Kite Realty Group Trust Annual Report 2015

Plain-text annual report

ANNUAL REPORT | 2015 KITE 2015 ANNUAL REPORT DEAR SHAREHOLDERS: I’m pleased to report that 2015 marked another year of successful milestones for your company. The team’s outstanding efforts, attention and skill enabled us to execute on our strategic initiatives and deliver industry-leading results. Each area of our business contributed to the outperformance: • We generated $170.2 million of Funds From Operations (“FFO”), as adjusted, or $1.99 per diluted common share. • We maintained strong same-property net operating income (“NOI”) growth, which met the high end of our expectations at a 3.5% increase versus last year. • We continued to upgrade our high-quality portfolio by disposing of seven assets in March and selling two non-core assets in the Paciﬁc Northwest in December. • We successfully invested in four premier operating properties located in Dallas-Fort Worth, Texas; Livingston, New Jersey; and Oklahoma City, Oklahoma. • We maintained our unique Kite culture by further developing and encouraging our team, as evidenced by our industry-leading efﬁciency ratios. • We substantially completed two redevelopment projects and transitioned these assets back into our operating portfolio. • We launched our 3-R program, which represents our redevelopment, reposition and repurpose initiatives, and outlined ~$140 million in near-term opportunities. • We grew our annual free cash ﬂow to approximately $50 million after dividend payments. • We positioned the Company to enable our recent announcement of a 5.5% increase in our cash dividend while still maintaining a conservative payout ratio. This most recent payout increase results in approximately 20% cumulative dividend growth for our shareholders since 2013. • We introduced our ‘CORE’ strategic initiative plan, which will enable us to achieve the goals outlined in our three-year roadmap. At Kite, ‘CORE’ represents the four pillars that will support our long-term strategic objectives, which we provided in our three-year roadmap. We have been laser-focused on our CORE in 2015, and our ﬁnancial results and operating performance are a testament to this. CORE stands for our unique company Culture and passion, our expectation and delivery of Operational excellence, our diligent path to achieve and maintain a Resilient and ﬂexible balance sheet and Executing on these objectives and strategic initiatives to grow shareholder value over the long-term. 1 KITE REALTY GROUP kiterealty.com CULTURE AND PASSION We operate the business with an efﬁcient corporate structure and an intense passion to achieve best-in-class results. Our 2014 merger provided a catalyst to upgrade our software platforms across our business, resulting in numerous synergies, faster processes and smoother execution. We continue to produce industry-leading operating efﬁciency metrics, in terms of NOI margin and comparing our overhead expenses to revenues. We were one of the only strip center REITs to consistently be in the top of both categories for 2015. While ﬁnancial metrics are extremely important, we do not focus on short-term or immediate metrics and results. We also strive for top-tier internal controls and procedures. The Kite culture emphasizes the importance of maintaining the utmost integrity and dedication to an ethically-sound organization. We focus intently on our tenants—or more accurately, our “customers.” We closely monitor our interactions, which we call ‘tenant touches,’ because we know our business is all about relationships. In 2015, we completed nearly 7,000 tenant touches on an average tenant base of approximately 2,000 tenants. Building our platform to scale in a personal way supports our operating efﬁciency, as we maintained our tenant retention ratio above our internal goals throughout the year, ﬁnishing strong in the fourth quarter by retaining over 90%. Customer retention is the most cost-effective way to grow revenue and shareholder value. 2 OPERATIONAL EXCELLENCE We continue to execute and demonstrate to the market our operating and managing skills, as evidenced by our same-property NOI growth, which was at the high end of our expectations at 3.5%, excluding redevelopments. Over the course of the year, we also maintained a healthy NOI margin of approximately 74%. Lastly, we made signiﬁcant strides on our small shop leasing initiative, which improved 190 basis points to 87.6% leased at the end of 2015. Each of the CORE pillars contributed to our earnings power during 2015, and we met or exceeded our expectations during 2015. Despite selling properties, intentionally de-leasing future redevelopment assets and incurring one-time ﬁnancial charges, like those related to redeeming our preferred shares, we grew FFO, as deﬁned by NAREIT, by 4.5% compared to last year, to $2.11 per diluted share and produced FFO, as adjusted, of $1.99 per diluted share. 1). Peers include BRX, CDR, DDR, EQY, FRT, KIM, REG, ROIC, RPAI, RPT, WRI. Same-property numbers for KRG exclude redevelopment. RESILIENT AND FLEXIBLE BALANCE SHEET Our balance sheet and capital position ﬁnished the year on a strong note. This year welcomed Kite’s inaugural bond offering. This bond offering and our other major unsecured transactions brought our unencumbered value to well above 50% of gross assets. We also improved our balance sheet by redeeming our preferred shares in December. By doing so, we reduced overall funding costs and continued to improve our ﬁxed charge ratio, which remains in excess of three times. Also, we continued to stagger our debt maturities and maintain sufﬁcient liquidity to fund our near-term debt obligations up to the year 2020. After funding our additional $100 million relating to the seven-year term loan this coming June, and excluding the line of credit, we will have only about $110 million of CMBS debt and two project-speciﬁc loans to reﬁnance up to the year 2020. The unsecured ﬁnancing transactions we executed this year helped reduce our ﬂoating interest rate exposure from 23% at the end of 2014 to only 12% at the end of 2015. Growing our free cash ﬂow is a primary objective for Kite and imperative to being competitive in our industry. Capitalizing on opportunities of scale and focusing on operational efﬁciencies have enabled us to grow our cash ﬂow from $3 million in 2010 to $50 million in 2015. The team’s signiﬁcant focus on cash ﬂow has allowed us to achieve this growth while returning more capital to our shareholders, as evidenced by our nearly 20% cumulative dividend increase since 2013. Our enhanced liquidity position will be used to fund redevelopments and further improve our balance sheet, both of which generate meaningful returns for our shareholders. 3 KITE REALTY GROUP kiterealty.com MSA: New York/Newark - GLA: 139,700 Anchors: Nordstrom Rack, DSW, World Market, TJ Maxx, ULTA, BuyBuyBaby LIVINGSTON SHOPPING CENTER Livingston, NJ CHAPEL HILL SHOPPING CENTER Chapel Hill, TX MSA: Dallas-Fort Worth - GLA: 191,200 Anchors: Central Market, The Container Store, Cost Plus World Market EXECUTION PORTFOLIO TRANSFORMATION Maintaining reliable and organic earnings growth and a strong balance sheet are the foundations of our business. High-quality real estate is not state or market-speciﬁc, but rather sub-market and even corner-speciﬁc. Our Kite standard of being a leader in efﬁciencies, operating performance and ﬁnancial ﬂexibility helps drive our results, which is then compounded as we further elevate our portfolio’s quality. Over the last year, we substantially upgraded our already high-quality portfolio by tightening our geographic footprint around our six regional hubs and repositioning a number of our key assets via remerchandising and other enhancements. Source: STI: Popstats; information based on a 3-mile radius for the KRG portfolio. kiterealty.com 6 TRANSACTIONS Since December of 2014, we successfully exited six states that were not integral to our future strategy. We realized approximately $365 million in proceeds from these dispositions. The portfolio pruning included the second tranche of our 15-asset disposition announced in 2014 as well as two non-core assets in the Paciﬁc Northwest. With our ﬁnal asset in the area marketed to sell, we will complete our exit from the region. We prudently reinvested in attractive opportunities in our primary markets, resulting in meaningful value creation for our shareholders. Including Rampart Commons in Las Vegas, which we acquired in December of 2014, we purchased ﬁve properties for a total of approximately $220 million. Most of these properties were acquired in off-market transactions, and they included assets with NOI growth opportunities, such as Colleyville Downs in the Dallas-Fort Worth area. Note: Dispositions include the 15-asset disposition, which closed in Q4 2014 and Q1 2015. Acquisition assets include Livingston Shopping Center, Rampart Commons, Belle Isle, Colleyville Downs and Chapel Hill. Demographic data from AGS; population based on a 5-mile radius, and household income based on a 3-mile radius. DEVELOPMENT AND REDEVELOPMENT/LONG-TERM VALUE CREATION Three of our development projects continue to move toward stabilization in the latter half of 2016. In aggregate, these projects are approximately 89% pre-leased or committed, with roughly 85% of costs already funded. We substantially completed and transitioned our two redevelopment projects into our operating portfolio in 2015. Across these ﬁve development and redevelopment assets, we anticipate the majority of the annualized, incremental $9.2 million of cash NOI to come online by the end of 2016. We have identiﬁed a pipeline of $130 to $145 million in redevelopment, repurpose and repositioning opportunities, which we plan to commence over the next 18 months. These opportunities are projected to average an incremental return of approximately 9% to 11% and will be meaningfully accretive to our portfolio’s value. 7 KITE REALTY GROUP kiterealty.com MSA: Dallas-Fort Worth - GLA: 200,900 Anchors: Whole Foods, Petco COLLEYVILLE DOWNS Colleyville, TX BELLE ISLE STATION Oklahoma City, OK MSA: Oklahoma City - GLA: 396,400 Anchors: Nordstrom Rack, Babies R Us, Ross Dress for Less, Old Navy, Shoe Carnival, Walmart CONCLUSION I would like to thank the team for their effort, our Board of Trustees for their guidance and our shareholders for your continued support. We will be providing our shareholders periodic updates regarding the progress on our three-year roadmap as we work to achieve these strategic objectives and further strengthen the future of Kite Realty Group. We are excited about the future, and I’m personally privileged to lead your Company. Sincerely, John A. Kite Chief Executive Officer and Chairman of the Board 9 KITE REALTY GROUP kiterealty.com 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 For the fiscal year ended December 31, 2015 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the transition period from ___________to___________ Commission File Number: 001-32268 (Kite Realty Group Trust) Commission File Number: 333-202666-01 (Kite Realty Group, L.P.) Kite Realty Group Trust Kite Realty Group, L.P. (Exact name of registrant as specified in its charter) Maryland (Kite Realty Group Trust) Delaware (Kite Realty Group, L.P.) (State or other jurisdiction of incorporation or organization) 11-3715772 20-1453863 (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. Kite Realty Group Trust Yes No Kite Realty Group, L.P. 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. Kite Realty Group Trust Yes No Kite Realty Group, L.P. 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. Kite Realty Group Trust Yes No Kite Realty Group, L.P. 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). Kite Realty Group Trust Yes No Kite Realty Group, L.P. 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. Kite Realty Group Trust: Large accelerated filer Accelerated filer Kite Realty Group, L.P.: Large accelerated filer Accelerated filer Non-accelerated filer (do not check if a smaller reporting company) Smaller reporting company Non-accelerated filer (do not check if a smaller reporting company) Smaller reporting company Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act) Kite Realty Group Trust Yes No Kite Realty Group, L.P. Yes No The aggregate market value of the voting and non-voting common shares held by non-affiliates of the Registrant as the last business day of the Registrant’s most recently completed second quarter was $2.0 billion based upon the closing price on the New York Stock Exchange on such date. The number of Common Shares outstanding as of February 22, 2016 was 83,408,604 ($.01 par value). Documents Incorporated by Reference Portions of the definitive Proxy Statement relating to the Registrant’s Annual Meeting of Shareholders, scheduled to be held on May 11, 2016, 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. EXPLANATORY NOTE This report combines the annual reports on Form 10-K for the year ended December 31, 2015 of Kite Realty Group Trust, Kite Realty Group, L.P. and its subsidiaries. Unless stated otherwise or the context otherwise requires, references to "Kite Realty Group Trust" or the "Parent Company" mean Kite Realty Group Trust, and references to the "Operating Partnership" mean Kite Realty Group, L.P. and its consolidated subsidiaries. The terms "Company," "we," "us," and "our" refer to the Parent Company and the Operating Partnership collectively, and those entities owned or controlled by the Parent Company and/or the Operating Partnership. The Operating Partnership is engaged in the ownership and operation, acquisition, development and redevelopment of high- quality neighborhood and community shopping centers in select markets in the United States. The Parent Company is the sole general partner of the Operating Partnership and as of December 31, 2015 owned approximately 97.8% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.2% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) are owned by the limited partners. We believe combining the annual reports on Form 10-K of the Parent Company and the Operating Partnership into this single report benefits investors by: • • enhancing investors' understanding of the Parent Company and the Operating Partnership by enabling investors to view the business as a whole in the same manner as management views and operates the business; eliminating duplicative disclosure and providing a more streamlined and readable presentation of information because a substantial portion of the Company's disclosure applies to both the Parent Company and the Operating Partnership; and • creating time and cost efficiencies through the preparation of one combined report instead of two separate reports. We believe it is important to understand the few differences between the Parent Company and the Operating Partnership in the context of how we operate as an interrelated consolidated company. The Parent Company has no material assets or liabilities other than its investment in the Operating Partnership. The Parent Company issues public equity from time to time but does not have any indebtedness as all debt is incurred by the Operating Partnership. In addition, the Parent Company currently does not nor does it intend to guarantee any debt of the Operating Partnership. The Operating Partnership has numerous wholly-owned subsidiaries, and it also owns interests in certain joint ventures. These subsidiaries and joint ventures own and operate retail shopping centers and other real estate assets. The Operating Partnership is structured as a partnership with no publicly-traded equity. Except for net proceeds from equity issuances by the Parent Company, which are contributed to the Operating Partnership in exchange for General Partner Units, the Operating Partnership generates the capital required by the business through its operations, its incurrence of indebtedness and the issuance of Limited Partner Units to third parties. Shareholders' equity and partners' capital are the main areas of difference between the consolidated financial statements of the Parent Company and those of the Operating Partnership. In order to highlight this and other differences between the Parent Company and the Operating Partnership, there are separate sections in this report, as applicable, that separately discuss the Parent Company and the Operating Partnership, including separate financial statements and separate Exhibit 31 and 32 certifications. In the sections that combine disclosure of the Parent Company and the Operating Partnership, this report refers to actions or holdings as being actions or holdings of the collective Company. KITE REALTY GROUP TRUST AND KITE REALTY GROUP, L.P. AND SUBSIDIARIES Annual Report on Form 10-K For the Fiscal Year Ended December 31, 2015 TABLE OF CONTENTS Item No. Part I 1 Business 1A. Risk Factors 1B. Unresolved Staff Comments 2 3 4 Properties Legal Proceedings Mine Safety Disclosures Part II 5 6 7 Market for the Registrant’s Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities Selected Financial Data Management’s Discussion and Analysis of Financial Condition and Results of Operations 7A. Quantitative and Qualitative Disclosures about Market Risk 8 9 Financial Statements and Supplementary Data Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9A. Controls and Procedures 9B. Other Information Part III 10 11 12 13 14 Part IV Trustees, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters Certain Relationships and Related Transactions and Director Independence Principal Accountant Fees and Services 15 Exhibits, Financial Statement Schedule Signatures Page 3 10 30 30 45 45 46 49 51 82 82 82 82 87 88 88 88 88 88 89 90 [This page intentionally left blank] Forward-Looking Statements This Annual Report on Form 10-K, together with other statements and information publicly disseminated by us, 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, financial or otherwise, expressed or implied by the forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include but are not limited to: • • • • • • • • • • • • • • • • national and local economic, business, real estate and other market conditions, particularly in light of low growth in the U.S. economy as well as uncertainty added to the economic forecast due to oil and energy prices remaining relatively low in 2015 and early 2016; financing risks, including the availability of and costs associated with sources of liquidity; our ability to refinance, or extend the maturity dates of, our 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 we operate; acquisition, disposition, development and joint venture risks; property ownership and management risks; our ability to maintain our 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 we own; risks related to the geographical concentration of our properties in Florida, Texas, and Indiana; insurance costs and coverage; risks related to cybersecurity attacks and the loss of confidential information and other business disruptions; 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. We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise. 2 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”). Overview Kite Realty Group Trust, a publicly-held real estate investment trust, through its majority-owned subsidiary, Kite Realty Group, L.P., owns interests in various operating subsidiaries and joint ventures engaged in the ownership, operation, acquisition, development, and redevelopment of high-quality neighborhood and community shopping centers in selected markets in the United States. We derive revenues primarily from rents and reimbursement payments received from tenants under leases at our properties. Our operating results therefore depend materially on the ability of our tenants to make required rental payments, conditions in the United States retail sector and overall economic and real estate market conditions. As of December 31, 2015, we owned interests in 110 retail operating properties totaling approximately 22.0 million square feet of gross leasable area (including approximately 6.7 million square feet of non-owned anchor space) located in 20 states. Our retail operating portfolio was 95.4% leased to a diversified retail tenant base, with no single retail tenant accounting for more than 3.4% of our total annualized base rent. In the aggregate, our largest 25 tenants accounted for 36.4% of our annualized base rent. See Item 2, “Properties” for a list of our top 25 tenants by annualized base rent. As of December 31, 2015, we had an interest in three development projects under construction. Upon completion, these projects are anticipated to have approximately 0.6 million square feet of gross leasable area. In addition to our development projects, as of December 31, 2015, we had six redevelopment projects, which are expected to contain 1.2 million square feet of gross leasable area upon completion. Significant 2015 Activities Operating Activities We continued to drive strong operating results from our portfolio as follows: • Same Property Net Operating Income ("Same Property NOI") increased 3.5% in 2015 compared to 2014 primarily due to increases in rental rates, and improved expense control and expense recoveries; • We executed leases on 188 new and 181 renewal individual spaces for approximately 2.1 million square feet of retail space in 2015, which are both records for the Company; and • Continued to maintain our operational excellence. We believe our efficiency metrics, which we define as a combination of operating margin and general and administrative expenses to revenue, are in the top third of our peer group. 3 Portfolio Recycling and Acquisition Activities In March 2015, we sold seven retail operating properties for aggregate gross proceeds of $167.4 million and a net gain of $3.4 million. In addition, in December 2015, we sold two properties for gross proceeds of $44.9 million and a net gain of $0.6 million. During 2015, we acquired four operating properties with total gross leasable area ("GLA") of approximately 928,000 square feet (617,000 square feet of owned GLA) for an aggregate purchase price of $185.8 million, including the following: • Colleyville Downs – In April 2015, we acquired this shopping center with total GLA of 200,900 square feet (185,800 square feet of owned GLA) in Dallas, Texas. Primary anchor tenants for this center include Whole Foods Market, Ace Hardware, and Petco. • Belle Isle Station – In May 2015, we acquired this shopping center with total GLA of 396,400 square feet (164,300 square feet of owned GLA) in Oklahoma City, Oklahoma. Anchor tenants for this center include Nordstrom Rack, Old Navy, Ross Dress for Less, Shoe Carnival, Babies ‘R Us, Party City, Kirkland’s and a non-owned Wal-Mart Supercenter. • Livingston Shopping Center – In July 2015, we acquired this shopping center with total and owned GLA of 139,700 square feet in Livingston, New Jersey. Anchor tenants for this center include Nordstrom Rack, TJ Maxx, Cost Plus World Market, Buy Buy Baby, DSW and Ulta. • Chapel Hill Shopping Center – In August 2015, we acquired this shopping center with total GLA of 191,200 square feet (126,800 square feet of owned GLA) in Fort Worth, Texas. In connection with the acquisition, we assumed an $18.3 million fixed rate mortgage. Anchor tenants for this center include HEB Grocery, The Container Store and Cost Plus World Market. Development and Redevelopment Activities During 2015, we initiated, advanced, and completed a number of development and redevelopment activities, including the following: • Parkside Town Commons – Phase II near Raleigh, North Carolina – We commenced construction on Phase II of this development with total GLA of 347,800 square feet (297,400 square feet of owned GLA) in the second quarter of 2014. Field & Stream and Golf Galaxy both opened in 2014 and Frank Theatres opened in July of 2015. The property is expected to be stabilized in the second half of 2016. • Holly Springs Towne Center – Phase II near Raleigh, North Carolina – We commenced construction on Phase II of this development with total GLA of 154,000 square feet (122,000 square feet of owned GLA) in the third quarter of 2014. Phase II of the development is anchored by Bed Bath & Beyond, which opened in December 2015, and DSW, which is expected to open in the first half of 2016. The remaining anchor, Carmike Theatres, is expected to open in the summer of 2016. • Tamiami Crossing in Naples, Florida – We commenced site work on this development with total GLA of 141,600 square feet (121,600 square feet of owned GLA) in the fourth quarter of 2014. The development is expected to be stabilized by the second half of 2016. This center will be anchored by Stein Mart, Ulta, Michaels, Marshalls, Ross Dress for Less and Petsmart. • Gainesville Plaza in Gainesville, Florida – We substantially completed construction on this redevelopment and transitioned this project to the operating portfolio in the fourth quarter of 2015. This center is anchored by Burlington Coat Factory and Ross Dress for Less. • Cool Spring Market in Nashville, Tennessee – We completed the relocation of an existing Staples to a new, smaller space and executed new leases with Buy Buy Baby and DSW on this redevelopment. We transitioned this project to the operating portfolio in the fourth quarter of 2015. 4 Financing and Capital Raising Activities. Our primary business objectives are to generate increasing cash flow, achieve long-term growth and maximize shareholder value primarily through the operation, acquisition, development and redevelopment of well-located community and neighborhood shopping centers. In 2015, we were able to strengthen our balance sheet and improve our financial flexibility and liquidity to fund future growth. We ended the year with approximately $373 million of combined cash and borrowing capacity on our unsecured revolving credit facility. Significant financing and capital raising activities included: • • • • In June 2015, we increased the existing unsecured term loan with a maturity date of July 1, 2019 from $230 million to $400 million. In September 2015, the Operating Partnership issued $250 million of senior unsecured notes at a blended rate of 4.41% and an average maturity of 9.8 years. In October 2015, we entered into a new seven-year unsecured term loan ("7-Year Term Loan") for up to $200 million. In December 2015, we retired the $90 million loan that was secured by City Center utilizing a draw on our unsecured revolving credit facility. Later in December 2015, we drew $100 million on the term loan and used the proceeds to pay down the unsecured revolving credit facility. In December 2015, we redeemed all 4,100,000 outstanding shares of our 8.250% Series A Cumulative Redeemable Perpetual Preferred Share (“Series A Preferred Shares”). • During 2015, we retired $233.1 million of property level secured debt. 2015 Cash Distributions In 2015, we declared total cash distributions of $1.09 per common share and $2.0912 per share of our Series A Preferred Shares. The cash distribution per share of our Series A Preferred Shares includes the amount equal to all accrued and unpaid dividends up to, but not including, the redemption date of December 2, 2015. On February 4, 2016, our Board of Trustees approved a quarterly common share distribution of $0.2875 per common share for the first quarter of 2016, which represents a 5.5% increase over our previous quarterly distribution. Business Objectives and Strategies Our primary business objectives are to increase the cash flow and build or realize capital appreciation of our properties, achieve sustainable long-term growth and maximize shareholder value primarily through the operation, acquisition, development, and redevelopment of well-located community and neighborhood shopping centers. We invest in properties with well-located real estate and strong demographics and we use our effective leasing and management strategies to improve the long-term values and economic returns of our properties. We believe that many of our 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 or renovating certain properties to make them more attractive to existing and prospective tenants and consumers; • Growth Strategy: Using debt and equity capital prudently to selectively acquire additional retail properties, redevelop or renovate our existing properties, and develop shopping centers on land parcels that we currently 5 own or newly acquired land where we believe that investment returns would meet or exceed internal benchmarks; and • Financing and Capital Preservation Strategy: Maintaining a strong balance sheet with sufficient flexibility to fund our operating and investment activities. Funding sources include the public equity and debt market, our existing revolving credit facility, new secured debt, internally generated funds, proceeds from selling land and properties that no longer fit our strategy, and potential strategic joint ventures. We continuously monitor the capital markets and may consider raising additional capital when appropriate. Operating Strategy. Our primary operating strategy is to maximize rental rates and occupancy levels by attracting and retaining a strong and diverse tenant base. Most of our properties are located in regional and neighborhood trade areas with attractive demographics, which allows us to maintain and, in many cases, increase occupancy and rental rates. We seek to implement our operating strategy by, among other things: • increasing rental rates upon the renewal of expiring leases or re-leasing space to new tenants while minimizing vacancy to the extent possible; • maximizing the occupancy of our operating portfolio; • minimizing tenant turnover; • maintaining leasing and property management strategies that maximize rent growth and cost recovery; • maintaining a diverse tenant mix in an effort to limit our exposure to the financial condition of any one tenant or any category of tenants; • maintaining the physical appearance, condition, and design of our properties and other improvements located on our properties to maximize our ability to attract customers; • actively managing costs to minimize overhead and operating costs; • 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; and • taking advantage of under-utilized land or existing square footage, reconfiguring properties for better use, or adding ancillary income areas to existing facilities. We successfully executed our operating strategy in 2015 in a number of ways, including improving our Same Property NOI by 3.5% and generating blended new and renewal positive cash leasing spreads of 11.4% in 2015. We have also been successful in maintaining a diverse retail tenant mix with no tenant accounting for more than 3.4% of our annualized base rent. See Item 2, “Properties” for a list of our top tenants by gross leasable area and annualized base rent. Growth Strategy. Our growth strategy includes the selective deployment of resources to projects that are expected to generate investment returns that meet or exceed our internal benchmarks. We continue to implement our growth strategy in a number of ways, including: • • • selectively pursuing the acquisition of retail operating properties, portfolios and companies in markets with strong demographics; continually evaluating our operating properties for redevelopment and renovation opportunities that we believe will make them more attractive for leasing to new tenants, right sizing anchor space while increasing rental rates, or re-leasing to existing tenants at increased rental rates; and disposing of selected assets that no longer meet our long-term investment criteria and recycling the net proceeds into assets that provide maximum returns and rent growth potential in targeted markets or using the proceeds to improve our financial position. 6 In evaluating opportunities for potential acquisition, development, redevelopment and disposition, we consider a number of factors, including: • • • • the expected returns and related risks associated with the investments 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 re-leased or 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, availability of parking, visibility, and the demographics of the surrounding area; and • the level of success of existing properties in the same or nearby markets. In 2015, we were successful in completing and integrating the acquisition of four high-quality retail properties that enabled us to expand our presence in our core markets. We also delivered three very strong development and redevelopment projects to the operating portfolio, and we expect to deliver several more projects in 2016. In addition, we are currently evaluating additional redevelopment, repositioning, and repurposing opportunities at a number of operating properties. Total estimated costs for these projects are expected to be in the range of $130 million to $145 million. Financing and Capital Preservation Strategy. We finance our acquisition, development, and redevelopment 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 shares through public offerings or private placements, the reinvestment of proceeds from the disposition of assets, the incurrence of additional indebtedness through secured or unsecured borrowings, and entering into real estate joint ventures. Our primary financing and capital preservation strategy is to maintain a strong balance sheet and enhance our flexibility to fund operating and investment activities in the most cost-effective way. We consider a number of factors when evaluating our level and type of indebtedness and when making decisions regarding additional borrowings. Among these factors are the construction costs or purchase prices of properties to be developed or acquired, the estimated market value of our properties and the Company as a whole upon consummation of the financing, and the ability of particular properties to generate cash flow to cover expected debt service. Our efforts to strengthen our balance sheet are important. We achieved an investment grade credit rating in 2014. We expect that will enable us to opportunistically access the public unsecured bond market at some point and otherwise will allow us to lower our cost of capital and provide greater flexibility in managing the acquisition and disposition of assets in our operating portfolio. In addition, through the retirement of property level secured debt in 2015, we were able to unencumber approximately $440 million of gross assets associated with our operating properties. We intend to continue implementing our financing and capital strategies in a number of ways, including: • prudently managing our balance sheet, including maintaining sufficient capacity 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; 7 • • • • extending the maturity dates of and/or refinancing our near-term mortgage, construction and other indebtedness; expanding our unencumbered asset pool; raising additional capital through the issuance of common shares, preferred shares or other securities; evaluating whether to enter into construction loans prior to commencement of vertical construction to fund our larger developments and redevelopments; • managing our exposure to interest rate increases on our variable-rate debt through the use of fixed rate hedging transactions; • issuing unsecured bonds in the public markets, and securing property specific long-term non-recourse financing; and • entering into joint venture arrangements in order to access less expensive capital and to mitigate risk. Competition The United States commercial real estate market continues to be highly competitive. We face competition from other REITs and other owner-operators engaged in the ownership, leasing, acquisition, and development of shopping centers as well as from numerous local, regional and national real estate developers and owners in each of our markets. Some of these competitors may have greater capital resources than we do; although we do not believe that any single competitor or group of competitors in any of the primary markets where our properties are located are dominant in that market. We face significant competition in our efforts to lease available space to prospective tenants at our operating, development and redevelopment properties. The nature of the competition for tenants varies based on the characteristics of each local market in which we own 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, appearance, access and traffic patterns 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 We and our properties are subject to a variety of federal, state, and local environmental, health, safety and similar laws including: 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. Affordable Care Act. Effective January 2015, we may be subject to excise taxes under the employer mandate provisions of the Affordable Care Act ("ACA"), if we (i) do not offer health care coverage to substantially all of our full-time employees and their dependents; or (ii) do not offer health care coverage that meets the ACA's affordability and minimum value standards. The excise tax is based on the number of full-time employees. We do not anticipate being subject to a penalty under the ACA; however, even in the event that we are, any such penalty would be less than $0.3 million, as we have 145 full-time employees as of December 31, 2015. 8 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 storage tanks 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. 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. Neither existing environmental, health, safety and similar laws nor the costs of our compliance with these laws has had a material adverse effect on our financial condition or results operations, and management does not believe they will in the future. In addition, we have not incurred, and do not expect to incur, any material costs or liabilities due to environmental contamination at properties we currently own or have owned in the past. However, we cannot predict the impact of new or changed laws or regulations on properties we currently own or may acquire in the future. With environmental sustainability becoming a national priority, we have continued to demonstrate our strong commitment to be a responsible corporate citizen through resource reduction and employee training that have resulted in reductions of energy consumption, waste and improved maintenance cycles. 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. Certain risks such as loss from riots, war or acts of God, and, in some cases, flooding are not insurable; and therefore, we do not carry insurance for these losses. 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, 2015, we had 145 full-time employees. The majority of these employees were based at our Indianapolis, Indiana headquarters. Segment Reporting Our primary business is the ownership and operation of neighborhood and community shopping centers. We do not distinguish or group our operations on a geographical basis, or any other basis, when measuring performance. Accordingly, we have one operating segment, which also serves as our reportable segment for disclosure purposes in accordance with GAAP. 9 Available Information Our Internet website address is www.kiterealty.com. You can obtain on our website, free of charge, a copy of our Annual Report on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K, and any amendments to those reports, as soon as reasonably practicable after we electronically file such reports or amendments with, or furnish them to, the SEC. Our Internet website and the information contained therein or connected thereto are not intended to be incorporated into this Annual Report on Form 10-K. Also available on our website, free of charge, are copies of our Code of Business Conduct and Ethics, our Code of Ethics for Principal Executive Officer and Senior Financial Officers, our Corporate Governance Guidelines, and the charters for each of the committees of our Board of Trustees—the Audit Committee, the Corporate Governance and Nominating Committee, and the Compensation Committee. Copies of our Code of Business Conduct and Ethics, our Code of Ethics for Principal Executive Officer and Senior Financial Officers, our Corporate Governance Guidelines, and our committee charters are also available 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. 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 Because of our geographical concentration in Florida, Indiana and Texas, a prolonged economic downturn in these states could materially and adversely affect our financial condition and results of operations. The specific markets in which we operate may face challenging economic conditions that could persist into the future. In particular, as of December 31, 2015, 26% of our owned square footage and 25% of our total annualized base rent was located in Florida, 17% of our owned square footage and 15% of our total annualized base rent was located in Indiana and 13% of our owned square footage and 13% of our total annualized base rent was 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 and high unemployment rates. Adverse economic or real estate trends in Florida, Indiana, Texas, or the surrounding regions, or any decrease in demand for retail 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. 10 Disruptions in the financial markets could affect our ability to obtain financing on reasonable terms, or at all, and have other material adverse effects on our business. Disruptions in the credit markets generally, or relating to the real estate industry specifically, may adversely affect our ability to obtain debt financing at favorable rates or at all. These disruptions could impact the overall amount of debt financing available, lower loan to value ratios, cause a tightening of lender underwriting standards and terms and higher interest rate spreads. As a result, we may be unable to refinance or extend our existing indebtedness or the terms of any refinancing may not be as favorable as the terms of our existing indebtedness. For example, as of December 31, 2015, we had approximately $263 million and $17 million of debt maturing in 2016 and 2017, respectively. We intend to retire $100 million of the 2016 maturities utilizing the remaining capacity on the 7-Year Term Loan. If we are not successful in refinancing our remaining 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. We currently have sufficient capacity under the unsecured revolving credit facility to retire outstanding debt in the event we are not able to refinance such debt when it becomes due, but we cannot provide any assurances that we will be able to maintain that capacity in order to retire any or all of these loans at maturity. If economic conditions deteriorate in any of our markets, we may be forced to seek alternative sources of potentially less attractive financing, and have to adjust our business plan accordingly. In addition, we may be unable to obtain permanent financing on development projects we temporarily financed with construction loans. 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. These events also may make it more difficult or costly for us to raise capital through the issuance of our common shares or preferred shares. The disruptions in the financial markets have had and may continue to have a material adverse effect on the market value of our common shares and other adverse effects on our business. If our tenants are unable to secure financing necessary to continue to operate and grow 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 and grow their businesses. Disruptions in credit markets, as discussed above, may adversely affect our tenants’ ability to obtain debt financing at favorable rates or at all. 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. Ongoing challenging conditions in the United States and global economy, and the challenges facing our retail tenants and non-owned anchor tenants may have a material adverse effect on our financial condition and results of operations. Certain sectors of the United States economy are still experiencing weakness. Over the past several years, this structural weakness has resulted in periods of high unemployment, the bankruptcy or weakened financial condition of a number of retailers, decreased consumer spending, increased home foreclosures, low consumer confidence, and reduced demand and rental rates for certain retail space. Market conditions remain challenging as higher than historical levels of unemployment and lower consumer confidence have persisted. There can be no assurance that the recovery will continue. General economic factors that are beyond our control, including, but not limited to, economic recessions, decreases in consumer confidence, reductions in consumer credit availability, increasing consumer debt levels, rising energy costs, higher 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 their rent obligations 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 request rental concessions on 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, federal, state, and local 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. 11 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, or a loss on disposition of one or more of our properties. Our real estate assets may be subject to impairment charges, which may negatively affect our net income. Our long-lived assets, primarily real estate held for investment, are carried at cost unless circumstances indicate that the carrying value of the assets may not be recoverable. We evaluate whether there are any indicators, including property operating performance and general market conditions, that the value of the real estate properties (including any related amortizable intangible assets or liabilities) may not be recoverable. Through the evaluation, we compare the current carrying value of the asset to the estimated undiscounted cash flows that are directly associated with the use and ultimate disposition of the asset. Our estimated cash flows are based on several key assumptions, including rental rates, costs of tenant improvements, leasing commissions, anticipated hold periods, and assumptions regarding the residual value upon disposition, including the exit capitalization rate. These key assumptions are subjective in nature and could differ materially from actual results. Changes in our disposition strategy or changes in the marketplace may alter the hold period of an asset or asset group, which may result in an impairment loss, and such loss could be material to our financial condition or operating performance. To the extent that the carrying value of the asset exceeds the estimated undiscounted cash flows, an impairment loss is recognized equal to the excess of carrying value over fair value. If such indicators, as described above, are not identified, management will not assess the recoverability of a property's carrying value. The fair value of real estate assets is highly subjective and is determined through comparable sales information and other market data if available or through use of an income approach such as the direct capitalization method or the traditional discounted cash flow approach. Such cash flow projections consider factors, including expected future operating income, trends and prospects, as well as the effects of demand, competition and other factors, and therefore are subject to a significant degree of management judgment. Changes in those factors could impact the determination of fair value. In estimating the fair value of undeveloped land, we generally use market data and comparable sales information. These subjective assessments have a direct impact on our net income because recording an impairment charge results in an immediate negative adjustment to net income. There can be no assurance that we will not take additional charges in the future related to the impairment of our assets. Any future impairment could have a material adverse effect on our results of operations in the period in which the charge is taken. Our business is significantly influenced by demand for retail space generally, and a decrease in such demand may have a greater adverse effect on our business than if we owned a more diversified real estate portfolio. 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 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. The termination of any leases by any non-owned anchor tenant or major tenant with leases in multiple locations, 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 12 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. In the event of a prolonged or severe economic downturn, 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. Lease terminations or failure of a 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. Additionally, in the event our tenants are involved in mergers with or acquisitions by third parties, such tenants may choose to terminate their leases, vacate the leased premises or not renew their leases if they consolidate, downsize or relocate their operations as a result of the transaction. For example, our tenant Office Depot announced its agreement to merge with Staples, which merger is currently subject to regulatory approvals. These two tenants contribute on a combined basis approximately 2% of our total annualized base rent. In connection with the proposed merger, Office Depot and Staples may choose to close or relocate a number of their stores, which may be stores at premises they lease from us. In that event, we may experience periods where multiple locations are not leased as we seek new tenants, which would negatively affect our net rental revenues in the near term. 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, 2015, the five largest tenants in our operating portfolio in terms of annualized base rent were Publix, TJX Companies, Petsmart, Bed Bath & Beyond, and Ross Stores, representing 3.4%, 2.6%, 2.2%, 2.2%, and 2.1%, respectively, of our total annualized base rent. We face potential material adverse effects from tenant bankruptcies, and we may be unable to collect balances due from any tenant in bankruptcy or replace the tenant at current rates, or at all. Tenant bankruptcies may increase during periods of difficult economic conditions. We cannot make any assurance that a tenant that files for bankruptcy protection will continue to pay its rent obligations. A bankruptcy filing by or relating to one of our tenants or a lease guarantor would legally bar our efforts to collect pre-bankruptcy debts from that tenant or the lease guarantor, 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 including pre-bankruptcy balances. 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, which would result in a reduction in our cash flow and in the amount of cash available for distribution to our shareholders. Moreover, 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. We had $1.7 billion of consolidated indebtedness outstanding as of December 31, 2015, 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 $1.7 billion of consolidated outstanding indebtedness as of December 31, 2015. At December 31, 2015, $711.0 million of our debt bore interest at variable rates ($215.3 million when reduced by our $495.7 million of fixed interest rate swaps). 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, net of cash flow hedges, as of December 31, 2015 increased by 1%, the increase in interest expense on our unhedged variable rate debt would decrease future cash flows by $2.2 million annually. 