV, Item 15(a) of this report. 69 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 the Company’s 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 has been no change in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation required by Rule 13a-15(b) under the Securities Exchange Act of 1934 of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a- 15(e) under the Securities Exchange Act of 1934) as of December 31, 2009 that has materially affected, or is reasonably likely to materially affect, our 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 for the Company, 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, 2009. The Company’s independent auditors, Ernst & Young LLP, an independent registered public accounting firm, have issued a report on 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. 70 Report of Independent Registered Public Accounting Firm The Board of Trustees and Shareholders of Kite Realty Group Trust: We have audited Kite Realty Group Trust and subsidiaries’ internal control over financial reporting as of December 31, 2009, 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 and subsidiaries’ management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on 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, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, 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, Kite Realty Group Trust and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2009, 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, 2009 and 2008, and the related consolidated statements of operations, shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2009 and the related financial statement schedule listed in the index at Item 15(a) as of December 31, 2009 of Kite Realty Group Trust and subsidiaries and our report dated March 16, 2010 expressed an unqualified opinion thereon. Ernst & Young LLP Indianapolis, Indiana March 16, 2010 71 ITEM 9B. OTHER INFORMATION None. PART III ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE 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. The remaining information required by this Item is hereby incorporated by reference to the material appearing in our 2010 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 Nominees for Election for a One-Year Term Expiring at the 2011 Annual Meeting”, “Executive Officers”, “Information Regarding Governance and Board and Committee Meetings – Committee Charters and Corporate Governance”, “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 “Compensation Discussion and Analysis”, “Compensation of Executive Officers and Trustees”, “Compensation Committee Interlocks and Insider Participation”, and “Compensation Committee Report”. 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 AND DIRECTOR INDEPENDENCE The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement, under the captions “Certain Relationships and Related Transactions” and “Information Regarding Corporate Governance and Board Committee Meetings – Independence of Trustees”. ITEM 14. PRINCIPAL ACCOUNTANT 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 Registered Public Accounting Firm”. 72 PART IV ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULE (a) Documents filed as part of this report: (1) Financial Statements: Consolidated financial statements for the Company listed on the index immediately preceding 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. 73 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 16, 2010 (Date) March 16, 2010 (Date) KITE REALTY GROUP TRUST (Registrant) /s/ JOHN A. KITE John A. Kite Chairman and Chief Executive Officer (Principal Executive Officer) /s/ DANIEL R. SINK Daniel R. Sink Executive Vice President and Chief Financial Officer (Principal Financial and 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. Date March 16, 2010 March 16, 2010 March 16, 2010 March 16, 2010 March 16, 2010 March 16, 2010 March 16, 2010 March 16, 2010 Signature Title /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/ DARELL E. ZINK, JR. (Darell E. Zink, Jr.) /s/ DANIEL R. SINK (Daniel R. Sink) Chairman, Chief Executive Officer, and Trustee (Principal Executive Officer) Trustee Trustee Trustee Trustee Trustee Trustee Executive Vice President and Chief Financial Officer (Principal Financial and Accounting Officer) 74 Kite Realty Group Trust Index to Financial Statements Consolidated Financial Statements: Report of Independent Registered Public Accounting Firm........................................................................... Balance Sheets as of December 31, 2009 and 2008 ....................................................................................... Statements of Operations for the Years Ended December 31, 2009, 2008, and 2007 .................................... Statements of Shareholders’ Equity for the Years Ended December 31, 2009, 2008, and 2007 .................... Statements of Cash Flows for the Years Ended December 31, 2009, 2008, and 2007 ................................... Notes to Consolidated Financial Statements .................................................................................................. Financial Statement Schedule: Schedule III – Real Estate and Accumulated Depreciation ............................................................................ Notes to Schedule III ...................................................................................................................................... Page F-1 F-2 F-3 F-4 F-5 F-6 F-37 F-40 Report of Independent Registered Public Accounting Firm The Board of Trustees and Shareholders of Kite Realty Group Trust: We have audited the accompanying consolidated balance sheets of Kite Realty Group Trust and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 2009. Our audit also included the financial statement schedule listed in the index at item 15(a). 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 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 Kite Realty Group Trust and subsidiaries at December 31, 2009 and 2008, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2009, 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. As discussed in Note 2 to the consolidated financial statements, Kite Realty Group Trust and subsidiaries have retrospectively applied certain reclassification adjustments upon adoption of a new accounting pronouncement for noncontrolling interests. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Kite Realty Group Trust and subsidiaries’ internal control over financial reporting as of December 31, 2009, 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 16, 2010 expressed an unqualified opinion thereon. Ernst & Young LLP Indianapolis, Indiana March 16, 2010 F-1 Kite Realty Group Trust Consolidated Balance Sheets December 31, 2009 December 31, 2008 Assets: Investment properties, at cost: Land ........................................................................................................................................... $ Land held for development......................................................................................................... Buildings and improvements...................................................................................................... Furniture, equipment and other .................................................................................................. Construction in progress............................................................................................................. Less: accumulated depreciation ....................................................................................... (127,031,144 ) 226,506,781 $ 27,546,315 736,027,845 5,060,233 176,689,227 1,171,830,401 1,044,799,257 227,781,452 25,431,845 690,161,336 5,024,696 191,106,309 1,139,505,638 (104,051,695) 1,035,453,943 Cash and cash equivalents .......................................................................................................... Tenant receivables, including accrued straight-line rent of $8,570,069 and $7,221,882, 19,958,376 9,917,875 17,776,282 respectively, net of allowance for uncollectible accounts ..................................................... 10,357,679 Other receivables........................................................................................................................ 1,902,473 Investments in unconsolidated entities, at equity ....................................................................... 11,316,728 Escrow deposits.......................................................................................................................... 21,167,288 Deferred costs, net...................................................................................................................... Prepaid and other assets ............................................................................................................. 4,159,638 Total Assets ............................................................................................................................... $ 1,140,685,444 $ 1,112,051,906 Liabilities and Equity: Mortgage and other indebtedness ............................................................................................... $ Accounts payable and accrued expenses .................................................................................... Deferred revenue and other liabilities......................................................................................... Total Liabilities......................................................................................................................... Commitments and contingencies Redeemable noncontrolling interests in Operating Partnership.................................................. Equity: Kite Realty Group Trust Shareholders’ Equity Preferred Shares, $.01 par value, 40,000,000 shares authorized, no shares issued and 18,537,031 9,326,475 10,799,782 11,377,408 21,509,070 4,378,045 658,294,513 $ 32,799,351 19,835,438 710,929,302 677,661,466 53,144,015 24,594,794 755,400,275 47,307,115 67,276,904 outstanding............................................................................................................................ — — Common Shares, $.01 par value, 200,000,000 shares authorized, 63,062,083 shares and 341,812 34,181,179 shares issued and outstanding at December 31, 2009 and 2008, respectively .... 343,631,595 Additional paid in capital ....................................................................................................... (7,739,154) Accumulated other comprehensive loss ................................................................................. (51,276,059) Accumulated deficit ............................................................................................................... 284,958,194 Total Kite Realty Group Trust Shareholders’ Equity......................................................... 4,416,533 Noncontrolling Interests ........................................................................................................ Total Equity .............................................................................................................................. 289,374,727 Total Liabilities and Equity ..................................................................................................... $ 1,140,685,444 $ 1,112,051,906 (69,613,763 ) 375,077,842 7,371,185 382,449,027 630,621 449,863,390 (5,802,406 ) The accompanying notes are an integral part of these consolidated financial statements. F-2 Kite Realty Group Trust Consolidated Statements of Operations 2009 Year Ended December 31, 2008 2007 Revenue: Minimum rent ............................................................................ $ Tenant reimbursements ............................................................ Other property related revenue ................................................. Construction and service fee revenue ....................................... Total revenue ....................................................................................... Expenses: $ 71,612,415 18,163,191 6,065,708 19,450,789 115,292,103 Property operating ..................................................................... Real estate taxes ........................................................................ Cost of construction and services ............................................. General, administrative, and other ............................................ Depreciation and amortization .................................................. Total expenses Operating income Interest expense ......................................................................... Income tax benefit (expense) of taxable REIT subsidiary ....... Income from unconsolidated entities ........................................ Gain on sale of unconsolidated property .................................. Non-cash gain from consolidation of subsidiary ...................... Other income, net ...................................................................... Income from continuing operations Discontinued operations: Discontinued operations............................................................ Non-cash loss on impairment of discontinued operation ......... (Loss) gain on sale of operating properties............................... (Loss) income from discontinued operations Consolidated net (loss) income Net income attributable to noncontrolling interests Net (loss) income attributable to Kite Realty Group Trust (Loss) income per common share – basic: Income from continuing operations attributable to Kite $ Realty Group Trust common shareholders ......................... $ (Loss) income from discontinued operations attributable to Kite Realty Group Trust common shareholders ................. Net (loss) income attributable to Kite Realty Group Trust common shareholders (Loss) income per common share - diluted: $ Income from continuing operations attributable to Kite Realty Group Trust common shareholders ......................... $ (Loss) income from discontinued operations attributable to Kite Realty Group Trust common shareholders ................. Net (loss) income attributable to Kite Realty Group Trust common 18,188,710 12,068,903 17,192,267 5,711,623 32,148,318 85,309,821 29,982,282 (27,151,054) 22,293 226,041 — 1,634,876 224,927 4.939,365 (732,621) (5,384,747) — (6,117,368) (1,178,003) (603,763) (1,781,766) 0.07 (0.10) (0.03) 0.07 (0.10) $ $ $ $ 71,313,482 17,729,788 13,916,680 39,103,151 142,063,101 16,388,515 11,864,552 33,788,008 5,879,702 34,892,975 102,813,752 39,249,349 (29,372,181 ) (1,927,830 ) 842,425 1,233,338 — 157,955 10,183,056 330,482 — (2,689,888 ) (2,359,406 ) 7,823,650 (1,730,524 ) 6,093,126 $ 68,068,285 17,522,396 10,012,934 37,259,934 132,863,549 14,171,192 11,065,723 32,077,014 6,285,267 29,730,654 93,329,850 39,533,699 (25,965,141) (761,628) 290,710 — — 778,434 13,876,074 2,078,860 — 2,036,189 4,115,049 17,991,123 (4,468,440) 13,522,683 $ 0.26 $ (0.06 ) 0.20 $ 0.26 $ (0.06 ) 0.36 0.11 0.47 0.35 0.11 0.46 shareholders $ (0.03) $ 0.20 $ Weighted average Common Shares outstanding – basic ................ 52,146,454 30,328,408 28,908,274 Weighted average Common Shares outstanding – diluted ............. 52,146,454 30,340,449 29,180,987 Dividends declared per Common Share ........................................... $ 0.3325 $ 0.8200 $ 0.8000 Net (loss) income attributable to Kite Realty Group Trust common shareholders: Income from continuing operations Discontinued operations Net (loss) income attributable to Kite Realty Group Trust common shareholders Consolidated net (loss) income Other comprehensive income (loss) Comprehensive income Comprehensive (income) loss attributable to noncontrolling interests Comprehensive income attributable to Kite Realty Group Trust $ $ $ $ 3,515,875 (5,297,641) (1,781,766) (1,178,003) 3,032,080 1,854,077 (1,699,095) 154,982 $ $ $ $ 7,945,260 (1,852,134 ) 6,093,126 7,823,650 (6,443,839 ) 1,379,811 96,643 1,476,454 $ $ $ $ 10,325,290 3,197,393 13,522,683 17,991,123 (3,420,022) 14,571,101 (4,468,440) 10,102,661 The accompanying notes are an integral part of these consolidated financial statements. F-3 Kite Realty Group Trust Consolidated Statements of Shareholders’ Equity Common Shares Shares Amount Additional Paid-in Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total 28,981,594 $ 98,619 289,816 $ 241,084,719 $ (3,122,482) $ 986 1,134,747 Balances, December 31, 2006.................. Stock compensation activity .................... Controlled equity offering, net of costs ... Other comprehensive loss attributable to Kite Realty Group Trust..................... Distributions declared .............................. Net income attributable to Kite Realty Group Trust ........................................ Exchange of redeemable noncontrolling interest for common stock.................. Adjustment to redeemable noncontrolling interests - Operating Partnership.......................................... Balances, December 31, 2007.................. Stock compensation activity .................... Proceeds of common share offering, net of costs ............................................... Proceeds from employee share purchase plan ..................................................... Other comprehensive loss attributable to Kite Realty Group Trust..................... Distributions declared .............................. Net income attributable to Kite Realty Group Trust ........................................ Exchange of redeemable noncontrolling interest for common stock.................. Adjustment to redeemable noncontrolling interests - Operating Partnership.......................................... Balances, December 31, 2008.................. Stock compensation activity .................... Proceeds of common share offering, net of costs ............................................... Proceeds from employee share purchase plan ..................................................... Other comprehensive income attributable to Kite Realty Group Trust ................................................... Distributions declared .............................. Net loss attributable to Kite Realty Group Trust ........................................ Exchange of redeemable noncontrolling interest for common stock.................. Adjustment to redeemable noncontrolling interests - Operating Partnership.......................................... Balances, December 31, 2009.................. 28,842,831 $ 47,396 30,000 — — — 61,367 288,428 $ 213,515,076 $ 474 300 — — — 614 799,564 465,746 — — — 960,393 — — 25,343,940 4,810,000 48,100 48,257,025 5,197 — — — 52 — — — 29,956 — — — 285,769 2,858 632,140 — — 52,493,008 28,750,000 287,500 87,199,059 15,939 — — — 159 — — — 51,012 — — — 73,981 740 1,124,247 — — 16,991,880 297,540 $ — — (21,831,543 ) $ 192,269,501 800,038 466,046 — — (3,420,022) — — (23,133,296 ) (3,420,022) (23,133,296) — — — — — — (4,616,672) — — — — — — — — — — 13,522,683 13,522,683 — 961,007 — 25,343,940 (31,442,156 ) $ 206,809,897 1,135,733 — — — 48,305,125 30,008 (25,927,029 ) (4,616,672) (25,927,029) 6,093,126 6,093,126 — 634,998 — 52,493,008 (51,276,059 ) $ 284,958,194 866,007 — — — 87,486,559 51,171 (1,781,766 ) (1,781,766) — 1,124,987 — 16,991,880 (69,613,763 ) $ 375,077,842 1,936,748 — — (16,555,938 ) 1,936,748 (16,555,938) 34,181,179 $ 40,984 341,812 $ 343,631,595 $ (7,739,154) $ 410 865,597 63,062,083 $ 630,621 $ 449,863,390 $ (5,802,406) $ The accompanying notes are an integral part of these consolidated financial statements. F-4 Kite Realty Group Trust Consolidated Statements of Cash Flows Cash flow from operating activities: Consolidated net (loss) income ............................................................................ $ Adjustments to reconcile consolidated net income to net cash provided by operating activities: Non-cash loss on impairment of real estate asset Non-cash gain from consolidation of subsidiary Net loss (gain) on sale of operating property ............................................. Gain on sale of unconsolidated property.................................................... Income from unconsolidated entities ......................................................... Straight-line rent ......................................................................................... Depreciation and amortization ................................................................... Provision for credit losses, net of recoveries ............................................. Compensation expense for equity awards.................................................. Amortization of debt fair value adjustment ............................................... Amortization of in-place lease liabilities ................................................... Distributions of income from unconsolidated entities ............................... Changes in assets and liabilities: ............................................................................ Tenant receivables ...................................................................................... Deferred costs and other assets .................................................................. Accounts payable, accrued expenses, deferred revenue, and other liabilities ............................................................................................... Net cash provided by operating activities .......................................................... Cash flow from investing activities: Acquisitions of interests in properties and capital expenditures, net......... Net proceeds from sales of operating properties........................................ Change in construction payables................................................................ Cash receipts on notes receivable............................................................... Note receivable from joint venture partner Contributions to unconsolidated entities.................................................... Cash from consolidation of subsidiary Distributions of capital from unconsolidated entities ................................ Net cash used in investing activities.................................................................... Cash flow from financing activities: Equity issuance proceeds, net of costs ....................................................... Loan proceeds............................................................................................. Loan transaction costs ................................................................................ Loan payments............................................................................................ Purchase of noncontrolling interest............................................................ Distributions paid – common shareholders................................................ Distributions paid – redeemable noncontrolling interests ......................... Distributions to noncontrolling interests.................................................... Proceeds from exercise of stock options.................................................... Net cash provided by financing activities........................................................... Increase (decrease) in cash and cash equivalents.............................................. Cash and cash equivalents, beginning of year ................................................... Cash and cash equivalents, end of year..............................................................$ Year Ended December 31, 2009 2008 2007 (1,178,003) $ 7,823,650 $ 17,991,123 5,384,747 (1,634,876) — — (226,041) (1,591,209) 34,003,017 2,104,841 526,795 (430,858) (3,120,359) 145,701 (566,121) (2,309,437) (10,116,910) 20,991,287 (36,806,704) — (5,036,410) — (1,375,298) (12,044,052) 247,969 167,361 (54,847,134) 87,537,730 93,536,599 (981,163) (112,472,694) — (19,746,716) (3,877,243) (100,165) — 43,896,348 10,040,501 9,917,875 19,958,376 $ — — 2,689,888 (1,233,338 ) (842,425 ) (1,040,456 ) 37,256,010 1,212,604 803,687 (430,858 ) (2,769,256 ) 428,910 — — (2,036,189) — (290,710) (1,943,137) 32,886,267 319,360 569,022 (430,858) (4,736,840) 331,732 (1,217,894 ) (6,095,991 ) (360,823) (1,772,879) 4,477,867 41,062,398 (2,403,868) 38,122,200 (117,851,086 ) 19,659,695 579,721 729,167 — (818,472 ) — 2,012,430 (95,688,545 ) (105,417,442) 2,609,777 2,274,195 3,739,320 — — — 106,728 (96,687,422) 48,335,133 249,453,785 (1,882,360 ) (218,194,446 ) — (24,859,003 ) (6,817,069 ) (494,286 ) — 45,541,754 (9,084,393 ) 19,002,268 9,917,875 $ 465,746 238,899,989 (1,278,917) (154,507,969) (55,803) (22,822,984) (6,635,296) (470,479) 20,609 53,614,896 (4,950,326) 23,952,594 19,002,268 The accompanying notes are an integral part of these consolidated financial statements. F-5 Kite Realty Group Trust Notes to Consolidated Financial Statements December 31, 2009 Note 1. Organization Kite Realty Group Trust (the “Company” or “REIT”) was organized in Maryland in 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. The Company began operations in 2004 when it completed its initial public offering of common shares and concurrently consummated certain other formation transactions. The Company, through Kite Realty Group, L.P. (“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. The Company also provides real estate facilities management, construction, development and other advisory services to third parties through its taxable REIT subsidiaries. At December 31, 2009, the Company owned interests in 55 operating properties (consisting of 51 retail properties, three commercial operating properties and an associated parking garage) and seven properties under development or redevelopment. The Company also owned parcels in a “shadow” development pipeline which includes land parcels that are undergoing pre-development activities and are in various stages of preparation for construction to commence, including pre-leasing activity and negotiations for third-party financings. As of December 31, 2009, this shadow pipeline consisted of six projects that are expected to contain approximately 2.8 million square feet of total gross leasable area (including non- owned anchor space) upon completion. Finally, as of December 31, 2009, the Company also owned interests in other land parcels comprising approximately 95 acres that we expect to be used for future expansion of existing properties, development of new retail or commercial properties or sold to third parties. These land parcels are classified as “Land held for development” in the accompanying consolidated balance sheets. At December 31, 2008, the Company owned interests in 56 operating properties (consisting of 52 retail properties, three commercial operating properties and an associated parking garage), eight properties under development or redevelopment and 105 acres of land held for development. Note 2. Basis of Presentation and Summary of Significant Accounting Policies 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. On July 1, 2009, the Company adopted the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“Codification” or “ASC”). The Codification is now the single source of authoritative nongovernmental GAAP. It does not change current GAAP, but is intended to simplify user access to all authoritative GAAP by providing all the authoritative literature related to a particular topic in one place. All existing accounting standard documents were superseded and all other accounting literature not included in the Codification is now considered non-authoritative. The Codification is effective for financial statements issued for interim and annual periods ending after September 15, 2009. Accordingly, the Company has updated all references to authoritative GAAP to coincide with the appropriate section of the Codification. Consolidation and Investments in Joint Ventures The accompanying financial statements of the Company are presented on a consolidated basis and include all accounts of the Company, the Operating Partnership, the taxable REIT subsidiary of the Operating Partnership, subsidiaries of the Company or the Operating Partnership that are controlled and any variable interest entities (“VIEs”) in which the Company is the primary beneficiary. In general, a 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. The Company consolidates properties that are F-6 wholly owned as well as properties it controls but in which it owns less than a 100% interest. Control of a property is demonstrated by: • • • • the Company’s ability to manage day-to-day operations of the property; the Company’s ability to refinance debt and sell the property without the consent of any other partner or owner; the inability of any other partner or owner to replace the Company as manager of the property; or being the primary beneficiary of a VIE, as defined in Topic 810 – “Consolidation” in the ASC. The Company considers all relationships between itself and the VIE, including management agreements and other contractual arrangements, in determining the party obligated to absorb the majority of expected losses. The Company also continuously reassesses primary beneficiary status. Other than with regard to The Centre, as described below, there were no changes during the years ended December 31, 2009, 2008 or 2007 to the Company’s conclusions regarding whether an entity qualifies as a VIE or whether the Company is the primary beneficiary of any previously identified VIE. The Centre The third-party loan secured by The Centre, a previously unconsolidated operating property in which we own a 60% interest, matured on August 1, 2009. In July 2009, in order to pay off this loan, the Company made a capital contribution of $2.1 million and simultaneously extended a loan of $1.4 million to the partnership bearing interest at 12% for 30 days and 15% thereafter, which is due within 30 days upon demand, but in no event before January 31, 2010. The Company’s extension of a loan to the partnership caused the Company to reevaluate whether The Centre qualifies as a VIE and whether the Company is its primary beneficiary. The analysis concluded that The Centre now qualifies as a VIE and the Company is its primary beneficiary. As a result, the financial statements of The Centre were consolidated as of September 30, 2009, the assets and liabilities were recorded at fair value, and a non-cash gain of $1.6 million was recorded, of which the Company’s share was approximately $1.0 million. A market participant income approach was utilized to estimate the fair value of the investment property, related intangibles, and noncontrolling interest. The income approach required the Company to make assumptions about market leasing rates, discount rates, noncontrolling interest and disposal values using Level 2 and Level 3 inputs. The consolidation of the Centre is reflected as a non-cash item in the 2009 statement of cash flows. As of December 31, 2009, the Company had investments in seven joint ventures that are VIEs in which the Company is the primary beneficiary. As of this date, these VIEs had total debt of approximately $99.5 million which is secured by assets of the VIEs totaling approximately $183.0 million. The Operating Partnership guarantees the debt of these VIEs. The Company accounts for its investments in unconsolidated joint ventures under the equity method of accounting as it exercises significant influence over, but does 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. Purchase Accounting In accordance with Topic 805—“Business Combinations” in the ASC, the Company measures identifiable assets acquired, liabilities assumed, and any non-controlling interests in an acquiree at fair value on the acquisition date, with goodwill being the excess value over the net identifiable assets acquired. In making estimates of fair values for the purpose of allocating purchase price, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities. A portion of the purchase price is allocated to tangible assets and intangibles, 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 F-7 addition to rental income over the remaining non-cancelable terms of the respective leases. Should a tenant vacate, terminate its lease, or otherwise notify the Company of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income; and • the value of leases acquired. The Company utilizes independent sources for its estimates to determine the respective in-place lease values. The Company’s estimates of value are made using methods similar to those used by independent appraisers. Factors the Company considers in their 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. Due to the January 1, 2009 adoption of new accounting guidance regarding business combinations, the costs of an acquisition are expensed in the period incurred. Investment Properties Capitalization and Depreciation Investment properties are recorded at cost and include costs of acquisitions, development, pre-development, construction, 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. If a tenant vacates a space prior to the lease expiration, terminates its lease, or otherwise notifies the Company of its intent to do so, any related unamortized tenant allowances are immediately expensed. 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 and for certain land held for development including acquisition contract deposits, as well as legal, engineering and other external professional fees related to evaluating the feasibility of developing a shopping center or other project. 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. Once construction commences on the land, it is transferred to construction in progress. The Company also capitalizes costs such as construction, interest, real estate taxes, and salaries and related costs of personnel directly involved with the development of our properties. As portions of the development property become operational, the Company expenses appropriate costs on a pro rata basis. 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. Impairment Management reviews investment properties, land parcels and intangible assets within the real estate operation and development segment for impairment on at least a quarterly basis or whenever events or changes in circumstances indicate that the carrying value of investment properties may not be recoverable. The review for possible impairment requires management to make certain assumptions and estimates and requires significant judgment. Impairment losses for investment properties are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets. Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset. F-8 In the third quarter of 2009, as part of its regular quarterly review, the Company determined that it was appropriate to write off the net book value on the Galleria Plaza operating property in Dallas, Texas and recognize a non-cash impairment charge of $5.4 million. The Company’s estimated future cash flows were anticipated to be insufficient to recover the carrying value of the building and improvements due to significant ground lease obligations and expected future required capital expenditures. A market participant income approach was utilized to estimate the fair value of the investment property improvements and related intangibles. The income approach required us to make assumptions about market leasing rates, discount rates, and disposal values using Level 2 and Level 3 inputs. The Company determined that there was no value to the improvements and related intangibles. The Company leased the ground on which the property is situated and in December 2009, the Company conveyed the title to Galleria Plaza to the ground lessor. Since the Company conveyed title to the property during the fourth quarter, the non-cash impairment loss and the operating results related to this property were reclassified to discontinued operations for each of the fiscal years presented herein. There was no mortgage on the property. Management does not believe any other investment properties are impaired as of December 31, 2009. In connection with the Company’s standard practice of regular evaluation of development-related assets for potential abandonment, approximately $0.1 million and $0.5 million was written off in 2008 and 2007, respectively ($0.1 million and $0.3 million after tax). There were no amounts written off in 2009. Held for Sale and Discontinued Operations 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 period during which the asset is held-for-sale. There were no assets classified as held for sale as of December 31, 2009 or 2008. The Company’s properties generally have operations and cash flows that can be clearly distinguished from the rest of the Company. The operations reported in discontinued operations include those operating properties that were sold, disposed of 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 reclassified to reflect the operations of these properties as discontinued operations to the extent they are material to the results of operations. Escrow Deposits Escrow deposits typically consist of cash held for real estate taxes, property maintenance, insurance and other requirements at specific properties as required by lending institutions. 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. As of December 31, 2009, the majority of the Company’s cash and cash equivalents were held in deposit accounts that are 100% insured by the federal government’s Temporary Liquidity Guarantee Program. From time to time, such investments may temporarily be held in accounts that are not insured under this program and which are in excess of FDIC and SIPC insurance limits; however the Company attempts to limit its exposure at any one time. The Company maintains certain compensating balances in several financial institutions in support of borrowings from those institutions. Such compensating balances were not material to the consolidated balance sheets. Cash paid for interest, net of capitalized interest, and cash paid for taxes for the years ended December 31, 2009, 2008, and 2007 was as follows: For the year ended December 31, 2008 2009 Cash Paid for Interest, net ........ $ 25,830,213 $ 28,439,879 $ Capitalized Interest................... $ 8,892,218 $ 10,061,770 $ 2,601,000 $ Cash Paid for Taxes.................. $ 110,225 $ 2007 25,870,012 12,824,398 974,459 F-9 Accrued but unpaid distributions were $4.3 million and $8.7 million as of December 31, 2009 and 2008, respectively, and are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. Fair Value Measurements Cash and cash equivalents, accounts receivable, escrows and deposits, and other working capital balances approximate fair value. As discussed below under “Derivative Financial Instruments,” the Company accounts for its derivative financial instruments at fair value calculated in accordance with Topic 820—“Fair Value Measurements and Disclosures” in the ASC. Fair value is a market-based measurement, not an entity-specific measurement. Therefore, a fair value measurement should be determined based on the assumptions that market participants would use in pricing the asset or liability. The fair value hierarchy distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs for identical instruments that are classified within Level 1 and observable inputs for similar instruments that are classified within Level 2) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3). As further discussed in Note 11, the Company has determined that its derivative valuations in their entirety are classified in Level 2 of the fair value hierarchy. Derivative Financial Instruments All derivative instruments are recorded on the consolidated balance sheets at fair value. Gains or losses resulting from changes in the fair 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 instruments such as interest rate swaps or rate locks to mitigate interest rate risk on related financial instruments. Changes in the fair values of derivatives that qualify as cash flow hedges are recognized in other comprehensive income (“OCI”) while any ineffective portion of a derivative’s change in fair value is 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. Revenue Recognition As lessor, the Company retains substantially all of the risks and benefits of ownership of the investment properties and accounts for its 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. Percentage rents are included in other property related revenue in the accompanying consolidated 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 and losses on sales of real estate 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. As part of the Company’s ongoing business strategy, it will, from time to time, sell land parcels and outlots, some of which are ground leased to tenants. Net gains realized on such sales were $2.9 million, $10.0 million, and $6.9 million for the years ended December 31, 2009, 2008, and 2007, respectively, and are classified as other property related revenue in the accompanying consolidated statements of operations. 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 incurred to date. Project costs 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 performance, 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. F-10 From time to time, the Company will construct and sell build-to-suit merchant assets to third parties. Proceeds from the sale of build-to-suit merchant assets are included in construction and service fee revenue, and the related costs of the sale of these assets are included in cost of construction and services in the accompanying consolidated financial statements. There were no proceeds from the sale of build-to-suit assets or associated construction costs for the year ended December 31, 2009. Proceeds from such sales were $10.6 million and $6.1 million for the years ended December 31, 2008 and 2007, respectively, and the associated construction costs were $9.4 million and $4.1 million, respectively. 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. 