Kite Realty Trust(KRG) - 2025 Q2 - Quarterly Report

FORM 10-Q EXPLANATORY NOTE This report combines the quarterly reports on Form 10-Q for Kite Realty Group Trust and Kite Realty Group, L.P. due to their interrelated operations - The report combines 10-Q filings for Kite Realty Group Trust (Parent Company) and Kite Realty Group, L.P. (Operating Partnership)[7] - The Parent Company is the sole general partner of the Operating Partnership, owning approximately 97.8% of common partnership interests as of June 30, 2025[8][36] - The Operating Partnership focuses on ownership, operation, acquisition, development, and redevelopment of high-quality, open-air, grocery-anchored shopping centers and mixed-use assets in high-growth Sun Belt and strategic gateway markets[8][34] - The Parent Company has no material assets or liabilities other than its investment in the Operating Partnership; all debt is incurred by the Operating Partnership[9] PART I — FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS (Unaudited) This section presents the unaudited consolidated financial statements for Kite Realty Group Trust and Kite Realty Group, L.P. and their subsidiaries for the periods ended June 30, 2025, and December 31, 2024 KITE REALTY GROUP TRUST The financial statements for Kite Realty Group Trust show a slight increase in total shareholders' equity and a significant turnaround from a net loss in the prior year to substantial net income for the three and six months ended June 30, 2025 Consolidated Balance Sheets The consolidated balance sheets for Kite Realty Group Trust show a decrease in total assets from $7,091,767 thousand at December 31, 2024, to $6,858,340 thousand at June 30, 2025, primarily due to a reduction in net investment properties and short-term deposits - Total Assets: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $6,858,340 | | December 31, 2024 | $7,091,767 | - Net Investment Properties: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $5,761,745 | | December 31, 2024 | $6,046,530 | - Mortgage and Other Indebtedness, net: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $3,022,496 | | December 31, 2024 | $3,226,930 | - Total Shareholders' Equity: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $3,317,716 | | December 31, 2024 | $3,312,110 | Consolidated Statements of Operations and Comprehensive Income (Loss) For the three and six months ended June 30, 2025, Kite Realty Group Trust reported a significant turnaround from a net loss in the prior year to substantial net income - Net Income (Loss) Attributable to Common Shareholders: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $110,318 | $(48,638) | +$158,956 | | Six Months Ended June 30 | $134,048 | $(34,482) | +$168,530 | - Net Income (Loss) Per Common Share – Basic and Diluted: | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0.50 | $(0.22) | +$0.72 | | Six Months Ended June 30 | $0.61 | $(0.16) | +$0.77 | - Gain (Loss) on Sales of Operating Properties, net: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $103,022 | $(1,230) | +$104,252 | | Six Months Ended June 30 | $103,113 | $(1,466) | +$104,579 | - Impairment Charges: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0 | $66,201 | $(66,201) | | Six Months Ended June 30 | $0 | $66,201 | $(66,201) | - Interest Expense: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(34,052) | $(30,981) | $(3,071) | | Six Months Ended June 30 | $(67,006) | $(61,345) | $(5,661) | Consolidated Statements of Shareholders' Equity The consolidated statements of shareholders' equity show a slight increase in total shareholders' equity from $3,312,110 thousand at December 31, 2024, to $3,317,716 thousand at June 30, 2025 - Total Shareholders' Equity: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $3,317,716 | | December 31, 2024 | $3,312,110 | | June 30, 2024 | $3,421,601 | | December 31, 2023 | $3,568,138 | - Net Income (Loss) Attributable to Common Shareholders (Six Months): | Period | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $134,048 | | June 30, 2024 | $(34,482) | - Distributions to Common Shareholders (Six Months): | Period | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $(118,710) | | June 30, 2024 | $(109,818) | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased, while