13 We also intend to incur additional debt in connection with various development and redevelopment projects and may incur additional debt 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” (determined before the deduction of dividends paid and excluding net capital gains) or otherwise as is necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes or otherwise avoid paying taxes that can be eliminated through distributions to our shareholders. Our substantial debt 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 development and acquisitions in the future. Agreements with lenders supporting our unsecured revolving credit facility 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 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 in the agreement, covenant or condition contained in the agreements, failure to maintain certain financial and operating ratios and other criteria, misrepresentations, acceleration of other material indebtedness 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 the extent such debt is secured, 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, limit our ability to make distributions to our shareholders, prevent us from obtaining additional funds needed to address cash shortfalls or pursue growth opportunities. Certain of our fixed-rate and variable-rate 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. The agreements relating to our unsecured revolving credit facility, Term Loan and 7-Year Term Loan contain provisions providing that any “Event of Default” under one of these facilities or loans will constitute an “Event of Default” under the other facility or loan. In addition, these agreements relating to our unsecured revolving credit facility, Term Loan and 7-Year Term Loan, as well as the agreement relating to our senior unsecured notes, include a provision providing that any payment default under an agreement relating to any material indebtedness will constitute an “Event of Default” thereunder. These provisions could allow the lending institutions to accelerate the amount due under the loans. If payment is accelerated, our assets may not be sufficient to repay such debt in full, and, as a result, such an event may have a material adverse effect on our cash flow, financial condition and results of operations. We were in compliance with all applicable covenants under the agreements relating to our unsecured revolving credit facility, Term Loan, 7-Year Term Loan and senior unsecured notes as of December 31, 2015, although there can be no assurance that we will continue to remain in compliance. 14 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. A significant amount of our indebtedness is 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. For tax purposes, a foreclosure of any of our properties would be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we would recognize taxable income on foreclosure, but we would not receive any cash proceeds, which could hinder our ability to meet the REIT distribution requirements imposed by the Internal Revenue Code. If any of our properties are foreclosed on due to a default, our ability to pay cash distributions to our shareholders and our earnings will be limited. In addition, as a result of cross-collateralization or cross-default provisions contained in certain of our mortgage loans, a default under one mortgage loan could result in a default on other indebtedness and cause us to lose other better performing properties, which could materially and adversely affect our financial condition and results of operations. We are subject to risks associated with hedging agreements. We use a combination of interest rate protection agreements, including interest rate swaps, to manage risk associated with interest rate volatility. This may expose us to additional risks, including a risk that the 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 being able to generate substantial revenues from our properties. Periods of economic slowdown or recession, rising interest rates or declining demand for real estate, or the public perception that any of these events may occur, could result in a general decline in rents or an increased incidence of defaults under existing leases. Such events would materially and adversely affect our financial condition, results of operations, cash flow, per share trading price of our common shares and our ability to satisfy debt service obligations and to make distributions to 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 but are not limited to: • • • • • • • adverse changes in the national, regional and local economic climate, particularly in: Florida, where 26% of our owned square footage and 25% of our total annualized base rent is located; Indiana, where 17% of our owned square footage and 15% of our total annualized base rent is located; and Texas, where 13% of our owned square footage and 13% of our total annualized base rent is located; tenant bankruptcies; local oversupply of rental space, increased competition or reduction in demand for rentable space; inability to collect rent from tenants or having to provide significant rent concessions to tenants; 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; 15 • • • 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-lease space; decreased attractiveness of our properties to tenants; • weather conditions that may increase or decrease energy costs and other weather-related expenses (such as snow removal costs); • • • • • costs of complying with changes in governmental regulations, including those governing health, safety, 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 customer traffic patterns. Our financial covenants may restrict our operating and acquisition activities. Our unsecured revolving credit facility contains certain financial and operating covenants, including, among other things, certain coverage ratios, as well as limitations on our ability to incur debt, make dividend payments, sell all or substantially all of our assets and engage in mergers and consolidations and certain acquisitions. These covenants may restrict our ability to pursue certain business initiatives or certain acquisition transactions. In addition, certain of our 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. 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. 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, 2015, we owned 10 of our operating properties through consolidated joint ventures and one through an unconsolidated joint venture. As of December 31, 2015, the 10 properties represented 13.4% of the annualized base rent of the portfolio. In addition, we currently own land held for development through one joint venture. Our joint ventures may 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 certain 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; 16 • • 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 may seek 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-lease space as leases expire or require us to undertake unbudgeted capital improvements. 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 markets in which our properties are located but which have greater capital resources. As of December 31, 2015, leases representing 6.5% of our owned gross leasable area (GLA) were scheduled to expire in 2016. If our competitors offer space at rental rates below current market rates, or below the rental rates we currently charge our tenants, we may be unable to lease on satisfactory terms to potential tenants, and we may be pressured to reduce our rental rates below those we currently charge in order to retain tenants when our leases with them expire. We also may be required to offer more substantial rent abatements, tenant improvements and early termination rights or accommodate requests for renovations, build-to-suit remodeling and other improvements than we have historically. 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. 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 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 dilution in shareholder value. As of December 31, 2015, we have nine development and redevelopment projects. New development projects and property 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; as a result of competition for attractive development and acquisition opportunities, we may be unable to acquire assets as we desire or the purchase price may be significantly elevated, which may impede our growth; difficulty obtaining financing on acceptable terms or paying operating expenses and debt service costs associated with redevelopment properties prior to sufficient occupancy; • the failure to meet anticipated occupancy or rent levels within the projected time frame, if at all; 17 • • • • • inability to operate successfully in new markets where new properties are located; inability to successfully integrate new properties into existing operations; exposure to fluctuations in the general economy due to the significant time lag between commencement and completion of redevelopment projects; 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 could 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 may increase, which may result in reduced returns, or even losses, from such investments. In deciding whether to acquire or develop a particular property, we make certain assumptions regarding the expected future performance of that property. If these new properties do not perform as expected, our financial performance may be materially and adversely affected, or an impairment charge could occur. In addition, the issuance of equity securities as consideration for any acquisitions could be dilutive to our shareholders. We may not be successful in pursuing suitable acquisitions, for which we face significant competition, or identifying 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 continue to evaluate the market for available properties and may acquire properties when we believe strategic opportunities exist. However, we may be unable to acquire a desired property because of competition from other real estate investors with substantial capital, including from other REITs and institutional investment funds. Even if we are able to acquire a desired property, competition from other potential acquirers may significantly increase the purchase price. Additionally, we may not be successful in identifying suitable real estate properties or other assets that meet our development or redevelopment criteria, or we may fail to complete developments, redevelopments, acquisitions or investments on satisfactory terms. Failure to identify or complete developments, redevelopments or acquisitions could slow our growth, which could in turn materially adversely affect our operations. Development and 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 three development projects under construction. We have also identified multiple redevelopment opportunities at our operating properties and expect to commence redevelopment in the future. In connection with any development or 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, or an impairment charge could occur. 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. Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers of our properties, and we cannot predict the various market conditions affecting real estate investments that 18 will exist at any particular time in the future. In addition, in connection with our formation at the time of our initial public offering (“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 7.4% of our annualized base rent in the aggregate as of December 31, 2015. These six properties are International Speedway Square, Shops at Eagle Creek, Whitehall Pike, Portofino 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. Uninsured losses or losses in excess of insurance coverage could materially and adversely affect our cash flow, financial condition and results of operations. 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. In addition, tenants generally are required to indemnify and hold us harmless from liabilities resulting from injury to persons or damage to personal or real property, on the premises, due to activities conducted by tenants or their agents on the properties (including without limitation any environmental contamination) and, at the tenant’s expense, to obtain and keep in full force during the term of the lease, liability and property damage insurance policies. However, tenants may not properly maintain their insurance policies or have the ability to pay the deductibles associated with such policies. 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 at adequate levels 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 after a covered period of time, 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 19 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 generally do not decrease, and may increase, 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. 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 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. Environmental laws also may create liens on contaminated sites in favor of the government for damages and costs it incurs to address such contamination. Moreover, if contamination is discovered on our properties, environmental laws may impose restrictions on the manner in which that property may be used or how businesses may be operated on that property. Some of the properties in our portfolio contain, may have contained or are adjacent to or near other properties that have contained or currently contain underground storage tanks for petroleum products or other hazardous or toxic substances. These tanks may have released, or have the potential to release, such substances into the environment. In addition, some of our properties have tenants that may use hazardous or toxic substances in the routine course of their businesses. In 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 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 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; 20 • • 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. Compliance with the Americans with Disabilities Act and fire, safety and other regulations may require us to make expenditures that adversely affect our cash flows. 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. Noncompliance with the ADA could result in imposition of fines or an award of damages to private litigants and the incurrence of additional costs associated with bringing the properties into compliance. Although we believe the properties in our portfolio substantially comply with present requirements of the ADA, we have not conducted an audit or investigation of all of our properties to determine our compliance. While the tenants to whom our properties are leased are obligated by law to comply with the ADA provisions, and typically under tenant leases are obligated to cover costs associated with compliance, if required changes involve greater expenditures than anticipated, or if the changes must be made on a more accelerated basis than anticipated, the ability of these tenants to cover costs could be adversely affected. As a result, we could be required to expend funds to comply with the provisions of the ADA, which could adversely affect our results of operations and financial condition. In addition, we are required to operate the properties in compliance with fire and safety regulations, building codes and other land use regulations, as they may be adopted by governmental agencies and bodies and become applicable to the properties. We may be required to make substantial capital expenditures to comply with, and we may be restricted in our ability to renovate the properties subject to, those requirements. The resulting expenditures and restrictions could have a material adverse effect on our ability to meet our financial obligations. Inflation may adversely affect our financial condition and results of operations. Most of our leases contain provisions requiring the tenant to pay a 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. It may also limit our ability to recover all of our operating expenses. 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. In addition, renewals of leases or future leases may not be negotiated on current terms, in which event we may recover a smaller percentage of our operating expenses. We face risks relating to cybersecurity attacks that could cause loss of confidential information and other business disruptions. We rely extensively on computer systems to process transactions and manage our business, and our business is at risk from and may be impacted by cybersecurity attacks. These could include attempts to gain unauthorized access to our data and computer systems. Attacks can be both individual and/or highly organized attempts by very sophisticated hacking organizations. A cybersecurity attack could compromise the confidential information of our employees, tenants, and vendors. Additionally, we rely on a number of service providers and vendors, and cybersecurity risks at these service providers and vendors create additional risks for our information and business. A successful attack could lead to identity theft, fraud or other disruptions to our business operations, any of which may negatively affect our results of operations. We employ a number of measures to prevent, detect and mitigate these threats. These prevention measures include password protection, frequent password change events, firewall detection systems, frequent backups, a redundant data system for core applications and penetration testing. We conduct periodic assessments of (i) the nature, sensitivity and location of information that we collect, process and store and the technology systems we use; (ii) internal and external cybersecurity threats to and vulnerabilities of our information and technology systems; (iii) security controls and processes currently in place; (iv) the impact 21 should our technology systems become compromised; and (v) the effectiveness of our management of cybersecurity risk. The results of these assessments are used to create and implement a strategy designed to prevent, detect and respond to cybersecurity threats. However, there is no guarantee such efforts will be successful in preventing a cyber-attack. 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 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, and has waived in the past, 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 22 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 additional 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. Furthermore, our Board of Trustees has the sole power to amend our bylaws and may amend our bylaws in a way that may have the effect of delaying, deferring or preventing a change in control of our company or the removal of existing management or may otherwise be detrimental to your interests. Certain provisions of Maryland law could inhibit changes in control. Certain provisions of Maryland law may have the effect of inhibiting a third party from making a proposal to acquire us or of impeding a change of control under circumstances that otherwise could provide the holders of our common shares with the opportunity to realize a premium over the then-prevailing market price of such shares, including: • • “business combination moratorium/fair price” provisions that, subject to limitations, prohibit certain business combinations between us and an “interested shareholder” (defined generally as any person who beneficially owns 10% or more of the voting power of our shares or an affiliate thereof) for five years after the most recent date on which the shareholder becomes an interested shareholder, and thereafter imposes stringent fair price and super-majority shareholder voting requirements on these combinations; and “control share” provisions that provide that “control shares” of our company (defined as shares which, when aggregated with other shares controlled by the shareholder, entitle the shareholder to exercise one of three increasing ranges of voting power in electing trustees) acquired in a “control share acquisition” (defined as the direct or indirect acquisition of ownership or control of “control shares” from a party other than the issuer) have no voting rights except to the extent approved by our shareholders by the affirmative vote of at least two thirds of all the votes entitled to be cast on the matter, excluding all interested shares, and are subject to redemption in certain circumstances. We have opted out of these provisions of Maryland law. However, our Board of Trustees may opt to make these provisions applicable to us at any time. A substantial number of common shares eligible for future issuance or sale could cause our common share price to decline significantly and may be dilutive to current shareholders. Our declaration of trust authorizes our Board of Trustees to, among other things, issue additional common shares without shareholder approval. The issuance of substantial numbers of our common shares in the public market or the perception that such issuances might occur could adversely affect the per share trading price of our common shares. In addition, any such issuance could dilute our existing shareholders' interests in our company. Furthermore, if our shareholders sell, or the market perceives that 23 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, 2015, we had outstanding 83,334,865 common shares, and substantially all of these shares are freely tradable. In addition, 1,901,278 units of our Operating Partnership were owned by our executive officers and other individuals as of December 31, 2015, 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 to register 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. Certain officers and trustees may have interests that conflict with the interests of shareholders. Certain of our officers 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. The term of each employment agreement runs through June 30, 2017, with automatic one-year renewals each July 1st thereafter unless either we or the officer elects not to renew them. 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 within a reasonable timeframe. Until suitable replacements could be identified and hired, our operations and financial condition could be impaired. We depend on external capital to fund our capital needs. To qualify as a REIT, we are required to distribute to our shareholders each year at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains). In order to eliminate federal income tax, we are required to distribute annually 100% of our net taxable income, including capital gains. Partly because of these distribution requirements, we may 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. Any additional debt we incur will increase our leverage, expose us to the risk of default and may impose operating restrictions on us, and any additional equity we raise could be dilutive to existing shareholders. Our access to third-party sources of capital depends on a number of things, including: • • • • • • • general market conditions; the market’s perception of our growth potential; our current debt levels; our current and potential future earnings; our cash flow and cash distributions; our ability to qualify as a REIT for federal income tax purposes; and the market price of our common shares. 24 If we cannot obtain capital from third-party sources, we may not be able to acquire or develop properties when strategic opportunities exist, satisfy our principal and interest obligations or make distributions to our shareholders. 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 limited liability in that capacity if he or she performs his or her duties in good faith and in a manner that he or she reasonably believes to be in our best interests and 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. 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 investment, financing, borrowing and dividend policies and our policies with respect to all other activities, including growth, debt, capitalization and operations, will be determined by our management and, in certain cases, approved by our Board of Trustees. 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. Our share price could be volatile and could decline, resulting in a substantial or complete loss of 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 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; 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 including tax reform; • speculation in the press or investment community; 25 • • • • • actions by institutional shareholders or hedge funds; increases or decreases in dividends; 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. The cash available for distribution to shareholders may not be sufficient to pay distributions at expected levels, nor can we assure you of our ability to make distributions in the future. We may use borrowed funds to make distributions. If cash available for distribution generated by our assets decreases in future periods from expected levels, our inability to make expected distributions could result in a decrease in the market price of our common shares. All distributions will be made at the discretion of our Board of Trustees and will depend on our earnings, our financial condition, maintenance of our REIT qualification and other factors as our Board of Trustees may deem relevant from time to time. We may not be able to make distributions in the future. In addition, some of our distributions may include a return of capital. To the extent that we decide to make distributions in excess of our current and accumulated earnings and profits, such distributions would generally be considered a return of capital for federal income tax purposes to the extent of the holder’s adjusted tax basis in their shares. A return of capital is not taxable, but it has the effect of reducing the holder’s adjusted tax basis in its investment. To the extent that distributions exceed the adjusted tax basis of a holder’s shares, they will be treated as gain from the sale or exchange of such shares. If we borrow to fund distributions, our future interest costs would increase, thereby reducing our earnings and cash available for distribution from what they otherwise would have been. Future offerings of debt securities, which would be senior to our equity securities, may adversely affect the market prices of our common shares. In the future, we may attempt to increase our capital resources by making offerings of debt securities, including unsecured notes, medium term notes, senior or subordinated notes. Debt securities will generally be entitled to receive interest payments, both current and in connection with any liquidation or sale, prior to the holders of our common shares are entitled to receive distributions. Future offerings of debt securities, or the perception that such offerings may occur, may reduce the market prices of our common shares and/or the distributions that we pay with respect to our common shares. Because we may generally issue any such debt securities in the future without obtaining the consent of our shareholders, our shareholders will bear the risk of our future offerings reducing the market prices of our equity securities. If securities or industry analysts do not publish research or reports about our business, or if they downgrade their recommendations regarding our common shares, our share price and trading volume could decline. The trading market for our shares is influenced by the research and reports that industry or securities analysts publish about us or our business. If any of the analysts who cover us downgrades our common shares or publishes inaccurate or unfavorable research about our business, our share price may decline. If analysts cease coverage of us or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our common share price or trading volume to decline and our shares to be less liquid. An inactive market may also impair our ability to raise capital by selling shares and may impair our ability to acquire additional properties or other businesses by using our shares as consideration, which in turn could materially adversely affect our business. In addition, the stock market in general, and the NYSE and REITs in particular, have recently experienced extreme price and volume fluctuations. These broad market and industry factors may decrease the market price of our shares, regardless of our actual operating performance. For these reasons, among others, the market price of our shares may decline substantially and quickly. 26 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” (determined before the deduction for dividends paid and excluding net 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. Since we were the successor to Inland Diversified Real Estate Trust, Inc. ("Inland Diversified") for federal income tax purposes as a result of our merger, the rule against re-electing REIT status following a loss of such status also would apply to us if Inland Diversified failed to qualify as a REIT in any of its 2011 through 2014 tax years. Although Inland Diversified believed that it was organized and operated in conformity with the requirements for qualification and taxation as a REIT for each of its taxable years prior to the Merger with us, Inland Diversified did not request a ruling from the IRS that it qualified as a REIT and thus no assurance can be given that it qualified as a REIT. 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 unsecured term loans 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. If Inland Diversified failed to qualify as a REIT for a taxable year before the Merger or that includes the Merger and no relief is available, in connection with the Merger we would succeed to any earnings and profits accumulated by Inland Diversified for taxable periods that it did not qualify as a REIT, and we would have to pay a special dividend and/or employ applicable deficiency dividend procedures (including significant interest payments to the IRS) to eliminate such earnings and profits. 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 27 gain net income and 100% of our undistributed income from prior years. Moreover, if we have net income from “prohibited transactions,” that income will be subject to a 100% tax. In general, prohibited transactions are sales or other dispositions of property held primarily for sale to customers in the ordinary course of business. The determination as to whether a particular sale is a prohibited transaction depends on the facts and circumstances related to that sale. While we will undertake sales of assets if those assets become inconsistent with our long-term strategic or return objectives, we do not believe that those sales should be considered prohibited transactions, but there can be no assurance that the IRS would not contend otherwise. The need to avoid prohibited transactions could cause us to forego or defer sales of properties that 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. If Inland Diversified failed to qualify as a REIT for a taxable year before the Merger or that includes the Merger and no relief is available, as a result of the Merger (a) we would inherit any corporate income tax liabilities of Inland Diversified for Inland Diversified’s open tax years (generally three years or Inland Diversified’s 2011 through 2014 tax years but possibly extending back six years or Inland Diversified’s initial 2009 tax year through its 2014 tax year), including penalties and interest, and (b) we would be subject to tax on the built-in gain on each asset of Inland Diversified existing at the time of the Merger if we were to dispose of the Inland Diversified asset within five years following the Merger (i.e. before July 1, 2019). 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. Complying with REIT requirements may limit our ability to hedge effectively and may cause us to incur tax liabilities. The REIT provisions of the Code may limit our ability to hedge our assets and operations. Under these provisions, any income that we generate from transactions intended to hedge our interest rate risk will be excluded from gross income for purposes of the REIT 75% and 95% gross income tests if the instrument hedges interest rate risk on liabilities used to carry or acquire real estate assets (each such hedge, a "Borrowing Hedge") or manages the risk of certain currency fluctuations (each such hedge, a "Currency Hedge"), and such instrument is properly identified under applicable Treasury Regulations. Effective for taxable years beginning after December 31, 2015 the exclusion from 95% and 75% gross income tests also will apply if we previously entered into a Borrowings Hedge or a Currency Hedge, a portion of the hedged indebtedness or property is disposed of, and in connection with such extinguishment or disposition we enter into a new properly identified hedging transaction to offset the prior hedging position. Income from hedging transactions that do not meet these requirements will generally constitute non-qualifying income for purposes of both the REIT 75% and 95% gross income tests. As a result of these rules, we may have to limit our use of hedging techniques that might otherwise be advantageous or implement those hedges through a taxable REIT subsidiary. This could increase the cost of our hedging activities because our taxable REIT subsidiary would be subject to tax on gains or expose us to greater risks associated with changes in interest rates than we would otherwise want to bear. In addition, losses in our taxable REIT subsidiary will generally not provide any tax benefit, except for being carried back or forward against past or future taxable income in the taxable REIT subsidiary. 28 Complying with the REIT requirements may cause us to forgo and/or liquidate otherwise attractive investments. To qualify as a REIT, we must continually satisfy tests concerning, among other things, the sources of our income, the nature and diversification of our assets, the amounts that we distribute to our shareholders and the ownership of our shares. To meet these tests, we may be required to take actions we would otherwise prefer not to take or forgo taking actions that we would otherwise consider advantageous. For instance, in order to satisfy the gross income or asset tests applicable to REITs under the Code, we may be required to forgo investments that we otherwise would make. Furthermore, we may be required to liquidate from our portfolio otherwise attractive investments. In addition, we may be required to make distributions to shareholders at disadvantageous times or when we do not have funds readily available for distribution. These actions could reduce our income and amounts available for distribution to our shareholders. Thus, compliance with the REIT requirements may hinder our investment performance. Dividends paid by REITs generally do not qualify for reduced tax rates. The maximum rate applicable to “qualified dividend income” paid by regular “C” corporations to U.S. shareholders that are individuals, trusts and estates generally is 20%. Dividends payable by REITs, however, generally are not eligible for the current reduced rate, except to the extent that certain holding requirements have been met and a REIT’s dividends are attributable to dividends received by a REIT from taxable corporations (such as a REIT’s taxable REIT subsidiaries), to income that was subject to tax at the REIT/corporate level, or to dividends properly designated by the REIT as “capital gains dividends.” Although the reduced rates applicable to dividend income from regular “C” corporations do not adversely affect the taxation of REITs or dividends payable by REITs, it could cause investors who are non-corporate taxpayers to perceive investments in REITs to be relatively less attractive than investments in the shares of regular “C” corporations that pay dividends, which could adversely affect the value of our common shares. If the Operating Partnership fails to qualify as a partnership for U.S. federal income tax purposes, we could fail to qualify as a REIT and suffer other adverse consequences. We believe that our Operating Partnership is organized and operated in a manner so as to be treated as a partnership and not an association or a publicly traded partnership taxable as a corporation, for U.S. federal income tax purposes. As a partnership, our Operating Partnership is not subject to U.S. federal income tax on its income. Instead, each of the partners is allocated its share of our Operating Partnership’s income. No assurance can be provided, however, that the IRS will not challenge our Operating Partnership’s status as a partnership for U.S. federal income tax purposes or that a court would not sustain such a challenge. If the IRS were successful in treating our Operating Partnership as an association or publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT. Also, the failure of the Operating Partnership to qualify as a partnership would cause it to become subject to U.S. federal corporate income tax, which would reduce significantly the amount of its cash available for distribution to its partners, including us. New partnership tax audit rules could have a material adverse effect on us. The recently enacted Bipartisan Budget Act of 2015 changes the rules applicable to federal income tax audits of partnerships. Under the new rules (which are generally effective for taxable years beginning after December 31, 2017), among other changes and subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner's distributive share thereof) is determined, and taxes, interest, or penalties attributable thereto are assessed and collected, at the partnership level. Although it is uncertain how these new rules will be implemented, it is possible that they could result in partnerships in which we directly or indirectly invest being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and we, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though we, as a REIT, may not otherwise have been required to pay additional corporate-level taxes had we owned the assets of the partnership directly. The new partnership tax audit rules will apply to the Operating Partnership and its subsidiaries that are classified as partnerships for federal income tax purposes. The changes created by these new rules are sweeping and in many respects dependent on the promulgation of future regulations and 29 other guidance by the U.S. Department of the Treasury, or the Treasury, and, accordingly, there can be no assurance that these rules will not have a material adverse effect on us. ITEM 1B. UNRESOLVED STAFF COMMENTS None ITEM 2. PROPERTIES Retail Operating Properties As of December 31, 2015, we owned interests in a portfolio of 110 retail operating properties totaling approximately 22.0 million square feet of total Gross Leasable Area (“GLA”) (including approximately 6.7 million square feet of non-owned anchor space). The following tables set forth more specific information with respect to our retail operating properties as of December 31, 2015: 30 r o j a M s t n a n e T d e n w o - n o N s t n a n e T d e n w O r o j a M R B A r e p . t f . q S % d e s a e L 2 A L G d e n w O r a e Y / t l i u B s p o h S s r o h c n A l a t o T s p o h S s r o h c n A l a t o T d e t a v o n e R A S M 1 y t r e p o r P a m a b a l A b u l C s ' m a S , s ' l h o K g i B , s l l a h s r a M , s a m e n i C l a g e R , t r a M - l a W 5 0 . 9 % 5 . 7 6 x i l b u P 5 2 . 2 1 $ % 4 . 8 7 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 3 9 % 3 . 3 9 5 2 3 , 1 2 4 7 4 , 2 9 0 1 0 , 4 5 3 4 8 4 , 6 4 4 9 9 9 1 0 4 8 , 4 4 5 6 1 , 6 6 3 0 0 2 / 6 6 9 1 m a h g n i m r i B m a h g n i m r i B e d a n e m o r P e l l i v s s u r T e c a l p t e k r a M y a l C e e r T r a l l o D , t r a m S t e P , s t o L t o p e D e m o H e r o M & e n i W l a t o T , k c a R m o r t s d r o N 5 0 . 8 2 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 9 1 0 , 4 2 3 8 8 , 5 5 2 0 9 , 9 7 8 0 0 2 n o s c u T r e n r o C e h T a n o z i r A t u c i t c e n n o C t e g r a T , s l e a h c i M , d n o y e B & h t a B d e B , x x a M J T , t e k r a m r e p u S p o h S & p o t S , s e l p a t S , o c t e P t n e m e v o r p m I e m o H s e w o L ' 3 3 . 6 1 % 2 . 6 8 % 0 . 0 0 1 % 0 . 6 9 9 7 6 , 0 6 0 5 2 , 8 4 1 9 2 9 , 8 0 2 0 1 0 2 y l g n i l l i K y l g n i l l i K t a 3 s n o m m o C g n i s s o r C t o p e D e m o H e m o H s e w o L ' t n e m e v o r p m I e m o H s e w o L ' t n e m e v o r p m I e c i f f O , 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 8 9 . 6 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 , y t i r o h t u A s t r o p S , t r a m s t e P , y b b o L y b b o H s ' l h o K e r a w d r a H e c A , s ' l l a e B , x i l b u P 2 0 . 9 n n A , e i l r a h C g n i m r a h C , s o c i h C , o i t a P s ' l r a C , k n a B . A . s o J , x i l b u P , r e t a e h T s k n a r F 9 7 . 4 2 r o l y a T % 2 . 7 6 % 8 . 8 8 % 0 . 0 0 1 % 0 . 0 0 1 % 9 . 4 9 % 9 . 3 9 8 4 1 , 4 2 6 5 9 , 1 4 1 5 1 9 , 0 3 1 6 3 1 , 8 1 1 3 6 0 , 5 5 1 2 9 0 , 0 6 2 , e e r T r a l l o D , s s e n t i F k c o l C e h t d n u o r A 2 0 . 4 1 % 6 . 0 6 % 0 . 0 0 1 % 2 . 2 9 1 7 0 , 6 3 3 8 2 , 6 4 1 4 5 3 , 2 8 1 s t e P l l A , y t i C y t r a P , s d o o F e l o h W m u i r o p m E t o p e D 9 3 . 6 2 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 4 4 0 , 5 6 9 6 1 , 8 6 3 1 2 , 3 3 1 6 8 . 5 1 % 4 . 7 7 % — % 4 . 7 7 1 3 6 , 5 2 — 1 3 6 , 5 2 t e g r a T s l e a h c i M , t r a m S t e P , n i a t n u o M r e d n a G 0 9 . 5 1 s s e n t i F t e n a l P , e r u t i n r u F e n i h s n u S s l l a h s r a M , s t r o p S y m e d a c A , s s e n t i F A L 8 4 . 9 x i l b u P 6 6 . 8 % 6 . 2 8 % 5 . 2 6 % 6 . 5 5 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 4 . 5 9 % 4 . 3 9 % 8 . 6 7 3 5 6 , 5 2 0 6 3 , 9 2 3 4 9 , 9 4 1 0 7 , 5 2 0 0 6 , 5 4 4 7 5 , 3 9 3 4 5 , 5 9 5 7 2 , 9 1 1 0 4 5 , 1 7 3 9 1 , 7 9 8 0 0 2 5 9 1 , 6 3 1 5 5 5 , 5 6 1 4 1 0 2 / 6 8 9 1 a p m a T e l l i v n o s k c a J a d r o G a t n u P n o t n e d a r B , g n i n r o M y a d s e u T , t r a M n i e t S , x i l b u P 7 6 . 9 % 7 . 9 8 % 0 . 0 0 1 % 0 . 9 9 0 4 6 , 3 1 6 7 3 , 1 2 1 6 1 0 , 5 3 1 3 0 0 2 / 8 7 9 1 h c a e B o r e V 9 8 9 1 7 0 0 2 1 1 0 2 0 1 0 2 8 0 0 2 / 4 8 9 1 3 1 0 2 6 0 0 2 e l a d r e d u a L t F a z a l P e n o t s e l b b o C s r e y M t r o F e r a u q S l a i n o l o C t r a u t S y a r l e D s e l p a N 3 e c a l p t e k r a M y a r l e D r e t n e C e v o C s n o m m o C n w o T o r e t s E e d a n e m o r P e r o t S t n r u B s n o m m o C t n i o P e r t n e C s n o m m o C t r o p y a B a z a l P n o t l o B a z a l P t e e r t S h t 2 1 a d i r o l F t e g r a T e e r T r a l l o D , t o p e D e c i f f O , s ' l l a e B 6 0 . 1 1 x i l b u P 4 8 . 3 1 % 9 . 7 9 % 8 . 2 8 % 0 . 0 0 1 % 0 . 0 0 1 % 9 . 8 9 % 9 . 5 9 0 3 7 , 3 6 6 0 7 , 3 3 9 9 9 , 5 5 0 0 0 , 9 0 1 9 2 7 , 9 1 1 6 0 7 , 2 4 1 4 0 0 2 / 7 9 9 1 h c a e B o r e V e r a u q S r e v i R n a i d n I 4 9 9 1 o d n a l r O e d a n e m o r P k e e r C s ' r e t n u H t a o C n o t g n i l r u B , s s e L r o f s s e r D s s o R t o L a e v a S , s e l r a h C d n a d n 2 , y r o t c a F 2 0 . 9 % 3 . 0 2 % 0 . 0 0 1 % 6 . 1 8 1 3 5 , 7 3 8 2 1 , 5 2 1 9 5 6 , 2 6 1 5 1 0 2 / 0 7 9 1 e l l i v s e n i a G a z a l P e l l i v s e n i a G 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 7 1 . 1 1 % 0 . 6 9 % 0 . 0 0 1 % 5 . 9 9 8 3 0 , 0 3 7 5 4 , 3 0 2 5 9 4 , 3 3 2 3 1 0 2 / 9 9 9 1 a n o t y a D 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 t e g r a T , s ' l l a e B y t i C y t r a P , x i l b u P 7 4 . 6 1 % 1 . 4 9 % 0 . 0 0 1 % 8 . 7 9 6 1 5 , 9 3 1 5 3 , 6 6 7 6 8 , 5 0 1 1 3 e i x i D n n i W s s e n t i F h c n u r C , s l l a e B , x x a M J T 3 9 . 1 1 % 7 . 2 7 % 0 . 0 0 1 % 4 . 2 9 n o l a S a t l U , x x a M t e g r a T J T , s s e L r o f s s e r D s s o R , t r a m s t e P , s l e a h c i M 2 0 . 8 1 % 9 . 1 9 % 0 . 0 0 1 % 7 . 6 9 l a v i n r a C e o h S , e r o M & e n i W l a t o T , s d o o G g n i t r o p S s ’ k c i D , s l e a h c i M , s e l p a t S , y v a N s s e n t i F l a y o R , x i l b u P 3 9 . 6 1 e i x i D n n i W , t r a M n i e t S 0 2 . 2 1 s n e e r g l a W 1 0 . 7 3 t r a m s t e P 9 9 . 4 1 x i l b u P 4 0 . 4 1 % 9 . 8 8 % 9 . 1 8 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 4 7 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 2 . 6 9 % 3 . 4 9 % 0 . 0 0 1 % 0 . 0 0 1 % 1 . 4 8 l a r e n e G r a l l o D , l a t i p s o H s n e r d l i h C ' i m a i M , s ' l h o K 5 8 . 5 1 % 5 . 8 8 % 5 . 5 8 % 6 . 6 8 t e k r a M h s e r F , t r a M n i e t S 9 8 . 4 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 2 4 9 , 9 2 0 1 9 , 0 2 0 6 1 , 4 0 9 4 , 6 7 3 7 , 1 2 1 2 5 9 , 6 3 9 8 2 , 7 8 6 5 6 , 9 4 5 7 4 , 7 6 1 3 1 , 7 5 0 0 6 , 5 4 1 3 1 , 2 1 0 8 8 , 4 1 0 4 8 , 7 7 7 4 5 , 3 5 3 7 0 , 7 8 0 1 5 , 6 6 1 9 2 , 6 1 0 7 3 , 1 2 7 7 5 , 9 9 1 9 9 4 , 0 9 4 1 0 2 / 6 8 9 1 8 0 0 2 1 1 0 2 9 0 0 2 8 9 9 1 / 8 4 9 1 3 1 0 2 / 3 0 0 2 s e l p a N y t i C e k a L y t i C e k a L o d n a l r O e l l i v n o s k c a J a p m a T 5 0 5 , 7 3 1 4 9 7 , 4 2 2 8 0 0 2 e l a d r e d u a L t F I I e s a h P - s n o m m o C y t i C e k a L e d a n e m o r P d o o w e k a L a z a l P y r a M e k a L e r a u q S e k a L s g n i K ' s n o m m o C y t i C e k a L g n i s s o r C a i h t i L e r a u q S r a m a r i M 9 6 2 , 8 2 1 5 2 9 , 7 7 1 2 0 0 2 / 5 8 9 1 a p m a T e d a n e m o r P e l a d h t r o N 2 2 8 , 0 0 1 7 9 2 , 8 6 1 0 1 0 2 3 9 9 1 t s a o C m l a P g n i d n a L t s a o C m l a P s e l p a N g n i s s o r C e g d i R e n i P e m o H s e w o L ' t e g r a T , t n e m e v o r p m I e m o H s e w o L ' t n e m e v o r p m I t e g r a T t e g r a T r o j a M s t n a n e T d e n w o - n o N s t n a n e T d e n w O r o j a M R B A r e p . t f . q S s p o h S s r o h c n A l a t o T s p o h S s r o h c n A l a t o T % d e s a e L 2 A L G d e n w O s s e n t i F A L , y b b o L y b b o H 1 7 . 4 1 % 1 . 3 9 x i l b u P 6 3 . 4 1 $ % 6 . 1 8 x i l b u P 2 0 . 3 1 x i l b u P 2 7 . 5 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 5 . 3 9 % 0 . 0 0 1 % 0 . 0 0 1 % 6 . 8 9 2 4 0 , 5 2 1 4 4 , 4 2 1 0 4 , 9 2 0 9 5 , 4 2 0 0 6 , 5 4 9 7 3 , 4 5 0 9 8 , 8 4 4 0 3 , 5 9 2 4 6 , 0 7 0 2 8 , 8 7 1 9 2 , 8 7 4 9 8 , 9 1 1 r a e Y / t l i u B d e t a v o n e R 8 0 0 2 3 0 0 2 1 0 0 2 / 1 9 9 1 A S M o d n a l r O d u o l C . t S s e l p a N 9 0 0 2 y t i C e g n a r O s n o m m o C l l i H t n a s a e l P 1 y t r e p o r P d u o l C . t S t a x i l b u P a z a l P e s a h c r e v i R g n i s s o r C n o x a S s e l p a t S , t e k r a M h s e r F 8 9 . 4 1 % 4 . 0 7 % 0 . 0 0 1 % 4 . 1 9 8 6 5 , 0 2 7 8 1 , 0 5 5 5 7 , 0 7 3 1 0 2 / 3 8 9 1 s e l p a N k e e r C e l g a E t a s p o h S ' s o t u p a C s U R y o T , s s e L r o f s s e r D s s o R , s s e n t i F A L 0 5 . 4 1 % — e e r T r a l l o D , s d o o F r e n i F s k c i n i m o D ' 8 5 . 3 1 t r a m S t e P , x x a M J T 7 2 . 3 1 % 8 . 6 6 % 6 . 2 9 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 , l l i T n a V & k c a r t S s n e e r g l a W ) e s a e l d n u o r g ( t e k r a M h s e r F e h T — % — % — s s e n t i F e m i t y n A 7 9 . 4 1 % 0 . 3 9 % 0 . 0 0 1 % 9 . 8 8 % 1 . 8 9 % 0 . 0 0 1 % — % 4 . 4 9 x i l b u P 1 0 . 2 1 % 2 . 6 9 x i l b u P 8 6 . 2 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 3 . 8 9 % 0 . 0 0 1 0 4 7 , 1 3 5 0 4 , 1 2 5 9 0 , 3 3 0 1 1 , 2 2 — — 8 8 8 , 7 3 4 7 6 , 1 5 7 7 9 , 5 6 3 8 6 , 1 6 8 2 6 , 9 6 9 7 0 , 3 7 2 7 0 , 9 9 3 9 7 , 3 8 0 0 0 , 8 2 1 0 0 0 , 8 2 1 — — 4 5 8 , 5 4 3 4 0 , 1 1 7 9 8 , 6 5 t e g r a T , s l h o K , s U R s e i b a B , s s e L r o f s s e r D s s o R o c t e P , x a M e c i f f O , s l l a h s r a M , y o B Z - a L 7 9 . 1 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 6 9 9 , 5 4 6 1 7 , 5 0 2 2 1 7 , 1 5 2 s n e e r g l a W 2 5 . 6 1 % 2 . 3 4 % 0 . 0 0 1 % 7 . 3 6 8 3 8 , 5 2 3 9 5 , 4 1 1 3 4 , 0 4 s ' l h o K l a v i n r a C e o h S , n o l a S a t l U , x x a M J T , o c t e P 8 3 . 4 1 % 4 . 9 8 % 0 . 0 0 1 % 7 . 5 9 1 9 1 , 0 5 0 4 4 , 4 7 1 3 6 , 4 2 1 t e k r a M k c u n h c S 6 8 . 1 1 % 0 . 3 9 % 0 . 0 0 1 % 5 . 8 9 9 8 6 , 0 2 2 2 1 , 4 7 1 1 8 , 4 9 d e B , s U R s e i b a B , n o l a S a t l U , x x a M J T , s l e a h c i M , s s e n t i F A L , d n o y e B & h t a B , 1 r e i P , t r a m s t e P , y v a N d l O , x a M e c i f f O W S D , y t i r o h t u A s t r o p S 8 . 4 1 % 2 . 4 7 e c i v r e S l e c r a P d e t i n U , y a b t e e w S 3 8 . 0 1 % 0 . 0 0 1 s e l p a t S , t e k r a M d l r o W 9 8 . 1 2 t e k r a M h s e r F 5 6 . 8 1 x i l b u P 0 7 . 2 1 % 7 . 2 9 % 5 . 2 9 % 5 . 7 8 e i x i D - n n i W 0 9 . 2 1 % 0 . 0 0 1 x i l b u P 9 3 . 6 1 x i l b u P 6 7 . 5 1 % 4 . 7 8 % 0 . 0 8 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 2 . 8 9 % 4 . 6 9 % 6 . 6 9 % 0 . 0 0 1 % 0 . 5 9 % 2 . 4 9 % 8 . 3 9 % 0 . 0 0 1 5 2 5 , 7 1 9 6 1 , 9 1 6 9 3 , 2 2 9 7 5 , 1 3 2 6 3 , 9 6 2 8 3 , 9 3 3 9 1 , 4 2 5 4 2 , 6 2 2 1 5 , 1 5 8 3 0 , 1 2 1 5 1 , 0 6 8 9 7 , 8 5 7 3 0 , 9 6 7 0 2 , 0 4 7 4 5 , 2 8 7 7 3 , 0 9 6 9 3 , 0 9 2 8 5 7 , 9 5 3 0 0 6 , 5 4 0 4 3 , 4 5 3 0 7 , 1 5 2 8 9 , 4 8 3 3 5 , 8 7 8 4 9 , 7 7 7 9 9 1 1 1 0 2 7 0 0 2 2 1 0 2 7 0 0 2 6 0 0 2 9 0 0 2 7 9 9 1 5 0 0 2 6 9 9 1 1 0 0 2 2 0 0 2 8 0 0 2 1 1 0 2 8 0 0 2 6 0 0 2 8 0 0 2 4 0 0 2 8 0 0 2 o d n a l r O e l l i v n o s k c a J s e l p a N e c a r r e T e l p m e T k e e r C n o t g n i l u J t a s p o h S d o o w t s 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 e c a r r e T e l p m e T e i c u L t S t r o P n o i t i d a r T t a g n i d n a L e h T e i c u L t S t r o P r e t n e C e g a l l i V n o i t i d a r T s r e y M t r o F o d n a l r O s n a v E 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 t n i o P n w o r C h g r u b w e N o m o k o K e g a l l i V s e k a L d r o f r e t a W k l a W e g a l l i V a l o n a P t a e r t n e C e h T h t r o w c A t a x i l b u P s i o n i l l I 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 g n i s s o r C e k a L x o F g n i s s o r C s n i l l u M a i g r o e G e g e l l o C & h t 4 5 l l i H n o c a e B a n a i d n I g n i s s o r C d r a v e l u o B e r t n e C s k a O l l e B s i l o p a n a i d n I e c a l p t e k r a M r e t a w e g d i r B 2 3 , e e r T r a l l o D , l a v i n r a C e o h S , s d o o G e m o H y r o t c a F t a o C n o t g n i l r u B / x x a M J T , y t i C e u l a V , r a e w s n e M G & K 3 1 . 1 1 % 5 . 8 7 % 0 . 0 0 1 % 8 . 6 9 2 6 4 , 3 4 0 1 7 , 7 4 2 2 7 1 , 1 9 2 2 1 0 2 / 5 7 9 1 s i l o p a n a i d n I g n i s s o r C n o t e l t s a C s r e t t i f t u O n a b r U , e r o t s k o o B s e m m a H 5 0 . 4 2 e r a w d r a H e c A , l l i w d o o G 5 3 . 6 1 % 4 . 2 9 % 8 . 2 9 % 0 . 0 0 1 % 0 . 0 0 1 % 2 . 4 9 % 2 . 6 9 t r a M n i e t S , t e k r a M h s e r F e h T 5 5 . 7 1 % 2 . 2 9 % 0 . 0 0 1 % 6 . 5 9 s k c u b r a t S , s t t e l l o F 6 3 . 8 % 0 . 0 0 1 % — % 0 . 0 0 1 6 4 0 , 1 7 4 7 9 , 1 1 7 3 8 , 7 6 0 1 2 , 4 3 — 0 0 6 , 3 5 4 5 1 , 0 2 0 0 7 , 9 2 6 4 6 , 4 2 1 4 7 9 , 1 1 1 9 9 , 7 8 0 1 9 , 3 6 5 0 0 2 2 1 0 2 9 0 0 2 6 0 0 2 s i l o p a n a i d n I s n o m m o C k e e r C l o o C e l t s a c n e e r G e r o t s k o o B y t i s r e v i n U w u a p e D d n e B h t u o S s i l o p a n a i d n I s n o m m o C t e e r t S y d d E n o i l i v a P t s i e G é f a C d n a t o p e D e m o H , x a M e c i f f O , r e t n e C t n e m n g i s n o C e m o H , b u l C s ' m a S , s s e L r o f s s e r D s s o R , o c t e P t r a M - l a W s n e e r g l a W r o j a M s t n a n e T d e n w o - n o N s t n a n e T d e n w O r o j a M R B A r e p . t f . q S % d e s a e L 2 A L G d e n w O r a e Y / t l i u B s p o h S s r o h c n A l a t o T s p o h S s r o h c n A l a t o T d e t a v o n e R A S M 1 y t r e p o r P e m o H s e w o L ' , s e l p a t S , s r e t a e h T k r a m d n a L , s ’ y c a M 2 2 . 7 $ % 2 . 0 9 % 0 . 0 0 1 % 4 . 8 9 6 5 4 , 3 6 6 4 5 , 9 2 3 2 0 0 , 3 9 3 8 0 0 2 / 8 5 9 1 s i l o p a n a i d n I r e t n e C n w o T e l a d n e l G t r a M - l a W t r a m t s e P , t o p e D e c i f f O , e e r T r a l l o D , i d l A 7 2 . 4 1 s n e e r g l a W , e r a F h t r a E 0 5 . 1 2 % 1 . 4 6 % 7 . 3 8 , y d n I f o e g a r a G e l c y c i B , e r o t S r e n i a t n o C e h T , k c a R m o r t s d r o N , e r u t i n r u F s u a h r A y b a B y u B y u B 9 1 . 0 2 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 7 . 9 8 % 6 . 1 9 % 0 . 0 0 1 0 4 9 , 8 2 0 2 3 , 1 5 9 1 3 , 1 3 , t e g r a T , t n e m e v o r p m I f o y m e d a c A s u x e N , y r a r b i L s i l o p a n a i d n I s n e e r g l a W e m o H s e w o L ' r e t n e C t n e m e v o r p m I s i l o p a n a i d n I 0 2 . 8 1 % 0 . 0 0 1 % — % 0 . 