Kite Realty Group Trust (KRG) 10-Q 2005 Q3 Quarterly report

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2005

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

State of Organization:	IRS Employer Identification Number:
Maryland	11-3715772

30 S. Meridian Street, Suite 1100
Indianapolis, Indiana 46204
Telephone: (317) 577-5600

(Address, including zip code and telephone number, including area code, of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ý  No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  Yes o  No ý

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes o  No ý

The number of Common Shares outstanding as of November 2, 2005 was 28,554,117 ($.01 par value)

KITE REALTY GROUP TRUST

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2005

TABLE OF CONTENTS

Part I.	FINANCIAL INFORMATION
	Cautionary Note About Forward-Looking Statements
Item 1.	Consolidated and Combined Financial Statements
		Consolidated Balance Sheets for the Company as of September 30, 2005 and December 31, 2004
		Consolidated and Combined Statements of Operations for the Company for the Three Months ended September 30, 2005 and for the period from August 16, 2004 through September 30, 2004 and for Kite Property Group (“the Predecessor”) for the period from July 1, 2004 through August 15, 2004
		Consolidated and Combined Statements of Operations for the Company for the Nine Months ended September 30, 2005 and for the period from August 16, 2004 through September 30, 2004 and for the Predecessor for the period from January 1, 2004 through August 15, 2004
		Consolidated and Combined Statements of Cash Flows for the Company for the Nine Months Ended September 30, 2005 and 2004
		Notes to Consolidated and Combined Financial Statements
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3.	Quantitative and Qualitative Disclosure About Market Risk
Item 4.	Controls and Procedures
Part II.	OTHER INFORMATION
Item 1.	Legal Proceedings
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds
Item 3.	Defaults Upon Senior Securities
Item 4.	Submission of Matters to a Vote of Security Holders
Item 5.	Other Information
Item 6.	Exhibits
SIGNATURES

2

Cautionary Note About Forward-Looking Statements

This Quarterly Report on Form 10-Q, together with other statements and information publicly disseminated by Kite Realty Group Trust (the “Company”), contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934.  Such statements are based on assumptions and expectations that may not be realized and are inherently subject to risks, uncertainties and other factors, many of which cannot be predicted with accuracy and some of which might not even be anticipated.  Future events and actual results, performance, transactions or achievements, financial or otherwise, may differ materially from the results, performance, transactions or achievements expressed or implied by the forward-looking statements.  Risks, uncertainties and other factors that might cause such differences, some of which could be material, include, but are not limited to:

•national and local economic, business, real estate and other market conditions;

•the ability of tenants to pay rent;

•the competitive environment in which the Company operates;

•financing risks;

•property management risks;

•the level and volatility of interest rates;

•the financial stability of tenants;

•the Company’s ability to maintain its status as a real estate investment trust (“REIT”) for federal income tax purposes;

•acquisition, disposition, development and joint venture risks;

•potential environmental and other liabilities;

•other factors affecting the real estate industry generally; and

•other risks identified in this Quarterly Report on Form 10-Q and, from time to time, in other reports we file with the Securities and Exchange Commission (the “SEC”) or in other documents that we publicly disseminate.

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

3

Part I.  FINANCIAL INFORMATION

Item 1.