investing activities shifted from a net use to a net provision of cash, largely due to proceeds from short-term deposits and sales of operating properties - Net Cash Provided by Operating Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $206,894 | $195,686 | +$11,208 | - Net Cash Provided by (Used in) Investing Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $178,030 | $(154,601) | +$332,631 | - Net Cash (Used in) Provided by Financing Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $(330,641) | $76,480 | $(407,121) | - Cash, Cash Equivalents and Restricted Cash, End of Period: | Period | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $187,835 | | June 30, 2024 | $158,995 | KITE REALTY GROUP, L.P. AND SUBSIDIARIES The financial statements for Kite Realty Group, L.P. and subsidiaries largely mirror those of the Parent Company, reflecting its role as the primary operating entity Consolidated Balance Sheets The Operating Partnership's consolidated balance sheets show a decrease in total assets from $7,091,767 thousand at December 31, 2024, to $6,858,340 thousand at June 30, 2025, mainly due to a reduction in net investment properties and short-term deposits - Total Assets: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $6,858,340 | | December 31, 2024 | $7,091,767 | - Net Investment Properties: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $5,761,745 | | December 31, 2024 | $6,046,530 | - Mortgage and Other Indebtedness, net: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $3,022,496 | | December 31, 2024 | $3,226,930 | - Total Partners' Equity: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $3,317,716 | | December 31, 2024 | $3,312,110 | Consolidated Statements of Operations and Comprehensive Income (Loss) For the three and six months ended June 30, 2025, the Operating Partnership reported a significant shift from a net loss in the prior year to net income, mirroring the Parent Company's performance - Net Income (Loss) Attributable to Common Unitholders: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $112,518 | $(49,377) | +$161,895 | | Six Months Ended June 30 | $136,712 | $(35,008) | +$171,720 | - Net Income (Loss) Per Common Unit – Basic and Diluted: | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0.50 | $(0.22) | +$0.72 | | Six Months Ended June 30 | $0.61 | $(0.16) | +$0.77 | - Gain (Loss) on Sales of Operating Properties, net: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $103,022 | $(1,230) | +$104,252 | | Six Months Ended June 30 | $103,113 | $(1,466) | +$104,579 | - Impairment Charges: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0 | $66,201 | $(66,201) | | Six Months Ended June 30 | $0 | $66,201 | $(66,201) | - Interest Expense: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(34,052) | $(30,981) | $(3,071) | | Six Months Ended June 30 | $(67,006) | $(61,345) | $(5,661) | Consolidated Statements of Partners' Equity The consolidated statements of partners' equity for Kite Realty Group, L.P. and subsidiaries show a slight increase in total partners' equity from $3,312,110 thousand at December 31, 2024, to $3,317,716 thousand at June 30, 2025 - Total Partners' Equity: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $3,317,716 | | December 31, 2024 | $3,312,110 | | June 30, 2024 | $3,421,601 | | December 31, 2023 | $3,568,138 | - Net Income (Loss) Attributable to Parent Company (Six Months): | Period | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $134,048 | | June 30, 2024 | $(34,482) | - Distributions to Parent Company (Six Months): | Period | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $(118,710) | | June 30, 2024 | $(109,818) | Consolidated Statements of Cash Flows For the six months ended June 30, 2025, the Operating Partnership's cash flows from operating activities increased, and investing activities shifted from a net use to a net provision of cash, largely due to proceeds from short-term deposits and sales of operating properties - Net Cash Provided by Operating Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $206,894 | $195,686 | +$11,208 | - Net Cash Provided by (Used in) Investing Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $178,030 | $(154,601) | +$332,631 | - Net Cash (Used in) Provided by