0 0 1 2 5 1 , 9 — 2 5 1 , 9 1 2 5 , 1 7 2 6 9 , 7 4 1 6 4 , 0 0 1 2 8 2 , 9 9 0 9 8 , 7 1 1 9 0 2 , 9 4 1 1 1 0 2 5 0 0 2 8 0 0 2 3 1 0 2 / 6 8 9 1 s i l o p a n a i d n I s n o m m o C d n u o h y e r G e n y a W t r o F 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 c a l p t e k r a M a m L i g n i s s o r C e n i l e g n a R e g d E s r e v i R e m o H s e w o L ' 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 ' s ' m a S , t n e m e v o r p m I b u l C , d n o y e B & h t a B , d e B , s t e k r a m r e p u S h s r a - A - s k o o B , t r a m S t e P , y v a N d l O , s l e a h c i n o i l l i M M M , e r t a e h T C M A , s d o o G g n i t r o p S s k c i D ' 2 0 . 5 1 % 2 . 1 9 % 0 . 0 0 1 % 7 . 8 9 3 6 9 , 0 4 1 2 7 , 8 3 2 4 8 6 , 9 7 2 5 0 0 2 s i l o p a n a i d n I t n i o P s r e d a r T s s e n t i F A L , l l i w d o o G , g g e r G H H 9 3 . 2 1 % — % 0 . 0 0 1 % 0 . 0 0 1 — 0 3 3 , 4 8 0 3 3 , 4 8 3 1 0 2 / 0 0 0 2 s i l o p a n a i d n I s n o m m o C k e e r C y e n o t S 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 ' 6 8 . 7 % — % 0 . 0 0 1 % 0 . 0 0 1 — 7 9 9 , 8 2 1 7 9 9 , 8 2 1 8 9 . 4 2 % 2 . 2 9 % — % 2 . 2 9 9 9 0 , 6 4 — 9 9 0 , 6 4 1 4 . 4 3 % 4 . 6 9 % — % 4 . 6 9 5 4 7 , 0 3 — 5 4 7 , 0 3 5 0 0 2 9 9 9 1 8 0 0 2 s i l o p a n a i d n I n o t g n i m o o l B s a g e V s a L 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 3 r e n r o C y r e n n a C a d a v e N , s l e a h c i M , r a e w t o o F s u o m a F , s t o L g i B , o c t e P , y t i C y t r a P , x a M e c i f f O t o p e D e m o H , e l l e i d o s p a h R , s s e L r o f s s e r D s s o R , b u l C s ' m a S , t r a M - l a W 9 8 . 2 2 % 8 . 7 8 % 0 . 0 0 1 % 6 . 3 9 0 7 3 , 6 7 1 5 3 3 , 8 5 1 5 0 7 , 4 3 3 2 0 0 2 s a g e V s a L 3 r e t n e C l a i n n e t n e C , e s u o h e r a W ' s n a m s t r o p S , s s e n t i F r u o H 4 2 8 5 . 3 2 % 1 . 1 9 % 1 . 2 8 % 6 . 4 8 8 3 1 , 3 5 1 6 8 , 9 3 1 9 9 9 , 2 9 1 5 0 0 2 s a g e V s a L 3 y a w e t a G l a i n n e t n e C 9 4 . 3 2 % 6 . 4 9 % 0 . 0 0 1 % 4 . 7 9 2 6 4 , 8 7 2 8 9 , 3 8 4 4 4 , 2 6 1 6 0 0 2 / 8 9 9 1 s a g e V s a L 3 r e t n e C y a w t l e B n r e t s a E s m a i l l i W , n r a B y r e t t o P , c i l b u p e R a n a n a B a m o n o S e m o H s e w o L ' s ' m a S , t n e m e v o r p m I b u l C 8 0 . 2 3 % 4 . 4 4 % — % 4 . 4 4 8 0 2 , 0 3 — 8 0 2 , 0 3 y t i C t r a M - l a W y t r a P , t o p e D e c i f f O , e r o t S y l n O t n e C 9 9 1 0 . 2 2 % 0 . 4 8 % 0 . 0 0 1 % 8 . 2 9 9 5 5 , 3 4 0 3 0 , 3 5 9 8 5 , 6 9 2 0 0 2 7 0 0 2 s a g e V s a L s a g e V s a L 3 a z a l P s e w o L ' 3 e t a g t s a E , n o i t c e l l o C s a c s e c n a r F ' ' , s o c i h C , r o l y a T n n A 9 4 . 6 2 % 2 . 5 9 % 0 . 0 0 1 % 9 . 6 9 7 2 0 , 2 5 5 6 2 , 9 2 2 9 2 , 1 8 8 9 9 1 s a g e V s a L s n o m m o C t r a p m a R s l e a h c i M , n o l a S a t l U t e g r a T , o c t e P , s l l a h s r a M , s d o o G g n i t r o p S s k c i D ' 0 1 . 7 1 % 3 . 3 9 % 0 . 0 0 1 % 8 . 6 9 4 9 2 , 8 9 3 3 2 , 9 0 1 7 2 5 , 7 0 2 t o p e D e c i f f O , r e t e e T s i r r a H 9 5 . 2 1 % 0 . 5 9 % 0 . 0 0 1 % 3 . 8 9 5 9 3 , 7 3 6 7 8 , 3 7 1 7 2 , 1 1 1 a t l U , x x a M , J T W S D , k c a R m o r t s d r o N , y b a B y u B y u B , s u l P t s o C 7 7 . 9 1 % — % 0 . 0 0 1 % 3 . 5 9 0 8 4 , 6 7 7 1 , 3 3 1 7 5 6 , 9 3 1 t r a M - l a W , t n e m e v o p m I e m o H ' s e w o L , b u l C s t r o p S k r o Y w e N , s l e a h c i M 2 6 . 8 2 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 4 6 1 , 4 5 9 1 2 , 2 5 3 8 3 , 6 0 1 ' ) s w a h S ( e u l a v r e p u S 9 7 . 2 1 % 8 . 2 9 % 0 . 0 0 1 % 7 . 7 9 2 9 8 , 4 2 0 0 0 , 4 5 2 9 8 , 8 7 7 0 0 2 1 1 0 2 7 9 9 1 3 1 0 2 8 0 0 2 3 3 k c a m i r r e M e n n o y a B r e t n e C e g a l l i V k c a m i r r e M e r i h s p m a H w e N g n i s s o r C e n n o y a B y e s r e J w e N s g n i r p S y l l o H r e t n e C e n w o T s g n i r p S y l l o H a n i l o r a C h t r o N k r a w e N r e t n e C g n i p p o h S n o t s g n i v i L o r o b s l o G s n o m m o C l a i r o m e M t e g r a T y v a N d l O , e e r T r a l l o D , l a d i r ' B s d i v a D , I E R 4 0 . 2 2 $ % 5 . 2 9 % 2 . 6 8 % 9 . 8 8 s d o o F e l o h W 9 0 . 6 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 1 2 6 , 7 5 6 8 3 , 5 1 3 5 0 , 6 7 4 4 1 , 0 3 4 7 6 , 3 3 1 0 3 5 , 5 4 t e g r a T o c t e P , r e t e e T s i r r a H 3 3 . 5 2 % 8 . 5 9 % 6 . 5 5 % 5 . 9 7 3 6 9 , 2 3 0 0 5 , 2 2 3 6 4 , 5 5 t n e m e v o r p m I e m o H s e w o L ' , t r a m s t e P , x a M e c i f f O , s e o h S y a w d a o r B f f O , y u B t s e B 8 4 . 0 2 % 7 . 0 8 % 0 . 0 0 1 % 8 . 6 9 1 9 8 , 0 2 2 6 2 , 5 0 1 3 5 1 , 6 2 1 e r a F h t r a E 3 3 . 0 2 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 7 6 4 , 4 3 2 7 0 , 6 2 9 3 5 , 0 6 h t a B d e B W S D , , t r a m S t e P , e r u t i n r u F y t i C d n o y e B & 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 3 9 . 8 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 0 0 5 , 4 0 3 7 , 1 3 2 0 3 2 , 6 3 2 y e n n e P C J , b u l C s ' m a S , t r a M - l a W t o p e D e m o H e c i f f O , y b b o L y b b o H , s e i r o s s e c c A n o i h s a F ' s e e t s u D , y u B t s e B , d n o y e B d n a h t a B d e B s s e L r o f s s e r D s s o R , t r a m s t e P , t o p e D s U R s e i b a B , k c a R m o r t s d r o N 2 3 . 2 1 % 6 . 9 9 % 0 . 0 0 1 % 9 . 9 9 6 7 7 , 1 7 6 1 9 , 7 8 1 2 9 6 , 9 5 2 t o p e D e c i f f O , s l h o K 4 8 . 5 1 % 1 . 2 7 % 0 . 0 0 1 % 9 . 3 8 9 2 9 , 7 2 5 1 5 , 0 2 4 4 4 , 8 4 t r a M - l a W , s e r o t S s s o R , y v a N d l O , l a v i n r a C e o h S 3 9 . 6 1 % 6 . 6 9 % 0 . 0 0 1 % 5 . 8 9 9 8 5 , 1 7 3 8 7 , 2 9 2 7 3 , 4 6 1 t e g r a T n o l a S a t l U , x x a M J T , o c t e P , t o p e D e c i f f O 5 6 . 7 1 % 7 . 2 9 % 0 . 0 0 1 % 2 . 6 9 1 2 4 , 1 8 7 9 0 , 7 7 8 1 5 , 8 5 1 , s d o o G e m o H W S D , , s t r o p S y m e d a c A 2 9 . 1 1 % 5 . 8 7 % 0 . 0 0 1 % 6 . 3 9 8 4 9 , 6 5 6 4 5 , 3 3 1 4 9 4 , 0 9 1 8 0 0 2 2 1 0 2 8 0 0 2 5 1 0 2 4 0 0 2 5 9 9 1 0 0 0 2 0 1 0 2 1 0 0 2 9 0 0 2 2 1 0 2 r o j a M s t n a n e T d e n w o - n o N s t n a n e T d e n w O r o j a M R B A r e p . t f . q S s p o h S s r o h c n A l a t o T s p o h S s r o h c n A l a t o T % d e s a e L 2 A L G d e n w O r a e Y / t l i u B d e t a v o n e R A S M e t t o l r a h C n o t g n i m l i W r e t n e C g n i p p o h S t s e r c h t r o N e c a l P r e d n a e l O 1 y t r e p o r P e t t o l r a h C s d o o W r e t e m i r e P y r a C - s n o m m o C n w o T e d i s k r a P I e s a h P e t t o l r a h C t e k r a M n o d g n i r o T i t a n n i c n i C n o i l i v a P e t a g t s a E o i h O y t i C a m o h a l k O a m o h a l k O e l s I e l l e B e r o o M e r o o M t a s p o h S y t i C a m o h a l k O e t n i o P s g n i r p S r e v l i S n a m r o N n a m r o N r e t n e C n w o T y t i s r e v i n U r e t n e C n w o T y t i s r e v i n U a n i l o r a C h t u o S a z a l P k c o c h c t i H I I e s a h P y m e d a c A , s s e L r o f s s e r D s s o R , x x a M J T s r e m r a F , d n o y e B d n a h t a B d e B , s t r o p S o c t e P , y v a N d l O , e r u t i n r u F e m o H s l h o K , s l e a h c i M 5 0 . 0 1 % 4 . 7 9 % 7 . 9 8 % 8 . 0 9 0 9 8 , 7 3 0 8 4 , 4 1 2 0 7 3 , 2 5 2 6 0 0 2 n e k i A c i r b a F n n A - o J , s e l p a t S W S D , , y b a B r e g o r K y u B y u B , s l l a h s r a M , s d o o G g n i t r o p S s k c i D ' 7 6 . 4 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 6 3 2 , 3 6 2 1 7 , 7 6 1 8 4 9 , 0 3 2 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 v a N d l O , s l e a h c i M , s d o o G g n i t r o p S s k c i D 5 6 . 4 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 7 2 7 , 9 3 7 3 7 , 5 3 1 4 6 4 , 5 7 1 C A , l a v i n r a C e o h S , y t i C y t r a P , s r a e S y v a N d l O , e r o o M x i l b u P 7 6 . 0 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 0 0 1 , 0 2 5 5 9 , 7 4 5 5 0 , 8 6 7 9 9 1 5 9 9 1 8 0 0 2 e l l i v n e e r G f f u r d o o W t a x i l b u P e e s s e n n e T e l l i v h s a N t e k r a M s g n i r p S l o o C a o c l A I I e s a h P - g n i s s o r C n o t l i m a H I I I & s a x e T , s p o h S e e r T s a m t s i r h C , d n o y e B & h t a B d e B 3 8 . 2 1 % 0 . 0 0 1 % 1 . 4 9 % 7 . 4 9 1 7 6 , 2 2 6 3 1 , 2 7 1 7 0 8 , 4 9 1 0 0 0 2 e l l i v n e e r G n e e r G a z a l P t a s e p p o h S y d o o G y d o o G , l l a M e u q i t n A s d r a y e n i V ' o c t e P , r u o q i L t s o C , e r o t S r e n i a t n o C e h T , y r e c o r G B - 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A . s o J , r o l y a T n n A , s t o b l a T ' , s o c i h C , o c t e P , g u r D d n a d o o F s ' l l a d n a R 7 2 . 9 1 % 3 . 8 9 % 0 . 0 0 1 % 1 . 9 9 0 3 5 , 9 8 6 3 8 , 4 7 6 6 3 , 4 6 1 9 9 9 1 n o t s u o H s n o m m o C d o o w g n i K y u B , t o p e D e c i f f O , s s o R , c i r b a F n n A - o J 4 0 . 2 1 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 9 7 8 , 9 1 6 4 7 , 6 3 1 5 2 6 , 6 5 1 1 1 0 2 / 0 7 9 1 h t r o W t r o F e g a l l i V t e e r t S t e k r a M 4 3 r o j a M s t n a n e T d e n w o - n o N s t n a n e T d e n w O r o j a M R B A r e p . t f . q S s p o h S s r o h c n A l a t o T s p o h S s r o h c n A l a t o T d e t a v o n e R % d e s a e L 2 A L G d e n w O r a e Y / t l i u B s s e r D s s o R W S D , , t e k r a M s r e m r a F s t u o r p S 4 6 . 2 1 $ % 0 . 0 0 1 % 0 . 0 0 1 % 0 . 0 0 1 3 9 3 , 9 5 5 6 0 , 4 4 2 8 5 4 , 3 0 3 0 1 0 2 / 0 0 0 2 b u l C s ' m a S y a w e f i L , y t i r o h t u A s t r o p S , s l e a h c i , M W S D 4 8 . 7 1 % 3 . 2 8 s U ” R “ , x a M e c i f f O , y b b o L y b b o H , s s e L r o f s e i b a B / s U ” R “ s y o T , s l l a h s r a M y r e c o r G B - E - H 7 8 . 6 1 2 . 1 8 % 0 . 0 0 1 % 0 . 0 0 1 % 8 . 3 9 % 2 . 2 9 3 3 3 , 1 5 9 7 7 , 7 6 1 0 0 0 , 5 0 1 8 5 8 , 1 1 2 3 3 3 , 6 5 1 7 3 6 , 9 7 3 4 0 0 2 0 1 0 2 / 9 9 9 1 A S M s a l l a D n i t s u A n o t s u o H r e t n e C g n i p p o h S o n i f o t r o P e t n e l o V a z a l P l l i H r a d e C t a a z a l P 1 y t r e p o r P d l O , t r a m s t e P , t r a M n i e t S , e r o t S n a i t s i r h C x x a M J T , y v a N , s s o R , t r a m S t e P , t e k r a M s r e m r a F s t u o r p S e n i F s c e p S , d n o y e B & h t a B d e B , t r a m K s e n i W 7 6 . 1 1 % 7 . 1 9 % 0 . 0 0 1 % 9 . 8 9 0 0 4 , 1 4 7 3 0 , 5 6 2 7 3 4 , 6 0 3 4 1 0 2 / 6 9 9 1 o s a P l E e r t n e C e n w o T d n a l n u S C J , t o p e D e m o H y e n n e P i d l A , t e g r a T 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 u B t s e B 4 6 . 4 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 0 1 6 3 9 , 4 2 1 9 1 , 2 7 7 2 1 , 7 9 e o h S , 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 t i C y t r a P , t o p e D e c i f f O , e e r T r a l l o D ' , s n n o C l a v i n r a C 4 6 . 2 1 % 8 . 2 9 % 0 . 0 0 1 % 1 . 8 9 b m u h T m o T s ' l l a d n a R 2 1 . 6 1 % 0 . 0 0 1 % 0 . 0 0 1 % 0 0 1 7 7 3 , 3 2 5 2 4 , 2 5 0 0 0 , 0 7 7 7 3 , 3 9 2 0 3 , 2 4 1 7 2 7 , 4 9 1 s s e L r o f s s e r D s s o R , r a e B s ' l h o K d e t l i u Q , o c t e P , t o p e D e c i f f O , s l e a h c i M 6 6 . 8 1 % 7 . 0 9 % 0 . 0 0 1 % 5 9 0 3 1 , 9 1 1 4 6 4 , 1 0 1 4 9 5 , 0 2 2 s h t i m S , e m o H t s a e n w o D , e e r T r a l l o D , x x a M J T 8 5 . 4 1 % 1 . 6 8 % 0 . 0 0 1 % 9 . 5 9 2 8 1 , 8 4 6 1 9 , 5 1 1 8 9 0 , 4 6 1 0 1 0 2 3 1 0 2 2 1 0 2 2 1 0 2 2 1 0 2 e i h c a h a x a W g n i s s o r C e i h c a h a x a W s a l l a D s a l l a D r e p a r D r e p a r D g n i s s o r C n w o T d n a l t a e h W t e k r a M e d i s t s e W g n i s s o r C r e p a r D h a t U s k a e P r e p a r D a i n i g r i V s ' l h o K , t r a m t s e P , x a M e c i f f O , w o l e B e v i F , n o i l l i M - A - s k o o B , y u B t s e B , d n o y e B & h t a B d e B d n a l k r i K , s n e e r g l a W , a t l U , m o o R k c a R 0 0 . 9 1 % 1 . 9 8 % 3 . 5 9 % 5 . 2 9 1 8 5 , 1 8 1 6 6 4 , 7 1 2 7 4 0 , 9 9 3 7 0 0 2 h c a e B a i n i g r i V s n o m m o C n w o t s d n a L y e n n e P C J , W S D 1 5 . 4 1 % 7 . 6 7 % 0 . 0 0 1 % 5 . 3 8 6 7 3 , 8 5 8 7 8 , 3 2 4 5 2 , 2 8 5 0 0 2 n o n e b u a w h s A k r a P y a B t a e g a l l i V n i s n o c s i W 2 2 . 5 1 $ % 6 . 7 8 % 0 . 9 9 % 4 . 5 9 5 1 6 , 4 4 8 , 4 4 9 8 , 7 4 4 , 0 1 9 0 5 , 2 9 2 , 5 1 l a t o T . e g e l l o C & h t 4 5 d n a s n o m m o C d n u o h y e r G r o f t p e c x e , 5 1 0 2 , 1 3 r e b m e c e D f o s a d e s a e l / A R N A L G d e n w O s t c e l f e r d e s a e L A L G d e n w O f o e g a t n e c r e P . y n a p m o C e h t y b e l p m i s e e f n i d e n w o s i y t r e p o r p h c a e , d e t o n e s i w r e h t o s s e l n U . d e t a c i d n i s a t p e c x e , d e n w o y l l o h w e r a s e i t r e p o r p l l A . e r u t n e v t n i o j a s i y t r e p o r p g n i t a r e p O 1 2 3 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 5 3 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 4 . 0 g n i l a t o 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 y t r e p o r p g n i t a r e p o e c i f f o e n o n i s t s e r e t n i d e n w o e w , 5 1 0 2 , 1 3 r e b m e c e D f o s A : 5 1 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 g n i k r a p d n a e c i f f o 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 R N “ ( s e i t r e p o r P e c i f f O g n i t a r e p O s t n a n e T r o j a M , p u o r G y t l a e R 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 n o i t a d n u o F a n i m u L 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 e c i f f O t n e R e s a B 1 d e z i l a u n n A 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 , 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 E C I F F O G N I T A R E P O ) s d n a s u o h t n i $ ( 0 9 . 7 1 $ % 9 . 8 7 9 8 8 , 4 $ % 8 . 4 9 8 2 9 , 7 8 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 e i t r e p o r P g n i k r a P d n a e c i f f O 2 n a i d i r e M h t u o S y t r i h T g n i k r a P n o s i n e D A N / / A N A N / A N / A N / d e r i u q c A 6 8 9 1 s i l o p a n a i d n I 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 s t c e j o r p l i a t e r f o s t n e n o p m o c e c i f f o e n o l a - d n a t S s e c i f f O e m a D e r t o N f o y t i s r e v i n U 6 5 . 4 1 $ % 2 . 9 1 8 8 1 , 1 $ % 0 . 0 0 1 8 2 6 , 1 8 d e p o l e v e D 9 0 0 2 d n e B h t u o S y d d E f o t r a p ( e c i f f O t e e r t S y d d E 4 ) s n o m m o C t e e r t S . y t r e p o r p e h t f o s t n e n o p m o c l i a t e r d n a e c i f f o e h t d n a l e t o h a s e v r e s t a h t e g a r a g g n i k r a p a h t i w g n o l a , a n a i d n I , d n e B h t u o S n i r e t n e c g n i p p o h s l i a t e r s n o m m o C t e e r t S y d d E e h t s n w o o s l a y n a p m o C e h T t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c r u o f o s e s o p r u p r o f n o i t a d i l o s n o c n i d e t a n i m i l e s i h c i h w , 5 1 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 6 1 2 , 3 2 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 . 2 1 y b d e i l p i t l u m , y t r e p o r p e l b a c i l p p a h c a e r o f 5 1 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 . 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 . n o i t a t n e s e r p 1 2 3 4 2 0 . 7 1 $ % 0 . 0 0 1 3 9 1 , 6 $ % 2 . 2 9 3 7 4 , 4 9 3 8 6 . 2 1 % 9 . 1 6 1 1 % 6 . 6 3 7 1 9 , 4 2 d e r i u q c A 6 0 0 2 e i c u L . t S t r o P f o t r a p ( e c i f f O e g a l l i V n o i t i d a r T ) e r a u q S e g a l l i V n o i t i d a r T l a t o T _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 6 3 , s k c u b r a t S ' , s y u h C , t r a M n i e t S , m a e r t S & d l e i F , y x a l a G f l o G , s e r t a e h T k n a r F d a e r B a r e n a P W S D , d n o y e B & h t a B d e B r e d n u y l t n e r r u c s t c e j o r p t n e m p o l e v e d e e r h t n i s t s e r e t n i d e n w o e w , 5 1 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 e c i f f o d n 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 : 5 1 0 2 , 1 3 r e b m e c e D f o s a s e i t r e p o r p t n e m p o l e v e d l i a t e r s ’ y n a p m o C e h t o t t c e p s e r h t i w n o i t a m r o f n i 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 c u r t s n o c s t c e j o r P t n e m p o l e v e D 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 d e r r u c n I t s o C l a t o T f o s a , 1 3 r e b m e c e D 6 5 1 0 2 d e t a m i t s E t c e j o r P t s o C t n e c r e P d e n w O f o A L G / d e s a e L - e r P 5 d e t t i m m o C t n e c r e P d e n w O f o A L G 4 d e i p u c c O d e t c e j o r P d e t c e j o r P 3 l a t o T A L G d e n w O 2 A L G d e t c e j o r P n o i t a z i l i b a t S 1 e t a D y n a p m o C p i h s r e n w O A S M % t c e j o r P : n o i t c u r t s n o C r e d n U ) s d n a s u o h t n i $ ( , s a m e n i C e k i m r a C , ) d e n w o - n o n ( t e g r a T 3 4 9 , 5 3 $ 0 0 5 , 7 4 $ % 9 . 3 8 % 1 . 4 2 1 0 0 , 4 5 1 1 0 0 , 2 2 1 6 1 0 2 H 2 h g i e l a R % 0 0 1 - C N , r e t n e C e n w o T s g n i r p S y l l o H I I e s a h P 9 8 8 , 5 7 0 0 2 , 1 8 % 1 . 6 8 % 5 . 0 6 1 0 8 , 7 4 3 6 3 4 , 7 9 2 6 1 0 2 d i M h g i e l a R % 0 0 1 - C N , s n o m m o C n w o T e d i s k r a P I I e s a h P , s l e a h c i M , s l l a h s r a M , s s o R , t r a M n i e t S 6 7 5 , 3 3 0 0 0 , 4 4 % 0 . 0 0 1 % 0 . 0 8 7 5 , 1 4 1 8 7 5 , 1 2 1 6 1 0 2 H 2 s e l p a N % 0 0 1 L F , g n i s s o r C i m a i m a T a t l U , t r a m S t e P 8 0 4 , 5 4 1 3 3 7 , 1 9 $ $ 0 0 7 , 2 7 1 $ % 7 . 8 8 % 7 . 8 3 0 8 3 , 3 4 6 5 1 0 , 1 4 5 l a t o T t e e h s e c n a l a b e h t 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 5 1 0 2 , 1 3 r e b m e c e D f o s a d e r r u c n i t s o C 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 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 . d e i p u c c o y l l a i t n a t s b u s r o / d n a e t a d g n i n e p o t c e j o r p m o r f r a e y e n o f o r e n o o s e h t s t n e s e r p e r e t a d n o i t a z i l i b a t S . 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 8 2 7 , 6 1 y l e t a m i x o r p p a r o f n o i t a i t o g e n r e d n u s e s a e l s e d u l c n I . s t n a n e t o t d e s a e l d n u o r g d n a y n a p m o C e h t y b d e n w o s l e c r a p d n a l t o l t u o . t n e t n i s e d u l c x E f o s r e t t e l . 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 . n o i t a z i l i b a t s r a e n s a o i l o f t r o p g n i t a r e p o e h t o t d e v o m s t c e j o r p t n e m p o l e v e d e r o t g n i t a l e r I O N l a n o i t i d d A 1 2 3 4 5 6 7 _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 7 3 Redevelopment, Reposition, Repurpose Projects In addition to our development projects, as displayed in the table above, we are also currently evaluating potential redevelopment, repositioning, and repurposing of several operating properties. ($ in thousands) REDEVELOPMENT Location Bolton Plaza Jacksonville Bridgewater Indianapolis Burnt Store Promenade Punta Gorda City Center* White Plains Courthouse Shadows* Naples Fishers Station* Indianapolis Hamilton Crossing Centre* Indianapolis Portofino Shopping Center Houston Rampart Commons Las Vegas Targeted Return ** Expected Cost REPOSITION1 Castleton Crossing Centennial Center Location Indianapolis Las Vegas Centennial Gateway Las Vegas Hitchcock Plaza Aiken Landstown Commons Virginia Beach Northdale Promenade Tampa Shops at Moore Oklahoma City Tarpon Bay Naples Description Second phase; replace existing vacant shop space with 22,000 square foot junior anchor and center upgrades. Second phase; creation of new outparcel building to relocate existing shop space. Replacing vacant shop space with 15,000 square foot junior anchor. New building construction of current grocer into 45,000 square foot space. New 20 year lease and center upgrades. Pending construction start to reactivate street level retail components and enhance overall shopping experience within multilevel project. Recapture of natural lease expiration; demolition of the site to add a large format single tenant ground lease as well as an additional outparcel development. Demolition, expansion, and replacement of previous anchor. Recapture of lease expiration; substantially enhancing merchandising mix and replacing available space with new movie theatre for entertainment. Multiple phase project. Addition of two small shop buildings and a 33,000 square foot junior anchor. Also rightsizing of a 25,000 square foot junior anchor. Addition of new tenants replacing expiring leases. Upgrades to building façades and hardscape through the center. 9.5% - 10.5% $75,000 - $80,000 Description Creation of new outparcel small shop building. General building enhancements including improved access of main entry point. Addition of two restaurants to anchor the small shop building. Recapture of a 13,950 square foot anchor location to provide retenanting opportunity to enhance overall quality of the center; also includes additional structural improvements and building upgrades. Replacing vacant space with building conversion for two junior anchors and incremental shop space. Relocation of Starbucks to create drive through. General improvement of the main street area, including façade improvements and addition of pedestrian elements. Multi-phase project involving rightsizing of an existing shop tenant to accommodate construction of new junior anchor, and the demolition of shop space to add another junior anchor, enhance space visibility, and improve overall small shop mix. Expansion of existing vacant space to be reconstructed and occupied with the addition of a new junior anchor. Recapture of a junior anchor space to enhance merchandising mix and cross shopping experience; also, upgrading exterior of the center and other building improvements. Trussville Promenade2 Birmingham Replacing existing small shops with 22,000 square foot junior anchor. Targeted Return ** Expected Cost REPURPOSE Location Beechwood Promenade* Athens The Corner* Indianapolis Targeted Return ** Expected Cost Total Targeted Return Total Expected Cost 9.5% - 10.5% $35,000 - $40,000 Description Contemplating a mixed use opportunity for recaptured space given dynamic college town environment. Creation of a mixed use (retail and multi-family) development replacing an unanchored small shop center. 9.0% - 10.0% $20,000 - $25,000 9.0% - 11.0% $130,000 - $145,000 ____________________ 1 Reposition refers to less substantial asset enhancements based on internal costs. 2 * ** Repositioning refers to Trussville I. Asterisk represents assets removed from the operating portfolio and in final planning stage. Projected cost and projected ROI will be added upon commencement of construction. These opportunities are merely potential at this time and are subject to various contingencies, many of which are beyond the Company's control. Targeted return is based upon our current expectations of capital expenditures, budgets, anticipated leases and certain other factors relating to such opportunities. The actual return on these investments may not meet our expectations. 38 Tenant Diversification No individual retail or office tenant accounted for more than 3.4% of the portfolio’s annualized base rent for the year ended December 31, 2015. 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, 2015: TOP 10 RETAIL TENANTS BY GROSS LEASABLE AREA Number of Leases Company Owned GLA Ground Lease GLA Number of Anchor Owned Locations Number of Locations 14 16 14 18 9 21 17 18 9 Total GLA 2,376,540 2,301,943 2,072,666 868,222 783,599 634,317 485,673 469,772 440,502 6 — 5 18 5 21 17 18 9 203,742 811,956 — 128,997 868,222 184,516 634,317 485,673 469,772 440,502 — 650,161 — 245,223 — — — — 18 154 374,127 10,807,361 18 117 374,127 3,789,868 — 1,707,340 Anchor Owned GLA 1,360,842 2,301,943 1,293,508 — 353,860 — — — — — 5,310,153 8 16 9 — 4 — — — — — 37 Tenant Wal-Mart Target Lowe's Home Improvement Publix Kohls TJX Companies1 Ross Stores Bed Bath & Beyond2 Dick's Sporting Goods Petsmart Total ____________________ 1 2 Includes TJ Maxx, Home Goods and Marshalls, all of which are owned by the same parent company. Includes Buy Buy Baby, Christmas Tree Shops and Cost Plus, all of which are owned by the same parent company. 39 The following table sets forth certain information for the largest 25 tenants open for business at the Company’s retail properties based on minimum rents in place as of December 31, 2015: TOP 25 TENANTS BY ANNUALIZED BASE RENT ($ in thousands) Tenant Publix TJX Companies3 Petsmart Bed Bath & Beyond4 Ross Stores Lowe's Home Improvement Office Depot / Office Max Dick's Sporting Goods Michaels Wal-Mart LA Fitness Nordstrom Best Buy Kohls National Amusements Toys R Us / Babies R Us5 Petco Walgreens Frank Theaters DSW New York Sports Club Burlington Coat Factory Randall's Food & Drugs Mattress Firm Old Navy TOTAL ____________________ Number of Stores 18 21 18 18 17 5 18 9 13 6 5 5 6 5 1 6 12 4 2 7 2 3 3 17 8 229 Leased GLA/NRA2 % of Owned GLA/NRA of the Portfolio Annualized Base Rent1 Annualized Base Rent per Sq. Ft. % of Total Portfolio Annualized Base Rent 868,222 634,317 374,127 446,372 485,673 128,997 368,482 440,502 278,111 203,742 208,209 170,545 213,604 184,516 80,000 179,316 167,455 67,212 122,224 134,681 86,717 247,400 133,990 69,258 5.5 % $ 8,439 $ 4.0 % 2.4 % 2.8 % 3.1 % 0.8 % 2.3 % 2.8 % 1.7 % 1.3 % 1.3 % 1.1 % 1.3 % 1.2 % 0.5 % 1.1 % 1.1 % 0.4 % 0.8 % 0.8 % 0.5 % 1.6 % 0.8 % 0.4 % 6,431 5,513 5,399 5,214 5,039 5,018 4,658 3,697 3,655 3,447 3,122 3,024 2,927 2,898 2,896 2,747 2,099 2,081 1,938 1,936 1,792 1,774 1,773 130,404 6,424,076 0.8 % 40.4% $ 1,762 89,277 $ 9.72 10.14 14.74 12.09 10.74 6.47 13.62 10.57 13.29 3.60 16.56 18.30 14.16 6.81 36.22 13.79 16.41 31.23 17.02 14.39 22.32 7.24 13.24 25.60 13.51 11.13 3.4 % 2.6 % 2.2 % 2.2 % 2.1 % 2.1 % 2.0 % 1.9 % 1.5 % 1.5 % 1.4 % 1.3 % 1.2 % 1.2 % 1.2 % 1.2 % 1.1 % 0.9 % 0.8 % 0.8 % 0.8 % 0.7 % 0.7 % 0.7 % 0.7 % 36.4% 1 2 3 4 5 Annualized base rent represents the monthly contractual rent for December 31, 2015 for each applicable tenant multiplied by 12. Annualized base rent does not include tenant reimbursements. Excludes the estimated size of the structures located on land owned by the Company and ground leased to tenants. Includes TJ Maxx, Marshalls and HomeGoods, all of which are owned by the same parent company. Includes Buy Buy Baby, Christmas Tree Shops and Cost Plus, all of which are owned by the same parent company. Annualized base rent and percent of total portfolio includes ground lease rent. 40 Geographic Diversification The Company owns interests in 118 operating and redevelopment properties consisting of 110 retail properties, six retail redevelopment properties, one office operating property and an associated parking garage. We also own interests in three development properties under construction. The total operating portfolio consists of approximately 17.2 million of owned square feet in 20 states. The following table summarizes the Company’s operating properties by state as of December 31, 2015: ($ in thousands) Florida Texas Indiana Nevada North Carolina Oklahoma New York Georgia New Jersey Virginia Utah Indiana - Office Tennessee South Carolina Alabama Connecticut Illinois Arizona Ohio Wisconsin New Hampshire Total Operating Portfolio Excluding Developments and Redevelopments Developments and Redevelopments Total Operating Portfolio Including Developments and Redevelopments Owned GLA/ NRA1 4,512,435 2,272,090 2,186,679 928,982 740,157 821,520 — 394,419 246,040 399,047 384,692 369,556 406,412 515,232 512,649 208,929 310,865 79,902 236,230 82,254 78,892 Annualized Base Rent Owned GLA/ NRA1 Annualized Base Rent Number of Properties $ 62,699 32,566 28,854 20,245 13,014 11,399 — 4,762 5,677 7,011 6,206 6,077 5,959 5,398 4,524 3,275 4,143 2,241 2,109 997 986 5,960 $ — 294,056 — 541,962 — 365,905 353,970 — — — — — — — — — — — — — 364 — 2,453 — 1,699 — 9,195 3,433 — — — — — — — — — — — — — 39 12 22 7 9 5 1 4 2 1 2 2 2 3 2 1 3 1 1 1 1 Owned GLA/ NRA1 4,518,395 2,272,090 2,480,735 928,982 1,282,119 821,520 365,905 748,389 246,040 399,047 384,692 369,556 406,412 515,232 512,649 208,929 310,865 79,902 236,230 82,254 78,892 Annualized Base Rent - Ground Leases Total Annualized Base Rent Percent of Annualized Base Rent $ $ 3,423 1,071 1,053 3,737 3,029 1,175 — 473 2,233 294 162 — — — 201 939 — — — 381 85 66,486 33,637 32,361 23,982 17,743 12,574 9,195 8,668 7,910 7,306 6,367 6,077 5,959 5,398 4,725 4,214 4,143 2,241 2,109 1,377 1,071 25.2% 12.8% 12.3% 9.1% 6.7% 4.8% 3.5% 3.3% 3.0% 2.8% 2.4% 2.3% 2.3% 2.0% 1.8% 1.6% 1.6% 0.9% 0.8% 0.5% 0.4% 15,686,982 $ 228,142 1,561,853 $ 17,144 121 17,248,835 $ 18,256 $ 263,543 100.0% ____________________ 1 Owned GLA/NRA represents gross leasable area or net leasable area owned by the Company. It also excludes the square footage of Union Station Parking Garage. 41 Lease Expirations In 2016, leases representing 6.7% of total annualized base rent and 6.5% of total GLA/NRA expire. The following tables show scheduled lease expirations for retail and office tenants and in-process development property tenants open for business as of December 31, 2015, assuming none of the tenants exercise renewal options. LEASE EXPIRATION TABLE – OPERATING PORTFOLIO ($ in thousands) Number of Expiring Leases1 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Beyond 247 273 345 254 245 180 99 107 92 75 104 2,021 Expiring GLA/NRA2 1,035,946 1,716,666 2,165,695 1,668,015 2,185,112 1,399,263 937,164 976,817 1,028,054 706,087 2,074,143 15,892,962 % of Total GLA/ NRA Expiring Expiring Annualized Base Rent3 % of Total Annualized Base Rent Expiring Annualized Base Rent per Sq. Ft. Expiring Ground Lease Revenue 6.7 % $ 15.92 $ 6.5 % $ 10.8 % 13.7 % 10.5 % 13.8 % 8.8 % 5.9 % 6.0 % 6.5 % 4.5 % 16,490 27,805 35,350 24,673 29,339 20,677 15,330 15,100 19,793 11,838 11.4 % 14.5 % 10.1 % 12.0 % 8.5 % 6.3 % 6.0 % 8.1 % 4.9 % — 226 1,588 819 1,559 757 1,048 360 381 768 16.20 16.32 14.79 13.43 14.78 16.36 15.46 19.25 16.77 13.93 15.43 13.0 % 100.0% $ 28,892 245,287 11.8 % 100.0% $ 10,750 18,256 $ ____________________ 1 2 3 Lease expiration table reflects rents in place as of December 31, 2015 and does not include option periods; 2016 expirations include 48 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 2015 for each applicable tenant multiplied by 12. Excludes tenant reimbursements and ground lease revenue. 42 LEASE EXPIRATION TABLE – RETAIL ANCHOR TENANTS1 ($ in thousands) Number of Expiring Leases2 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Beyond 21 42 50 34 42 36 27 25 22 19 45 363 Expiring GLA/NRA3 488,781 1,058,414 1,388,073 1,100,242 1,674,340 949,042 647,329 664,649 760,926 464,436 1,849,490 11,045,722 % of Total GLA/NRA Expiring Expiring Annualized Base Rent4 % of Total Annualized Base Rent Expiring Annualized Base Rent per Sq. Ft. Expiring Ground Lease Revenue 3.1 % $ 6.7 % 8.8 % 6.9 % 10.6 % 6.0 % 4.1 % 4.1 % 4.8 % 2.9 % 11.6 % 69.6% $ 5,252 12,633 16,248 10,834 17,209 10,124 8,625 7,808 13,449 6,221 23,308 131,711 2.2 % $ 5.2 % 6.7 % 4.4 % 7.1 % 4.2 % 3.5 % 3.1 % 5.5 % 2.6 % 9.5 % 53.8% $ 10.75 11.94 11.71 9.85 10.28 10.67 13.32 11.75 17.67 13.40 12.60 11.92 $ $ — — 1,194 — 1,111 289 745 260 260 381 6,384 10,623 ____________________ 1 2 3 4 Retail anchor tenants are defined as tenants that occupy 10,000 square feet or more. Lease expiration table reflects rents in place as of December 31, 2015 and does not include option periods. 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 2015 for each applicable tenant multiplied by 12. Excludes tenant reimbursements and ground lease revenue. LEASE EXPIRATION TABLE – RETAIL SHOPS ($ in thousands) Number of Expiring Leases1 224 229 293 219 200 143 69 80 68 53 59 1,637 Expiring GLA/NRA2 539,251 575,142 759,785 562,520 496,261 444,059 238,789 279,180 201,780 162,011 224,653 4,483,431 % of Total GLA/NRA Expiring 3.3% 3.6% 4.8% 3.6% 3.1% 2.8% 1.5% 1.7% 1.3% 1.0% 1.5% 28.1% Expiring Annualized Base Rent3 $ $ 11,155 13,672 18,714 13,738 11,841 10,412 5,831 6,667 5,313 4,451 5,584 107,379 % of Total Annualized Base Rent 4.5% 5.6% 7.7% 5.6% 4.8% 4.3% 2.4% 2.6% 2.2% 1.8% 2.5% 43.7% 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 Beyond Expiring Annualized Base Rent per Sq. Ft. Expiring Ground Lease Revenue $ $ 20.69 23.77 24.63 24.42 23.86 23.45 24.42 23.88 26.33 27.48 24.86 23.95 $ $ — 226 394 819 448 469 304 100 121 388 4,365 7,633 43 ____________________ 1 2 3 Lease expiration table reflects rents in place as of December 31, 2015, and does not include option periods; 2016 expirations include 47 month-to- month tenants. This column also excludes ground leases. Expiring GLA excludes estimated square footage attributable to non-owned structures on land we own and ground leased to tenants. Annualized base rent represents the monthly contractual rent for December 2015 for each applicable tenant multiplied by 12. Excludes tenant reimbursements and ground lease revenue. LEASE EXPIRATION TABLE – OFFICE TENANTS ($ in thousands) 2016 2017 2018 2019 2020 2021 2022 2023 20244 2025 Beyond Number of Expiring Leases1 2 2 2 1 3 1 3 2 2 3 — 21 Expiring GLA/NRA2 7,914 83110 17,837 5,253 14,511 6,162 51,046 32,988 65,348 79,640 — 363,809 % of Total GLA/NRA Expiring 0.1% 0.6% 0.1% — 0.1% — 0.3% 0.2% 0.4% 0.5% — 2.3% $ $ Expiring Annualized Base Rent3 84 1,501 387 101 288 142 874 625 1,031 1,165 — 6,197 % of Total Annualized Base Rent — 0.7% 0.2% — 0.1% 0.1% 0.4% 0.3% 0.5% 0.5% — 2.8% Expiring Annualized Base Rent per Sq. Ft. $ $ 10.59 18.06 21.70 19.25 19.85 23.00 17.11 18.96 15.77 14.63 — 17.03 ____________________ 1 2 3 4 Lease expiration table reflects rents in place as of December 31, 2015 and does not include option periods; 2016 expirations include one month-to- month tenant. This column also excludes ground leases. Lease expiration table reflects rents in place as of December 31, 2015 and does not include option periods. This column also excludes ground leases. Annualized base rent represents the monthly contractual rent for December 2015 for each applicable tenant multiplied by 12. Excludes tenant reimbursements. Expiring annualized base rent includes $0.7 million from Kite Realty Group and subsidiaries. Lease Activity – New and Renewal In 2015, the Company executed new and renewal leases on 369 individual spaces totaling 2,098,133 square feet. New leases were signed on 188 individual spaces for 720,192 square feet of GLA, while renewal leases were signed on 181 individual spaces for 1,377,941 square feet of GLA. For comparable signed leases, which are defined as leases signed for which there was a former tenant within the last 12 months, we achieved a blended rent spread of 11.4% while incurring $8.78 per square foot of incremental capital improvement costs. The average rents for the 68 new comparable leases signed on individual spaces in 2015 were $20.23 per square foot compared to average expiring rents of $16.59 per square foot. The average rents for the 181 renewals signed on individual spaces in 2015 were $12.58 per square foot compared to average expiring rents of $11.53 per square foot. Further, average leasing costs for new comparable leases signed in 2015 were $43.94 per square foot, while there were minimal leasing costs incurred for renewal leases. 44 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 where the outcome 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. MINE SAFETY DISCLOSURES Not applicable. 45 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 February 22, 2016, the last reported sales price of our common shares on the NYSE was $26.98. The following table sets forth, for the periods indicated, the high and low prices for our common shares: Quarter Ended December 31, 2015 Quarter Ended September 30, 2015 Quarter Ended June 30, 2015 Quarter Ended March 31, 2015 Quarter Ended December 31, 2014 Quarter Ended September 30, 2014 Quarter Ended June 30, 2014 Quarter Ended March 31, 2014 ____________________ High1 Low1 $ $ $ $ $ $ $ $ 27.17 26.64 28.33 31.44 29.68 26.70 25.72 26.28 $ $ $ $ $ $ $ $ 23.85 22.93 24.47 26.39 23.71 22.92 22.92 23.20 1 Per share information has been restated for the effects of the Company’s one-for-four reverse common share split in August 2014. Holders The number of registered holders of record of our common shares was 1,516 as of February 22, 2016. This total excludes beneficial or non-registered holders that held their shares through various brokerage firms. This figure does not represent the actual number of beneficial owners of our common shares because our common shares are frequently held in “street name” by securities dealers and others for the benefit of beneficial owners who may vote the shares. Distributions Our Board of Trustees declared the following cash distributions per share to our common shareholders for the periods indicated: 46 Quarter Record Date Distribution Per Share1 Payment Date January 6, 2016 October 6, 2015 July 7, 2015 April 6, 2015 January 6, 2015 October 6, 2014 June 24, 2014 April 7, 2014 $ $ $ $ $ $ $ $ 0.2725 January 13, 2016 0.2725 October 13, 2015 0.2725 July 14, 2015 0.2725 April 13, 2015 0.2600 January 13, 2015 0.2600 October 13, 2014 0.2600 0.2600 April 14, 2014 July 1, 2014 4th 2015 3rd 2015 2nd 2015 1st 2015 4th 2014 3rd 2014 2nd 2014 1st 2014 ____________________ 1 Per share information has been restated for the effects of the Company’s one-for-four reverse common share split in August 2014. 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. On February 4, 2016, our Board of Trustees approved an increase to our common dividend to $0.2875 per share that will be paid on or about April 13, 2016 to shareholders of record as of April 6, 2016. This quarterly dividend represents a 5.5% increase over our previous quarterly distribution and an approximate 19.8% increase since 2013. 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 taxable 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 taxable 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 shareholders of at least 90% of our “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) 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, 2015, approximately 14% of our distributions to shareholders constituted a return of capital, approximately 74% constituted taxable ordinary income dividends and approximately 12% constituted taxable capital gains. 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. 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. 47 Issuer Repurchases; Unregistered Sales of Securities During the year ended December 31, 2015, certain of our employees surrendered common shares owned by them to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common shares of beneficial interest issued under our 2013 Equity Incentive Plan. The following table summarizes all of these repurchases during the year ended December 31, 2015: Total number of shares purchased1 Average price paid per share Total number of shares purchased as part of publicly announced plans or programs Maximum number of shares that may yet be purchased under the plans or programs $ $ $ $ $ $ — 20,123 7,638 — 77 — 7,202 715 — — 26 — 35,781 — 29.22 28.96 — 26.90 — 25.77 25.68 — — 27.07 — N/A — N/A N/A — N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A N/A Period January 1 - January 31 February 1 - February 31 March 1 - March 31 April 1 - April 30 May 1 - May 31 June 1 - June 30 July 1 - July 31 August 1 - August 31 September 1 - September 30 October 1 - October 31 November 1 - November 30 December 1 - December 31 Total ____________________ 1 The number of shares purchased represents common shares surrendered by certain of our employees to satisfy their statutory minimum federal and state tax obligations associated with the vesting of restricted common shares of beneficial interest issued under our 2013 Plan. With respect to these shares, the price paid per share is based on the closing price of our common shares as of the date of the determination of the statutory minimum federal and state tax obligations. Issuances Under Equity Compensation Plans For information regarding the securities authorized for issuance under our equity compensation plans, see Item 12 of this Annual Report on Form 10-K. Performance Graph Notwithstanding anything to the contrary set forth in any of our filings under the Securities Act or the Exchange Act that might incorporate SEC filings, in whole or in part, the following performance graph will not be incorporated by reference into any such filings. 48 The following graph compares the cumulative total shareholder return of our common shares for the period from December 31, 2010 to December 31, 2015, 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 $100 at December 31, 2010 and that all cash distributions were reinvested. The shareholder return shown on the graph below is not indicative of future performance. Kite Realty Group Trust S&P 500 FTSE NAREIT Equity REITs 12/10 6/11 12/11 6/12 12/12 6/13 12/13 6/14 12/14 6/15 12/15 100.00 100.00 94.10 106.03 87.61 102.11 99.32 111.80 113.92 118.45 125.35 134.83 139.32 156.82 134.26 168.01 158.82 178.29 137.77 180.48 149.30 180.75 100.00 110.20 108.29 124.44 127.85 136.15 131.01 154.14 170.49 160.82 175.94 ITEM 6. SELECTED FINANCIAL DATA The following tables set forth, on a historical basis, selected unaudited financial and operating information. The financial information has been derived from our consolidated balance sheets and statements of operations. The share and per share information has been restated for the effects of our one-for-four reverse share split that occurred in August 2014. This information 49 should be read in conjunction with our audited consolidated financial statements and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K. ($ in thousands) Operating Data: Total rental related revenue Expenses: Property operating Real estate taxes General, administrative, and other Merger and acquisition costs Litigation charge, net Non-cash gain from release of assumed earnout liability Impairment charge Depreciation and amortization Total expenses Operating income Interest expense Income tax (expense) benefit of taxable REIT subsidiary Non-cash gain on debt extinguishment Gain on settlement Gain on sale of unconsolidated property Remeasurement loss on consolidation of Parkside Town Commons, net Other (expense) income, net Income (loss) from continuing operations Discontinued operations: Income from operations, excluding impairment charge Impairment charge Non-cash gain on debt extinguishment Gain (loss) on sale of operating properties Income (loss) from discontinued operations Income (loss) before gain on sale of operating properties Gain on sale of operating properties, net Consolidated net income (loss) Net (income) loss attributable to noncontrolling interests: Net income (loss) attributable to Kite Realty Group Trust: Dividends on preferred shares Adjustment for redemption of preferred shares Net income (loss) attributable to common shareholders Income (loss) per common share – basic: Income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders Income (loss) from discontinued 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 – diluted: Income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders Income (loss) from discontinued 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 Weighted average Common Shares outstanding – diluted Distributions declared per Common Share $ $ $ $ $ $ Year Ended December 31 (Unaudited) 20151 20142 20133 20124 20115 $ 347,005 $ 259,528 $ 129,488 $ 96,539 $ 89,116 49,973 40,904 18,709 1,550 — (4,832) 1,592 167,312 275,208 71,797 (56,432) (186) 5,645 4,520 — — (95) 25,249 — — — — — 25,249 4,066 29,315 (2,198) 27,117 (7,877) (3,797) 38,703 29,947 13,043 27,508 — — — 120,998 230,199 29,329 (45,513) (24) — — — — (244) (16,452) — — — 3,198 3,198 (13,254) 8,578 (4,676) (1,025) (5,701) (8,456) — 21,729 15,263 8,211 2,214 — — — 54,479 101,896 27,592 (27,994) (262) — — — — (62) (726) 834 (5,372) 1,242 487 (2,809) (3,535) — (3,535) 685 (2,850) (8,456) — 16,756 12,858 7,117 364 1,007 — — 38,835 76,937 19,602 16,830 12,448 6,274 — — — — 33,114 68,666 20,450 (23,392) (21,625) 106 — — — (7,980) 209 (11,455) 656 — — 7,094 7,750 (3,705) — (3,705) (629) (4,334) (7,920) — 1 — — 4,320 — 607 3,753 1,630 — — (398) 1,232 4,985 — 4,985 (4) 4,981 (5,775) — (794) 15,443 $ (14,157) $ (11,306) $ (12,254) $ 0.19 $ (0.29) $ (0.37) $ (1.04) $ (0.12) — 0.05 (0.11) 0.32 0.08 0.19 $ (0.24) $ (0.48) $ (0.72) $ (0.04) 0.18 $ (0.29) $ (0.37) $ (1.04) $ (0.12) — 0.05 (0.11) 0.32 0.08 0.18 $ (0.24) $ (0.48) $ (0.72) $ (0.04) 83,421,904 83,534,381 58,353,448 58,353,448 23,535,434 23,535,434 16,721,315 16,721,315 15,889,331 15,889,331 1.09 $ 1.02 $ 0.96 $ 0.96 $ 0.96 50 Net income (loss) attributable to Kite Realty Group Trust common shareholders: Income (loss) from continuing operations6 Income (loss) from discontinued operations Net income (loss) attributable to Kite Realty Group Trust common shareholders $ $ 15,443 $ (17,268) $ (8,686) $ (17,571) $ — 3,111 (2,620) 5,317 (1,891) 1,097 15,443 $ (14,157) $ (11,306) $ (12,254) $ (794) ____________________ 1 In 2015, we disposed of nine operating properties. The operations of these properties are not reflected as discontinued operations as none of the disposals individually, nor in the aggregate, represent a strategic shift that has or will have a major effect on our operations and financial results. 2 3 4 5 6 In 2014, we disposed of a number of operating properties. Of our 2014 disposals, the only property’s operations reflected as discontinued operations for each of the years presented is 50th and 12th, as the other disposals individually or in the aggregate did not represent a strategic shift that has or will have a major effect on our operations and financial results. Further, the 50th and 12th operating property is included in discontinued operations, as the property was classified as held for sale as of December 31, 2013. In 2013, we disposed of the following properties: Cedar Hill Village and Kedron Village. The operations of these properties are reflected as discontinued operations for each of the years presented above. In 2012, we sold the following operating properties: Pen Products, Indiana State Motor Pool, Sandifur Plaza, Preston Commons, Zionsville Place, Coral Springs Plaza, 50 South Morton, South Elgin Commons, and Gateway Shopping Center. The operations of these properties are reflected as discontinued operations for each of the years presented above. In December 2011, we sold our Martinsville Shops operating property. The operations of this property are reflected as discontinued operations for each of the years presented above. Includes gain on sale of operating properties and preferred dividends. ($ in thousands) As of December 31 2015 2014 2013 2012 2011 Balance Sheet Data (Unaudited): Investment properties, net Cash and cash equivalents Assets held for sale Total assets $ 3,500,845 $ 3,417,655 $ 1,644,478 $ 1,200,336 $ 1,095,721 33,880 — 43,826 179,642 18,134 — 12,483 — 10,042 — 3,766,038 3,874,216 1,763,927 1,288,657 1,193,266 Mortgage and other indebtedness 1,734,059 1,554,263 857,144 699,909 689,123 Liabilities held for sale Total liabilities — 81,164 — — — 1,946,974 1,846,986 962,894 774,365 737,807 Limited Partners' interests in Operating Partnership and other 92,315 125,082 Kite Realty Group Trust shareholders’ equity 1,725,976 1,898,784 773 3,364 43,928 753,557 3,548 37,670 473,086 3,536 41,836 409,372 4,251 3,766,038 3,874,216 1,763,927 1,288,657 1,193,266 Noncontrolling interests Total liabilities and equity 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 “our Company,” “we,” “us,” and “our” mean Kite Realty Group Trust and its direct and indirect subsidiaries, including Kite Realty Group, L.P. 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 and how it impacts our financing strategy. 51 Our Business and Properties Kite Realty Group Trust, a publicly-held real estate investment trust, through its majority-owned subsidiary, Kite Realty Group, L.P., owns interests in various operating subsidiaries and joint ventures engaged in the ownership, operation, acquisition, development, and redevelopment of high-quality neighborhood and community shopping centers in selected markets in the United States. We derive revenues primarily from rents and reimbursement payments received from tenants under leases at our properties. Our operating results therefore depend materially on the ability of our tenants to make required rental payments, conditions in the United States retail sector and overall economic and real estate market conditions. As of December 31, 2015, we owned interests in 118 operating and redevelopment properties consisting of 110 retail properties, six retail redevelopment properties, one office operating property and an associated parking garage. We also owned three development properties under construction as of this date. Portfolio Update In evaluating acquisition, development, and redevelopment opportunities, we focus on strong sub-markets where average household income is above the average for the market. We also focus on locations with population density, high traffic counts, and strong daytime work force populations. Household incomes in our largest markets are significantly higher than the median for the market. 2015 was a strong year for the shopping center industry as landlords continued to take advantage of historically low new shopping center supply. This provided landlords the opportunity to optimize the tenant mix at properties and upgrade shop space. In addition, the continued investment by retailers in omni-channel operations to merge their brick and mortar and online operations is an opportunity for landlords with quality assets in strong locations to drive rent and occupancy growth. In 2015, we disposed of nine non-core operating properties. These sales provided us with an additional source of capital which we used to reduce debt and acquire operating properties in core markets including Colleyville Downs in Dallas, Texas, Belle Isle Station in Oklahoma City, Oklahoma, Livingston Shopping Center in Newark, New Jersey, and Chapel Hill Shopping Center in Fort Worth, Texas. We are also currently evaluating potential redevelopment, repositioning, and repurposing of several operating properties. Total estimated costs are expected to be in the range of $130 million to $145 million. In addition to targeting sub-markets with strong consumer demographics, we focus on having the appropriate tenant mix at each center. The majority of our tenants are service oriented or have a notable online platform that has reduced the impact of the expansion of e-commerce on their operations. We have aggressively targeted and executed leases with notable soft goods retailers such as TJX Companies, Ross Dress for Less, Ulta and Bed Bath and Beyond. Additionally, we have identified cost- efficient ways to optimize space for junior anchors such as right-sizing office supply stores and backfilling the existing space with a tenant more suitable to the larger space. In addition, many of our redevelopment projects include right-sizing small shop space to accommodate construction of new junior anchor space. Capital and Financing Activities Our ability to obtain capital on satisfactory terms and to refinance borrowings as they mature is affected by the condition of the economy in general and by the financial strength of properties securing borrowings. Throughout 2015, we strengthened our balance sheet by retiring multiple property level secured loans using our unsecured loans. In addition, we redeemed all 4,100,000 outstanding shares of our Series A Preferred Shares. 52 We increased our liquidity through amending our existing unsecured term loan to increase the total borrowing capacity from $230 million to $400 million. We also issued $250 million of senior unsecured notes and entered into a new seven-year unsecured term loan for up to $200 million. The amount that we may borrow under our unsecured revolving credit facility is based on the value of assets in our unencumbered property pool. The senior unsecured notes and the seven-year unsecured term loan are included in the total borrowings outstanding for the purpose of determining the amount we may borrow under our unsecured revolving credit facility. Taking into account outstanding draws and letters of credit, as of December 31, 2015, we had $339.5 million available for future borrowings under our unsecured revolving credit facility. In addition, we had $33.9 million in cash and cash equivalents as of December 31, 2015. The unencumbering of a number of operating properties, amending our existing unsecured term loan, issuing unsecured notes and entering into a seven-year unsecured term loan provides us with more flexibility for future capital activity. In addition, the investment grade credit ratings we received in 2014 also provide us with access to the unsecured public bond market, which we may use in the future to finance acquisition activity, repay debt maturing in the near term and fix interest rates that are currently at historically low levels. 