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 specific collateral other than corporate or personal guarantees 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. Balance, beginning of year......................................... $ Provision for credit losses, net of recoveries.............. Accounts written off................................................... Balance, end of year................................................... $ 1,913,584 $ 2009 808,024 $ 2008 745,479 $ 2,104,841 1,212,604 (999,281) (1,150,059 ) 808,024 $ 2007 561,282 319,360 (135,163) 745,479 Other Receivables Other receivables consist primarily of receivables due in the ordinary course of the Company’s construction and advisory services business. Concentration of Credit Risk The Company may be subject to concentrations of credit risk with regards to its cash and cash equivalents. The Company places its cash and temporary cash investments with high-credit-quality financial institutions. From time to time, such investments may temporarily be in excess of FDIC and SIPC insurance limits. In addition, the Company’s accounts receivable from tenants potentially subjects it to a concentration of credit risk related to its accounts receivable. At December 31, 2009, approximately 46%, 16% and 14% of property accounts receivable were due from tenants leasing space in the states of Indiana, Florida, and Texas, respectively. 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. Potentially dilutive securities include outstanding share options, units in the Operating Partnership, which may be exchanged, at our option, for either cash or common shares under certain circumstances, and deferred share units, which may be credited to the accounts of non-employee trustees in lieu of the payment of cash compensation or the issuance of common shares to such trustees. Due to the Company’s net loss for the year ended December 31, 2009, the potentially dilutive securities were not dilutive for this period. For the years ended December 31, 2008 and 2007, all of the Company’s outstanding deferred share units had a potentially dilutive effect. In addition, for the year ended December 31, 2007, outstanding share options also had a potentially dilutive effect. The dilutive effect of these securities was as follows: F-11 Dilutive effect of outstanding share options to outstanding common shares ................................................................. Dilutive effect of deferred share units to outstanding common shares ................................................................. Total dilutive effect ..................................................... 2009 Year Ended December 31 2008 2007 — — — — 267,183 12,041 12,041 5,530 272,713 For each of the years ended December 31, 2009 and 2008, 1.4 million of the Company’s outstanding common share options were excluded from the computation of diluted earnings per share because their impact was not dilutive. An immaterial number of shares were excluded for the year ended December 31, 2007. The effect of conversion of units of the Operating Partnership is not reflected in diluted common 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 redeemable noncontrolling 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 income per common share. Income Taxes and REIT Compliance The Company, which is considered a corporation for federal income tax purposes, qualifies as a REIT and generally will not be subject to federal income tax to the extent it distributes its REIT taxable income to its shareholders and meets certain other requirements on a recurring basis. REITs are subject to a number of organizational and operational requirements. If the Company fails to qualify as a REIT in any taxable year, the Company will be subject to federal income tax on its taxable income at regular corporate rates. The Company may also be subject to certain federal, state and local taxes on its income and property and to federal income and excise taxes on its undistributed income even if it does qualify as a REIT. For example, the Company will be subject to income tax to the extent it distributes less than 90% of its REIT taxable income (including capital gains). 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 be impermissible for REITs. 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. Deferred tax assets are 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. For the year ended December 31, 2009, there was an insignificant income tax benefit. Income tax provisions for the years ended December 31, 2008 and 2007 were approximately $1.9 million and $0.8 million, respectively. Income tax provision for the year ended December 31, 2008 included approximately $1.2 million incurred in connection with the Company’s taxable REIT subsidiary’s sale of land in the first quarter of 2008 as well as $0.5 million incurred in connection with the taxable REIT subsidiary’s sale of Spring Mill Medical, Phase II, a consolidated joint venture property that owned a build-to-suit commercial asset. Franchise and other taxes were not significant in any of the periods presented. Noncontrolling Interests Effective January 1, 2009, the Company adopted the provisions of Statement of Financial Accounting Standard (“SFAS”) No. 160 “Non-controlling Interests in Consolidated Financial Statements,” which was primarily codified into Topic 810—“Consolidation” in the ASC. The provision requires a noncontrolling interest in a subsidiary to be reported as equity and the amount of consolidated net income specifically attributable to the noncontrolling interest to be identified in the consolidated financial statements. As a result of the retrospective application of this provision, the Company reclassified noncontrolling interest from the liability section to the equity section in its accompanying consolidated balance sheets and as an allocation of net income rather than an expense in the accompanying consolidated statements of operations. As a result of the reclassification, total equity at December 31, 2006 increased $4.3 million. F-12 The noncontrolling interests in the properties for the years ended December 31, 2009, 2008, and 2007 were as follows: Noncontrolling interests balance January 1 Net income allocable to noncontrolling interests, excluding redeemable noncontrolling interests Distributions to noncontrolling interests Recognition of noncontrolling interests upon consolidation of subsidiary and other Noncontrolling interests balance at December 31 2009 4,416,533 $ 2008 4,731,211 $ 2007 4,295,723 879,463 (100,165) 61,707 (398,899) 587,413 (151,925) 2,175,354 7,371,185 $ 22,514 4,416,533 $ — 4,731,211 $ $ In addition, as part of the adoption of this provision, the Company applied the measurement provisions of EITF Topic D-98 “Classification and Measurement of Redeemable Securities,” which was primarily codified into Topic 480 – “Distinguishing Liabilities from Equity” in the ASC. In applying the measurement provisions, the Company did not change the classification of redeemable noncontrolling interests in the Operating Partnership in the accompanying consolidated balance sheets because the Company may be required to pay cash to unitholders upon redemption of their interests in the limited partnership under certain circumstances. However, as noted above, noncontrolling interests, including redeemable interests, are now classified as an allocation of net income rather than an expense in the accompanying consolidated statements of operations. The redeemable noncontrolling interests in the Operating Partnership for the years ended December 31, 2009, 2008, and 2007 were as follows: Redeemable noncontrolling interests balance January 1 Net (loss) income allocable to redeemable noncontrolling interests Accrued distributions to redeemable noncontrolling interests Other comprehensive loss allocable to redeemable noncontrolling interests 1 Exchange of redeemable noncontrolling interest for common stock Adjustment to redeemable noncontrolling interests - Operating Partnership2 2009 2008 2007 $ 67,276,904 $ 127,325,047 $ 156,456,691 (275,700) 1,668,817 3,881,027 (2,672,554) (6,761,787) (6,707,724) 1,095,332 (1,827,167) — (1,124,987) (634,998) (961,007) (16,991,880) (52,493,008) (25,343,940) Redeemable noncontrolling interests balance at December 31 $ 47,307,115 $ 67,276,904 $ 127,325,047 ____________________ 1 Represents the noncontrolling interests’ share of the changes in the fair value of derivative instruments accounted for as cash flow hedges (see Note 11). 2 Includes adjustments to reflect amounts at the greater of historical book value or redemption value. F-13 The following sets forth accumulated other comprehensive loss allocable to noncontrolling interests for the years ended December 31, 2009, 2008, and 2007: Accumulated comprehensive loss balance at January 1 Other comprehensive income (loss) allocable to noncontrolling interests 1 Accumulated comprehensive loss balance at December 31 2009 2008 2007 $ (1,827,167) $ — $ 1,095,332 (1,827,167) $ (731,835) $ (1,827,167) $ — — — ____________________ 1 Represents the noncontrolling interests’ share of the changes in the fair value of derivative instruments accounted for as cash flow hedges (see Note 11). The carrying amount of the redeemable noncontrolling interests in the Operating Partnership is required to be reflected at the greater of historical book value or redemption value with a corresponding adjustment to additional paid in capital. The application of this provision increased the carrying value of the redeemable noncontrolling interests by $52.8 million and $77.6 million as of December 31, 2007 and 2006, respectively, with corresponding decreases to additional paid in capital in the accompanying consolidated balance sheets. As of December 31, 2009 and 2008, the historic book value of the redeemable noncontrolling interests exceeded the redemption value, so no adjustment was necessary. Although the presentation of certain of the Company’s noncontrolling interests in subsidiaries did change as a result of the adoption of the provision, it did not have a material impact on the Company’s financial condition or results of operations. The Company allocates net operating results of the Operating Partnership based on the partners’ respective weighted average ownership interest. The Company adjusts the redeemable noncontrolling interests in the Operating Partnership at the end of each period to reflect their interests in the Operating Partnership. This adjustment is reflected in the Company’s shareholders’ equity. The Company’s and the redeemable noncontrolling weighted average interests in the Operating Partnership for the years ended December 31, 2009, 2008, and 2007 were as follows: Company’s weighted average diluted interest in Operating Partnership . Redeemable noncontrolling weighted average diluted interests in Year Ended December 31, 2008 78.5 % 2009 86.6% 2007 77.7% Operating Partnership ......................................................................... 13.4% 21.5 % 22.3% The Company’s and the redeemable noncontrolling ownership interests in the Operating Partnership at December 31, 2009 and 2008 were as follows: Company’s interest in Operating Partnership ............................. Redeemable noncontrolling interests in Operating Partnership.. Note 3. Share-Based Compensation Overview Balance at December 31, 2008 2009 88.8% 11.2% 80.9 % 19.1 % The Company's 2004 Equity Incentive Plan (the "Plan") authorized options and other share-based compensation awards to be granted to employees and trustees for up to 2,000,000 common shares of the Company. The Plan was amended in May 2009 to authorize an additional 1,000,000 shares of the Company’s common stock for future issuance. F-14 The Company accounts for its share-based compensation in accordance with the fair value recognition provisions provided under Topic 718—“Stock Compensation” in the ASC. The total share-based compensation expense, net of amounts capitalized, included in general and administrative expenses for the years ended December 31, 2009, 2008, and 2007 was $0.5 million, $0.8 million, and $0.6 million, respectively. Total share-based compensation cost capitalized for the years ended December 31, 2009, 2008, and 2007 was $0.3 million, $0.3 million, and $0.3 million, respectively, related to development and leasing personnel. As of December 31, 2009, there were 978,932 shares available for grant under the 2004 Equity Incentive Plan. Share Options Pursuant to the Plan, the Company periodically grants options to purchase common shares at an exercise price equal to the grant date per-share fair value of the Company's common shares. Granted options typically vest over a five year period and expire ten years from the grant date. The Company issues new common shares upon the exercise of options. For the Company's share option plan, the grant date fair value of each grant was estimated using the Black-Scholes option pricing model. The Black-Scholes model utilizes assumptions related to the dividend yield, expected life and volatility of the Company’s common shares, and the risk-free interest rate. The dividend yield is based on the Company's historical dividend rate. The expected life of the grants is derived from expected employee duration, which is based on Company history, industry information, and other factors. The risk-free interest rate is derived from the U.S. Treasury yield curve in effect at the time of grant. Expected volatilities utilized in the model are based on the historical volatility of the Company's share price and other factors. The following summarizes the weighted average assumptions used for grants in fiscal periods 2009, 2008, and 2007: Expected dividend yield.............. Expected term of option .............. Risk-free interest rate .................. Expected share price volatility .... 2009 10.00% 6 years 1.96% 55.51% 2008 5.00% 8 years 3.40% 21.74% 2007 4.00% 8 years 5.08% 15.56% A summary of option activity under the Plan as of December 31, 2009, and changes during the year then ended, is presented below: Outstanding at January 1, 2009............... Granted ................................................... Forfeited ................................................. Outstanding at December 31, 2009......... Exercisable at December 31, 2009 ......... Options 1,373,431 526,730 (223,901) 1,676,260 863,684 Weighted-Average Exercise Price $ $ $ 13.05 3.06 11.96 10.06 13.08 The fair value on the respective grant dates of the 526,730, 523,173, and 43,750 options granted during the periods ended December 31, 2009, 2008, and 2007 was $0.55, $1.43, and $2.74 per option, respectively. The aggregate intrinsic value of the 4,958 options exercised during the year ended December 31, 2007 was $17,460. No options were exercised during the years ended December 31, 2009 and 2008. The weighted average remaining contractual term of the outstanding and exercisable options at December 31, 2009 were as follows: Options Outstanding at December 31, 2009.......... 1,676,260 Exercisable at December 31, 2009........... 863,684 Weighted-Average Remaining Contractual Term (in years) 6.94 5.23 F-15 These options had no aggregate intrinsic value as of December 31, 2009 as the exercise price was greater than the Company’s closing share price on December 31, 2009. As of December 31, 2009, there was $0.8 million of total unrecognized compensation cost related to outstanding unvested share option awards. This cost is expected to be recognized over a weighted-average period of 2.1 years. We expect to incur approximately $0.2 million of this expense in each of fiscal years 2010, 2011, 2012, and 2013. Restricted Shares In addition to share option grants, the Plan also authorizes the grant of share-based compensation awards in the form of restricted common shares. Under the terms of the Plan, these restricted shares, which are considered to be outstanding shares from the date of grant, typically vest over a period ranging from one to five years. In addition, the Company pays dividends on restricted shares that are charged directly to shareholders’ equity. The following table summarizes all restricted share activity to employees and non-employee members of the Board of Trustees as of December 31, 2009 and changes during the year then ended: Restricted shares outstanding at January 1, 2009.......... Shares granted ............................................................... Shares forfeited ............................................................. Shares vested................................................................. Restricted shares outstanding at December 31, 2009 .... Restricted Shares 104,340 31,692 (1,676) (42,788) 91,568 Weighted Average Grant Date Fair Value per share 14.22 $ 2.84 14.44 14.77 10.02 $ During the years ended December 31, 2008 and 2007, the Company granted 99,126 and 41,618 restricted shares to employees and non-employee members of the Board of Trustees with weighted average grant date fair values of $12.74 and $20.21, respectively. The total fair value of shares vested during the years ended December 31, 2009, 2008, and 2007 was $0.2 million, $0.5 million, and $0.3 million. As of December 31, 2009, there was $0.5 million of total unrecognized compensation cost related to restricted shares granted under the Plan, which is expected to be recognized over a weighted-average period of 1.0 years. We expect to incur approximately $0.3 million of this expense in fiscal year 2010, approximately $0.1 million in fiscal year 2011, and the remainder in fiscal year 2012. Deferred Share Units Granted to Trustees In addition, the Plan allows for the deferral of certain equity grants into the Trustee Deferred Compensation Plan. The Trustee Deferred Compensation Plan authorizes the issuance of “deferred share units” to the Company’s non-employee trustees. Each deferred share unit is equivalent to one common share of the Company. Non-employee trustees receive an annual retainer, fees for Board meetings attended, Board committee chair retainers and fees for Board committee meetings attended. Except as described below, these fees are typically paid in cash or common shares of the Company. Under the Plan, deferred share units may be credited to non-employee trustees in lieu of the payment of cash compensation or the issuance of common shares. In addition, beginning on the date on which deferred share units are credited to a non-employee trustee, the number of deferred share units credited is increased by additional deferred share units in an amount equal to the relationship of dividends declared to the value of the Company’s common shares. The deferred share units credited to a non-employee trustee are not settled until he or she ceases to be a member of the Board of Trustees, at which time an equivalent number of common shares will be issued. During the years ended December 31, 2009, 2008, and 2007, three trustees elected to receive at least a portion of their compensation in deferred share units and an aggregate of 42,739, 11,270, and 4,611, deferred share units, respectively, including dividends that were reinvested for additional share units, were credited to those non-employee trustees based on a weighted-average grant date fair value of $3.42, $9.28, and $17.21, respectively. During each of the years ended December 31, 2009, 2008, and 2007, the Company incurred $0.1 million of compensation expense related to deferred share units credited to non-employee trustees. F-16 Other Equity Grants During the years ended 2009, 2008, and 2007, the Company issued 10,968, 3,006, and 2,091 unrestricted common shares, respectively, with weighted average grant date fair values of $3.42, $12.47, and $17.91 per share, respectively, to non-employee members of our Board of Trustees in lieu of 50% of their annual retainer compensation. Note 4. Deferred Costs Deferred costs consist primarily of financing fees incurred to obtain long-term financing, acquired lease intangible assets, 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, lease intangibles and other are amortized on a straight-line basis over the terms of the related leases. At December 31, 2009 and 2008, deferred costs consisted of the following: Deferred financing costs ..................................... $ Acquired lease intangible assets ......................... Deferred leasing costs and other ......................... Less—accumulated amortization ........................ Total .......................................................... $ 2009 7,705,679 5,830,089 21,448,325 34,984,093 (13,475,023) 21,509,070 $ $ 2008 9,993,480 6,393,240 18,548,324 34,935,044 (13,767,756) 21,167,288 The estimated aggregate amortization amounts from net unamortized acquired lease intangible assets for each of the next five years and thereafter are as follows: 2010 ....................................................................................................................... 2011 ....................................................................................................................... 2012 ....................................................................................................................... 2013 ....................................................................................................................... 