Financing Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $(330,641) | $76,480 | $(407,121) | - Cash, Cash Equivalents and Restricted Cash, End of Period: | Period | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $187,835 | | June 30, 2024 | $158,995 | KITE REALTY GROUP TRUST AND KITE REALTY GROUP, L.P. AND SUBSIDIARIES This section provides essential context and detail for the unaudited consolidated financial statements, covering the company's organization, significant accounting policies, and specific financial activities NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION Kite Realty Group Trust operates as a REIT through its majority-owned Operating Partnership, focusing on high-quality, open-air, grocery-anchored shopping centers and mixed-use assets in high-growth Sun Belt and strategic gateway markets - The Company's business focuses on ownership, operation, acquisition, development, and redevelopment of high-quality, open-air, grocery-anchored shopping centers and mixed-use assets in high-growth Sun Belt and strategic gateway markets[34] - The Parent Company is the sole general partner of the Operating Partnership, owning approximately 97.8% of common partnership interests as of June 30, 2025[36] - The Company intends to maintain its qualification as a real estate investment trust ("REIT") for U.S. federal income tax purposes[35] NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This note outlines the Company's significant accounting policies, including the composition of investment properties, recognition of rental income, and the treatment of short-term deposits - Portfolio Composition (as of June 30, 2025): | Property Type | Count | Square Footage | | :--- | :--- | :--- | | Operating retail/mixed-use properties | 171 | 27,256,979 | | Operating retail/mixed-use properties – unconsolidated joint ventures | 8 | 2,146,707 | | Total operating retail/mixed-use properties | 179 | 29,403,686 | | Standalone office properties | 2 | 412,812 | - Investment Properties, at cost: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $7,423,024 | | December 31, 2024 | $7,634,191 | - Rental Income Components (Six Months Ended June 30): | Component | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Fixed contractual lease payments | $336,408 | $322,213 | +$14,195 | | Variable lease payments | $87,466 | $80,133 | +$7,333 | | Bad debt reserve | $(3,701) | $(2,133) | $(1,568) | | Straight-line rent adjustments | $5,496 | $6,192 | $(696) | | Amortization of in-place lease liabilities, net | $5,107 | $4,656 | +$451 | | Total Rental Income | $430,354 | $411,649 | +$18,705 | - The Company earned $2.5 million of interest income on $350.0 million in short-term deposits at a weighted average interest rate of 5.05% during the six months ended June 30, 2025[42] NOTE 3. ACQUISITIONS During the six months ended June 30, 2025, the Company acquired two properties: Village Commons (100% interest) and a 52% interest in Legacy West through a joint venture with GIC - Acquisitions (Six Months Ended June 30, 2025): | Property Name | Ownership Interest | MSA | Property Type | Retail Square Footage | Acquisition Price (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Village Commons | 100% | Miami | Multi-tenant retail | 170,976 | $68,400 | | Legacy West | 52% | Dallas/Ft. Worth | Multi-tenant retail, office & multifamily | 342,011 | $408,200 (Company's share) | - The Legacy West Joint Venture acquired Legacy West for a gross purchase price of $785.0 million, including the assumption of $304.0 million of debt with an interest rate of 3.80%[62] - Acquisitions were funded using a combination of available cash on hand, proceeds from dispositions, and borrowings on the Company's unsecured revolving line of credit[61] - The Company did not acquire any properties during the six months ended June 30, 2024[63] NOTE 4. DISPOSITIONS AND IMPAIRMENT CHARGES The Company completed several dispositions during the six months ended June 30, 2025, resulting in a net gain on sales of operating properties of $102.6 million - Dispositions (Six Months Ended June 30, 2025): | Property Name | MSA | Property Type | Square Footage | Sales Price (in thousands) | Gain (Loss) (in thousands) | | :--- | :--- | :--- | :--- | :--- | :--- | | Stoney Creek Commons | Indianapolis | Multi-tenant