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. Valuation of Investment Properties Management reviews operational and development projects, land parcels and intangible assets for impairment on at least a quarterly basis or whenever events or changes in circumstances indicate that the carrying value 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 and intangible assets are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets. Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset. Our impairment review for land and development properties assumes we have the intent and the ability to complete the developments or projected uses for the land parcels. If we determine those plans will not be completed or our assumptions with respect to operating assets are not realized, an impairment loss may be appropriate. Depreciation may be accelerated for a redevelopment project, including partial demolition of existing structures after the asset is assessed for impairment. Operating properties 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, amongst other factors. Operating properties are carried at the lower of cost or fair value less estimated costs to sell. Depreciation and amortization are suspended during the held-for-sale period. Our operating properties have operations and cash flows that can be clearly distinguished from the rest of our activities. Historically, 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. In the first quarter of 2014, 53 we adopted the provisions of ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which will result in fewer real estate sales being classified within discontinued operations, as only disposals representing a strategic shift in operations will be presented as discontinued operations. All operating properties included in discontinued operations in 2014 were classified as such prior to the adoption of ASU 2014-08, and no properties that have been sold, or designated as held-for-sale, since the adoption of ASU 2014-08, have met the revised criteria for classification within discontinued operations. Acquisition of Real Estate Investments Upon acquisition of real estate operating properties, we estimate the fair value of acquired identifiable tangible assets and identified intangible assets and liabilities, assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date. In making estimates of fair values, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities. The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs. Fair value is determined for tangible assets and intangibles, including: • • • • the fair value of the building on an as-if-vacant basis and the fair value of land determined either by comparable market data, real estate tax assessments, independent appraisals or other relevant data; above-market and below-market in-place lease values for acquired properties, which are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over the remaining non-cancelable term of the leases. Any below-market renewal options are also considered in the in-place lease values. The capitalized above-market and below-market lease values are amortized as a reduction of or addition to rental income over the term of the lease. Should a tenant vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income; the value of leases acquired. We utilize independent and internal sources for our estimates to determine the respective in-place lease values. Our estimates of value are made using methods similar to those used by independent appraisers. Factors we consider in our analysis include an estimate of costs to execute similar leases including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant. The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases; and the fair value of any assumed financing that is determined to be above or below market terms. We utilize third party and independent sources for our estimates to determine the respective fair value of each mortgage payable. The fair market value of each mortgage payable is amortized to interest expense over the remaining initial terms of the respective loan. We also consider whether there is any value to in-place leases that have a related customer relationship intangible value. Characteristics the Company considers in determining these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, among other factors. To date, a tenant relationship has not been developed that is considered to have a current intangible value. Certain properties we acquired from the Merger included earnout components to the purchase price, meaning Inland Diversified did not pay a portion of the purchase price of the property at closing. We are not obligated to pay the contingent portion of the purchase prices unless space which was vacant at the time of acquisition is later leased by the seller within the time limits and parameters set forth in the acquisition agreements. If at the end of the time limits certain space has not been leased, occupied and rent producing, we will have no further obligation to pay the additional purchase price consideration and we will retain ownership of that entire property. The liability for potential future earnout payments was determined using 54 estimated fair value measurements at the end of the period, which included the lease-up periods, market rents and probability of occupancy. As these earnouts were the original obligation of the previous owner, our assumption of these earnouts is similar to the assumption of a contingent obligation. The earnout payments are based on a predetermined formula applied to rental income received. The earnouts are recorded as an addition to the purchase price of the related properties and as a liability included in deferred revenue and, intangibles, net and other liabilities on the accompanying consolidated balance sheets. Subsequent to the measurement period, any adjustment to the assumed earnout liability is reflected in the consolidated statements of 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. Minimum rent, percentage rent, and expense recoveries from tenants for common area maintenance costs, insurance and real estate taxes are our principal source of revenue. Base minimum rents are recognized on a straight-line basis over the terms of the respective leases. Certain lease agreements contain provisions that grant additional rents based on a tenant’s sales volume (contingent percentage rent). Overage rent is recognized when tenants achieve the specified targets as defined in their lease agreements. Overage rent is included in other property related revenue in the accompanying statements of operations. As a result of generating this revenue, we will routinely have accounts receivable due from tenants. We are subject to tenant defaults and bankruptcies that may affect the collection of outstanding receivables. To address the collectability of these receivables, we analyze historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the adequacy of our allowance for doubtful accounts and straight line rent reserve. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates. Gains from 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, 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. As part of our ongoing business strategy, we will, from time to time, sell land parcels and outlots, some of which are ground leased to tenants, on a case by case basis. Fair Value Measurements We follow the framework established under accounting standard FASB ASC 820 for measuring fair value of non-financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis but only in certain circumstances, such as a business combination or upon determination of impairment. Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: • Level 1 fair value inputs are quoted prices in active markets for identical instruments to which we have access. • Level 2 fair value inputs are inputs other than quoted prices included in Level 1 that are observable for similar instruments, either directly or indirectly, and appropriately considers counterparty creditworthiness in the valuations. • Level 3 fair value inputs reflect our best estimate of inputs and assumptions market participants would use in pricing an instrument at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate. 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. Our assessment of the significance of a particular input to 55 the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. As discussed in Note 11, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy. Note 4 to the accompanying consolidated financial statements includes a discussion of fair values recorded when we recognized an impairment charge on our Kedron Village operating property in 2013. Level 3 inputs to this transaction include our estimations of market leasing rates, discount rates, holding period, and disposal values. Note 8 to the accompanying consolidated financial statements includes a discussion of the fair values recorded in determining the fair value of acquired assets and assumed liabilities in business combinations. Level 3 inputs to these acquisitions include our estimations of market leasing rates, tenant-related costs, discount rates, and disposal values. Note 9 to the accompanying consolidated financial statements includes a discussion of the fair values recorded when we recognized an impairment charge on our Shops at Otty operating property. Level 3 inputs to this transaction include our estimations of market leasing rates, discount rates, holding period, and disposal values. Income Taxes and REIT Compliance Parent Company The Parent Company, which is considered a corporation for federal income tax purposes, has been organized and intends to continue to operate in a manner that will enable it to maintain its qualification as a REIT for federal income tax purposes. As a result, it generally will not be subject to federal income tax on the earnings that it distributes to the extent it distributes its “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) to shareholders of the Parent Company and meets certain other requirements on a recurring basis. To the extent that it satisfies this distribution requirement, but distributes less than 100% of its taxable income, it will be subject to federal corporate income tax on its undistributed REIT taxable income. REITs are subject to a number of organizational and operational requirements. If the Parent Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate rates for a period of four years following the year in which qualification is lost. 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 taxable income even if the Parent Company does qualify as a REIT. The Operating Partnership intends to continue to make distributions to the Parent Company in amounts sufficient to assist the Parent Company in adhering to REIT requirements and maintaining its REIT status. We have elected to treat Kite Realty Holdings, LLC as a taxable REIT subsidiary of the Operating Partnership, and we may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. This election enables us to receive income and provide services that would otherwise be impermissible for a REIT. 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 tax 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. Operating Partnership The allocated share of income and loss, other than the operations of our taxable REIT subsidiary, is included in the income tax returns of the Operating Partnership's partners. Accordingly, the only federal income taxes included in the accompanying consolidated financial statements are in connection with its taxable REIT subsidiary. 56 Inflation Inflation has not had a significant impact on our results of operations because of relatively low inflation rates in recent years. Additionally, 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, or include a fixed amount for these costs that escalates over time, thereby reducing our exposure to increases in operating expenses resulting from inflation. Furthermore, most of our leases are for terms of less than ten years, which enables us to seek to increase rents upon re-rental at market rates if current rents are below the then existing market rates. Results of Operations At December 31, 2015, we owned interests in 118 properties (consisting of 110 retail operating properties, six retail redevelopment properties, and one office operating property and an associated parking garage). Also, as of December 31, 2015, we had an interest in three retail development projects that were under construction. At December 31, 2014, we owned interests in 123 properties (consisting of 118 retail operating properties, three retail redevelopment properties, and one office operating property and an associated parking garage). Also, as of December 31, 2014, we had an interest in four retail development projects that were under construction. At December 31, 2013, we owned interests in 72 properties (consisting of 66 retail operating properties, 4 retail redevelopment properties, and one office operating property and an associated parking garage). Also, as of December 31, 2013, we had an interest in two development projects that were under construction and one development project that had not yet commenced construction. The comparability of results of operations is significantly affected by our merger with Inland Diversified on July 1, 2014 and by our development, redevelopment, and operating property acquisition and disposition activities in 2013 through 2015. Therefore, we believe it is most useful to review the comparisons of our results of operations for these years (as set forth below under “Comparison of Operating Results for the Years Ended December 31, 2015 and 2014” and “Comparison of Operating Results for the Years Ended December 31, 2014 and 2013”) in conjunction with the discussion of these activities during those periods, which is set forth below. Property Acquisition Activities During 2015, 2014 and 2013, we acquired the properties below. 57 Acquisition Date Owned GLA Property Name Shoppes of Eastwood Cool Springs Market Castleton Crossing Toringdon Market Nine Property Portfolio Merger with Inland Diversified (60 operating properties) Rampart Commons Colleyville Downs Belle Isle Station Livingston Shopping Center MSA Orlando, FL Nashville, TN Indianapolis, IN Charlotte, NC Various Various January 2013 April 2013 May 2013 August 2013 November 2013 July 2014 Las Vegas, NV December 2014 Dallas, TX Oklahoma City, OK New York - Newark April 2015 May 2015 July 2015 Chapel Hill Shopping Center Fort Worth / Dallas, TX August 2015 Operating Property Disposition Activities During 2015, 2014 and 2013, we sold or disposed of the operating properties listed in the table below. 69,037 230,948 291,172 60,539 1,977,711 10,719,471 81,292 185,848 164,372 139,657 126,755 Property Name MSA Disposition Date Owned GLA Kedron Village1 Cedar Hill Village1 50th and 12th (Walgreens)2 Red Bank Commons Ridge Plaza Zionsville Walgreens Sale of eight operating properties Sale of seven operating properties Cornelius Gateway Four Corner Square ____________________ Atlanta, GA Dallas, TX Seattle, WA Evansville, IN Oak Ridge, NJ Zionsville, IN Various3 Various3 Portland, OR Seattle, WA July 2013 September 2013 January 2014 March 2014 March 2014 September 2014 November & December 2014 March 2015 December 2015 December 2015 157,345 44,214 14,500 34,258 115,088 14,550 805,644 740,034 21,326 107,998 1 2 3 Operating properties were classified in discontinued operations in the consolidated statements of operations for the year ended December 31, 2013. Operating property was classified in discontinued operations in the consolidated statements of operations for the years ended December 31, 2014 and 2013. Shortly after the merger we identified and sold certain properties located in multiple MSA's that were not consistent with the Company's strategic plan. Development Activities During the years ended December 31, 2015, 2014 and 2013, the following significant development properties became operational or partially operational: 58 Property Name Delray Marketplace MSA Delray Beach, FL Economic Occupancy Date1 January 2013 Holly Springs Towne Center – Phase I Raleigh, NC Parkside Town Commons – Phase I Parkside Town Commons – Phase II Raleigh, NC Raleigh, NC Holly Springs Towne Center – Phase II Raleigh, NC March 2013 March 2014 September 2014 December 2015 Owned GLA 260,092 207,527 55,463 347,801 154,001 ____________________ 1 Represents the earlier of 1) the date on which we started receiving rental payments under tenant leases or ground leases at the property or 2) the date the first tenant took possession of its space at the property. Redevelopment Activities During portions of the years ended December 31, 2015, 2014 and 2013, the following redevelopment properties were under construction or in the final stages of the development process: Property Name MSA Rangeline Crossing Four Corner Square2 King’s Lake Square Bolton Plaza Gainesville Plaza Cool Springs Market Courthouse Shadows34 Hamilton Crossing Centre3 City Center3 Fishers Station3 Beechwood Promenade3 The Corner3 ____________________ Carmel, IN Seattle, WA Naples, FL Jacksonville, FL Gainesville, FL Nashville, TN Naples, FL Indianapolis, IN White Plains, NY Indianapolis, IN Athens, GA Indianapolis, IN Transition to Redevelopment1 Transition to Operations Owned GLA 99,282 June 2012 June 2013 September 2008 December 2013 July 2013 June 2008 June 2013 July 2015 June 2013 June 2014 December 2015 December 2015 December 2015 December 2015 April 2014 September 2014 December 2015 December 2015 Pending Pending Pending Pending Pending Pending 107,998 87,073 165,555 162,659 230,948 5,960 93,839 365,905 173,717 353,970 26,500 1 2 3 4 Transition date represents the date the property was transferred from our operating portfolio into redevelopment status. This operating property was sold in December 2015. These operating properties have been identified as redevelopment properties as they have been excluded from the same property pool. Our redevelopment plan is to demolish the site to add a large format single tenant ground lease with projected total GLA at the site of 140,710 square feet. Anchor Tenant Openings Included below is a list of anchor tenants that opened in 2015. 59 Tenant Name Property Name MSA Owned GLA Goodwill Ross Dress For Less Carl's Patio Stoney Creek Commons Gainesville Plaza Delray Marketplace Noblesville, IN Gainesville, FL Delray Beach, FL Frank Theatres & CineBowl Grill Parkside Town Commons – Phase II Raleigh, NC Staples TJ Maxx Kirklands Cool Springs Market Portofino Shopping Center Landstown Commons Franklin, TN Shenandoah, TX Virginia Beach, VA Bed Bath & Beyond Holly Springs Towne Center – Phase II Holly Springs, NC 19,030 25,000 10,256 59,944 12,000 22,500 10,150 23,400 Same Property Net Operating Income The Company believes that Net Operating Income ("NOI") is helpful to investors as a measure of its operating performance because it excludes various items included in net income that do not relate to or are not indicative of its operating performance, such as depreciation and amortization, interest expense, and impairment, if any. The Company believes that Same Property NOI is helpful to investors as a measure of its operating performance because it includes only the NOI of properties that have been owned for the full period presented, which eliminates disparities in net income due to the redevelopment, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent metric for the comparison of the Company's properties. NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indicators of the Company's financial performance. When evaluating the properties that are included in the same property pool, we have established specific criteria in determining the inclusion of properties acquired or those recently under development. An acquired property is included in the same property pool twelve months after the acquisition date. A development property is included in the same property pool twelve months after construction is substantially complete, which is typically between six and twelve months after the first date a tenant is open for business. A redevelopment property is included in the same property pool twelve months after the construction of the redevelopment property is substantially complete. A redevelopment property is first excluded from the same property pool when the execution of a redevelopment plan is likely and we begin recapturing space from tenants. For the year ended December 31, 2015, we excluded eight redevelopment properties from the same property pool that met these criteria and were owned in all periods compared. The following table reflects Same Property NOI (and reconciliation to net income (loss) attributable to common shareholders) for the years ended December 31, 2015 and 2014 (unaudited): 60 ($ in thousands) Leased percentage Economic Occupancy percentage1 Years Ended December 31, 2015 2014 % Change 95.4% 93.9% 95.1% 93.7% Net operating income - same properties2 $ 164,607 $ 159,040 3.5% Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure: Net operating income - same properties Net operating income - non-same activity3 General, administrative and other Merger and acquisition costs Depreciation expense Non-cash gain from release of assumed earnout liability Impairment charge Interest expense Gain on settlement Other expense, net Discontinued operations Non-cash gain on debt extinguishment Gains on sales of operating properties Net income attributable to noncontrolling interests Dividends on preferred shares Non-cash adjustment for redemption of preferred shares $ 164,607 $ 159,040 91,521 (18,709) (1,550) (167,312) 4,832 (1,592) (56,432) 4,520 (281) — 5,645 4,066 (2,198) (7,877) (3,797) 15,443 31,838 (13,043) (27,508) (120,998) — — (45,513) — (268) 3,198 — 8,578 (1,025) (8,456) — (14,157) $ Net income (loss) attributable to common shareholders $ ____________________ 1 2 3 Excludes leases that are signed but for which tenants have not commenced payment of cash rent. Calculated as a weighted average based on the timing of cash rent commencement during the period. Same property NOI excludes net gains from outlot sales, straight-line rent revenue, bad debt expense and recoveries, lease termination fees, amortization of lease intangibles and significant prior year expense recoveries and adjustments, if any. Includes non-cash accounting items across the portfolio as well as net operating income from properties not included in the same property pool. The increase in Same Property NOI of 3.5% in 2015 compared to 2014 is primarily due to increases in rental rates, and improved expense control and real estate tax recovery resulting in an improvement in net recoveries of $1.4 million. 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) and related revisions, which we refer to as the White Paper. The White Paper defines FFO as consolidated net income (loss) (computed in accordance with GAAP), excluding gains (or losses) from sales and impairments of depreciated property, less preferred dividends, plus depreciation and amortization, and after adjustments for third-party shares of appropriate items. 61 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 and impairment 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 gain on settlement, merger and acquisition costs, non-cash adjustment for redemption of preferred shares, non-cash gain from release of assumed earnout liability, non-cash gains on debt extinguishment in 2013 and 2015 and accelerated amortization of deferred financing fees in 2013. We believe this supplemental information provides a meaningful measure of our operating performance. We believe that our presentation of FFO, as adjusted provides investors with another financial measure that may facilitate comparison of operating performance between periods and compared to our peers. FFO and FFO, as adjusted, should not be considered as alternatives to consolidated net income (loss) (determined in accordance with GAAP) as indicators of our financial performance, are not alternatives to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and are not indicative of funds available to satisfy our cash needs, including our ability to make distributions. Our computations of FFO and FFO, as adjusted, may not be comparable to FFO or FFO, as adjusted, reported by other REITs. Our calculations of FFO1 (and reconciliation to consolidated net income, as applicable) and FFO, as adjusted. for the years ended December 31, 2015, 2014 and 2013 (unaudited) are as follows: ($ in thousands) Consolidated net income (loss) Less: cash dividends on preferred shares Less: non-cash adjustment for redemption of preferred shares Less: net income attributable to noncontrolling interests in properties Less: gains on sales of operating properties Add: impairment charge Add: depreciation and amortization of consolidated entities, net of noncontrolling interests Funds From Operations of the Kite Portfolio 1 Less: Limited Partners' interests in Funds From Operations Funds From Operations attributable to Kite Realty Group Trust common shareholders1 Funds From Operations of the Kite Portfolio 1 Less: gain on settlement Add: write-off of loan fees on early repayment of debt Add: merger and acquisition costs Add: adjustment for redemption of preferred shares (non-cash) Less: gain from release of assumed earnout liability (non-cash) Less: gain on debt extinguishment (non-cash) Funds From Operations of the Kite Portfolio, as adjusted Years Ended December 31, 2015 2014 2013 $ $ $ $ 29,315 (7,877) (3,797) (1,854) (4,066) 1,592 166,509 179,822 (3,789) 176,033 179,822 (4,520) — 1,550 3,797 (4,832) (5,645) 170,172 $ (4,676) $ (8,456) — (1,435) (11,776) — 120,452 94,109 (2,541) $ $ 91,568 94,109 $ $ — — 27,508 — — — $ 121,617 $ (3,535) (8,456) — (121) (487) 5,372 54,850 47,623 (3,195) 44,428 47,623 — 488 1,648 — — (1,242) 48,517 ____________________ 1 “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 attributable to Kite Realty Group Trust common shareholders” reflects a reduction for the redeemable noncontrolling weighted average diluted interest in the Operating Partnership. 62 Earnings before Interest, Tax, Depreciation, and Amortization We define EBITDA, a non-GAAP financial measure, as net income before depreciation and amortization, interest expense and income tax expense of taxable REIT subsidiary. For informational purposes, we have also provided Adjusted EBITDA, which we define as EBITDA less (i) EBITDA from unconsolidated entities, (ii) non-cash gain on debt extinguishment, (iii) gain on resolution of assumed contingency, (iv) impairment charge, (v) gain on sales of operating properties, (vi) other income and expense and (vii) noncontrolling interest EBITDA. Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA, as calculated by us, are not comparable to EBITDA reported by other REITs that do not define EBITDA exactly as we do. EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA do not represent cash generated from operating activities in accordance with GAAP, and should not be considered alternatives to net income as an indicator of performance or as alternatives to cash flows from operating activities as an indicator of liquidity. Given the nature of our business as a real estate owner and operator, we believe that EBITDA and Adjusted EBITDA are helpful to investors when measuring operating performance because they exclude various items included in net income or loss that do not relate to or are not indicative of operating performance, such as impairments of operating properties and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. For informational purposes, we have also provided Annualized Adjusted EBITDA, adjusted as described above. We believe this supplemental information provides a meaningful measure of our operating performance. We believe presenting EBITDA in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results. The following table presents a reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to consolidated net income (the most directly comparable GAAP measure) and a calculation of Net Debt to EBITDA. 63 ($ in thousands) Consolidated net income Adjustments to net income: Depreciation and amortization Interest expense Income tax expense of taxable REIT subsidiary Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) Adjustments to EBITDA: Unconsolidated EBITDA Non-cash gain on debt extinguishment Gain on resolution of assumed contingency Impairment charge Gain on sales of operating properties Other expense, net Noncontrolling interest Adjusted EBITDA Annualized Adjusted EBITDA1 Company share of net debt: Mortgage and other indebtedness Less: Partner share of consolidated joint venture debt Less: Cash Less: Debt Premium Company Share of Net Debt Net Debt to EBITDA Net Debt plus Preferred Shares to Annualized Adjusted EBITDA Three Months Ended December 31, $ 11,256 43,116 15,437 52 69,861 33 (5,645) (4,832) 1,592 (854) 61 (445) 59,771 $ 239,084 1,734,059 (13,753) (33,880) (16,521) 1,669,905 6.98x 6.98x ____________________ 1 Represents Adjusted EBITDA for the three months ended December 31, 2015 (as shown in the table above) multiplied by four. Comparison of Operating Results for the Years Ended December 31, 2015 and 2014 The following table reflects income statement line items from our consolidated statements of operations for the years ended December 31, 2015 and 2014: 64 ($ in thousands) Revenue: Rental income (including tenant reimbursements) Other property related revenue Total revenue Expenses: Property operating Real estate taxes General, administrative, and other Merger and acquisition costs Non-cash gain from release of assumed earnout liability Impairment charge Depreciation and amortization Total expenses Operating income Interest expense Income tax expense of taxable REIT subsidiary Non-cash gain on debt extinguishment Gain on settlement Other expense, net Income (loss) from continuing operations Discontinued operations: Gain on sales of operating properties, net Income (loss) from discontinued operations Income (loss) before gain on sale of operating properties Gain on sale of operating properties, net Consolidated net income (loss) Net income attributable to noncontrolling interests Net income (loss) attributable to Kite Realty Group Trust Dividends on preferred shares Non-cash adjustment for redemption of preferred shares 2015 2014 Net change 2014 to 2015 $ 334,029 12,976 347,005 $ 252,228 7,300 259,528 $ 81,801 5,676 87,477 49,973 40,904 18,709 1,550 (4,832) 1,592 167,312 275,208 71,797 (56,432) (186) 5,645 4,520 (95) 25,249 — — 25,249 4,066 29,315 (2,198) 27,117 (7,877) (3,797) 15,443 38,703 29,947 13,043 27,508 — — 120,998 230,199 29,329 (45,513) (24) — — (244) (16,452) 3,198 3,198 (13,254) 8,578 (4,676) (1,025) (5,701) (8,456) — (14,157) 11,270 10,957 5,666 (25,958) (4,832) 1,592 46,314 45,009 42,468 (10,919) (162) 5,645 4,520 149 41,701 (3,198) (3,198) 38,503 (4,512) 33,991 (1,173) 32,818 579 (3,797) 29,600 $ $ Net income (loss) attributable to common shareholders $ Property operating expense to total revenue ratio 14.4% 14.9% (0.5)% Rental income (including tenant reimbursements) increased $81.8 million, or 32.4%, due to the following: ($ in thousands) Properties acquired during 2014 or 2015 and retained Development properties that became operational or were partially operational in 2014 and/or 2015 Properties sold during 2014 or 2015 including properties acquired in the Merger Properties under redevelopment during 2014 and/or 2015 including properties acquired in the Merger Properties fully operational during 2014 and 2015 and other Total Net change 2014 to 2015 $ $ 82,672 3,468 (11,420) 6,090 991 81,801 65 The net increase of $82.7 million in rental income at properties acquired and retained during 2014 or 2015 is attributable to the Merger with Inland Diversified and the acquisition of Rampart Commons in 2014 and the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in 2015. The properties acquired and retained in connection with the Merger with Inland Diversified contributed an additional $71.3 million to rental income in 2015, while the remaining 2014 and 2015 acquisitions contributed $11.4 million. The net decrease of $11.4 million in rental income from properties sold during 2014 or 2015 is primarily due to the sale of 15 properties sold in late 2014 and early 2015. The net increase of $1.0 million in rental income for properties fully operational in both years is primarily attributable to an increase in rental rates, and an improvement in economic occupancy. The average rents for new comparable leases signed in 2015 were $20.23 per square foot compared to average expiring rents of $16.59 per square foot in that period. The average rents for renewals signed in 2015 were $12.58 per square foot compared to average expiring rents of $11.53 per square foot in that period. Our same property economic occupancy improved to 93.9% as of December 31, 2015 from 93.7% as of December 31, 2014. For our retail operating portfolio, annualized base rent per square foot improved to $15.22 per square foot as of December 31, 2015, up from $15.15 per square foot as of December 31, 2014. Other property related revenue primarily consists of parking revenues, overage rent, specialty leasing income, lease termination income and gains related to sales of land parcels peripheral to our properties. This revenue increased by $5.7 million, primarily as a result of higher gains on land sales of $4.1 million, an increase of $0.5 million in specialty leasing income, an increase of $0.5 million in lease termination income and an increase in overage rent of $0.3 million. Property operating expenses increased $11.3 million, or 29.1%, due to the following: ($ in thousands) Properties acquired during 2014 or 2015 and retained Development properties that became operational or were partially operational in 2014 and/or 2015 Properties sold during 2014 or 2015 including properties acquired in the Merger Properties under redevelopment during 2014 and/or 2015 including properties acquired in the Merger Properties fully operational during 2014 and 2015 and other Total Net change 2014 to 2015 $ $ 9,876 767 (1,616) 1,811 432 11,270 The net increase of $9.9 million in property operating expenses at properties acquired and retained during 2014 or 2015 is attributable to the Merger with Inland Diversified and the acquisition of Rampart Commons in 2014 and the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in 2015. The properties acquired and retained in connection with the Merger with Inland Diversified contributed an additional $7.9 million to property operating expenses in 2015, while the remaining 2014 and 2015 acquisitions contributed $2.0 million. The net decrease of $1.6 million in property operating expenses at properties sold during 2014 or 2015 is primarily due to the sale of 15 properties sold in late 2014 and early 2015. The net $0.4 million increase for properties fully operational is due to an increase of $1.5 million in on-site personnel and regional office costs, $0.7 million in bad debt expense, and $0.2 million in marketing costs, offset by a decrease of $0.5 million in insurance costs as we leveraged our larger operating platform, $1.1 million in repair and maintenance costs, and $0.4 million in snow removal costs. Property operating expenses as a percentage of total revenue for the year ended December 31, 2015 were 14.4% compared to 14.9% over the same period in the prior year. The decrease was mostly due to higher other property related revenue and an improvement in expense recoveries from tenants as a result of higher economic occupancy rates. The overall recovery ratio for reimbursable expenses improved to 87.1% for the twelve months ended December 31, 2015 compared to 85.3% for the twelve months ended December 31, 2014. 66 Real estate taxes increased $11.0 million, or 36.6%, due to the following: ($ in thousands) Properties acquired during 2014 or 2015 and retained Development properties that became operational or were partially operational in 2014 and/or 2015 Properties sold during 2014 or 2015 including properties acquired in the Merger Properties under redevelopment during 2014 and/or 2015 including properties acquired in the Merger Properties fully operational during 2014 and 2015 and other Total Net change 2014 to 2015 $ $ 10,297 215 (1,213) 1,012 646 10,957 The $10.3 million increase in real estate taxes at properties acquired and retained during 2014 or 2015 is attributable to the Merger with Inland Diversified and the acquisition of Rampart Commons in 2014 and the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in 2015. The properties acquired and retained in connection with the Merger with Inland Diversified contributed an additional $8.5 million to real estate taxes in 2015, while the remaining 2014 and 2015 acquisitions contributed $1.8 million. The net decrease of $1.2 million in real estate taxes at properties sold during 2014 or 2015 is primarily due to the sale of 15 properties sold in late 2014 and early 2015. The net $0.6 million increase in real estate taxes for properties fully operational during 2014 and 2015 is due to higher tax assessments at certain operating properties. The majority of changes in our real estate tax expense is recoverable from tenants and, therefore, reflected in tenant reimbursement revenue. General, administrative and other expenses increased $5.7 million, or 43.4%. The increase is due primarily to higher public company costs and personnel costs associated with the July 2014 merger with Inland Diversified. Our employee base increased from 95 full-time employees as of December 31, 2013 to 145 full-time employees as of December 31, 2015. Merger and acquisition costs in 2014 related almost entirely to our Merger with Inland Diversified and totaled $27.5 million for the year ended December 31, 2014 compared to $1.6 million of costs for various property acquisitions for the year ended December 31, 2015. We recorded a non-cash gain from the release of an assumed earnout liability of $4.8 million for the year ended December 31, 2015. See additional discussion in Note 15 to the consolidated financial statements. We recorded an impairment charge of $1.6 million related to our Shops at Otty operating property for the year ended December 31, 2015. See additional discussion in Note 9 to the consolidated financial statements. Depreciation and amortization expense increased $46.3 million, or 38.3%, due to the following: ($ in thousands) Properties acquired during 2014 or 2015 and retained Development properties that became operational or were partially operational in 2014 and/or 2015 Properties sold during 2014 or 2015 including properties acquired in the Merger Properties under redevelopment during 2014 and/or 2015 including properties acquired in the Merger Properties fully operational during 2014 and 2015 and other Total Net change 2014 to 2015 $ $ 45,414 2,514 (3,456) 3,870 (2,028) 46,314 67 The net increase of $45.4 million in depreciation and amortization expense at properties acquired and retained during 2014 or 2015 is attributable to the Merger with Inland Diversified and the acquisition of Rampart Commons in 2014 and the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in 2015. The net decrease of $3.5 million in depreciation and amortization expense at properties sold during 2014 or 2015 is primarily due to the sale of 15 properties sold in late 2014 and early 2015. The net $2.0 million decrease in depreciation at properties fully operational during 2014 and 2015 is mainly due to a tenant vacating at an operating property in 2014, which resulted in the acceleration of depreciation and amortization on certain assets. Interest expense increased $10.9 million or 24.0%. The increase mainly resulted from our assumption of $859.6 million of debt as part of the Merger with Inland Diversified, in addition to draws on the unsecured revolving credit facility to fund a portion of our 2015 acquisitions. In addition, we secured longer-term fixed rate debt that carried higher interest rates than the variable rate on our unsecured revolving credit facility. The increase was also due to certain development projects, including Delray Marketplace and Parkside Town Commons - Phase I becoming operational. As a portion of the project becomes operational, we expense a pro-rata amount of related interest expense. We recorded a non-cash gain on debt extinguishment of $5.6 million for the year ended December 31, 2015, related to the retirement of the $90 million loan secured by our City Center operating property. See additional discussion in Note 10 to the consolidated financial statements. We recorded a gain on settlement of $4.5 million for the year ended December 31, 2015, related to the settlement of a dispute related to eminent domain and related damages at one of our operating properties. See additional discussion in Note 3 to the consolidated financial statements. The allocation of net income attributable to noncontrolling interests increased due to allocations to joint venture partners in certain consolidated properties acquired as part of the Merger with Inland Diversified. These partners are allocated income generally equal to the distribution received from the operations of the properties in which they hold an interest. Comparison of Operating Results for the Years Ended December 31, 2014 and 2013 The following table reflects income statement line items from our consolidated statements of operations for the years ended December 31, 2014 and 2013: 68 ($ in thousands) Revenue: 2014 2013 Net change 2013 to 2014 Rental income (including tenant reimbursements) $ 252,228 $ 118,059 $ 134,169 Other property related revenue Total revenue Expenses: Property operating Real estate taxes General, administrative, and other Merger and acquisition costs Depreciation and amortization Total expenses Operating income Interest expense Income tax expense of taxable REIT subsidiary Other expense, net Loss from continuing operations Discontinued operations: Discontinued operations Impairment charge Non-cash gain on debt extinguishment Gain on sale of operating properties Income (loss) from discontinued operations Loss before gain on sale of operating properties Gain on sale of operating properties Consolidated net loss Net (income) loss attributable to noncontrolling interests Net loss attributable to Kite Realty Group Trust Dividends on preferred shares Net loss attributable to Kite Realty Group Trust common shareholders $ 7,300 259,528 11,429 129,488 (4,129) 130,040 38,703 29,947 13,043 27,508 120,998 230,199 29,329 (45,513) (24) (244) (16,452) — — — 3,198 3,198 (13,254) 8,578 (4,676) (1,025) (5,701) (8,456) (14,157) 21,729 15,263 8,211 2,214 54,479 101,896 27,592 (27,994) (262) (62) (726) 834 (5,372) 1,242 487 (2,809) (3,535) — (3,535) 685 (2,850) (8,456) (11,306) 16,974 14,684 4,832 25,294 66,519 128,303 1,737 (17,519) 238 (182) (15,726) (834) 5,372 (1,242) 2,711 6,007 (9,719) 8,578 (1,141) (1,710) (2,851) — $ (2,851) $ Property operating expense to total revenue ratio 14.9% 16.8% (1.9)% Rental income (including tenant reimbursements) increased $134.2 million, or 113.6%, due to the following: 69 ($ in thousands) Properties acquired through merger with Inland Diversified Properties acquired during 2013 and 2014 Development properties that became operational or were partially operational in 2013 and/or 2014 Properties sold during 2014 Properties sold to Inland Real Estate during 2014 Properties under redevelopment during 2013 and/or 2014 Properties fully operational during 2013 and 2014 and other Total Net change 2013 to 2014 $ 85,310 32,816 4,775 (2,486) 6,662 2,025 5,067 $ 134,169 The net increase of $32.8 million in rental income at properties acquired during 2013 and 2014 is attributable to the acquisitions of Cool Springs Market, Castleton Crossing, Toringdon Market, and the nine property portfolio in November 2013. The net increase of $5.1 million in rental income for fully operational properties is primarily attributable to anchor tenant openings at certain operating properties, improvement in small shop occupancy, and an improvement in expense recoveries from tenants. The average rents for new comparable leases signed in 2014 were $17.24 per square foot compared to average expiring rents of $12.15 per square foot in that period. The average rents for renewals signed in 2014 were $14.48 per square foot compared to average expiring rents of $13.68 per square foot in that period. For our retail operating portfolio, annualized base rent per square foot improved to $15.15 (excluding ground leases) per square foot as of December 31, 2014, up from $13.18 (excluding ground leases) as of December 31, 2013 due to recent acquisition activity. Other property related revenue primarily consists of parking revenues, overage rent, lease settlement income and gains related to land sales. This revenue decreased by $4.1 million, primarily as a result of lower gains on land sales of $4.7 million partially offset by increases in overage rent income of $0.5 million. Property operating expenses increased $17.0 million, or 78.1%, due to the following: ($ in thousands) Properties acquired through merger with Inland Diversified Properties acquired during 2013 and 2014 Development properties that became operational or were partially operational in 2013 and/or 2014 Properties sold during 2014 Properties sold to Inland Real Estate during 2014 Properties under redevelopment during 2013 and/or 2014 Properties fully operational during 2013 and 2014 and other Total Net change 2013 to 2014 $ 8,022 5,714 1,063 (274) 943 497 1,009 $ 16,974 The net $5.7 million increase in property operating expenses at properties acquired during 2013 and 2014 is attributable to the acquisitions of Cool Springs Market, Castleton Crossing, Toringdon Market, and the nine property portfolio in November 2013. The net $1.0 million increase in property operating expenses at properties fully operational during 2013 and 2014 was due to higher maintenance, landscaping and insurance costs. 70 Property operating expenses as a percentage of total revenue for the year 2014 was 14.9% compared to 16.8% in 2013. The decrease in the percentage was mostly due to an improvement in expense recoveries from tenants. For the total portfolio, the overall recovery ratio for reimbursable expenses improved to 85.3% for 2014 compared to 76.1% for 2013. The improved ratio is mostly due to higher occupancy. Real estate taxes increased $14.7 million, or 96.2%, due to the following: ($ in thousands) Properties acquired through merger with Inland Diversified Properties acquired during 2013 and 2014 Development properties that became operational or were partially operational in 2013 and/or 2014 Properties sold during 2014 Properties sold to Inland Real Estate during 2014 Properties under redevelopment during 2013 and/or 2014 Properties fully operational during 2013 and 2014 and other Total Net change 2013 to 2014 $ 10,317 3,513 701 (258) 682 57 (328) 14,684 $ The net increase of $3.5 million in real estate taxes at properties acquired during 2013 and 2014 is attributable to the acquisitions of Cool Springs Market, Castleton Crossing, Toringdon Market, and the nine property portfolio in November 2013. The net $0.3 million decrease in real estate taxes at properties fully operational during 2013 and 2014 was due to successful appeals at certain properties. The majority of changes in our real estate tax expense is recoverable from tenants and, therefore, reflected in tenant reimbursement revenue. General, administrative and other expenses increased $4.8 million, or 58.8%, due primarily to higher public company and personnel costs largely associated with the Merger. Specifically, our year-end employee base increased 48.4% from 95 employees in 2013 to 141 employees in 2014. Merger and acquisition costs for the year ended December 31, 2014 related almost entirely to our Merger with Inland Diversified and totaled $27.5 million compared to $2.2 million of costs for property acquisitions for the year ended December 31, 2013. The majority of the $27.5 million related to investment banking, lender, due diligence, legal, and professional expenses. Depreciation and amortization expense increased $66.5 million, or 122.1%, due to the following: 71 ($ in thousands) Properties acquired through merger with Inland Diversified Properties acquired during 2013 and 2014 Development properties that became operational or were partially operational in 2013 and/or 2014 Properties sold during 2014 Properties sold to Inland Real Estate during 2014 Properties under redevelopment during 2013 and/or 2014 Properties fully operational during 2013 and 2014 and other Total Net change 2013 to 2014 $ 41,851 20,794 4,424 (764) 2,357 (3,407) 1,264 $ 66,519 The net increase of $20.8 million for depreciation and amortization expense at properties acquired during 2013 and 2014 is attributable to the acquisitions of Cool Springs Market, Castleton Crossing, Toringdon Market, and the nine property portfolio in November 2013. The net increase of $1.3 million in depreciation and amortization expense at properties fully operational during 2013 and 2014 was primarily due to an increase in anchor tenants openings. Interest expense increased $17.5 million, or 62.6%. The increase partially resulted from our assumption of $859.6 million of debt from the Merger. The increase was also due to certain development and redevelopment projects, including Delray Marketplace, Holly Springs Towne Centre – Phase I, Rangeline Crossing, Four Corner Square, and Parkside Town Commons – Phase I becoming operational. As a portion of the project becomes operational, we expense pro-rata amount of related interest expense. We recorded an impairment charge of $5.4 million related to our Kedron Village operating property for the year ended December 31, 2013. We also recognized a non-cash gain of $1.2 million resulting from the transfer of the Kedron Village assets to the lender in satisfaction of the debt. See additional discussion in Note 4 to the consolidated financial statements. We had a gain from discontinued operations of $3.2 million for the year ended December 31, 2014 compared to a loss of $0.5 million in the same period of 2013. The current year gain from discontinued operations relates to the sale of the 50th and 12th operating property, which was classified as held for sale as of December 31, 2013 and 2012. In the first quarter of 2014, we adopted the provisions of ASU 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. The Red Bank Commons, Ridge Plaza, Zionsville Walgreens and Tranche I operating properties are not included in discontinued operations in the accompanying Statements of Operations for the year ended December 31, 2014 and 2013, as the disposals individually and in the aggregate did not represent a strategic shift that has or will have major effect on our operations and financial results. We also recorded gains totaling $8.6 million for the year ended December 31, 2014 on the sales of our Red Bank Commons, Ridge Plaza, Zionsville Walgreens, and eight operating properties we sold in late 2014. Disposal gains and losses in prior years were generally classified in discontinued operations prior to our adoption of ASU 2014-08. The allocation to net income of noncontrolling interests increased due to allocations to joint venture partners in certain consolidated properties acquired as part of the Merger. These partners are allocated income generally equal to the distribution received from the operations of the properties in which they hold an interest. 