Kite Realty Group Trust

Consolidated Balance Sheets

As of September 30, 2005 and December 31, 2004

	September 30,			December 31,
	2005			2004
	(unaudited)
Assets:
Investment properties, at cost:
Land	$	153,829,567		$	115,806,345
Land held for development	21,159,604			10,454,246
Buildings and improvements	453,198,740			365,043,023
Furniture, equipment and other	5,752,447			5,587,052
Construction in progress	72,443,798			52,485,321
	706,384,156			549,375,987
Less: accumulated depreciation	(38,495,999		)	(24,133,716		)
	667,888,157			525,242,271
Cash and cash equivalents	14,130,941			10,103,176
Tenant receivables, including accrued straight-line rent, net of allowance for bad debts	9,815,446			5,763,831
Other receivables	7,641,308			7,635,276
Investments in unconsolidated entities, at equity	1,384,144			155,495
Escrow deposits	9,838,934			4,497,337
Deferred costs, net	17,392,668			15,264,271
Prepaid and other assets	1,971,618			1,093,176
Total Assets	$	730,063,216		$	569,754,833
Liabilities and Shareholders’ Equity:
Mortgage and other indebtedness	$	434,658,748		$	283,479,363
Cash distributions and losses in excess of net investment in unconsolidated entities, at equity	—			837,083
Accounts payable and accrued expenses	38,119,946			23,919,949
Deferred revenue and other liabilities	27,064,211			34,836,430
Minority interest	3,621,127			59,735
Total liabilities	503,464,032			343,132,560
Commitments and contingencies
Limited Partners’ interests in operating partnership	70,245,717			68,423,213
Shareholders’ Equity:
Preferred Shares, $.01 par value, 40,000,000 shares authorized, no shares issued and outstanding	—			—
Common Shares, $.01 par value, 200,000,000 shares authorized, 19,154,117 shares and 19,148,267 shares issued and outstanding at September 30, 2005 and December 31, 2004, respectively	191,541			191,483
Additional paid in capital and other	168,039,894			164,532,227
Unearned compensation	(707,426		)	(806,879		)
Other comprehensive loss	(228,612		)	—
Accumulated deficit	(10,941,930		)	(5,717,771		)
Total shareholders’ equity	156,353,467			158,199,060
Total Liabilities and Shareholders’ Equity	$	730,063,216		$	569,754,833

See accompanying notes.

4

Kite Realty Group Trust and

Kite Property Group (the Predecessor)
Consolidated and Combined Statements of Operations

Three Months Ended September 30, 2005 and 2004

(unaudited)

	The Company						The Predecessor
				Period			Period
	Three Months Ended			August 16, 2004			July 1, 2004
	September 30,			through			through
	2005			September 30, 2004			August 15, 2004
Revenue:
Minimum rent	$	14,628,482		$	4,406,584		$	2,875,839
Tenant reimbursements	2,405,152			765,427			535,097
Other property related revenue	2,409,900			72,864			160,791
Construction and service fee revenue	4,916,774			1,862,122			1,211,775
Other income, net	57,758			16,920			36,009
Total revenue	24,418,066			7,123,917			4,819,511
Expenses:
Property operating	2,961,408			1,138,909			1,146,826
Real estate taxes	1,634,920			605,807			367,089
Cost of construction and services	4,355,163			1,848,166			1,031,378
General, administrative, and other	1,112,313			579,938			350,051
Depreciation and amortization	5,568,967			1,687,928			1,131,390
Total expenses	15,632,771			5,860,748			4,026,734
Operating income	8,785,295			1,263,169			792,777
Interest expense	5,176,658			1,273,814			1,359,807
Loan prepayment penalties and expenses	—			1,671,449			—
Income tax expense of taxable REIT subsidiary	197,800			—			—
Minority interest (income) loss	(623,574		)	(23,650		)	286,930
Equity in earnings of unconsolidated entities	76,385			52,914			138,106
Limited Partners’ interest in operating partnership	(881,407		)	499,033			—
Net income (loss)	$	1,982,241		$	(1,153,797	)	$	(141,994	)
Basic income (loss) per share	$	0.10		$	(0.06	)
Diluted income (loss) per share	$	0.10		$	(0.06	)
Weighted average Common Shares outstanding - basic	19,151,910			17,800,441
Weighted average Common Shares outstanding - diluted	19,289,737			17,800,441

See accompanying notes.

5

Kite Realty Group Trust and

Kite Property Group (the Predecessor)
Consolidated and Combined Statements of Operations

Nine Months Ended September 30, 2005 and 2004

(Unaudited)

	The Company						The Predecessor
				Period			Period
	Nine Months Ended			August 16, 2004			January 1, 2004
	September 30,			through			through
	2005			September 30, 2004			August 15, 2004
Revenue:
Minimum rent	$	41,410,297		$	4,406,584		$	11,046,605
Tenant reimbursements	7,910,696			765,427			1,662,576
Other property related revenue	3,765,989			72,864			1,373,503
Construction and service fee revenue	13,596,417			1,862,122			5,257,201
Other income, net	150,217			16,920			110,819
Total revenue	66,833,616			7,123,917			19,450,704
Expenses:
Property operating	8,212,466			1,138,909			4,130,747
Real estate taxes	5,067,826			605,807			1,595,578
Cost of construction and services	11,620,017			1,848,166			4,405,160
General, administrative, and other	3,621,683			579,938			1,477,112
Depreciation and amortization	16,003,577			1,687,928			3,584,290
Total expenses	44,525,569			5,860,748			15,192,887
Operating income	22,308,047			1,263,169			4,257,817
Interest expense	13,643,969			1,273,814			4,828,888
Loan prepayment penalties and expenses	—			1,671,449			—
Income tax expense of taxable REIT subsidiary	232,285			—			—
Minority interest (income) loss	(716,523		)	(23,650		)	214,887
Equity in earnings of unconsolidated entities	278,736			52,914			163,804
Limited Partners’ interest in operating partnership	(2,446,166		)	499,033			—
Net income (loss)	$	5,547,840		$	(1,153,797	)	$	(192,380	)
Basic income (loss) per share	$	0.29		$	(0.06	)
Diluted income (loss) per share	$	0.29		$	(0.06	)
Weighted average Common Shares outstanding - basic	19,149,495			17,800,441
Weighted average Common Shares outstanding - diluted	19,262,229			17,800,441

