UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q




x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2015~~2016

OR

o	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)		11-3715772
Delaware (Kite Realty Group, L.P.)		20-1453863
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

30 S. Meridian Street, Suite 1100 Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip code)

Telephone: (317) 577-5600
(Registrant’s telephone number, including area code)

Not Applicable
(Former name, former address and former fiscal year, if changed since last report)

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 x	No o	Kite Realty Group, L.P.	Yes x	No o

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 x	No o	Kite Realty Group, L.P.	Yes x	No o

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:



x	Large accelerated filer	o	Accelerated filer	o	Non-accelerated filer	o	Smaller reporting company

Kite Realty Group, L.P.:



o	Large accelerated filer	o	Accelerated filer	x	Non-accelerated filer	o	Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).



Kite Realty Group Trust	Yes o	No x	Kite Realty Group, L.P.	Yes o	No x

The number of Common Shares of Kite Realty Group Trust outstanding as of October ~~30, 2015~~31, 2016 was ~~83,323,574~~83,545,986 ($.01 par value).

EXPLANATORY NOTE

This report combines the quarterly reports on Form 10-Q for the period ended September 30, ~~2015~~2016 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 September 30, ~~2015~~2016 owned approximately ~~97.8%~~97.7% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining ~~2.2%~~2.3% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) ~~are~~were owned by the limited partners.

We believe combining the quarterly reports on Form 10-Q 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~~placement 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

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, ~~2015~~2016

TABLE OF CONTENTS



		Page
Part I.	FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (Unaudited)

Kite Realty Group Trust:

	Consolidated Balance Sheets as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015	4

	Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	5

	Consolidated Statement of Shareholders' Equity for the Nine Months Ended September 30, ~~2015~~2016	6

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	7

Kite Realty Group, L.P. and subsidiaries:

	Consolidated Balance Sheets as of September 30, ~~2015~~2016 and December 31, ~~2014~~2015	8

	Consolidated Statements of Operations and Comprehensive Income for the Three and Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	9

	Consolidated Statement of Partners' Equity for the Nine Months Ended September 30, ~~2015~~2016	10

	Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2015~~2016 and ~~2014~~2015	11

Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries:

	Notes to Consolidated Financial Statements	12

Item 2.	Cautionary Note About Forward-Looking Statements	28	27

	Management's Discussion and Analysis of Financial Condition and Results of Operations	28

Item 3.	Quantitative and Qualitative Disclosure about Market Risk	48	46

Item 4.	Controls and Procedures	48	46

Part II.	OTHER INFORMATION

Item 1.	Legal Proceedings	50	48

Item 1A.	Risk Factors	50	48

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50	48

Item 3.	Defaults upon Senior Securities	50	48

Item 4.	Mine Safety Disclosures	50	48

Item 5.	Other Information	50	49

Item 6.	Exhibits	50	49

SIGNATURES		53	52

Part I. FINANCIAL INFORMATION

Item 1.

Kite Realty Group Trust

Consolidated Balance Sheets

(Unaudited)

(in thousands, except share and per share data)


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
Assets:
Investment properties, at cost	$	3,980,886		$	3,732,748		$	3,990,208		$	3,933,140
Less: accumulated depreciation	(410,328		)	(315,093		)	(531,946		)	(432,295		)
	3,570,558			3,417,655			3,458,262			3,500,845

Cash and cash equivalents	42,951			43,826			28,793			33,880
Tenant and other receivables, including accrued straight-line rent of $23,312 and $18,630, respectively, net of allowance for uncollectible accounts	47,353			48,097
Tenant and other receivables, including accrued straight-line rent of $27,875 and $23,809, respectively, net of allowance for uncollectible accounts							50,350			51,101
Restricted cash and escrow deposits	15,713			16,171			9,585			13,476
Deferred costs, net	150,983			159,978
Deferred costs and intangibles, net							133,114			148,274
Prepaid and other assets	10,089			8,847			10,814			8,852
Assets held for sale (see Note 10)	—			179,642
Total Assets	$	3,837,647		$	3,874,216		$	3,690,918		$	3,756,428

Liabilities and Equity:
Mortgage and other indebtedness	$	1,679,843		$	1,554,263
Mortgage and other indebtedness, net							$	1,732,344		$	1,724,449
Accounts payable and accrued expenses	90,148			75,150			93,440			81,356
Deferred revenue and other liabilities	137,554			136,409
Liabilities held for sale (see Note 10)	—			81,164
Deferred revenue and intangibles, net and other liabilities							120,550			131,559
Total Liabilities	1,907,545			1,846,986			1,946,334			1,937,364
Commitments and contingencies	—			—			—			—
Limited partners' interests in Operating Partnership and other redeemable noncontrolling interests	86,957			125,082			99,478			92,315
Equity:
Kite Realty Group Trust Shareholders' Equity:
Preferred Shares, $.01 par value, 40,000,000 shares authorized, 4,100,000 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively, with a liquidation value of $102,500	102,500			102,500
Common Shares, $.01 par value, 225,000,000 shares authorized, 83,323,563 and 83,490,663 shares issued and outstanding at September 30, 2015 and December 31, 2014, respectively	833			835
Common Shares, $.01 par value, 225,000,000 shares authorized, 83,545,486 and 83,334,865 shares issued and outstanding at September 30, 2016 and December 31, 2015, respectively							835			833
Additional paid in capital and other	2,050,915			2,044,425			2,049,702			2,050,545
Accumulated other comprehensive loss	(6,209		)	(1,175		)	(8,738		)	(2,145		)
Accumulated deficit	(305,902		)	(247,801		)	(397,391		)	(323,257		)
Total Kite Realty Group Trust Shareholders' Equity	1,842,137			1,898,784			1,644,408			1,725,976
Noncontrolling Interests	1,008			3,364			698			773
Total Equity	1,843,145			1,902,148			1,645,106			1,726,749
Total Liabilities and Equity	$	3,837,647		$	3,874,216		$	3,690,918		$	3,756,428

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014			2016			2015			2016			2015

Revenue:
Minimum rent	$	66,279		$	69,033		$	196,656		$	131,515		$	69,518		$	66,279		$	205,436		$	196,656
Tenant reimbursements	16,787			17,605			51,891			35,083			17,531			16,787			52,691			51,891
Other property related revenue	4,081			1,938			9,163			5,481			2,073			4,081			7,120			9,163
Total revenue	87,147			88,576			257,710			172,079			89,122			87,147			265,247			257,710
Expenses:
Property operating	11,994			11,850			36,519			26,057			11,916			11,994			35,454			36,519
Real estate taxes	10,045			10,632			29,821			20,048			10,690			10,045			32,327			29,821
General, administrative, and other	4,559			3,939			14,131			9,358			5,081			4,559			15,228			14,131
Merger and acquisition costs	1,089			19,088			1,550			26,849
Transaction costs													—			1,089			2,771			1,550
Depreciation and amortization	42,549			44,383			124,196			81,559			45,543			42,549			131,625			124,196
Total expenses	70,236			89,892			206,217			163,871			73,230			70,236			217,405			206,217
Operating income	16,911			(1,316		)	51,493			8,208			15,892			16,911			47,842			51,493
Interest expense	(13,881		)	(15,386		)	(40,995		)	(30,291		)	(17,139		)	(13,881		)	(47,964		)	(40,995		)
Income tax expense of taxable REIT subsidiary	(9		)	(14		)	(134		)	(37		)	(15		)	(9		)	(763		)	(134		)
Gain on settlement	—			—			4,520			—			—			—			—			4,520
Other expense, net	(60		)	(13		)	(189		)	(119		)	—			(60		)	(94		)	(189		)
Income (loss) from continuing operations	2,961			(16,729		)	14,695			(22,239		)
Discontinued operations:
Gain on sale of operating property	—			—			—			3,199
Income from discontinued operations	—			—			—			3,199
Income (loss) before gain on sale of operating properties	2,961			(16,729		)	14,695			(19,040		)
(Loss) income before gain on sale of operating properties													(1,262		)	2,961			(979		)	14,695
Gain on sales of operating properties	—			2,749			3,363			6,336			—			—			194			3,363
Consolidated net income (loss)	2,961			(13,980		)	18,058			(12,704		)
Consolidated net (loss) income													(1,262		)	2,961			(785		)	18,058
Net income attributable to noncontrolling interests	(435		)	(304		)	(1,626		)	(224		)	(420		)	(435		)	(1,391		)	(1,626		)
Net income (loss) attributable to Kite Realty Group Trust	$	2,526		$	(14,284	)	$	16,432		$	(12,928	)
Net (loss) income attributable to Kite Realty Group Trust													$	(1,682	)	$	2,526		$	(2,176	)	$	16,432
Dividends on preferred shares	(2,114		)	(2,114		)	(6,342		)	(6,342		)	—			(2,114		)	—			(6,342		)
Net income (loss) attributable to common shareholders	$	412		$	(16,398	)	$	10,090		$	(19,270	)
Net (loss) income attributable to common shareholders													$	(1,682	)	$	412		$	(2,176	)	$	10,090

Net income (loss) per common share - basic & diluted:
Income (loss) from continuing operations attributable to Kite Realty Group Trust common shareholders	$	0.00		$	(0.20	)	$	0.12		$	(0.45	)
Income from discontinued operations attributable to Kite Realty Group Trust common shareholders	—			—			—			0.06
Net income (loss) attributable to Kite Realty Group Trust common shareholders	$	0.00		$	(0.20	)	$	0.12		$	(0.39	)

Net (loss) income per common share - basic & diluted													$	(0.02	)	$	0.00		$	(0.03	)	$	0.12

Weighted average common shares outstanding - basic	83,325,074			83,455,900			83,453,660			49,884,469			83,474,348			83,325,074			83,399,813			83,453,660
Weighted average common shares outstanding - diluted	83,433,379			83,718,735			83,566,554			50,145,571			83,474,348			83,433,379			83,399,813			83,566,554

Dividends declared per common share	$	0.2725		$	0.2600		$	0.8175		$	0.7600
Common dividends declared per common share													$	0.2875		$	0.2725		$	0.8625		$	0.8175

Net income attributable to Kite Realty Group Trust common shareholders:
Income (loss) from continuing operations	$	412		$	(16,398	)	$	10,090		$	(22,366	)
Income from discontinued operations	—			—			—			3,096
Net income (loss) attributable to Kite Realty Group Trust common shareholders	$	412		$	(16,398	)	$	10,090		$	(19,270	)

Consolidated net income (loss)	$	2,961		$	(13,980	)	$	18,058		$	(12,704	)
Consolidated net (loss) income													$	(1,262	)	$	2,961		$	(785	)	$	18,058
Change in fair value of derivatives	(3,436		)	2,671			(5,153		)	(249		)	3,185			(3,436		)	(6,747		)	(5,153		)
Total comprehensive (loss) income	(475		)	(11,309		)	12,905			(12,953		)
Total comprehensive income (loss)													1,923			(475		)	(7,532		)	12,905
Comprehensive income attributable to noncontrolling interests	(399		)	(400		)	(1,507		)	(177		)	(493		)	(399		)	(1,237		)	(1,507		)
Comprehensive (loss) income attributable to Kite Realty Group Trust	$	(874	)	$	(11,709	)	$	11,398		$	(13,130	)
Comprehensive income (loss) attributable to Kite Realty Group Trust													$	1,430		$	(874	)	$	(8,769	)	$	11,398

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust

Consolidated Statement of Shareholders’ Equity

(Unaudited)

(in thousands, except share data)

Preferred Shares Common Shares
Additional
Paid-in Capital

Accumulated
Other
Comprehensive
Loss

Accumulated
Deficit
Total
Shares Amount Shares Amount
Balances, December 31, 2014 4,100,000
$ 102,500
83,490,663
$ 835
$ 2,044,425
$ (1,175 ) $ (247,801 ) $ 1,898,784
Stock compensation activity —
—
(174,100 ) (2 ) 2,408
—
—
2,406
Other comprehensive loss
  attributable to Kite Realty Group Trust —
—
—
—
—
(5,034 ) —
(5,034 )
Distributions declared to common
  shareholders —
—
—
—
—
—
(68,191 ) (68,191 )
Distributions to preferred
  shareholders —
—
—
—
—
—
(6,342 ) (6,342 )
Net income attributable to Kite
  Realty Group Trust —
—
—
—
—
—
16,432
16,432
Acquisition of partners' interests
  in consolidated joint ventures —
—
—
—
1,445
—
—
1,445
Exchange of redeemable noncontrolling
  interests for common shares —
—
7,000
—
189
—
—
189
Adjustment to redeemable
  noncontrolling interests —
—
—
—
2,448
—
—
2,448
Balances, September 30, 2015 4,100,000
$ 102,500
83,323,563
$ 833
$ 2,050,915
$ (6,209 ) $ (305,902 ) $ 1,842,137



	Common Shares			Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
	Shares	Amount		Additional Paid-in Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balances, December 31, 2015	83,334,865	$	833	$	2,050,545		$	(2,145	)	$	(323,257	)	$	1,725,976
Stock compensation activity	68,392	1		3,640			—			—			3,641
Issuance of common shares under at-the-market plan, net	137,229	1		3,836			—			—			3,837
Other comprehensive loss attributable to Kite Realty Group Trust	—	—		—			(6,593		)	—			(6,593		)
Distributions declared to common shareholders	—	—		—			—			(71,958		)	(71,958		)
Net loss attributable to Kite Realty Group Trust	—	—		—			—			(2,176		)	(2,176		)
Exchange of redeemable noncontrolling interests for common shares	5,000	—		136			—			—			136
Adjustment to redeemable noncontrolling interests	—	—		(8,455		)	—			—			(8,455		)
Balances, September 30, 2016	83,545,486	$	835	$	2,049,702		$	(8,738	)	$	(397,391	)	$	1,644,408

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2016			2015
Cash flows from operating activities:
Consolidated net income (loss)	$	18,058		$	(12,704	)
Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities:
Consolidated net (loss) income							$	(785	)	$	18,058
Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:
Straight-line rent	(4,408		)	(3,351		)	(4,318		)	(4,408		)
Depreciation and amortization	126,580			83,472			135,369			126,580
Gain on sale of operating properties, net	(3,363		)	(9,535		)	(194		)	(3,363		)
Provision for credit losses	2,984			1,206			1,883			2,984
Compensation expense for equity awards	3,239			1,336			3,932			3,239
Amortization of debt fair value adjustment	(4,641		)	(1,663		)	(3,008		)	(4,641		)
Amortization of in-place lease liabilities, net	(2,148		)	(3,582		)	(5,822		)	(2,148		)
Changes in assets and liabilities:
Tenant receivables and other	1,777			(6,811		)	2,354			1,777
Deferred costs and other assets	(7,310		)	(5,542		)	(11,846		)	(7,310		)
Accounts payable, accrued expenses, deferred revenue and other liabilities	7,054			(32,258		)	3,141			8,056
Payments on assumed earnout liability							—			(2,869		)
Net cash provided by operating activities	137,822			10,568			120,706			135,955
Cash flows from investing activities:
Acquisitions of interests in properties	(167,831		)	—			—			(167,831		)
Capital expenditures, net	(69,937		)	(72,345		)	(68,352		)	(69,792		)
Net proceeds from sales of operating properties	126,460			40,771			139			126,460
Net proceeds from sales of marketable securities acquired from merger	—			18,601
Net cash received from merger	—			108,666
Collection of note receivable							500			—
Change in construction payables	1,005			(7,075		)	621			1,005
Collection of note receivable	—			542
Payments on seller earnouts	(2,869		)	—
Net cash (used in) provided by investing activities	(113,172		)	89,160
Net cash used in investing activities							(67,092		)	(110,158		)
Cash flows from financing activities:
Common share issuance proceeds, net of costs	(224		)	(1,865		)
Proceeds from issuance of common shares, net							4,383			—
Purchase of redeemable noncontrolling interests	(33,853		)	—			—			(33,998		)
Repurchases of common shares upon the vesting of restricted shares							(1,124		)	(964		)
Loan proceeds	640,895			84,207			550,194			640,895
Loan transaction costs	(2,770		)	(3,709		)	(7,280		)	(3,032		)
Loan payments	(553,255		)	(131,786		)
Loan payments and related financing escrows							(531,070		)	(553,255		)
Distributions paid – common shareholders	(67,191		)	(24,953		)	(70,650		)	(67,191		)
Distributions paid - preferred shareholders	(6,342		)	(6,342		)	—			(6,342		)
Distributions paid – redeemable noncontrolling interests	(2,721		)	(1,914		)	(2,932		)	(2,721		)
Distributions to noncontrolling interests	(64		)	(287		)	(222		)	(64		)
Net cash used in financing activities	(25,525		)	(86,649		)	(58,701		)	(26,672		)
Net change in cash and cash equivalents	(875		)	13,079			(5,087		)	(875		)
Cash and cash equivalents, beginning of period	43,826			18,134			33,880			43,826
Cash and cash equivalents, end of period	$	42,951		$	31,213		$	28,793		$	42,951

Non-cash investing and financing activities
Assumption of mortgages upon completion of merger including debt premium of $33,298	$	—		$	892,909
Properties and other assets added upon completion of merger	—			2,367,600
Marketable securities added upon completion of merger	—			18,602
Assumption of mortgages by buyer upon sale of properties	40,303			—			$	—		$	40,303
Assumption of debt in connection with acquisition of Chapel Hill Shopping Center including debt premium of $223	18,473			—
Assumption of debt in connection with acquisition of Chapel Hill Shopping Center including debt premiums of $223							—			18,473

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Balance Sheets

(unaudited)

(in thousands, except unit data)


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
Assets:
Investment properties, at cost	$	3,980,886		$	3,732,748		$	3,990,208		$	3,933,140
Less: accumulated depreciation	(410,328		)	(315,093		)	(531,946		)	(432,295		)
	3,570,558			3,417,655			3,458,262			3,500,845

Cash and cash equivalents	42,951			43,826			28,793			33,880
Tenant and other receivables, including accrued straight-line rent of $23,312 and $18,630, respectively, net of allowance for uncollectible accounts	47,353			48,097
Tenant and other receivables, including accrued straight-line rent of $27,875 and $23,809, respectively, net of allowance for uncollectible accounts							50,350			51,101
Restricted cash and escrow deposits	15,713			16,171			9,585			13,476
Deferred costs, net	150,983			159,978
Deferred costs and intangibles, net							133,114			148,274
Prepaid and other assets	10,089			8,847			10,814			8,852
Assets held for sale (see Note 10)	—			179,642
Total Assets	$	3,837,647		$	3,874,216		$	3,690,918		$	3,756,428