72 Liquidity and Capital Resources Overview Our primary finance and capital strategy is to maintain a strong balance sheet with sufficient flexibility to fund our operating and investment activities in a cost-effective manner. We consider a number of factors when evaluating our level of indebtedness and when making decisions regarding additional borrowings or equity offerings, including the estimated value of properties to be developed or acquired, the estimated market value of our properties and the Company as a whole upon placement of the borrowing or offering, and the ability of particular properties to generate cash flow to cover debt service. We will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common or preferred shares, unsecured debt securities, or other securities. Our Principal Capital Resources For a discussion of cash generated from operations, see “Cash Flows,” beginning on page 76. In addition to cash generated from operations, we discuss below our other principal capital resources. The increased asset base and operating cash flows of the Company have substantially enhanced our liquidity position and reduced our borrowing costs. We continue to focus on a balanced approach to growth and staggering debt maturities in order to retain our financial flexibility. In 2015, we issued $520 million of unsecured debt in order to retire $233.1 million of property level secured debt, acquire $185.8 million of operating properties and to partially fund the $102.6 million redemption of our outstanding Series A Preferred Shares. As of December 31, 2015, we had approximately $339.5 million available under our unsecured revolving credit facility for future borrowings based on the unencumbered property pool allocated to the unsecured revolving credit facility. We also had $33.9 million in cash and cash equivalents as of December 31, 2015. We were in compliance with all applicable financial covenants under our unsecured revolving credit facility, our unsecured term loans, and our senior unsecured notes as of December 31, 2015. In the future, we may raise capital by disposing of properties, land parcels or other assets that are no longer core components of our growth strategy. The sale price may differ from our carrying value at the time of sale. We will also continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. 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 recent economic downturn adversely affected the ability of some of our tenants to meet their lease obligations. 73 Sale of Real Estate Assets We may pursue opportunities to sell non-strategic real estate assets in order to generate additional liquidity. Our ability to dispose of such properties is dependent on the availability of credit to potential buyers to purchase properties at prices that we consider acceptable. Sales prices on such transactions may be less than our carrying value. We sold eight retail operating properties in November and December 2014 for aggregate net proceeds of $150.8 million and a net gain of $1.4 million and seven retail operating properties in March 2015 for aggregate net proceeds of $103.0 million and a net gain of $3.4 million. Proceeds from these sales were used to pay down the unsecured revolving credit facility, acquire properties in our core markets, and to retire property level secured debt. During the fourth quarter of 2015, we sold our Four Corner operating property in Seattle, Washington, and our Cornelius Gateway operating property in Portland, Oregon, for aggregate proceeds of $44.9 million and a net gain of $0.6 million. Proceeds from these sales were used to pay down the unsecured revolving credit facility. Our Principal Liquidity Needs Short-Term Liquidity Needs Near-Term Debt Maturities. As of December 31, 2015, we have $262.5 million of debt scheduled to mature in 2016, excluding scheduled monthly principal payments. The recently executed seven-year unsecured term loan for up to $200 million, of which $100 million is undrawn, provides the majority of the funding for these securitized debt maturities. In addition, the maturity date of the $75.9 million Parkside Town Commons construction loan may be extended for an additional 48 months to November 21, 2020 at the Company’s option subject to certain conditions. Other Short-Term Liquidity Needs. The requirements for qualifying as a REIT and for a tax deduction for some or all of the dividends paid to shareholders, necessitate that we distribute at least 90% of our taxable income on an annual basis. Such requirements cause us to have substantial liquidity needs over both the short term and the long term. Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, interest expense and scheduled principal payments on our debt, expected dividend payments to our common shareholders and to Common Unit holders, and recurring capital expenditures. In December 2015, our Board of Trustees declared a cash distribution of $0.2725 per common share and Common Unit for the fourth quarter of 2015. This distribution was paid on January 13, 2016 to common shareholders and Common Unit holders of record as of January 6, 2016. On February 4, 2016, the Board of Trustees declared a cash distribution of $0.2875 per common share and Common Unit for the first quarter of 2016, which represents a 5.5% increase over our previous quarterly distribution. Future dividends are at the discretion of the Board of Trustees. Other short-term liquidity needs include expenditures for tenant improvements, external leasing commissions and recurring capital expenditures. During the year ended December 31, 2015, we incurred $3.2 million of costs for recurring capital expenditures on operating properties and also incurred $6.6 million of costs for tenant improvements and external leasing commissions (excluding first generation space and development and redevelopment properties). We currently anticipate incurring approximately $13 million to $15 million of additional major tenant improvements and renovation costs within the next twelve months at a number of our operating properties. As of December 31, 2015, we had three development projects under construction. The total estimated cost of the development projects is approximately $172.7 million, of which $145.4 million had been incurred as of December 31, 2015. We currently anticipate incurring the remaining $27.3 million of costs over the next twelve to eighteen months. We believe we currently 74 have sufficient financing in place to fund the projects and expect to do so primarily through existing or new construction loans or borrowings on our unsecured revolving credit facility. 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, ongoing tenant improvements, non-recurring capital expenditures, acquisitions of properties, and payment of indebtedness at maturity. Potential Redevelopment, Reposition, Repurpose Opportunities. We are currently evaluating potential redevelopment, repositioning, and repurposing of several operating properties. Total estimated costs are expected to be in the range of $130 million to $145 million. We believe we currently have sufficient financing in place to fund our investment in any existing or future projects through cash from operations and borrowings on our unsecured revolving credit facility. Selective Acquisitions, Developments and Joint Ventures. We may selectively pursue the acquisition and development of other properties, which would require additional capital. It is unlikely that we would have sufficient funds on hand to meet these long-term capital requirements. We would have to satisfy these needs through additional borrowings, sales of common or preferred shares, issuance of Operating Partnership units, cash generated through property dispositions or future property acquisitions and/ or participation in potential joint venture arrangements. We cannot be certain that we would have access to these sources of capital on satisfactory terms, if at all, to fund our long-term liquidity requirements. We evaluate all future opportunities against pre- established criteria including, but not limited to, location, demographics, expected return, tenant credit quality, tenant relationships, and amount of existing retail space. Our ability to access the capital markets will be dependent on a number of factors, including general capital market conditions. Capitalized Expenditures on All Properties The following table summarizes cash basis capital expenditures for our development and redevelopment properties and capital expenditures for the year ended December 31, 2015 and on a cumulative basis since the project’s inception: ($ in thousands) Developments Redevelopments Recently completed developments1 Miscellaneous other activity, net Recurring operating capital expenditures (primarily tenant improvement payments) Total Year to Date Cumulative December 31, 2015 December 31, 2015 52,858 $ 145,408 2,649 12,138 15,033 9,886 92,564 $ N/A N/A N/A N/A 145,408 $ $ ____________________ 1 This classification includes Parkside Town Commons - Phase I, Delray Marketplace, Holly Springs Towne Center – Phase I, Bolton Plaza, Gainesville Plaza, and Cool Springs. We capitalize certain indirect costs such as interest, salaries and benefits, and other general and administrative costs related to these development activities. If we were to experience a 10% reduction in development activities, without a corresponding decrease in indirect project costs, we would have recorded additional expense for the year ended December 31, 2015 of $0.5 million. 75 Impact of Changes in Credit Ratings on Our Liquidity In 2014, we were assigned investment grade corporate credit ratings from two nationally recognized credit rating agencies. These ratings remain unchanged at December 31, 2015. The ratings could change based upon, among other things, the impact that prevailing economic conditions may have on our results of operations and financial condition. Credit rating reductions by one or more rating agencies could also adversely affect our access to funding sources, the cost and other terms of obtaining funding, as well as our overall financial condition, operating results and cash flow. Cash Flows As of December 31, 2015, we had cash and cash equivalents on hand of $33.9 million. We may be subject to concentrations of credit risk with regard to our cash and cash equivalents. We place our cash and short-term cash investments with high-credit- quality financial institutions. While we attempt to limit our exposure at any point in time, occasionally, such cash and investments may temporarily be in excess of FDIC and SIPC insurance limits. 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. Comparison of the Year Ended December 31, 2015 to the Year Ended December 31, 2014 Cash provided by operating activities was $169.3 million for the year ended December 31, 2015, an increase of $126.8 million from the same period of 2014. The increase was primarily due to the increased cash flows generated by the properties acquired in 2014. Cash used in investing activities was $84.4 million for the year ended December 31, 2015, as compared to cash provided by investing activities of $186.9 million in the same period of 2014. Highlights of significant cash sources and uses are as follows: • Net proceeds of $170.0 million related to the sale of seven operating properties in early 2015 and the sale of Four Corner and Cornelius Gateway operating properties in December 2015 compared to net proceeds of $191.1 million related to the sale of eight operating properties in late 2014 and the sale of Red Bank Commons, Ridge Plaza, and 50th and 12th operating properties in early 2014; • Net cash outflow of $166.4 million related to 2015 acquisitions compared to a net cash outflow of $22.5 million related to the 2014 acquisition of Rampart Commons; • Decrease in capital expenditures of $2.0 million, in addition to a decrease in the change in construction payables of $19.5 million. In 2015, there was significant construction activity at Parkside Town Commons - Phase II, Tamiami Crossing, and Holly Springs Towne Center - Phase II. Cash used in financing activities was $94.9 million for the year ended December 31, 2015, compared to cash provided by financing activities of $203.8 million in the same period of 2014. Highlights of significant cash sources and uses in 2015 are as follows: • We drew $102.6 million on the unsecured revolving credit facility to redeem all the outstanding shares of our Series A Preferred Shares; $59 million to fund a portion of the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center and Chapel Hill Shopping Center; $30 million to fund the acquisition of 76 our partner's interest in our City Center operating property; and $14.7 million on construction loans related to development projects; • We retired the $12.2 million loan secured by our Indian River operating property, the $26.2 million loan secured by our Plaza Volente operating property and the $50.1 million loan secured by our Landstown Commons operating property; • We exercised the accordion option feature on the existing unsecured term loan to increase our total borrowings from $230 million to $400 million. The $170 million of proceeds were utilized to pay down our unsecured revolving credit facility by $140 million and to retire loans totaling $30.5 million that were secured by our Draper Peaks and Beacon Hill operating properties; • We issued $250 million of senior unsecured notes; • • In September 2015, we paid off the remaining balance of $199.6 million on our unsecured revolving credit facility and the $33 million loan secured by our Crossing at Killingly operating property, using proceeds from the issuance of the senior unsecured notes, and then in December 2015, we entered into a new $33 million loan secured by our Crossing at Killingly operating property; In connection with the sale of seven properties in March 2015, we retired the $24 million loan secured by the Regal Court property. We paid down our unsecured revolving credit facility by $27 million utilizing a portion of proceeds from these property sales. In addition in December 2015, we paid down our unsecured revolving credit facility utilizing gross proceeds of $44.9 million from the sales of Four Corner Square and Cornelius Gateway; • We entered into a seven-year unsecured term loan for up to $200 million, and in December 2015 drew $100 million on the seven-year unsecured term loan and used the proceeds to pay down the unsecured revolving credit facility that was initially utilized to retire the $90 million loan secured by our City Center operating property. • Distributions to common shareholders and Common Unit holders of $93.1 million; and • Distributions to preferred shareholders of $8.6 million. In addition to the cash activity above, in August 2015, in connection with the acquisition of Chapel Hill Shopping Center, we assumed a $18.3 million loan secured by the operating property. As part of the estimated fair value determination, a debt premium of $0.2 million was recorded; Comparison of the Year Ended December 31, 2014 to the Year Ended December 31, 2013 Cash provided by operating activities was $42.6 million for the year ended December 31, 2014, a decrease of $9.8 million from the same period of 2013. The decrease was primarily due to outflows for our merger costs and costs incurred by Inland Diversified prior to the Merger that were paid by us subsequent to June 30, 2014. Cash provided by investing activities was $186.9 million for the year ended December 31, 2014, as compared to cash used in investing activities of $514.9 million in the same period of 2013. Highlights of significant cash sources and uses are as follows: • Net proceeds of $191.1 million related to the sales of the Red Bank Commons, Ridge Plaza, 50th and 12th, Zionsville Walgreens and eight operating properties in 2014 compared to net proceeds of $7.3 million in 2013; • Net proceeds of $18.6 million related to the sale of marketable securities in 2014. These securities were acquired as part of the Merger; 77 • Net cash acquired of $108.7 million upon completion of the Merger. A portion of this cash was utilized to retire construction loans and other indebtedness while the remainder was retained for working capital including payment of Merger related costs; • Net cash outflow of $407.2 million related to 2013 acquisitions compared to net cash outflows of $19.7 million in 2014; • Decrease in capital expenditures of $18.0 million, offset by an increase in construction payables of $12.6 million as significant construction was ongoing at Gainesville Plaza, Parkside Town Commons – Phase I & II, Holly Springs Towne Center – Phase II and Tamiami Crossing in 2014. Cash used in financing activities was $203.8 million for the year ended December 31, 2014, compared to cash provided by financing activities of $468.2 million in the same period of 2013. Highlights of significant cash sources and uses in 2014 are as follows: • • • • In 2014, we drew $66.7 million on the unsecured revolving credit facility to fund the acquisition of Rampart Commons, redevelopment and tenant improvement costs; In 2014, we drew $50.8 million on construction loans related to development projects; In 2014, we paid down $51.7 million on the unsecured revolving credit facility utilizing a portion of proceeds from property sales and cash on hand; In July, we retired loans totaling $41.6 million that were secured by land at 951 and 41 in Naples, Florida, Four Corner Square, and Rangeline Crossing utilizing cash on hand obtained as part of the Merger; • We retired loans totaling $8.6 million that were secured by the 50th and 12th and Zionsville Walgreens operating properties upon the sale of these properties; • In December 2014, we retired the $15.8 million loan secured by our Eastgate Pavilion operating property, the $1.9 million loan secured by our Bridgewater Marketplace operating property, the $34.0 million loan secured by our Holly Springs – Phase I development property and the $15.2 million loan secured by Wheatland Town Crossing utilizing a portion of proceeds from property sales; • In December 2014, we paid down $4.0 million on the loan secured by Delray Marketplace operating property; • Distributions to common shareholders and operating partnership unit holders of $49.6 million; and • Distributions to preferred shareholders of $8.5 million. In addition to the cash activity above, in July 2014, as a result of the Merger, we assumed $859.6 million in debt secured by 41 properties. As part of the fair value determination, a debt premium of $33.3 million was recorded. In December 2014, in connection with the acquisition of Rampart Commons, we assumed a $12.4 million fixed rate mortgage. As part of the fair value determination, a debt premium of $2.2 million was recorded. In December 2014, in connection with the sale of eight operating properties, Inland Real Estate assumed $75.8 million of our secured loans associated with Shoppes at Prairie Ridge, Fox Point, Harvest Square, Heritage Square, The Shoppes at Branson Hills and Copp’s Grocery. 78 Other Matters Financial Instruments We are exposed to capital market risk, such as changes in interest rates. In order to reduce the volatility relating to interest rate risk, we may enter into interest rate hedging arrangements from time to time. We do not utilize derivative financial instruments for trading or speculative purposes. Off-Balance Sheet Arrangements We do not currently have any off-balance sheet arrangements that in our opinion have, or are reasonably likely to have, a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources. We do, however, have certain obligations related to some of the projects in our operating and development properties. As of December 31, 2015, we have outstanding letters of credit totaling $14.7 million and no amounts were advanced against these instruments. Contractual Obligations The following table summarizes our contractual obligations to third parties based on contracts executed as of December 31, 2015. ($ in thousands) 2016 2017 2018 2019 2020 Thereafter Total Consolidated Long-term Debt and Interest2 327,443 $ Development Activity and Tenant Allowances1 Operating Ground Leases Employment Contracts3 Total $ 9,769 $ 1,494 $ 1,870 $ 340,576 72,598 135,825 447,405 89,383 983,789 — — — — — 1,494 1,132 1,103 1,088 44,583 935 — — — — 75,027 136,957 448,508 90,471 1,028,372 $ 2,056,443 $ 9,769 $ 50,894 $ 2,805 $ 2,119,911 ____________________ 1 2 3 Tenant allowances include commitments made to tenants at our operating and under construction development and redevelopment properties. Our long-term debt consists of both variable and fixed-rate debt and includes both principal and interest. Interest expense for variable-rate debt was calculated using the interest rates as of December 31, 2015. We have entered into employment agreements with certain members of senior management. The term of each employment agreement expires on June 30, 2017, with automatic one-year renewals each July 1st thereafter unless we or the individual elects not to renew the agreement. In connection with our formation at the time of our 2004 initial public offering, we entered into an agreement that restricts our ability, prior to December 31, 2016, to dispose of six of our operating properties in taxable transactions and limits the amount of gain we can trigger with respect to certain other operating properties without incurring reimbursement obligations to certain 79 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). We do not intend to dispose of these properties prior to December 31, 2016 in a manner that would result in a taxable transaction. The six properties to which our potential tax indemnity obligations relate represented 7.4% of our annualized base rent in the aggregate as of December 31, 2015. These six properties are International Speedway Square, Shops at Eagle Creek, Whitehall Pike, Portofino Shopping Center, Thirty South, and Market Street Village. Obligations in Connection with Development and Redevelopment Projects Under Construction We are obligated under various completion guarantees with lenders and lease agreements with tenants to complete all or portions of our in-process development and redevelopment projects. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through existing construction loans or draws on our unsecured facility. Our share of estimated future costs for our in-process and future developments and redevelopments is further discussed on page 74 in the "Short and Long-Term Liquidity Needs" section. Outstanding Indebtedness The following table presents details of outstanding consolidated indebtedness as of December 31, 2015 and 2014 adjusted for hedges: ($ in thousands) Senior unsecured notes Unsecured revolving credit facility Unsecured term loans Notes payable secured by properties under construction - variable rate Mortgage notes payable - fixed rate Mortgage notes payable - variable rate Net premiums on acquired debt Total mortgage and other indebtedness Mortgage notes - properties held for sale Total December 31, 2015 December 31, 2014 $ 250,000 $ 20,000 500,000 132,776 756,494 58,268 16,521 1,734,059 — — 160,000 230,000 119,347 810,959 205,798 28,159 1,554,263 67,452 $ 1,734,059 $ 1,621,715 Consolidated indebtedness, including weighted average maturities and weighted average interest rates at December 31, 2015, is summarized below: 80 ($ in thousands) Fixed rate debt1 Variable Rate Debt Net Premiums on Acquired Debt Total Amount 1,502,190 215,348 16,521 1,734,059 $ $ Weighted Average Maturity (Years) Weighted Average Interest Rate Percentage of Total 5.4 4.0 N/A 5.2 4.17% 1.97% N/A 3.90% 88% 12% N/A 100% ____________________ 1 Calculations on fixed rate debt include the portion of variable rate debt that has been hedged; therefore, calculations on variable rate debt exclude the portion of variable rate debt that has been hedged. $495.7 million in variable rate debt is hedged for a weighted average 2.0 years. Mortgage and construction loans are collateralized by certain real estate properties and leases. Mortgage loans are generally due in monthly installments of interest and principal and mature over various terms through 2030. Variable interest rates on mortgage and construction loans are based on LIBOR plus spreads ranging from 135 to 225 basis points. At December 31, 2015, the one-month LIBOR interest rate was 0.43%. Fixed interest rates on mortgage loans range from 3.78% to 6.78%. 81 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. We are exposed to interest rate changes primarily through (1) our variable-rate unsecured credit facility and unsecured term loans, (2) property-specific variable-rate construction loans, and (3) other property-specific variable-rate mortgages. Our objectives with respect to interest rate risk are to limit the impact of interest rate changes on operations and cash flows, and to lower its overall borrowing costs. To achieve these objectives, we may borrow at fixed rates and may enter into derivative financial instruments such as interest rate swaps, hedges, etc., in order to mitigate its interest rate risk on a related variable-rate financial instrument. As a matter of policy, we do not utilize financial instruments for trading or speculative transactions. We had $1.7 billion of outstanding consolidated indebtedness as of December 31, 2015 (inclusive of net premiums on acquired debt of $16.5 million). As of December 31, 2015, we were party to various consolidated interest rate hedge agreements for a total of $495.7 million, with maturities over various terms ranging from 2016 through 2020. Including the effects of these hedge agreements, our fixed and variable rate debt would have been $1.5 billion (88%) and $0.2 billion (12%), respectively, of our total consolidated indebtedness at December 31, 2015. We have $129.8 million of fixed rate debt maturing within the next twelve months. A 100 basis point increase in market interest rates would not materially impact the annual cash flows associated with these loans. A 100 basis point change in interest rates on our unhedged variable rate debt as of December 31, 2015 would change our annual cash flow by $2.2 million. Based upon the terms of our variable rate debt, we are most vulnerable to change in short-term LIBOR interest rates. The sensitivity analysis was estimated using cash flows discounted at current borrowing rates adjusted by 100 basis points. 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. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. ITEM 9A. CONTROLS AND PROCEDURES Kite Realty Group Trust Evaluation of Disclosure Controls and Procedures An evaluation was performed under the supervision and with the participation of the Parent Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Parent Company's Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective. 82 Changes in Internal Control Over Financial Reporting There has been no change in the Parent 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, 2015 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting. Management Report on Internal Control Over Financial Reporting The Parent Company is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision of and with the participation of the Parent Company's management, including its Chief Executive Officer and Chief Financial Officer, the Parent Company conducted an evaluation of the effectiveness of its internal control over financial reporting based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in Internal Control – Integrated Framework, the Parent Company's management has concluded that its internal control over financial reporting was effective as of December 31, 2015. The Parent Company's independent auditors, Ernst & Young LLP, an independent registered public accounting firm, have issued a report on its internal control over financial reporting as stated in their report which is included herein. The Parent Company's internal control system was designed to provide reasonable assurance to our 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. Kite Realty Group, L.P. Evaluation of Disclosure Controls and Procedures An evaluation was performed under the supervision and with the participation of the Operating Partnership’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report. Based on that evaluation, the Operating Partnership's Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective. Changes in Internal Control Over Financial Reporting There has been no change in the Operating Partnership’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, 2015 that has materially affected, or is reasonably likely to materially affect, its internal control over financial reporting. Management Report on Internal Control Over Financial Reporting The Operating Partnership is responsible for establishing and maintaining adequate internal control over financial reporting, as that term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision of and with the participation of the Operating Partnership's management, including its Chief Executive Officer and Chief Financial Officer, the Operating Partnership conducted an evaluation of the effectiveness of its internal control over financial reporting based on the 2013 framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the framework in Internal Control – Integrated Framework, the Operating Partnership's management has concluded that its internal control over financial reporting was effective as of December 31, 2015. The Operating Partnership's independent auditors, Ernst & Young LLP, an independent registered public accounting firm, have issued a report on its internal control over financial reporting as stated in their report which is included herein. The Operating Partnership's internal control system was designed to provide reasonable assurance to our 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. 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’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Kite Realty Group Trust’s management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting 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 maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, 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 as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2015 and the related financial statement schedule listed in the index at Item 15(a) as of December 31, 2015 of Kite Realty Group Trust and our report dated February 26, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Indianapolis, Indiana February 26, 2016 Report of Independent Registered Public Accounting Firm The Board of Trustees and Shareholders of Kite Realty Group, L.P. and subsidiaries: We have audited Kite Realty Group, L.P. and subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) (the COSO criteria). Kite Realty Group, L.P. 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, L.P. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, 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, L.P. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity and cash flows for each of the three years in the period ended December 31, 2015 and the related financial statement schedule listed in the index at Item 15(a) as of December 31, 2015 of Kite Realty Group, L.P. and subsidiaries and our report dated February 26, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Indianapolis, Indiana February 26, 2016 ITEM 9B. OTHER INFORMATION None 87 ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE PART III The information required by this Item is hereby incorporated by reference to the material appearing in our 2016 Annual Meeting Proxy Statement (the “Proxy Statement”), which we intend to file within 120 days after our fiscal year-end in accordance with Regulation 14A. ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is hereby incorporated by reference to the material appearing in our Proxy Statement. 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. 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. 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. 88 PART IV ITEM 15. EXHIBITS, AND 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. 89 SIGNATURES 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. 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 Chief Financial Officer (Principal Financial Officer) KITE REALTY GROUP L.P. AND SUBSIDIARIES (Registrant) /s/ John A. Kite John A. Kite Chairman and Chief Executive Officer (Principal Executive Officer) /s/ Daniel R. Sink Daniel R. Sink Chief Financial Officer (Principal Financial Officer) February 26, 2016 (Date) February 26, 2016 (Date) February 26, 2016 (Date) February 26, 2016 (Date) 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. 90 Signature Title Date /s/ John A. Kite (John A. Kite) /s/ William E. Bindley (William E. Bindley) /s/ Victor J. Coleman (Victor J. Coleman) /s/ Christie B. Kelly (Christie B. Kelly) /s/ David R. O’Reilly (David R. O’Reilly) /s/ Barton R. Peterson (Barton R. Peterson) /s/ Lee A. Daniels (Lee A. Daniels) /s/ Gerald W. Grupe (Gerald W. Grupe) Chairman, Chief Executive Officer, and Trustee (Principal Executive Officer) Trustee Trustee Trustee Trustee Trustee Trustee Trustee /s/ Charles H. Wurtzebach Trustee (Charles H. Wurtzebach) February 26, 2016 February 26, 2016 February 26, 2016 February 26, 2016 February 26, 2016 February 26, 2016 February 26, 2016 February 26, 2016 February 26, 2016 /s/ Daniel R. Sink (Daniel R. Sink) /s/ Thomas R. Olinger (Thomas R. Olinger) Chief Financial Officer (Principal Financial Officer) February 26, 2016 Senior Vice President, Chief Accounting Officer February 26, 2016 91 Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries Index to Financial Statements Consolidated Financial Statements: Kite Realty Group Trust: Report of Independent Registered Public Accounting Firm Kite Realty Group, L.P. and subsidiaries Report of Independent Registered Public Accounting Firm Kite Realty Group Trust: Balance Sheets as of December 31, 2015 and 2014 Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2015, 2014, and 2013 Statements of Shareholders’ Equity for the Years Ended December 31, 2015, 2014, and 2013 Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and 2013 Kite Realty Group, L.P. and subsidiaries Balance Sheets as of December 31, 2015 and 2014 Statements of Operations and Comprehensive Income (Loss) for the Years Ended December 31, 2015, 2014, and 2013 Statements of Partners’ Equity for the Years Ended December 31, 2015, 2014, and 2013 Statements of Cash Flows for the Years Ended December 31, 2015, 2014, and 2013 Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries: Notes to Consolidated Financial Statements Financial Statement Schedule: Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries: Schedule III – Real Estate and Accumulated Depreciation Notes to Schedule III All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted. Page F-1 F-2 F-3 F-4 F-5 F-6 F-7 F-8 F-9 F-10 F-11 F-48 F-53 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 as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. 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 at December 31, 2015 and 2014, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2015, 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, the Company changed its method for reporting discontinued operations as a result of the adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Kite Realty Group Trust’s internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 26, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Indianapolis, Indiana February 26, 2016 F-1 Report of Independent Registered Public Accounting Firm The Board of Trustees and Shareholders of Kite Realty Group, L.P. and subsidiaries: We have audited the accompanying consolidated balance sheets of Kite Realty Group, L.P. and subsidiaries as of December 31, 2015 and 2014, and the related consolidated statements of operations and comprehensive income (loss), shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2015. 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, L.P. and subsidiaries at December 31, 2015 and 2014, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2015, 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, the Company changed its method for reporting discontinued operations as a result of the adoption of the amendments to the FASB Accounting Standards Codification resulting from Accounting Standards Update No. 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, effective January 1, 2014. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Kite Realty Group, L.P. and subsidiaries’ internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 Framework) and our report dated February 26, 2016 expressed an unqualified opinion thereon. /s/ Ernst & Young LLP Indianapolis, Indiana February 26, 2016 F-2 Kite Realty Group Trust Consolidated Balance Sheets ($ in thousands, except share data) Assets: Investment properties, at cost Less: accumulated depreciation Cash and cash equivalents Tenant and other receivables, including accrued straight-line rent of $23,809 and $18,630 respectively, net of allowance for uncollectible accounts Restricted cash and escrow deposits Deferred costs and intangibles, net Prepaid and other assets Assets held for sale (see Note 9) Total Assets Liabilities and Equity: Mortgage and other indebtedness Accounts payable and accrued expenses Deferred revenue and intangibles, net and other liabilities Liabilities held for sale (see Note 9) Total Liabilities Commitments and contingencies Limited partners' interests in Operating Partnership and other redeemable noncontrolling interests Equity: Kite Realty Group Trust Shareholders’ Equity Preferred Shares, $.01 par value, 40,000,000 shares authorized, 0 and 4,100,000 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively Common Shares, $.01 par value, 225,000,000 shares authorized, 83,334,865 and 83,490,663 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively Additional paid in capital and other Accumulated other comprehensive loss Accumulated deficit Total Kite Realty Group Trust Shareholders' Equity Noncontrolling Interests Total Equity Total Liabilities and Equity December 31, 2015 December 31, 2014 $ $ 3,933,140 (432,295) 3,500,845 3,732,748 (315,093) 3,417,655 33,880 43,826 51,101 13,476 157,884 8,852 — 48,097 16,171 159,978 8,847 179,642 $ 3,766,038 $ 3,874,216 $ 1,734,059 $ 1,554,263 81,356 131,559 — 75,150 136,409 81,164 1,946,974 1,846,986 — — 92,315 125,082 — 102,500 833 2,050,545 (2,145) (323,257) 1,725,976 773 835 2,044,425 (1,175) (247,801) 1,898,784 3,364 1,726,749 1,902,148 $ 3,766,038 $ 3,874,216 The accompanying notes are an integral part of these consolidated financial statements. F-3 Kite Realty Group Trust Consolidated Statements of Operations and Comprehensive Income (Loss) ($ in thousands, except share and per share data) Revenue: Minimum rent Tenant reimbursements Other property related revenue Total revenue Expenses: Property operating Real estate taxes General, administrative, and other Merger and acquisition costs Non-cash gain from release of assumed earnout liability Impairment charge Depreciation and amortization Total expenses Operating income Interest expense Income tax expense of taxable REIT subsidiary Non-cash gain on debt extinguishment Gain on settlement Other expense, net Income (loss) from continuing operations Discontinued operations: Operating income from discontinued operations Impairment charge Non-cash gain on debt extinguishment Gain on sales of operating properties, net Income (loss) from discontinued operations Income (loss) before gain on sale of operating properties Gain on sale of operating properties, net Consolidated net income (loss) Net (income) loss attributable to noncontrolling interests Net income (loss) attributable to Kite Realty Group Trust Dividends on preferred shares Non-cash adjustment for redemption of preferred shares Net income (loss) attributable to common shareholders Net income (loss) per common share – basic: Income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders Income (loss) from discontinued operations attributable to Kite Realty Group Trust common shareholders Net income (loss) attributable to Kite Realty Group Trust common shareholders Net income (loss) per common share – diluted: Income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders Income (loss) from discontinued 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 Weighted average common shares outstanding - diluted Dividends declared per common share Net income (loss) attributable to Kite Realty Group Trust common shareholders: Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) attributable to Kite Realty Group Trust common shareholders Consolidated net income (loss) Change in fair value of derivatives Total comprehensive income (loss) Comprehensive (income) loss attributable to noncontrolling interests Comprehensive income (loss) attributable to Kite Realty Group Trust Year Ended December 31, 2015 2014 2013 $ 263,794 $ 199,455 $ 70,235 12,976 347,005 49,973 40,904 18,709 1,550 (4,832) 1,592 167,312 275,208 71,797 (56,432) (186) 5,645 4,520 (95) 25,249 — — — — — 25,249 4,066 29,315 (2,198) 27,117 (7,877) (3,797) 52,773 7,300 259,528 38,703 29,947 13,043 27,508 — — 120,998 230,199 29,329 (45,513) (24) — — (244) (16,452) — — — 3,198 3,198 (13,254) 8,578 (4,676) (1,025) (5,701) (8,456) — 93,637 24,422 11,429 129,488 21,729 15,263 8,211 2,214 — — 54,479 101,896 27,592 (27,994) (262) — — (62) (726) 834 (5,372) 1,242 487 (2,809) (3,535) — (3,535) 685 (2,850) (8,456) — $ $ $ $ $ $ $ $ $ $ 15,443 $ (14,157) $ (11,306) 0.19 — 0.19 0.18 — 0.18 $ $ $ $ (0.29) $ 0.05 (0.24) $ (0.29) $ 0.05 (0.24) $ (0.37) (0.11) (0.48) (0.37) (0.11) (0.48) 83,421,904 83,534,381 58,353,448 58,353,448 23,535,434 23,535,434 1.09 $ 1.02 $ 0.96 $ $ $ 15,443 — 15,443 29,315 (995) 28,320 (2,173) (17,268) $ $ $ 3,111 (14,157) (4,676) (2,621) (7,297) (932) 26,147 $ (8,229) $ (8,686) (2,620) (11,306) (3,535) 7,136 3,601 161 3,762 The accompanying notes are an integral part of these consolidated financial statements. F-4 l a t o T d e t a l u m u c c A t i c i f e D r e h t O d e t a l u m u c c A e v i s n e h e r p m o C e m o c n I ) s s o L ( l a n o i t i d d A s e r a h S n o m m o C s e r a h S d e r r e f e r P l a t i p a C n i - d i a P t n u o m A s e r a h S t n u o m A s e r a h S t s u r T p u o r G y t l a e R e t i K y t i u q E ’ s r e d l o h e r a h S f o s t n e m e t a t S d e t a d i l o s n o C ) a t a d e r a h s t p e c x e , s d n a s u o h t n i $ ( 0 1 5 , 2 8 9 8 , 3 1 3 2 2 2 1 6 , 6 — — — — ) 0 8 7 , 3 2 ( ) 0 8 7 , 3 2 ( ) 6 5 4 , 8 ( ) 0 5 8 , 2 ( 2 8 5 ) 5 6 4 , 8 ( — — ) 6 5 4 , 8 ( ) 0 5 8 , 2 ( — — — 2 1 6 , 6 — — — — — 8 0 5 , 2 7 6 7 , 3 1 3 2 2 — — — — 2 8 5 ) 5 6 4 , 8 ( 2 1 3 1 — — — — — — — 4 3 9 — — — — — 0 0 5 , 2 2 6 9 6 , 9 6 1 0 5 2 , 1 8 0 , 3 1 — — — — — — — — — — — — — — — — — — 4 8 4 , 3 7 4 $ ) 4 4 0 , 8 3 1 ( $ ) 9 5 2 , 5 ( $ 3 9 0 , 4 1 5 $ 4 9 1 $ 4 7 1 , 2 3 4 , 9 1 0 0 5 , 2 0 1 $ 0 0 0 , 0 0 1 , 4 p i h s r e n t r a P g n i t a r e p O – s t s e r e t n i g n i l l o r t n o c n o n e l b a m e e d e r o t s t n e m t s u j d A k c o t s n o m m o c r o f t s e r e t n i g n i l l o r t n o c n o n e l b a m e e d e r f o e g n a h c x E t s u r T p u o r G y t l a e R e t i K o t e l b a t u b i r t t a e m o c n i e v i s n e h e r p m o c r e h t O n a l p e s a h c r u p e r a h s e e y o l p m e r e d n u d e u s s i s e r a h s n o m m o C s r e d l o h e r a h s n o m m o c o t d e r a l c e d s n o i t u b i r t s i D s r e d l o h e r a h s d e r r e f e r p o t s n o i t u b i r t s i D t s u r T p u o r G y t l a e R e t i K o t e l b a t u b i r t t a s s o l t e N 2 1 0 2 , 1 3 r e b m e c e D , s e c n a l a B y t i v i t c a n o i t a s n e p m o c k c o t S t e n , s e r a h s n o m m o c f o e c n a u s s I 7 5 5 , 3 5 7 $ ) 0 3 1 , 3 7 1 ( $ 3 5 3 , 1 $ 7 0 5 , 2 2 8 $ 7 2 3 $ 4 5 5 , 6 0 7 , 2 3 0 0 5 , 2 0 1 $ 0 0 0 , 0 0 1 , 4 3 1 0 2 , 1 3 r e b m e c e D , s e c n a l a B ) 0 6 ( 9 9 2 , 3 ) 8 2 5 , 2 ( 6 4 7 8 1 , 3 3 2 , 1 — — — — — ) 4 1 5 , 0 6 ( ) 4 1 5 , 0 6 ( ) 6 5 4 , 8 ( ) 1 0 7 , 5 ( 7 6 5 ) 3 1 6 , 4 1 ( — — ) 6 5 4 , 8 ( ) 1 0 7 , 5 ( — — — — ) 8 2 5 , 2 ( — — — — — ) 0 6 ( 4 9 2 , 3 6 4 4 8 6 , 2 3 2 , 1 — — — — 7 6 5 ) 3 1 6 , 4 1 ( — 3 0 5 — 5 — — — — — — ) 6 3 4 , 2 ( 5 2 4 , 0 9 4 2 1 8 , 1 8 0 3 , 2 7 2 , 0 5 — — — — — 0 0 0 , 2 2 — — — — — — — — — — — — — — — — — — — — 4 8 7 , 8 9 8 , 1 $ ) 1 0 8 , 7 4 2 ( $ ) 5 7 1 , 1 ( $ 5 2 4 , 4 4 0 , 2 $ 5 3 8 $ 3 6 6 , 0 9 4 , 3 8 0 0 5 , 2 0 1 $ 0 0 0 , 0 0 1 , 4 ) 0 7 9 ( 2 4 7 , 3 ) 9 9 8 , 0 9 ( ) 7 7 8 , 7 ( ) 0 0 5 , 2 0 1 ( 7 1 1 , 7 2 7 8 4 5 4 4 , 1 ) 3 5 3 , 3 ( — — ) 9 9 8 , 0 9 ( ) 7 7 8 , 7 ( ) 7 9 7 , 3 ( 7 1 1 , 7 2 — — — — ) 0 7 9 ( — — — — — — — — — — 7 9 7 , 3 — 7 8 4 5 4 4 , 1 ) 3 5 3 , 3 ( — — — — — — — — — — — — — — — 0 0 0 , 8 1 4 4 7 , 3 ) 2 ( ) 8 9 7 , 3 7 1 ( 6 7 9 , 5 2 7 , 1 $ ) 7 5 2 , 3 2 3 ( $ ) 5 4 1 , 2 ( $ 5 4 5 , 0 5 0 , 2 $ 3 3 8 $ 5 6 8 , 4 3 3 , 3 8 — — — — — $ — — — — — — — — — — — — — ) 0 0 5 , 2 0 1 ( ) 0 0 0 , 0 0 1 , 4 ( s t s o c g n i r e f f o f o t e n , r e g r e M f o t r a p s a d e u s s i s e r a h s n o m m o C t i l p s e r a h s e s r e v e r h t i w n o i t c e n n o c n i d e r i t e r s e r a h s n o m m o C n a l p e s a h c r u p e r a h s e e y o l p m e r e d n u d e u s s i s e r a h s n o m m o C y t i v i t c a n o i t a s n e p m o c k c o t S t s u r T p u o r G y t l a e R e t i K o t e l b a t u b i r t t a s s o l e v i s n e h e r p m o c r e h t O s r e d l o h e r a h s n o m m o c o t d e r a l c e d s n o i t u b i r t s i D s r e d l o h e r a h s d e r r e f e r p o t s n o i t u b i r t s i D t s u r T p u o r G y t l a e R e t i K o t e l b a t u b i r t t a s s o l t e N s e r a h s n o m m o c r o f s t s e r e t n i g n i l l o r t n o c n o n e l b a m e e d e r f o e g n a h c x E s t s e r e t n i g n i l l o r t n o c n o n e l b a m e e d e r o t t n e m t s u j d A t s u r T p u o r G y t l a e R e t i K o t e l b a t u b i r t t a s s o l e v i s n e h e r p m o c r e h t O s r e d l o h e r a h s n o m m o c o t d e r a l c e d s n o i t u b i r t s i D s r e d l o h e r a h s d e r r e f e r p o t s n o i t u b i r t s i D s e r a h s d e r r e f e r p f o n o i t p m e d e R t s u r T p u o r G y t l a e R e t i K o t e l b a t u b i r t t a e m o c n i t e N s e r a h s n o m m o c r o f s t s e r e t n i g n i l l o r t n o c n o n e l b a m e e d e r f o e g n a h c x E s e r u t n e v t n i o j d e t a d i l o s n o c n i s t s e r e t n i ' s r e n t r a p f o n o i t i s i u q c A s t s e r e t n i g n i l l o r t n o c n o n e l b a m e e d e r o t t n e m t s u j d A 5 1 0 2 , 1 3 r e b m e c e D , s e c n a l a B 4 1 0 2 , 1 3 r e b m e c e D , s e c n a l a B y t i v i t c a n o i t a s n e p m o c k c o t S . s t n e m e t a t s l a i c n a n i f d e t a d i l o s n o c e s e h t f o t r a p l a r g e t n i n a e r a s e t o n g n i y n a p m o c c a e h T 5 - F Kite Realty Group Trust Consolidated Statements of Cash Flows ($ in thousands) Cash flow from operating activities: Consolidated net income (loss) Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: Gain on sale of operating properties, net of tax Impairment charge Gain on debt extinguishment 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 Non-cash gain from release of assumed earnout liability Changes in assets and liabilities: Tenant receivables Deferred costs and other assets Accounts payable, accrued expenses, deferred revenue, and other liabilities Payments on assumed earnout liability Net cash provided by operating activities Cash flow from investing activities: Acquisitions of interests in properties Capital expenditures, net Net proceeds from sales of operating properties Net proceeds from sales of marketable securities acquired from Merger Net cash received from Merger Change in construction payables Collection of note receivable Net cash (used in) provided by investing activities Cash flow from financing activities: Common share issuance proceeds, net of costs Payments for redemption of preferred shares Repurchases of common shares upon the vesting of restricted shares Offering costs Purchase of redeemable noncontrolling interests Loan proceeds Loan transaction costs Loan payments Distributions paid – common shareholders Distributions paid – preferred shareholders Distributions paid – redeemable noncontrolling interests Distributions to noncontrolling interests Net cash (used in) provided by financing activities (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplemental disclosures Cash paid for interest, net of capitalized interest Cash paid for taxes Year Ended December 31, 2015 2014 2013 $ 29,315 $ (4,676) $ (3,535) (4,066) 1,592 (5,645) (5,638) 170,521 4,331 4,580 (5,834) (3,347) (4,832) (1,510) (6,646) (903) (2,581) 169,337 (166,411) (92,564) 170,016 — — 4,562 — (11,776) — — (4,744) 123,862 1,740 2,914 (3,468) (4,521) — (10,044) (5,355) (41,375) — 42,557 (22,506) (94,553) 191,126 18,601 108,666 (14,950) 542 (487) 5,372 (1,242) (3,496) 57,757 922 1,932 (127) (2,674) — (1,690) (9,062) 8,688 — 52,358 (407,215) (112,581) 7,293 — — (2,396) — (84,397) 186,926 (514,899) — (102,500) (1,002) — (33,998) 984,303 (4,913) (835,019) (89,379) (8,582) (3,681) (115) (94,886) (9,946) 43,826 33,880 61,306 281 — — (378) (1,966) — 146,495 (4,270) (285,244) (46,656) (8,456) (2,992) (324) 314,771 — (261) — — 528,590 (2,138) (342,033) (20,594) (8,456) (1,579) (108) (203,791) 468,192 25,692 18,134 43,826 48,526 87 $ $ $ 5,651 12,483 18,134 31,577 45 $ $ $ $ $ $ The accompanying notes are an integral part of these consolidated financial statements. F-6 Kite Realty Group, L.P. and subsidiaries Consolidated Balance Sheets ($ in thousands, except unit data) Assets: Investment properties, at cost Less: accumulated depreciation Cash and cash equivalents Tenant and other receivables, including accrued straight-line rent of $23,809 and $18,630 respectively, net of allowance for uncollectible accounts Restricted cash and escrow deposits Deferred costs and intangibles, net Prepaid and other assets Assets held for sale (see Note 9) Total Assets Liabilities and Equity: Mortgage and other indebtedness Accounts payable and accrued expenses Deferred revenue and intangibles, net and other liabilities Liabilities held for sale (see Note 9) Total Liabilities Commitments and contingencies Limited partners' interests in Operating Partnership and other redeemable noncontrolling interests Partners Equity: Parent Company: December 31, 2015 December 31, 2014 $ $ 3,933,140 (432,295) 3,500,845 3,732,748 (315,093) 3,417,655 33,880 43,826 51,101 13,476 157,884 8,852 — 48,097 16,171 159,978 8,847 179,642 $ 3,766,038 $ 3,874,216 $ 1,734,059 $ 1,554,263 81,356 131,559 — 75,150 136,409 81,164 1,946,974 1,846,986 — — 92,315 125,082 Preferred equity, 0 and 4,100,000 units issued and outstanding at December 31, 2015 and December 31, 2014, respectively — 102,500 Common equity, 83,334,865 and 83,490,663 units issued and outstanding at December 31, 2015 and December 31, 2014, respectively Accumulated other comprehensive loss Total Partners Equity Noncontrolling Interests Total Equity Total Liabilities and Equity 1,728,121 (2,145) 1,725,976 773 1,797,459 (1,175) 1,898,784 3,364 1,726,749 1,902,148 $ 3,766,038 $ 3,874,216 The accompanying notes are an integral part of these consolidated financial statements. F-7 Kite Realty Group, L.P. and subsidiaries Consolidated Statements of Operations and Comprehensive Income (Loss) ($ in thousands, except unit and per unit data) Revenue: Minimum rent Tenant reimbursements Other property related revenue Total revenue Expenses: Property operating Real estate taxes General, administrative, and other Merger and acquisition costs Non-cash gain from release of assumed earnout liability Impairment charge Depreciation and amortization Total expenses Operating income Interest expense Income tax expense of taxable REIT subsidiary Non-cash gain on debt