retail | 84,094 | $9,500 | $4,802 | | Fullerton Metrocenter | Los Angeles | Multi-tenant retail | 241,027 | $118,500 | $20,295 | | Denton Crossing (1) | Dallas/Ft. Worth | Multi-tenant retail | 343,345 | $81,593 | $35,636 | | Parkway Towne Crossing (1) | Dallas/Ft. Worth | Multi-tenant retail | 180,736 | $57,653 | $18,133 | | The Landing at Tradition (1) | Port St. Lucie, FL | Multi-tenant retail | 397,199 | $93,754 | $23,710 | | Total | | | 1,246,401 | $361,000 | $102,576 | (1) Company retained a 52% noncontrolling interest in this property. - The Company contributed three previously wholly owned properties, valued at $233.0 million, to a newly formed joint venture with GIC, receiving $112.1 million in gross proceeds for the 48% interest acquired by GIC[65] - Impairment Charges: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0 | $66,201 | $(66,201) | | Six Months Ended June 30 | $0 | $66,201 | $(66,201) | - Humblewood Shopping Center and City Center were classified as held for sale as of June 30, 2025. Humblewood was sold on July 21, 2025, for $18.3 million[68][69] NOTE 5. INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES The Company's investments in unconsolidated joint ventures significantly increased from $19,511 thousand at December 31, 2024, to $390,827 thousand at June 30, 2025, primarily due to the formation of two new joint ventures with GIC - Investments in Unconsolidated Joint Ventures: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $390,827 | | December 31, 2024 | $19,511 | - Formed Legacy West Joint Venture with GIC in March 2025 (52% ownership) to acquire Legacy West in the Dallas/Fort Worth MSA[74] - Formed GIC Portfolio Joint Venture in June 2025 (52% ownership) by contributing three previously wholly owned properties[75] - The Company acts as the operating member for the Legacy West and GIC Portfolio joint ventures, providing leasing, construction, and property management services for fees[74][75] NOTE 6. DEFERRED COSTS AND INTANGIBLES, NET Deferred costs, primarily acquired lease intangible assets and deferred leasing costs, decreased from $238,213 thousand at December 31, 2024, to $208,683 thousand at June 30, 2025 - Deferred Costs, Net: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $208,683 | | December 31, 2024 | $238,213 | - Amortization of Deferred Leasing Costs, Lease Intangibles and Other (Six Months Ended June 30): | Period | Amount (in thousands) | | :--- | :--- | | 2025 | $35,742 | | 2024 | $40,850 | - Amortization of Above-Market Lease Intangibles (Six Months Ended June 30): | Period | Amount (in thousands) | | :--- | :--- | | 2025 | $4,221 | | 2024 | $5,177 | NOTE 7. DEFERRED REVENUE, INTANGIBLES, NET AND OTHER LIABILITIES Deferred revenue and other liabilities decreased from $246,100 thousand at December 31, 2024, to $227,807 thousand at June 30, 2025, with amortization of below-market lease intangibles increasing year-over-year - Deferred Revenue and Other Liabilities: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $227,807 | | December 31, 2024 | $246,100 | - Amortization of Below-Market Lease Intangibles (Six Months Ended June 30): | Period | Amount (in thousands) | | :--- | :--- | | 2025 | $12,900 | | 2024 | $9,800 | NOTE 8. MORTGAGE AND OTHER INDEBTEDNESS The Company's total mortgage and other indebtedness, net, decreased from $3,226,930 thousand at December 31, 2024, to $3,022,496 thousand at June 30, 2025, driven by debt repayments and new issuances - Total Mortgage and Other Indebtedness, Net: | Date | Amount (in thousands) | | :--- | :--- | | June 30, 2025 | $3,022,496 | | December 31, 2024 | $3,226,930 | - Debt Composition (as of June 30, 2025): | Type | Amount Outstanding (in thousands) | Ratio | Weighted Average Interest Rate | Weighted Average Years to Maturity | | :--- | :--- | :--- | :--- | :--- | | Fixed rate debt | $2,857,178 | 94% | 4.28% | 4.8 | | Variable rate debt | $168,400 | 6% | 7.63% | 1.2 | | Total (net) | $3,022,496 | 100% | 4.46% | 4.6 | - Repaid $350.0 million principal balance of 4.00% senior unsecured notes due March 2025 and issued $300.0 million of 5.20% senior unsecured notes due 2032, using proceeds to repay a $150.0 million unsecured term loan and revolving line of credit borrowings[88][89] - Debt Maturities (as of June 