Liabilities and Equity:
Mortgage and other indebtedness	$	1,679,843		$	1,554,263
Mortgage and other indebtedness, net							$	1,732,344		$	1,724,449
Accounts payable and accrued expenses	90,148			75,150			93,440			81,356
Deferred revenue and other liabilities	137,554			136,409
Liabilities held for sale (see Note 10)	—			81,164
Deferred revenue and intangibles, net and other liabilities							120,550			131,559
Total Liabilities	1,907,545			1,846,986			1,946,334			1,937,364
Commitments and contingencies	—			—			—			—
Redeemable Limited Partners’ and other redeemable noncontrolling interests	86,957			125,082			99,478			92,315
Partners Equity:
Parent Company:
Preferred equity, 4,100,000 units issued and outstanding at September 30, 2015 and December 31, 2014, with a liquidation value of $102,500	102,500			102,500
Common equity, 83,323,563 and 83,490,663 units issued and outstanding at September 30, 2015 and December 31, 2014, respectively	1,745,846			1,797,459
Common equity, 83,545,486 and 83,334,865 units issued and outstanding at September 30, 2016 and December 31, 2015, respectively							1,653,146			1,728,121
Accumulated other comprehensive loss	(6,209		)	(1,175		)	(8,738		)	(2,145		)
Total Partners Equity	1,842,137			1,898,784			1,644,408			1,725,976
Noncontrolling Interests	1,008			3,364			698			773
Total Equity	1,843,145			1,902,148			1,645,106			1,726,749
Total Liabilities and Equity	$	3,837,647		$	3,874,216		$	3,690,918		$	3,756,428

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Statements of Operations and Comprehensive Income

(Unaudited)

(in thousands, except unit and per unit data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2015			2014			2016			2015			2016			2015

Revenue:
Minimum rent	$	66,279		$	69,033		$	196,656		$	131,515		$	69,518		$	66,279		$	205,436		$	196,656
Tenant reimbursements	16,787			17,605			51,891			35,083			17,531			16,787			52,691			51,891
Other property related revenue	4,081			1,938			9,163			5,481			2,073			4,081			7,120			9,163
Total revenue	87,147			88,576			257,710			172,079			89,122			87,147			265,247			257,710
Expenses:
Property operating	11,994			11,850			36,519			26,057			11,916			11,994			35,454			36,519
Real estate taxes	10,045			10,632			29,821			20,048			10,690			10,045			32,327			29,821
General, administrative, and other	4,559			3,939			14,131			9,358			5,081			4,559			15,228			14,131
Merger and acquisition costs	1,089			19,088			1,550			26,849
Transaction costs													—			1,089			2,771			1,550
Depreciation and amortization	42,549			44,383			124,196			81,559			45,543			42,549			131,625			124,196
Total expenses	70,236			89,892			206,217			163,871			73,230			70,236			217,405			206,217
Operating income	16,911			(1,316		)	51,493			8,208			15,892			16,911			47,842			51,493
Interest expense	(13,881		)	(15,386		)	(40,995		)	(30,291		)	(17,139		)	(13,881		)	(47,964		)	(40,995		)
Income tax expense of taxable REIT subsidiary	(9		)	(14		)	(134		)	(37		)	(15		)	(9		)	(763		)	(134		)
Gain on settlement	—			—			4,520			—			—			—			—			4,520
Other expense, net	(60		)	(13		)	(189		)	(119		)	—			(60		)	(94		)	(189		)
Income (loss) from continuing operations	2,961			(16,729		)	14,695			(22,239		)
Discontinued operations:
Gain on sale of operating property	—			—			—			3,199
Income from discontinued operations	—			—			—			3,199
Income (loss) before gain on sale of operating properties	2,961			(16,729		)	14,695			(19,040		)
(Loss) income before gain on sale of operating properties													(1,262		)	2,961			(979		)	14,695
Gain on sales of operating properties	—			2,749			3,363			6,336			—			—			194			3,363
Consolidated net income (loss)	2,961			(13,980		)	18,058			(12,704		)
Consolidated net (loss) income													(1,262		)	2,961			(785		)	18,058
Net income attributable to noncontrolling interests	(410		)	(680		)	(1,411		)	(757		)	(461		)	(410		)	(1,443		)	(1,411		)
Distributions on preferred units	(2,114		)	(2,114		)	(6,342		)	(6,342		)	—			(2,114		)	—			(6,342		)
Net income (loss) attributable to common unitholders	$	437		$	(16,774	)	$	10,305		$	(19,803	)
Net (loss) income attributable to common unitholders													$	(1,723	)	$	437		$	(2,228	)	$	10,305

Allocation of net income (loss):
Allocation of net (loss) income:
Limited Partners	$	25		$	(376	)	$	215		$	(533	)	$	(41	)	$	25		$	(52	)	$	215
Parent Company	412			(16,398		)	10,090			(19,270		)	(1,682		)	412			(2,176		)	10,090
	$	437		$	(16,774	)	$	10,305		$	(19,803	)	$	(1,723	)	$	437		$	(2,228	)	$	10,305

Net income (loss) per unit - basic & diluted:
Income (loss) from continuing operations attributable to common unitholders	$	0.00		$	(0.20	)	$	0.12		$	(0.45	)
Income from discontinued operations attributable to common unitholders	—			—			—			0.06
Net income (loss) attributable to common unitholders	$	0.00		$	(0.20	)	$	0.12		$	(0.39	)

Net (loss) income per unit - basic & diluted													$	(0.02	)	$	0.00		$	(0.03	)	$	0.12

Weighted average common units outstanding - basic	85,238,537			85,114,237			85,214,390			51,543,952			85,417,753			85,238,537			85,336,859			85,214,390
Weighted average common units outstanding - diluted	85,346,842			85,377,073			85,327,283			51,805,054			85,417,753			85,346,842			85,336,859			85,327,283

Distributions declared per common unit	$	0.2725		$	0.2600		$	0.8175		$	0.7600		$	0.2875		$	0.2725		$	0.8625		$	0.8175

Net income (loss) attributable to common unitholders:
Income (loss) from continuing operations	$	437		$	(16,774	)	$	10,305		$	(23,002	)
Income from discontinued operations	—			—			—			3,199
Net income (loss) attributable to common unitholders	$	437		$	(16,774	)	$	10,305		$	(19,803	)

Consolidated net income (loss)	$	2,961		$	(13,980	)	$	18,058		$	(12,704	)
Consolidated net (loss) income													$	(1,262	)	$	2,961		$	(785	)	$	18,058
Change in fair value of derivatives	(3,436		)	2,671			(5,153		)	(249		)	3,185			(3,436		)	(6,747		)	(5,153		)
Total comprehensive (loss) income	(475		)	(11,309		)	12,905			(12,953		)
Total comprehensive income (loss)													1,923			(475		)	(7,532		)	12,905
Comprehensive income attributable to noncontrolling interests	(410		)	(680		)	(1,411		)	(757		)	(461		)	(410		)	(1,443		)	(1,411		)
Comprehensive income (loss) attributable to common unitholders	$	(885	)	$	(11,989	)	$	11,494		$	(13,710	)	$	1,462		$	(885	)	$	(8,975	)	$	11,494

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Statements of Partners’ Equity

(Unaudited)

(in thousands)


	General Partner									Total			General Partner						Total
	Common Equity			Preferred Equity			Accumulated Other Comprehensive Loss						Common Equity			Accumulated Other Comprehensive Loss

Balances, December 31, 2014	$	1,797,459		$	102,500		$	(1,175	)	$	1,898,784
Balances, December 31, 2015													$	1,728,121		$	(2,145	)	$	1,725,976
Stock compensation activity	2,406			—			—			2,406			3,641			—			3,641
Capital Contribution from the General Partner													3,837			—			3,837
Other comprehensive loss attributable to Parent Company	—			—			(5,034		)	(5,034		)	—			(6,593		)	(6,593		)
Distributions declared to Parent Company	(68,191		)	—			—			(68,191		)	(71,958		)	—			(71,958		)
Distributions to preferred unitholders	—			(6,342		)	—			(6,342		)
Net income	10,090			6,342			—			16,432
Acquisition of partners' interests in consolidated joint ventures	1,445			—			—			1,445
Net loss													(2,176		)	—			(2,176		)
Conversion of Limited Partner Units to shares of the Parent Company	189			—			—			189			136			—			136
Adjustment to redeemable noncontrolling interests	2,448			—			—			2,448			(8,455		)	—			(8,455		)
Balances, September 30, 2015	$	1,745,846		$	102,500		$	(6,209	)	$	1,842,137
Balances, September 30, 2016													$	1,653,146		$	(8,738	)	$	1,644,408

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group, L.P. and subsidiaries

Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)


	Nine Months Ended September 30,						Nine Months Ended September 30,
	2015			2014			2016			2015
Cash flows from operating activities:
Consolidated net income (loss)	$	18,058		$	(12,704	)
Adjustments to reconcile consolidated net income (loss) to net cash provided by operating activities:
Consolidated net (loss) income							$	(785	)	$	18,058
Adjustments to reconcile consolidated net (loss) income to net cash provided by operating activities:
Straight-line rent	(4,408		)	(3,351		)	(4,318		)	(4,408		)
Depreciation and amortization	126,580			83,472			135,369			126,580
Gain on sale of operating properties, net	(3,363		)	(9,535		)	(194		)	(3,363		)
Provision for credit losses	2,984			1,206			1,883			2,984
Compensation expense for equity awards	3,239			1,336			3,932			3,239
Amortization of debt fair value adjustment	(4,641		)	(1,663		)	(3,008		)	(4,641		)
Amortization of in-place lease liabilities, net	(2,148		)	(3,582		)	(5,822		)	(2,148		)
Changes in assets and liabilities:
Tenant receivables and other	1,777			(6,811		)	2,354			1,777
Deferred costs and other assets	(7,310		)	(5,542		)	(11,846		)	(7,310		)
Accounts payable, accrued expenses, deferred revenue and other liabilities	7,054			(32,258		)	3,141			8,056
Payments on assumed earnout liability							—			(2,869		)
Net cash provided by operating activities	137,822			10,568			120,706			135,955
Cash flows from investing activities:
Acquisitions of interests in properties	(167,831		)	—			—			(167,831		)
Capital expenditures, net	(69,937		)	(72,345		)	(68,352		)	(69,792		)
Net proceeds from sales of operating properties	126,460			40,771			139			126,460
Net proceeds from sales of marketable securities acquired from merger	—			18,601
Net cash received from merger	—			108,666
Collection of note receivable							500			—
Change in construction payables	1,005			(7,075		)	621			1,005
Collection of note receivable	—			542
Payments on seller earnouts	(2,869		)	—
Net cash (used in) provided by investing activities	(113,172		)	89,160
Net cash used in investing activities							(67,092		)	(110,158		)
Cash flows from financing activities:
Contributions from the Parent Company	(224		)	(1,865		)
Contributions from the General Partner							4,383			—
Purchase of redeemable noncontrolling interests	(33,853		)	—			—			(33,998		)
Repurchases of common shares upon the vesting of restricted shares							(1,124		)	(964		)
Loan proceeds	640,895			84,207			550,194			640,895
Loan transaction costs	(2,770		)	(3,709		)	(7,280		)	(3,032		)
Loan payments	(553,255		)	(131,786		)
Loan payments and related financing escrows							(531,070		)	(553,255		)
Distributions paid – common unitholders	(67,191		)	(24,953		)	(70,650		)	(67,191		)
Distributions paid - preferred unitholders	(6,342		)	(6,342		)	—			(6,342		)
Distributions paid – redeemable noncontrolling interests - subsidiaries	(2,721		)	(1,914		)	(2,932		)	(2,721		)
Distributions to noncontrolling interests	(64		)	(287		)	(222		)	(64		)
Net cash (used in) provided by financing activities	(25,525		)	(86,649		)
Net cash used in financing activities							(58,701		)	(26,672		)
Net change in cash and cash equivalents	(875		)	13,079			(5,087		)	(875		)
Cash and cash equivalents, beginning of period	43,826			18,134			33,880			43,826
Cash and cash equivalents, end of period	$	42,951		$	31,213		$	28,793		$	42,951

Non-cash investing and financing activities
Assumption of mortgages upon completion of merger including debt premium of $33,298	$	—		$	892,909
Properties and other assets added upon completion of merger	—			2,367,600
Marketable securities added upon completion of merger	—			18,602
Assumption of mortgages by buyer upon sale of properties	40,303			—			$	—		$	40,303
Assumption of debt in connection with acquisition of Chapel Hill Shopping Center including debt premium of $223	18,473			—
Assumption of debt in connection with acquisition of Chapel Hill Shopping Center including debt premiums of $223							—			18,473

The accompanying notes are an integral part of these consolidated financial statements.

Kite Realty Group Trust and Kite Realty Group, L.P. and subsidiaries

Notes to Consolidated Financial Statements

September 30, ~~2015~~2016

(Unaudited)

(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 September 30, ~~2015~~2016 owned approximately ~~97.8%~~97.7% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining ~~2.2%~~2.3% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) ~~are~~were 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 in a stock-for-stock exchange with a transaction value of approximately $2.1 billion, including the assumption of approximately $0.9 billion of debt. 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 September 30, ~~2015,~~2016, we owned interests in ~~121~~120 operating and redevelopment properties consisting of ~~119~~109 retail properties, nine retail redevelopment properties, one office operating property and an associated parking garage. We also owned ~~three~~one development ~~properties~~property under construction as of this date.

Note 2. Basis of Presentation, Consolidation, Investments in Joint Ventures, and Noncontrolling Interests

We have prepared the accompanying unaudited financial statements pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) may have been condensed or omitted pursuant to such rules and regulations, although management believes that the disclosures are adequate to make the presentation not misleading. The unaudited financial statements as of September 30, ~~2015~~2016 and for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 include all adjustments, consisting of normal recurring adjustments, necessary in the opinion of management to present fairly the financial information set forth therein. The consolidated financial statements in this Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes thereto included in the ~~Parent Company’s 2014~~combined Annual Report on Form 10-K of the Parent Company and the Operating ~~Partnership's audited consolidated financial statements and related notes thereto filed by~~Partnership for the ~~Parent Company on its Current Report on Form 8-K on March 11,~~year ended December 31, 2015.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the disclosure of contingent assets and liabilities, the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reported period. Actual results could differ from these estimates. The results of operations for the interim periods are not necessarily indicative of the results that may be expected on an annual basis.

~~Components of Investment Properties~~

~~The Company’s investment properties as of September 30, 2015 and December 31, 2014 consisted of the following components:~~

Balance at
September 30,
2015 December 31,
2014
Investment properties, at cost:
Land $ 814,306
$ 778,780
Buildings and improvements 2,995,003
2,785,780
Furniture, equipment and other 6,802
6,398
Land held for development 34,975
35,907
Construction in progress 129,800
125,883
$ 3,980,886
$ 3,732,748

Consolidation and Investments in Joint Ventures

The accompanying financial statements are presented on a consolidated basis and include all accounts of the Parent Company, the Operating Partnership, the taxable REIT subsidiary of the Operating Partnership, subsidiaries of the Operating Partnership that are controlled and any variable interest entities (“VIEs”) in which the Operating Partnership 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.

As of January 1, 2016, we adopted Accounting Standards Update ("ASU") 2015-02, Consolidation: Amendments to the Consolidation Analysis, as required. See the below section entitled "Recently Issued Accounting Pronouncements" for further details. The Operating Partnership ~~consolidates~~accounts for properties that are ~~wholly~~ owned ~~as well as properties it controls but~~by joint ventures in ~~which it owns less than a 100% interest. Control of a property~~accordance with the consolidation guidance. The Operating Partnership evaluates each joint venture and determines first whether to follow the VIE or the voting interest entity ("VOE") model. Once the appropriate consolidation model 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~~identified, the Operating Partnership ~~as manager of~~then evaluates whether it should consolidate the ~~property; or~~

~~being~~joint venture. Under the ~~primary beneficiary of a VIE. The primary beneficiary is defined as~~VIE model, the Operating Partnership consolidates an entity ~~that~~when it 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. Under the VOE model, the Operating Partnership consolidates an entity when (i) it controls the entity through ownership of a majority voting interest if the entity is not a limited partnership or (ii) it controls the entity through its ability to remove the other partners or owners in the entity, at its discretion, when the entity is a limited partnership.

~~As of September 30, 2015, we owned an investment in one joint venture that is~~In determining whether to consolidate a VIE ~~in which we are~~with 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 $107.3 million. The~~ Operating Partnership, ~~guarantees the debt of the VIE.~~

Wewe consider all relationships between the Operating Partnership and the applicable VIE, including ~~the~~ development ~~agreement, the~~agreements, management ~~agreement~~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 periodically reassess primary beneficiary status of ~~this~~the VIE. ~~During~~Prior to the ~~three months ended~~adoption of ASC 2015-02, we treated one of our consolidated joint ventures as a VIE. As a result of the adoption of ASC 2015-02, we concluded that two additional previously-consolidated joint ventures of the Operating Partnership were VIEs as the partners did not have substantive participating rights and we were the primary beneficiary. As a result, as of September 30, ~~2015, there~~2016, we owned investments in three joint ventures that were ~~no changes to our~~VIEs in which we were the primary beneficiary. As of this date, these VIEs had total debt of $237.7 million, which were secured by assets of the VIEs totaling $498.9 million. The Operating Partnership guarantees the debt of these VIEs. These conclusions ~~regarding whether an entity qualifies as~~did not impact the Company's financial position or results of operations.

As part of the adoption of ASC 2015-02, the Company concluded the Operating Partnership was a VIE as the limited partners do not hold kick-out rights or ~~whether we are~~substantive participating rights. The Parent Company consolidates the Operating Partnership as it is the primary beneficiary ~~of any previously identified VIE.~~in accordance with the VIE model.

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.

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~~the Operating Partnership's taxable REIT subsidiary.

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 nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 were as follows:


	2015			2014			2016			2015
Noncontrolling interests balance January 1	$	3,364		$	3,548		$	773		$	3,364
Net income allocable to noncontrolling interests, excluding redeemable noncontrolling interests	84			103			147			84
Distributions to noncontrolling interests	(87		)	(287		)	(222		)	(87		)
Acquisition of partner's interest in Beacon Hill	(2,353		)	—			—			(2,353		)
Noncontrolling interests balance at September 30	$	1,008		$	3,364		$	698		$	1,008

Redeemable Noncontrolling Interests - Limited Partners

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 September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, 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 three and nine months ended September 30, ~~2015~~2016 and ~~2014,~~2015, the weighted average interests of the Parent Company and the limited partners in the Operating Partnership were as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,				Three Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2015		2014		2016		2015		2016		2015
Parent Company’s weighted average basic interest in Operating Partnership	97.8	%	98.1	%	97.9	%	96.8	%	97.7	%	97.8	%	97.7	%	97.9	%
Limited partners' weighted average basic interests in Operating Partnership	2.2	%	1.9	%	2.1	%	3.2	%	2.3	%	2.2	%	2.3	%	2.1	%

At September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the Parent Company's interest and the limited partners' redeemable noncontrolling ownership interests in the Operating Partnership were 97.7% and 2.3% and 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. ~~These Limited Partners~~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’~~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 nine months ended September 30, 2016 and 2015, respectively, 5,000 and ~~2014, respectively,~~ 7,000 ~~and 4,500~~ Limited Partner Units were exchanged for the same number of common shares of the Parent Company.