extinguishment Gain on settlement Other expense, net Loss from continuing operations Discontinued operations: Operating income from discontinued operations Impairment charge Non-cash gain on debt extinguishment Gain on sales of operating properties, net Income (loss) from discontinued operations Income (loss) before gain on sale of operating properties Gain on sale of operating properties, net Consolidated net income (loss) Net (income) loss attributable to noncontrolling interests Dividends on preferred units Non-cash adjustment for redemption of preferred shares Net income (loss) attributable to common unitholders Allocation of net income (loss): Limited Partners Parent Company Net income (loss) per unit - basic: Income (loss) from continuing operations attributable to common unitholders Income (loss) from discontinued operations attributable to common unitholders Net income (loss) attributable to common unitholders Net income (loss) per unit - diluted: Income (loss) from continuing operations attributable to common unitholders Income (loss) from discontinued operations attributable to common unitholders Net income (loss) attributable to common unitholders Weighted average common units outstanding - basic Weighted average common units outstanding - diluted Distributions declared per common unit Net income (loss) attributable to common unitholders: Income (loss) from continuing operations Income (loss) from discontinued operations Net income (loss) attributable to common unitholders Consolidated net income (loss) Change in fair value of derivatives Total comprehensive income (loss) Comprehensive (income) loss attributable to noncontrolling interests Comprehensive income (loss) attributable to common unitholders Year Ended December 31, 2015 2014 2013 $ 263,794 $ 199,455 $ 70,235 12,976 347,005 49,973 40,904 18,709 1,550 (4,832) 1,592 167,312 275,208 71,797 (56,432) (186) 5,645 4,520 (95) 25,249 — — — — — 25,249 4,066 29,315 (1,854) (7,877) (3,797) 52,773 7,300 259,528 38,703 29,947 13,043 27,508 — — 120,998 230,199 29,329 (45,513) (24) — — (244) (16,452) — — — 3,198 3,198 (13,254) 8,578 (4,676) (1,435) (8,456) — 93,637 24,422 11,429 129,488 21,729 15,263 8,211 2,214 — — 54,479 101,896 27,592 (27,994) (262) — — (62) (726) 834 (5,372) 1,242 487 (2,809) (3,535) — (3,535) (121) (8,456) — $ $ $ $ $ $ $ $ $ $ $ $ 15,787 $ (14,567) $ (12,112) 344 15,443 15,787 0.19 — 0.19 0.19 — 0.19 $ $ $ $ $ $ (410) $ (14,157) (14,567) $ (0.29) $ 0.05 (0.24) $ (0.29) $ 0.05 (0.24) $ (806) (11,306) (12,112) (0.37) (0.11) (0.48) (0.37) (0.11) (0.48) 85,219,827 85,332,303 60,010,480 60,250,900 25,217,287 25,278,273 1.09 $ 1.02 $ 0.96 $ $ $ 15,787 — 15,787 29,315 (995) 28,320 (1,854) (17,765) $ $ $ 3,198 (14,567) (4,676) (2,621) (7,297) (1,435) 26,466 $ (8,732) $ (9,303) (2,809) (12,112) (3,535) 7,136 3,601 (121) 3,480 The accompanying notes are an integral part of these consolidated financial statements. F-8 Kite Realty Group, L.P. and subsidiaries Consolidated Statements of Partners’ Equity ($ in thousands) General Partner Common Equity Preferred Equity Accumulated Other Comprehensive (Loss) Income Total 473,484 2,510 313,920 6,612 (23,780) (8,456) (2,850) 582 (8,465) 753,557 1,233,233 (60) 3,299 (2,528) (60,514) (8,456) (5,701) 567 (14,613) Balances, December 31, 2012 Stock compensation activity Capital contribution from Parent Company Other comprehensive income attributable to Parent Company Distributions declared to Parent Company Distributions to preferred unitholders Net loss Conversion of Limited Partner Units to shares of the Parent Company Adjustments to redeemable noncontrolling interests – Operating Partnership $ 376,243 $ 102,500 $ (5,259) $ 2,510 313,920 — (23,780) — (11,306) 582 (8,465) — — — — (8,456) 8,456 — — — — 6,612 — — — — — Balances, December 31, 2013 $ 649,704 $ 102,500 $ 1,353 $ Capital contribution as part of Merger, net of offering costs 1,233,233 Common units retired in connection with reverse share split Stock compensation activity Other comprehensive loss attributable to Parent Company Distributions declared to Parent Company Distributions to preferred unitholders Net loss Conversion of Limited Partner Units to shares of the Parent Company Adjustment to redeemable noncontrolling interests Balances, December 31, 2014 Stock compensation activity Other comprehensive loss attributable to Parent Company Distributions declared to Parent Company Distributions to preferred unitholders Redemption of preferred units Net income Acquisition of partners' interests in consolidated joint ventures Conversion of Limited Partner Units to shares of the Parent Company Adjustment to redeemable noncontrolling interests (60) 3,299 — (60,514) — (14,157) 567 (14,613) — — — — — (8,456) 8,456 — — — — — (2,528) — — — — — $ 1,797,459 $ 102,500 $ (1,175) $ 1,898,784 3,742 — (90,899) — 3,797 15,443 1,445 487 (3,353) — — — (7,877) (102,500) 7,877 — — — — (970) — — — — — — — 3,742 (970) (90,899) (7,877) (98,703) 23,320 1,445 487 (3,353) Balances, December 31, 2015 $ 1,728,121 $ — $ (2,145) $ 1,725,976 The accompanying notes are an integral part of these consolidated financial statements. F-9 Kite Realty Group, L.P. and subsidiaries Consolidated Statements of Cash Flows ($ in thousands) Cash flow from operating activities: Consolidated net income (loss) Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities: Gain on sale of operating properties, net of tax Impairment charge Gain on debt extinguishment 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 Non-cash gain from release of assumed earnout liability Changes in assets and liabilities: Tenant receivables Deferred costs and other assets Accounts payable, accrued expenses, deferred revenue, and other liabilities Payments on assumed earnout liability Net cash provided by operating activities Cash flow from investing activities: Acquisitions of interests in properties Capital expenditures, net Net proceeds from sales of operating properties Net proceeds from sales of marketable securities acquired from Merger Net cash received from Merger Change in construction payables Collection of note receivable Net cash provided by (used in) investing activities Cash flow from financing activities: Contributions from the Parent Company Payments for redemption of preferred units Repurchases of common shares upon the vesting of restricted shares Offering costs Purchase of redeemable noncontrolling interests Loan proceeds Loan transaction costs Loan payments Distributions paid – common unitholders Distributions paid – preferred unitholders Distributions paid – redeemable noncontrolling interests Distributions to noncontrolling interests Net cash (used in) provided by financing activities (Decrease) increase in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year Supplemental disclosures Cash paid for interest, net of capitalized interest Cash paid for taxes Year Ended December 31, 2015 2014 2013 $ 29,315 $ (4,676) $ (3,535) (4,066) 1,592 (5,645) (5,638) 170,521 4,331 4,580 (5,834) (3,347) (4,832) (1,510) (6,646) (903) (2,581) 169,337 (166,411) (92,564) 170,016 — — 4,562 — (11,776) — — (4,744) 123,862 1,740 2,914 (3,468) (4,521) — (10,044) (5,355) (41,375) — 42,557 (22,506) (94,553) 191,126 18,601 108,666 (14,950) 542 (487) 5,372 (1,242) (3,496) 57,757 922 1,932 (127) (2,674) — (1,690) (9,062) 8,688 — 52,358 (407,215) (112,581) 7,293 — — (2,396) — (84,397) 186,926 (514,899) — (102,500) (1,002) — (33,998) 984,303 (4,913) (835,019) (89,379) (8,582) (3,681) (115) (94,886) (9,946) 43,826 33,880 61,306 281 — — (378) (1,966) — 146,495 (4,270) (285,244) (46,656) (8,456) (2,992) (324) 314,771 — (261) — — 528,590 (2,138) (342,033) (20,594) (8,456) (1,579) (108) (203,791) 468,192 25,692 18,134 43,826 48,526 87 $ $ $ 5,651 12,483 18,134 31,577 45 $ $ $ $ $ $ The accompanying notes are an integral part of these consolidated financial statements. F-10 Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries Notes to Consolidated Financial Statements December 31, 2015 ($ in thousands, except share and per share data) Note 1. Organization Kite Realty Group Trust (the "Parent Company"), through its majority-owned subsidiary, Kite Realty Group, L.P. (the “Operating Partnership”), owns interests in various operating subsidiaries and joint ventures engaged in the ownership and operation, acquisition, development and redevelopment of high-quality neighborhood and community shopping centers in selected markets in the United States. The terms "Company," "we," "us," and "our" refer to the Parent Company and the Operating Partnership, collectively, and those entities owned or controlled by the Parent Company and/or the Operating Partnership. The Operating Partnership was formed on August 16, 2004, when the Parent Company contributed properties and the net proceeds from an initial public offering of shares of its common stock to the Operating Partnership. The Parent Company was organized in Maryland in 2004 to succeed in the development, acquisition, construction and real estate businesses of its predecessor. We believe the Company qualifies as a real estate investment trust (a “REIT”) under provisions of the Internal Revenue Code of 1986, as amended. The Parent Company is the sole general partner of the Operating Partnership, and as of December 31, 2015 owned approximately 97.8% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 2.2% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) are owned by the limited partners. As the sole general partner of the Operating Partnership, the Parent Company has full, exclusive and complete responsibility and discretion in the day-to-day management and control of the Operating Partnership. The Parent Company and the Operating Partnership are operated as one enterprise. The management of the Parent Company consists of the same members as the management of the Operating Partnership. As the sole general partner with control of the Operating Partnership, the Parent Company consolidates the Operating Partnership for financial reporting purposes, and the Parent Company does not have any significant assets other than its investment in the Operating Partnership. On July 1, 2014, we completed a merger (the "Merger") with Inland Diversified Real Estate Trust, Inc. (“Inland Diversified”), in which Inland Diversified merged with and into a wholly-owned subsidiary of ours. Upon completion of the Merger with Inland Diversified, we acquired 60 operating properties. Subsequent to the Merger, we sold 15 of these properties in November and December 2014 and March 2015. At December 31, 2015, we owned interests in 118 operating and redevelopment properties consisting of 110 retail properties, six retail redevelopment properties, one office operating property and an associated parking garage. We also owned three development properties under construction as of this date. At December 31, 2014, we owned interests in 123 operating and redevelopment properties consisting of 118 retail properties, of which seven were classified as held for sale, three retail redevelopment properties, one office operating property and an associated parking garage. We also owned four development properties under construction as of this date. 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. F-11 Components of Investment Properties The Company’s investment properties, excluding properties held for sale, as of December 31, 2015 and December 31, 2014 were as follows: ($ in thousands) Investment properties, at cost: Land Buildings and improvements Furniture, equipment and other Land held for development Construction in progress Balance at December 31, 2015 December 31, 2014 $ 805,646 $ 778,780 2,946,976 2,785,780 6,960 34,975 138,583 6,398 35,907 125,883 $ 3,933,140 $ 3,732,748 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) has equity investors that do not provide sufficient financial resources for the entity to support its activities, (b) does not have equity investors with voting rights or (c) has equity investors whose votes are disproportionate from their economics and substantially all of the activities are conducted on behalf of the investor with disproportionately fewer voting rights. The Company consolidates properties that are 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, among other factors: • • • our 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. The primary beneficiary is defined 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. As of December 31, 2015, we had an investment in one joint venture that is a VIE in which we are the primary beneficiary. As of this date, the VIE had total debt of $56.8 million which is secured by assets of the VIE totaling $107.2 million. The Operating Partnership guarantees the debt of the VIE. We consider all relationships between the Company and the VIE, including development agreements, management agreements and other contractual arrangements, in determining whether we have the power to direct the activities of the VIE that most significantly affect the VIE’s performance. We also continuously reassess primary beneficiary status. During the twelve months ended December 31, 2015, 2014 and 2013 there were no changes to our conclusions regarding whether an entity qualifies as a VIE or whether we are the primary beneficiary of any previously identified VIE. F-12 Beacon Hill In June 2015, we acquired our partner's interest in our Beacon Hill operating property. The transaction was accounted for as an equity transaction as we retained our controlling financial interest. Cornelius Gateway In December 2015, we sold our Cornelius Gateway operating property that was owned in a consolidated joint venture. The loss, which was not material and is included in "gain on sale of operating properties, net" in the accompanying consolidated statement of operations, was allocated 80% and 20% between us and our partner in accordance with the joint venture's operating agreement. Acquisition of Real Estate Properties Upon acquisition of real estate operating properties, we estimate the fair value of acquired identifiable tangible assets and identified intangible assets and liabilities, assumed debt, and any noncontrolling interest in the acquiree at the date of acquisition, based on evaluation of information and estimates available at that date. Based on these estimates, we record the estimated fair value to the applicable assets and liabilities. In making estimates of fair values, a number of sources are utilized, including information obtained as a result of pre-acquisition due diligence, marketing and leasing activities. The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs. Fair value is determined for tangible assets and intangibles, including: • • • • the fair value of the building on an as-if-vacant basis and the fair value of land determined either by comparable market data, real estate tax assessments, independent appraisals or other relevant data; above-market and below-market in-place lease values for acquired properties, which are based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to the in-place leases and (ii) management’s estimate of fair market lease rates for the corresponding in-place leases, measured over the remaining non-cancelable term of the leases. Any below-market renewal options are also considered in the in-place lease values. The capitalized above-market and below-market lease values are amortized as a reduction of or addition to rental income over the term of the lease. Should a tenant vacate, terminate its lease, or otherwise notify us of its intent to do so, the unamortized portion of the lease intangibles would be charged or credited to income; the value of leases acquired. We utilize independent and internal sources for our estimates to determine the respective in-place lease values. Our estimates of value are made using methods similar to those used by independent appraisers. Factors we consider in our analysis include an estimate of costs to execute similar leases including tenant improvements, leasing commissions and foregone costs and rent received during the estimated lease-up period as if the space was vacant. The value of in-place leases is amortized to expense over the remaining initial terms of the respective leases; and the fair value of any assumed financing that is determined to be above or below market terms. We utilize third party and independent sources for our estimates to determine the respective fair value of each mortgage payable. The fair market value of each mortgage payable is amortized to interest expense over the remaining initial terms of the respective loan. We also consider whether there is any value to in-place leases that have a related customer relationship intangible value. Characteristics the Company considers in determining these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, the tenant’s credit quality, and expectations of lease renewals, among other factors. To date, a tenant relationship has not been developed that is considered to have a current intangible value. F-13 We finalize the measurement period of our business combinations when all facts and circumstances are understood, but in no circumstances to exceed one year. Certain properties we acquired from the Merger included earnout components to the purchase price, meaning Inland Diversified did not pay a portion of the purchase price of the property at closing, although they owned the entire property. We are not obligated to pay the contingent portion of the purchase prices unless space which was vacant at the time of acquisition is later leased by the seller within the time limits and parameters set forth in the acquisition agreements. If at the end of the time limits certain space has not been leased, occupied and rent producing, we will have no further obligation to pay the additional purchase price consideration and we will retain ownership of that entire property. The liability for potential future earnout payments was determined using estimated fair value measurements at the end of the period which included the lease-up periods, market rents and probability of occupancy. As these earnouts were the original obligation of the previous owner, our assumption of these earnouts is similar to the assumption of a contingent obligation. The earnout payments are based on a predetermined formula applied to rental income received. The earnouts are recorded as an addition to the purchase price of the related properties and as a liability included in deferred revenue and intangibles, net and other liabilities on the accompanying consolidated balance sheets. Subsequent to the measurement period, any adjustment to the assumed earnout liability is reflected in the consolidated statements of operations. The Company determined that it was the acquirer for accounting purposes in the merger with Inland Diversified. We considered the continuation of the Company’s existing management and a majority of the existing board members as the most significant considerations in our analysis. Additionally, Inland Diversified had previously announced the transaction as a liquidation event and we believe this transaction was an acquisition of Inland Diversified by the Company. See Note 8 for additional discussion. Investment Properties Capitalization and Depreciation Investment properties are recorded at cost and include costs of land acquisition, 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 expensed over the shortened lease period. Maintenance and repairs that do not extend the useful lives of the respective assets are reflected in property operating expense. Pre-development costs are incurred prior to vertical construction and for certain land held for development acquisitions during the due diligence phase and include contract deposits, legal, engineering, cost of internal resources and other professional fees related to evaluating the feasibility of developing or redeveloping 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. Once construction commences on the land, it is transferred to construction in progress. We also capitalize costs such as acquisition of land, construction of buildings, interest, real estate taxes, and the costs of personnel directly involved with the development of our properties. As a portion of a development property becomes operational, we expense a pro rata amount of related costs. 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 tenant improvements are 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 F-14 over 5 to 10 years. Depreciation may be accelerated for a redevelopment project including partial demolition of existing structure after the asset is assessed for impairment. Impairment Management reviews operational properties, development properties, land parcels and intangible assets for impairment on at least a quarterly basis or whenever events or changes in circumstances indicate that the carrying value 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 and intangible assets are measured when the undiscounted cash flows estimated to be generated by the investment properties during the expected holding period are less than the carrying amounts of those assets. Impairment losses are recorded as the excess of the carrying value over the estimated fair value of the asset. If the Company decides to sell or otherwise dispose of an asset, its carrying value may differ from its sales price. Held for Sale and Discontinued Operations Operating properties classified as "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 among other factors. Operating properties held for sale 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. In the first quarter of 2014, we adopted the provisions of ASU 2014-8, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, which will result in fewer real estate sales being classified within discontinued operations as only disposals representing a strategic shift in operations will be presented as discontinued operations. All operating properties included in discontinued operations in 2014 were classified as such prior to the adoption of ASU 2014-08, and no properties that have been sold, or designated as held-for-sale, since the adoption of ASU 2014-08 have met the revised criteria for classification within discontinued operations. Escrow Deposits Escrow deposits consist of cash held for real estate taxes, property maintenance, insurance and other requirements at specific properties as required by lending institutions and certain municipalities. Cash and Cash Equivalents We consider all highly liquid investments purchased with an original maturity of 90 days or less to be cash and cash equivalents. From time to time, such investments may temporarily be held in accounts that are in excess of FDIC and SIPC insurance limits; however the Company attempts to limit its exposure at any one time. As of December 31, 2014, cash and cash equivalents included $16.1 million of funds set aside by the Company to affect a tax deferred purchase of real estate. Such funds were not considered available for general corporate purposes. Fair Value Measurements We follow the framework established under accounting standard FASB ASC 820 for measuring fair value of non-financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis but only in certain circumstances, such as a business combination or upon determination of an impairment. Assets and liabilities recorded at fair value on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows: F-15 • Level 1 fair value inputs are quoted prices in active markets for identical instruments to which we have access. • Level 2 fair value inputs are inputs other than quoted prices included in Level 1 that are observable for similar instruments, either directly or indirectly, and appropriately considers counterparty creditworthiness in the valuations. • Level 3 fair value inputs reflect our best estimate of inputs and assumptions market participants would use in pricing an instrument at the measurement date. The inputs are unobservable in the market and significant to the valuation estimate. 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. Our 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. As discussed in Note 11, the Company has determined that its derivative valuations are classified in Level 2 of the fair value hierarchy. Cash and cash equivalents, accounts receivable, escrows and deposits, and other working capital balances approximate fair value. Note 4 includes a discussion of fair values recorded in 2013 when we transferred the Kedron Village operating property to the loan servicer. Note 8 includes a discussion of the fair values recorded in purchase accounting. Note 9 includes a discussion of the fair values recorded when we recognized an impairment charge on our Shops at Otty operating property. Level 3 inputs to these transactions include our estimations of market leasing rates, tenant-related costs, discount rates, and disposal values. 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. 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. We use 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 hedged transaction. As of December 31, 2015 and 2014, all of our derivative instruments qualify for hedge accounting. Revenue Recognition As a lessor of real estate assets, the Company retains substantially all of the risks and benefits of ownership and accounts for its leases as operating leases. Contractual rent, percentage rent, and expense reimbursements from tenants for common area maintenance costs, insurance and real estate taxes are our principal source of revenue. Base minimum rents are recognized on a straight-line basis over the terms of the respective leases. Certain lease agreements contain provisions that grant additional rents based on a tenant’s sales volume (contingent overage rent). Overage rent is recognized when tenants achieve the specified sales targets as defined in their lease agreements. Overage rent is included in other property related revenue in the accompanying statements of operations. As a result of generating this revenue, we will routinely have accounts receivable due from tenants. We are subject to tenant defaults and bankruptcies that may affect the collection of outstanding receivables. To address the collectability of these receivables, we analyze historical write-off experience, tenant credit-worthiness and current economic trends when evaluating the adequacy of F-16 our allowance for doubtful accounts and straight line rent reserve. Although we estimate uncollectible receivables and provide for them through charges against income, actual experience may differ from those estimates. Gains or losses from sales of real estate are recognized when a sale has been consummated, the buyer’s initial and continuing investment is adequate to demonstrate a commitment to pay for the asset, 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 $5.6 million, $1.5 million, and $6.2 million for the years ended December 31, 2015, 2014, and 2013, respectively, and are classified as other property related revenue in the accompanying consolidated statements of operations. Tenant Receivables and Allowance for Doubtful Accounts Tenant receivables consist primarily of billed minimum rent, accrued and billed tenant reimbursements, and accrued straight- line rent. The Company generally does not require specific collateral other than corporate or personal guarantees from its tenants. An allowance for doubtful accounts is maintained for estimated losses resulting from the inability of certain tenants or others to meet contractual obligations under their lease or other agreements. Accounts are written off when, in the opinion of management, the balance is uncollectible. ($ in thousands) Balance, beginning of year Provision for credit losses, net of recoveries Accounts written off Balance, end of year 2015 2014 2013 $ $ 2,433 $ 1,328 $ 4,331 (2,439) 4,325 $ 1,740 (635) 2,433 $ 755 922 (349) 1,328 For the years ended December 31, 2015, 2014 and 2013, allowance for doubtful accounts represented 1.2%, 0.9% and 1.0% of total revenues, respectively. Other Receivables Other receivables consist primarily of receivables due from municipalities and from tenants for non-rental revenue related activities. Concentration of Credit Risk We may be subject to concentrations of credit risk with regards to our cash and cash equivalents. We place cash and temporary cash investments with high-credit-quality financial institutions. From time to time, such cash and investments may temporarily be in excess of insurance limits. In addition, our accounts receivable from and leases with tenants potentially subjects us to a concentration of credit risk related to our accounts receivable and revenue. At December 31, 2015, 50%, 11% and 6% of total billed receivables were due from tenants leasing space in the states of Florida, Indiana, and Texas, respectively, compared to 40%, 11%, and 4% in 2014. For the year ended December 31, 2015, 25%, 14% and 12% of the Company’s revenue recognized was from tenants leasing space in the states of Florida, Indiana, and Texas, respectively, compared to 26%, 18%, and 13% in 2014 and 30%, 36%, and 14% in 2013. F-17 Earnings Per Share Basic earnings per share or unit is calculated based on the weighted average number of common shares or units outstanding during the period. Diluted earnings per share or unit is determined based on the weighted average common number of shares or units outstanding during the period combined with the incremental average common shares or units that would have been outstanding assuming the conversion of all potentially dilutive common shares or units into common shares or units as of the earliest date possible. Potentially dilutive securities include outstanding options to acquire common shares; Limited Partner Units, which may be exchanged for either cash or common shares, at the Parent Company’s option and under certain circumstances; units under our Outperformance Plan; potential settlement of redeemable noncontrolling interests in certain joint ventures; and deferred common share units, which may be credited to the personal accounts of non-employee trustees in lieu of the payment of cash compensation or the issuance of common shares to such trustees. Limited Partner Units have been omitted from the Parent Company’s denominator for the purpose of computing diluted earnings per share since the effect of including these amounts in the denominator would have no dilutive impact. Weighted average Limited Partner Units outstanding for the years ended December 31, 2015, 2014 and 2013 were 1.8 million, 1.7 million and 1.7 million, respectively. Due to our net loss attributable to common shareholders and Common Unit holders for the years ended December 31, 2014 and 2013, there are no potentially dilutive securities for those periods. Approximately 0.1 million, 0.3 million and 0.4 million outstanding options to acquire common shares were excluded from the computations of diluted earnings per share or unit because their impact was not dilutive for the twelve months ended December 31, 2015, 2014 and 2013 respectively. On August 11, 2014, we completed a one-for-four reverse share split of our common shares. As a result of the reverse share split, the number of outstanding common shares of the Company was reduced from approximately 332.7 million to approximately 83.2 million at that date. Unless otherwise noted, all common share and per share information contained herein has been restated to reflect the reverse share split as if it had occurred as of the beginning of the first period presented. Segment Reporting Our primary business is the ownership and operation of neighborhood and community shopping centers. We do not distinguish or group our operations on a geographical basis, or any other basis, when measuring performance. Accordingly, we have one operating segment, which also serves as our reportable segment for disclosure purposes in accordance with GAAP. Income Taxes and REIT Compliance Parent Company The Parent Company, which is considered a corporation for federal income tax purposes, has been organized and intends to continue to operate in a manner that will enable it to maintain its qualification as a REIT for federal income tax purposes. As a result, it generally will not be subject to federal income tax on the earnings that it distributes to the extent it distributes its “REIT taxable income” (determined before the deduction for dividends paid and excluding net capital gains) to shareholders of the Parent Company and meets certain other requirements on a recurring basis. To the extent that it satisfies this distribution requirement, but distributes less than 100% of its taxable income, it will be subject to federal corporate income tax on its undistributed REIT taxable income. REITs are subject to a number of organizational and operational requirements. If the Parent Company fails to qualify as a REIT in any taxable year, it will be subject to federal income tax on its taxable income at regular corporate rates for a period of four years following the year in which qualification is lost. 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 taxable income even if the Parent Company does qualify as a REIT. The Operating Partnership intends to continue to make distributions to the Parent Company in amounts sufficient to assist the Parent Company in adhering to REIT requirements and maintaining its REIT status. F-18 We have elected to treat Kite Realty Holdings, LLC as a taxable REIT subsidiary of the Operating Partnership, and we may elect to treat other subsidiaries as taxable REIT subsidiaries in the future. This election enables us to receive income and provide services that would otherwise be impermissible for a REIT. 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 tax 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. Operating Partnership The allocated share of income and loss, other than the operations of our taxable REIT subsidiary, is included in the income tax returns of the Operating Partnership's partners. Accordingly, the only federal income taxes included in the accompanying consolidated financial statements are in connection with its taxable REIT subsidiary. Other state and local income taxes were not significant in any of the periods presented. Noncontrolling Interests We report the non-redeemable noncontrolling interests in subsidiaries as equity and the amount of consolidated net income attributable to these noncontrolling interests is set forth separately in the consolidated financial statements. The noncontrolling interests in consolidated properties for the years ended December 31, 2015, 2014, and 2013 were as follows: ($ in thousands) Noncontrolling interests balance January 1 Net income allocable to noncontrolling interests, excluding redeemable noncontrolling interests Distributions to noncontrolling interests Acquisition of partner's interest in Beacon Hill operating property Partner's share of loss on sale of Cornelius Gateway operating property Noncontrolling interests balance at December 31 $ Redeemable Noncontrolling Interests – Operating Partnership 2015 2014 2013 $ 3,364 $ 3,548 $ 3,535 111 (115) (2,353) (234) 773 140 (324) — — 121 (108) — — $ 3,364 $ 3,548 Limited Partner Units are redeemable noncontrolling interests in the Operating Partnership. We classify redeemable noncontrolling interests in the Operating Partnership in the accompanying consolidated balance sheets outside of permanent equity because we may be required to pay cash to holders of Limited Partner Units upon redemption of their interests in the Operating Partnership or deliver registered shares upon their conversion. The carrying amount of the redeemable noncontrolling interests in the Operating Partnership is reflected at the greater of historical book value or redemption value with a corresponding adjustment to additional paid-in capital. At December 31, 2015 and 2014, the redemption value of the redeemable noncontrolling interests exceeded the historical book value, and the balance was accordingly adjusted to redemption value. We allocate net operating results of the Operating Partnership after preferred dividends and noncontrolling interests in the consolidated properties based on the partners’ respective weighted average ownership interest. We adjust the redeemable noncontrolling interests in the Operating Partnership at the end of each reporting period to reflect their interests in the Operating Partnership or redemption value. This adjustment is reflected in our shareholders’ and Parent Company's equity. For the years ended December 31, 2015, 2014, and 2013, the weighted average interests of the Parent Company and the limited partners in the Operating Partnership were as follows: F-19 Parent Company’s weighted average interest in Operating Partnership Limited partners' weighted average interests in Operating Partnership Year Ended December 31, 2015 2014 2013 97.9% 97.2% 93.3% 2.1% 2.8% 6.7% At December 31, 2015 and December 31, 2014, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.8% and 2.2% and 98.1% and 1.9%, respectively. Concurrent with the Parent Company’s initial public offering and related formation transactions, certain individuals received Limited Partner Units of the Operating Partnership in exchange for their interests in certain properties. The limited partners were granted the right to redeem Limited Partner Units on or after August 16, 2005 for cash or, at the Parent Company's election, common shares of the Parent Company in an amount equal to the market value of an equivalent number of common shares of the Parent Company at the time of redemption. Such common shares must be registered, which is not fully in the Parent Company’s control. Therefore, the limited partners’ interest is not reflected in permanent equity. The Parent Company also has the right to redeem the Limited Partner Units directly from the limited partner in exchange for either cash in the amount specified above or a number of its common shares equal to the number of Limited Partner Units being redeemed. For the years ended December 31, 2015, 2014 and 2013, respectively, 18,000, 22,000, and 23,250 Limited Partner Units were exchanged for the same number of common shares of the Parent Company. There were 1,901,278 and 1,639,443 Limited Partner Units outstanding as of December 31, 2015 and 2014, respectively. The increase in Limited Partner Units outstanding from December 31, 2014 is due primarily to non-cash compensation awards previously made to our executive officers in the form of Limited Partner Units. Redeemable Noncontrolling Interests - Subsidiaries Prior to the Merger, Inland Diversified formed joint ventures with the previous owners of certain properties and issued Class B units in three joint ventures that indirectly own those properties. The Class B units related to two of these three joint ventures remain outstanding subsequent to the Merger with Inland Diversified and are accounted for as noncontrolling interests in these properties. The Class B units will become redeemable at our applicable partner’s election at future dates generally beginning in March 2017 or October 2022 based on the applicable joint venture and the fulfillment of certain redemption criteria. Beginning in June 2018 and November 2022, with respect to the applicable joint venture, the Class B units can be redeemed at the election of either our partner or us for cash or Limited Partner Units in the Operating Partnership. None of the issued Class B units have a maturity date and none are mandatorily redeemable. On February 13, 2015, we acquired our partner’s redeemable interest in the City Center operating property for $34.0 million and other non-redeemable rights and interests held by our partner for $0.4 million. We funded this acquisition with a $30 million draw on our unsecured revolving credit facility and the remainder in Limited Partner Units in the Operating Partnership. As a result of this transaction, our guarantee of a $26.6 million loan on behalf of LC White Plains Retail, LLC and LC White Plains Recreation, LLC was terminated. We classify redeemable noncontrolling interests in certain subsidiaries in the accompanying consolidated balance sheets outside of permanent equity because, under certain circumstances, we may be required to pay cash to Class B unitholders in specific subsidiaries upon redemption of their interests. The carrying amount of these redeemable noncontrolling interests is required to be reflected at the greater of initial book value or redemption value with a corresponding adjustment to additional paid- in capital. As of December 31, 2015 and 2014, the redemption amounts of these interests did not exceed the fair value of each interest. As of December 31, 2015, the redemption value of the redeemable noncontrolling interests exceeded the initial book value. F-20 The redeemable noncontrolling interests in the Operating Partnership and subsidiaries for the years ended December 31, 2015, 2014, and 2013 were as follows: ($ in thousands) Redeemable noncontrolling interests balance January 1 Acquired redeemable noncontrolling interests from merger Acquisition of partner's interest in City Center operating property Net income (loss) allocable to redeemable noncontrolling interests Distributions declared to redeemable noncontrolling interests Other, net Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at December 31 Limited partners' interests in Operating Partnership Other redeemable noncontrolling interests in certain subsidiaries Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at December 31 $ 2015 125,082 — (33,998) 2,087 (3,773) 2,917 2014 2013 $ 43,928 69,356 — 891 (3,021) 13,928 37,670 — — (806) (1,587) 8,651 92,315 $ 125,082 $ 43,928 $ 50,085 42,230 $ 47,320 77,762 43,928 — 92,315 $ 125,082 $ 43,928 $ $ $ $ Reclassifications Certain amounts in the accompanying consolidated financial statements for 2014 and 2013 have been reclassified to conform to the 2015 consolidated financial statement presentation. The reclassifications had no impact on net loss previously reported. Recently Issued Accounting Pronouncements In April 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-08, Presentation of Financial Statements (Topic 205) and Property, Plant, and Equipment (Topic 360): Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity (the “Update”). The Update changes the definition of discontinued operations by limiting discontinued operations reporting to disposals of components of an entity or assets that meet the criteria to be classified as held for sale and that represent strategic shifts that have (or will have) a major effect on an entity’s operations and financial results. The Update also requires expanded disclosures for discontinued operations and requires an entity to disclose the pretax profit or loss of an individually significant component of an entity that does not qualify for discontinued operations reporting in the period in which it is disposed of or is classified as held for sale and for all prior periods that are presented in the statement where net income is reported. The Update is effective for annual periods beginning on or after December 15, 2014, with early adoption permitted for disposals of assets that were not held for sale as of December 31, 2013. We adopted the Update in the first quarter of 2014. In March 2014, the Company disposed of its 50th and 12th operating property which had been classified as held for sale at December 31, 2013. Accordingly, the revenues and expenses of this property and the associated gain on sale have been classified in discontinued operations in the 2014 consolidated statements of operations In May 2014, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2014-9, Revenue from Contracts with Customers (“ASU 2014-9”). ASU 2014-9 is a comprehensive revenue recognition standard that will supersede nearly all existing GAAP revenue recognition guidance. It will also affect the existing GAAP guidance governing the sale of nonfinancial assets. The new standard’s core principle is that a company will recognize revenue when it satisfies performance obligations, by transferring promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for fulfilling those performance obligations. In doing so, companies will need to exercise more judgment and make more estimates than under existing GAAP guidance. F-21 Under the new standard, entities will now generally recognize the sale, and any associated gain or loss, of a real estate property when control of the property transfers, as long as collectability of the consideration is probable. The new standard also amends ASC 340-40, Other Assets and Deferred Costs - Contracts with Customers. Under ASC 340-40, incremental costs of obtaining a contract are recognized as an asset if the entity expects to recover them. Other costs related to originating a revenue transaction, such as salary expense, that is based on other qualitative or quantitative metrics, likely do not meet the criteria for capitalization because they are not directly related to obtaining a contract. We expect this new guidance will increase total General, administrative, and other expense on our consolidated statement of operations and decrease amortization expense. ASU 2014-9 was to be effective for public entities for annual and interim reporting periods beginning after December 15, 2016 and early adoption is not permitted, but in August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which delays the effective date of ASU 2014-9 for one year. ASU 2014-9 allows for either recognizing the cumulative effect of application (i) at the start of the earliest comparative period presented (with the option to use any or all of three practical expedients) or (ii) as a cumulative effect adjustment as of the date of initial application, with no restatement of comparative periods presented. We are currently evaluating the impact adopting the new accounting standard, and the transition method of such adoption, will have on our consolidated financial statements. In February 2015, the FASB issued ASU 2015-02, Amendments to the Consolidation Analysis. ASU 2015-02 makes changes to both the variable interest model and the voting model. This guidance becomes effective for annual and interim periods beginning on or after December 15, 2015. All reporting entities involved with limited partnerships will have to re-evaluate whether these entities qualify for consolidation and revise documentation accordingly. We are currently evaluating the impact adopting the new accounting standard will have on our consolidated financial statements, but we do not currently believe it will result in material changes to our previous consolidation conclusions. In April 2015, the FASB issued ASU 2015-03, Interest- Imputation of Interest ("ASU 2015-03"). ASU 2015-03 will require that debt issuance costs related to a recognized debt liability be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability. ASU 2015-03 is effective for annual and interim reporting periods beginning on or after December 15, 2015, with early adoption permitted. We expect this new guidance will reduce total assets and total debt on our consolidated balance sheet by amounts currently classified as deferred issuance costs, but we do not expect this update to have any other material effect on our consolidated financial statements. In August 2015, the FASB issued ASU 2015-15, Interest- Imputation of Interest: Presentation and Subsequent Measurement of Debt Issuance Costs Associated with Line-of-Credit Arrangements- Amendments to SEC Paragraphs Pursuant to Staff Announcement at June 18, 2015 EITF Meeting ("ASU 2015-15"). ASU 2015-15 was issued as a result of ASU 2015-03 not addressing presentation or subsequent measurement of debt issuance costs related to line-of-credit arrangements. ASU 2015-15 provides the option to present debt issuance costs as an asset and subsequently amortize the deferred debt issuance costs ratably over the term of the line-of-credit arrangement, regardless of whether there are any outstanding borrowings on the line-of-credit arrangement. As this is already the current practice of the Parent Company and the Operating Partnership, we do not expect this update to have any effect on our consolidated financial statements. In September 2015, the FASB issued ASU 2015-16, Business Combinations (Topic 805): Simplifying the Accounting for Measurement-Period Adjustments. ASU 2015-16 will eliminate the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. ASU 2015-16 requires that an acquirer must recognize measurement- period adjustments in the period in which they determine the amounts, including the effect on earnings of any amounts they would have recorded in previous periods if the accounting had been completed at the acquisition date. This guidance is effective for annual and interim reporting periods beginning on or after December 15, 2016, with early adoption permitted. We are currently evaluating the effect, if any, on our consolidated financial statements. In February 2016, the FASB issued ASU 2016-02, Leases. ASU 2016-02 amends the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU 2016-02 will be effective for annual and interim reporting periods beginning on or after December 15, F-22 2018, with early adoption permitted. The new leases standard requires a modified retrospective transition approach for all leases existing at, or entered into after, the date of initial application, with an option to use certain transition relief. We are currently evaluating the impact adopting the new accounting standard will have on our consolidated financial statements. Note 3. Gain on Settlement In June 2015, we received $4.75 million to settle a dispute related to eminent domain and related damages at one of our operating properties. The settlement agreement did not restrict our use of the proceeds from this settlement. These proceeds, net of certain costs, are included in gain on settlement in the accompanying statement of operations. In July 2015, we used the proceeds to pay down a portion of the loan secured by the operating property. Note 4. Kedron Village In July 2013, foreclosure proceedings were completed by the mortgage lender on the indebtedness secured by the Company’s Kedron Village operating property and the mortgage lender took title to the property in satisfaction of principal and interest due on the loan. We reevaluated the Kedron Village property for impairment as of June 30, 2013 and determined that, based on the developments, the carrying value of the property was no longer fully recoverable considering the reduced holding period that considered the foreclosure proceedings. Accordingly, we recorded a non-cash impairment charge of $5.4 million for the three months ended June 30, 2013 based upon the estimated fair value of the asset of $25.5 million using level 3 inputs. During the year ended December 31, 2013, we recognized a non-cash gain of $1.2 million resulting from the transfer of the Kedron Village assets to the lender in satisfaction of the debt. Also, in the third quarter, we reversed an accrual of unpaid interest (primarily default interest) of approximately $1.1 million. The operations of Kedron Village were classified as discontinued operations in the consolidated statement of operations for the year ended December 31, 2013. Note 5. Share-Based Compensation Overview The Company's 2013 Equity Incentive Plan (the "Plan") authorizes options and other share-based compensation awards to be granted to employees and trustees for up to an additional 1,500,000 common shares of the Company. 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, 2015, 2014, and 2013 was $4.4 million, $2.9 million, and $1.1 million, respectively. For the years ended December 31, 2015, 2014, and 2013, total share-based compensation cost capitalized for development and leasing activities was $1.0 million, $0.8 million, and $0.5 million, respectively. As of December 31, 2015, there were 1,239,022 shares available for grant under the Plan. F-23 Share Options Pursuant to the Plan, the Company may periodically grant options to purchase common shares at an exercise price equal to the grant date 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. A summary of option activity under the Plan as of December 31, 2015, and changes during the year then ended, is presented below: Aggregate Intrinsic Value Weighted-Average Remaining Contractual Term (in years) Options Weighted-Average Exercise Price Outstanding at January 1, 2015 Granted Exercised Expired Forfeited Outstanding at December 31, 2015 Exercisable at December 31, 2015 Exercisable at December 31, 2014 $ $ 1,282,272 1,272,738 2.95 2.94 There were no options granted in 2015, 2014 and 2013. 