30, 2025): | Year | Total (in thousands) | | :--- | :--- | | 2025 | $82,641 | | 2026 | $415,181 | | 2027 | $503,120 | | 2028 | $103,757 | | 2029 | $404,324 | | Thereafter | $1,516,555 | NOTE 9. DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOME The Company uses interest rate derivative agreements, primarily cash flow hedges, to manage variable interest rate risk, not for speculative purposes - The Company uses interest rate derivative agreements to manage potential future variable interest rate risk, not for trading or speculative purposes[105] - Hedging Relationships (as of June 30, 2025): | Type of Hedge | Aggregate Notional (in thousands) | Fair Value Assets (Liabilities) (in thousands) | | :--- | :--- | :--- | | Cash Flow Hedges (variable to fixed) | $700,000 | $4,719 | | Fair Value Hedges (fixed to floating) | $155,000 | $(1,191) | - The fair value of derivatives is classified within Level 2 of the fair value hierarchy[110] - Approximately $5.2 million was reclassified as a reduction to interest expense for the six months ended June 30, 2025, with an estimated $8.7 million decrease to interest expense expected over the next 12 months[111] NOTE 10. SEGMENT REPORTING The Company operates as a single reportable segment, focusing on the ownership and operation of high-quality, open-air shopping centers and mixed-use assets - The Company's primary business is the ownership and operation of high-quality, open-air shopping centers and mixed-use assets, aggregated into one reportable segment due to economic similarity[114] - The Chief Executive Officer (CODM) evaluates financial performance and allocates resources based on net operating income (NOI) for each property[115] - Net Operating Income (Six Months Ended June 30): | Metric | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Total Revenue | $432,864 | $415,191 | +$17,673 | | Total Expenses | $112,104 | $108,757 | +$3,347 | | Net Operating Income | $320,760 | $306,434 | +$14,326 | NOTE 11. SHAREHOLDERS' EQUITY The Board of Trustees declared a cash distribution of $0.27 per common share and Common Unit for Q2 2025, totaling $0.54 per share/unit for the six months ended June 30, 2025 - Cash Distributions per Common Share/Unit: | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Q2 | $0.27 | $0.25 | +$0.02 | | Six Months Ended June 30 | $0.54 | $0.50 | +$0.04 | - The Company has an existing share repurchase program for up to $300.0 million of common shares, extended to February 28, 2026. No shares were repurchased during the six months ended June 30, 2025[119][120] NOTE 12. EARNINGS PER SHARE OR UNIT Basic and diluted earnings per share/unit are calculated based on weighted average common shares/units outstanding, considering potentially dilutive securities like Limited Partner Units and exchangeable notes - Net Income (Loss) Per Common Share – Basic and Diluted: | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0.50 | $(0.22) | +$0.72 | | Six Months Ended June 30 | $0.61 | $(0.16) | +$0.77 | - Potentially dilutive securities include outstanding options, Limited Partner Units, Appreciation Only Long-Term Incentive Plan Units, deferred common share units, and common shares issuable upon the exchange of Exchangeable Notes[122] - No securities had a dilutive impact for the three and six months ended June 30, 2024, due to the net loss allocable to common shareholders and common unitholders[123] NOTE 13. COMMITMENTS AND CONTINGENCIES The Company has various commitments, including completion guarantees for development projects and tenant-specific spaces, and outstanding letters of credit totaling $4.5 million - The Company is obligated under various completion guarantees for development projects and tenant-specific space, with sufficient financing expected from free cash flow or revolving facility borrowings[124] - Outstanding letters of credit totaled $4.5 million as of June 30, 2025, with no amounts advanced[125] - No material litigation is currently threatened or ongoing against the Company; routine litigation is not expected to have a material adverse impact[126] NOTE 14. SUBSEQUENT EVENTS Subsequent to June 30, 2025, the Company experienced severe flooding at one property, completed the disposition of Humblewood Shopping Center for $18.3 million, and amended