There were ~~1,912,278~~1,942,840 and ~~1,639,443~~1,901,278 Limited Partner Units outstanding as of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, respectively. The increase in Limited Partner Units outstanding from December 31, ~~2014~~2015 is due primarily to ~~the conversion of 274,835 restricted shares owned by~~non-cash compensation awards made to our executive officers toin the form of Limited Partner ~~Units in the second quarter of 2015.~~Units.

Redeemable Noncontrolling Interests - Subsidiaries

Prior to the ~~Merger,~~merger with Inland Diversified Real Estate Trust, Inc. ("Inland Diversified") in 2014, 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~~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 ~~our Territory Portfolio and Crossing at Killingly~~the applicable joint ~~ventures, respectively,~~venture, the ~~applicable~~ Class B units can be redeemed at the election of either our ~~applicable partner’s~~partner or ~~our election~~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. We consolidate these joint ventures because we control the decision making of each of the joint ventures and our joint venture partners have limited protective rights.

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 ~~$34.4~~$0.4 million. We funded this acquisition in part 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 consolidate each of the above-mentioned joint ventures because we control the decision making of each of the joint ventures and our joint venture partners have limited protective rights.~~

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 September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, the redemption amounts of these interests did not exceed the fair value of each interest. As of September 30, 2016 and December 31, 2015, the redemption value of the redeemable noncontrolling interests ~~did not exceed~~exceeded the initial book value.

The redeemable noncontrolling interests in the Operating Partnership and subsidiaries for the nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 were as follows:


	2015			2014			2016			2015
Redeemable noncontrolling interests balance January 1	$	125,082		$	43,928		$	92,315		$	125,082
Acquired redeemable noncontrolling interests from merger	—			69,356
Acquisition of partner's interest in City Center operating property	(33,998		)	—			—			(33,998		)
Net income allocable to redeemable noncontrolling interests	1,541			118			1,244			1,541
Distributions declared to redeemable noncontrolling interests	(2,810		)	(1,946		)	(2,973		)	(2,810		)
Other, net	(2,858		)	(1,902		)
Other, net, including adjustments to redemption value							8,892			(2,858		)
Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at September 30	$	86,957		$	109,554		$	99,478		$	86,957


Limited partners' interests in Operating Partnership	$	46,166		$	40,198		$	55,368		$	46,166
Other redeemable noncontrolling interests in certain subsidiaries	40,791			69,356			44,110			40,791
Total limited partners' interests in Operating Partnership and other redeemable noncontrolling interests balance at September 30	$	86,957		$	109,554		$	99,478		$	86,957

~~The following sets forth accumulated other comprehensive loss allocable to noncontrolling interests for the nine months ended September 30, 2015 and 2014:~~Fair Value Measurements

2015 2014
Accumulated comprehensive (loss) income balance at January 1 $ (24 ) $ 69
Other comprehensive loss allocable to redeemable
noncontrolling interests¹
(119 ) (47 )
Accumulated comprehensive (loss) income balance at September 30 $ (143 ) $ 22
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.



~~____________________~~
1	~~Represents the noncontrolling interests’ share of the changes in the fair value of derivative instruments accounted for as cash flow hedges (see Note 5).~~

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 the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability.

Reclassifications

Certain amounts in the accompanying consolidated financial statements for 2015 have been reclassified to conform to the 2016 consolidated financial statement presentation. The reclassifications had no impact on net income previously reported.

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board ("FASB") issued ~~Accounting Standards Update ("ASU")~~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.

Under this 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. Upon adoption of the new standard, we expect an increase in general, administrative, and other expense and a decrease in amortization expense on our consolidated statement of operations, as well as a decrease in capitalized leasing costs on our consolidated balance sheets. 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.

ASU 2014-9 ~~was to be~~is effective for public entities for annual and interim reporting periods beginning after December 15, ~~2016~~2017 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.~~permitted. 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) atas a cumulative effect adjustment as of the date of initial application, with no restatement of comparative periods presented.

In February 2015, the FASB issued ASU 2015-02, Consolidation: Amendments to the Consolidation Analysis. ASU 2015-02 makes changes to both the VIE and VOE models, amended the criteria for determining VIEs and eliminated the presumption that a general partner should consolidate a limited partnership. All reporting entities involved with limited partnerships and similar entities were required to re-evaluate whether these entities, including the Operating Partnership, are subject to the VIE or VOE model and whether they qualify for consolidation. We ~~have not yet selected~~adopted ASU 2015-02 in the first quarter of 2016 and, although we classified two additional consolidated joint ventures of the Operating Partnership as VIEs (for a ~~transition method nor have we determined the~~total of three consolidated VIEs as of March 31, 2016), there was no material effect ~~of ASU 2014-9~~ on our ~~ongoing~~consolidated financial ~~reporting.~~statements.

In April 2015, the FASB issued ASU 2015-03, ~~Interest- Imputation~~Simplifying the Presentation of ~~Interest~~Debt Issuance Costs ("ASU 2015-03"). ASU 2015-03 ~~will require~~requires 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. Prior to the issuance of ASU 2015-03, debt issuance costs were required to be presented as deferred charge assets, separate from the related debt liability. ASU 2015-03 is effective for annual and interim reporting periods beginning on or after December 15, 2015. We adopted ASU 2015-03 retrospectively in the first quarter of 2016. As a result of the retrospective adoption, we reclassified unamortized deferred financing costs of $9.6 million as of December 31, 2015, ~~with early adoption permitted. We expect this new guidance will reduce total assets~~from deferred costs and ~~total debt~~intangibles, net to a reduction in mortgage and other indebtedness, net on our consolidated balance ~~sheet by amounts currently classified as deferred issuance costs, but we do not expect~~sheets. Other than this ~~update to have any other material effect on our consolidated financial statements.~~

~~In August 2015,~~reclassification, 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~~adoption of ASU 2015-03 did 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~~have 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 effectimpact 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~~eliminates 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~~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~~ASU 2015-16 is effective for ~~fiscal years~~annual and interim reporting periods beginning on or after December 15, 2015. We adopted ASU 2015-16 in the first quarter of 2016 and there was no effect on our consolidated financial statements as we did not have any business combinations during this period.

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 certain changes to lessor accounting, including the accounting for sales-type and direct financing leases. ASU 2016-02 will be effective for annual and interim reporting periods beginning on or after December 15, 2018, with early adoption permitted. The new 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 ~~effect, if any,~~impact adopting the new accounting standard will have on our consolidated financial statements.

Note 3. Earnings Per Share or Unit

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 Incentive Compensation 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~~because the effect of including these amounts in the denominator would have no dilutive impact. Weighted average Limited Partner Units outstanding for the nine months ended September 30, 2016 and 2015 ~~and 2014~~ were ~~1.8~~1.9 million and ~~1.7~~1.8 million, respectively.

Due to our net loss attributable to common shareholders and Common Unit holders for the three and nine months ended September 30, 2014, the potentially dilutive securities were not dilutive for those periods and were excluded from our net income per common share or unit calculations. Approximately ~~0.1~~0.2 million and ~~0.3~~0.1 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 three and nine months ended September 30, 2016 and 2015, respectively. Due to the net loss allocable to common shareholders and ~~2014, respectively.~~Common Unit holders for the three and nine months ended September 30, 2016, no securities had a dilutive impact for these periods.

During the third quarter of 2014, we completed a one-for-four reverse split of our common shares. 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.

Note 4. Mortgage and Other Indebtedness

Mortgage and other indebtedness consisted of the following atas of September 30, ~~2015~~2016 and December 31, ~~2014:~~2015:


	Balance at				As of September 30, 2016
	September 30, 2015		December 31, 2014		Principal		Unamortized Net Premiums		Unamortized Deferred Financing Costs			Total
Senior unsecured notes	$	250,000	$	—	$	550,000	$	—	$	(6,349	)	$	543,651
Unsecured revolving credit facility	—		160,000		43,700		—		(2,991		)	40,709
Unsecured term loan	400,000		230,000
Notes payable secured by properties under construction - variable rate	132,368		119,347
Unsecured term loans					400,000		—		(2,309		)	397,691
Mortgage notes payable - fixed rate	758,083		810,959		624,064		13,513		(1,068		)	636,509
Mortgage notes payable - variable rate	115,443		205,798		114,570		—		(786		)	113,784
Net premiums on acquired debt	23,949		28,159
Total mortgage and other indebtedness	1,679,843		1,554,263		$	1,732,334	$	13,513	$	(13,503	)	$	1,732,344
Mortgage notes - properties held for sale	—		67,452
Total	$	1,679,843	$	1,621,715



	As of December 31, 2015
	Principal		Unamortized Net Premiums		Unamortized Deferred Financing Costs			Total
Senior unsecured notes	$	250,000	$	—	$	(2,755	)	$	247,245
Unsecured revolving credit facility	20,000		—		(1,727		)	18,273
Unsecured term loans	500,000		—		(2,985		)	497,015
Notes payable secured by properties under construction - variable rate	132,776		—		(133		)	132,643
Mortgage notes payable - fixed rate	756,494		16,521		(1,555		)	771,460
Mortgage notes payable - variable rate	58,268		—		(455		)	57,813
Total mortgage and other indebtedness	$	1,717,538	$	16,521	$	(9,610	)	$	1,724,449

Consolidated indebtedness, including weighted average maturities and weighted average interest rates as of September 30, ~~2015,~~2016, considering the impact of interest rate swaps, is summarized below:


	Amount		Percentage of Total		Weighted Average Maturity (Years)	Weighted Average Interest Rate		Outstanding Amount		Ratio		Weighted Average Interest Rate		Weighted Average Maturity (Years)
Fixed rate debt¹	$	1,524,373	92	%	5.6	4.20	%	$	1,648,718	95	%	4.13	%	6.7
Variable Rate Debt	131,521		8	%	4.0	1.85	%
Net Premiums on Acquired Debt	23,949		N/A		N/A	N/A
Variable rate debt								83,616		5	%	2.03	%	5.4
Net debt premiums and issuance costs, net								10		N/A		N/A		N/A
Total	1,679,843		100	%	5.5	4.01	%	$1,732,344		100	%	4.03	%	6.6



____________________
1	~~Calculations on fixed~~Fixed rate debt ~~include~~includes, and variable rate debt excludes, the portion of ~~variable rate~~such debt that has been ~~hedged; therefore, calculations on variable~~hedged by interest rate ~~debt exclude the portion~~derivatives. As of ~~variable rate debt that has been hedged. $516.3~~September 30, 2016, $474.7 million in variable rate debt is hedged for a weighted average ~~2.4~~2.9 years.

Mortgage ~~and construction loans are~~indebtedness is collateralized by certain real estate properties and leases. Mortgage ~~loans are~~indebtedness is generally due in monthly installments of interest and principal and mature over various terms through 2030.

Variable interest rates on mortgage ~~and construction loans~~indebtedness are based on LIBOR plus spreads ranging from ~~135~~160 to ~~245~~225 basis points. At September 30, ~~2015,~~2016, the one-month LIBOR interest rate was ~~0.19%~~0.53%. Fixed interest rates on mortgage ~~loans~~indebtedness range from 3.78% to 6.78%.

~~Senior~~

Seven-Year Unsecured ~~Notes~~Term Loan

~~In August 2015,~~On June 29, 2016, we drew the Operating Partnership entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with various purchasers 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 proceeds from the issuance of the notes were utilized to pay off the balance of $199.6remaining $100 million on our $200 million seven-year unsecured term loan and used the proceeds to pay down the unsecured revolving credit ~~facility and the $33~~facility. We had $200 million outstanding on our seven-year unsecured term loan ~~secured by our Crossing at Killingly operating property. The Note Purchase Agreement contains a number of customary financial and restrictive covenants. As~~as of September 30, ~~2015, we were in compliance with all such covenants.~~2016.

Unsecured Revolving Credit Facility and Unsecured Term Loan

On ~~June 29, 2015, we~~July 28, 2016, the Operating Partnership entered into an ~~amendment~~amended and restated credit agreement (the “amended credit agreement”) with respect to our ~~Fourth Amended and Restated Credit Agreement (the “Credit Agreement”). The amendment increased the total~~$500 million unsecured revolving credit facility maturing July 28, 2020 (with two six-month extension options), our $200 million unsecured term loan maturing July 1, 2019 ("Term Loan A") and our $200 million unsecured term loan maturing July 28, 2021 ("Term Loan B"). As noted below, we paid off Term Loan A during the quarter with the proceeds from ~~$230~~the issuance of our 4.00% Senior Notes due October 1, 2026.

The Operating Partnership has the option to increase the borrowing availability of the unsecured revolving credit facility to $1 billion and, the option to increase Term Loan B to provide for an additional $200 million, ~~to $400 million, and modified two financial covenants to permit,~~ in each case ~~only~~subject to certain conditions, including obtaining commitments from any one ~~time during~~or more lenders.

Borrowings under the ~~term~~amended credit agreement with respect to (i) the unsecured revolving credit facility bear interest at a rate of LIBOR plus an applicable margin of 135 to 195 basis points, (ii) Term Loan A (prior to its payoff) bore interest at a rate of LIBOR plus an applicable margin of 135 to 190 basis points, and (iii) Term Loan B bear interest at a rate of LIBOR plus an applicable margin of 130 to 190 basis points, in each case depending on the Operating Partnership’s leverage ratio and subject to certain exceptions.

The Operating Partnership is required to pay a quarterly facility fee on the unused portion of the ~~Credit Agreement for up~~unsecured revolving credit facility ranging from 15 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.25 basis points.

As of September 30, ~~2015, $400~~2016, $43.7 million was ~~outstanding under the unsecured term loan and no amounts were~~ outstanding under the unsecured revolving credit facility. ~~As of September 30, 2015,~~Additionally, we had ~~outstanding~~ letters of credit ~~totaling $13.3~~outstanding which totaled $12.2 million, against which no amounts were advanced as of September 30, ~~2015.~~2016.

The amount that we may borrow under our ~~$500 million~~ unsecured revolving credit facility is ~~based on~~limited by the value of the assets in our unencumbered asset pool. ~~The senior unsecured notes are included~~As of September 30, 2016, the value of the assets in ~~the total borrowings outstanding for the purpose of determining the amount we may borrow under~~ our ~~unsecured revolving credit facility.~~unencumbered asset pool was $413.2 million. Taking into account outstanding borrowings and letters of credit, we had ~~$390.3~~$401 million available under our unsecured revolving credit facility for future borrowings as of September 30, ~~2015.~~2016.

Our ability to borrow under the ~~Credit Agreement~~unsecured revolving credit facility 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 September 30, ~~2015,~~2016, we were in compliance with all such ~~covenants~~covenants.

Senior Unsecured Notes

On September 26, 2016, the Operating Partnership completed a $300 million public offering of 4.00% Senior Notes due October 1, 2026 ("the Notes"). The net proceeds from the issuance of the ~~Credit Agreement.~~Notes were utilized to retire the $200 million Term Loan A and retire the $75.9 million construction loan secured by our Parkside Town Commons operating property and to pay down our unsecured revolving credit facility. The Notes contain a number of customary financial and restrictive covenants. As of September 30, 2016, we were in compliance with all such covenants.

Other Debt Activity

For the nine months ended September 30, ~~2015,~~2016, we had total new borrowings of ~~$640.9~~$550.2 million and total repayments of ~~$553.3~~$531.1 million. ~~The major~~In addition to the items mentioned above, the remaining components of this activity ~~are~~were as follows:

~~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;~~

~~In September 2015, we sold $250 million of senior unsecured notes;~~

In the first and second quarter of 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 using draws on the unsecured revolving credit facility;

~~We drew $30 million on the unsecured revolving credit facility in the first quarter of 2015 to fund the acquisition of our partner's interest in our City Center operating property;~~

In March 2015, in connection with the sale of seven properties ("Tranche II") to Inland Real Estate Income Trust, Inc. ("IREIT"), IREIT assumed $40.3 million of loans secured by our Prattville Town Center, Walgreens Plaza, Fairgrounds Crossing and Eastside Junction operating properties and retired the $24 million loan secured by the Regal Court property. We used a portion of the proceeds from this sale to pay down $27 million on the unsecured revolving credit facility;

In June 2015, we exercised the accordion option under our unsecured term loan to increase our total borrowings from $230 million to $400 million. We used the proceeds from this exercise 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;

In the first nine months of ~~2015,~~2016, we ~~drew $59~~retired the $16.3 million loan secured by our Cool Creek Commons operating property, the $23.6 million loan secured by our Sunland Towne Centre operating property, the $20.3 million loan secured by our Mullins Crossing operating property, the $16.5 million loan secured by our Pine Ridge Crossing operating property, the $9.9 million loan secured by our Riverchase Plaza operating property and the $42.2 million loan secured by our Traders Point operating property;

We borrowed $150.2 million on the unsecured revolving credit facility to fund ~~a portion~~the above retirements of secured debt and for general business purposes;

In the ~~acquisitions~~third quarter of ~~Colleyville Downs, Belle Isle Station, Livingston Shopping Center and Chapel Hill Shopping Center;~~

~~We drew $14.3~~2016, we refinanced the $56.9 million ~~in the first nine months of 2015 on~~ construction ~~loans related to our Parkside – Phases I and II development projects and~~loan secured by our Delray Marketplace ~~property;~~operating property and extended the maturity of the loan to February 2022;

In the third quarter of 2016, we incurred $6.5 million of debt issuance costs related to amending the unsecured term loans and completing the issuance of our senior unsecured notes.

In the third quarter of 2016, we recorded $1.2 million in non-cash accelerated amortization of debt issuance costs as a result of amending the unsecured revolving credit facility, the unsecured term loans, retiring Term Loan A, retiring the Parkside Town Commons construction loan and refinancing the Delray Marketplace construction loan; and

We made scheduled principal payments on indebtedness totaling ~~$4.6~~$4.3 million in the first nine months of ~~2015.~~2016.

See Note 13 for indebtedness transactions occurring subsequent to September 30, 2016.

Fair Value of Fixed and Variable Rate Debt

As of September 30, ~~2015,~~2016, the estimated fair value of our fixed rate debt ~~which includes the senior unsecured notes,~~ was ~~$1.1~~$1.3 billion compared to the book value of $1$1.2 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 September 30, ~~2015,~~2016, the fair value of variable rate debt was ~~$661.7~~$601.1 million compared to the book value of ~~$647.8~~$558.3 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 ~~1.54%~~1.83% to ~~2.64%~~2.78%.