248,991 $ — (1,250) (14,375) — 233,366 231,875 243,686 $ $ $ 33.88 — 10.56 60.68 — 32.36 32.44 34.16 The aggregate intrinsic value of the 1,250 and 3,313 options exercised during the years ended December 31, 2015 and 2014 was less than $0.1 million. The aggregate intrinsic value of the 40,639 options exercised during the year ended December 31, 2013 was $0.4 million. As of December 31, 2015 there was less than $0.1 million of total unrecognized compensation cost related to outstanding unvested share option awards. 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. The Company pays dividends on restricted shares and such dividends 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, 2015 and changes during the year then ended: F-24 Restricted shares outstanding at January 1, 2015 Shares granted Shares forfeited Shares canceled Shares vested Restricted shares outstanding at December 31, 2015 Number of Restricted Shares Weighted Average Grant Date Fair Value per share 615,453 $ 121,075 (358) (274,835) (105,001) 356,334 $ 22.87 28.10 21.49 21.25 23.86 25.61 During the years ended December 31, 2015, 2014, and 2013, the Company granted 121,075, 499,436, and 103,685 restricted shares, respectively, to employees and non-employee members of the Board of Trustees with weighted average grant date fair values of $28.10, $22.62, and $25.80, respectively. In June 2015, the Company canceled 274,835 shares of unvested restricted shares that would have vested in equal amounts on July 2, 2015, July 2, 2016, July 2, 2017, and July 2, 2018 in exchange for converting these awards into an equal number of Limited Partner Units, which had the same fair value. The total fair value of shares vested during the years ended December 31, 2015, 2014, and 2013 was $2.9 million, $1.6 million, and $1.1 million, respectively. As of December 31, 2015, there was $6.9 million of total unrecognized compensation cost related to restricted shares and units granted under the Plan, which amount is expected to be recognized in the consolidated statements of operations over a weighted-average period of 1.76 years. We expect to incur $2.5 million of this expense in fiscal year 2016, $1.9 million in fiscal year 2017, $1.6 million in fiscal year 2018, $0.8 million in fiscal year 2019, and the remainder in fiscal year 2020. Outperformance Plan The Compensation Committee of the Board of Trustees has adopted the Kite Realty Group Trust 2014 Outperformance Plan in July 2014 for members of executive management and certain other employees, pursuant to which participants are eligible to earn units in the Operating Partnership based on the achievement of certain performance criteria related to the Company’s common shares. Participants in the 2014 Outperformance Plan were awarded the right to earn, in the aggregate, up to $7.5 million of share-settled awards (the “bonus pool”) if, and only to the extent of which, based on our total shareholder return (“TSR”) performance measures are achieved for the three-year period beginning July 1, 2014 and ending June 30, 2017. Awarded interests not earned based on the TSR measures are forfeited. At the end of the three-year performance period, participants will receive their percentage interest in the bonus pool as units in the Operating Partnership that vest over an additional two-year service period. The compensation cost of the 2014 Outperformance Plan is fixed as of the grant date and is recognized regardless of whether the units are ultimately earned if the required service is determined. The 2014 Outperformance Plan was valued at an aggregate value of $2.4 million utilizing a Monte Carlo simulation. The value of the awards will be amortized to expense through the final vesting date of June 30, 2019 based upon a graded vesting schedule. We expect to incur $0.7 million of this expense in fiscal year 2016, $0.6 million in fiscal year 2017, $0.3 million in fiscal year 2018 and $0.1 million in fiscal year 2019. Performance Awards The Compensation Committee of the Board of Trustees revised the structure for its annual incentive awards in 2015. The Compensation Committee established an overall target value of incentive compensation for each executive officer, with 50% of the target value being granted in the form of a time-based restricted shares award to be made on a discretionary basis in the spring of 2016, based on review of the prior year's performance, and the remaining 50% being granted in the form of a three-year performance share award. F-25 In March 2015, in connection with the setting of these overall target values, the Compensation Committee awarded each executive officer a three-year performance award of restricted shares units ("PSUs"). These PSUs may be earned over a three- year performance period from January 1, 2015 to December 31, 2017. The performance criteria will be based on the relative total shareholder return ("TSR") achieved by the Company measured against the SNL US REIT Retail Shopping Center index over the three-year measurement period. Any PSUs earned at the end of the three-year period will be fully vested. The PSUs were valued at an aggregate value of $1.1 million utilizing a Monte Carlo simulation. The value of the awards will be amortized to expense through the final vesting date of February 28, 2018 based upon a graded vesting schedule. We expect to incur $0.4 million of this expense in fiscal year 2016, $0.4 million in fiscal year 2017 and $0.1 million in fiscal year 2018. Note 6. Deferred Costs and Intangibles, net Deferred costs consist primarily of financing fees incurred to obtain long-term financing, acquired lease intangible assets, and broker fees and capitalized salaries and related benefits incurred in connection with lease originations. Deferred financing costs are amortized on a straight-line basis over the terms of the respective loan agreements. Deferred leasing costs, lease intangibles and similar costs are amortized on a straight-line basis over the terms of the related leases. At December 31, 2015 and 2014, deferred costs consisted of the following: ($ in thousands) Deferred financing costs Acquired lease intangible assets Deferred leasing costs and other Less—accumulated amortization Total Deferred costs and intangibles, net – properties held for sale Total 2015 2014 $ 19,052 $ 14,575 138,796 54,902 212,750 (54,866) 157,884 — $ 157,884 $ 142,823 48,149 205,547 (36,583) 168,964 (8,986) 159,978 The estimated net amounts of amortization from acquired lease intangible assets for each of the next five years and thereafter are as follows: ($ in thousands) 2016 2017 2018 2019 2020 Thereafter Total Amortization of above market leases Amortization of deferred leasing costs $ $ 5,252 $ 16,737 $ 4,293 2,724 1,475 1,279 5,307 13,866 10,045 7,507 6,560 35,279 20,330 $ 89,994 $ Total 21,989 18,159 12,769 8,982 7,839 40,586 110,324 The accompanying consolidated statements of operations include amortization expense as follows: F-26 ($ in thousands) Amortization of deferred financing costs Amortization of deferred leasing costs, lease intangibles and other Amortization of above market lease intangibles For the year ended December 31, 2015 2014 2013 $ 3,209 $ 2,864 $ 25,187 6,860 17,291 4,787 2,434 5,605 534 Amortization of deferred leasing costs, leasing intangibles and other is included in depreciation and amortization expense, except for the amortization of above market leases, while the amortization of deferred financing costs is included in interest expense. The amortization of above market lease intangibles is included as a reduction to revenue. Note 7. Deferred Revenue, Intangibles, Net and Other Liabilities Deferred revenue and other liabilities primarily consist of unamortized fair value of in-place lease liabilities recorded in connection with purchase accounting, an assumed obligation related to a pre-existing potential earnout payment related to the Merger, retainage payables for development and redevelopment projects, and tenant rent payments received in advance of their due date. The amortization of in-place lease liabilities is recognized as revenue over the remaining life of the leases (including option periods for leases with below market renewal options). Tenant rent payments received in advance are recognized as revenue in the period to which they apply, which is typically the month following their receipt. At December 31, 2015 and 2014, deferred revenue and other liabilities consisted of the following: ($ in thousands) Unamortized in-place lease liabilities Retainages payable and other Assumed earnout liability (Note 15) Tenant rents received in advance Total Deferred revenue, intangibles, net and other liabilities – liabilities held for sale Total 2015 2014 $ 112,405 $ 125,336 5,636 1,380 12,138 131,559 — $ 131,559 $ 2,852 9,664 10,841 148,693 (12,284) 136,409 The estimated net amounts of amortization of in-place lease liabilities and the increasing effect on minimum rent for each of the next five years and thereafter is as follows: ($ in thousands) 2016 2017 2018 2019 2020 Thereafter Total $ 8,198 7,143 6,414 5,855 5,442 79,353 $ 112,405 F-27 Note 8. Merger and Acquisitions The results of operations for all acquired properties during the years ended December 31, 2015, 2014, and 2013, respectively, have been included in continuing operations within our consolidated financial statements since their respective dates of acquisition. The fair value of the real estate and related assets acquired were primarily determined using the income approach. The income approach required us to make assumptions about market leasing rates, tenant-related costs, discount rates, and disposal values. The estimates of fair value were determined to have primarily relied upon Level 2 and Level 3 inputs, as previously defined. Merger and acquisition costs are expensed as incurred and include transaction costs for completed and prospective acquisitions. As part of the Merger with Inland Diversified, we incurred significant costs in 2014 related to investment banking, lender, due diligence, legal, and professional fees. Merger and acquisition costs for the years ended December 31, 2015, 2014, and 2013 were $1.6 million, $27.5 million and $2.2 million, respectively. A preliminary estimation of the fair value of acquired tangible and intangible assets and liabilities was made at the dates of each acquisition. 2015 Acquisitions In 2015, we acquired four operating properties for total consideration of $185.8 million, including the assumption of an $18.3 million loan, which are summarized below: Property Name MSA Acquisition Date Colleyville Downs Belle Isle Station Livingston Shopping Center Chapel Hill Shopping Center Dallas, TX Oklahoma City, OK New York - Newark Fort Worth, TX April 2015 May 2015 July 2015 August 2015 The following table summarizes the estimation of the fair value of assets acquired and liabilities assumed for the properties acquired in 2015: F-28 ($ in thousands) Investment properties, net Lease-related intangible assets, net Other assets Total acquired assets Mortgage and other indebtedness Accounts payable and accrued expenses Deferred revenue and other liabilities Total assumed liabilities $ 176,223 17,436 435 194,094 18,473 2,125 8,269 28,867 Fair value of acquired net assets $ 165,227 The leases at the acquired properties had a weighted average remaining life at acquisition of approximately 9.4 years. The operating properties acquired in 2015 generated revenues of $8.8 million and a loss from continuing operations of $1.3 million (inclusive of depreciation and amortization expense of $5.8 million) since their respective dates of acquisition. As of December 31, 2015, we finalized the fair values of the assets and liabilities acquired in 2015. There were no material adjustments to the fair values of acquired assets and assumed liabilities of our 2015 acquisitions during the year ended December 31, 2015. 2014 Merger and Acquisitions In 2014, we acquired a total of 61 operating properties. Upon completion of the Merger with Inland Diversified in July, we acquired 60 operating properties and in December we acquired an operating property in Las Vegas, Nevada. The total purchase price of the assets acquired in the Merger was $2.1 billion. As part of the Merger, we assumed $860 million of debt, maturing in various years through March 2023. In addition, we assumed a $12.4 million mortgage with a fixed interest rate of 5.73%, maturing in June 2030, as part of the Las Vegas acquisition. The following is a summary of our 2014 operating property acquisitions. Property Name MSA Acquisition Date Purchase Price ($ in millions) Merger with Inland Diversified Various July 2014 $ Rampart Commons Las Vegas, NV December 2014 2,128.6 32.3 The ranges of the most significant Level 3 assumptions utilized in determining the value of the real estate and related assets of each building acquired during the Merger are as follows: F-29 Lease-up period (months) Net rental rate per square foot – Anchors (greater than 10,000 square feet) Net rental rate per square foot – Small Shops Discount rate Low High 6 18 $ $ 5.00 11.00 $ $ 30.00 53.00 5.75% 9.25% The following table summarizes the aggregate estimated fair values of the properties acquired in connection with the Merger with Inland Diversified on July 1, 2014: ($ in thousands) Assets: Investment properties, net Deferred costs, net Investments in marketable securities Cash and cash equivalents Accounts receivable, prepaid expenses, and other Total assets Liabilities: Mortgage and other indebtedness, including debt premium of $33,298 Deferred revenue and other liabilities Accounts payable and accrued expenses Total Liabilities Noncontrolling interests Common stock issued Total estimated fair value of acquired net assets $ 2,095,567 143,210 18,602 108,666 20,157 $ 2,386,202 $ 892,909 129,935 59,314 1,082,158 69,356 1,234,688 $ 2,386,202 The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 5.8 years. The following table summarizes the revenues and expenses of the properties acquired in 2014 subsequent to the respective acquisition dates. These revenues and expenses are included in the consolidated statement of operations for the year ended December 31, 2014: F-30 ($ in thousands) Revenue Expenses: Property operating Real estate taxes and other Depreciation and amortization Interest expense Total expenses Gain on sale and other (1) Net income impact from 2014 acquisitions prior to income allocable to noncontrolling interests Income allocable to noncontrolling interests Impact from 2014 acquisitions on income attributable to Kite Realty Trust Year ended December 31, 2014 $ $ 92,212 14,262 11,254 43,257 14,845 83,618 2,153 10,747 (1,284) 9,463 ____________________ 1 We sold eight properties that were acquired through the Merger in November and December 2014. The following table presents unaudited pro forma financial information for the years ended December 31, 2014 and 2013 as if the Merger and the 2013 and 2014 property acquisitions had been consummated on January 1, 2013. The pro forma results have been accounted for pursuant to our accounting policies and adjusted to reflect the results of Inland Diversified’s additional depreciation and amortization that would have been recorded assuming the allocation of the purchase price to investment properties, intangible assets and indebtedness had been applied on January 1, 2013. The pro forma results exclude Merger and acquisition costs and reflect the termination of management agreements with affiliates of Inland Diversified as neither are expected to have a continuing impact on the results of the operations following the Merger and the results also reflect the pay down of certain indebtedness. ($ in thousands) Total revenue Consolidated net income Twelve Months Ended December 31, (unaudited) 2014 2013 $ 355,716 $ 26,911 357,506 2,219 As of June 30, 2015, we finalized the fair values of the assets and liabilities acquired in the Merger. There were no material adjustments made to the fair values of acquired assets and assumed liabilities during 2015, except as described in Note 15. 2013 Acquisition Activities In 2013, we acquired thirteen operating properties, which are summarized below: F-31 Property Name MSA Acquisition Date Purchase Price ($ in millions) Shoppes of Eastwood Cool Springs Market Castleton Crossing Toringdon Market Orlando, FL Nashville, TN Indianapolis, IN Charlotte, NC January 2013 $ April 2013 May 2013 August 2013 Nine Property Portfolio Various November 2013 11.6 37.6 39.0 15.9 304.0 The following table summarizes our final aggregated estimated fair value of amounts recognized for each major class of asset and liability for these acquisitions: ($ in thousands) Investment properties, net Lease-related intangible assets Other assets Total acquired assets Accounts payable and accrued expenses Deferred revenue and other liabilities Total assumed liabilities Allocation to opening balance sheet $ 419,080 19,537 293 438,910 2,204 29,291 31,495 Fair value of acquired net assets $ 407,415 The leases in the acquired properties had a weighted average remaining life at acquisition of approximately 4.6 years. There were no material adjustments to the fair value determination of acquired assets and assumed liabilities for our 2013 acquisitions during the year ended December 31, 2014. Note 9. Disposals, Discontinued Operations, Investment Properties Held for Sale and Impairment Charge 2015 Activities During the fourth quarter of 2015, we sold our Four Corner operating property in Seattle, Washington, and our Cornelius Gateway operating property in Portland, Oregon, for aggregate proceeds of $44.9 million and a net gain of $0.6 million. In connection with the sale of these two properties, we evaluated the prospects of our remaining operating property in the Pacific Northwest, Shops at Otty. As part of this review and our limited presence in the Pacific Northwest market led to our intent to sell the property in the near term, which shortened the intended holding period. Based on this re-evaluation, the estimated undiscounted cash flows over the remaining holding period do not exceed the carrying value of the asset. Accordingly, we determined it was appropriate to write off the net book value of this property and record a non-cash impairment charge of $1.6 million for the year ended December 31, 2015, because our estimation is that the fair value of this property is nominal. F-32 As discussed below, in March 2015, we sold seven properties for aggregate net proceeds of $103.0 million and a net gain of $3.4 million. The results of these operating properties are not included in discontinued operations in the accompanying statements of operations as none of the operating properties individually, nor in the aggregate, represent a strategic shift that has had or will have a material effect on our operations or financial results (see Note 2). 2014 Activities During 2014, we sold our Red Bank Commons operating property in Evansville, Indiana, our Ridge Plaza operating property in Oak Ridge, New Jersey, Zionsville Walgreens operating property in Zionsville, Indiana, and our 50th and 12th operating property in Seattle, Washington, for aggregate proceeds of $42.5 million and a net gain of $9.6 million. The Red Bank Commons, Ridge Plaza and Zionsville Walgreens operating properties are not included in discontinued operations in the accompanying Statements of Operations for the years ended December 31, 2014 and 2013, as the disposals individually, nor in the aggregate, represent a strategic shift that has or will have a major effect on our operations and financial results (see Note 2). The 50th and 12th operating property is included in discontinued operations in the accompanying consolidated statements of operations for the years ended December 31, 2014 and 2013, as the property was classified as held for sale as of December 31, 2013, prior to our adoption of ASU 2014-8. In September 2014, we agreed to sell 15 of our operating properties. In late 2014, we completed the sale of eight of these operating properties for aggregate net proceeds of $150.8 million and a net gain of $1.4 million. In March 2015, we sold the remaining seven operating properties for aggregate net proceeds of $103.0 million and a net gain of $3.4 million. The operating properties sold in late 2014 and early 2015 are as follows: F-33 Property Name MSA Owned GLA Sold in late 2014 Copps Grocery Fox Point Harvest Square Landing at Ocean Isle Beach Branson Hills Plaza1 Shoppes at Branson Hills Shoppes at Prairie Ridge Heritage Square Sold in early 2015 Eastside Junction Fairgrounds Crossing Hawk Ridge Prattville Town Center Regal Court Whispering Ridge Walgreens Plaza Stevens Point, WI Neenah, WI Harvest, AL Ocean Isle Beach, NC Branson, MO Branson, MO Pleasant Prairie, WI Conyers, GA Athens, AL Hot Springs, AR Saint Louis, MO Prattville, AL Shreveport, LA Omaha, NE Jacksonville, NC 69,911 171,121 70,590 53,220 289,986 128,431 22,385 79,700 151,927 75,951 168,842 151,719 69,676 42,219 ____________________ 1 Owned GLA includes Branson Hills Plaza and Shoppes at Branson Hills. The results of the 15 operating properties sold are not included in discontinued operations in the accompanying Statements of Operations as the disposals neither individually, nor in the aggregate, represent a strategic shift that has had or will have a material effect on our operations or financial results. The seven properties sold in March 2015, met the requirements for presentation as held for sale as of December 31, 2014. Upon meeting the held-for-sale criteria, depreciation and amortization ceased for these operating properties. The assets and liabilities associated with the operating properties that were classified as held sale in 2014 are separately classified as held for sale in the consolidated balance sheets as of December 31, 2014. The following table presents the assets and liabilities associated with the held for sale properties: F-34 ($ in thousands) Assets: Investment properties, at cost Less: accumulated depreciation Accounts receivable, prepaids and other assets Deferred costs and intangibles, net Total assets held for sale Liabilities: Mortgage and other indebtedness, including net premium Accounts payable and accrued expenses Deferred revenue, intangibles and other liabilities Total liabilities held for sale 2013 Activities December 31, 2014 $ $ $ $ 170,782 (1,313) 169,469 1,187 8,986 179,642 67,452 1,428 12,284 81,164 In September 2013, we sold our Cedar Hill Village operating property in Dallas, Texas. In July 2013, foreclosure proceedings were completed on the Kedron Village operating property and the mortgage lender took title to the property in satisfaction of principal and interest due on the mortgage (see Note 4). The activities of these properties sold in 2013 are reflected as discontinued operations in the accompanying consolidated statements of operations. Discontinued Operations The results of the discontinued operations related to the properties that were classified as such prior to the adoption of ASU 2014-08 were comprised of the following for the years ended December 31, 2014 and 2013: F-35 ($ in thousands) Revenue Expenses: Property operating Real estate taxes and other Depreciation and amortization Impairment charge Total expenses Operating loss Interest expense Loss from discontinued operations Gain on debt extinguishment Gain on sale of operating properties, net Total income (loss) from discontinued operations Income (loss) from discontinued operations attributable to Kite Realty Group Trust common shareholders Income (loss) from discontinued operations attributable to noncontrolling interests Total income (loss) from discontinued operations Note 10. Mortgage Loans and Other Indebtedness Year ended December 31, 2014 2013 $ — $ 2,565 — — — — — — — — — 3,198 3,198 $ 3,111 87 3,198 $ $ $ $ $ 117 199 844 5,372 6,532 (3,967) (571) (4,538) 1,242 487 (2,809) (2,620) (189) (2,809) Mortgage and other indebtedness, excluding mortgages related to assets held for sale (see Note 9), consist of the following at December 31, 2015 and 2014: F-36 ($ in thousands) Description Senior Unsecured Notes Maturing at various dates through September 2027; interest rates ranging from 4.23% to 4.57% at December 31, 2015 Unsecured Revolving Credit Facility Matures July 20181; borrowing level up to $339.5 million available at December 31, 2015 and $500 million at December 31, 2014; interest at LIBOR + 1.40%2 or 1.83% at December 31, 2015 and interest at LIBOR + 1.40%2 or 1.57% at December 31, 2014 Unsecured Term Loans $400 million matures July 20193; interest at LIBOR + 1.35%2 or 1.78% at December 31, 2015 and interest at LIBOR + 1.35%2 or 1.52% at December 31, 2014; $100 million matures October 2022; interest at LIBOR + 1.60%2 or 2.03% at December 31, 2015 Construction Loans—Variable Rate Generally interest only; maturing at various dates through 2016; interest at LIBOR + 1.75%-2.10%, ranging from 2.18% to 2.53% at December 31, 2015 and interest at LIBOR +1.75%-2.10%, ranging from 1.92% to 2.27% at December 31, 2014 Mortgage Notes Payable—Fixed Rate Generally due in monthly installments of principal and interest; maturing at various dates through 2030; interest rates ranging from 3.78% to 6.78% at December 31, 2015 and interest rates ranging from 3.81% to 6.78% at December 31, 2014 Mortgage Notes Payable—Variable Rate Due in monthly installments of principal and interest; maturing at various dates through 2023; interest at LIBOR + 1.70%-2.25%, ranging from 2.13% to 2.68% at December 31, 2015 and interest at LIBOR + 1.75%-2.75%, ranging from 1.92% to 2.92% at December 31, 2014 Net premium on acquired indebtedness Total mortgage and other indebtedness Balance at December 31, 2015 2014 $ 250,000 $ — 20,000 160,000 500,000 230,000 132,776 119,347 756,494 810,959 58,268 16,521 205,798 28,159 $ 1,734,059 $ 1,554,263 ____________________ 1 The maturity date may be extended at the Company’s option for up to two additional periods of six months each, subject to certain conditions. 2 3 The interest rates on our unsecured revolving credit facility and unsecured term loans varied at certain parts of the year due to provisions in the agreement and the amendment and restatement of the agreement. The maturity date may be extended for an additional six months at the Company’s option subject to certain conditions. The one month LIBOR interest rate was 0.43% and 0.17% as of December 31, 2015 and 2014, respectively. Non-cash Gain on Extinguishment of Debt On December 10, 2015, we retired the $90 million loan secured by our City Center operating property, and we recognized a non-cash debt extinguishment gain of $5.6 million, primarily due to the premium related to this mortgage. F-37 Senior Unsecured Notes In August 2015, the Operating Partnership entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with various parties in connection with a private placement of senior unsecured notes. On September 10, 2015, the Operating Partnership issued $250 million of senior unsecured notes at a blended rate of 4.41% and an average maturity of 9.8 years. The net proceeds from the issuance of the notes were utilized to pay off the balance of $199.6 million on our unsecured revolving credit facility and the $33 million loan secured by our Crossing at Killingly operating property. The Note Purchase Agreement contains a number of customary financial and restrictive covenants. As of December 31, 2015, we were in compliance with all such covenants. Seven-Year Unsecured Term Loan On October 26, 2015, we entered into a seven-year unsecured term loan ("7-Year Term Loan") for up to $200 million. On December 31, 2015, we drew $100 million on the 7-Year Term Loan and used the proceeds to pay down the unsecured revolving credit facility. The 7-Year Term Loan may be funded on a delayed draw basis at our discretion and has a scheduled maturity date of October 2022. The Operating Partnership has the ability to make a total of two additional draws each of which must be at least $25 million. The remaining $100 million may be drawn through June 30, 2016. Unsecured Revolving Credit Facility and Unsecured Term Loan On March 12, 2015, we amended the terms of the Fourth Amended and Restated Credit Agreement (the “Amended Facility”). The amendment provided for the release of the subsidiary guarantees relating to the Amended Facility upon the satisfaction of specified conditions (the “Release Conditions”). The amendment also changed the calculation of unsecured debt interest expense, which is used for purposes of calculating the unsecured debt interest coverage ratio, to be the actual interest expense incurred. Previously, unsecured debt interest expense was the greater of the actual interest expense incurred and an implied expense based on an assumed 6.0% interest rate. On March 17, 2015, upon satisfaction of the Release Conditions all of the subsidiary guarantees relating to the Amended Facility were released. As provided in the Amended Facility, if any subsidiary of the Operating Partnership becomes liable with respect to any unsecured indebtedness, that subsidiary is required to become a subsidiary guarantor under the Amended Facility. On June 29, 2015, we entered into an amendment to our Fourth Amended and Restated Credit Agreement (the “Credit Agreement”). The amendment increased the total unsecured term loan from $230 million to $400 million, and modified two financial covenants to permit, in each case only one time during the term of the Credit Agreement for up to four consecutive fiscal quarters following a material acquisition, an increase in the maximum leverage ratio from 60% to 65%, and an increase in the ratio of unsecured indebtedness to unencumbered asset pool value from .60 to 1.00 to .65 to 1.00. The amendment also removed two financial covenants and eliminated certain reporting requirements triggered by the addition of new properties to the unencumbered asset pool. We used the proceeds from this transaction to pay down $140 million on the unsecured revolving credit facility and retire the $23.9 million loan secured by our Draper Peaks operating property and the $6.6 million loan secured by our Beacon Hill operating property. The amount that we may borrow under our unsecured revolving credit facility is based on the value of the assets in our unencumbered asset pool. The senior unsecured notes and the new unsecured term loan are included in the total borrowings outstanding for the purpose of determining the amount we may borrow under our unsecured revolving credit facility. Taking into account outstanding borrowings and letters of credit, we had $339.5 million available under our unsecured revolving credit facility for future borrowings as of December 31, 2015. As of December 31, 2015, $20 million was outstanding under the Credit Agreement and $500 million was outstanding under our unsecured term loans. Additionally, we had letters of credit outstanding which totaled $14.7 million, against which no amounts were advanced as of December 31, 2015. F-38 Our ability to borrow under the Credit Agreement is subject to our compliance with various restrictive and financial covenants, including with respect to liens, indebtedness, investments, dividends, mergers and asset sales. As of December 31, 2015, we were in compliance with all such covenants. Mortgage and Construction Loans Mortgage and construction loans are secured by certain real estate and in some cases by guarantees from the Operating Partnership, and are generally due in monthly installments of interest and principal and mature over various terms through 2030. The following table presents maturities of mortgage debt, corporate debt, and construction loans as of December 31, 2015: ($ in thousands) 2016 2017 2018 2019 2020 Thereafter Unamortized Premiums Total Annual Principal Payments Term Maturity1 Total $ $ 5,666 $ 261,041 $ 5,103 5,335 5,255 5,200 12,196 17,026 62,584 20,000 442,339 875,793 38,755 $ 1,678,783 $ $ 266,707 22,129 67,919 25,255 447,539 887,989 1,717,538 16,521 1,734,059 ____________________ 1 This presentation reflects the Company's exercise of its options to extend the maturity dates by one year to July 1, 2019 for the Company's unsecured credit facility and its option to extend the maturity date by six months to January 1, 2020 for the Company's unsecured term loan. Other Debt Activity For the year ended December 31, 2015, we had total new loan borrowings of $984.3 million and total loan repayments of $835.0 million. In addition to the $250 million senior unsecured notes and the $270 million from new and expanded term loans, the major components of this activity are as follows: • • • In 2015, we drew $102.6 million on the unsecured revolving credit facility to redeem all the outstanding shares of our Series A Cumulative Redeemable Perpetual Preferred Shares; $59 million to fund a portion of the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center and Chapel Hill Shopping Center; $30 million to fund the acquisition of our partner's interest in our City Center operating property; and $14.7 million on construction loans related to development projects; In 2015, we retired the $12.2 million loan secured by our Indian River operating property, the $26.2 million loan secured by our Plaza Volente operating property and the $50.1 million loan secured by our Landstown Commons operating property; In December 2015, we entered into a new $33 million loan secured by our Crossing at Killingly operating property and paid down $44.9 million on the unsecured revolving credit facility utilizing proceeds from our property sales; F-39 • • In August 2015, in connection with the acquisition of Chapel Hill Shopping Center, we assumed a $18.3 million loan secured by the operating property. As part of the estimated fair value determination, a debt premium of $0.2 million was recorded; In March 2015, we used a portion of the proceeds from the sale of seven operating properties to retire the $24 million loan secured by the Regal Court property and to pay down $27 million on the unsecured revolving credit facility; and • We made scheduled principal payments on indebtedness totaling $6.5 million. In connection with the sale of seven operating properties in March 2015, the buyer assumed $40.3 million of loans secured by our Prattville Town Center, Walgreens Plaza, Fairgrounds Crossing and Eastside Junction operating properties. The amount of interest capitalized in 2015, 2014, and 2013 was $4.6 million, $4.8 million, and $5.1 million, respectively. Fair Value of Fixed and Variable Rate Debt As of December 31, 2015, the estimated fair value of our fixed rate debt, was $1.1 billion compared to the book value of $1.0 billion. The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments which ranged from 3.78% to 6.78%. As of December 31, 2015, the fair value of variable rate debt was $734.5 million compared to the book value of $711.0 million. The fair value was estimated using Level 2 and 3 inputs with cash flows discounted at current borrowing rates for similar instruments which ranged from 1.78% to 2.68%. Note 11. Derivative Instruments, Hedging Activities and Other Comprehensive Income In order to manage potential future volatility relating to variable interest rate risk, we enter into interest rate hedging agreements from time to time. We do not use derivatives for trading or speculative purposes nor do we have any derivatives that are not designated as cash flow hedges. The agreements with each of our derivative counterparties provide that, in the event of default on any of our indebtedness, we could also be declared in default on our derivative obligations. As of December 31, 2015, we were party to various cash flow hedge agreements with notional amounts totaling $498.3 million. These hedge agreements effectively fix the interest rate underlying certain variable rate debt instruments over terms ranging from 2016 through 2020. Utilizing a weighted average interest rate spread over LIBOR on all variable rate debt resulted in fixing the weighted average interest rate at 2.75%. These interest rate hedge agreements are the only assets or liabilities that we record at fair value on a recurring basis. The valuation of these assets and liabilities is determined using widely accepted techniques including discounted cash flow analysis. These techniques consider the contractual terms of the derivatives (including the period to maturity) and use observable market-based inputs such as interest rate curves and implied volatilities. We also incorporate credit valuation adjustments into the fair value measurements to reflect nonperformance risk on both our part and that of the respective counterparties. As a basis for considering market participant assumptions in fair value measurements, accounting 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. Our 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. F-40 Although we have 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 our counterparties. However, as of December 31, 2015 and 2014, we have assessed the significance of the impact of the credit valuation adjustments on the overall valuation of its 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 are classified in Level 2 of the fair value hierarchy. As of December 31, 2015, the estimated fair value of our interest rate hedges was a net liability of $4.8 million, including accrued interest of $0.4 million. As of December 31, 2015, $0.2 million is reflected in prepaid and other assets and $5.0 million is reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheet. At December 31, 2014 the estimated fair value of our interest rate hedges was a net liability of $4.4 million, including accrued interest of $0.5 million. As of December 31, 2014, $0.7 million is reflected in prepaid and other assets and $5.1 million is reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheet. 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 the years ended December 31, 2015, 2014 and 2013, $5.6 million, $5.1 million and $2.8 million, respectively, were reclassified as a reduction to earnings. As the interest payments on our hedges are made over the next 12 months, we estimate the impact to increased interest expense to be $2.6 million. Our share of net unrealized gains and losses on our interest rate hedge agreements are the only components of the change in accumulated other comprehensive loss. Note 12. Lease Information Tenant Leases The Company receives rental income from the leasing of retail and office 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 remaining term of the lease agreements is approximately 5.1 years. During the periods ended December 31, 2015, 2014, and 2013, the Company earned overage rent of $1.4 million, $1.1 million, and $0.6 million, respectively. As of December 31, 2015, future minimum rentals to be received under non-cancelable operating leases for each of the next five years and thereafter, excluding tenant reimbursements of operating expenses and percentage rent based on sales volume, are as follows: ($ in thousands) 2016 2017 2018 2019 2020 Thereafter Total $ 255,764 238,169 203,888 174,547 150,735 743,848 $ 1,766,951 F-41 Lease Commitments As of December 31, 2015, we are obligated under nine ground leases for approximately 43 acres of land with eight landowners. Most of these ground leases require fixed annual rent payments. The expiration dates of the remaining initial terms of these ground leases range from 2017 to 2083. These leases have five- to ten-year extension options ranging in total from 30 to 60 years. Ground lease expense incurred by the Company on these operating leases for the years ended December 31, 2015, 2014, and 2013 was $1.1 million, $0.7 million, and $0.7 million, respectively. We are obligated under a ground lease for one of our operating properties, Eddy Street Commons at the University of Notre Dame. The Company makes ground lease payments to the University of Notre Dame for the land beneath the initial phase of the development. This lease agreement is for a 75-year term at a fixed payment for the first two years (June 2008-June 2010), after which payments are based on a percentage of certain gross revenues. Contingent amounts are not readily estimable and are not reflected in the table below for fiscal years 2016 and beyond. Future minimum lease payments due under ground leases for the next five years ending December 31 and thereafter are as follows: ($ in thousands) 2016 2017 2018 2019 2020 Thereafter Total Note 13. Shareholders’ Equity Reverse Share Split $ $ 1,494 1,494 1,132 1,103 1,088 44,583 50,894 On August 11, 2014, we completed a reverse share split of our common shares at a ratio of one new share for each four shares then outstanding. As a result of the reverse share split, the number of outstanding common shares was reduced from approximately 332.7 million shares to approximately 83.2 million shares. The reverse share split had the same impact on the number of outstanding operating partnership units. Authorized Common Shares In 2014, in preparation for our merger with Inland Diversified and upon approval from shareholders, we filed an amendment to our Articles of Amendment and Restatement of Declaration of Trust, as amended, with the State of Maryland State Department of Assessments and Taxation to increase the total number of authorized common shares of beneficial interest from 200,000,000 to 450,000,000. In May 2015, upon approval from shareholders we filed an amendment to our Articles of Amendment and Restatement of Declaration of Trust, as amended, with the State of Maryland State Department of Assessments and Taxation to decrease the total number of authorized common shares of beneficial interest from 450,000,000 to 225,000,000 to reflect the decrease in the number of our common shares outstanding as a result of the one-for-four reverse share split in August 2014. F-42 Common Equity In November 2013, we completed an equity offering of 9.2 million common shares at an offering price of $24.64 per share for net offering proceeds of $217 million. We initially used the proceeds to repay borrowings under our unsecured revolving credit facility and subsequently redeployed the proceeds to fund a portion of the purchase price of the portfolio of nine unencumbered retail properties (see Note 8). In April and May of 2013, we completed an equity offering of 3.9 million common shares at an offering price of $26.20 per share for net offering proceeds of $97 million. We initially used the proceeds to repay borrowings under our unsecured revolving credit facility and subsequently redeployed the proceeds to acquire Cool Springs Market, Castleton Crossing, and Toringdon Market (see Note 8). Accrued but unpaid distributions on common shares and units were $23.7 million and $22.1 million as of December 31, 2015 and 2014, respectively, and are included in accounts payable and accrued expenses in the accompanying consolidated balance sheets. These distributions were paid in January of the following year. Preferred Equity On December 7, 2015, we redeemed all 4,100,000 outstanding shares of our 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”). The Series A Preferred Shares were redeemed at a redemption price of $25.00 per share, plus $0.0287 per share, the amount equal to accrued and unpaid dividends since the previous payment date. The Series A Preferred Shares had a total redemption value of approximately $102.6 million. The carrying value of these preferred shares in equity, prior to the redemption, was net of the original issuance costs. Therefore, in conjunction with the redemption, approximately $3.8 million of initial issuance costs were written off as a non-cash charge against income attributable to common shareholders. Dividend Reinvestment and Share Purchase Plan We maintain a Dividend Reinvestment and Share Purchase Plan (the “Plan”) which offers investors the option to invest all or a portion of their common share dividends in additional common shares. In addition, a direct share purchase option permits Plan participants and new investors to purchase common shares by making optional cash investments with certain restrictions. Distribution Payments Our Board of Trustees declared a cash distribution of $0.2725 per common share and Common Unit for the fourth quarter of 2015. This distribution was paid on January 13, 2016 to common shareholders and Common Unit holders of record as of January 6, 2016. Note 14. Quarterly Financial Data (Unaudited) Presented below is a summary of the consolidated quarterly financial data for the years ended December 31, 2015 and 2014. F-43 ($ in thousands) Total revenue Operating income Income from continuing operations Gain on sale of operating properties, net Consolidated net income Net income from continuing operations attributable to Kite Realty Group Trust common shareholders Net income attributable to Kite Realty Group Trust common shareholders Net income per common share – basic and diluted: Net income from continuing operations attributable to Kite Realty Group Trust common shareholders Net income attributable to Kite Realty Group Trust common shareholders Weighted average Common Shares outstanding - basic Weighted average Common Shares outstanding - diluted ($ in thousands) Total revenue Operating income (Loss) income from continuing operations Income (loss) from discontinued operations Gain on sale of operating properties, net Consolidated net income (loss) Net income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders Net income (loss) attributable to Kite Realty Group Trust common shareholders Net (loss) income per common share – basic and diluted: Net (loss) 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 Weighted average Common Shares outstanding - diluted Quarter Ended March 31, 2015 Quarter Ended June 30, 2015 Quarter Ended September 30, 2015 Quarter Ended December 31, 2015 $ 86,828 $ 83,735 $ 18,483 4,499 3,363 7,862 7,179 5,065 0.06 0.06 16,099 7,235 — 7,235 6,727 4,613 0.06 0.06 87,147 16,911 2,961 — 2,961 89,295 20,307 10,402 854 11,256 2,526 10,685 412 $ 5,353 0.00 0.00 0.06 0.06 83,532,092 83,506,078 83,325,074 83,327,664 83,625,352 83,803,879 83,433,379 83,438,844 Quarter Ended March 31, 2014 Quarter Ended June 30, 2014 Quarter Ended September 30, 2014 Quarter Ended December 31, 2014 $ 42,660 $ 40,843 $ 5,206 (2,217) 3,198 3,490 4,471 4,332 2,218 0.00 0.08 4,319 (3,196) — — (3,196) (2,976) (5,090) (0.16) (0.16) $ 88,576 (1,316) (16,729) — 2,749 (13,980) (14,284) (16,398) (0.20) (0.20) 87,448 21,120 5,786 — 2,243 8,029 7,227 5,113 0.06 0.06 32,755,898 32,884,467 83,455,900 83,478,680 32,755,898 32,884,467 83,455,900 83,727,400 F-44 Note 15. Commitments and Contingencies Other Commitments and Contingencies We are not subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against us. We are parties to routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such routine litigation, claims, and administrative proceedings will not have a material adverse impact on our consolidated financial statements. We are obligated under various completion guarantees with certain lenders and lease agreements with tenants to complete all or portions of the development and redevelopment projects. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through existing construction loans. In addition, if necessary, we may make draws on our unsecured revolving credit facility. As of December 31, 2015, we had outstanding letters of credit totaling $14.7 million. At that date, there were no amounts advanced against these instruments. Previously Assumed Earnout Liability Six of our properties, which were acquired from Inland Diversified, had earnout components as of the Merger date, whereby we are required to pay the original seller of those properties (not Inland Diversified) additional consideration based on whether those sellers were able to identify tenants and lease certain vacant space. The potential earnout liability was $1.4 million and $9.7 million at December 31, 2015 and 2014, respectively. While the remaining accrued amount at December 31, 2015 represents our best estimate of the ultimate settlement, any difference between the accrual and settlement would impact earnings and be reflected in the consolidated statements of operations. The table below presents the change in our earnout liability for the twelve months ended December 31, 2015. ($ in thousands) Earnout liability – beginning of period Decreases: Settlement of earnout obligations Adjustments to estimated fair value determination during the Merger measurement period Non-cash gain from release of assumed earnout liability Earnout liability – end of period Twelve Months Ended December 31, 2015 $ $ 9,664 (2,581) (871) (4,832) 1,380 We recorded a non-cash gain from the release of assumed earnout liability of $4.8 million for the year ended December 31, 2015. The expiration date of the associated earnout liability was December 28, 2015 and the original sellers were unable to perform the necessary leasing activity that would have resulted in payment of the previously estimated obligation. As such, because the Merger measurement period had closed, the reduction of this assumed contingent obligation impacted earnings. Note 16. Supplemental Schedule of Non-Cash Investing/Financing Activities The following schedule summarizes the non-cash investing and financing activities of the Company for the years ended December 31, 2015, 2014 and 2013: F-45 ($ in thousands) Assumption of mortgages upon completion of Merger including debt premium of $33,298 $ Properties and other assets acquired upon completion of Merger Marketable securities acquired upon completion of Merger Assumption of debt in connection with acquisition of Rampart Commons including debt premium of $2,221 Accrued distribution to preferred shareholders Extinguishment of mortgages upon transfer of Tranche I operating properties Assumption of mortgages by buyer upon sale of properties Assumption of debt in connection with acquisition of Chapel Hill Shopping Center including debt premium of $212 Extinguishment of mortgage upon transfer of Kedron Village operating property Net assets of Kedron Village transferred to lender (excluding non-recourse debt) Year Ended December 31, 2015 2014 2013 — $ 892,909 $ — 2,367,600 — — — — 40,303 18,462 — — 18,602 14,586 705 75,800 — — — — — — — — 705 — — — 29,195 27,953 Note 17. Related Parties and Related Party Transactions Subsidiaries of the Company provide certain management, construction management and other services to certain unconsolidated entities and entities owned by certain members of the Company’s management. During the years ended December 31, 2015, 2014 and 2013, we earned $0 from unconsolidated entities, and less than $0.1 million during each year presented, from entities owned by certain members of management. We reimburse an entity owned by certain members of our management for travel and related services. During the years ended December 31, 2015, 2014 and 2013, amounts paid by the Company to this related entity were $0.4 million, $0.4 million, and $0.3 million, respectively. Note 18. Subsequent Events Dividend Declaration On February 4, 2016, the Board of Trustees declared a cash distribution of $0.2875 for the first quarter of 2016 to common shareholders and Common Unit holders of record as of April 6, 2016, which represents a 5.5% increase over our previous quarterly distribution. The distribution is expected to be paid on or about April 13, 2016. Retirement of Secured Debt On February 11, 2016, we retired the $16.3 million loan secured by our Cool Creek Commons operating property using a draw on our unsecured revolving credit facility. Forward-Starting Interest Rate Swap On January 6, 2016, we entered into two forward-starting interest rate swaps that will effectively fix the interest rate on $150 million of previously unhedged variable rate debt at 3.208%. The effective date of the swaps is June 30, 2016 and will expire on July 1, 2021. F-4(cid:25) Outperformance Plan On January 28, 2016, the Compensation Committee of the Board of Trustees of Kite Realty Group Trust adopted the 2016 Outperformance Program for members of executive management and certain other employees, pursuant to which participants are eligible to earn units in the Operating Partnership based on the achievement of certain performance criteria related to the Company’s common shares. Participants in the 2016 Outperformance Plan were awarded the right to earn, in the aggregate, up to $6 million of share-settled awards (the “bonus pool”) if, and only to the extent of which, based on our total shareholder return (“TSR”) performance measures are achieved for the three-year period beginning January 4, 2016 and ending December 31, 2018. Awarded interests not earned based on the TSR measures are forfeited. At the end of the three-year performance period, participants will receive their percentage interest in the bonus pool as units in the Operating Partnership that vest over an additional two-year service period. The compensation cost of the 2016 Outperformance Plan is fixed as of the grant date and is recognized regardless of whether the units are ultimately earned if the required service is determined. Restricted Award Grants In February 2016, a total of 103,685 restricted awards were granted to members of executive management and certain other employees. The restricted awards will vest ratably over periods ranging from three to five years. Performance Awards In February 2016, the Compensation Committee awarded each executive officer a three-year performance award of restricted shares units ("PSUs"). These PSUs may be earned over a three-year performance period from January 1, 2016 to December 31, 2018. The performance criteria are based on the relative total shareholder return ("TSR") achieved by the Company measured against a peer group over the three-year measurement period. Any PSUs earned at the end of the three-year period will be fully vested. The total number of PSUs issued to the executive officers was based on a target value of $1.0 million. The number of PSUs that may be earned will range from 50% to 200% of the target value depending on our TSR of the measurement period in relation to the peer group. F-47 s e i r a i d i s b u s d n a . . 