2014 ....................................................................................................................... Thereafter............................................................................................................... Total ............................................................................................................. $ 603,812 480,981 381,605 329,756 280,210 783,844 $ 2,860,208 The accompanying consolidated statements of operations include amortization expense as follows: Amortization of deferred financing costs ....... $ 1,602,161 Amortization of deferred leasing costs, lease 2009 For the year ended December 31, 2008 $ 1,272,333 2007 $ 1,035,497 intangibles and other.................................. $ 4,108,855 $ 4,293,540 $ 3,044,341 Amortization of deferred leasing costs, leasing intangibles and other is included in depreciation and amortization expense, while the amortization of deferred financing costs is included in interest expense. Note 5. Deferred Revenue and Other Liabilities Deferred revenue and other liabilities consist of unamortized fair value of in-place lease liabilities recorded in connection with purchase accounting, construction billings in excess of costs, construction retainages payable, and tenant rents received in advance. 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. F-17 At December 31, 2009 and 2008, 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................................. Total................................................................... $ $ 2009 12,690,211 2,561,073 2,018,288 2,565,866 19,835,438 2008 15,667,652 1,906,783 4,636,725 2,383,634 24,594,794 $ $ The estimated aggregate amortization of acquired lease intangibles (unamortized fair value of in-place lease liabilities) for each of the next five years and thereafter is as follows: 2010 ....................................................................................................................... 2011 ....................................................................................................................... 2012 ....................................................................................................................... 2013 ....................................................................................................................... 2014 ....................................................................................................................... Thereafter............................................................................................................... Total ............................................................................................................. $ 2,791,582 2,275,052 1,743,637 1,640,625 1,282,223 2,957,092 $ 12,690,211 Note 6. Investments in Unconsolidated Joint Ventures The Company owns a 60% equity interest in an entity that owns and operates The Centre rental property. During the first nine months of 2009, this entity was unconsolidated. The third-party loan secured by The Centre matured on August 1, 2009. In July 2009, in order to pay off this loan, the Company made a capital contribution of $2.1 million and simultaneously extended a loan of $1.4 million to the partnership bearing interest at 12% for 30 days and 15% thereafter, which is due within 30 days upon demand, but in no event before January 31, 2010. The Company’s extension of a loan to the partnership caused the Company to reevaluate whether The Centre qualifies as a VIE and whether the Company is its primary beneficiary. The analysis concluded that The Centre now qualifies as a VIE and the Company is its primary beneficiary. As a result, the financial statements of The Centre were consolidated as of September 30, 2009, the assets and liabilities were recorded at fair value, and a non-cash gain of $1.6 million was recorded, of which the Company’s share was approximately $1.0 million. In the summarized financial information below, the 2009 income reflects the first nine months of activity from The Centre. During the fourth quarter of 2009, construction commenced on a limited service hotel at the Eddy Street Commons development. The hotel is owned by an unconsolidated joint venture in which the Company holds a 50% interest, which represents a sufficient interest in the entity in order to exercise significant influence, but not control, over operating and financial policies. Accordingly, this investment is accounted for using the equity method. In addition, as of December 31, 2009, the Company owned a non-controlling interest in one pre-development land parcel (Parkside Town Commons), which was also accounted for under the equity method as the Company’s ownership represents a sufficient interest in the entity in order to exercise significant influence, but not control, over operating and financial policies. Parkside Town Commons is owned through an agreement (the “Venture”) with Prudential Real Estate Investors (“PREI”). The Venture was established to pursue joint venture opportunities for the development and selected acquisition of community shopping centers in the United States. In 2006, the Company contributed 100 acres of development land located in Cary, North Carolina, to the Venture at its cost of $38.5 million, including the Venture’s assumption of $35.6 million of variable rate debt. In 2007, the Venture purchased approximately 17 acres of additional land in Cary, North Carolina for a purchase price of approximately $3.4 million, including assignment costs, which was funded through draws from the Venture's variable rate construction loan. The Venture is in the process of developing this land, along with the adjacent 100 acres purchased in 2006, into an approximately 1.5 million total square foot mixed-use shopping center. As of December 31, 2009, the Company owned a 40% interest in the Venture which, under the terms of the Venture, will be reduced to 20% upon project specific construction financing. In December 2008, the Company’s 50% owned unconsolidated joint venture sold Spring Mill Medical, Phase I. This property is located in Indianapolis, Indiana and was sold for approximately $17.5 million, resulting in a gain on the sale of approximately $3.5 million, of which the Company’s share was approximately $1.2 million, net of the Company’s excess investment. Net proceeds of approximately $14.4 million from the sale of this property were utilized to purchase securities which were used to defease the related mortgage loan. The Company established legal isolation with respect to the F-18 mortgage and therefore the Company was released of its obligations under the mortgage. The joint venture was required by the buyer to defease the mortgage loan prior to closing and in doing so, incurred approximately $2.7 million of expense, which is reflected as a reduction to the gain on sale of the property. The Company used the majority of its share of the remaining net proceeds to pay down borrowings under the Company’s unsecured revolving credit facility. Prior to the Company’s sale of its interest in this property, the joint venture sold a parcel of land for net proceeds of approximately $1.1 million, of which the Company’s share was $0.6 million. 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: December 31, 2009 December 31, 2008 $ — — 62,204,124 62,204,124 — 62,204,124 540,264 — 600,000 243,236 $ 63,587,624 $ 35,836,186 980,677 38,816,863 26,770,761 $ 63,587,624 $ 25,729,647 $ 10,799,782 — $ 10,799,782 $ 14,530,793 $ 1,310,561 3,379,153 57,373,714 62,063,428 (1,952,012 ) 60,111,416 852,270 792,359 29,447 107,021 $ 61,892,513 $ 58,554,548 1,639,977 60,194,525 1,697,988 $ 61,892,513 $ 25,472,938 315,703 $ 1,586,770 $ 1,902,473 $ 24,132,729 Assets: Investment properties at cost: Land............................................................................... Building and improvements .......................................... Construction in progress................................................ Less: Accumulated depreciation.................................... Investment properties, at cost, net ................................. Cash and cash equivalents............................................. Tenant receivables, net .................................................. Escrow deposits............................................................. Deferred costs and other assets...................................... Total assets .................................................................... Liabilities and Owners’ Equity: Mortgage and other indebtedness.................................. Accounts payable and accrued expenses ....................... Total liabilities............................................................... Owners’ equity .............................................................. Total liabilities and Owners’ equity .............................. Company share of total assets ....................................... Company share of Owners’ equity ................................ Add: Excess investment ................................................ Company investment in joint ventures .......................... Company share of mortgage and other indebtedness .... F-19 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 .................................................... Other income ........................................................ Income from continuing operations ............................... Discontinued operations: Operating income from discontinued operations.. Gain on sale of operating property ....................... Income from discontinued operations............................ Net income..................................................................... Third-party investors’ share of net income .................... Company share of net income........................................ Amortization of excess investment ................................ Interest on intercompany indebtedness Excess investment in sale of discontinued operations ... Income from unconsolidated entities and gain on sale Year ended December 31, 2008 2009 2007 691,739 $ 256,426 20,916 969,081 965,498 $ 975,996 297,653 348,927 — 20,359 1,263,151 1,345,282 195,656 142,198 102,626 440,480 528,601 (179,177) 32,090 381,514 147,402 — 147,402 528,916 (226,306) 302,610 (96,047) 19,478 — 237,892 143,438 130,162 511,492 751,659 (261,044 ) 255,678 194,088 140,932 590,698 754,584 (276,065) 490,615 478,519 1,352,237 3,544,524 4,896,761 5,387,376 (2,644,627 ) 2,742,749 (128,042 ) — (538,944 ) 263,322 — 263,322 741,841 (323,069) 418,772 (128,062) — — of unconsolidated property........................................ $ 226,041 $ 2,075,763 $ 290,710 “Excess investment” represented the unamortized difference of the Company’s investment over its share of the equity in the underlying net assets of the joint ventures acquired. The Company amortized 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. The excess investment related to The Centre and was eliminated upon the September 30, 2009 consolidation of this property. The Company periodically reviews its ability to recover the carrying values of its investments in joint venture properties. If the Company were to determine that any portion of its investment is not recoverable, the Company would record an adjustment to write off the unrecoverable amounts. As of December 31, 2009, the Company’s share of unconsolidated joint venture indebtedness was $14.5 million, $13.5 million of which was related to the Parkside Town Commons development. The remaining $1.0 million represents the Company’s share of the $2.0 million drawn on the Eddy Street Commons limited service hotel construction loan. The loan, obtained in the third quarter of 2009, has a total commitment of $10.9 million, bears interest at the greater of LIBOR + 315 basis points or 4.00% and matures in August 2014. Unconsolidated joint venture debt is the liability of the joint venture and is typically secured by the assets of the joint venture. As of December 31, 2009, the Operating Partnership had guaranteed unconsolidated joint venture debt of $13.5 million in the event the joint venture partnership defaults under the terms of the underlying arrangement, all of which was related to the Parkside Town Commons development. Mortgages which are guaranteed by the Operating Partnership are secured by the property of the joint venture and the joint venture could sell the property in order to satisfy the outstanding obligation. F-20 Note 7. Significant Acquisition Activity 2009 Acquisitions The Company made no significant acquisitions in 2009. 2008 Acquisitions The Company made the following significant acquisitions in 2008: • • • In July 2008, the Company purchased approximately 123 acres of land in Holly Springs, North Carolina for $21.6 million, which was funded with borrowings from the Company’s unsecured revolving credit facility. In addition, on October 1, 2008, the Company purchased an additional 18 acres of land adjacent to this location for approximately $5.0 million, which was also funded with borrowings from the Company’s unsecured revolving credit facility. These land parcels may be used for future development purposes. In April 2008, one of the Company’s consolidated joint ventures, in which the Company owns an 85% interest, purchased approximately four acres of land in Indianapolis, Indiana, commonly known as Pan Am Plaza. The Company funded the joint venture’s purchase with borrowings from the Company’s unsecured revolving credit facility. This land is situated across the street from the Indiana Convention Center and adjacent to the recently constructed Indianapolis Colts football stadium. The joint venture intends to develop restaurants and retail space on this property. In February 2008, the Company purchased the Shops at Rivers Edge, an 110,875 square foot shopping center located in Indianapolis, Indiana, for $18.3 million, with the intent to redevelop. The Company utilized approximately $2.7 million of proceeds from the November 2007 sale of its 176th & Meridian property. The remaining purchase price of $15.6 million was funded initially through a draw on the Company’s unsecured credit facility and subsequently refinanced with a variable rate loan. The Company is in the process of redeveloping this property (See Note 8). 2007 Acquisitions The Company made the following significant land acquisitions in 2007: • • • In January 2007, the Company purchased approximately ten acres of land in Naples, Florida for approximately $6.3 million with borrowings from its then-existing secured revolving credit facility. This land is adjacent to 15.4 acres previously purchased by the Company in 2005. In March 2007, the Company purchased approximately 105 acres of land in Apex, North Carolina for approximately $14.5 million with borrowings from the unsecured revolving credit facility. The Company is in the process of developing this land into an approximately 345,000 total square foot shopping center. Some portions of land at this property may be sold to third parties in the future. In August 2007, the Company purchased approximately 14 acres of land in South Elgin, Illinois for approximately $5.9 million with borrowings from its unsecured revolving credit facility. The first phase of this development was completed in 2009 and consists of a 45,000 square foot single tenant building. The second phase of this development is in the Company’s shadow pipeline and once Phase II is completed, the property is expected to consist of approximately 263,000 square feet, including non-owned anchor space. The Company has entered into master lease agreements with the seller in connection with certain property acquisitions. These payments are due to the Company 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 approximately $0.1 million, $0.1 million and $0.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. All master lease agreements had expired as of December 31, 2009; therefore, no further amounts will be collectible by the Company. F-21 Note 8. Development and Redevelopment Activities 2009 Development Activities South Elgin Commons, Phase I In the second quarter of 2009, the Company completed the development of South Elgin Commons, Phase I, a 45,000 square foot LA Fitness facility located in a suburb of Chicago, Illinois, and transitioned it into the operating portfolio. This project had been added to the development pipeline in 2008. Cobblestone Plaza The Company has partially completed the construction of Cobblestone Plaza, a 138,000 square foot neighborhood shopping center located in Ft. Lauderdale, Florida. This project is owned through a consolidated joint venture in which we hold a 50% interest and was added to the development pipeline in 2006. As of December 31, 2009, this property was 73.9% leased or committed. The Company currently anticipates the total cost of this project (including the joint venture partner’s share) will be approximately $52.0 million, of which $45.3 million had been incurred as of December 31, 2009. Eddy Street Commons, Phase I The Company has substantially completed the construction of the retail and office components of Eddy Street Commons, Phase I, a 465,000 square foot center located in South Bend, Indiana that includes a 300,000 square foot non- owned multi-family component. This project was added to the development pipeline in 2008. As of December 31, 2009, Eddy Street Commons, Phase I was 72.4% leased or committed. The Company currently anticipates its total investment in this project will be approximately $35.0 million, of which $27.5 million had been incurred as of December 31, 2009. 2009 Redevelopment Activities Shops at Rivers Edge The Company is in the process of redeveloping its Shops at Rivers Edge property in Indianapolis, Indiana. The current anchor tenant’s lease at this property will expire on March 31, 2010. The tenant may continue to occupy the space for a period of time while the Company markets the space to several potential anchor tenants. This property was moved to the redevelopment pipeline in 2008. The Company currently anticipates its total investment in the redevelopment at the Shops at Rivers Edge will be approximately $2.5 million, which may increase depending on the outcome of current negotiations with potential anchor tenants. Bolton Plaza The Company is in the process of redeveloping its Bolton Plaza Shopping Center in Jacksonville, Florida. The former anchor tenant’s lease at the shopping center expired in May 2008 and was not renewed. In December 2009, a new anchor executed a lease for approximately half of the anchor tenant space and is expected to take occupancy in the second half of 2010. This property was moved to the redevelopment pipeline in 2008. The Company currently anticipates its total investment in the redevelopment at Bolton Plaza will be approximately $5.7 million. Courthouse Shadows The Company is in the process of redeveloping its Courthouse Shadows Shopping Center in Naples, Florida. The Company intends to modify the existing façade and pylon signage and upgrade the landscaping and lighting. In 2009, an anchor tenant purchased the lease of the former anchor tenant and made certain improvements to the space. This property was moved to the redevelopment pipeline in 2008. The Company currently anticipates its total investment in the redevelopment at Courthouse Shadows will be approximately $2.5 million. F-22 Four Corner Square The Company is currently redeveloping its Four Corner Square Shopping Center in Seattle, Washington. In addition to the existing center, the Company also owns approximately ten acres of adjacent land in the shadow pipeline which is expected to be utilized in the redevelopment. The Company anticipates the majority of the existing center will remain open during the redevelopment. This property was moved to the redevelopment pipeline in 2008. The Company currently anticipates its total investment in the redevelopment at Four Corner Square will be approximately $0.5 million. Coral Springs Plaza The Company is currently redeveloping its Coral Springs Plaza Shopping Center in Boca Raton, Florida. In December 2009, a new anchor tenant executed a lease to occupy the entire center, which was formerly anchored by Circuit City. This new tenant is expected to open during the second half of 2010. This property was moved to the redevelopment pipeline in the first quarter of 2009 following the bankruptcy of Circuit City. The Company currently anticipates its total investment in the redevelopment at Coral Springs Plaza will be approximately $4.5 million. Note 9. Discontinued Operations In December 2009, the Company conveyed the title to its Galleria Plaza operating property in Dallas, Texas to the ground lessor. The Company had determined during the third quarter of 2009 that there was no value to the improvements and intangibles related to Galleria Plaza and recognized a non-cash impairment charge of $5.4 million to write off the net book value of the property. Since the Company ceased operating this property during the fourth quarter of 2009, it was appropriate to reclassify the non-cash impairment loss and the operating results related to this property were reclassified to discontinued operations for each of the fiscal years presented. In December 2008, the Company sold its Silver Glen Crossings property, located in Chicago, Illinois, for net proceeds of $17.2 million and recognized a loss on sale of $2.7 million. The majority of the net proceeds from this sale were used to pay down borrowings under the Company’s unsecured revolving credit facility. The loss on sale and operating results for this property have been reflected as discontinued operations for each of the fiscal years presented. In November 2007, the Company sold its 176th & Meridian property, located in Seattle, Washington, for net proceeds of $7.0 million and a gain of $2.0 million. The gain on sale and operating results related to this property have been reflected as discontinued operations for fiscal year 2007. The Company anticipated utilizing the proceeds from the sale to execute a like-kind exchange under Section 1031 of the Internal Revenue Code in 2008 and in February 2008, did so when it purchased the Shops at Rivers Edge (see Note 7). The results of the discontinued operations related to these properties were comprised of the following for the years ended December 31, 2009, 2008, and 2007: F-23 Rental income................................................................... $ Expenses: Property operations .......................................................... Real estate taxes and other Depreciation and amortization.......................................... Non-cash loss on impairment of discontinued operation Total expenses........................................................... Operating (loss) income.................................................... Interest expense and other income, net............................. (Loss) income from discontinued operations.................... (Loss) gain on sale of operating property ......................... Total (loss) income from discontinued operations............ $ (Loss) income from discontinued operations attributable to Kite Realty Group Trust common shareholders.......................................................... $ (Loss) income from discontinued operations Year ended December 31, 2009 554,934 $ 3,202,193 2008 2007 $ 6,338,222 802,500 193,639 256,172 5,384,747 6,637,058 (6,082,124) (35,244) (6,117,368) 1,185,704 595,374 1,090,702 — 2,871,780 330,413 69 330,482 (2,689,888 ) (6,117,368) $ (2,359,406 ) — 954,289 865,210 2,207,969 — 4,027,468 2,310,754 (231,894) 2,078,860 2,036,189 $ 4,115,049 (5,297,641) $ (1,852,134 ) $ 3,197,393 attributable to noncontrolling interests ................. Total (loss) income from discontinued operations .... $ (819,727) (507,272 ) (6,117,368) $ (2,359,406 ) 917,656 $ 4,115,049 Note 10. Mortgage Loans and Other Indebtedness Mortgage and other indebtedness consist of the following at December 31, 2009 and 2008: Description Unsecured Revolving Credit Facility1 Matures February 2011; maximum borrowing level of $150.2 million and $184.2 million available at December 31, 2009 and 2008, respectively; interest at LIBOR + 1.25% (1.48%) at December 31, 2009 and interest at LIBOR + 1.35% (1.79%) at December 31, 2008 ........................................................................................................................... $ 77,800,000 Unsecured Term Loan2 Matures July 2011 and bears interest at LIBOR+2.65% at both December 31, 2009 and $105,000,000 Balance at December 31, 2008 2009 2008 (2.88% and 3.09%, respectively) ........................................................................... 55,000,000 55,000,000 Notes Payable Secured by Properties under Construction—Variable Rate Generally due in monthly installments of interest; maturing at various dates through 2013; interest at LIBOR+1.85%-3.00%, ranging from 2.13% to 5.00%3 at December 31, 2009 and interest at LIBOR+1.25%-2.75%, ranging from 1.69% to 5.00%3 at December 31, 2008.......................................................................................................... Mortgage Notes Payable—Fixed Rate Generally due in monthly installments of principal and interest; maturing at various dates through 2022; interest rates ranging from 5.16% to 7.65% at December 31, 2009 and interest rates ranging from 5.11% to 7.65% at December 31, 2008 ................................ 77,143,865 66,458,435 300,893,193 331,198,521 Mortgage Notes Payable—Variable Rate Due in monthly installments of principal and interest; maturing at various dates through 2017; interest at LIBOR + 1.25%-3.50%, ranging from 1.48% to 3.73% at December 31, 2009 and interest at LIBOR + 1.25%-2.75%, ranging from 1.69% to 3.19% at December 31, 2008.......................................................................................................... Net premium on acquired indebtedness................................................................................ 146,479,685 977,770 Total mortgage and other indebtedness ...................................................................... $ 658,294,513 118,595,882 1,408,628 $677,661,466 F-24 ____________________ 1 The Company entered into two certain cash flow hedge agreements that fix interest on portions of its unsecured revolving credit facility. The weighted average interest rate on the unsecured revolving credit facility, including the effect of the hedge agreements, was 6.10% and 5.06% at December 31, 2009 and 2008, respectively. The unsecured revolving credit facility has a one-year extension option to February 2012 if the Company is in compliance with the covenants under the related agreement. 2 The Company entered into a cash flow hedge for the entire $55 million outstanding under the Term Loan at a fixed interest rate of 5.92%. 3 The Bridgewater Marketplace construction loan has a LIBOR floor of 3.15%. One month LIBOR was 0.23 % and 0.44% as of December 31, 2009 and 2008, respectively. For the year ended December 31, 2009, the Company had loan borrowing proceeds of $93.5 million and loan repayments of $112.5 million. The major components of this activity are as follows: • Draws of approximately $18.8 million were made on the variable rate construction loan at the Eddy Street Commons development project; • The $11.8 million fixed rate mortgage loan on the Boulevard Crossing operating property was retired prior to its December 2009 maturity using available cash; • The $15.8 million fixed rate mortgage loan on the Ridge Plaza operating property was refinanced with a permanent loan in the same amount. The new variable rate loan matures in January 2017 and bears interest at LIBOR + 325 basis points, which the Company simultaneously hedged to fix the interest rate at 6.56% for the full term of the loan; • The maturity date of the variable rate loan on the Tarpon Springs operating property was extended to January 2013. The loan now bears interest at LIBOR + 325 basis points, and the Company funded a $3.7 million paydown with cash; • The maturity date of the variable rate loan on the Estero Town Commons operating property was extended to January 2013. The loan now bears interest at LIBOR + 325 basis points, and the Company funded a $3.4 million paydown with cash; • The $8.2 million loan on the Bridgewater Crossing operating property was refinanced with a variable rate loan bearing interest at LIBOR + 185 basis points and maturing in June 2013. The Company funded a $1.2 million paydown with cash. • The maturity date of the construction loan on the Cobblestone Plaza development property was extended to March 2010. The Company funded a $7.0 million paydown with cash; • The $4.1 million loan on the Fishers Station operating property was refinanced with a loan bearing interest at LIBOR + 350 basis points and maturing in June 2011; • Permanent financing of $15.4 million was placed on the Eastgate Pavilion operating property, a previously unencumbered property. This variable rate loan bears interest at LIBOR + 295 basis points and matures in April 2012; • The maturity date of the Delray Marketplace construction loan was extended to June 2011; • The maturity date of the variable rate loan on the Beacon Hill operating property was extended to March 2014. The Company funded the $3.5 million paydown made in conjunction with the extension utilizing its unsecured revolving credit facility; • Approximately $57 million was paid down on the unsecured revolving credit facility using proceeds from the Company’s May 2009 common share offering; • In addition to the preceding activity, during the year ended December 31, 2009, the Company used proceeds from its unsecured revolving credit facility and other borrowings (exclusive of repayments) totaling approximately $30 million for development, redevelopment, and general working capital purposes; and • The Company made scheduled principal payments totaling approximately $4.0 million. F-25 Unsecured Revolving Credit Facility In 2007, the Operating Partnership entered into an amended and restated four-year $200 million unsecured revolving credit facility (the “unsecured facility”) with a group of financial institutions led by Key Bank National Association, as agent. The Company and several of the Operating Partnership’s subsidiaries are guarantors of the Operating Partnership’s obligations under the unsecured facility. The unsecured facility has a maturity date of February 20, 2011, with a one-year extension option to February 20, 2012 (subject to certain customary conditions). Borrowings under the unsecured facility bear interest at a floating interest rate of LIBOR + 115 to 135 basis points, depending on the Company’s leverage ratio. The unsecured facility has a commitment fee ranging from 0.125% to 0.20% applicable to the average daily unused amount. Subject to certain conditions, including the prior consent of the lenders, the Company has the option to increase its borrowings under the unsecured facility to a maximum of $400 million if there are sufficient unencumbered assets to support the additional borrowings. The unsecured facility also includes a short-term borrowing line of $25 million with a variable interest rate. Borrowings under the short-term line may not be outstanding for more than five days. The amount that the Company may borrow under the unsecured facility is based on the value of assets in its unencumbered property pool. As of December 31, 2009, the Company has 51 unencumbered properties and other assets used to calculate the value of the unencumbered property pool, of which 48 are wholly owned and three of which are owned through joint ventures. The major unencumbered assets include: Boulevard Crossing, Broadstone Station, Coral Springs Plaza, Courthouse Shadows, Four Corner Square, Hamilton Crossing Centre, King's Lake Square, Market Street Village, Naperville Marketplace, PEN Products, Publix at Acworth, Red Bank Commons, Shops at Eagle Creek, Traders Point II, Union Station Parking Garage, Wal-Mart Plaza, and Waterford Lakes Village. As of December 31, 2009, the total amount available for borrowing under the unsecured credit facility was approximately $67.3 million. The Company’s ability to borrow under the unsecured facility is subject to ongoing compliance with various restrictive covenants, including with respect to liens, indebtedness, investments, dividends, mergers and asset sales. In addition, the unsecured facility requires that the Company satisfy certain financial covenants, including: • a maximum leverage ratio of 65% (or up to 70% in certain circumstances); • Adjusted EBITDA (as defined in the unsecured facility) to fixed charges coverage ratio of at least 1.50 to 1; • minimum tangible net worth (defined as Total Asset Value less Total Indebtedness) of $300 million (plus 75% of the net proceeds of any equity issuances from the date of the agreement); • ratio of net operating income of unencumbered property to debt service under the unsecured facility of at least 1.50 to 1; • minimum unencumbered property pool occupancy rate of 80%; • • ratio of variable rate indebtedness to total asset value of no more than 0.35 to 1; and ratio of recourse indebtedness to total asset value of no more than 0.30 to 1. The Company was in compliance with all applicable covenants under the unsecured facility as of December 31, 2009. Under the terms of the unsecured facility, the Company is permitted to make distributions to its shareholders of up to 95% of its funds from operations provided that no event of default exists. If an event of default exists, the Company may only make distributions sufficient to maintain its REIT status. However, the Company may not make any distributions if an event of default resulting from nonpayment or bankruptcy exists, or if its obligations under the credit facility are accelerated. Unsecured Term Loan In 2008, the Operating Partnership entered into a $30 million unsecured term loan agreement (the “Term Loan”) arranged by KeyBanc Capital Markets Inc., which has an accordion feature that enables the Operating Partnership to increase the loan amount up to a total of $60 million, subject to certain conditions. The Term Loan matures on July 15, 2011 and bears interest at LIBOR + 265 basis points. A significant portion of the initial $30 million of proceeds from the Term Loan was used to pay down the Company’s unsecured credit facility. In August 2008, the Operating Partnership entered into an amendment to the Term Loan, which, among other things, increased the amount available for borrowing under the original term loan agreement by an additional $25 million. This amount was subsequently drawn, resulting in an F-26 aggregate amount outstanding under the Term Loan of $55 million. The additional $25 million of proceeds of borrowings under the Term Loan were used to pay down the Company’s unsecured facility. In connection with obtaining the Term Loan, in September 2008, the Company entered into a cash flow hedge for the entire $55 million outstanding, which effectively fixed the interest rate at 5.92%. The Company’s ability to borrow under the Term Loan is subject to ongoing compliance by the Company, the Operating Partnership and their subsidiaries with various restrictive covenants, including with respect to liens, indebtedness, investments, dividends, mergers, and asset sales. In addition, the Term Loan requires that the Company satisfy certain financial covenants that are substantially similar to the covenants under the unsecured credit facility, as described above. The Company was in compliance with all applicable covenants under the Term Loan as of December 31, 2009. 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. As of February 17, 2010, the Company had refinanced or extended the maturity dates of all of its 2010 debt maturities. See Note 21. The following table presents maturities of mortgage debt, corporate debt, and construction loans as of December 31, 2009 and also presents maturities (excluding regular principal payments) after consideration of early 2010 refinancing actions: Annual Maturities $ (3,144,733) Subsequent Activity (56,856,671) $ (3,124,697) (3,549,537) (3,556,861) (3,262,898) (7,765,780) (24,404,506) $ 56,856,671 $ - Amounts Due at Maturity After 2010 Maturity Date Extensions $ - 249,747,214 50,565,066 92,384,162 31,539,567 208,676,228 632,912,237 $ Balances As of December 31, 2009 60,001,404 $ 252,871,911 54,114,603 39,084,352 34,802,465 216,442,008 657,316,743 977,770 658,294,513 $ $ 2010 2011 1 2012 2013 2014 Thereafter Unamortized Premiums Total ____________________ 1 The Company’s unsecured revolving credit facility, of which $77.8 million was outstanding as of December 31, 2009, matures in February 2011. A one-year extension option to February 2012 is available if the Company remains in compliance with the facility’s restrictive covenants. Fair Value of Fixed and Variable Rate Debt As of December 31, 2009, the fair value of fixed rate debt was approximately $304.3 million compared to the book value of $300.9 million. The fair value was estimated using cash flows discounted at current borrowing rates for similar instruments which ranged from 3.96% to 6.51%. As of December 31, 2009, the $356.4 million book value of variable rate debt approximates its fair value. The fair value was estimated using cash flows discounted at current borrowing rates for similar instruments which ranged from 3.23% to 6.56%. As of December 31, 2008, the fair value of fixed rate debt was approximately $355.3 million compared to the book value of $332.6 million. The fair value was estimated using cash flows discounted at current borrowing rates for similar instruments which ranged from 3.33% to 5.01%. As of December 31, 2008, the fair value of variable rate debt was approximately $342.6 million compared to the book value of $345.1 million. The fair value was estimated using cash flows discounted at current borrowing rates for similar instruments which ranged from 2.94% to 4.50%. F-27 Note 11. Derivative Instruments, Hedging Activities and Other Comprehensive Income The Company is exposed to capital market risk, including changes in interest rates. In order to manage volatility relating to variable interest rate risk, the Company enters into interest rate hedging transactions from time to time. The Company does not use derivatives for trading or speculative purposes nor does the Company currently have any derivatives that are not designated as cash flow hedges. The Company has agreements with each of its derivative counterparties that contain a provision that if the Company defaults on any of its indebtedness, including a default where repayment of the indebtedness has not been accelerated by the lender, then the Company could also be declared in default on its derivative obligations. As of December 31, 2009, the Company was party to various consolidated cash flow hedge agreements totaling $220 million, which effectively fix certain variable rate debt at interest rates ranging from 4.40% to 6.56% and mature over various terms through 2017. These interest rate hedge agreements are the only assets or liabilities that the Company records at fair value on a recurring basis. The valuation is determined using widely accepted techniques including discounted cash flow analysis, which considers the contractual terms of the derivatives (including the period to maturity) and uses observable market- based inputs such as interest rate curves and implied volatilities. The Company also incorporates credit valuation adjustments to appropriately reflect both its own nonperformance risk and the respective counterparty’s nonperformance risk in the fair value measurements. As a basis for considering market participant assumptions in fair value measurements, FASB guidance establishes a fair value hierarchy that distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (observable inputs for identical instruments that are classified within Level 1 and observable inputs for similar instruments that are classified within Level 2) and the reporting entity’s own assumptions about market participant assumptions (unobservable inputs classified within Level 3). In instances where the determination of the fair value measurement is based on inputs from different levels of the fair value hierarchy, the level in the fair value hierarchy within which the entire fair value measurement falls is based on the lowest level input that is significant to the fair value measurement in its entirety. The Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability. Although the Company has determined that the majority of the inputs used to value its derivatives fall within Level 2 of the fair value hierarchy, the credit valuation adjustments associated with its derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by itself and its counterparties. However, as of December 31, 2009 and 2008, the Company has assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its derivative positions and has determined that the credit valuation adjustments are not significant to the overall valuation of its derivatives. As a result, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy. The fair value of the Company’s interest rate hedge liabilities as of December 31, 2009 was approximately $7.0 million, including accrued interest of approximately $0.5 million, and is recorded in accounts payable and accrued expenses on the accompanying consolidated balance sheet. As of December 31, 2008, the Company had approximately $197.9 million of consolidated interest rate swaps outstanding. In addition, as of December 31, 2008 the Parkside Town Commons unconsolidated joint venture was party to a cash flow hedge agreement on $42.0 million of debt, of which the Company’s share was $16.8 million. In total, the fair value of these interest rate hedge liabilities as of December 31, 2008 was approximately $10.0 million, including accrued interest of approximately $0.4 million which is included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. The Company currently expects an increase to interest expense of approximately $6.4 million as the hedged forecasted interest payments occur. No hedge ineffectiveness on cash flow hedges was recognized by the Company during any period presented. Amounts reported in accumulated other comprehensive income related to derivatives will be reclassified to earnings over time as the hedged items are recognized in earnings during 2010. During the years ended December 31, 2009 and 2008, approximately $6.4 million and $2.3 million, respectively, was reclassified as a reduction to earnings. During the year ended December 31, 2007, $0.5 million was reclassified as an increase to earnings. The Company’s share of net unrealized gains (losses) on its interest rate hedge agreements are the only components of its accumulated comprehensive income (loss). The following sets forth comprehensive income allocable to the Company for the years ended December 31, 2009, 2008, and 2007: F-28 Year ended December 31, 2009 2008 2007 Net (loss) income attributable to Kite Realty Group Trust...................................................... $ (1,781,766) $ 6,093,126 $ 13,522,683 Other comprehensive income (loss) allocable to Kite Realty Group Trust1 ................................. Comprehensive income attributable to Kite 1,936,748 (4,616,672 ) (3,420,022) Realty Group Trust .......................................... $ 154,982 $ 1,476,454 $ 10,102,661 ____________________ 1 Reflects the Company’s share of the net change in the fair value of derivative instruments accounted for as cash flow hedges. Note 12. 