Note 5. 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 September 30, ~~2015,~~2016, we were party to various cash flow hedge agreements with notional amounts totaling ~~$543.3~~$474.7 million. These hedge agreements effectively fix the interest rate underlying certain variable rate debt instruments over terms ranging from 2017 through ~~2020.~~2021. Utilizing a weighted average interest rate spread over LIBOR on all variable rate debt resulted in fixing the weighted average interest rate at ~~2.93%~~3.17%.

In January 2016, we entered into two forward-starting interest rate swaps that effectively fixed the interest rate on $150 million of previously unhedged variable rate debt at 3.208%. The effective date of the swaps was June 30, 2016, and they will expire on July 1, 2021.

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.

~~Although we have~~We determined that the majority of the inputs used to value our derivatives fall within Level 2 of the fair value hierarchy, although the credit valuation adjustments associated with our derivatives utilize Level 3 inputs, such as estimates of current credit spreads to evaluate the likelihood of default by us and our counterparties. As of September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, we ~~have~~ assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and ~~have~~ determined ~~that~~ the credit valuation adjustments ~~are~~were not significant to the overall valuation of our derivatives. As a result, we ~~have~~ determined ~~that~~ our derivative valuations ~~are~~were classified inwithin Level 2 of the fair value hierarchy.

As of September 30, ~~2015~~2016, the estimated fair value of our interest rate hedges was a liability of ~~$9.0~~$11.0 million, including accrued interest of ~~$0.5~~$0.4 million. As of September 30, ~~2015, $9.0~~2016, $11.0 million iswas reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheets. At December 31, ~~2014~~2015, the ~~net~~estimated fair value of our interest rate hedges was a net liability of ~~$4.4~~$4.8 million, including accrued interest of ~~$0.5~~$0.4 million. As of December 31, ~~2014, $0.7~~2015, $0.2 million iswas reflected in prepaid and other assets and ~~$5.1~~$5.0 million iswas reflected in accounts payable and accrued expenses on the accompanying consolidated balance sheets.

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 nine months ended September 30, 2016 and 2015, ~~and 2014, $4.2~~$3.5 million and ~~$3.6~~$4.2 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 interest expense to be ~~$4.3~~$3.7 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 6. Shareholders’ Equity

~~Authorized Common Shares~~

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.

Distribution Payments

Our Board of Trustees declared a ~~quarterly~~ cash distribution of ~~$0.515625 per Series A Preferred Share covering the period from June 2, 2015 to September 1, 2015. This distribution was paid on September 1, 2015 to shareholders of record as of August 21, 2015.~~

~~Our Board of Trustees declared a cash distribution of $0.2725 per common share and Common Unit~~$0.2875 for the third quarter of ~~2015. This distribution was paid on October 13, 2015~~2016 to common shareholders and Common Unit holders of record as of October 6, ~~2015.~~2016. The distribution was paid on October 13, 2016.

Outperformance Plan

In January 2016, the Compensation Committee of our Board of Trustees adopted the 2016 Outperformance Incentive Compensation Plan for members of executive management and certain other employees, pursuant to which participants are eligible to earn profits interests ("LTIP 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 Incentive Compensation 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, performance measures based on our total shareholder return (“TSR”) 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.

If the TSR performance measures are achieved at the end of the three-year performance period, participants will receive their percentage interest in the bonus pool as LTIP Units in the Operating Partnership. Such LTIP Units vest over an additional

two-year service period. The compensation cost of the 2016 Outperformance Plan was fixed as of the grant date and will be recognized regardless of whether the LTIP Units are ultimately earned assuming the service requirement is met.

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 of our four named executive officers a three-year performance award in the form of restricted performance share 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 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 at that date. The total number of PSUs issued to the executive officers was based on a target value of $1.0 million but may be earned in a range from 0% to 200% of the target value depending on our TSR over the measurement period in relation to the peer group.

At-the-Market Equity Program

During the third quarter of 2016, we issued 137,229 of our common shares at an average price per share of $29.52 pursuant to our at-the-market equity program, generating gross proceeds of approximately $4.1 million and, after deducting commissions and other costs, net proceeds of approximately $3.8 million. The proceeds from these offerings were contributed to the Operating Partnership and used to pay down our unsecured revolving credit facility.

Note 7. 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 September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, deferred costs consisted of the following:


	September 30, 2015			December 31, 2014			September 30, 2016			December 31, 2015
Deferred financing costs	$	16,708		$	14,575
Acquired lease intangible assets	129,815			142,823			$	126,515		$	138,796
Deferred leasing costs and other	54,284			48,149			63,116			55,332
	200,807			205,547			189,631			194,128
Less—accumulated amortization	(49,824		)	(36,583		)	(56,517		)	(45,854		)
Total	150,983			168,964			$	133,114		$	148,274
Deferred costs – properties held for sale	—			(8,986		)
Total	$	150,983		$	159,978

The accompanying consolidated statements of operations include amortization expense as follows:


	Nine Months Ended September 30,				Nine Months Ended September 30,
	2015		2014		2016		2015
Amortization of deferred financing costs	$	2,384	$	1,912
Amortization of deferred leasing costs, lease intangibles and other	17,538		11,501		$	19,177	$	17,538
Amortization of above market lease intangibles					4,803		4,523

Amortization of deferred leasing costs, leasing intangibles and other is included in depreciation and amortization ~~expense, while the~~expense. The amortization of ~~deferred financing costs~~above market lease intangibles is included ~~in interest expense.~~as a reduction to revenue.

Note 8. Deferred Revenue and Other Liabilities

Deferred revenue and other liabilities consist of unamortized fair value of in-place lease liabilities recorded in connection with purchase accounting, potential earnout payments related to property acquisitions, retainage payables for development and redevelopment projects, and tenant rent payments received in advance. 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) through 2046. 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 September 30, ~~2015~~2016 and December 31, ~~2014,~~2015, deferred revenue and other liabilities consisted of the following:


	September 30, 2015		December 31, 2014			September 30, 2016		December 31, 2015
Unamortized in-place lease liabilities	$	116,090	$	125,336		$	100,972	$	112,405
Retainage payables and other	5,146		2,852			6,589		5,636
Potential earnout payments due (Note 9)	5,924		9,664
Assumed earnout liability (Note 9)						1,285		1,380
Tenant rent payments received in advance	10,394		10,841			11,704		12,138
Total	137,554		148,693			$	120,550	$	131,559
Deferred revenue and other liabilities – liabilities held for sale	—		(12,284		)
Total	$	137,554	$	136,409

The amortization of below market lease intangibles was $10.6 million and $6.7 million for the nine months ended September 30, 2016 and 2015, respectively. The amortization of below market lease intangibles is included as an increase to revenue.

Note 9. 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 other than~~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~~borrowings on our unsecured revolving credit facility.

As of September 30, ~~2015,~~2016, we had outstanding letters of credit totaling ~~$13.3~~$12.2 million. At that date, there were no amounts advanced against these instruments.

Earnout Liability

~~Six~~

We are a party to an earnout arrangement with the former seller of ~~the~~one of our operating properties, whereby we ~~acquired in the Merger with Inland Diversified had pre-existing earnout arrangements whereby the Company could be~~were required to pay the seller additional consideration based on ~~leasing activity of vacant space.~~whether the seller satisfied certain post-sale obligations. The estimated ~~future~~potential earnout ~~payment~~liability was ~~$5.9~~$1.3 million at September 30, 2016 and $1.4 million at December 31, 2015. ~~The table below presents~~

On October 6, 2016, we paid $1.3 million related to the ~~change in our~~remaining earnout ~~liability for the nine months ended September 30, 2015.~~liability. We do not have any further earnout obligations after this date.

Nine Months Ended
September 30, 2015
Earnout liability – beginning of period $ 9,664
Decreases:
Settlement of earnout obligations (2,869 )
Adjustments to purchase price allocation (871 )
Earnout liability – end of period $ 5,924

The expiration dates of the remaining earnouts range from November 2, 2015 through December 28, 2015. While the accrued amount represents our best estimate of the ultimate settlement, any difference between the accrual and settlement would impact earnings.

Note 10. Disposals of Operating Properties

~~Sale~~During the three months ended June 30, 2016, we sold our Shops at Otty operating property in Portland, Oregon for a net gain of ~~Properties to IREIT~~

~~On September 16, 2014,~~$0.2 million. In the fourth quarter of 2015, we ~~entered into~~wrote off the book value of this property and recorded a ~~Purchase and Sale Agreement with IREIT, which provided for~~non-cash impairment charge of $1.6 million, as the ~~sale of 15 of our operating properties (the “Portfolio”) to IREIT. The Purchase and Sale Agreement provided that~~estimated undiscounted cash flows over the ~~Portfolio would be sold to IREIT in two separate tranches. The sale~~remaining holding period did not exceed the carrying value of the ~~first tranche (“Tranche I”) consisted~~asset.

During the fourth quarter of ~~eight retail~~2015, we sold our Four Corner operating ~~properties that were sold~~property in ~~November~~Seattle, Washington, and ~~December 2014~~our Cornelius Gateway operating property in Portland, Oregon, for aggregate ~~net~~ proceeds of ~~$150.8~~$44.9 million and a net gain of ~~$1.4~~$0.6 million. ~~The sale of Tranche II consisted of~~

In March 2015, we sold seven ~~retail operating~~ properties ~~that were sold on March 16, 2015~~ for aggregate net proceeds of $103.0 million and a net gain of $3.4 million.

The results of ~~the~~these operating properties ~~sold to IREIT~~ are not included in discontinued operations in the accompanying ~~Statements~~statements of ~~Operations~~operations as none of the ~~disposals neither~~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. The properties in Tranche II of the Portfolio 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 combined results of operations for the investment properties that were sold in the first nine months of 2015 are presented in the table below:~~

Nine Months Ended
September 30, 2015
Revenue:
Minimum rent $ 2,403
Tenant reimbursements 539
Total revenue 2,942
Expenses:
Property operating 495
Real estate taxes 276
Total expenses 771
Operating income 2,171
Interest expense (527 )
Income from continuing operations $ 1,644

Note 11. Acquisitions and Transaction Costs

During the nine months ended September 30, 2016, we incurred $2.8 million of terminated transaction costs. We record transaction costs as they are incurred, regardless of whether the transaction is ultimately completed or terminated. Transaction costs generally consist of legal, lender, due diligence, and other expenses for professional services.

In 2015, we acquired four operating ~~properties. In 2014, we acquired a~~properties for total consideration of ~~61 operating properties. Upon completion~~$185.8 million, including the assumption of ~~the Merger with Inland Diversified in July 2014, we acquired 60 operating properties and in December 2014 we acquired~~ an operating property in Las Vegas, Nevada. The total purchase price of the assets acquired in the Merger was $2.1 billion. Purchase price allocations were made at the date of acquisition, primarily to the fair value of tangible assets (land, building, and improvements) as well as to intangibles. The estimated purchase price allocations for the acquisitions that took place in the fourth quarter of 2014 and in the second and third quarters of 2015 remain preliminary at September 30, 2015 and$18.3 million loan, which are subject to revision within the measurement period, not to exceed one year. As of June 30, 2015, the purchase price allocation for the properties acquired in the Merger were final. There were no material adjustments made to the allocations during the nine months ended September 30, 2015.summarized below:

~~Following is a summary of our 2014 and 2015 operating property acquisitions.~~



Property Name	MSA	Acquisition Date	Owned GLA

~~Merger with Inland Diversified~~	~~Various - 60 properties~~	~~July 2014~~	~~10,719,471~~

~~Rampart Commons~~	~~Las Vegas, NV~~	~~December 2014~~	~~81,456~~

Colleyville Downs	Dallas, TX	April 2015	~~185,848~~191,126

Belle Isle Station	Oklahoma City, OK	May 2015	~~164,337~~164,362

Livingston Shopping Center	New York - Newark	July 2015	~~139,657~~139,605

Chapel Hill Shopping Center	Fort Worth / Dallas, TX	August 2015	126,755

~~The following table summarizes the aggregate purchase price allocation for the properties acquired as part of the Merger with Inland Diversified as of July 1, 2014 (in thousands):~~

Assets:
Investment properties, net $ 2,095,567
Deferred costs, net 143,210
Investments in marketable securities 18,602
Cash and cash equivalents 108,666
Accounts receivable, prepaid expenses, and other 20,157
Total Assets $ 2,386,202

Liabilities:
Mortgage and other indebtedness, including debt premium of $33,298 $ 892,909
Deferred revenue and other liabilities 129,935
Accounts payable and accrued expenses 59,314
Total Liabilities 1,082,158

Noncontrolling interests 69,356
Common shares issued 1,234,688
Total Allocated Purchase Price $ 2,386,202

The remaining operating properties acquired through the Merger with Inland Diversified generated total revenue of $122.2 million and consolidated net income of $10.5 million for the nine months ended September 30, 2015. This includes total revenue and consolidated net income through the date of sale from the seven operating properties we sold to IREIT in March 2015 (see Note 10).

Acquisition costs for the nine months ended September 30, 2015 of $1.6 million related to our acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center. Merger costs of $26.8 million for the nine months ended September 30, 2014 related to our Merger with Inland Diversified and were mainly comprised of investment banking, due diligence, legal, and other professional expenses.

Note 12. 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. These proceeds, net of certain costs, are included in gain on settlement within the statement of operations. ~~In July 2015, we~~We used the net proceeds to pay down ~~a portion of~~ the secured loan ~~secured by the~~at this operating property.

Note 13. Subsequent Events

On October 26, 2015, we entered into a seven-year unsecured term loan for up to $200 million. The term loan will be funded on a delayed draw basis at our discretion over the next 8 months and has a scheduled maturity dateRetirement of October 2022. The Operating Partnership has the ability to make a total of three draws and each draw must be at least $25 million. Any draws under the term loan must be made by June 30, 2016. The proceeds will primarily be used to retire loans secured by certain operating properties with maturity dates in 2016 or to fund the redemption of our outstanding preferred shares.Secured Debt

On ~~October 30, 2015,~~November 1, 2016, we ~~announced that we intend to redeem all 4,100,000 outstanding shares of~~retired the $25 million loan secured by our ~~8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”)~~Colonial Square and Village Walk operating properties using a draw on December 7, 2015. The Series A Preferred Shares will be redeemed at a redemption price of $25.00 per share, plus $0.0287 per share, the amount equal to all accrued and unpaid dividends from December 2, 2015 up to, but not including, the redemption date. The Series A Preferred Shares will have a total redemption value of approximately $102.6 million. In conjunction with the redemption, approximately $3.8 million of initial issuance costs will be a non-cash charge against income attributable to common shareholders. our unsecured revolving credit facility.

On November 1, 2016, we retired the $10.4 million loan secured by our Geist Pavilion operating property, which included a release of a $1.6 million letter of credit, using a draw on our unsecured revolving credit facility.

Item 2.

Cautionary Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by us, ~~contains~~contain 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 economic uncertainty ~~added to~~caused by fluctuations in the ~~economic forecast due to the sharp drop in~~prices of oil and other energy ~~prices in 2015;~~sources;

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, Indiana and Texas;

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 ~~uncertainties and factors~~risks identified in this Quarterly Report on Form 10-Q and, from time to time, in other reports we file with the ~~SEC~~Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate, including, in particular, the section titled “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, ~~2014.~~2015.

~~The Company undertakes~~We undertake no obligation to publicly update or revise these forward-looking statements, whether as a result of new information, future events or otherwise.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in connection with the accompanying historical financial statements and related notes thereto. 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.

Our Business and Properties

Kite Realty Group Trust is a publicly-held real estate investment trust which, 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 activities associated with the collection of contractual 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~~lease payments, ~~conditions in~~the health and resilience of the United States retail sector, interest rate volatility, job growth and overall economic and real estate market conditions.

At September 30, 2016, we owned interests in 120 operating and redevelopment properties consisting of 109 retail properties, nine retail redevelopment properties, one office operating property and an associated parking garage. We also owned one development property under construction as of this date.

At September 30, 2015, we owned interests in 121 operating and redevelopment properties consisting of ~~119~~113 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. In addition, we also owned interests in other land parcels comprising 94 acres that may be used for future expansion of existing properties, development of new retail or office properties or sold to third parties.

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 September 30, 2014, we owned interests in 129 operating and redevelopment properties consisting of 127 retail properties, one office operating property and an associated parking garage and three development properties under construction.

Current Quarter Actions

~~We continue to execute on our strategy to maximize shareholder value, including:~~

~~Acquisition,~~ Development and Redevelopment ~~Activities.~~ Activities

We believe evaluating our operating properties for development and redevelopment opportunities enhances shareholder value as it will make them more attractive for leasing to new tenants and it improves long-term values and economic returns. We initiated and advanced a number of development and redevelopment activities during the quarter, including the following:

Holly Springs Towne Center – Phase II~~Since~~ near Raleigh, North Carolina – This property was substantially completed in June ~~30, 2015, we have acquired $90 million of real estate assets. In July 2015, we acquired Livingston Shopping Center, a 140,000 square foot shopping center~~2016 and transitioned to the operating portfolio. The remaining anchor, Carmike Theatres, opened in ~~Newark, New Jersey. The center is 95.4% leased and anchored by Nordstrom Rack, TJ Maxx, Cost Plus (World Market), Buy Buy Baby,~~October 2016 to join anchors DSW and ~~Ulta. In August~~Bed Bath & Beyond, which opened in March 2016 and December 2015, we acquired Chapel Hill Shopping Center, a 127,000 square foot shopping center in Fort Worth, Texas. The center is 97.8% leased and anchored by H-E-B Grocery, The Container Store, and Cost Plus (World Market).respectively.

Under Construction Redevelopment, Reposition, and Repurpose Projects. Our Redevelopment, Reposition and Repurpose (“3-R”) initiative, which includes a total of 24 existing and potential projects, continued to progress during the third quarter of 2016. We commenced construction on four additional 3-R projects, for a total of twelve projects under construction. These twelve projects have an estimated incremental return averaging approximately 9% to 10%, with aggregate costs for all of these projects expected to range between $58.1 million and $67.0 million.