pricing terms of its Revolving Facility and term loans - One property experienced severe flooding; adequate third-party insurance (subject to a $0.3 million deductible) is in place, and no significant adverse impact is expected[127] - Humblewood Shopping Center was sold on July 21, 2025, for $18.3 million, with an anticipated gain on sale. Proceeds are restricted for 180 days for a potential 1031 Exchange[129] - The Operating Partnership amended the pricing terms of the Revolving Facility, $300M Term Loan, and $250M Term Loan to remove the 0.10% SOFR spread adjustment and decreased credit ratings-based pricing credit spread on the $300M Term Loan[129] ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This section provides management's perspective on the Company's financial condition, results of operations, and liquidity, offering a detailed analysis of revenue, expenses, and key financial metrics Overview Kite Realty Group Trust, a REIT, operates through its Operating Partnership, focusing on grocery-anchored shopping centers and mixed-use assets in high-growth Sun Belt and strategic gateway markets - Kite Realty Group Trust is a publicly held REIT focused on high-quality, open-air, grocery-anchored shopping centers and mixed-use assets in high-growth Sun Belt and strategic gateway markets[135] - As of June 30, 2025, the Company owns interests in 179 operating retail/mixed-use properties (29.4 million square feet) and two standalone office properties (0.4 million square feet)[136] - The Company monitors inflation and tariffs, which may lead to higher prices for tenants, potentially reducing consumer demand and impacting rent pricing, although many leases contain mitigating provisions[137] Operating Activity During Q2 2025, the Company executed 170 new and renewal leases totaling 1,214,631 square feet, achieving a 17.0% cash leasing spread on comparable leases - Leasing Activity (Q2 2025): | Metric | Value | | :--- | :--- | | Total leases executed | 170 spaces, 1,214,631 sq ft | | Cash leasing spread (133 comparable leases) | 17.0% | | New leases cash leasing spread (38 comparable leases) | 31.3% | | Non-option renewal leases cash leasing spread (52 comparable leases) | 19.7% | | Blended cash spread (comparable new and non-option renewal) | 25.5% | - New tax legislation, effective July 4, 2025, permanently extends the 20% deduction for 'qualified REIT dividends' and increases the REIT asset test limit for taxable REIT subsidiaries from 20% to 25% for taxable years beginning after December 31, 2025[141] Results of Operations The Company's results of operations for the three and six months ended June 30, 2025, showed a significant improvement in net income compared to the prior year, primarily driven by substantial gains on property sales and the absence of impairment charges - Net Income (Loss) Attributable to Common Shareholders: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $110,318 | $(48,638) | +$158,956 | | Six Months Ended June 30 | $134,048 | $(34,482) | +$168,530 | - Total Revenue: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $213,395 | $212,434 | +$961 | | Six Months Ended June 30 | $435,157 | $419,873 | +$15,284 | - Gain (Loss) on Sales of Operating Properties, net: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $103,022 | $(1,230) | +$104,252 | | Six Months Ended June 30 | $103,113 | $(1,466) | +$104,579 | - Impairment Charges: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0 | $66,201 | $(66,201) | | Six Months Ended June 30 | $0 | $66,201 | $(66,201) | - Interest Expense: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $(34,052) | $(30,981) | $(3,071) | | Six Months Ended June 30 | $(67,006) | $(61,345) | $(5,661) | Net Operating Income and Same Property Net Operating Income Net Operating Income (NOI) and Same Property NOI are non-GAAP measures used to evaluate property performance, showing increases for the three and six months ended June 30, 2025 - NOI is defined as income from real estate (including lease termination fees) less property operating expenses, excluding depreciation, interest, and impairment[175] - Same Property NOI includes NOI of properties owned for the full periods presented, excluding certain non-recurring items and properties acquired, sold, or under