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. During the periods ended December 31, 2009, 2008, and 2007, the Company earned percentage rent of $0.3 million, $0.4 million, and $1.1 million, respectively, including the Company’s joint venture partners’ share of $20,580 for the year ended December 31, 2007. During the year ended December 31, 2007, the Company earned percentage rent of $0.4 million related to the Union Station parking garage lease that was changed to a management agreement in 2008. As of December 31, 2009, future minimum rentals to be received under non-cancelable operating leases for each of the next five years and thereafter, excluding tenant reimbursements of operating expenses and percentage rent based on sales volume, are as follows: 2010 ...................................................................................................................$ 68,190,321 2011 ................................................................................................................... 64,485,480 2012 ................................................................................................................... 57,862,929 2013 ................................................................................................................... 51,295,251 2014 ................................................................................................................... 45,437,005 Thereafter........................................................................................................... 210,281,543 Total .........................................................................................................$ 497,552,529 Lease Commitments As of December 31, 2009, the Company was 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 2083. These leases have five to ten year extension options ranging in total from 20 to 30 years. During 2009, the Company was also obligated under a ground lease for its Galleria Plaza operating property in Dallas, Texas. The lease had been for 4.1 acres of land, required fixed annual rent of $594,000, and was scheduled to expire in 2027. As previously discussed, during the third quarter of 2009, the Company determined that the property’s estimated future cash flows would be insufficient to recover the carrying value of the building and improvements due to the significant ground lease obligations and expected future required capital expenditures. The Company thus recognized a non-cash impairment charge of $5.4 million to write off the property’s net book value. In December 2009, the Company conveyed the title to Galleria Plaza to the ground lessor. In connection with the transfer, the Company was released from the original ground lease and holds no future obligations related to this property. Ground lease expense incurred by the Company on these operating leases (including Galleria Plaza) for the years ended December 31, 2009, 2008, and 2007 was $1.1 million, $1.0 million, and $0.9 million, respectively. Of these F-29 amounts, for each of the years ended December 31, 2009 and 2008, approximately $0.1 million was capitalized as a project cost of the Company’s Eddy Street Commons development, as discussed below. As further discussed in Note 16, the Company is currently developing Eddy Street Commons at the University of Notre Dame. Beginning in June 2008, in accordance with the operating agreement in place, the Company began making ground lease payments to the University of Notre Dame for the land beneath the initial phase of the development. This lease agreement is for a 75-year term at a fixed rate for the first two years, after which payments are based on a percentage of certain revenues. The table below reflects the fixed term of this ground lease in fiscal year 2010. Contingent amounts are not reflected in the table below for fiscal years 2011 and beyond. Future minimum lease payments due under such leases for the next five years ending December 31 and thereafter are as follows: 2010....................................................................................................................$ 2011.................................................................................................................... 2012.................................................................................................................... 2013.................................................................................................................... 2014.................................................................................................................... Thereafter ........................................................................................................... 389,300 326,800 326,800 212,500 220,000 715,000 Total..........................................................................................................$ 2,190,400 Note 13. Shareholders’ Equity and Redeemable Noncontrolling Interests Common Equity In May 2009, the Company completed an equity offering of 28,750,000 common shares at an offering price of $3.20 per share for aggregate gross and net proceeds of $92.0 million and $87.5 million, respectively. Approximately $57 million of the net proceeds were used to repay borrowings under the Company’s unsecured revolving credit facility and the remainder was retained as cash. In October 2008, the Company completed an equity offering of 4,750,000 common shares at an offering price of $10.55 per share under a previously filed registration statement, for net offering proceeds of approximately $47.8 million, all of which was used to repay borrowings under the Company’s unsecured revolving credit facility. In April 2008, the Company issued 60,000 common shares at a weighted-average offering price of $15.19 under a previously filed registration statement, for net offering proceeds of approximately $0.9 million. In May 2007, the Company issued 30,000 common shares at an offering price of $21.15 under a previously filed registration statement, for net offering proceeds of approximately $0.5 million. Dividend Reinvestment and Share Purchase Plan The Company maintains a Dividend Reinvestment and Share Purchase Plan (the “Dividend Reinvestment Plan”) which offers investors a dividend reinvestment component to invest all or a portion of the dividends on their common shares, or cash distributions on their units in the Operating Partnership, in additional common shares. In addition, the direct share purchase component permits Dividend Reinvestment Plan participants and new investors to purchase common shares by making optional cash investments with certain restrictions. Equity Distribution Agreement In December 2009 the Company entered into an Equity Distribution Agreement pursuant to which it may sell, from time to time, up to an aggregate amount of $25 million of its common shares. To date, the Company has not utilized this program. F-30 Redeemable Noncontrolling 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. For the years ended December 31, 2009, 2008, and 2007, respectively, 73,981, 285,769, and 61,367 Operating Partnership units were exchanged for the same number of common shares. For the year ended December 31, 2007, 3,000 Operating Partnership units were redeemed for cash. Note 14. Segment Information The Company’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 only in the United States. Combined segment data of the Company for the years ended December 31, 2009, 2008, and 2007 are presented below. The results for the years ended December 31, 2008 and 2007 have been reclassified to reflect the presentation of discontinued operations as described in Note 9. Year Ended December 31, 2009 Revenues Operating expenses, cost of construction and services, general, administrative and other Depreciation and amortization Operating income (loss) Interest expense Income tax benefit of taxable REIT subsidiary Income from unconsolidated entities Non-cash gain from consolidation of subsidiary Other income, net Income (loss) from continuing operations Discontinued operations: Discontinued operations Non-cash loss on impairment of discontinued operation Loss from discontinued operations Consolidated net income (loss) Less: Net income attributable to noncontrolling interests Net loss attributable to Kite Realty Group Trust Total assets at December 31, 2009 Real Estate Operation Development, Construction and Advisory Services Subtotal Intersegment Eliminations Total $ 97,061,070 $ 42,759,584 $ 139,820,654 $ (24,528,551) $ 115,292,103 33,787,084 31,971,118 31,302,868 (27,506,702) - 206,564 1,634,876 750,098 43,683,182 177,200 (1,100,798) (150,046) 22,293 - - - 77,470,266 32,148,318 30,202,070 (27,656,748) 22,293 206,564 1,634,876 750,098 (24,308,763) - (219,788) 505,694 - 19,477 - (525,171) 53,161,503 32,148,318 29,982,282 (27,151,054) 22,293 226,041 1,634,876 224,927 6,387,704 (1,228,551) 5,159,153 (219,788) 4,939,365 (732,621) - (732,621) - (732,621) (5,384,747) (6,117,368) 270,336 - - (1,228,551) (5,384,747) (6,117,368) (958,215) - - (219,788) (5,384,747) (6,117,368) (1,178,003) (797,841) (527,505) 1,138,963,146 $ $ 164,626 (633,215) 29,452 (603,763) $ $ (1,063,925) 23,925,090 $ $ (1,591,430) 1,162,888,236 $ $ (190,336) (22,202,792) $ $ (1,781,766) 1,140,685,444 F-31 Year Ended December 31, 2008 Revenues Operating expenses, cost of construction and services, general, administrative and other Depreciation and amortization Operating income (loss) Interest expense Income tax expense of taxable REIT subsidiary Income from unconsolidated entities Gain on sale of unconsolidated property Other income, net Income from continuing operations Discontinued operations: Discontinued operations Loss on sale of operating property Loss from discontinued operations Consolidated net income Less: Net income attributable to noncontrolling interests Net income attributable to Kite Realty Group Trust Total assets at December 31, 2008 Real Estate Operation Development, Construction and Advisory Services1 Subtotal Intersegment Eliminations Total $ 101,152,298 $ 89,973,444 $ 191,125,742 $ (49,062,641) $ 142,063,101 31,186,332 34,770,426 35,195,540 (29,721,587) - 842,425 1,233,338 862,828 8,412,544 330,482 (2,689,888) (2,359,406) 6,053,138 85,172,529 122,549 4,678,366 (355,467) (1,927,830) - - - 2,395,069 - - - 2,395,069 116,358,861 34,892,975 39,873,906 (30,077,054) (1,927,830) 842,425 1,233,338 862,828 10,807,613 330,482 (2,689,888) (2,359,406) 8,448,207 (48,438,084) - (624,557) 704,873 - - - (704,873) (624,557) - - - (624,557) 67,920,777 34,892,975 39,249,349 (29,372,181) (1,927,830) 842,425 1,233,338 157,955 10,183,056 330,482 (2,689,888) (2,359,406) 7,823,650 (1,453,898) (374,074) (1,827,972) 97,448 (1,730,524) $ $ 4,599,240 1,097,996,338 $ $ 2,020,995 51,344,334 $ $ 6,620,235 1,149,340,672 $ $ (527,109) (37,288,766) $ $ 6,093,126 1,112,051,906 ____________________ 1 This segment includes revenue and expense resulting in a net pre-tax gain of $3.0 million from the sale of land within the Company’s taxable REIT subsidiary. Income tax expense related to this sale was approximately $1.1 million. Year Ended December 31, 2008 Year Ended December 31, 2007 Revenues Revenues Operating expenses, cost of construction and Operating expenses, cost of construction and services, general, administrative and other services, general, administrative and other Depreciation and amortization Depreciation and amortization Operating income (loss) Operating income (loss) Interest expense Interest expense Income tax expense of taxable REIT subsidiary Income tax expense of taxable REIT subsidiary Income from unconsolidated entities Income from unconsolidated entities Gain on sale of unconsolidated property Other income, net Other income, net Income from continuing operations Income from continuing operations Discontinued operations: Discontinued operations: Discontinued operations Discontinued operations Gain on sale of operating property Loss on sale of operating property Income from discontinued operations Loss from discontinued operations Consolidated net income Consolidated net income Less: Net income attributable to Less: Net income attributable to noncontrolling interests noncontrolling interests Net income attributable to Kite Realty Net income attributable to Kite Realty Group Trust Group Trust Total assets at December 31, 2008 Total assets at December 31, 2007 Real Estate Real Estate Operation Operation Development, Development, Construction Construction and Advisory and Advisory Services1 Services Subtotal Subtotal Intersegment Intersegment Eliminations Eliminations $ $ 101,152,298 96,313,451 $ $ 89,973,444 99,995,505 $ $ 191,125,742 196,308,956 $ $ (49,062,641) (63,445,407) $ $ 31,186,332 30,527,863 34,770,426 29,621,988 35,195,540 36,163,600 (29,721,587) (26,214,841) - - 842,425 290,710 1,233,338 1,787,447 862,828 12,026,916 8,412,544 2,078,860 330,482 2,036,189 (2,689,888) 4,115,049 (2,359,406) 16,141,965 6,053,138 85,172,529 94,039,335 122,549 108,666 4,678,366 5,847,504 (355,467) (759,313) (1,927,830) (761,628) - - - - - 4,326,563 2,395,069 - - - - - - 4,326,563 2,395,069 (1,453,898) (4,096,959) (374,074) (869,171) $ $ $ $ 4,599,240 12,045,006 1,097,996,338 1,041,671,941 $ $ $ $ 2,020,995 3,457,392 51,344,334 41,321,857 $ $ $ $ 116,358,861 124,567,198 34,892,975 29,730,654 39,873,906 42,011,104 (30,077,054) (26,974,154) (1,927,830) (761,628) 842,425 290,710 1,233,338 1,787,447 862,828 16,353,479 10,807,613 2,078,860 330,482 2,036,189 (2,689,888) 4,115,049 (2,359,406) 20,468,528 8,448,207 (1,827,972) (4,966,130) 6,620,235 15,502,398 1,149,340,672 1,082,993,798 (48,438,084) (60,968,002) - - (624,557) (2,477,405) 704,873 1,009,013 - - - - - (1,009,013) (704,873) (2,477,405) (624,557) - - - - - - (2,477,405) (624,557) Total Total 142,063,101 132,863,549 67,920,777 63,599,196 34,892,975 29,730,654 39,249,349 39,533,699 (29,372,181) (25,965,141) (1,927,830) (761,628) 842,425 290,710 1,233,338 778,434 157,955 13,876,074 10,183,056 2,078,860 330,482 2,036,189 (2,689,888) 4,115,049 (2,359,406) 17,991,123 7,823,650 97,448 497,690 (1,730,524) (4,468,440) $ $ $ $ (527,109) (1,979,715) (37,288,766) (35,068,865) $ $ $ $ 6,093,126 13,522,683 1,112,051,906 1,047,924,933 ____________________ 1 This segment includes revenue and expense resulting in a net pre-tax gain of $3.0 million from the sale of land within the Company’s taxable REIT subsidiary. Income tax expense related to this sale was approximately $1.1 million. Year Ended December 31, 2007 Revenues Operating expenses, cost of construction and services, general, administrative and other Depreciation and amortization Operating income (loss) Interest expense Income tax expense of taxable REIT subsidiary Income from unconsolidated entities Other income, net Income from continuing operations Discontinued operations: Discontinued operations Gain on sale of operating property Income from discontinued operations Consolidated net income Less: Net income attributable to noncontrolling interests Net income attributable to Kite Realty Group Trust Real Estate Operation Development, Construction and Advisory Services Subtotal Intersegment Eliminations Total $ 96,313,451 $ 99,995,505 $ 196,308,956 $ (63,445,407) $ 132,863,549 30,527,863 29,621,988 36,163,600 (26,214,841) - 290,710 1,787,447 12,026,916 94,039,335 108,666 5,847,504 (759,313) (761,628) F-32 - - 4,326,563 2,078,860 2,036,189 4,115,049 16,141,965 - - - 4,326,563 124,567,198 29,730,654 42,011,104 (26,974,154) (761,628) 290,710 1,787,447 16,353,479 2,078,860 2,036,189 4,115,049 20,468,528 (60,968,002) - (2,477,405) 1,009,013 - - (1,009,013) (2,477,405) - - - (2,477,405) 63,599,196 29,730,654 39,533,699 (25,965,141) (761,628) 290,710 778,434 13,876,074 2,078,860 2,036,189 4,115,049 17,991,123 (4,096,959) (869,171) (4,966,130) 497,690 (4,468,440) Total assets at December 31, 2007 1,041,671,941 41,321,857 1,082,993,798 (35,068,865) 1,047,924,933 12,045,006 3,457,392 15,502,398 (1,979,715) 13,522,683 $ $ $ $ $ $ $ $ $ $ F-32 Note 15. Quarterly Financial Data (Unaudited) Presented below is a summary of the consolidated quarterly financial data for the years ended December 31, 2009 and 2008. The results reflect the presentation of discontinued operations as described in Note 9. Such reclassifications had no effect on consolidated net income (loss) previously reported. Total revenue ............................................... $ Operating income......................................... $ $ Income from continuing operations $ Loss from discontinued operations $ Consolidated net income (loss) Income from continuing operations attributable to Kite Realty Group Trust common shareholders.............................. $ Net income (loss) attributable to Kite Realty Group Trust common shareholders............................................. $ Income (loss) per common share – basic and diluted: Income from continuing operations attributable to Kite Realty Group Trust common shareholders ............... $ Net income (loss) attributable to Kite Realty Group Trust common shareholders ....................................... $ Weighted average Common Shares outstanding - basic ....................................... - diluted ..................................... Total revenue ................................................. $ Operating income........................................... $ Income from continuing operations $ Income (loss) from discontinued operations $ $ Consolidated net income (loss) Income from continuing operations attributable to Kite Realty Group Trust common shareholders................................ $ Net income (loss) attributable to Kite Realty Quarter Ended March 31, 2009 30,211,586 $ $ 7,836,765 1,102,689 $ (216,711) $ $ 885,978 Quarter Ended December 31, 2009 Quarter Ended September 30, 2009 Quarter Ended June 30, 2009 30,087,083 $ 25,708,597 $ 29,284,837 $ 7,324,825 $ 7,401,053 7,419,641 924,873 2,340,380 $ 571,423 $ (18,614 ) (5,616,007 ) $ (266,036) $ 906,259 (3,275,627 ) $ $ 305,387 876,778 $ 485,607 $ 1,488,381 $ 665,109 701,242 $ 257,085 $ (3,383,370 ) $ 643,277 0.03 $ 0.01 $ 0.03 $ 0.01 0.02 $ 0.01 $ (0.05 ) $ 0.01 34,184,305 34,220,160 47,988,205 48,081,453 62,980,447 62,980,447 62,997,180 63,132,990 Quarter Ended March 31, 2008 32,084,815 $ 11,431,078 $ 3,150,684 $ 329,457 $ 3,480,141 $ Quarter Ended December 31, 2008 Quarter Ended September 30, 2008 Quarter Ended June 30, 2008 33,920,114 $ 34,328,105 $ 41,730,067 $ 11,197,108 $ 6,169,591 10,451,572 $ 2,966,012 402,571 112,806 $ (3,011,974 ) $ 210,306 3,776,595 $ (2,609,403 ) $ 3,176,318 3,663,789 $ 2,451,311 $ 2,295,342 $ 2,833,133 $ 365,475 Group Trust common shareholders ........... $ 2,707,299 $ 2,459,289 $ 2,920,896 $ (1,994,358 ) Income (loss) per common share – basic and diluted: Income from continuing operations attributable to Kite Realty Group Trust common shareholders ................. $ Net income (loss) attributable to Kite Realty Group Trust common shareholders ......................................... $ Weighted average Common Shares outstanding - basic ......................................... - diluted ....................................... 