Operational ~~Activities.~~ Activities

During the third quarter of ~~2015,~~2016, we executed ~~107~~ new and renewal leases on 110 individual spaces totaling ~~796,000~~627,925 square feet. WeNew leases were signed ~~comparable new leases with 24 tenants~~on 49 individual spaces for ~~69,000~~208,320 square feet of ~~gross leasable area ("GLA") and comparable~~GLA, while renewal leases ~~with 48 tenants~~were signed on 61 individual spaces for ~~515,000~~419,605 square feet of GLA. We

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 ~~13.1% on these comparable signed leases~~9.7% while incurring ~~$4.32~~$18.05 per square foot of incremental capital improvement costs. The average ~~rents~~rent for the 23 new comparable leases signed on individual spaces in the third quarter of ~~2015 were $20.50~~2016 was $23.95 per square foot compared to average expiring ~~rents~~rent of ~~$14.98~~$21.17 per square foot in that quarter. The average ~~rents~~rent for the 61 renewals signed on individual spaces in the third quarter of ~~2015 were $9.61~~2016 was $17.08 per square foot compared to average expiring ~~rents~~rent of ~~$8.92~~$15.72 per square foot in that quarter. ~~Further, average leasing costs for new comparable leases signed in the third quarter of 2015 were $30.79 per square foot, while there were minimal leasing costs incurred for renewal leases.~~

Our same property net operating income increased 3.1% and 3.5% for the three and nine months ended September 30, 2015 compared to the same periods of the prior year. These increases were primarily due to increases in rental rates (as described above), and improved expense control and real estate tax recovery resulting in an improvement in net recoveries of $0.5 million and $1.0 million for the three and nine months ended September 30, 2015, respectively.

~~Capital Activity.~~ In August 2015, the Operating Partnership entered into a Note Purchase Agreement (the “Note Purchase Agreement”) with various purchasers 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 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 September 30, 2015, we were in compliance with all such covenants.

Results of Operations

The comparability of results of operations for the nine months ended September 30, 2016 and 2015 ~~and 2014~~ is ~~significantly~~ affected ~~by our Merger with Inland Diversified on July 1, 2014 and, to a lesser extent,~~ by our development, redevelopment and operating property acquisition and disposition activities during these periods. Therefore, we believe it is useful to review the comparisons of our results of operations for these periods in conjunction with the discussion of ~~these~~our activities during those periods, which is set forth below.

Property Acquisitions

The following operating properties were acquired between January 1, ~~2014~~2015 and September 30, ~~2015:~~2016 and, therefore, our consolidated statements of operations include the results of partial periods for these properties:



Property Name	MSA	Acquisition Date	Owned GLA

~~Merger with Inland Diversified~~	~~Various - 60 properties~~	~~July 2014~~	~~10,719,471~~

~~Rampart Commons~~	~~Las Vegas, NV~~	~~December 2014~~	~~81,456~~

Colleyville Downs	Dallas, TX	April 2015	~~185,848~~191,126

Belle Isle Station	Oklahoma City, OK	May 2015	~~164,337~~164,362

Livingston Shopping Center	New York - Newark	July 2015	~~139,657~~139,605

Chapel Hill Shopping Center	Fort Worth / Dallas, TX	August 2015	126,755

Property Dispositions

In ~~2014~~2015 and ~~2015,~~2016, we sold the following operating properties:



Property Name	MSA	Disposition Date	Owned GLA
Sale of seven operating properties
~~50th and 12th (Walgreens)~~	~~Seattle, WA~~	~~January 2014~~	~~14,500~~
~~Red Bank Commons~~	~~Evansville, IN~~	~~March 2014~~	~~34,258~~
~~Ridge Plaza~~	~~Oak Ridge, NJ~~	~~March 2014~~	~~115,088~~
~~Zionsville Walgreens~~	~~Zionsville, IN~~	~~September 2014~~	~~14,550~~
~~Tranche I of Portfolio Sale to IREIT~~	Various	~~November & December 2014~~	~~805,644~~
~~Tranche II of Portfolio Sale to IREIT~~	~~Various~~¹	March 2015	740,034
Cornelius Gateway	Portland, OR	December 2015	21,326
Four Corner Square	Seattle, WA	December 2015	107,998
Shops at Otty	Portland, OR	June 2016	9,845



____________________
1	Shortly after the merger with Inland Diversified, we identified and sold certain properties located in multiple MSAs that were not consistent with the Company's strategic plan.

Development Activities

The following development properties became partially operational at various times from January 1, ~~2014~~2015 through September 30, ~~2015:~~2016 :



Property Name	MSA	Economic Occupancy Date¹	Owned GLA

~~Parkside Town Commons – Phase I~~	~~Raleigh, NC~~	~~March 2014~~	~~122,143~~
~~Parkside Town Commons~~Holly Springs Towne Center – Phase II	Raleigh, NC	~~September 2014~~December 2015	~~297,436~~122,032
Tamiami Crossing	Naples, FL	March 2016	121,949



____________________
1	Represents the earlier of the date on which we started receiving rental payments ~~under tenant leases or ground leases~~ at the property or ~~the~~a tenant took possession of ~~the property, whichever was earlier.~~its space.

Redevelopment Activities

The following properties were under redevelopment at various times during the period from January 1, ~~2014~~2015 through September 30, ~~2015:~~2016:



Property Name	MSA	Transition to Redevelopment¹	Transition to Operations	Owned GLA
Gainesville Plaza	Gainesville, FL	June 2013	December 2015	162,693
~~King’s Lake Square~~Cool Springs Market	Nashville, TN	July 2015	December 2015	230,988
Courthouse Shadows^2,3	Naples, FL	~~April 2014~~	~~87,073~~
~~Bolton Plaza~~	~~Jacksonville, FL~~	~~September 2014~~	~~164,655~~
~~Gainesville Plaza~~¹	~~Gainesville, FL~~June 2013	Pending	~~162,693~~8,160
~~Cool Springs Market~~Hamilton Crossing Centre²	~~Franklin, TN~~Indianapolis, IN	June 2014	Pending	~~230,912~~93,839
City Center²	White Plains, NY	December 2015	Pending	313,139
Fishers Station²	Indianapolis, IN	December 2015	Pending	175,290
Beechwood Promenade²	Athens, GA	December 2015	Pending	353,970
The Corner²	Indianapolis, IN	December 2015	Pending	26,500
Rampart Commons²	Las Vegas, NV	March 2016	Pending	81,292
Northdale Promenade²	Tampa, FL	March 2016	Pending	179,680
Burnt Store²	Punta Gorda, FL	June 2016	Pending	95,787



____________________
1	~~In March 2015, Ross Dress for Less opened to join Burlington Coat Factory as anchors at~~Transition date represents the ~~project.~~ date the property was transferred from our operating portfolio into redevelopment status.
2	InThese operating properties have been identified as redevelopment properties and they are not included in the ~~second quarter~~operating portfolio or the same property pool.
3	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 ~~2015, we signed new leases with DSW and Buy Buy Baby and their spaces are currently under construction.~~140,710 square feet.

Comparison of Operating Results for the Three Months Ended September 30, 2016 to the Three Months Ended September 30, 2015

31The following table reflects our consolidated statements of operations for the three months ended September 30, 2016 and 2015. The comparability of the periods is impacted by acquisitions, dispositions, and redevelopments previously described.



($ in thousands)	2016			2015			Net change 2015 to 2016
Revenue:
Rental income (including tenant reimbursements)	$	87,049		$	83,066		$	3,983
Other property related revenue	2,073			4,081			(2,008		)
Total revenue	89,122			87,147			1,975
Expenses:
Property operating	11,916			11,994			(78		)
Real estate taxes	10,690			10,045			645
General, administrative, and other	5,081			4,559			522
Transaction costs	—			1,089			(1,089		)
Depreciation and amortization	45,543			42,549			2,994
Total expenses	73,230			70,236			2,994
Operating income	15,892			16,911			(1,019		)
Interest expense	(17,139		)	(13,881		)	(3,258		)
Income tax expense of taxable REIT subsidiary	(15		)	(9		)	(6		)
Other expense, net	—			(60		)	60
(Loss) income before gain on sale of operating properties	(1,262		)	2,961			(4,223		)
Gain on sales of operating properties	—			—			—
Consolidated net (loss) income	(1,262		)	2,961			(4,223		)
Net income attributable to noncontrolling interests	(420		)	(435		)	15
Net (loss) income attributable to Kite Realty Group Trust	(1,682		)	2,526			(4,208		)
Dividends on preferred shares	—			(2,114		)	2,114
Net (loss) income attributable to common shareholders	$	(1,682	)	$	412		$	(2,094	)

Property operating expense to total revenue ratio	13.4		%	13.8		%

Rental income (including tenant reimbursements) increased $4.0 million, or 4.8%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	855
Development properties that became operational or were partially operational in 2015 and/or 2016	1,170
Properties sold during 2015 and 2016	(780		)
Properties under redevelopment during 2015 and/or 2016	1,458
Properties fully operational during 2015 and 2016 and other	1,280
Total	$	3,983

The net increase of $0.9 million in rental income at properties acquired during 2015 is attributable to the acquisitions of Livingston Shopping Center and Chapel Hill Shopping Center in the third quarter of 2015. The net decrease of $0.8 million in rental income at properties sold during 2015 and 2016 is due to the sale of two operating properties in December 2015 and one operating property in June 2016. The net increase of $1.3 million in rental income for properties fully operational during 2015 and 2016 is primarily attributable to an increase in rental rates.

The average rent for new comparable leases signed in the third quarter of 2016 was $23.95 per square foot compared to average expiring rent of $21.17 per square foot in that quarter. The average rent for renewals signed in the third quarter of 2016 was $17.08 per square foot compared to average expiring rent of $15.72 per square foot in that quarter. For our total retail operating portfolio, annualized base rent per square foot improved to $15.42 per square foot as of September 30, 2016, up from $15.24 as of September 30, 2015.

Other property related revenue primarily consists of parking revenues, overage rent, lease termination income and gains on sales of undepreciated assets. This revenue decreased by $2.0 million, primarily as a result of lower gains on sales of undepreciated assets of $2.9 million, partially offset by an increase of $0.7 million in lease termination income.

Property operating expenses decreased $0.1 million, or 0.7%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	303
Development properties that became operational or were partially operational in 2015 and/or 2016	335
Properties sold during 2015 and 2016	(202		)
Properties under redevelopment during 2015 and/or 2016	(145		)
Properties fully operational during 2015 and 2016 and other	(369		)
Total	$	(78	)

The net increase of $0.3 million in property operating expenses at properties acquired during 2015 is attributable to the acquisitions of Livingston Shopping Center and Chapel Hill Shopping Center in the third quarter of 2015. The net decrease of $0.2 million in property operating expenses at properties sold during 2015 and 2016 is due to the sale of two operating properties in December 2015 and one operating property in June 2016. The net $0.4 million decrease for properties fully operational during 2015 and 2016 is primarily due to a combination of a decrease of $0.8 million in bad debt expense and $0.2 million in insurance costs as we generated efficiencies with our larger operating platform. These decreases were offset by an increase of $0.4 million in general building repair and landscaping costs at certain properties and $0.2 million in legal expenses.

Property operating expenses as a percentage of total revenue for the three months ended September 30, 2016 was 13.4% compared to 13.8%, or a change of approximately $0.1 million, over the same period in the prior year. The decrease was mostly due to an improvement in expense control and an improvement in operating expense recoveries from tenants.

Real estate taxes increased $0.6 million, or 6.4%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	308
Development properties that became operational or were partially operational in 2015 and/or 2016	112
Properties sold during 2015 and 2016	(87		)
Properties under redevelopment during 2015 and/or 2016	28
Properties fully operational during 2015 and 2016 and other	284
Total	$	645

The $0.3 million increase in real estate taxes at properties acquired during 2015 is attributable to the acquisitions of Livingston Shopping Center and Chapel Hill Shopping Center in the third quarter of 2015. The net $0.3 million increase in real estate taxes

for properties fully operational during 2015 and 2016 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 $0.5 million, or 11.4%. The increase is due primarily to higher payroll costs and company overhead expenses of $0.4 million.

Transaction costs generally consist of legal, lender, due diligence, and other expenses for professional services. Such costs decreased $1.1 million as we had no transaction activity during the three months ended September 30, 2016.

Depreciation and amortization expense increased $3.0 million, or 7.0%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	415
Development properties that became operational or were partially operational in 2015 and/or 2016	2,375
Properties sold during 2015 and 2016	(409		)
Properties under redevelopment during 2015 and/or 2016	1,747
Properties fully operational during 2015 and 2016 and other	(1,134		)
Total	$	2,994

The net increase of $0.4 million in depreciation and amortization expense at properties acquired during 2015 is attributable to the acquisitions of Livingston Shopping Center and Chapel Hill Shopping Center in the third quarter of 2015. The net decrease of $0.4 million in depreciation and amortization expense at properties sold during 2015 and 2016 is due to the sale of two operating properties in December 2015 and one operating property in June 2016. The net increase of $1.7 million in properties under redevelopment during 2015 and 2016 is primarily due to an increase of $1.7 million in accelerated depreciation and amortization from the demolition of a portion of a building at one of our redevelopment properties. The net decrease of $1.1 million in depreciation at properties fully operational during 2015 and 2016 is primarily due to a decrease in accelerated depreciation and amortization related to multiple tenants vacating at several operating properties in 2016 compared to the same period in 2015 and a decrease in depreciation related to tenant-specific assets becoming fully depreciated in 2016.

Interest expense increased $3.3 million or 23.5%. The increase is partially due to recording $1.0 million in accelerated amortization of debt issuance costs from amending the unsecured term loans and retiring Term Loan A. In addition, we secured longer-term fixed rate debt in the second half of 2015 and in the third quarter of 2016 that carried higher interest rates than the variable rate on our unsecured revolving credit facility, which was paid down with the proceeds. We also redeemed all of our outstanding preferred stock in the fourth quarter of 2015 using the proceeds from the fixed rate debt. The increase was also due to certain development projects, including Parkside Town Commons - Phase I and Holly Springs Towne Center - Phase II becoming operational. As a portion of the project becomes operational, we cease capitalization of the related interest expense.

Comparison of Operating Results for the Nine Months Ended September 30, 2016 to the Nine Months Ended September 30, 2015

The following table reflects our consolidated statements of operations for the nine months ended September 30, 2016 and 2015 . The comparability of the periods is impacted by acquisitions, dispositions, and redevelopments previously described.



($ in thousands)	2016			2015			Net change 2015 to 2016
Revenue:
Rental income (including tenant reimbursements)	$	258,127		$	248,547		$	9,580
Other property related revenue	7,120			9,163			(2,043		)
Total revenue	265,247			257,710			7,537
Expenses:
Property operating	35,454			36,519			(1,065		)
Real estate taxes	32,327			29,821			2,506
General, administrative, and other	15,228			14,131			1,097
Transaction costs	2,771			1,550			1,221
Depreciation and amortization	131,625			124,196			7,429
Total expenses	217,405			206,217			11,188
Operating income	47,842			51,493			(3,651		)
Interest expense	(47,964		)	(40,995		)	(6,969		)
Income tax expense of taxable REIT subsidiary	(763		)	(134		)	(629		)
Gain on settlement	—			4,520			(4,520		)
Other expense, net	(94		)	(189		)	95
Income before gain on sale of operating properties	(979		)	14,695			(15,674		)
Gain on sales of operating properties	194			3,363			(3,169		)
Consolidated net income	(785		)	18,058			(18,843		)
Net income attributable to noncontrolling interests	(1,391		)	(1,626		)	235
Net (loss) income attributable to Kite Realty Group Trust	(2,176		)	16,432			(18,608		)
Dividends on preferred shares	—			(6,342		)	6,342
Net (loss) income attributable to common shareholders	$	(2,176	)	$	10,090		$	(12,266	)

Property operating expense to total revenue ratio	13.4		%	14.2		%

Rental income (including tenant reimbursements) increased $9.6 million, or 3.9%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	7,418
Development properties that became operational or were partially operational in 2015 and/or 2016	3,580
Properties sold during 2015 and 2016	(5,165		)
Properties under redevelopment during 2015 and/or 2016	794
Properties fully operational during 2015 and 2016 and other	2,953
Total	$	9,580

The net increase of $7.4 million in rental income at properties acquired during 2015 is attributable to the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in the second and third quarters of 2015. The net decrease of $5.2 million in rental income at properties sold during 2015 and 2016 is due to the sale of seven operating properties in March 2015, two operating properties in December 2015, and one operating property in June 2016.

The net increase of $3.0 million in rental income for properties fully operational during 2015 and 2016 is primarily attributable to an increase in rental rates, and an increase in expense recoveries through year end reconciliations of common area maintenance, insurance and real estate tax expense.

The average rent for new comparable leases signed in the first nine months of 2016 was $22.17 per square foot compared to average expiring rent of $19.38 per square foot in that period. The average rent for renewals signed in the first nine months of 2016 was $16.24 per square foot compared to average expiring rent of $15.08 per square foot in that period. For our full operating portfolio, annualized base rent per square foot improved to $15.42 per square foot as of September 30, 2016, up from $15.24 as of September 30, 2015.

Other property related revenue primarily consists of parking revenues, overage rent, lease termination income and gains on sales of undepreciated assets. This revenue decreased by $2.0 million, primarily as a result lower gains on sales of undepreciated assets of $0.9 million and decreases of $0.7 million in lease termination income and fluctuations in other miscellaneous activities.

Property operating expenses decreased $1.1 million, or 2.9%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	1,655
Development properties that became operational or were partially operational in 2015 and/or 2016	709
Properties sold during 2015 and 2016	(981		)
Properties under redevelopment during 2015 and/or 2016	(459		)
Properties fully operational during 2015 and 2016 and other	(1,989		)
Total	$	(1,065	)

The net increase of $1.7 million in property operating expenses at properties acquired during 2015 is attributable to the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in the second and third quarter of 2015. The net decrease of $1.0 million in property operating expenses at properties sold during 2015 and 2016 is due to the sale of seven operating properties in March 2015, two operating properties in December 2015, and one operating property in June 2016. The net $2.0 million decrease for properties fully operational during 2015 and 2016 is primarily due to a combination of a decrease of $1.0 million in bad debt expense, $0.5 million in insurance costs as we generated efficiencies with our larger operating platform, $0.4 million in general building repair costs at certain properties, $0.4 million in utility expense, and $0.2 million in landscaping expense. The decreases were offset by an increase of $0.2 million in security expense, $0.2 million in advertising expense and $0.1 million in association fees.

Property operating expenses as a percentage of total revenue for the nine months ended September 30, 2016 was 13.4% compared to 14.2%, or a change of approximately $0.3 million, over the same period in the prior year. The decrease was mostly due to an improvement in expense control and an improvement in operating expense recoveries from tenants as a result of higher occupancy rates.