development[176][180] - Total Property NOI: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $157,010 | $153,925 | +2.0% | | Six Months Ended June 30 | $320,760 | $306,434 | +4.7% | - Same Property NOI: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $144,104 | $139,512 | +3.3% | | Six Months Ended June 30 | $287,903 | $279,038 | +3.2% | NAREIT Funds From Operations NAREIT FFO for the Operating Partnership showed a slight decrease for Q2 2025 but an increase for the six-month period compared to 2024, with Core FFO indicating healthy core cash flow generation - NAREIT FFO of the Operating Partnership: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $113,965 | $117,487 | (3.00%) | | Six Months Ended June 30 | $236,745 | $230,327 | +2.79% | - Core FFO of the Operating Partnership: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $113,160 | $111,605 | +1.40% | | Six Months Ended June 30 | $231,224 | $218,948 | +5.61% | - Core FFO per share of the Operating Partnership – diluted: | Period | 2025 | 2024 | Change (YoY) | | :--- | :--- | :--- | :--- | | Three Months Ended June 30 | $0.50 | $0.50 | 0.00% | | Six Months Ended June 30 | $1.03 | $0.98 | +5.10% | Earnings before Interest, Taxes, Depreciation and Amortization ("EBITDA") EBITDA for the three months ended June 30, 2025, was $244,737 thousand, with Adjusted EBITDA at $149,952 thousand, reflecting the Company's operational earnings and leverage - EBITDA (Three Months Ended June 30, 2025): | Metric | Amount (in thousands) | | :--- | :--- | | Net income | $112,599 | | Depreciation and amortization | $97,887 | | Interest expense | $34,052 | | Income tax expense of taxable REIT subsidiaries | $199 | | EBITDA | $244,737 | - Adjusted EBITDA (Three Months Ended June 30, 2025): | Metric | Amount (in thousands) | | :--- | :--- | | Adjusted EBITDA | $149,952 | | Annualized Adjusted EBITDA | $590,690 | - Net Debt to Adjusted EBITDA (as of June 30, 2025): | Metric | Value | | :--- | :--- | | Company share of Net Debt | $3,004,846 thousand | | Net Debt to Adjusted EBITDA | 5.1x | Liquidity and Capital Resources The Company maintains a strong balance sheet with $182.0 million in cash and equivalents and $1.1 billion available under its Revolving Facility, providing ample liquidity for operations and investments - As of June 30, 2025, the Company had $182.0 million in cash and cash equivalents, $5.6 million in restricted cash, and $1.1 billion of remaining availability under its unsecured revolving credit facility[194][199] - The Company repaid $350.0 million of 4.00% senior unsecured notes due March 2025 and a $150.0 million unsecured term loan due July 2026, and issued $300.0 million of 5.20% senior unsecured notes due 2032[194][196] - Short-term liquidity needs include operating expenses, scheduled interest ($70.0 million) and principal payments ($2.6 million) for the remainder of 2025, expected dividend payments, and recurring capital expenditures[203] - Long-term liquidity needs include funding new development projects (e.g., One Loudoun Expansion, $65.0-$75.0 million expected funding), redevelopment, acquisitions, and payment of indebtedness at maturity[206][208] - Debt Maturities (as of June 30, 2025): | Year | Total (in thousands) | | :--- | :--- | | 2025 | $82,641 | | 2026 | $415,181 | | 2027 | $503,120 | | 2028 | $103,757 | | 2029 | $404,324 | | Thereafter | $1,516,555 | Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities increased by $11.2 million to $206.9 million, while investing activities shifted to a net provision of cash, and financing activities resulted in a net cash outflow - Net Cash Provided by Operating Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $206,894 | $195,686 | +$11,208 | - Net Cash Provided by (Used in) Investing Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $178,030 | $(154,601) | +$332,631 | - Net Cash (Used in) Provided by Financing Activities: | Period | 2025 (in thousands) | 2024 (in thousands) | Change (YoY) | | :--- | :--- | :--- | :--- | | Six Months Ended June 30 | $(330,641) | $76,480 | $(407,121) | - Key investing activities in H1 2025 included receiving $350.0 million from short-term deposit maturity, investing $253.9 million in the Legacy West unconsolidated joint venture, and receiving $232.5 million net proceeds from property