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3 , 1 4 9 4 , 1 9 2 6 , 2 9 5 8 , 2 0 6 2 , 4 9 1 3 , 2 1 5 3 3 , 8 0 0 1 , 5 9 6 7 , 7 9 1 5 , 4 5 1 7 , 5 5 1 4 , 3 7 7 2 , 1 3 1 4 , 1 3 8 7 , 1 9 2 3 , 9 1 3 0 7 , 4 5 6 0 , 3 2 7 3 , 0 1 5 2 1 , 2 4 6 7 , 9 8 6 5 , 1 1 2 9 , 1 2 9 3 , 6 2 2 8 5 , 0 1 4 6 3 , 5 4 4 0 , 4 8 1 7 , 1 3 6 8 2 6 9 , 4 8 6 5 , 2 3 9 7 , 5 3 0 4 6 , 5 2 8 7 , 5 0 0 6 , 4 0 5 3 , 3 4 5 7 , 4 7 5 3 , 1 — — — — — — — 7 5 5 , 0 1 ) d e u n i t n o c ( s e i t r e p o r P g n i t a r e p O * 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 n o i l i v a P t s i e G * I I I & I I e s a h P - g n i s s o r C n o t l i m a H * r e t n e C e n w o T s g n i r p S y l l o H * e d a n e m o r P k e e r C s r e t n u H * e r a u q S r e v i R n a i d n I * a z a l P k c o c h c t i H 4 9 6 , 9 1 * 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 — — — — 0 8 0 , 5 — — 3 8 3 , 8 — — — — — 5 4 4 , 5 5 2 6 , 1 3 1 7 4 , 0 2 0 4 9 , 7 0 8 7 , 5 1 — — 0 5 5 , 2 2 4 0 8 , 8 1 0 3 3 , 3 3 6 4 6 , 6 1 — — 2 5 7 , 6 — 2 7 8 , 5 I I e s a h P - s n o m m o C y t i C e k a L * e r a u q S e k a L s g n i K ' * s n o m m o C d o o w g n i K * s n o m m o C y t i C e k a L * e d a n e m o r P d o o w e k a L * s n o m m o C n w o t s d n a L a z a l P y r a M e k a L e c a l p t e k r a M a m L i * g n i s s o r C a i h t i L * r e t n e C g n i p p o h S n o t s g n i v i L * 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 l a i r o m e M r e t n e C e g a l l i V k c a m i r r e M a z a l P s e w o L ' * g n i s s o r C s n i l l u M e r a u q S r a m a r i M r e t n e C g n i p p o h S t s e r c h t r o N * e d a n e m o r P e l a d h t r o N e c a l p t e k r a M e l l i v r e p a N g n i d n a L t s a o C m l a P * e c a l P r e d n a e l O I e s a h P - s n o m m o C n w o T e d i s k r a P * r e t n e C g n i p p o h S o n i f o t r o P s n o m m o C l l i H t n a s a e l P h t r o w c A t a x i l b u P g n i s s o r C e g d i R e n i P * l l i H r a d e C t a a z a l P s d o o W r e t e m i r e P * e t n e l o V a z a l P r a e Y / t l i u B r a e Y d e t a l u m u c c A & g n i d l i u B & g n i d l i u B & g n i d l i u B d e r i u q c A d e t a v o n e R n o i t a i c e r p e D 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 e m a N 4 1 0 2 2 1 0 2 4 1 0 2 A N 6 0 0 2 8 0 0 2 4 1 0 2 2 1 0 2 3 1 0 2 3 0 0 2 4 1 0 2 4 1 0 2 4 1 0 2 4 1 0 2 A N 4 0 0 2 A N 4 1 0 2 4 0 0 2 4 1 0 2 4 1 0 2 3 1 0 2 A N A N 4 1 0 2 3 1 0 2 4 1 0 2 4 1 0 2 4 1 0 2 4 1 0 2 4 0 0 2 4 1 0 2 4 1 0 2 4 1 0 2 A N 3 0 0 2 7 9 9 1 8 9 9 1 3 1 0 2 / 6 8 9 1 1 0 0 2 / 1 9 9 1 1 1 0 2 9 0 0 2 0 0 0 2 7 9 9 1 8 9 9 1 1 1 0 2 0 1 0 2 1 0 0 2 1 1 0 2 0 0 0 2 6 9 9 1 7 0 0 2 2 1 0 2 1 0 0 2 8 0 0 2 7 0 0 2 4 0 0 2 5 0 0 2 5 0 0 2 6 0 0 2 9 9 9 1 9 0 0 2 2 1 0 2 5 0 0 2 9 0 0 2 7 9 9 1 0 1 0 2 3 1 0 2 2 1 0 2 9 9 9 1 1 3 1 , 1 2 2 3 , 2 0 1 8 , 1 7 6 4 , 4 2 2 5 , 3 6 4 4 , 5 6 0 2 , 1 2 3 3 , 4 6 4 3 , 2 5 2 5 , 3 0 4 6 8 3 1 , 3 5 6 0 , 1 4 5 5 , 1 9 3 2 , 2 6 3 8 , 8 6 5 3 , 6 6 5 5 8 1 1 , 3 2 5 4 , 1 7 9 0 , 4 2 7 2 , 1 9 2 7 , 2 1 6 5 3 , 2 5 8 1 , 1 9 6 7 , 5 2 0 2 , 2 9 9 9 , 1 0 0 3 , 1 1 3 7 1 7 0 , 3 3 5 1 , 1 9 1 8 4 2 9 , 1 7 2 1 , 4 0 9 5 , 4 1 2 8 2 , 9 4 6 0 , 1 3 1 9 5 , 0 2 8 0 5 , 6 1 8 0 2 , 7 3 0 9 5 , 0 2 3 9 5 , 9 2 0 6 6 , 2 1 5 8 2 , 8 1 9 2 4 , 0 1 8 3 6 , 1 4 4 9 5 , 7 1 1 8 0 , 6 2 7 5 0 , 1 1 8 1 3 , 2 4 3 2 9 , 8 2 6 1 6 , 1 1 7 0 5 , 0 1 6 7 4 , 8 2 9 9 2 , 5 6 8 5 1 , 5 1 7 3 2 , 7 4 6 5 1 , 0 1 3 0 1 , 8 1 7 3 0 , 5 5 6 9 9 , 5 3 8 6 1 , 2 3 5 0 3 , 9 1 6 1 0 , 5 1 5 1 0 , 0 1 1 7 7 , 7 1 5 6 9 , 1 2 4 4 7 , 7 3 3 4 0 , 0 1 5 5 8 , 1 1 9 9 4 , 7 8 2 9 , 9 2 8 4 5 , 8 1 9 1 6 , 2 1 1 6 5 , 1 3 6 2 8 , 6 1 4 4 8 , 5 2 2 7 9 , 0 1 8 0 7 , 2 1 7 5 0 , 8 8 0 6 , 3 3 9 0 9 , 7 5 6 1 , 2 2 9 2 4 , 0 1 5 4 5 , 7 2 0 5 6 , 4 2 1 7 3 , 9 1 2 5 , 8 4 0 7 , 4 2 4 9 7 , 6 4 0 1 7 , 9 4 9 7 , 7 3 0 8 7 , 7 3 6 9 , 4 1 4 1 9 , 5 4 1 7 8 , 1 3 6 6 2 , 4 2 7 5 0 , 1 1 2 6 4 , 2 1 8 9 6 , 7 0 6 3 , 6 1 1 7 7 , 7 1 2 2 1 , 1 3 8 4 3 , 6 5 3 7 , 2 3 8 7 , 1 6 3 1 , 1 3 4 0 , 2 9 8 8 , 3 7 4 6 , 5 4 6 7 , 3 9 4 7 , 3 8 8 6 , 1 7 7 5 , 5 2 7 3 , 2 0 3 0 , 8 5 8 6 , 9 6 1 9 , 3 8 2 6 3 7 7 , 4 1 3 7 2 , 4 5 4 2 , 2 6 8 9 , 1 2 7 7 , 3 5 0 5 , 8 1 8 4 4 , 5 3 4 4 , 9 6 7 3 , 2 0 4 1 , 3 3 2 1 , 9 5 2 1 , 4 2 0 9 , 7 8 4 2 , 8 4 5 5 , 2 7 1 3 , 2 1 1 4 , 1 4 9 1 , 4 2 2 6 , 6 5 9 6 , 3 5 3 5 5 1 1 3 8 8 5 4 2 2 1 7 9 1 , 1 2 9 1 , 1 1 9 3 2 9 6 , 4 6 4 3 7 9 8 1 5 2 0 3 8 , 5 8 5 9 , 4 7 6 1 0 5 0 3 3 2 6 5 9 3 6 1 1 9 5 4 0 9 8 5 1 8 4 2 1 1 4 7 0 3 8 7 2 7 3 8 4 — 6 3 2 — — — — — — — — — 9 9 1 — — — — — — — — — — — — — — — — — — — — — — — — — 0 2 8 , 1 1 4 4 3 , 7 7 9 0 , 9 2 0 9 4 , 8 1 2 2 4 , 1 1 9 3 4 , 1 3 2 2 8 , 6 1 2 5 6 , 4 2 1 8 5 , 0 1 6 1 0 , 8 1 1 0 , 8 5 3 5 , 3 3 0 2 7 , 7 0 4 1 , 2 2 9 9 5 , 4 7 8 5 , 2 2 3 8 4 , 4 2 1 2 3 , 9 1 9 1 , 8 2 4 6 , 4 2 9 9 3 , 6 4 4 9 6 , 9 3 0 2 , 7 3 6 7 8 , 6 5 0 9 , 4 1 3 3 4 , 5 4 9 5 7 , 1 3 2 6 2 , 4 2 0 5 0 , 1 1 2 3 4 , 2 1 0 2 4 , 7 3 2 3 , 6 1 3 2 7 , 7 1 2 2 1 , 1 3 2 1 1 , 6 5 3 7 , 2 3 8 7 , 1 6 3 1 , 1 3 4 0 , 2 9 8 8 , 3 7 4 6 , 5 4 6 7 , 3 9 4 7 , 3 8 8 6 , 1 8 7 3 , 5 2 7 3 , 2 0 3 0 , 8 5 8 6 , 9 6 1 9 , 3 8 2 6 — — 5 5 8 , 1 1 — — 7 8 9 , 9 0 0 4 , 1 1 — — — — — 5 8 7 , 4 0 0 3 , 1 2 0 0 8 , 8 3 7 7 , 4 1 0 1 6 , 3 2 3 7 2 , 4 5 4 2 , 2 6 8 9 , 1 2 7 7 , 3 5 0 5 , 8 1 8 4 4 , 5 3 4 4 , 9 6 7 3 , 2 0 4 1 , 3 3 2 1 , 9 5 2 1 , 4 2 0 9 , 7 8 4 2 , 8 4 5 5 , 2 7 1 3 , 2 1 1 4 , 1 4 9 1 , 4 2 2 6 , 6 5 9 6 , 3 — — 1 7 2 , 2 0 5 7 , 4 1 — — 4 2 7 , 2 4 — — — 0 9 6 , 8 1 0 0 7 , 0 2 3 8 1 , 9 — — — — 0 5 7 , 7 2 3 7 , 5 ) d e u n i t n o c ( s e i t r e p o r P g n i t a r e p O * d u o l C . t S t a x i l b u P * f f u r d o o W t a x i l b u P * g n i s s o r C e n i l e g n a R s n o m m o C t r a p m a R a z a l P e s a h c r e v i R g n i s s o r C n o x a S * e g d E s r e v i R * n e e r G a z a l P t a s e p p o h S * d o o w t s a E f o s e p p o h S * k e e r C e l g a E t a s p o h S k e e r C n o t g n i l u J t a s p o h S e t n i o P s g n i r p S r e v l i S e r o o M t a s p o h S * s n o m m o C k e e r C y e n o t S * s n o m m o C n i g l E h t u o S * e r t n e C e n w o T d n a l n u S * a z a l P s g n i r p S n o p r a T * a l o n a P t a e r t n e C e h T * e c a r r e T e l p m e T r e n r o C e h T * n o i t i d a r T t a g n i d n a L e h T * r e t n e C e g a l l i V n o i t i d a r T * e d a n e m o r P e l l i v s s u r T r e t n e C n w o T y t i s r e v i n U * t e k r a M n o d g n i r o T * 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 I I e s a h P - r e t n e C n w o T y t i s r e v i n U k r a P y a B t a e g a l l i V k l a W e g a l l i V * g n i s s o r C e n w o T d n a l t a e h W e k i P l l a h e t i h W g n i s s o r C e i h c a h a x a W * t e k r a M e d i s t s e W * e g a l l i V s e k a L d r o f r e t a W 0 5 - F 0 1 7 , 2 8 3 8 9 8 , 2 7 3 , 3 9 4 9 , 8 1 6 , 2 9 4 9 , 3 5 7 9 8 4 , 6 8 3 7 0 , 3 0 6 4 , 2 3 5 , 2 6 7 8 , 0 5 7 8 3 3 , 4 5 8 s e i t r e p o r P g n i t a r e p O l a t o T t n u o m A g n i y r r a C s s o r G d o i r e P f o e s o l C 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 o t t n e u q e s b u S t n e m p o l e v e D t s o C l a i t i n I A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N A N 9 3 9 , 4 8 7 7 , 9 4 6 0 , 4 8 1 0 , 6 4 2 4 , 3 — — 6 6 5 , 1 7 6 3 , 3 7 9 4 , 8 4 2 7 8 , 2 8 1 4 7 2 , 1 2 9 0 1 , 6 1 6 0 8 , 5 1 6 6 4 , 3 4 7 1 3 , 8 7 2 6 4 , 6 3 0 7 7 , 5 3 6 7 , 5 4 7 0 3 , 2 6 1 5 7 2 , 6 1 3 7 3 , 2 1 7 5 2 , 0 1 2 2 0 , 1 3 5 2 3 , 9 5 1 9 5 , 7 1 6 6 4 , 5 4 3 7 , 2 5 6 5 , 0 2 9 9 9 , 4 6 3 7 , 3 9 4 5 , 5 4 4 4 , 2 1 2 9 9 , 8 1 1 7 8 , 8 1 4 0 3 — — — — — — — — — 3 6 7 , 5 4 7 0 3 , 2 6 1 5 7 2 , 6 1 3 7 3 , 2 1 7 5 2 , 0 1 2 2 0 , 1 3 5 2 3 , 9 5 1 9 5 , 7 1 6 6 4 , 5 4 3 7 2 , 5 6 5 , 0 2 9 9 9 , 4 6 3 7 , 3 9 4 5 5 , 4 4 4 , 2 1 2 9 9 , 8 1 1 7 8 , 8 1 4 0 3 — — — 8 6 1 , 7 4 9 7 , 0 1 — 8 3 1 , 7 5 — — 6 5 1 , 3 3 3 7 5 , 8 4 4 9 7 3 , 0 6 3 4 9 1 , 8 8 — — 9 7 3 , 0 6 3 4 9 1 , 8 8 0 0 1 , 5 7 — — — — — — — — — — — — r a e Y / t l i u B r a e Y d e t a l u m u c c A & g n i d l i u B & g n i d l i u B & g n i d l i u B d e r i u q c A d e t a v o n e R n o i t a i c e r p e D 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 e m a N t n u o m A g n i y r r a C s s o r G d o i r e P f o e s o l C 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 o t t n e u q e s b u S t n e m p o l e v e D t s o C l a i t i n I 1 0 0 2 1 0 0 2 6 8 9 1 2 0 0 2 / 5 0 9 1 7 4 6 , 1 1 7 1 4 , 1 5 7 9 , 9 2 8 3 4 , 4 2 3 3 , 8 2 4 3 5 , 3 4 0 9 3 4 6 , 1 4 8 8 7 1 6 , 8 1 4 6 0 , 3 1 3 1 4 , 4 3 6 6 8 , 1 3 7 4 5 , 2 1 0 5 , 9 1 5 1 7 , 9 0 5 6 , 2 4 0 9 3 4 6 , 1 — 0 0 1 , 8 1 * 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 e c i f f O h t u o S y t r i h T 5 6 3 , 2 1 7 4 5 , 2 0 0 1 , 8 1 s e i t r e p o r P e c i f f O l a t o T s e i t r e p o r P t n e m p o l e v e d e R d n a t n e m p o l e v e D — — — — — — — — — — — — — 7 4 4 , 2 5 0 1 , 2 5 3 2 , 1 2 5 2 4 , 3 9 5 4 , 3 1 8 7 1 4 6 , 5 3 3 0 , 6 7 4 1 1 3 , 6 1 2 1 8 , 8 — — 5 3 2 , 1 2 — — 1 8 7 — — — — 7 4 7 4 4 , 2 5 0 1 , 2 — 5 2 4 , 3 9 5 4 , 3 — 1 4 6 , 5 3 3 0 , 6 — 1 1 3 , 6 1 2 1 8 , 8 — — — 6 9 2 , 0 7 3 6 0 , 2 2 3 3 2 , 8 4 — — — — — — — — — — — — — — — — — — — — — — — — — — — 5 3 2 , 1 2 — — 1 8 7 — — — — 7 4 7 4 4 , 2 5 0 1 , 2 — 5 2 4 3 , 9 5 4 3 , — 1 4 6 5 , 3 3 0 , 6 — 1 1 3 , 6 1 2 1 8 , 8 3 6 0 , 2 2 3 3 2 , 8 4 — — — — — — — — — — — — 1 5 - F 0 3 9 , 8 2 4 $ 0 8 1 , 6 2 9 , 3 $ 7 5 2 , 3 3 0 , 3 $ 3 2 9 , 2 9 8 $ 0 9 9 , 5 0 1 $ 3 7 0 , 3 $ 7 6 2 , 7 2 9 , 2 $ 0 5 8 , 9 8 8 $ 8 3 5 , 7 1 7 , 1 $ l a t o T d n a r G — — — 0 0 0 , 0 7 7 d e r u c e s n U / n a o L m r e T / t i d e r c f o e n i L s e t o n e s a h P - r e t n e C e n w o T s g n i r p S y l l o H * I I I I e s a h P - s n o m m o C n w o T e d i s k r a P * g n i s s o r C i m a i m a T * r e n r o C e h T * e d a n e m o r P d o o w h c e e B * r e t n e C y t i C * s w o d a h S e s u o h t r u o C n o i t a t S s r e h s i F e r t n e C g n i s s o r C n o t l i m 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 d n a t n e m p o l e v e D l a t o T * * r e h t O * 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 t e e r t S y d d E * e k a L d o o w r e e D * l l i H n o c a e B I I g n i s s o r C e k a L x o F t n e m p o l e v e D G R K * l l i H w e N G R K y a w k a e P G R K a z a l P m A n a P y a w k a e P R K I I I e s a h P - s n o m m o C n w o T e d i s k r a P r e h t O l a t o 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 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 r u o 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 e v a h o s l a e W . 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 s a b g n i w o r r o b t i d e r c f o e n i l r u o 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 * * * _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ 2 5 - F Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries Notes to Schedule III Consolidated Real Estate and Accumulated Depreciation ($ in thousands) Note 1. Reconciliation of Investment Properties The changes in investment properties of the Company for the years ended December 31, 2015, 2014, and 2013 are as follows: Balance, beginning of year Merger and Acquisitions Improvements Impairment Disposals Balance, end of year 2015 2014 2013 $ 3,897,131 $ 1,872,088 $ 1,390,213 176,068 2,128,278 103,688 419,080 111,968 92,717 (2,293) (237,443) $ 3,926,180 — (206,923) $ 3,897,131 — (49,173) $ 1,872,088 The unaudited aggregate cost of investment properties for federal tax purposes as of December 31, 2015 was $3.1 billion. Note 2. Reconciliation of Accumulated Depreciation The changes in accumulated depreciation of the Company for the years ended December 31, 2015, 2014, and 2013 are as follows: Balance, beginning of year Depreciation expense Impairment Disposals Balance, end of year 2015 2014 2013 $ 313,524 $ 229,286 $ 190,972 141,516 (833) (25,277) 428,930 $ 103,155 — (18,917) 313,524 $ 49,392 — (11,078) 229,286 $ Depreciation of investment properties reflected in the statements of operations is calculated over the estimated original lives of the assets as follows: Buildings Building improvements Tenant improvements Furniture and Fixtures 20-35 years 10-35 years Term of related lease 5-10 years All other schedules have been omitted because they are inapplicable, not required or the information is included elsewhere in the consolidated financial statements or notes thereto. F-53 Exhibit No. Description EXHIBIT INDEX 2.1 3.1 3.2 3.3 3.4 4.1 10.1 10.2 10.3 10.4 10.5 10.6 10.7 Agreement and Plan of Merger by and among Kite Realty Group Trust, KRG Magellan, LLC and Inland Diversified Real Estate Trust, Inc., dated February 9, 2014 Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended Articles of Amendment to the Articles of Amendment and Restatement of Declaration of Trust of Kite Realty Group Trust, as supplemented and amended Second Amended and Restated Bylaws of the Company, as amended First Amendment to the Second Amended and Restated Bylaws of Kite Realty Group Trust, as amended Form of Common Share Certificate Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P., dated as of August 16, 2004 Amendment No. 1 to Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P., dated as of December 7, 2010 Amendment No. 2 to Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P. Amendment No. 3 to Amended and Restated Agreement of Limited Partnership of Kite Realty Group, L.P. Executive Employment Agreement, dated as of July 28, 2014, by and between the Company and John A. Kite* Executive Employment Agreement, dated as of July 28, 2014, by and between the Company and Thomas K. McGowan* Executive Employment Agreement, dated as of July 28, 2014, by and between the Company and Daniel R. Sink* F-54 Location Incorporated by reference to Exhibit 2.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on February 11, 2014 Incorporated by reference to Exhibit 3.1 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015 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 May 28, 2015 Incorporated by reference to Exhibit 3.2 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015 Incorporated by reference to Exhibit 3.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 28, 2015 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 Incorporate by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on December 13, 2010 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 March 12, 2012 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 29, 2014 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 29, 2014 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 29, 2014 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 29, 2014 10.8 10.9 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 10.20 10.21 Executive Employment Agreement, dated as of August 6, 2014, by and between the Company and Scott E. Murray* Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Alvin E. Kite* Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and John A. Kite* Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Thomas K. McGowan* Indemnification Agreement, dated as of August 16, 2004, by and between Kite Realty Group, L.P. and Daniel R. Sink* Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Scott E. Murray* 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.* Indemnification Agreement, dated as of March 8, 2013, by and between Kite Realty Group, L.P. and Victor J. Coleman* Indemnification Agreement, dated as of March7, 2014, by and between Kite Realty Group, L.P. and Christie B. Kelly* F-55 Incorporated by reference to Exhibit 10.8 the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended September 30, 2014. Incorporated by reference to Exhibit 10.16 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 20, 2004 Incorporated by reference to Exhibit 10.17 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 20, 2004 Incorporated by reference to Exhibit 10.18 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 20, 2004 Incorporated by reference to Exhibit 10.19 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 20, 2004 Incorporated by reference to Exhibit 10.13 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015 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 10.20 to the Annual Report on Form 10-K of Kite Realty Group Trust for the period ended December 31, 2013 Incorporated by reference to Exhibit 10.21 to the Annual Report on Form 10-K of Kite Realty Group Trust for the year ended December 31, 2014 10.22 10.23 10.24 10.25 10.26 Indemnification Agreement, dated as of March 7, 2014, by and between Kite Realty Group, L.P. and David R. O’Reilly* Indemnification Agreement, dated as of March 7, 2014, by and between Kite Realty Group, L.P. and Barton R. Peterson* Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Lee A. Daniels* Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Gerald W. Grupe* Indemnification Agreement, dated as of February 27, 2015, by and between Kite Realty Group, L.P., and Charles H. Wurtzebach* 10.27 Kite Realty Group Trust Equity Incentive Plan, as amended* 10.28 Kite Realty Group Trust Executive Bonus Plan* 10.29 Kite Realty Group Trust 2008 Employee Share Purchase Plan* 10.30 10.31 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, C. Kenneth Kite, David Grieve and KMI Holdings, LLC Amendment No. 1 to Registration Rights Agreement, dated August 29, 2005, by and among the Company and the other parties listed on the signature page thereto 10.32 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 10.33 Form of 2014 Outperformance LTIP Unit Award Agreement 10.34 Form of Nonqualified Share Option Agreement under 2013 Equity Incentive Plan* 10.35 Form of Restricted Share Agreement under 2013 Equity Incentive Plan* F-56 Incorporated by reference to Exhibit 10.22 to the Annual Report on Form 10-K of Kite Realty Group Trust for the year ended December 31, 2014 Incorporated by reference to Exhibit 10.23 to the Annual Report on Form 10-K of Kite Realty Group Trust for the year ended December 31, 2014 Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015 Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015 Incorporated by reference to Exhibit 10.24 to the Annual Report on Form 10-K of Kite Realty Group Trust filed with the SEC on February 27, 2015 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 Incorporated by reference to Exhibit 10.2 to the Quarterly Report on Form 10-Q of Kite Realty Group Trust for the period ended September 30, 2005 Incorporated by reference to Exhibit 10.33 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on August 20, 2004 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 29, 2014 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 14, 2013 Incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on May 14, 2013 10.36 Schedule of Non-Employee Trustee Fees and Other Compensation* Filed herewith 10.37 Kite Realty Group Trust Trustee Deferred Compensation Plan* 10.38 10.39 10.40 10.41 Fourth Amended and Restated Credit Agreement, dated as of July 1, 2014, by and among the Operating Partnership, KeyBank National Association, as Administrative Agent, Bank of America, N.A., as Syndication Agent with respect to the Revolving Facility, Wells Fargo Bank, National Association, as Syndication Agent with respect to the Term Loan, Wells Fargo Bank, National Association and U.S. Bank National Association, as Co-Documentation Agents with respect to the Revolving Facility, JPMorgan Chase Bank, N.A., Bank of America, N.A. and U.S. Bank National Association, as Co- Documentation Agents with respect to the Term Loan, KeyBanc Capital Markets Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as Co-Lead Arrangers with respect to the Revolving Facility, KeyBanc Capital Markets Inc. and Wells Fargo Securities, LLC, as Co-Lead Arrangers with respect to the Term Loan, and the other lenders party thereto First Amendment to Fourth Amended and Restated Credit Agreement, dated as of March 12, 2015, by and among Kite Realty Group Trust, Kite Realty Group, L.P., certain subsidiaries of Kite Realty Group, L.P., KeyBank National Association, as Administrative Agent, and the other lenders party thereto Second Amendment to Fourth Amended and Restated Credit Agreement, dated as of June 29, 2015, by and among Kite Realty Group Trust, Kite Realty Group, L.P., certain subsidiaries of Kite Realty Group, L.P., KeyBank National Association, as Administrative Agent, and the other lenders party thereto Third Amended and Restated Guaranty, dated as of July 1, 2014, by KRG Magellan, LLC and certain subsidiaries of the Operating Partnership party thereto 10.42 Springing Guaranty, dated as of July 1, 2014, by the Company 10.43 10.44 10.45 Term Loan Agreement, dated as of April 30, 2012, by and among the Operating Partnership, the Company, KeyBank National Association, as Administrative Agent, Wells Fargo Bank, National Association, as Syndication Agent, the Huntington National Bank, as Documentation Agent, Keybanc Capital Markets and Wells Fargo Securities, LLC, as Joint Bookrunners and Joint Lead Arrangers, and the other lenders party thereto. First Amendment to Term Loan Agreement, dated as of February 26, 2013, by and among the Operating Partnership, the Company, certain subsidiaries of the Operating Partnership party thereto, KeyBank National Association, as a lender and as Administrative Agent, and the other lenders party thereto. Second Amendment to Term Loan Agreement, dated as of August 21, 2013, by and among the Operating Partnership, the Company, certain subsidiaries of the Operating Partnership party thereto, KeyBank National Association, as a lender and as Administrative Agent, and the other lenders party thereto. F-57 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 July 8, 2014 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 March 18, 2015 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 2, 2015 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 8, 2014 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on July 8, 2014 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 4, 2012 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 March 4, 2013 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 27, 2013 Guaranty, dated as of April 30, 2012, by the Company and certain subsidiaries of the Operating Partnership party thereto Purchase and Sale Agreement, dated September 16, 2014, by and among Inland Real Estate Income Trust, Inc. and the subsidiaries of Kite Realty Group Trust party thereto Note Purchase Agreement, dated as of August 28, 2015, by and among Kite Realty Group, L.P., and the other parties named therein as Purchasers 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 May 4, 2012 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 22, 2014 Incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 3, 2015 Term Loan Agreement, dated as of October 26, 2015, by and among Kite Realty Group, L.P., KeyBank National Association, as Administrative Agent, and the other lenders party thereto 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 October 30, 2015 10.46 10.47 10.48 10.49 12.1 12.2 21.1 23.1 23.2 31.1 31.2 31.3 31.4 32.1 32.2 Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends of the Parent Company Statement of Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends of the Operating Partnership List of Subsidiaries Consent of Ernst & Young LLP relating to the Parent Company Consent of Ernst & Young LLP relating to the Operating Partnership Certification of principal executive officer of the Parent Company 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 of the Parent Company 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 executive officer of the Operating Partnership 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 of the Operating Partnership 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 of the Parent Company pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 Certification of Chief Executive Officer and Chief Financial Officer of the Operating Partnership 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 Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith Filed herewith 101.INS XBRL Instance Document 101.SCH XBRL Taxonomy Extension Schema Document 101.CAL XBRL Taxonomy Extension Calculation Linkbase Document Filed herewith F-58 101.DEF XBRL Taxonomy Extension Definition Linkbase Document Filed herewith 101.LAB XBRL Taxonomy Extension Label Linkbase Document Filed herewith 101.PRE XBRL Taxonomy Extension Presentation Linkbase Document Filed herewith ____________________ * Denotes a management contract or compensatory, plan contract or arrangement. F-59 EXHIBIT 10.36 Kite Realty Group Trust Schedule of Non-Employee Trustee Fees and Other Compensation Annual Retainer $60,000 Committee Chair Annual Retainer Committee Member Annual Retainer Audit Committee: $20,000 Compensation Committee: $15,000 Nominating and Corporate Governance Committee: $10,000 Audit Committee: $10,000 Compensation Committee: $7,500 Nominating and Corporate Governance Committee: $5,000 Lead Trustee Annual Retainer $20,000 Annual Restricted Share Awards Effective April 1, 2016. Each trustee will receive restricted common shares with a value of $85,000 on an annual basis, which shares will vest on the one-year anniversary of the grant date. In addition, upon initial election each trustee will receive a one-time grant of 750 restricted common shares, which shares will vest on the one-year anniversary of the grant date. Kite Realty Group Trust Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends EXHIBIT 12.1 ($ in thousands, except ratios) Years ended December 31 2015 2014 2013 2012 2011 Earnings: Net income (loss) from continuing operations $ 25,249 $ (16,452) $ (726) $ (11,455) $ 3,753 Add: Income taxes expense (benefit) Fixed charges, net of capitalized interest 186 56,488 24 45,549 262 28,026 (106) 23,423 (1) 21,660 Less: Income (loss) from unconsolidated entities — — — — 4,320 Earnings before fixed charges and preferred dividends Fixed charges: Interest expense Capitalized interest Interest within rental expense Total fixed charges Preferred dividends $ $ 81,923 $ 29,121 $ 27,562 $ 11,862 $ 21,092 56,432 $ 45,513 $ 27,994 $ 23,392 $ 4,633 56 61,121 7,877 4,789 36 50,338 8,456 5,081 33 33,108 8,456 7,444 31 30,867 7,920 21,625 8,487 34 30,146 5,775 35,921 Total fixed charges and preferred dividends $ 68,998 $ 58,794 $ 41,564 $ 38,787 $ Ratio of earnings to fixed charges and preferred dividends 1.19 (1) (2) (3) (4) ____________________ 1 The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2014 was $29.7 million. The calculation of earnings includes $121.0 million of non-cash depreciation expense The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2013 was $14.0 million. The calculation of earnings includes $54.5 million of non-cash depreciation expense. The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2012 was $26.9 million. The calculation of earnings includes $38.8 million of non The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2011 was $14.8 million. The calculation of earnings includes $33.1 million of non-cash depreciation expense. 2 3 4 Kite Realty Group, L.P. and subsidiaries Calculation of Ratio of Earnings to Combined Fixed Charges and Preferred Dividends EXHIBIT 12.2 ($ in thousands, except ratios) Years ended December 31 2015 2014 2013 2012 2011 Earnings: Net income (loss) from continuing operations $ 25,249 $ (16,452) $ (726) $ (11,455) $ 3,753 Add: Income taxes expense (benefit) Fixed charges, net of capitalized interest 186 56,488 24 45,549 262 28,026 (106) 23,423 (1) 21,660 Less: Income (loss) from unconsolidated entities — — — — 4,320 Earnings before fixed charges and preferred dividends Fixed charges: Interest expense Capitalized interest Interest within rental expense Total fixed charges Preferred dividends $ $ 81,923 $ 29,121 $ 27,562 $ 11,862 $ 21,092 56,432 $ 45,513 $ 27,994 $ 23,392 $ 4,633 56 61,121 7,877 4,789 36 50,338 8,456 5,081 33 33,108 8,456 7,444 31 30,867 7,920 21,625 8,487 34 30,146 5,775 35,921 Total fixed charges and preferred dividends $ 68,998 $ 58,794 $ 41,564 $ 38,787 $ Ratio of earnings to fixed charges and preferred dividends 1.19 (1) (2) (3) (4) ____________________ 1 The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2014 was $29.7 million. The calculation of earnings includes $121.0 million of non-cash depreciation expense The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2013 was $14.0 million. The calculation of earnings includes $54.5 million of non-cash depreciation expense. The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2012 was $26.9 million. The calculation of earnings includes $38.8 million of non The ratio is less than 1.0; the amount of coverage deficiency for the year ended December 31, 2011 was $14.8 million. The calculation of earnings includes $33.1 million of non-cash depreciation expense. 2 3 4 Kite Realty Group List of Subsidiaries Name of Subsidiary 116 & Olio, LLC 50th & 12th, LLC 82 & Otty, LLC Brentwood Land Partners, LLC Bulwark, LLC Cornelius Adair, LLC Corner Associates, LP Dayville Property Development, LLC Eagle Plaza II, LLC Fishers Station Development Company Glendale Centre, L.L.C. International Speedway Square, Ltd. Keller TX Retail DST Kite Acworth Management, LLC Kite Acworth, LLC Kite Eagle Creek, LLC Kite Greyhound III, LLC Kite Greyhound, LLC Kite King’s Lake, LLC Kite Kokomo Management, LLC Kite Kokomo, LLC Kite McCarty State, LLC Kite New Jersey, LLC Kite Pen, LLC Kite Realty Advisors, LLC d/b/a KMI Realty Advisors Kite Realty Construction, LLC Kite Realty Development, LLC Kite Realty Eddy Street Garage, LLC Kite Realty Eddy Street Land, LLC Kite Realty FS Hotel Operators, LLC Kite Realty Group Trust Kite Realty Group, L.P. Kite Realty Holding, LLC Kite Realty New Hill Place, LLC Kite Realty Peakway at 55, LLC Kite Realty Washington Parking, LLC Kite Realty/White LS Hotel Operators, LLC Kite San Antonio, LLC Kite Washington Parking, LLC Kite Washington, LLC EXHIBIT 21.1 Jurisdiction of Incorporation or Formation Indiana Indiana Indiana Delaware Delaware Indiana Indiana Connecticut Indiana Indiana Indiana Florida Delaware Delaware Indiana Indiana Indiana Indiana Indiana Delaware Indiana Indiana Delaware Indiana Indiana Indiana Indiana Indiana Indiana Indiana Maryland Delaware Indiana Indiana Indiana Indiana Indiana Indiana Indiana Indiana Kite West 86th Street II, LLC Kite West 86th Street, LLC KRG 951 & 41, LLC KRG Aiken Hitchcock, LLC KRG Alcoa TN, LLC KRG Alcoa Hamilton, LLC KRG Ashwaubenon Bay Park, LLC KRG Athens Eastside, LLC KRG Bayonne Urban Renewal, LLC KRG Beacon Hill, LLC KRG Beechwood, LLC KRG Belle Isle, LLC KRG Bolton Plaza, LLC KRG Bradenton Centre Point, LLC KRG Branson Hills IV, LLC KRG Branson Hills K-II, LLC KRG Branson Hills, LLC KRG Branson Hills T-III, LLC KRG Bridgewater, LLC KRG Burnt Store, LLC KRG Capital, LLC KRG Castleton Crossing, LLC KRG Cedar Hill Plaza, LP KRG Cedar Hill Village, LP KRG Centre, LLC KRG Chapel Hill Shopping Center, LLC KRG Charlotte Northcrest, LLC KRG Charlotte Perimeter Woods, LLC KRG CHP Management, LLC KRG Clay, LLC KRG College I, LLC KRG College, LLC KRG Colleyville Downs, LLC KRG Construction, LLC KRG Conyers Heritage, LLC KRG Cool Creek Management, LLC KRG Cool Creek Outlots, LLC KRG Cool Springs, LLC KRG Corner Associates, LLC KRG Courthouse Shadows I, LLC KRG Courthouse Shadows, LLC KRG Courthouse Shadows II, LLC KRG Cove Center, LLC KRG Dallas Wheatland, LLC KRG Daytona Management II, LLC KRG Daytona Management, LLC Indiana Indiana Indiana Delaware Delaware Delaware Delaware Delaware Delaware Indiana Indiana Indiana Indiana Delaware Delaware Delaware Delaware Delaware Indiana Indiana Indiana Indiana Delaware Indiana Indiana Delaware Delaware Delaware Delaware Indiana Indiana Indiana Indiana Indiana Delaware Indiana Indiana Indiana Indiana Delaware Delaware Delaware Indiana Delaware Delaware Indiana KRG Daytona Outlot Management, LLC KRG Dayville Killingly Member II, LLC KRG Dayville Killingly Member, LLC KRG Delray Beach, LLC KRG Development, LLC d/b/a Kite Development KRG Draper Crossing, LLC KRG Draper Peaks, LLC KRG Draper Peaks Outlot, LLC KRG Eagle Creek III, LLC KRG Eagle Creek IV, LLC KRG Eastgate Pavilion, LLC KRG Eastwood, LLC KRG Eddy Street Apartments, LLC KRG Eddy Street Commons at Notre Dame Declarant, LLC KRG Eddy Street Commons, LLC KRG Eddy Street FS Hotel, LLC KRG Eddy Street Land Management, LLC KRG Eddy Street Land, LLC KRG Eddy Street Office, LLC KRG Estero, LLC KRG Evans Mullins, LLC KRG Evans Mullins Outlots, LLC KRG Fishers Station II, LLC KRG Fishers Station, LLC KRG Four Corner Square, LLC KRG Fort Myers Colonial Square, LLC KRG Fort Myers Village Walk, LLC KRG Fort Wayne Lima, LLC KRG Fort Wayne Lima Outlot, LLC KRG Fox Lake Crossing II, LLC KRG Fox Lake Crossing, LLC KRG Frisco Westside, LLC KRG Gainesville, LLC KRG Geist Management, LLC KRG Goldsboro Memorial, LLC KRG Greencastle, LLC KRG Hamilton Crossing Management, LLC KRG Hamilton Crossing, LLC KRG Harvest Square, LLC KRG Henderson Eastgate, LLC KRG Hot Springs Fairgrounds, LLC KRG Hunter’s Creek, LLC KRG Jacksonville Deerwood Lake, LLC KRG Jacksonville Julington Creek, LLC KRG Jacksonville Julington Creek II, LLC KRG Jacksonville Richlands, LLC Delaware Delaware Delaware Indiana Indiana Delaware Delaware Indiana Indiana Indiana Indiana Indiana Indiana Indiana Indiana Indiana Delaware Indiana Indiana Indiana Delaware Delaware Indiana Indiana Indiana Delaware Delaware Delaware Delaware Indiana Delaware Delaware Indiana Indiana Delaware Indiana Delaware Indiana Delaware Delaware Delaware Indiana Delaware Delaware Delaware Delaware KRG Indian River, LLC KRG Indian River Outlot, LLC KRG ISS LH OUTLOT, LLC KRG ISS, LLC KRG Kingwood Commons, LLC KRG Kissimmee Pleasant Hill, LLC KRG Kokomo Project Company, LLC KRG Lake City Commons, LLC KRG Lake City Commons II, LLC KRG Lake Mary, LLC KRG Lake St. Louis Hawk Ridge, LLC KRG Lakewood, LLC KRG Las Vegas Centennial Center, LLC KRG Las Vegas Centennial Gateway, LLC KRG Las Vegas Craig, LLC KRG Las Vegas Eastern Beltway, LLC KRG Lithia, LLC KRG Livingston Center, LLC KRG Management, LLC KRG Market Street Village I, LLC KRG Market Street Village II, LLC KRG Market Street Village, LP KRG Marysville, LLC KRG Merrimack Village, LLC KRG Miramar Square, LLC KRG Naperville Management, LLC KRG Naperville, LLC KRG Neenah Fox Point, LLC KRG New Hill Place, LLC KRG New Hill Place II, LLC KRG Newburgh Bell Oaks, LLC KRG Norman University, LLC KRG Norman University II, LLC KRG Norman University III, LLC KRG Norman University IV, LLC KRG Northdale, LLC KRG North Las Vegas Losee, LLC KRG Oak and Ford Zionsville, LLC KRG Ocean Isle Beach Landing, LLC KRG Oklahoma City Silver Springs, LLC KRG Oldsmar Management, LLC KRG Oldsmar Project Company, LLC KRG Oldsmar, LLC KRG Oleander, LLC KRG Omaha Whispering Ridge, LLC KRG Orange City Saxon, LLC Delaware Delaware Indiana Indiana Indiana Delaware Indiana Delaware Delaware Delaware Delaware Indiana Delaware Delaware Delaware Delaware Indiana Indiana Indiana Indiana Indiana Indiana Indiana Delaware Delaware Delaware Indiana Delaware Indiana Indiana Delaware Delaware Delaware Delaware Delaware Indiana Delaware Indiana Delaware Delaware Delaware Delaware Indiana Indiana Delaware Delaware KRG Palm Coast Landing, LLC KRG Pan Am Plaza, LLC KRG Panola I, LLC KRG Panola II, LLC KRG Parkside I, LLC KRG Parkside II, LLC KRG Peakway at 55, LLC KRG Pembroke Pines, LLC KRG Pine Ridge, LLC KRG Pipeline Pointe, LP KRG Plaza Green, LLC KRG Plaza Volente Management, LLC KRG Plaza Volente, LP KRG Pleasant Prairie Ridge, LLC KRG Port St. Lucie Landing, LLC KRG Port St. Lucie Square, LLC KRG Portofino, LLC KRG Portofino Project Company, LLC KRG PR Ventures, LLC KRG Prattville Legends, LLC KRG Rampart, LLC KRG Riverchase, LLC KRG Rivers Edge II, LLC KRG Rivers Edge, LLC KRG San Antonio, LP KRG Shops at Moore II, LLC KRG Shops at Moore Member, LLC KRG Shops at Moore, LLC KRG Shreveport Regal Court, LLC KRG South Elgin Commons, LLC KRG St. Cloud 13th, LLC KRG Stevens Point Pinecrest, LLC KRG Sunland II, LP KRG Sunland Management, LLC KRG Sunland, LP KRG Temple Terrace, LLC KRG Temple Terrace Member, LLC KRG Territory Member, LLC KRG Territory, LLC KRG Texas, LLC KRG Toringdon Market, LLC KRG Traders Management, LLC KRG Trussville I, LLC KRG Trussville II, LLC KRG Tucson Corner, LLC KRG Vero, LLC Delaware Indiana Delaware Indiana Indiana Indiana Indiana Indiana Delaware Indiana Indiana Delaware Indiana Delaware Delaware Delaware Indiana Indiana Indiana Delaware Delaware Delaware Indiana Indiana Indiana Delaware Delaware Delaware Delaware Delaware Delaware Delaware Indiana Delaware Indiana Delaware Delaware Delaware Delaware Indiana Indiana Delaware Indiana Indiana Delaware Delaware KRG Virginia Beach Landstown, LLC KRG Washington Management, LLC KRG Waterford Lakes, LLC KRG Waxahachie Crossing GP, LLC KRG Waxahachie Crossing LP, LLC KRG Waxahachie Crossing Limited Partnership KRG Whitehall Pike Management, LLC KRG White Plains City Center Member II, LLC KRG White Plains City Center Member, LLC KRG White Plains City Center, LLC KRG White Plains Garage, LLC KRG Woodruff Greenville, LLC KRG/Atlantic Delray Beach, LLC KRG/CP Pan Am Plaza, LLC KRG/I-65 Partners Beacon Hill, LLC KRG/KP Northwest 20, LLC KRG/PRISA II Parkside, LLC KRG/PRP Oldsmar, LLC KRG/WLM Marysville, LLC Meridian South Insurance, LLC Meridian South Tax Advisors, LLC MS Insurance Protected Cell Series 2014-15 Noblesville Partners, LLC Preston Commons, LLP Splendido Real Estate, LLC Westfield One, LLC Whitehall Pike, LLC Property Owner's Association Brentwood Property Owners’ Association, Inc. Delray Marketplace Master Association, Inc. Eddy Street Commons at Notre Dame Master Association, Inc. Estero Town Commons Property Owners Association, Inc. Pleasant Hill Commons Property Owners’ Association, Inc. Riverchase Owners’ Association, Inc. Tradition Commercial Association, Inc. White Plains City Center Condo Association, Inc. Delaware Delaware Indiana Delaware Delaware Illinois Indiana Delaware Delaware Delaware Delaware Indiana Florida Indiana Indiana Indiana Delaware Florida Indiana Tennessee Indiana Tennessee Indiana Indiana Delaware Indiana Indiana Florida Florida Indiana Florida Florida Florida Florida New York Consent of Independent Registered Public Accounting Firm EXHIBIT 23.1 We consent to the incorporation by reference in the Registration Statements on Form S-8 (File Nos. 333-188436, 333-159219, 333-152943, and 333-120142) and the Registration Statements on Form S-3 (File Nos. 333-202666, 333-199677, 333-195857, and 333-127585) in the related Prospectuses of Kite Realty Group Trust of our reports dated February 26, 2016, with respect to the consolidated financial statements and schedule of Kite Realty Group Trust and the effectiveness of internal control over financial reporting of Kite Realty Group Trust, included in this Annual Report (Form 10-K) for the year ended December 31, 2015. /s/ Ernst & Young LLP Indianapolis, Indiana February 26, 2016 Consent of Independent Registered Public Accounting Firm EXHIBIT 23.2 We consent to the incorporation by reference in the Registration Statement on Form S-3 (File No. 333-202666) in the related Prospectuses of Kite Realty Group, L.P. and subsidiaries of our reports dated February 26, 2016, with respect to the consolidated financial statements and schedule of Kite Realty Group, L.P. and subsidiaries and the effectiveness of internal control over financial reporting of Kite Realty Group, L.P. and subsidiaries, included in this Annual Report (Form 10-K) for the year ended December 31, 2015. /s/ Ernst & Young LLP Indianapolis, Indiana February 26, 2016 KITE REALTY GROUP TRUST CERTIFICATION EXHIBIT 31.1 I, John A. Kite, certify that: 1. I have reviewed this annual report on Form 10-K of Kite Realty Group Trust; 2. 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; 3. 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; 4. The registrant’s other certifying officer(s) 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. 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; b. 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; c. 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 d. 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(s) 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 directors (or persons performing the equivalent functions): a. 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 b. 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: February 26, 2016 By: /s/ John A. Kite John A. Kite Chairman and Chief Executive Officer KITE REALTY GROUP TRUST CERTIFICATION EXHIBIT 31.2 I, Daniel R. Sink, certify that: 1. I have reviewed this annual report on Form 10-K of Kite Realty Group Trust; 2. 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; 3. 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; 4. The registrant’s other certifying officer(s) 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. 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; b. 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; c. 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 d. 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(s) 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 directors (or persons performing the equivalent functions): a. 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 b. 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: February 26, 2016 By: /s/ Daniel R. Sink Daniel R. Sink Chief Financial Officer KITE REALTY GROUP, L.P. CERTIFICATION EXHIBIT 31.3 I, John A. Kite, certify that: 1. I have reviewed this annual report on Form 10-K of Kite Realty Group, L.P.; 2. 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; 3. 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; 4. The registrant’s other certifying officer(s) 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. 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; b. 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; c. 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 d. 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(s) 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 directors (or persons performing the equivalent functions): a. 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 b. 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: February 26, 2016 By: /s/ John A. Kite John A. Kite Chief Executive Officer KITE REALTY GROUP, L.P. CERTIFICATION EXHIBIT 31.4 I, Daniel R. Sink, certify that: 1. I have reviewed this annual report on Form 10-K of Kite Realty Group, L.P.; 2. 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; 3. 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; 4. The registrant’s other certifying officer(s) 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. 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; b. 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; c. 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 d. 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(s) 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 directors (or persons performing the equivalent functions): a. 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 b. 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: February 26, 2016 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 “Parent Company”), and Daniel R. Sink, Chief Financial Officer of the Parent Company, each hereby certifies based on his knowledge, 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 Parent Company for the year ended December 31, 2015 (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 Parent Company. Date: February 26, 2016 Date: February 26, 2016 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 Parent Company and will be retained by the Parent Company and furnished to the Securities and Exchange Commission or its staff upon request. EXHIBIT 32.2 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, Chief Executive Officer of Kite Realty Group, L.P. (the “Operating Partnership”), and Daniel R. Sink, Chief Financial Officer of the Operating Partnership, each hereby certifies based on his knowledge, 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 Operating Partnership for the year ended December 31, 2015 (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 Operating Partnership. Date: February 26, 2016 Date: February 26, 2016 By: By: /s/ John A. Kite John A. Kite 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 Operating Partnership and will be retained by the Operating Partnership and furnished to the Securities and Exchange Commission or its staff upon request. CORPORATE HEADQUARTERS Kite Realty Group Trust 30 South Meridian Street, Suite 1100 Indianapolis, Indiana 46204 Phone: (317) 577-5600 Fax: (317) 713-2764 WEBSITE www.kiterealty.com STOCK EXCHANGE LISTING New York Stock Exchange. NYSE: KRG INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP TRANSFER AGENT AND REGISTRAR Broadridge Financial Solutions Ms. Kristen Tartaglione 2 Journal Square, 7th Floor Jersey City, NJ 07306 (201) 714-8094 SHAREHOLDER INFORMATION Shareholders seeking ﬁnancial and operating information may contact Investor Relations, Kite Realty Group Trust, 30 South Meridian Street, Suite 1100, Indianapolis, Indiana 46204. Current investor information, including press releases and quarterly earning’s 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, 2015 are available to shareholders without charge upon written request to Investor Rela- tions, 30 South Meridian Street, Suite 1100, Indianapolis, Indiana 46204. ANNUAL MEETING The Annual Meeting of Shareholders will be held at 9:00 a.m. EDT on May 11, 2016, at 30 South Meridian Street, Eighth Floor Confer- ence Center, Indianapolis, Indiana 46204. BOARD OF TRUSTEES John A. Kite Chairman and Chief Executive Ofﬁcer Kite Realty Group Trust William E. Bindley Chairman Bindley Capital Partners, LLC Victor J. Coleman Chairman and Chief Executive Ofﬁcer Hudson Paciﬁc Properties, Inc. Lee A. Daniels Founder Lee Daniels & Associates 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 Scott E. Murray Executive Vice President, General Counsel and Corporate Secretary Gerald W. Grupe Retired President and Chief Executive Ofﬁcer Ideal Insurance Agency, Inc. Christie B. Kelly Chief Financial Ofﬁcer Jones Lang LaSalle, Inc. David R. O’Reilly Executive Vice President and Chief Financial Ofﬁcer Parkway Properties, Inc. Barton R. Peterson Senior Vice President, Corporate Affairs and Communications Eli Lilly and Company Charles H. Wurtzebach Chairman, Department of Real Estate and Douglas and Cynthia Crocker Endowed Director, The Real Estate Center at DePaul University in Chicago, IL CHAIRMAN EMERITUS Alvin E. Kite Kite Realty Group Trust 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, 2015. The Company has submitted 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 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, transac- tions or achievements, ﬁnancial or otherwise, may differ materially from the results, performance, transactions or achievements, ﬁnancial or otherwise, expressed or implied by the forward-looking statements. Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not limited to: national and local economic, business, real estate and other market conditions, particularly in light of low growth in the U.S. economy, 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 venture, property ownership and management risks, the Company’s ability to maintain its status as a real estate investment trust 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, the dilutive effects of future offerings of issuing additional securities, 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 “Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, 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, whether as a result of new information, future events or otherwise. NON-GAAP FINANCIAL MEASURES Given the nature of the Company’s business as a real estate owner and operator, the Company believes that FFO and FFO, as adjusted are helpful to investors when measuring operating performance because they exclude various items included in net income or loss that do not relate to or are not indicative of operating performance, such as gains or losses from sales and impairments of operating properties and depreciation and amortization, which can make periodic and peer analyses of operating performance more difﬁcult. The Company believes that NOI is helpful to investors as a measure of its operating performance because it excludes various items included in net income that do not relate to or are not indicative of its operating performance, such as depreciation and amortization, interest expense, and impairment, if any. The Company believes that same-property NOI is helpful to investors as a measure of its operating performance because it includes only the NOI of properties that have been owned for the full period presented, which eliminates disparities in net income due to the redevelopment, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent metric for the comparison of the Company’s properties. We believe this supplemental information pro- vides a more meaningful measure of our operating performance. The Company believes presenting FFO, FFO, as adjusted, NOI and same-property NOI in this manner allows investors and other interested parties to form a more meaningful assessment of the Company’s operating results. Reconciliations of net income to FFO and FFO, as adjusted, NOI and same-property NOI appear beginning on page 59 of our Annual Report on Form 10-K for the year ended December 31, 2015.

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