Real estate taxes increased $2.5 million, or 8.4%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	1,605
Development properties that became operational or were partially operational in 2015 and/or 2016	249
Properties sold during 2015 and 2016	(514		)
Properties under redevelopment during 2015 and/or 2016	(37		)
Properties fully operational during 2015 and 2016 and other	1,203
Total	$	2,506

The $1.6 million increase in real estate taxes at properties acquired during 2015 is attributable to the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in the second and third quarter of 2015. The net decrease of $0.5 million in real estate taxes at properties sold during 2015 and 2016 is due to the sale of seven operating properties in March 2015, two operating properties in December 2015, and one operating property in June 2016. The net $1.2 million increase in real estate taxes for properties fully operational during 2015 and 2016 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 $1.1 million, or 7.8%. The increase is due primarily to a severance charge of $0.5 million in the first quarter of 2016 and higher payroll costs and company overhead expenses of $0.6 million.

Transaction costs generally consist of legal, lender, due diligence, and other expenses for professional services. Such costs increased $1.2 million as we had terminated transaction costs of $2.8 million for the nine months ended September 30, 2016, compared to property acquisition costs of $1.6 million for the nine months ended September 30, 2015.

Depreciation and amortization expense increased $7.4 million, or 6.0%, due to the following:



($ in thousands)	Net change 2015 to 2016
Properties acquired during 2015	$	3,923
Development properties that became operational or were partially operational in 2015 and/or 2016	3,286
Properties sold during 2015 and 2016	(1,202		)
Properties under redevelopment during 2015 and/or 2016	2,067
Properties fully operational during 2015 and 2016 and other	(644		)
Total	$	7,430

The net increase of $3.9 million in depreciation and amortization expense at properties acquired during 2015 is attributable to the acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center in the second and third quarter of 2015. The net decrease of $1.2 million in depreciation and amortization expense at properties sold during 2015 and 2016 is due to the sale of seven operating properties in March 2015, two operating properties in December 2015, and one operating property in June 2016. The net increase of $2.1 million in properties under redevelopment during 2015 and 2016 is primarily due to an increase of $1.7 million in accelerated depreciation and amortization from the demolition of a portion of a building at one of our redevelopment properties. The net decrease of $0.6 million in depreciation at properties fully operational during 2015 and 2016 is due to a decrease in accelerated depreciation and amortization on tenant-specific assets from multiple tenants vacating at several operating properties in the first nine months of 2016, compared to the accelerated depreciation and amortization on tenant-specific assets recorded in the same period in 2015.

Interest expense increased $7.0 million or 17.0%. The increase is due to recording $1.0 million in accelerated amortization of debt issuance costs from amending the unsecured term loans, retiring Term Loan A and securing longer-term fixed rate debt in the second half of 2015 and in the third quarter of 2016 that carried higher interest rates than the variable rate on our unsecured revolving credit facility, which was paid down with the proceeds. We also redeemed all of our outstanding preferred stock in the fourth quarter of 2015 using the proceeds from the fixed rate debt. The increase is also due to certain development projects, including Parkside Town Commons - Phase I and Holly Springs Towne Center - Phase II becoming operational. As a portion of the project becomes operational, we cease capitalization of the related interest expense.

We recorded a gain on settlement of $4.5 million for the nine months ended September 30, 2015. See additional discussion in Note 12 to the consolidated financial statements.

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. The Company’s computation of Same Property NOI may differ from the methodology used by other REITs, and therefore, may not be comparable to such other REITs.

When evaluating the properties that are included in the same property pool, we have established specific criteria infor 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.~~likely and we begin recapturing space from tenants. For the three months ended September 30, ~~2015,~~2016, we excluded ~~six~~nine current redevelopment properties from the same property pool that met these criteria and were owned in all periods compared.

The following table reflects same property net operating income (and reconciliation to net income attributable to common shareholders) for the three and nine months ended September 30, ~~2015~~2016 and ~~2014:~~2015:


	Three Months Ended September 30,								Nine Months Ended September 30,								Three Months Ended September 30,								Nine Months Ended September 30,
($ in thousands)	2015			2014			% Change		2015			2014			% Change		2016			2015			% Change		2016			2015			% Change
Number of properties at period end¹	110			110					110			110
Number of properties for the quarter¹																	103			103

Leased percentage at period end	95.4		%	94.9		%			95.4		%	94.9		%
Economic Occupancy percentage at period end²	93.6		%	93.5		%			93.6		%	93.5		%
Leased percentage																	95.3		%	95.4		%			95.3		%	95.2		%
Economic Occupancy percentage²																	93.6		%	93.7		%			93.8		%	93.6		%

Net operating income - same properties³	$	57,012		$	55,321		3.1	%	$	111,008		$	107,221		3.5	%	$	53,662		$	52,579		2.1	%	$	158,368		$	154,220		2.7	%
Net operating income - same properties excluding the impact of the 3-R initiative⁴																							2.9	%

Reconciliation of Same Property NOI to Most Directly Comparable GAAP Measure:
Net operating income - same properties	$	57,012		$	55,321				$	111,008		$	107,221				$	53,662		$	52,579				$	158,368		$	154,220
Net operating income - non-same activity⁴	8,096			10,773					80,362			18,753
Net operating income - non-same activity⁵																	12,854			12,529					39,098			37,150
Other expense, net																	(15		)	(69		)			(857		)	(323		)
General, administrative and other	(4,559		)	(3,939		)			(14,131		)	(9,358		)			(5,081		)	(4,559		)			(15,228		)	(14,131		)
Merger and acquisition costs	(1,089		)	(19,088		)			(1,550		)	(26,849		)
Transaction costs																	—			(1,089		)			(2,771		)	(1,550		)
Depreciation expense	(42,549		)	(44,383		)			(124,196		)	(81,559		)			(45,543		)	(42,549		)			(131,625		)	(124,196		)
Interest expense	(13,881		)	(15,386		)			(40,995		)	(30,291		)			(17,139		)	(13,881		)			(47,964		)	(40,995		)
Gain on settlement	—			—					4,520			—					—			—					—			4,520
Other expense, net	(69		)	(27		)			(323		)	(156		)
Discontinued operations	—			—					—			3,199
Gains on sales of operating properties	—			2,749					3,363			6,336					—			—					194			3,363
Net income attributable to noncontrolling interests	(435		)	(304		)			(1,626		)	(224		)			(420		)	(435		)			(1,391		)	(1,626		)
Dividends on preferred shares	(2,114		)	(2,114		)			(6,342		)	(6,342		)			—			(2,114		)			—			(6,342		)
Net income (loss) attributable to common shareholders	$	412		$	(16,398	)			$	10,090		$	(19,270	)
Net (loss) income attributable to common shareholders																	$	(1,682	)	$	412				$	(2,176	)	$	10,090



____________________
1	Same property analysis excludes operating properties in ~~redevelopment.~~redevelopment as well as office properties (Thirty South Meridian and Eddy Street Commons).
2	Excludes leases that are signed but for which tenants have not yet commenced the payment of cash rent. Calculated as a weighted average based on the timing of cash rent commencement during the period.
3	Same property net operating income 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.
4	See pages 27 and 28 of the Quarterly Financial Supplemental for further detail of the properties included in the 3-R initiative.
5	Includes non-cash ~~accounting items~~activity across the portfolio as well as net operating income from properties not included in the same property pool.

~~Comparison of Operating Results~~Our same property net operating income increased 2.1% and 2.7% for the ~~Three Months Ended~~three and nine months ended September 30, ~~2015~~2016 compared to the ~~Three Months Ended~~same period of the prior year. These increases were primarily due to increases in rental rates and improved expense control and operating expense recovery resulting in an improvement in net recoveries of $0.2 million and $1.4 million for the three and nine months ended September 30, ~~2014~~

~~The following table reflects our consolidated statements of operations for~~2016. Excluding the properties in the 3-R initiative, same property net operating income increased 2.9% in the three months ended September 30, ~~2015 and 2014. The comparability of the periods is impacted by the merger, acquisitions, dispositions, and redevelopments previously described.~~

($ in thousands) 2015 2014 Net change 2014 to 2015
Revenue:
Rental income (including tenant reimbursements) $ 83,066
$ 86,638
$ (3,572 )
  Other property related revenue 4,081
1,938
2,143
Total revenue 87,147
88,576
(1,429 )
Expenses:
  Property operating 11,994
11,850
144
  Real estate taxes 10,045
10,632
(587 )
  General, administrative, and other 4,559
3,939
620
  Merger and acquisition costs 1,089
19,088
(17,999 )
  Depreciation and amortization 42,549
44,383
(1,834 )
Total expenses 70,236
89,892
(19,656 )
Operating income 16,911
(1,316 ) 18,227
  Interest expense (13,881 ) (15,386 ) 1,505
  Income tax expense of taxable REIT subsidiary (9 ) (14 ) 5
  Other expense, net (60 ) (13 ) (47 )
Income (loss) before gain on sale of operating properties 2,961
(16,729 ) 19,690
  Gain on sales of operating properties —
2,749
(2,749 )
Consolidated net income (loss) 2,961
(13,980 ) 16,941
Net income attributable to noncontrolling interests (435 ) (304 ) (131 )
Net income (loss) attributable to Kite Realty Group Trust 2,526
(14,284 ) 16,810
Dividends on preferred shares (2,114 ) (2,114 ) —
Net income (loss) attributable to common shareholders $ 412
$ (16,398 ) $ 16,810

Property operating expense to total revenue ratio 13.8 % 13.4 %

~~Rental income (including tenant reimbursements) decreased $3.6 million, or 4.1%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 $ 3,877
Development properties that became operational or were partially operational in 2014 and/or 2015 1,038
Properties sold during 2014 or 2015 (7,244 )
Properties under redevelopment during 2014 and/or 2015 49
Properties fully operational during 2014 and 2015 and other (1,292 )
Total $ (3,572 )

The net increase of $3.9 million in rental income at properties acquired during 2014 or 2015 is attributable to the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center. The Inland merger properties acquired on July 1, 2014 are included in properties fully operational during 2014 and 2015 as a full quarter of rental income was recorded for these properties during both the third quarter of 2014 and 2015. The net decrease of $7.2 million in rental income at properties sold during 2014 or 2015 is primarily due to the sale of 15 operating properties to IREIT in November/December 2014 and March 2015. The net decrease of $1.3 million in rental income for properties fully operational is primarily attributable to a $0.3 million decrease in current year tax reimbursements due to successful real estate tax appeals and a $1.1 million prior year acceleration of below market lease revenue as a result of lease terminations.2016.

The average rents for new comparable leases signed in the third quarter of 2015 were $20.50 per square foot compared to average expiring rents of $14.98 per square foot in that quarter. The average rents for renewals signed in the third quarter of 2015 were $9.61 per square foot compared to average expiring rents of $8.92 per square foot in that quarter. For our full operating portfolio, annualized base rent per square foot improved to $15.24 per square foot as of September 30, 2015, up from $14.98 as of September 30, 2014 due to recent acquisition activity.

Other property related revenue primarily consists of parking revenues, overage rent, lease termination income and gains from land parcel sales. This revenue increased by $2.1 million, primarily as a result of higher gains on land sales of $2.7 million, which was partially offset by a decrease of $1.0 million in lease termination income.

~~Property operating expenses increased $0.1 million, or 1.2%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 $ 616
Development properties that became operational or were partially operational in 2014 and/or 2015 140
Properties sold during 2014 or 2015 (927 )
Properties under redevelopment during 2014 and/or 2015 30
Properties fully operational during 2014 and 2015 and other 285
Total $ 144

The net increase of $0.6 million in property operating expenses at properties acquired during 2014 or 2015 is attributable to the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center. The Inland merger properties acquired on July 1, 2014 are included in properties fully operational during 2014 and 2015 as a full quarter of property operating expenses was recorded for these properties during both the third quarter of 2014 and 2015. The net decrease of $0.9 million in rental income at properties sold during 2014 or 2015 is primarily due to the sale of 15 operating properties to IREIT in November/December 2014 and March 2015. The net $0.3 million increase for properties fully operational is due to a combination of a decrease in insurance costs as we leveraged our larger operating platform, a decrease in

roof maintenance costs, an increase in landscaping and parking lot repair costs and an increase in general building repair costs at certain properties. None of the individual fluctuations were greater than $0.2 million.

Property operating expenses as a percentage of total revenue for the three months ended September 30, 2015 was 13.8% compared to 13.4% over the same period in the prior year. The increase in the percentage was mostly due to higher non-recoverable expenses, which was partially offset by an improvement in other expense recoveries from tenants. For the total portfolio, the overall recovery ratio for reimbursable expenses improved to 87.4% for the three months ended September 30, 2015 compared to 86.5% for the three months ended September 30, 2014.

~~Real estate taxes decreased $0.6 million, or 5.5%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 $ 529
Development properties that became operational or were partially operational in 2014 and/or 2015 73
Properties sold during 2014 or 2015 (746 )
Properties under redevelopment during 2014 and/or 2015 (15 )
Properties fully operational during 2014 and 2015 and other (428 )
Total $ (587 )

~~The $0.5 million increase in real estate taxes at properties acquired during 2014 or 2015 is attributable to~~ ~~the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center~~. The Inland merger properties acquired on July 1, 2014 are included in properties fully operational during 2014 and 2015 as a full quarter of property operating expenses was recorded for these properties during both the third quarter of 2014 and 2015. The net decrease of $0.7 million in real estate taxes at properties sold during 2014 or 2015 is primarily due to the sale of 15 operating properties to IREIT in November/December 2014 and March 2015. The net $0.4 million decrease in real estate taxes for properties fully operational during 2014 and 2015 was primarily due to lower tax assessments and successful real estate tax appeals 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 $0.6 million, or 15.7%, due primarily to higher public company and personnel costs.~~

Merger and acquisition costs in 2014 related almost entirely to our Merger with Inland Diversified and totaled $19.1 million for the three months ended September 30, 2014 compared to $1.1 million of costs for property acquisitions for the three months ended September 30, 2015.

~~Depreciation and amortization expense decreased $1.8 million, or 4.1%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 $ 2,744
Development properties that became operational or were partially operational in 2014 and/or 2015 492
Properties sold during 2014 or 2015 (3,470 )
Properties under redevelopment during 2014 and/or 2015 349
Properties fully operational during 2014 and 2015 and other (1,949 )
Total $ (1,834 )

The net increase of $2.7 million in depreciation and amortization expense at properties acquired during 2014 or 2015 is attributable to the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center. 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 operating properties to IREIT in November/December 2014 and March 2015. The net $1.9 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 accelerating the depreciation on certain tenant improvement costs.

~~Interest expense decreased $1.5 million or 9.8%. The decrease is mainly attributable to a reduction in secured debt in connection with the sale of properties to IREIT.~~

~~Comparison of Operating Results for the Nine Months Ended September 30, 2015 to the Nine Months Ended September 30, 2014~~

The following table reflects our consolidated statements of operations for the nine months ended September 30, 2015 and 2014. The comparability of the periods is impacted by the merger, acquisitions, dispositions, and redevelopments previously described.

($ in thousands) 2015 2014 Net change 2014 to 2015
Revenue:
  Rental income (including tenant reimbursements) $ 248,547
$ 166,598
$ 81,949
  Other property related revenue 9,163
5,481
3,682
Total revenue 257,710
172,079
85,631
Expenses:
  Property operating 36,519
26,057
10,462
  Real estate taxes 29,821
20,048
9,773
  General, administrative, and other 14,131
9,358
4,773
  Merger and acquisition costs 1,550
26,849
(25,299 )
  Depreciation and amortization 124,196
81,559
42,637
Total expenses 206,217
163,871
42,346
Operating income 51,493
8,208
43,285
  Interest expense (40,995 ) (30,291 ) (10,704 )
  Income tax expense of taxable REIT subsidiary (134 ) (37 ) (97 )
  Gain on settlement 4,520
—
4,520
  Other expense (189 ) (119 ) (70 )
Income (loss) from continuing operations 14,695
(22,239 ) 36,934
Discontinued operations:
  Gain on sale of operating property —
3,199
(3,199 )
Income from discontinued operations —
3,199
(3,199 )
Income (loss) before gain on sale of operating properties 14,695
(19,040 ) 33,735
  Gain on sales of operating properties 3,363
6,336
(2,973 )
Consolidated net income 18,058
(12,704 ) 30,762
Net income attributable to noncontrolling interests (1,626 ) (224 ) (1,402 )
Net income attributable to Kite Realty Group Trust 16,432
(12,928 ) 29,360
Dividends on preferred shares (6,342 ) (6,342 ) —
Net income (loss) attributable to common shareholders $ 10,090
$ (19,270 ) $ 29,360

Property operating expense to total revenue ratio 14.2 % 15.1 %

~~Rental income (including tenant reimbursements) increased $81.9 million, or 49.2%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 and retained $ 84,990
Development properties that became operational or were partially operational in 2014 and/or 2015 2,407
Properties sold during 2014 or 2015 (5,277 )
Properties under redevelopment during 2014 and/or 2015 (337 )
Properties fully operational during 2014 and 2015 and other 166
Total $ 81,949

The net increase of $85.0 million in rental income at properties acquired and retained during 2014 or 2015 is attributable to the Merger with Inland Diversified and the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center. The properties acquired and retained in connection with the Merger with Inland Diversified contributed an additional $78.3 million to rental income in 2015, while Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center contributed $6.7 million. The net decrease of $5.3 million in rental income from properties sold during 2014 or 2015 is primarily due to the sale of Tranche I and Tranche II to IREIT, as those properties were sold in November and December 2014 and March 2015. The net increase of $0.2 million in rental income for properties fully operational is primarily attributable to an increase in rental rates and an improvement in economic occupancy.

The average rents for new comparable leases signed in the first nine months of 2015 were $20.52 per square foot compared to average expiring rents of $17.15 per square foot in that period. The average rents for renewals signed in the first nine months of 2015 were $12.38 per square foot compared to average expiring rents of $11.51 per square foot in that period. Our same property economic occupancy improved to 93.6% as of September 30, 2015 from 93.5% as of September 30, 2014. For our full operating portfolio, annualized base rent per square foot improved to $15.24 per square foot as of September 30, 2015, up from $14.98 as of September 30, 2014 due to recent acquisition activity.

Other property related revenue primarily consists of parking revenues, overage rent, lease termination income and gains related to land sales. This revenue increased by $3.7 million, primarily as a result of higher gains on land sales of $3.5 million.

~~Property operating expenses increased $10.5 million, or 40.2%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 and retained $ 10,472
Development properties that became operational or were partially operational in 2014 and/or 2015 423
Properties sold during 2014 or 2015 (636 )
Properties under redevelopment during 2014 and/or 2015 (28 )
Properties fully operational during 2014 and 2015 and other 231
Total $ 10,462

The net increase of $10.5 million in property operating expenses at properties acquired and retained during 2014 or 2015 is attributable to the Merger with Inland Diversified and the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center. The net decrease of $0.6 million in property operating expenses from properties sold during 2014 or 2015 is primarily due to the sale of Tranche I and Tranche II to IREIT, as those properties were sold in November and December 2014 and March 2015. The net $0.2 million increase for properties fully operational is due to a combination of a decrease in insurance costs as we leveraged our larger operating platform, a decrease in roof maintenance costs, an increase in landscaping and parking lot repair costs and an increase in general building repair costs at certain properties. None of the individual fluctuations were greater than $0.2 million.