sales and joint venture contribution[219] - Key financing activities in H1 2025 included borrowing $398.0 million on the Revolving Facility and $298.5 million from Notes Due 2032, repaying $398.0 million on the Revolving Facility, $350.0 million senior unsecured notes, and a $150.0 million unsecured term loan, and paying $122.4 million in distributions[224] ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK As of June 30, 2025, the Company had $3.0 billion in outstanding consolidated indebtedness, with 94% fixed-rate and 6% variable-rate debt (after hedging) - As of June 30, 2025, the Company had $3.0 billion of outstanding consolidated indebtedness, with 94% fixed-rate and 6% variable-rate debt (reflecting hedge agreements)[221] - A 100-basis point change in interest rates on $400.0 million of fixed-rate debt maturing within the next 18 months would change annual cash flow by $4.0 million[222] - A 100-basis point change in interest rates on unhedged variable-rate debt would change annual cash flow by $1.7 million[222] - The Company is most vulnerable to a change in short-term Secured Overnight Financing Rate ("SOFR") interest rates[222] ITEM 4. CONTROLS AND PROCEDURES The Chief Executive Officer and Chief Financial Officer of both Kite Realty Group Trust and Kite Realty Group, L.P. concluded that their disclosure controls and procedures were effective as of June 30, 2025 - The Chief Executive Officer and Chief Financial Officer of both Kite Realty Group Trust and Kite Realty Group, L.P. concluded that their disclosure controls and procedures were effective as of June 30, 2025[223][226] - There has been no change in the Parent Company's or Operating Partnership's internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting[225][227] PART II — OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not currently subject to any material litigation, nor is any material litigation threatened - The Company is not subject to any material litigation, nor is any material litigation currently threatened against it[230] - Routine litigation, claims, and administrative proceedings are not expected to have a material adverse impact on the consolidated financial condition, results of operations, or cash flows[230] ITEM 1A. RISK FACTORS There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K for the year ended December 31, 2024 - There have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2024[231] ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS No shares of common stock were surrendered or repurchased by the Company during the three months ended June 30, 2025, to satisfy tax obligations related to restricted share vesting - No shares of common stock were surrendered or repurchased by the Company during the three months ended June 30, 2025[232] - As of June 30, 2025, $300.0 million remained available for repurchases under the Company's Share Repurchase Program, which was extended to February 28, 2026[233] ITEM 3. DEFAULTS UPON SENIOR SECURITIES Not applicable - Not applicable[234] ITEM 4. MINE SAFETY DISCLOSURES Not applicable - Not applicable[235] ITEM 5. OTHER INFORMATION No officers or trustees adopted or terminated any Rule 10b5-1(c) trading arrangements or "non-Rule 10b5-1 trading arrangements" during the three months ended June 30, 2025 - None of the Company's officers or trustees adopted or terminated any Rule 10b5-1(c) trading arrangements or "non-Rule 10b5-1 trading arrangement" during the three months ended June 30, 2025[236] ITEM 6. EXHIBITS This section lists all exhibits filed with the Form 10-Q, including organizational documents, indentures, credit agreements, certifications, and Inline XBRL documents - The exhibits include Articles of Amendment, Bylaws, Supplemental Indentures, Credit Agreements, various certifications (e.g., 31.1, 31.2, 32.1, 32.2), and Inline XBRL documents[237] SIGNATURES The report is duly signed on behalf of Kite Realty Group Trust and Kite Realty Group, L.P. by John A. Kite and Heath R. Fear as of July 31, 2025 - The report was signed by John A. Kite (Chairman and Chief Executive Officer) and Heath R. Fear (Executive Vice President and Chief Financial Officer) for both Kite Realty Group Trust and Kite Realty Group, L.P[240] - The signing date for the report was July 31, 2025[240]