0.08 $ 0.08 $ 0.10 $ 0.01 0.09 $ 0.08 $ 0.10 $ (0.06 ) 29,028,953 29,059,809 29,147,361 29,269,062 29,189,424 29,201,838 33,920,594 33,920,594 F-33 Note 16. Commitments and Contingencies Eddy Street Commons at Notre Dame Eddy Street Commons at the University of Notre Dame, located adjacent to the university in South Bend, Indiana, is the Company’s most significant current development project. This multi-phase project is expected to include retail, office, hotels, a parking garage, apartments, and residential units. The Company wholly owns the retail and office components while other components will be owned by third parties or through joint ventures. The initial phase of the project opened in October 2009 and consists of the retail, office and apartment and residential units. In late 2009 construction commenced on a limited service hotel, which is owned by an unconsolidated joint venture in which the Company holds a 50% interest. The Company’s share of the cost of this hotel is approximately $5.5 million, which will be funded by a third-party construction loan. The City of South Bend has contributed $35 million to the development, funded by tax increment financing (TIF) bonds issued by the City and a cash commitment from the City, both of which are being used for the construction of the parking garage and infrastructure improvements to this project. The majority of the bonds will be funded by real estate tax payments made by the Company and subject to reimbursement from the tenants of the property. If there are delays in the development, the Company is obligated to pay certain fees. However, it has an agreement with the City of South Bend to limit its exposure to a maximum of $1 million as to such fees. In addition, the Company will not be in default concerning other obligations under the agreement with the City of South Bend so long as it commences and diligently pursues the completion of its obligations under that agreement. Although the Company does not expect to own either the residential or the apartment complex components of the project, the Company has jointly guaranteed the apartment developer’s construction loan, which at December 31, 2009, had an outstanding balance of approximately $25.2 million. The Company also has a contractual obligation in the form of a completion guarantee to the University of Notre Dame and a similar agreement in favor of the City of South Bend to complete all phases of the $200 million project (the Company’s portion of which is approximately $64 million), with the exception of certain of the residential units, consistent with commitments the Company typically makes in connection with other bank-funded development projects. To the extent the hotel joint venture partner, the apartment developer/owner or the residential developer/owner fail to complete those aspects of the project, the Company will be required to complete the construction, at which time the Company would expect to have the right to seek title to the assets and assume any construction borrowings related to the assets. The Company will have certain remedies against the developers if they were to fail to complete the construction. If the Company fails to fulfill its contractual obligations in connection with the project, but is timely commencing and pursuing a cure, it will not be in default to either the University of Notre Dame and the City of South Bend. Joint Venture Indebtedness Joint venture debt is the liability of the joint venture and is typically secured by the assets of the joint venture under circumstances where the lender has limited recourse to the Company. As of December 31, 2009, the Company’s share of unconsolidated joint venture indebtedness was approximately $14.5 million, $13.5 million of which was related to the Parkside Town Commons development. The remaining $1.0 million represents the Company’s share of the $2.0 million drawn on the Eddy Street Commons limited service hotel construction loan. The loan, obtained in the third quarter of 2009, has a total commitment of $10.9 million, bears interest at the greater of LIBOR + 315 basis points or 4.00%, and matures in August 2014. As of December 31, 2009, the Operating Partnership had guaranteed its $13.5 million share of the unconsolidated joint venture debt related to the Parkside Town Commons development in the event the joint venture partnership defaults under the terms of the underlying arrangement. Mortgages which are guaranteed by the Operating Partnership are secured by the property of the joint venture and the joint venture could sell the property in order to satisfy the outstanding obligation. Other Commitments and Contingencies 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 F-34 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 statements. As of December 31, 2009, the Company had outstanding letters of credit totaling $5.2 million. At that date, there were no amounts advanced against these instruments. Note 17. Employee 401(k) Plan The Company maintains a 401(k) plan for employees under which it matches 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, not to exceed an annual maximum of $15,000. The Company contributed to this plan $0.3 million for each of the years ended December 31, 2009, 2008, and 2007. Note 18. Recent Accounting Pronouncements In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R),” which is effective for fiscal years beginning after November 15, 2009 and introduces a more qualitative approach to evaluating VIEs for consolidation. This provision was primarily codified into Topic 810 – “Consolidation” in the ASC and requires a company to perform an analysis to determine whether its variable interest gives it a controlling financial interest in a VIE. This analysis identifies the primary beneficiary of a VIE as the entity that has (i) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (ii) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. In determining whether it has the power to direct the activities of the VIE that most significantly affect the VIE’s performance, the provision requires a company to assess whether it has an implicit financial responsibility to ensure that a VIE operates as designed. It also requires continuous reassessment of primary beneficiary status rather than periodic, event-driven assessments as previously required, and incorporates expanded disclosure requirements. The Company has not yet determined the impact that adoption of this provision will have on its consolidated financial statements. Note 19. Supplemental Schedule of Non-Cash Investing/Financing Activities The following schedule summarizes the non-cash investing and financing activities of the Company for the years ended December 31, 2009, 2008 and 2007: Year Ended December 31, 2008 2009 2007 Recognition of noncontrolling interests upon consolidation of subsidiary $ 2,175,354 Imputed value of common area development land at Eddy Street Commons ................... $ — Third-party assumption of fixed rate debt in connection with the sale of 176th & Meridian..................................................... $ — $ $ $ — $ 1,900,000 $ — — — $ 4,103,508 Note 20. Related Parties Subsidiaries of the Company provide certain management, construction and other services to certain unconsolidated entities and to entities owned by certain members of the Company’s management. During the years ended December 31, 2009, 2008 and 2007, the Company earned $0.1 million, $0.1 million and $0.0 million, respectively from unconsolidated entities and $0.1 million, $0.3 million and $0.5 million, respectively from entities owned by certain members of management. The Company reimburses an entity owned by certain members of the Company’s management for travel and related services. During the years ended December 31, 2009, 2008 and 2007, amounts paid by the Company to this related entity were $0.3 million, $0.3 million and $0.2 million, respectively. F-35 Note 21. Subsequent Events 2010 Debt Refinancings In January 2010, the Company extended the maturity date of its $11.0 million construction loan on the South Elgin Commons property to September 2013 at an interest rate of LIBOR + 325 basis points. The Company funded a $1.6 million paydown with cash and borrowings on the unsecured facility. In February 2010, the Company extended the maturity date of its $14.9 million variable rate loan on the Shops at Rivers Edge property to February 2013 at an interest rate of LIBOR + 400 basis points. The Company funded a $0.6 million paydown with cash. In February 2010, the Company extended the maturity date of its $30.9 million construction loan on the Cobblestone Plaza property to February 2013 at an interest rate of LIBOR + 350 basis points. The Company funded a $2.9 million paydown with cash and borrowings on the unsecured facility. Other In January 2010, $0.7 million of the $1.4 million loan the Company had extended to The Centre partnership was repaid. This partial repayment did not affect the status of The Centre as a VIE with the Company as its primary beneficiary. On March 16, the Company’s Board of Trustees declared a cash distribution of $0.06 per common share for the first quarter of 2010. Simultaneously, the Company’s Board of Trustees declared a cash distribution of $0.06 per Operating Partnership unit for the same period. These distributions are payable on April 16, 2010 to shareholders and unitholders of record as of April 7, 2010. F-36 $ 1 3 9 , 5 9 9 , 2 $ - $ d o i r e P f o e s o l C t n u o m A y r r a C s s o r G o t t n e u q e s b u S d e z i l a t i p a C t s o C / n o i t i s i u q c A t n e m p o l e v e D t s o C l a i t i n I 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 & g n i d l i u B s t n e m e v o r p m 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 d n a L & 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 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 t a d i l o s n o C 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 A N 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 6 9 9 1 8 9 9 1 6 8 9 1 4 0 0 2 2 0 0 2 9 8 9 1 0 0 0 2 5 8 9 1 0 7 9 1 9 9 9 1 1 0 0 2 6 9 9 1 7 9 9 1 9 9 9 1 9 9 9 1 2 0 0 2 9 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 8 1 2 , 7 8 3 , 1 2 7 8 , 3 0 5 , 1 3 5 6 , 7 6 6 , 1 4 3 8 , 6 1 2 , 2 7 2 2 , 9 0 2 , 4 2 9 2 , 7 4 5 , 3 2 6 2 , 7 9 9 , 6 8 5 3 , 6 6 8 6 7 7 , 8 1 6 , 1 0 5 1 , 9 5 1 , 2 1 3 3 , 0 7 4 , 1 1 6 3 , 2 0 3 , 4 3 3 6 , 0 7 5 , 1 5 2 9 , 2 3 0 , 7 7 9 6 , 1 5 3 5 4 6 , 0 4 4 , 1 6 3 9 , 3 7 1 , 3 9 3 6 , 0 6 5 5 2 0 , 6 5 9 8 2 4 , 3 5 0 , 3 9 2 3 , 8 4 4 , 1 3 9 9 , 0 8 2 , 4 6 9 2 , 5 2 1 , 3 6 9 8 , 3 5 9 , 2 4 4 0 , 1 3 7 , 5 2 7 3 , 2 5 0 , 1 2 7 4 , 6 0 2 3 1 9 , 2 1 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 8 5 5 , 3 3 4 1 3 9 , 0 2 4 7 9 1 , 6 0 1 , 1 6 7 6 , 2 8 1 , 1 5 9 9 , 0 8 5 9 2 6 , 8 4 4 , 2 3 6 9 , 9 3 9 , 4 8 0 0 2 / 8 5 9 1 3 1 7 , 2 3 9 , 2 1 $ 6 7 0 , 6 0 8 , 5 9 3 2 , 4 6 3 , 2 1 1 3 , 2 6 3 , 3 3 8 8 , 4 2 5 , 8 0 6 5 , 3 5 9 , 5 8 4 0 , 4 3 8 , 4 4 8 0 , 5 6 1 , 0 3 3 7 9 , 4 6 7 , 5 4 9 0 9 , 8 1 7 , 9 6 8 4 , 1 2 9 , 3 1 6 8 0 , 1 2 0 , 3 1 9 9 0 , 6 3 2 , 5 1 8 9 0 , 5 6 3 , 3 2 3 0 2 , 9 6 5 , 3 1 0 4 1 , 2 0 5 , 6 4 3 7 4 , 8 1 6 , 0 1 5 1 5 , 7 3 7 , 5 1 3 2 7 , 5 3 0 , 6 1 2 6 7 , 2 5 2 , 0 1 0 6 5 , 0 6 2 , 9 3 8 5 2 , 6 0 9 , 9 2 2 5 , 5 8 5 , 7 2 7 1 9 , 9 2 0 , 1 9 7 8 , 6 7 9 , 4 9 4 1 , 7 2 2 , 5 9 3 5 , 5 1 2 , 0 1 7 7 4 , 3 1 3 , 2 1 8 7 0 , 6 1 8 , 5 1 1 5 8 , 5 4 6 , 4 1 0 8 6 , 7 1 1 , 4 3 1 4 7 , 6 1 9 , 9 2 0 8 6 , 1 5 8 , 1 2 0 7 1 , 8 7 7 , 6 4 2 8 9 , 2 0 3 , 9 0 0 3 , 0 4 6 , 3 8 1 4 , 5 2 8 , 1 $ 5 4 1 9 3 2 1 1 3 8 3 2 0 6 5 2 3 1 , 0 1 8 2 , , 8 3 3 2 , , 3 3 3 3 , , 2 7 1 7 , , 0 2 9 3 , , 0 3 5 4 , 1 8 2 , 2 8 6 , 1 2 0 3 3 , 4 5 2 , 4 4 0 3 5 , 3 2 3 8 , 2 7 6 , 3 4 8 , 0 1 6 8 0 , 2 0 5 8 , 4 7 5 , 0 5 8 , 0 1 8 9 0 , 1 0 7 , 8 1 6 9 3 , 3 3 8 9 , 3 8 4 , 1 6 8 5 , 6 3 8 , 9 1 7 , 0 4 2 4 1 , 0 0 3 , 0 1 6 4 2 , 3 6 3 , 0 1 7 8 7 , 6 6 2 8 , 0 0 0 , 6 2 0 0 0 , 9 2 5 4 6 , 2 5 3 , 1 0 0 0 , 3 3 0 , 2 6 1 9 , 3 0 3 3 0 8 , 2 8 4 , 8 3 4 6 , 0 1 5 , 1 9 7 3 , 5 9 3 , 1 4 1 8 , 7 7 0 , 3 0 0 0 , 9 1 5 , 4 5 2 5 , 5 8 3 , 4 0 0 0 , 4 6 6 , 4 7 0 8 , 5 3 7 , 3 4 0 3 , 2 8 7 , 5 0 9 9 , 6 5 7 , 4 3 7 3 , 7 3 4 , 5 7 7 4 , 2 7 6 , 5 5 7 9 , 5 8 9 , 1 4 2 0 , 7 8 4 , 4 2 6 3 5 , 3 7 7 , 4 1 4 8 5 , 9 8 5 7 , 5 0 7 , 9 1 9 2 2 5 , 9 3 9 , 0 2 9 7 8 2 8 6 5 8 1 1 5 0 , 4 7 8 3 , , 6 2 5 6 , , 9 9 5 4 , , 0 8 5 8 , 5 4 5 , 6 5 3 9 , 8 7 0 , 6 3 6 , 0 1 0 8 6 , 7 1 5 , 9 2 6 9 8 , 4 1 4 , 9 1 9 2 3 , 9 8 7 , 5 1 1 2 7 , 4 3 3 , 7 3 5 8 1 , 7 2 9 6 , 3 9 9 , 6 6 8 6 2 7 , 8 8 1 1 , 4 7 6 , 6 1 3 , 2 0 0 0 , 6 4 6 , 6 2 1 2 , 0 1 1 0 0 0 , 2 0 1 , 1 7 5 8 , 8 8 6 , 3 4 6 9 , 7 2 6 6 2 4 , 3 3 7 , 3 0 0 0 , 0 8 1 , 5 6 0 3 , 9 8 2 , 5 0 0 0 , 0 0 6 , 4 1 5 3 , 2 6 0 , 6 9 4 4 , 3 4 4 , 9 7 9 7 , 5 7 3 , 2 7 0 3 , 3 7 7 , 2 2 9 6 , 6 3 6 5 4 8 , 1 0 5 , 0 1 - - - - - - - - - 7 8 0 , 0 0 2 $ - - - - - - - - - - - - - - - - - - - - - - - - - 7 3 0 , 3 7 1 5 4 1 , 0 1 8 , 2 7 4 0 , 5 6 1 , 2 1 1 3 , 3 3 3 , 3 3 4 8 , 1 2 7 , 5 1 5 4 , 2 9 6 , 3 0 6 1 , 8 7 0 , 4 0 2 6 , 4 3 6 , 1 2 0 3 3 , 4 5 2 , 4 4 3 4 5 , 3 0 3 , 8 1 9 7 , 1 6 1 , 8 3 9 3 , 2 1 6 , 7 2 8 6 , 9 1 8 , 0 1 4 0 0 , 9 6 6 , 7 1 0 1 5 , 4 5 4 , 9 2 0 1 , 7 6 8 , 8 3 8 8 3 , 1 3 6 , 5 2 4 7 , 7 7 2 , 0 1 5 7 9 , 2 9 1 , 0 1 2 6 5 , 8 4 2 , 8 8 9 1 , 6 8 7 , 3 2 4 8 5 , 1 7 5 , 7 8 4 8 , 9 5 7 , 0 2 5 0 7 , 9 1 9 3 0 1 , 4 9 2 , 3 0 4 9 , 5 0 4 , 6 5 8 1 , 9 9 5 , 4 7 5 6 , 2 8 5 , 7 1 0 9 , 6 3 3 , 9 8 7 2 , 0 1 6 , 0 1 0 8 6 , 7 1 5 , 9 2 4 8 6 , 8 8 1 , 9 1 1 0 3 , 6 8 6 , 5 1 5 0 8 , 2 9 2 , 7 3 5 8 1 , 7 2 9 , 6 3 9 9 , 6 6 8 6 2 7 , 8 8 1 , 1 0 0 0 , 6 2 0 0 0 , 9 2 5 4 6 , 2 5 3 , 1 0 0 0 , 3 3 0 , 2 6 1 9 , 3 0 3 3 0 8 , 2 8 4 , 8 3 4 6 , 0 1 5 , 1 9 7 3 , 5 9 3 , 1 7 2 7 , 7 7 8 , 2 0 0 0 , 9 1 5 , 4 5 2 5 , 5 8 3 , 4 0 0 0 , 4 6 6 , 4 7 0 8 , 5 3 7 , 3 4 0 3 , 2 8 7 , 5 0 9 9 , 6 5 7 , 4 3 7 3 , 7 3 4 , 5 7 7 4 , 2 7 6 , 5 5 7 9 , 5 8 9 , 1 4 7 6 , 6 1 3 , 2 0 0 0 , 6 4 6 , 6 2 1 2 , 0 1 1 0 0 0 , 2 0 1 , 1 7 5 8 , 8 8 6 , 3 4 6 9 , 7 2 6 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 5 , 3 7 7 , 4 1 - - - - 2 1 4 , 4 7 5 , 1 0 7 6 , 9 0 2 , 5 1 0 0 0 , 3 5 5 , 0 2 - - - - - - - 0 0 0 , 0 0 0 , 5 1 4 4 4 , 7 3 9 , 3 1 1 6 , 6 9 5 , 5 2 - 7 6 0 , 8 5 6 , 3 0 0 0 , 0 0 0 , 5 2 - 4 6 9 , 5 0 3 , 4 2 2 6 , 5 1 4 , 8 4 5 9 , 6 9 5 , 8 1 - - 9 8 3 , 6 1 2 , 3 1 3 5 7 , 8 8 2 , 1 1 3 0 7 , 9 9 4 , 8 2 5 4 8 , 1 0 5 , 0 1 - 1 5 3 , 2 6 0 , 6 9 4 4 , 3 4 4 , 9 7 9 7 , 5 7 3 , 2 7 0 3 , 3 7 7 , 2 2 9 6 , 6 3 6 - - - 9 0 7 , 2 6 8 , 7 1 0 0 0 , 0 0 0 , 8 4 $ 1 3 9 , 5 9 9 , 2 $ 3 0 1 , 0 7 3 , 4 $ s r e t n e C g n i p p o h S * y t t O t a s p o h S e h T * e g a l l i V l l i H r a d e C * t a o C n o t g n i l r u B * a z a l P s g n i r p S l a r o C h t 2 1 & h t 0 5 n o i l i v a P e t a g t s a E r e n r o C e h T r e t n e C n w o T e l a d n e l G * h t r o w c A t a x i l b u P * k e e r C e l g a E t a s p o h S * e r a u q S e k a L s g n i K ' * g n i s s o r C d r a v e l u o B * e r a u q S r e n r o C r u o F * g n i s s o r C n o t l i m a H * a l o n a P t a e r t n e C * a z a l P t r a M - l a W l l i H r a d e C t a a z a l P * n o i t a t S s r e h s i F a z a l P e g d i R 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 * 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 * s n o m m o C k e e r C y e n o t S * n o t r o M h t u o S 0 5 s n o m m o C n o t s e r P e k i P l l a h e t i h W * 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 * s n o m m o C d n u o h y e r G * s p o h S e l l i v s n i t r a M * I I t n i o P s r e d a r T t n i o P s r e d a r T 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 * a z a l P n o t l o B e t n e l o V a z a l P - 2 9 1 , 3 7 1 5 9 3 , 0 5 4 , 1 9 0 1 , 8 2 2 2 7 9 , 1 5 4 1 6 6 , 7 4 - 7 8 9 , 9 1 1 8 8 , 1 8 6 , 2 2 9 8 , 0 3 3 9 6 , 9 8 8 4 9 0 , 2 3 0 , 1 6 8 8 , 8 7 3 4 3 7 , 2 5 8 , 1 5 9 0 , 0 3 2 0 0 4 , 2 2 1 7 2 , 0 7 1 5 2 2 , 8 1 0 0 0 , 8 1 6 2 8 , 0 0 7 4 7 6 , 9 7 1 - - 6 7 7 , 0 8 5 2 4 7 , 0 2 1 0 0 8 , 5 2 4 4 6 , 9 1 4 9 3 , 7 9 9 - 2 1 2 , 6 2 2 8 2 0 , 3 0 1 6 1 9 , 1 4 - - - 7 3 - F d o i r e P f o e s o l C t n u o m A y r r a C s s o r G o t t n e u q e s b u S d e z i l a t i p a C t s o C / n o i t i s i u q c A t n e m p o l e v e D t s o C l a i t i n I 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 & g n i d l i u B s t n e m e v o r p m 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 d n a L & 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 6 0 0 2 6 0 0 2 6 0 0 2 A N 8 0 0 2 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 1 0 0 2 1 0 0 2 6 0 0 2 5 0 0 2 6 0 0 2 3 9 9 1 1 9 9 1 7 8 9 1 6 0 0 2 0 9 9 1 7 0 0 2 6 0 0 2 6 0 0 2 6 0 0 2 8 0 0 2 8 0 0 2 8 0 0 2 8 0 0 2 8 0 0 2 8 0 0 2 7 0 0 2 6 8 9 1 4 0 0 2 3 0 0 2 2 0 0 2 / 5 0 9 1 6 8 9 1 4 1 9 , 0 4 7 7 7 4 , 1 1 3 1 1 9 , 9 3 5 , 1 9 6 3 , 8 2 5 , 2 1 4 6 , 3 5 0 , 2 6 7 7 , 3 6 7 , 2 6 4 4 , 2 1 3 , 3 1 1 2 , 3 7 4 , 1 2 8 2 , 7 3 6 , 1 3 1 7 , 0 0 7 5 6 5 , 1 1 9 1 7 4 , 8 1 2 0 9 4 , 5 7 6 1 2 3 , 9 5 4 7 0 6 , 6 4 1 0 0 4 , 9 7 0 , 1 4 1 8 , 1 9 0 , 1 - 0 0 6 , 6 2 0 8 8 , 6 6 3 4 8 2 , 3 1 1 , 6 8 9 4 , 1 4 3 , 3 0 9 0 , 9 7 7 , 1 1 4 4 1 , 7 1 7 , 4 2 1 3 6 , 7 8 9 , 6 1 1 5 8 , 4 0 4 , 2 2 8 8 3 , 6 6 9 , 6 3 9 1 2 , 3 3 7 , 8 1 6 2 2 , 3 9 6 , 0 3 2 1 5 , 4 0 2 , 9 1 5 3 0 , 6 1 4 , 6 1 4 4 8 , 8 7 8 , 4 8 4 7 , 5 4 0 , 7 1 4 3 3 , 7 7 5 , 6 2 5 5 9 , 1 5 4 , 1 1 9 4 0 , 5 0 9 , 2 6 7 1 , 5 1 1 , 0 3 2 0 5 , 0 8 6 , 2 8 0 3 , 3 1 3 , 1 2 2 5 , 8 2 9 , 6 6 5 9 , 4 0 7 , 4 6 6 1 , 1 0 7 , 2 4 7 2 , 1 1 4 , 0 1 9 6 4 , 7 7 0 , 9 1 6 8 6 , 8 9 0 , 3 1 7 7 8 , 5 0 4 , 7 1 8 8 3 , 6 1 2 , 3 3 9 4 0 , 0 8 2 , 3 1 1 1 8 , 8 4 2 , 4 2 4 2 2 , 1 3 2 , 0 1 1 9 8 , 7 0 0 , 3 1 7 9 3 , 9 2 6 , 3 7 4 6 , 1 8 6 , 1 1 6 9 5 , 1 8 4 , 0 2 4 1 3 , 5 4 0 , 8 5 1 0 , 1 7 0 , 2 2 2 8 , 6 4 2 , 2 2 - 1 3 0 , 0 9 1 7 3 6 , 5 8 8 , 4 6 1 8 , 7 6 3 , 1 8 2 3 , 8 0 4 , 1 2 3 3 , 0 4 6 5 7 6 , 9 3 6 , 5 5 4 9 , 8 8 8 , 3 4 7 9 , 8 9 9 , 4 0 0 0 , 0 5 7 , 3 0 7 1 , 3 5 4 , 5 5 1 4 , 4 4 4 , 6 8 8 2 , 3 7 9 , 8 4 4 1 , 8 0 4 , 3 7 4 4 , 9 4 2 , 1 1 0 1 , 4 6 3 , 5 8 3 7 , 5 9 0 , 6 1 4 6 , 6 0 4 , 3 4 3 0 , 4 3 8 4 5 3 , 8 6 8 , 7 2 0 5 , 0 8 6 , 2 7 7 2 , 3 2 1 , 1 5 8 8 , 2 4 0 , 2 - 0 3 2 , 4 4 5 4 0 5 , 9 1 2 6 7 2 , 6 2 2 0 0 0 , 5 3 0 0 6 , 3 6 7 0 5 , 7 1 3 4 8 8 , 5 7 2 - - 0 6 1 , 3 1 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 4 4 0 , 7 6 8 , 9 6 5 9 , 4 0 7 , 4 2 6 6 , 1 8 4 , 2 3 9 1 , 1 5 8 , 8 1 6 8 6 , 3 6 0 , 3 1 0 7 3 , 8 8 0 , 7 1 8 8 7 , 2 5 1 , 3 3 5 6 1 , 4 0 0 , 3 1 1 1 8 , 8 4 2 , 4 2 4 2 2 , 1 3 2 , 0 1 1 3 7 , 4 9 9 , 2 1 7 9 3 , 9 2 6 , 3 7 4 6 , 1 8 6 , 1 1 6 9 5 , 1 8 4 , 0 2 4 1 3 , 5 4 0 , 8 5 1 0 , 1 7 0 , 2 2 2 8 , 6 4 2 , 2 2 - 1 3 0 , 0 9 1 7 3 6 , 5 8 8 , 4 6 1 8 , 7 6 3 , 1 8 2 3 , 8 0 4 , 1 2 3 3 , 0 4 6 5 7 6 , 9 3 6 , 5 5 4 9 , 8 8 8 , 3 4 7 9 , 8 9 9 , 4 0 0 0 , 0 5 7 , 3 0 7 1 , 3 5 4 , 5 5 1 4 , 4 4 4 , 6 8 8 2 , 3 7 9 , 8 4 4 1 , 8 0 4 , 3 7 4 4 , 9 4 2 , 1 1 0 1 , 4 6 3 , 5 8 3 7 , 5 9 0 , 6 1 4 6 , 6 0 4 , 3 4 3 0 , 4 3 8 4 5 3 , 8 6 8 , 7 2 0 5 , 0 8 6 , 2 7 7 2 , 3 2 1 , 1 5 8 8 , 2 4 0 , 2 - - 0 0 0 , 5 2 1 , 1 1 0 0 0 , 0 0 5 , 7 1 0 0 0 , 0 0 5 , 0 1 - 0 0 0 , 0 0 7 , 9 2 0 0 0 , 0 4 9 , 4 1 0 0 0 , 0 0 0 , 4 1 0 0 0 , 0 0 5 , 0 1 0 5 3 , 5 6 5 , 7 - - 0 0 0 , 0 0 0 , 7 6 6 8 , 2 4 0 , 1 2 - 6 1 9 , 8 7 0 , 0 2 - - - ) d e u n i t n o c ( s r e t n e C g n i p p o h S * s n o m m o C k n a B d e R g n i s s o r C e g d i R e n i P * e c a l P e l l i v s n o i Z n o i l i v a P t s i e G e s a h c r e v i R * s w o d a h S e s u o h t r u o C e g a l l i V n o r d e K r e t n e C g n i p p o h S e g d E s r e v i R r e t n e C g n i p p o h S l l i H n o c a e B s n o m m o C n w o T o r e t s E a z a l P s g n i r p S n o p r a T * e c a l p t e k r a M e l l i v r e p a N r e t n e C g n i p p o h S y a w e t a G e c a l p t e k r a M r e t a w e g d i r B y a w e t a G s u i l e n r o C s n o m m o C t r o p y a B * e g e l l o C & h t 4 5 a z a l P r u f i d n a S * S S I G R K e r t n e C e h T 7 2 1 , 1 8 1 , 5 1 1 5 8 1 , 7 1 4 , 4 9 8 1 2 1 , 1 7 7 , 5 7 6 4 6 0 , 6 4 6 , 8 1 2 1 6 6 , 7 8 3 , 4 1 4 2 1 , 3 7 3 0 6 4 , 3 8 3 , 1 6 6 0 4 9 , 2 7 2 , 8 1 2 2 3 5 , 7 3 0 , 9 2 4 s r e t n e C g n i p p o h S l a t o T 7 3 6 , 8 7 6 4 3 9 , 5 7 4 , 1 7 9 8 , 5 0 9 , 4 0 7 1 , 6 2 7 8 3 6 , 6 8 7 , 7 4 6 4 , 0 9 - 2 6 4 , 2 4 0 2 7 , 2 1 2 - - - - 4 2 4 , 8 6 6 , 4 3 0 3 , 0 2 2 , 6 1 3 6 , 2 9 9 , 3 6 2 8 , 2 1 5 , 4 2 4 8 1 , 4 9 3 , 9 3 8 0 7 , 9 6 2 , 4 4 6 8 0 , 5 0 4 , 3 4 1 0 8 , 5 4 8 , 1 3 6 5 9 , 9 0 0 , 5 1 2 4 4 , 2 8 0 , 0 1 1 5 2 , 0 5 2 , 1 4 0 0 , 6 1 0 2 6 , 5 1 6 4 2 4 , 4 1 6 , 4 3 0 3 , 4 9 0 , 6 4 0 0 , 9 8 0 , 3 1 1 4 , 9 6 8 , 2 2 2 4 1 , 7 6 6 , 6 3 2 9 6 , 3 7 6 , 2 3 0 6 9 , 9 9 8 , 4 2 1 0 8 , 5 4 9 , 9 2 2 3 7 , 6 2 0 , 9 1 5 4 , 1 1 9 , 4 1 5 2 , 0 5 2 , 1 4 0 0 , 6 1 0 2 6 , 5 1 6 0 0 0 , 4 5 0 0 0 , 6 2 1 7 2 6 , 3 0 9 5 1 4 , 3 4 6 , 1 2 4 0 , 7 2 7 , 2 6 1 0 , 6 9 5 , 1 1 6 2 1 , 5 0 5 , 8 1 0 0 0 , 0 0 9 , 1 4 2 2 , 3 8 9 , 5 1 9 9 , 0 7 1 , 5 - - - 6 4 6 , 5 4 3 8 6 8 , 4 9 4 , 6 4 1 1 1 5 , 9 3 3 , 3 0 1 7 5 3 , 5 5 1 , 3 4 8 1 0 , 4 1 3 8 7 , 7 2 1 6 0 4 , 6 4 4 3 4 5 , 4 2 3 , 3 1 1 5 7 , 2 1 9 , 3 1 - - - - - - - - - - - - - - - - - - - - - - - 6 0 4 , 0 0 6 , 4 0 2 5 , 6 6 9 , 5 8 6 8 , 4 4 5 , 9 8 9 5 , 2 4 6 , 2 1 9 3 , 4 5 7 , 2 2 2 9 6 , 3 7 6 , 2 3 0 6 9 , 9 9 8 , 4 2 1 0 8 , 5 4 9 , 9 2 2 3 7 , 6 2 0 , 9 1 5 4 , 1 1 9 , 4 1 5 2 , 0 5 2 , 1 4 0 0 , 6 1 0 2 6 , 5 1 6 0 0 0 , 4 5 0 0 0 , 6 2 1 7 2 6 , 3 0 9 5 1 4 , 3 4 6 , 1 2 4 0 , 7 2 7 , 2 6 1 0 , 6 9 5 , 1 1 6 2 1 , 5 0 5 , 8 1 0 0 0 , 0 0 9 , 1 4 2 2 , 3 8 9 , 5 1 9 9 , 0 7 1 , 5 - - - - - 0 4 4 , 2 5 6 , 3 6 0 9 , 2 8 6 , 1 2 6 4 3 , 5 3 3 , 5 2 0 0 0 , 5 2 4 , 9 2 5 2 , 3 5 8 , 0 3 4 9 1 , 2 0 8 , 8 1 9 1 4 , 3 6 0 , 1 1 - - - - s e i t r e p o r P l a i c r e m m o C * e g a r a G g n i k r a P n o i t a t S n o i n U 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 t c u d o r P N E P h t u o S y t r i h T s e i t r e p o r P t n e m p o l e v e D s n o m m o C t e e r t S y d d E a z a l P e n o t s e l b b o C h c a e B y a r l e D * e r a u q S r e n r o C r u o F r e t n e C n w o T e l a d n e l G t n e m p o l e v e D G R K t n e m p o l e v e D R K n i g l E h t u o S 1 1 5 , 9 3 3 , 3 0 1 7 5 3 , 5 5 1 , 3 4 5 6 8 , 3 4 1 , 0 7 s e i t r e p o r P t n e m p o l e v e D l a t o T 8 3 - F - - - - 9 4 1 , 3 8 2 , 4 1 8 7 , 6 4 1 , 6 1 1 3 9 , 3 6 4 , 6 8 - - 8 3 0 , 5 4 2 , 8 9 4 1 , 3 8 2 , 4 1 8 7 , 6 4 1 , 6 1 3 9 8 , 8 1 2 , 8 7 - - - - - - - - - - - - - 8 3 0 , 5 4 2 , 8 9 4 1 , 3 8 2 , 4 1 8 7 , 6 4 1 , 6 1 3 9 8 , 8 1 2 , 8 7 - - 1 1 4 , 3 1 3 , 3 2 1 $ 8 6 1 , 0 7 7 , 6 6 1 , 1 $ 2 1 8 , 2 2 0 , 4 2 8 $ 6 5 3 , 7 4 7 , 2 4 3 $ 2 1 4 , 0 0 3 , 8 2 $ 4 2 1 , 3 7 3 $ 0 0 4 , 2 2 7 , 5 9 7 $ 2 3 2 , 4 7 3 , 2 4 3 $ r a r e a e Y Y d e d r e i r u i u q c q c A A / t / l t i l u i u B B r a r e a e Y Y d e d t e a t v a o v o n e n e R R d e d t e a t l a u l u m m u c u c c c A A n n o i o t i a t i a c i e c r e p r e p e D D l a l t a o t o T T & & g g n i n d i l d i l u i u B B s t s n t e n e m m e v e o v r o r p p m m I I d d n n a a L L & & g g n i n d i l d i l u i u B B s t s n t e n e m m e v e v o r o r p p m m I I d d n n a a L L & & g g n i n d i l d i l u i u B B s t s n t e n e m m e v e v o r o r p p m m I I d d n n a a L L s e s c e c n n a r a r b b m m u u c c n n E E n n o i o t i a t c a o c o L L , e , e m m a a N N d d o i o r i e r e P P f o f o e s e o s l o C l C t n t n u u o o m m A A y r y r r a r a C C s s s o s r o r G G o t o t t n t e n u e u q e q s e b s b u u S S d e d z e i z l i a l t a i t p i p a a C C t s t o s o C C t n t e n e m m p p o l o e l v e e v e D D / n / n o i o t i i t s i i s u i u q c q c A A t s t o s o C C l a l i a t i i t n i I n I 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 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8 5 8 5 5 , 5 1 , 0 1 1 0 , 1 1 , 1 4 3 4 7 3 , 7 5 , 1 5 9 1 , 9 1 , 1 9 2 9 1 2 , 1 8 , 5 8 5 5 , 5 1 , 1 7 0 7 5 0 , 5 7 , 8 7 1 8 1 0 0 0 0 0 , 0 6 , 8 6 1 8 1 2 9 2 3 9 , 3 4 , 7 4 6 7 6 7 4 7 7 4 , 7 3 , 5 3 8 5 , 8 3 , 3 3 0 3 0 0 0 , 1 , 8 1 4 8 4 , 6 , 6 3 4 3 9 4 9 , 2 , 9 2 7 9 7 , 3 , 3 0 4 0 9 4 9 , 6 , 4 6 5 4 5 , 3 , 1 3 1 - - 0 8 0 7 8 7 , 5 , 6 5 3 6 3 , 4 , 4 8 6 8 2 6 2 , 0 , 7 0 3 7 3 , 8 , 2 8 2 9 4 9 1 4 1 , 3 , 8 3 2 8 2 , 4 , 4 - - - - - - - - - - - - - - - - - - - - - - - - - - 8 3 8 0 3 0 , 5 , 4 5 2 4 2 , 8 , 8 1 3 1 9 3 9 , 3 , 6 3 4 6 4 , 6 , 8 6 8 1 8 1 7 8 7 , 6 , 4 6 1 4 1 , 6 , 1 6 1 d o i r e P f o & g n i d l i u B 8 3 8 0 3 0 , 5 , 4 5 2 4 2 , 8 , 8 - - e s o l C t n u o m A y r r a C s s o r G 8 5 8 5 5 , 5 1 , 0 1 1 0 , 1 1 , 1 4 3 4 7 3 , 7 5 , 1 5 9 1 , 9 1 , 1 9 2 9 1 2 , 1 8 , 5 8 5 5 , 5 1 , 1 7 0 7 5 0 , 5 7 , 8 7 1 8 1 0 0 0 0 0 , 0 6 , 8 6 1 8 1 2 9 2 3 9 , 3 4 , 7 4 6 7 6 7 4 7 7 4 , 7 3 , 5 3 8 5 , 8 3 , 3 3 0 3 0 0 0 , 1 , 8 1 4 8 4 , 6 , 6 2 0 2 9 0 9 , 1 , 0 1 3 0 3 , 5 , 5 3 4 3 9 4 9 , 2 , 9 2 7 9 7 , 3 , 3 - - 0 8 0 7 8 7 , 5 , 6 5 3 6 3 , 4 , 4 8 6 8 2 6 2 , 0 , 7 0 3 7 3 , 8 , 2 8 2 9 4 9 1 4 1 , 3 , 8 3 2 8 2 , 4 , 4 1 8 1 7 8 7 , 6 , 4 6 1 4 1 , 6 , 1 6 1 3 9 3 8 9 8 , 8 , 1 8 2 1 2 , 8 , 7 8 7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - & g n i d l i u B o t t n e u q e s b u S d e z i l a t i p a C t s o C t n e m p o l e v e D / n o i t i s i u q c A - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - 8 3 8 0 3 0 , 5 , 4 5 2 4 2 , 8 , 8 - - - - - - - - - - - - & g n i d l i u B 8 3 8 0 3 0 , 5 , 4 5 2 4 2 , 8 , 8 t s o C l a i t i n I 8 5 8 5 5 , 5 1 , 0 1 1 0 , 1 1 , 1 4 3 4 7 3 , 7 5 , 1 5 9 1 , 9 1 , 1 9 2 9 1 2 , 1 8 , 5 8 5 5 , 5 1 , 1 7 0 7 5 0 , 5 7 , 8 7 1 8 1 0 0 0 0 0 , 0 6 , 8 6 1 8 1 2 9 2 3 9 , 3 4 , 7 4 6 7 6 7 4 7 7 4 , 7 3 , 5 3 8 5 , 8 3 , 3 3 0 3 0 0 0 , 1 , 8 1 4 8 4 , 6 , 6 2 0 2 9 0 9 , 1 , 0 1 3 0 3 , 5 , 5 3 4 3 9 4 9 , 2 , 9 2 7 9 7 , 3 , 3 - - 0 8 0 7 8 7 , 5 , 6 5 3 6 3 , 4 , 4 8 6 8 2 6 2 , 0 , 7 0 3 7 3 , 8 , 2 8 2 9 4 9 1 4 1 , 3 , 8 3 2 8 2 , 4 , 4 1 8 1 7 8 7 , 6 , 4 6 1 4 1 , 6 , 1 6 1 3 9 3 8 9 8 , 8 , 1 8 2 1 2 , 8 , 7 8 7 - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - e c e a c l a p l t p e t k e r k a r a M M r e r t e a t a w w e g e d g i d r i B r B s e s g e d g i d r i B r B o c o s c i s r i F r F * * n n o t o r t o r o M M n n o s o r s e r f e f f e f J e J * * e c e a c l a P l P e l e l i l l v i s v n s n o i o Z i Z I I I I g n g i n s i s s o s r o C r C e k e a k a L L x x o o F F * * V V I I k e k e e r e C r C e l e g l a g a E E * * I I I I I I d n d u n u o h o y h e y r e r G G * * y a y w a w k a k e a P e P G G R R K K * * y a y w a w k a k e a P e P R R K K r e r h e t h O t O r e r t e n t e n C e C g n g i n p i p p p o h o h S S l l i l l i H H n n o c o a c e a B e B * * a z a a z l a P l P m m A A n a n P a P h c h a c e a B e B y a y r a l r e l D e D * * e c e a c l a P l P l l i l l i H H w w e N e N * * l l i l l i H H w w e N e N R R K K r e r h e h t O t O l a l t a o t o T T * * 1 4 1 4 & & 1 5 1 9 5 9 - - - - 2 9 3 , 4 7 6 - 2 9 3 , 4 7 6 - 2 9 3 , 4 7 6 - - , k , k n n a a b b y y e e K K h h t i t w i w e e s s a a b b g g n n i w i w o o r r r r o o b b t i t d i d e 7 e r 4 r 7 c , c 3 5 f 8 f o , o 3 e e n n i l i l s s ’ ’ y y n n a a p p m m o o C C e e h h t t g g n n 7 i 4 t i a 7 t a , l 3 u l 5 u 8 c , 3 c l a l a c c n n i i d d e e s - s u u y y t r t r e e p p o o r r P P l o l o o o P P d d e e r r e e b b m m u u c c n n e e n n U U n n a a s s a a d 7 d 4 e 7 e d , 3 d u 5 u 8 l , c l 3 c n n i i s s i i y y t r t r e e - p p o o r r p p e e h h t t f f o o n n o o i t i r t r o o p p a a r r o o y I y I t g r t n r e i e s p s p o o r o C r r p e p k a s L s i x h i o h T F T - - - - - r r e e d d n n u u g g n n i d i d n n a a t s t s t u t u o o s s a a w w n n o o i l i l l i l i m m 8 8 . 7 . 7 7 3 7 0 $ 0 $ , 1 e 8 e 4 t , a t 6 a m m i x i x o o r r p p p p A A . o . o g g r r a a F F s s l l l e l e 3 0 0 / , / 1 k 8 k 4 n , 6 n a a B B a a i v i v o o h h c c a a W W W W d d n n a a , k , k n n a a B B S S U U , s , s e e m m a a - J J d d n n o o m m y y a a R R , k , 3 k 0 n 0 n , a 1 a B 8 B 4 , 6 s s i r i r r r a a H H , a , a c - c i r i r e e m m o o C C , p , p u u o o r r g g i t i i t i C C , a , a c c i r i r e e m m A A y f a f o w o k k a k e n P n a R a B K B * - - - - 3 4 9 , 2 9 7 , 3 - - - 3 4 9 , 2 9 7 , 3 0 4 9 , 6 4 5 , 3 1 8 3 0 , 5 4 2 , 8 2 0 9 , 1 0 3 , 5 8 3 0 , 5 4 2 , 8 2 0 9 , 1 0 3 , 5 - - . 9 . 9 0 0 0 0 2 2 , 1 , 1 3 3 r r e e b b m m e e c c e e D D f f o o s s a a - t n t n e e m m e e e e r r g g a a n n a 3 a o 4 o 9 L , L 2 9 m 7 m , 3 r r e e T T a a r r e e d d n n u u n n o o i l i l l i l i m m 0 0 . 5 . 5 5 5 $ $ d d n n a a r e t t n i t e d i C d e e g r n r c i p c p f o f o h o S e l l e i n H n i n l i o l s c s a i e h i B h t t - * y a w k a e P G R K - - - - - h c a e B y a r l e D - - - - - - - - h h c c i h i h w w , s , s e e i t i r t r e e p p o o r r p p g g n n i t i a t a r r e e p p o o d d n n a a t n t n 8 0 e 6 8 e m 2 7 m , , 0 5 p 7 6 p 3 3 o , , 8 4 o l 2 e l e v v e e d d s s t i t i t a t a s s l e l e c c r r a a p p d d n n a 8 0 a l 6 8 l 2 7 l , , 0 5 a l 7 6 a n 3 3 n , , o 8 4 o 2 i t i i t d i d d d a a n n i a i a t r t r e e c c s s a a h h o o s s l a l a y y n n a a p p m m o o C C e e h h T T - - - - - - - - . t . n t n e e m m p p o o l 8 0 e l 6 8 e 2 7 v v , , 0 5 e 7 6 e d 3 3 d , , 8 4 r 2 r o o f f d d l e l e h h d d n n a a l l s s e e d d u u l c l c n n i i y y l l l a l a r r e e n n e e g g y y r r o o * g * g e e a c e t z a l a a t P l a P c l c l m i H s A s i w h n i e h a N T P T * * * * * * - - - - - - - - - - - - - - 0 0 0 0 0 0 , 0 , 0 0 8 0 8 , 2 , 3 2 1 3 1 - - - - - 8 5 5 , 1 0 1 , 1 4 3 7 , 5 1 9 , 1 9 2 1 , 8 5 5 , 1 7 0 5 , 7 8 1 0 0 0 , 6 8 1 - - - - - 8 5 5 , 1 0 1 , 1 4 3 7 , 5 1 9 , 1 9 2 1 , 8 5 5 , 1 7 0 5 , 7 8 1 0 0 0 , 6 8 1 - - - - - - - - - - - - - - - 8 5 5 , 1 0 1 , 1 4 3 7 , 5 1 9 , 1 9 2 1 , 8 5 5 , 1 7 0 5 , 7 8 1 0 0 0 , 6 8 1 - - - - - 1 1 1 4 1 4 , 3 , 1 3 3 1 3 , 3 , 2 3 1 2 1 $ $ 8 6 8 1 6 1 , 0 , 7 0 7 7 7 , 6 , 6 6 1 6 1 , 1 , 1 $ $ 2 1 2 8 1 8 , 2 , 2 2 0 2 0 , 4 , 2 4 8 2 8 $ $ 6 5 6 3 5 3 , 7 , 4 7 7 4 7 , 2 , 4 2 3 4 3 $ $ 2 1 2 4 1 4 , 0 , 0 0 3 0 3 , 8 , 2 8 2 $ $ 4 2 4 1 2 1 , 3 , 7 3 3 7 3 $ $ 0 0 0 4 0 4 , 2 , 2 2 7 2 7 , 5 , 9 5 7 9 7 $ $ 2 3 2 2 3 2 , 4 , 7 4 3 7 3 , 2 , 4 2 3 4 3 $ $ 3 4 3 7 4 7 , 6 , 1 6 3 1 3 , 7 , 5 7 6 5 6 $ $ e c a l p t e k r a M r e t a w e g d i r B * V I k e e r C e l g a E * I I I d n u o h y e r G s e g d i r B o c s i r F * * e e r e e s e h s - t - O t i t d i e d r e c r c f o f o e n e i n L i L l a l t a o t o T T d n d a n r a G r G * e c a l P e l l i v s n o i Z _ _ _ _ _ _ _ * _ _ _ n _ o _ t _ r _ o _ M _ _ _ n _ o _ s _ r _ e _ f _ f _ e J _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ l a t o T s t n e m e v o r p m I d n a L s t n e m e v o r p m I 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 n o i t a c o L , e m a N . e . e l b l b a a t t s - s i h i h t t n n i i e e r r e e h h w w e e s s l e l e d d e e d d u u l c l c n n i i e e r r a * a s l l s i t H n t n w u u e o N o m R m K a a - - r e h t O l a t o T * 1 4 & 1 5 9 0 0 0 , 0 0 8 , 2 3 1 3 4 7 , 6 1 3 , 7 5 6 $ * e e s - t i d e r c f o e n i L l a t o T d n a r G _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ r e d n u g n i d n a t s t u o s a w n o i l l i m 8 . 7 7 $ e t a m i x o r p p A . o g r a F s l l e W / k n a B a i v o h c a W d n a , k n a B S U , s e m a J d n o m y a R , k n a B s i r r a H , a c i r e m o C , p u o r g i t i C , a c i r e m A f o k n a B , k n a b y e K h t i w e s a b g n i w o r r o b t i d e r c f o e n i l s ’ y n a p m o C e h t g n i t a l u c l a c n i d e s u y t r e p o r P l o o P d e r e b m u c n e n U n a s a d e d u l c n i s i y t r e p o r p e h t f o n o i t r o p a r o y t r e p o r p s i h T * . 9 0 0 2 , 1 3 r e b m e c e D f o s a t n e m e e r g a n a o L m r e T a r e d n u n o i l l i m 0 . 5 5 $ d n a t i d e r c f o e n i l s i h t 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 d e d u l c n i e r a s t n u o m a 9 9 3 3 - - F F 9 3 - F Kite Realty Group Trust Notes to Schedule III Consolidated Real Estate and Accumulated Depreciation Note 1. Reconciliation of Investment Properties The changes in investment properties of the Company for the years ended December 31, 2009, 2008, and 2007 are as follows: Balance, beginning of year.............. $ Acquisitions .................................... Consolidation of subsidiary............. Improvements.................................. Disposals ......................................... Balance, end of year........................ $ 2009 1,134,480,942 — 6,925,022 49,375,257 (24,011,053) 1,166,770,168 $ $ 2008 1,045,615,844 18,499,248 — 119,026,069 (48,660,219 ) 1,134,480,942 $ $ 2007 950,858,709 — — 124,043,706 (29,286,571) 1,045,615,844 The unaudited aggregate cost of investment properties for federal tax purposes as of December 31, 2009 was $1,109 million. Note 2. Reconciliation of Accumulated Depreciation The changes in accumulated depreciation of the Company for the years ended December 31, 2009, 2008, and 2007 are as follows: Balance, beginning of year...................... Acquisitions ............................................ Depreciation and amortization expense .. Disposals ................................................. Balance, end of year................................ $ $ 2009 100,762,741 — 27,714,495 (5,163,825) 123,313,411 2008 81,868,605 — 31,057,810 (12,163,674 ) 100,762,741 $ $ $ $ 2007 60,554,974 — 28,028,737 (6,715,106 ) 81,868,605 Depreciation of investment properties reflected in the statements of operations is calculated over the estimated original lives of the assets as follows: Buildings ..............................................................35 years Building improvements........................................10-35 years Tenant improvements...........................................Term of related lease Furniture and Fixtures..........................................5-10 years F-40 Exhibit No. Description Location EXHIBIT INDEX 3.1 3.2 Articles of Amendment and Restatement of Declaration of Trust of the Company 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 Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P., dated as of August 16, 2004 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* 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* 10.10 Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and John A. Kite* 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 10.9 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 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 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* Indemnification Agreement, dated as of November 3, 2008, by and between Kite Realty Group, L.P. and Darell E. Zink, Jr.* 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 Equity Incentive Plan, as amended* Kite Realty Group Trust Executive Bonus Plan* Kite Realty Group Trust 2008 Employee Share Purchase Plan* 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 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 10.4 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended September 30, 2008 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 the Kite Realty Group Trust definitive Proxy Statement, filed with the SEC on April 10, 2009 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 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 May 12, 2008 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 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 10.22 10.23  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 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 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 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* Kite Realty Group Trust Trustee Deferred Compensation Plan* Credit Agreement, dated as of February 20, 2007, by and among Kite Realty Group, L.P., the Company, KeyBank National Association, as Administrative Agent, Wachovia Bank, National Association as Syndication Agent, LaSalle Bank National Association and Bank of America, N.A. as Co-Documentation Agents and the other lenders party thereto Guaranty, dated as of February 20, 2007, by the Company and certain subsidiaries of Kite Realty Group, L.P. party thereto Term Loan Agreement, dated July 15, 2008, by and among Kite Realty Group, L.P., Kite Realty Group Trust, KeyBank National Association, as Administrative Agent and Lender, KeyBanc Capital Markets, as Lead Arranger, and the other lenders party thereto First Amendment to Term Loan Agreement, dated August 18, 2008, by and among Kite Realty Group, L.P., Kite Realty Group Trust , KeyBank National Association, as Original Lender and Agent, and Raymond James Bank and Royal Bank of Canada, collectively as “New Lenders” Form of Guaranty, dated as of July 15, 2008, by Kite Realty Group Trust Consulting Agreement, dated as of March 31, 2009, by and between the Company and Alvin E. Kite, Jr. 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 10.39 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 Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended June 30, 2006 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 February 23, 2007 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 February 23, 2007 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 22, 2008 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 22, 2008 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 22, 2008 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 6, 2009 10.24 10.25 10.26 10.27 10.28 10.29 10.30 10.31 10.32 10.33 10.34 10.35 21.1 23.1 31.1 31.2 32.1 List of Subsidiaries Consent of Ernst & Young LLP Filed herewith Filed herewith 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. EXHIBIT 31.1 I, John A. Kite, certify that: CERTIFICATION 1. 2. 3. 4. I have reviewed this annual report on Form 10-K of Kite Realty Group Trust; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. b. c. d. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions): a. b. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 16, 2010 By: /s/ John A. Kite John A. Kite Chairman and Chief Executive Officer EXHIBIT 31.2 I, Daniel R. Sink, certify that: CERTIFICATION 1. 2. 3. 4. I have reviewed this annual report on Form 10-K of Kite Realty Group Trust; Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a. b. c. d. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, 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; Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and 5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Trustees (or persons performing the equivalent functions): a. b. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. Date: March 16, 2010 By: /s/ Daniel R. Sink Daniel R. Sink Chief Financial Officer EXHIBIT 32.1 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 The undersigned, John A. Kite, Chairman and Chief Executive Officer of Kite Realty Group Trust (the “Company”), and Daniel R. Sink, Chief Financial Officer of the Company, each hereby certifies, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, that: 1. 2. The Annual Report on Form 10-K of the Company for the year ended December 31, 2009 (the “Report”) fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and The information in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. Date: March 16, 2010 By: By: /s/ John A. Kite John A. Kite Chairman and Chief Executive Officer /s/ Daniel R. Sink Daniel R. Sink Chief Financial Officer A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. Corporate Information 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 Registered Public Accounting Firm Ernst & Young, LLP Transfer Agent and Registrar BNY Mellon Shareholder Services Mr. Christopher Coleman 480 Washington Blvd., 29th Floor Jersey City, New Jersey 07310 (800) 820-8521 Shareholder Information Shareholders seeking financial 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 quar- terly 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, 2009 are avail- able to shareholders without charge upon written request to: Kite Realty Group Trust Investor Relations 30 South Meridian, Suite 1100 Indianapolis, Indiana 46204 Annual Meeting The Annual Meeting of Shareholders will be held at 9:00 a.m. local time on May 4, 2010, at 30 South Meridian, Eighth Floor Conference Center, Indianapolis, Indiana 46204. Executive Officers Tom McGowan and Dan Sink Board of Trustees John A. Kite Chairman and Chief Executive Officer Kite Realty Group Trust William E. Bindley Chairman Bindley Capital Partners, LLC Dr. Richard Cosier Dean and Leeds Professor of Management, Purdue University Eugene Golub Chairman, Golub & Company Gerald L. Moss Honorary of Counsel, Bingham McHale, LLP Michael L. Smith Retired former Executive Vice President and Chief Financial Officer Wellpoint, Inc. (formerly Anthem, Inc.) Darell E. Zink, Jr. Chairman and Chief Executive Officer Strategic Capital Partners, LLC Chairman Emeritus Alvin E. Kite Kite Realty Group Trust Executive Management Team John A. Kite Chairman and Chief Executive Officer Thomas K. McGowan President and Chief Operating Officer Daniel R. Sink Executive Vice President and Chief Financial Officer Securities and Exchange Commission and New York Stock Exchange Certifications The certifications of the Chief Executive Officer and Chief Financial Officer of the Company certifying the quality of the Company’s public disclosure and required to be filed with the Securities and Exchange Commission pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, have been filed as Exhibits 31.1 and 31.2, respectively, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009. The Company has submit- ted to the New York Stock Exchange the certification of the Chief Executive Officer certifying that he is not aware of any violation by the Company of the New York Stock Exchange corporate governance listing standards. Forward Looking Statement 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, particularly in light of the current recession; financing risks, including the availability of and costs associated with sources of liquidity; the Company’s ability to refinance, or extend the maturity dates of, its indebtedness; the level and volatility of interest rates; the financial stability of tenants, including their ability to pay rent and the risk of tenant bankruptcies; the competitive environment in which the Company operates; acquisition, disposition, development and joint ven- ture risks; property ownership and management risks; the Company’s ability to maintain its status as a real estate investment trust (“REIT”) for federal income tax purposes; potential environmental and other liabilities; impairment in the value of real estate property the Company owns; risks related to the geographical concentration of our properties in Indiana, Florida and Texas; and other factors affecting the real estate industry generally. The Company refers you to the documents filed by the Company from time to time with the Securities and Exchange Commission, specifically the section titled “Business Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2009, which discuss these and other factors that could adversely affect the Company’s results. The Company undertakes no obligation to publicly update or revise these forward-looking statements (including the FFO and net income estimates), whether as a result of new information, future events or otherwise. Kite Realty Group . 30 S. Meridian Street, Suite 1100 . Indianapolis, IN 46204 317.577.5600 www.kiterealty.com 

Continue reading text version or see original annual report in PDF format above