Property operating expenses as a percentage of total revenue for the nine months ended September 30, 2015 was 14.2% compared to 15.1% over the same period in the prior year. 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 87.6% for the nine months ended September 30, 2015 compared to 84.0% for the nine months ended September 30, 2014.

~~Real estate taxes increased $9.8 million, or 48.7%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 and retained $ 10,322
Development properties that became operational or were partially operational in 2014 and/or 2015 144
Properties sold during 2014 or 2015 (598 )
Properties under redevelopment during 2014 and/or 2015 (30 )
Properties fully operational during 2014 and 2015 and other (65 )
Total $ 9,773

~~The $10.3 million increase in real estate taxes at properties acquired during 2014 or 2015 is attributable to the Merger with Inland Diversified~~ ~~and the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center~~. The net decrease of $0.6 million in real estate taxes from properties sold during 2014 or 2015 is primarily due to the sale of Tranche I and Tranche II to IREIT, as those properties were sold in November and December 2014 and March 2015. The net $0.1 million decrease in real estate taxes for properties fully operational during 2014 and 2015 is due to lower tax assessments and successful real estate tax appeals 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 $4.8 million, or 51.0%, due primarily to higher public company and personnel costs largely associated with the increased size of the Company.~~

Merger and acquisition costs in 2014 related almost entirely to our Merger with Inland Diversified and totaled $26.8 million for the nine months ended September 30, 2014 compared to $1.6 million of costs for property acquisitions for the nine months ended September 30, 2015.

~~Depreciation and amortization expense increased $42.6 million, or 52.3%, due to the following:~~

($ in thousands) Net change 2014 to 2015
Properties acquired during 2014 or 2015 and retained $ 45,105
Development properties that became operational or were partially operational in 2014 and/or 2015 1,919
Properties sold during 2014 or 2015 (3,706 )
Properties under redevelopment during 2014 and/or 2015 895
Properties fully operational during 2014 and 2015 and other (1,576 )
Total $ 42,637

The net increase of $45.1 million in depreciation and amortization expense at properties acquired during 2014 or 2015 is attributable to the Merger with Inland Diversified and the acquisitions of Rampart Commons, Colleyville Downs, Belle Isle Station, Livingston Shopping Center, and Chapel Hill Shopping Center. The net decrease of $3.7 million in depreciation and amortization expense from properties sold during 2014 or 2015 is primarily due to the sale of Tranche I and Tranche II to IREIT, as those properties were sold in November and December 2014 and March 2015. The net $1.6 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 accelerating the depreciation on certain tenant improvement costs.

Interest expense increased $10.7 million or 35.3%. The increase mainly resulted from our assumption of $859.6 million of debt as part of the Merger with Inland Diversified, in addition to making multiple draws on the unsecured revolving credit facility to fund a portion of our 2015 acquisitions. 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 gain on settlement of $4.5 million for the nine months ended September 30, 2015. See additional discussion in Note 12 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.

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 shares, unsecured debt securities, preferred shares, or other securities.

Our Principal Capital Resources

For a discussion of cash generated from operations, see “Cash Flows,” beginning on page 43. 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 August 2015,~~On September 26, 2016, the Operating Partnership ~~entered into~~completed a ~~Note Purchase Agreement (the “Note Purchase Agreement”) with various purchasers in connection with a private placement~~$300 million public offering 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.~~4.00% Senior Notes due October 1, 2026. The net proceeds from the issuance of the ~~notes~~Notes were utilized to retire the $200 million Term Loan A and retire the $75.9 million construction loan secured by our Parkside Town Commons operating property and pay ~~off the balance of $199.6 million on~~down 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 September 30, 2015, we were in compliance with all such covenants.facility.

As of September 30, ~~2015,~~2016, we had approximately ~~$390.3~~$401 million available under our ~~$500 million~~ unsecured revolving credit facility for future borrowings based on the unencumbered property pool allocated to the unsecured revolving credit facility. We also had $28.8 million in cash and cash equivalents as of September 30, 2016.

We were in compliance with all applicable financial covenants under our unsecured revolving credit facility, our unsecured term ~~loan~~loans and our senior unsecured notes as of September 30, ~~2015.~~2016.

We have on file with the SEC a shelf registration statement on Form S-3 relating to the offer and sale, from time to time, of an indeterminate amount of equity and debt securities. Equity securities may be offered and sold by the Parent Company, and the net proceeds of any such offerings would be contributed to the Operating Partnership in exchange for additional General Partner Units. Debt securities may be offered and sold by the Operating Partnership with the Operating Partnership receiving the proceeds. From time to time, we may issue securities under this shelf registration statement to fund the repayment of long-term debt upon maturity and for other general corporate purposes.

We currently have an at the market equity program that allows the Parent Company to issue new common shares from time to time, with an aggregate offering price of up to $250.0 million. During the nine months ended September 30, 2016, we issued 137,229 common shares at an average price per share of $29.52 pursuant to our at-the-market offering program, generating gross proceeds of approximately $4.1 million and, after deducting commissions and other costs, net proceeds of approximately $3.8 million. We have $245.9 million remaining available for future common share issuances under our current at-the-market equity program.

~~Finally, we had $43.0 million in cash and cash equivalents as of September 30, 2015.~~

In the future, we will continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. We may also 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.

Our Principal Liquidity Needs

Short-Term Liquidity Needs

Near-Term Debt Maturities. As of September 30, ~~2015,~~2016, we ~~have $60.7~~had $17.1 million of secured debt scheduled to mature prior to September 30, ~~2016,~~2017, excluding scheduled monthly principal payments. ~~The recently executed seven-year unsecured term~~On November 1, 2016, we retired the $10.4 million loan ~~for up~~secured by our Geist Pavilion operating property, which included a release of a $1.6 million letter of credit that was scheduled to ~~$200~~mature on January 1, 2017. On November 1, 2016, we retired the $25 million ~~provides the majority of the funding for these securitized debt maturities.~~loan secured by our Colonial Square and Village Walk operating properties that was scheduled to mature on January 1, 2018.

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 ~~and preferred~~ shareholders and to Common Unit holders, and recurring capital expenditures.

In September ~~2015,~~2016, our Board of Trustees declared a ~~quarterly~~ cash distribution of ~~$0.2725~~$0.2875 per common share and Common Unit ~~totaling $23.2 million~~ for the third quarter ~~ended September 30, 2015.~~of 2016. This distribution was paid on October 13, ~~2015~~2016 to common shareholders and Common Unit holders of record as of October 6, ~~2015. In August 2015, our~~2016. Future distributions are at the discretion of the Board of Trustees declared a quarterly preferred share cash distribution of $0.515625 per Series A Preferred Share (totaling $2.1 million) covering the distribution period from June 2, 2015 to September 1, 2015 payable to holders of record as of August 21, 2015. This distribution was paid on September 1, 2015.Trustees.

Other short-term liquidity needs include expenditures for tenant improvements, external leasing commissions and recurring capital expenditures. During the nine months ended September 30, ~~2015,~~2016, we incurred ~~$2.3~~$1.0 million of costs for recurring capital expenditures on operating properties and also incurred ~~$4.4~~$7.6 million of costs for tenant improvements and external leasing commissions (excluding first generation space and development and redevelopment properties). We currently anticipate incurring approximately ~~$14~~$9 million to ~~$16~~$11 million of additional major tenant improvements and renovation costs within the next twelve months at a number of our operating ~~properties.~~ properties, excluding those properties in our "3-R" initiative.

We currently have 12 properties that are considered under construction as part of our "3-R" initiative. Total estimated costs of these properties are expected to be in the range of $58.1 million and $67.0 million.

As of September 30, ~~2015,~~2016, we had ~~three~~one development ~~and two redevelopment projects~~project under construction. The total estimated cost of ~~these projects~~this project is approximately ~~$188.8~~$83.5 million, of which ~~$146.0~~$80.2 million had been incurred as of September 30, ~~2015.~~2016. We currently anticipate incurring the majority of the remaining ~~$42.8~~$3.3 million of costs over the next ~~twelve to eighteen~~nine months. We believe we currently 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.~~

As of September 30, 2015, four of our properties, which are properties acquired by Inland Diversified prior to the date of the Merger, have earnout components remaining whereby we are required to pay the seller additional consideration based on subsequent leasing activity of vacant space. The estimated amount of future earnout payments was $5.9 million at September 30, 2015. The expiration dates of the remaining earnouts range from November 2, 2015 through December 28, 2015. We believe we currently have sufficient funds to satisfy these potential earnout obligations.

~~Preferred Shares~~. On October 30, 2015, we announced that we intend to redeem all 4,100,000 of our 8.25% Series A Cumulative Redeemable Perpetual Preferred Shares (the “Series A Preferred Shares”) on December 7, 2015. The Series A Preferred Shares will be redeemed at a redemption price of $25.00 per share, plus $0.0287 per share, the amount equal to accrued and unpaid dividends from December 2, 2015 up to, but not including, the redemption date. We believe we currently have sufficient financing in place to fund the redemptionproject and expect to do so primarily through borrowings on our unsecured revolving credit ~~facility or through borrowings on our new unsecured term loan.~~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, non-recurring capital expenditures, acquisitions of properties, and payment of indebtedness at maturity.

Potential Redevelopment, Reposition, Repurpose Opportunities. We are currently evaluating~~potential~~ additional redevelopment, repositioning, and repurposing of several other operating ~~properties.~~properties as part of our "3-R" initiative. Total estimated costs of these properties are expected to be in the range of ~~$115~~$85 million ~~to $130~~and $105 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 Consolidated Properties

The following table summarizes cash capital expenditures for our development and redevelopment properties and other capital expenditures for the nine months ended September 30, ~~2015~~2016 and on a cumulative basis since the project’s inception:

Year to Date – Cumulative –

(in thousands)
September 30,
2015 September 30,
2015
Under Construction - Developments $ 37,078
$ 136,383
Under Construction - Redevelopments 1,485
9,607
Pending Construction - Redevelopments 8,267
1,353
Total for Development Activity 46,830
147,343
Recently Completed Developments¹
10,456
N/A
Miscellaneous Other Activity, net 5,925
N/A
Recurring Operating Capital Expenditures (primarily tenant improvement payments) 6,726
N/A
Total $ 69,937
$ 147,343



	Year to Date –		Cumulative –
($ in thousands)	September 30, 2016		September 30, 2016
Developments	$	3,767	$	80,213
Redevelopments	23,027		N/A
Recently completed developments/redevelopments¹	29,063		N/A
Miscellaneous other activity, net	3,889		N/A
Recurring operating capital expenditures (primarily tenant improvement payments)	8,606		N/A
Total	$	68,352	$	80,213



____________________
1	This classification includes ~~Parkside Town Commons - Phase I, Delray Marketplace,~~Tamiami Crossing, Holly Springs Towne Center – Phase I and Phase II, Parkside Town Commons – Phase I, Bolton Plaza, Gainesville Plaza, and ~~Four Corner Square.~~Cool Springs.

We capitalize certain indirect costs such as interest, payroll, and other general and administrative costs related to these development activities. If we were to experience a 10% reduction in development and redevelopment activities, without a corresponding decrease in indirect project costs, we would have recorded additional expense of $0.1 million and $0.3 million for the three and nine months ended September 30, ~~2015 of $0.1 million and $0.3 million,~~2016, respectively.

Debt Maturities

The table below presents scheduled principal repayments (including scheduled monthly principal payments) on mortgage and other indebtedness as of September 30, ~~2015:~~2016:


(in thousands)	Annual Principal Payments		Term Maturity¹		Total
2015	$	1,633	$	—	$	1,633
($ in thousands)							Scheduled Principal Payments		Term Maturity¹		Total
2016	5,799		260,633		266,432		$	954	$	—	$	954
2017	5,103		17,026		22,129		5,103		17,025		22,128
2018	5,335		62,584		67,919		5,635		62,584		68,219
2019	5,255		—		5,255		5,975		—		5,975
2020							5,920		42,339		48,259
Thereafter	17,395		1,275,131		1,292,526		12,976		1,573,823		1,586,799
	$	40,520	$	1,615,374	$	1,655,894	$	36,563	$	1,695,771	$	1,732,334
Unamortized Premiums					23,949
Unamortized net debt premiums and issuance costs, net											10
Total					$	1,679,843					$	1,732,344



____________________
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~~one year to ~~January 1, 2020~~July 28, 2021 for the Company's unsecured ~~term loan.~~credit facility.

Failure to comply with our obligations under our ~~loan~~indebtedness agreements (including our payment obligations) could cause an event of default under such debt, which, among other things, could result in the loss of title to assets securing such ~~loans,~~debt, the acceleration of principal and interest payments or the termination of the debt facilities, or exposure to the risk of foreclosure. In addition, certain of our variable rate ~~loans and construction~~ loans contain cross-default provisions which provide that a violation by us of any financial covenant set forth in our unsecured revolving credit facility agreement will constitute an event of default under the loans, which could allow the lenders to accelerate the amounts due under ~~the loans~~our indebtedness agreements if we fail to satisfy these financial covenants. See “Item 1.A Risk Factors – Risks Related to Our Operations” in Kite Realty Group Trust's Annual Report on Form 10-K for the year ended December 31, ~~2014~~2015 for more information related to the risks associated with our indebtedness.

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 as of September 30, 2016.

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. A reduction in our credit rating by one or both rating agencies could also adversely affect our access to funding sources, the cost and other terms of future financing, as well as our overall financial condition, operating results and cash flow.

Cash Flows

As of September 30, ~~2015,~~2016, we had cash and cash equivalents on hand of ~~$43.0~~$28.8 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 Nine Months Ended September 30, ~~2015~~2016 to the Nine Months Ended September 30, ~~2014~~2015

Cash provided by operating activities was ~~$137.8~~$120.7 million for the nine months ended September 30, ~~2015, an increase~~2016, a decrease of ~~$127.3~~$15.2 million from the same period of ~~2014.~~2015. The ~~increase~~decrease was primarily due to the ~~increased cash flows generated by the properties acquired~~timing of real estate tax payments and annual insurance payments and an increase in ~~2014.~~leasing costs.

Cash used in investing activities was ~~$113.2~~$67.1 million for the nine months ended September 30, ~~2015,~~2016, as compared to cash ~~provided by~~used in investing activities of ~~$89.2~~$110.2 million in the same period of ~~2014.~~2015. Highlights of significant cash sources and uses in investing activities are as follows:

•

~~Net proceeds of $126.5 million related to the sale of the Tranche II properties in March 2015~~

Net proceeds of $0.1 million related to the sale of Shops at Otty in June 2016, compared to net proceeds of $126.5 million related to the sale of seven operating properties in March 2015;

There were no property acquisitions in the first nine months of 2016, while there was a net ~~proceeds of $33.4 million related to the sale of Red Bank Commons, Ridge Plaza, and 50~~^th ~~and 12~~^th ~~operating properties in 2014;~~

~~Net~~ cash outflow of $167.8 million related to ~~2015~~ acquisitions ~~while there were no acquisitions in~~over the same period ~~of 2014;~~in 2015;

~~Net cash outflow of $2.9 million related to payments on seller earnouts in 2015, while there were no seller earnout payments in the same period of 2014; and~~

Decrease in capital expenditures of ~~$2.4~~$1.4 million, ~~in addition to~~partially offset by an increase in construction payables of ~~$8.1~~$0.6 million. In the first nine months of ~~2015, there was significant~~2016, we substantially completed construction ~~activity~~ at ~~Parkside Town Commons - Phase II,~~our Tamiami Crossing and Holly Springs Towne Center - Phase ~~II.~~II development properties, and incurred additional construction costs at several of our redevelopment properties.

Cash used in financing activities was ~~$25.5~~$58.7 million for the nine months ended September 30, ~~2015,~~2016, compared to cash used in financing activities of ~~$86.6~~$26.7 million in the same period of ~~2014.~~2015. Highlights of significant cash sources and uses in financing activities in the first nine months of 2016 are as follows:

~~A draw of $30~~We retired the $16.3 million ~~was made on~~loan secured by our ~~unsecured revolving credit facility that was utilized to fund~~Cool Creek Commons operating property, the ~~acquisition of~~$23.6 million loan secured by our ~~partner's interest in~~Sunland Towne Centre operating property, the ~~City Center~~$20.3 million loan secured by our Mullins Crossing operating ~~property;~~

~~Draws of $59~~property, the $16.5 million ~~were made~~loan secured by our Pine Ridge Crossing operating property, the $9.9 million loan secured by our Riverchase Plaza operating property and the $42.2 million loan secured by our Traders Point operating property using draws on the unsecured revolving credit ~~facility~~facility;

We issued $300 million of senior unsecured notes in a public offering. The net proceeds of which were utilized to ~~fund a portion of~~retire the ~~acquisitions of Colleyville Downs, Belle Isle Station, Livingston Shopping Center~~$200 million Term Loan A and ~~Chapel Hill Shopping Center;~~

~~Draws of $14.3~~the $75.9 million ~~were made on~~ construction ~~loans related to~~loan secured by our Parkside Town Commons ~~- Phase I~~operating property and ~~Phase II and Delray Marketplace;~~

In the first and second quarter of 2015, we retired loans totaling $88.5 million that were secured by Indian River, Plaza Volente and Landstown Commons operating properties utilizing a draw on our unsecured revolving credit facility;

~~In June 2015, we exercised the accordion option feature on the 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;~~facility;

~~In August 2015, we sold $250 million of senior unsecured notes;~~

~~In September 2015, we paid off~~We drew the remaining ~~balance of $199.6~~$100 million on our $200 million seven-year unsecured term loan and used the proceeds to pay down the unsecured revolving credit ~~facility~~facility; and ~~the $33 million loan secured by our Crossing at Killingly operating property, using proceeds from the issuance of the senior unsecured notes;~~

In connection with the sale of Tranche II, we retired the $24 million loan secured by the Regal Court property. In addition, we paid down our unsecured revolving credit facility by $27 million utilizing a portion of proceeds from property sales;

~~Distributions~~We made distributions to common shareholders and Common Unit holders of ~~$67.2 million; and~~

~~Distributions to preferred shareholders of $6.3~~$73.6 million.

Funds From Operations

Funds ~~From~~from Operations ~~(“FFO”),~~(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~~(determined in accordance with ~~GAAP)~~generally accepted accounting principles (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.~~unconsolidated partnerships and joint ventures.

~~Given~~Considering 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)~~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 severance charge, accelerated amortization of debt issuance costs and transaction costs

in 2016 and a gain on settlement and ~~merger and acquisition costs.~~transaction costs in 2015. 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~~among our ~~peers.~~peer companies. FFO ~~and FFO, as adjusted~~ should not be considered as ~~alternatives~~an alternative to ~~consolidated~~ net income ~~(loss)~~ (determined in accordance with GAAP) as ~~indicators~~an indicator of our financial performance, ~~are~~is not ~~alternatives~~an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and ~~are~~is not indicative of funds available to satisfy our cash needs, including our ability to make distributions. Our ~~computations~~computation of FFO ~~and FFO, as adjusted~~ may not be comparable to FFO ~~or FFO, as adjusted~~ reported by other ~~REITs.~~REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definition differently than we do.

Our calculations of FFO¹ (and reconciliation to consolidated net income, as applicable) and FFO, as adjusted, for the three and nine months ended September 30, ~~2015~~2016 and ~~2014~~2015 (unaudited) are as follows:

Three Months Ended
September 30, Nine Months Ended
September 30,
(in thousands) 2015 2014 2015 2014
Consolidated net income (loss) $ 2,961
$ (13,980 ) $ 18,058
$ (12,704 )
Less: dividends on preferred shares (2,114 ) (2,114 ) (6,342 ) (6,342 )
Less: net income attributable to noncontrolling interests in properties (415 ) (679 ) (1,416 ) (757 )
Less: gains on sales of operating properties —
(2,749 ) (3,363 ) (9,534 )
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests 42,387
44,208
123,812
81,161
Funds From Operations of the Kite Portfolio 42,819
24,686
130,749
51,824
Less: Limited Partners' interests in Funds From Operations (967 ) (354 ) (2,698 ) (1,658 )
Funds From Operations attributable to Kite Realty Group Trust common shareholders¹
$ 41,852
$ 24,332
$ 128,051
$ 50,166

Funds From Operations of the Kite Portfolio $ 42,819
$ 24,686
$ 130,749
$ 51,824
Less: gain on settlement —
—
(4,520 ) —
Add: merger and acquisition costs 1,089
19,088
1,550
26,849
Funds From Operations of the Kite Portfolio, as adjusted $ 43,908
$ 43,774
$ 127,779
$ 78,673



($ in thousands)	Three Months Ended September 30,						Nine Months Ended September 30,
	2016			2015			2016			2015
Consolidated net (loss) income	$	(1,262	)	$	2,961		$	(785	)	$	18,058
Less: cash dividends on preferred shares	—			(2,114		)	—			(6,342		)
Less: net income attributable to noncontrolling interests in properties	(461		)	(415		)	(1,383		)	(1,416		)
Less: gains on sales of operating properties	—			—			(194		)	(3,363		)
Add: depreciation and amortization of consolidated entities, net of noncontrolling interests	45,310			42,387			130,909			123,812
Funds From Operations of the Operating Partnership¹	43,587			42,819			128,547			130,749
Less: Limited Partners' interests in Funds From Operations	(918		)	(967		)	(2,708		)	(2,698		)
Funds From Operations attributable to Kite Realty Group Trust common shareholders¹	$	42,669		$	41,852		$	125,839		$	128,051

Funds From Operations of the Operating Partnership¹	$	43,587		$	42,819		$	128,547		$	130,749
Less: gain on settlement	—			—			—			(4,520		)
Add: accelerated amortization of debt issuance costs (non-cash)²	1,121			—			1,121			—
Add: transaction costs	—			1,089			2,771			1,550
Add: severance charge	—			—			500			—
Funds From Operations of the Operating Partnership, as adjusted	$	44,708		$	43,908		$	132,939		$	127,779



____________________
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.
2	Primarily related to the debt extinguished with the proceeds from our inaugural public debt offering.

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) ~~merger and acquisition costs, (ii)~~ EBITDA from unconsolidated entities ~~(iii) EBITDA from acquisitions~~ and ~~mid-third quarter anchor openings, (iv) other income and expense and (v) minority~~(ii) noncontrolling interest EBITDA. Annualized Adjusted EBITDA is Adjusted EBITDA for the most recent quarter multiplied by four. Net Debt to EBITDA is our share of net debt divided by Annualized Adjusted EBITDA. EBITDA, Adjusted EBITDA, ~~and~~ Annualized Adjusted EBITDA and Net Debt to EBITDA, as calculated by us, are not comparable to EBITDA and EBITDA related measures 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~~

Considering the nature of our business as a real estate owner and operator, we believe that EBITDA, Adjusted EBITDA and ~~Adjusted~~the ratio of Net Debt to EBITDA are helpful to investors ~~when~~in measuring ~~operating~~our operational performance because they exclude various items included in net income ~~or loss~~ that do not relate to or are not indicative of our operating performance, such as ~~impairments~~gains or losses from sales of ~~operating properties~~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 Annualized Adjusted EBITDA, adjusted as described above. We believe this supplemental information provides a meaningful measure of our operating performance. We believe presenting EBITDA and the related measures in this manner allows investors and other interested parties to form a more meaningful assessment of our operating results.

AThe following table presents a reconciliation of our EBITDA, Adjusted EBITDA and Annualized Adjusted EBITDA to consolidated net income (the most directly comparable GAAP measure) ~~is included in the below table.~~and a calculation of Net Debt to EBITDA.

Three Months Ended
September 30, 2015
Consolidated net income $ 2,961
Adjustments to net income
Depreciation and amortization 42,549
Interest expense 13,881
Income tax expense of taxable REIT subsidiary 9
Earnings Before Interest, Taxes, Depreciation and Amortization 59,400
Merger and acquisition costs 1,089
Unconsolidated EBITDA 33
Pro forma adjustment²
(12 )
Other expense, net 60
Minority interest (415 )
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization 60,155

Annualized Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization¹
$ 240,620

Ratio of Company share of net debt:
Mortgage and other indebtedness 1,679,843
Less: Partner share of consolidated joint venture debt (10,457 )
Less: Cash (42,951 )
Less: Debt Premium (23,949 )
Company Share of Net Debt 1,602,486
Ratio of Net Debt to Annualized Adjusted EBITDA 6.7x
Net Debt plus Preferred Shares to Annualized Adjusted EBITDA 7.1x



($ in thousands)	Three Months Ended September 30, 2016
Consolidated net loss	$	(1,262	)
Adjustments to net loss
Depreciation and amortization	45,543
Interest expense	17,139
Income tax expense of taxable REIT subsidiary	15
Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)	61,435
Unconsolidated EBITDA	34
Noncontrolling interest	(461		)
Adjusted EBITDA	61,008

Annualized Adjusted EBITDA¹	$	244,032

Company share of net debt:
Mortgage and other indebtedness	1,732,344
Less: Partner share of consolidated joint venture debt²	(13,741		)
Less: Cash, Cash Equivalents, and Restricted Cash	(38,378		)
Less: Net debt premiums and issuance costs, net	(10		)
Company Share of Net Debt²	1,680,215
Company Share of Net Debt to EBITDA	6.9x



____________________
1	Represents Adjusted EBITDA for the three months ended September 30, ~~2015~~2016 (as shown in the table above) multiplied by four.
2	~~Represents NOI from acquisitions and mid-third quarter anchor openings.~~Partner share of consolidated joint venture debt is calculated based upon the partner's pro-rata ownership of the joint venture, multiplied by the related secured debt balance. In all cases, this debt is the responsibility of the consolidated joint venture.

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.

Contractual Obligations

Except with respect to our debt maturities as discussed on page ~~43,~~42, there have been no significant changes to our contractual obligations disclosed in the Annual Report on Form 10-K for the year ended December 31, ~~2014.~~2015.



Item 3.	Quantitative and Qualitative Disclosures About Market Risk

Market Risk Related to Fixed and Variable Rate Debt

We had $1.7 billion of outstanding consolidated indebtedness as of September 30, ~~2015~~2016 (exclusive of net premiums and issuance costs, net of ~~$23.9 million~~$10 thousand on acquired indebtedness). As of this date, we were party to various consolidated interest rate hedge agreements totaling ~~$543.3~~$474.7 million, with maturity dates ranging from 2017 through ~~2020.~~2021. Reflecting these hedge agreements, our fixed and variable rate debt was ~~$1.5~~$1.6 billion ~~(92%~~(95%) and $0.1 billion ~~(8%~~(5%), respectively, of our total consolidated indebtedness at September 30, ~~2015.~~2016.

As of September 30, ~~2015,~~2016, we had ~~$60.7~~$17.1 million of fixed rate debt maturing within the next twelve months. A 100 basis point change in market interest rates would not materially impact the annual cash flows associated with ~~these loans.~~this hedged debt. A 100 basis point change in interest rates on our unhedged variable rate debt as of September 30, ~~2015~~2016 would change our annual cash flow by ~~$1.3~~$0.8 million.



Item 4.	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.

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 September 30, ~~2015~~2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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 September 30, ~~2015~~2016 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Part II. Other Information



Item 1.	Legal Proceedings

We are party to various legal proceedings, which arise in the ordinary course of business. None of these actions are expected to have a material adverse effect on our consolidated financial condition, results of operations or cash flows taken as a whole.



Item 1A.	Risk Factors

Not Applicable



Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds

~~Not Applicable~~

Issuer Repurchases; Unregistered Sales of Securities

During the three months ended September 30, 2016, 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 three months ended September 30, 2016:



Period	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
July 1 - July 31	891	$	28.07	—	N/A
August 1 - August 31	715	$	28.60	—	N/A
September 1 - September 30	—	—		N/A	N/A
Total	1,606



____________________
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.



Item 3.	Defaults Upon Senior Securities

Not Applicable



Item 4.	Mine Safety Disclosures

Not Applicable



Item 5.	Other Information

Not Applicable



Item 6.	Exhibits



Exhibit No.	Description	Location
3.1	Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended	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

3.2	Articles of Amendment to the Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended	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



3.3	Second Amended and Restated Bylaws of the Company, as amended	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

3.4	First Amendment to the Second Amended and Restated Bylaws of Kite Realty Group Trust, as amended	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

4.1	Form of Common Share Certificate	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

4.2	~~Form of share certificate evidencing the 8.250% Series A Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, per value $0.01 per share~~	~~Incorporate by reference to Exhibit 4.1 to Kite Realty Group Trust’s registration statement on Form 8-A filed on December 7, 2010~~

~~10.1~~	~~Note Purchase Agreement,~~Indenture, dated ~~as of August 28, 2015, by and among~~September 26, 2016, between Kite Realty Group, L.P., as issuer, and ~~the other parties named therein~~U.S. Bank National Association, as ~~Purchasers~~trustee	Incorporated by reference to Exhibit ~~10.1~~4.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September ~~3, 2015~~27, 2016



4.3	First Supplemental Indenture, dated September 26, 2016, among Kite Realty Group, L.P., Kite Realty Group Trust, as possible future guarantor, and U.S. Bank National Association	Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016

~~10.2~~4.4	~~Term Loan~~Form of Global Note representing the Notes	Incorporated by reference to Exhibits 4.2 and 4.3 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016

10.1	Fifth Amended and Restated Credit Agreement, dated as of ~~October 26, 2015,~~July 28, 2016, 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~~July 29, 2016

10.2	First Amended and Restated Springing Guaranty, dated as of July 28, 2016, by Kite Realty Group Trust	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 July 29, 2016

10.3	First Amendment to Term Loan Agreement, dated as of July 28, 2016, by and among Kite Realty Group, L.P., Kite Realty Group Trust, KeyBank National Association, as Administrative Agent, and the other lenders party thereto	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 July 29, 2016

31.1	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	Filed herewith

31.2	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	Filed herewith

31.3	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	Filed herewith

31.4	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	Filed herewith



32.1	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	Filed herewith

32.2	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



101.INS	XBRL Instance Document	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith

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

SIGNATURES

Pursuant to the requirements 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

November ~~6, 2015~~8, 2016	By:	/s/ John A. Kite
(Date)		John A. Kite
		Chairman and Chief Executive Officer
		(Principal Executive Officer)


November ~~6, 2015~~8, 2016	By:	/s/ Daniel R. Sink
(Date)		Daniel R. Sink
		Chief Financial Officer
		(Principal Financial Officer)

EXHIBIT INDEX



Exhibit No.	Description	Location
3.1	Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended	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

3.2	Articles of Amendment to the Articles of Amendment and Restatement of Declaration of Trust of the Company, as supplemented and amended	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

3.3	Second Amended and Restated Bylaws of the Company, as amended	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

3.4	First Amendment to the Second Amended and Restated Bylaws of Kite Realty Group Trust, as amended	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

4.1	Form of Common Share Certificate	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

4.2	~~Form of share certificate evidencing the 8.250% Series A Cumulative Redeemable Perpetual Preferred Shares, liquidation preference $25.00 per share, per value $0.01 per share~~	~~Incorporate by reference to Exhibit 4.1 to Kite Realty Group Trust’s registration statement on Form 8-A filed on December 7, 2010~~

~~10.1~~	~~Note Purchase Agreement,~~Indenture, dated ~~as of August 28, 2015, by and among~~September 26, 2016, between Kite Realty Group, L.P., as issuer, and ~~the other parties named therein~~U.S. Bank National Association, as ~~Purchasers~~trustee	Incorporated by reference to Exhibit ~~10.1~~4.1 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September ~~3, 2015~~27, 2016

~~10.2~~4.3	~~Term Loan~~First Supplemental Indenture, dated September 26, 2016, among Kite Realty Group, L.P., Kite Realty Group Trust, as possible future guarantor, and U.S. Bank National Association	Incorporated by reference to Exhibit 4.2 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016

4.4	Form of Global Note representing the Notes	Incorporated by reference to Exhibits 4.2 and 4.3 to the Current Report on Form 8-K of Kite Realty Group Trust filed with the SEC on September 27, 2016




10.1	Fifth Amended and Restated Credit Agreement, dated as of ~~October 26, 2015,~~July 28, 2016, 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~~

July 29, 2016

10.2	First Amended and Restated Springing Guaranty, dated as of July 28, 2016, by Kite Realty Group Trust	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 July 29, 2016

10.3	First Amendment to Term Loan Agreement, dated as of July 28, 2016, by and among Kite Realty Group, L.P., Kite Realty Group Trust, KeyBank National Association, as Administrative Agent, and the other lenders party thereto	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 July 29, 2016

31.1	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	Filed herewith

31.2	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	Filed herewith

31.3	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	Filed herewith

31.4	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	Filed herewith

32.1	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	Filed herewith

32.2	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

101.INS	XBRL Instance Document	Filed herewith

101.SCH	XBRL Taxonomy Extension Schema Document	Filed herewith

101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document	Filed herewith

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



	Preferred Shares			Common Shares					Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
	Shares	Amount		Shares		Amount			Additional Paid-in Capital		Accumulated Other Comprehensive Loss			Accumulated Deficit			Total
Balances, December 31, 2014	4,100,000	$	102,500	83,490,663		$	835		$	2,044,425	$	(1,175	)	$	(247,801	)	$	1,898,784
Stock compensation activity	—	—		(174,100	)	(2		)	2,408		—			—			2,406
Other comprehensive loss attributable to Kite Realty Group Trust	—	—		—		—			—		(5,034		)	—			(5,034		)
Distributions declared to common shareholders	—	—		—		—			—		—			(68,191		)	(68,191		)
Distributions to preferred shareholders	—	—		—		—			—		—			(6,342		)	(6,342		)
Net income attributable to Kite Realty Group Trust	—	—		—		—			—		—			16,432			16,432
Acquisition of partners' interests in consolidated joint ventures	—	—		—		—			1,445		—			—			1,445
Exchange of redeemable noncontrolling interests for common shares	—	—		7,000		—			189		—			—			189
Adjustment to redeemable noncontrolling interests	—	—		—		—			2,448		—			—			2,448
Balances, September 30, 2015	4,100,000	$	102,500	83,323,563		$	833		$	2,050,915	$	(6,209	)	$	(305,902	)	$	1,842,137



	2015			2014
Accumulated comprehensive (loss) income balance at January 1	$	(24	)	$	69
Other comprehensive loss allocable to redeemable noncontrolling interests¹	(119		)	(47		)
Accumulated comprehensive (loss) income balance at September 30	$	(143	)	$	22



	Nine Months Ended September 30, 2015
Earnout liability – beginning of period	$	9,664
Decreases:
Settlement of earnout obligations	(2,869		)
Adjustments to purchase price allocation	(871		)
Earnout liability – end of period	$	5,924



Assets:
Investment properties, net	$	2,095,567
Deferred costs, net	143,210
Investments in marketable securities	18,602
Cash and cash equivalents	108,666
Accounts receivable, prepaid expenses, and other	20,157
Total Assets	$	2,386,202

Liabilities:
Mortgage and other indebtedness, including debt premium of $33,298	$	892,909
Deferred revenue and other liabilities	129,935
Accounts payable and accrued expenses	59,314
Total Liabilities	1,082,158

Noncontrolling interests	69,356
Common shares issued	1,234,688
Total Allocated Purchase Price	$	2,386,202



($ in thousands)	Net change 2014 to 2015
Properties acquired during 2014 or 2015	$	3,877
Development properties that became operational or were partially operational in 2014 and/or 2015	1,038
Properties sold during 2014 or 2015	(7,244		)
Properties under redevelopment during 2014 and/or 2015	49
Properties fully operational during 2014 and 2015 and other	(1,292		)
Total	$	(3,572	)



($ in thousands)	Net change 2014 to 2015
Properties acquired during 2014 or 2015 and retained	$	84,990
Development properties that became operational or were partially operational in 2014 and/or 2015	2,407
Properties sold during 2014 or 2015	(5,277		)
Properties under redevelopment during 2014 and/or 2015	(337		)
Properties fully operational during 2014 and 2015 and other	166
Total	$	81,949



	Three Months Ended September 30, 2015
Consolidated net income	$	2,961
Adjustments to net income
Depreciation and amortization	42,549
Interest expense	13,881
Income tax expense of taxable REIT subsidiary	9
Earnings Before Interest, Taxes, Depreciation and Amortization	59,400
Merger and acquisition costs	1,089
Unconsolidated EBITDA	33
Pro forma adjustment²	(12		)
Other expense, net	60
Minority interest	(415		)
Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization	60,155

Annualized Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization¹	$	240,620

Ratio of Company share of net debt:
Mortgage and other indebtedness	1,679,843
Less: Partner share of consolidated joint venture debt	(10,457		)
Less: Cash	(42,951		)
Less: Debt Premium	(23,949		)
Company Share of Net Debt	1,602,486
Ratio of Net Debt to Annualized Adjusted EBITDA	6.7x
Net Debt plus Preferred Shares to Annualized Adjusted EBITDA	7.1x