See accompanying notes.

6

Kite Realty Group Trust and

Kite Property Group (the Predecessor)
Consolidated and Combined Statements of Cash Flows

Nine Months Ended September 30, 2005 and 2004
(Unaudited)

	The Company			The Predecessor
	Nine Months Ended September 30,
	2005			2004
Cash flow from operating activities:
Net income (loss)	$	5,547,840		$	(1,346,177	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Minority interest income (loss)	716,523			(191,237		)
Equity in earnings of unconsolidated entities	(278,736		)	(216,718		)
Limited Partners’ interest in Operating Partnership	2,446,166			(499,033		)
Distributions of income from unconsolidated entities	246,793			315,059
Straight-line rent	(1,438,253		)	(366,061		)
Depreciation and amortization	16,478,258			5,272,218
Provision for credit losses	293,186			255,978
Compensation expense for equity awards	276,228			6,094
Amortization of debt fair value adjustment	(1,078,158		)	(359,386		)
Amortization of in-place lease liabilities	(2,650,049		)	(848,561		)
Changes in assets and liabilities:
Tenant receivables	(2,906,549		)	(1,257,961		)
Deferred costs and other assets	(12,723,830		)	(2,791,172		)
Accounts payable and accrued expenses	4,027,286			8,659,132
Net cash provided by operating activities	8,956,705			6,632,175
Cash flow from investing activities:
Acquisitions of properties	(95,415,362		)	(110,452,207		)
Acquisition of joint venture and outside minority interest	—			(12,704,577		)
Capital and construction expenditures, net	(36,592,822		)	(55,053,596		)
Change in construction payables	7,954,310			6,734,678
Distributions of capital from unconsolidated entities	15,207			212,006
Consolidation of acquired joint venture and outside minority interests’ cash	—			665,604
Consolidation of Glendale Mall’s cash as of March 31, 2004	—			108,822
Net cash used in investing activities	(124,038,667		)	(170,489,270		)
Cash flow from financing activities:
Offering proceeds, net of issuance costs	—			215,495,311
Loan proceeds	165,150,893			123,635,697
Loan transaction costs	(1,319,594		)	(2,697,702		)
Loan payments	(29,061,907		)	(162,352,560		)
Distributions paid - shareholders	(10,707,756		)	—
Distributions paid - unitholders	(4,801,974		)	—
Contributions (including minority interest share)	—			2,550,694
Distributions (including minority interest share)	(149,935		)	(11,792,896		)
Net cash provided by financing activities	119,109,727			164,838,544
Increase in cash and cash equivalents	4,027,765			981,449
Cash and cash equivalents, beginning of period	10,103,176			2,189,478
Cash and cash equivalents, end of period	$	14,130,941		$	3,170,927

See acccompanying notes.

7

Kite Realty Group Trust and

Kite Property Group (the Predecessor)
Notes to Consolidated and Combined Financial Statements
September 30, 2005
(Unaudited)

Note 1.  Organization

Kite Realty Group Trust (the “Company” or “REIT”) was organized in Maryland on March 29, 2004 to succeed to the development, acquisition, construction and real estate businesses of Kite Property Group (“the Predecessor”).  The Predecessor was owned by Al Kite, John Kite and Paul Kite (the “Principals”) and certain executives and family members and consisted of the properties, entities and interests contributed to the Company or its subsidiaries by the Principals.  The Company began operations on August 16, 2004 when it completed its initial public offering (“IPO”) and concurrently consummated certain other formation transactions.  The IPO consisted of the sale of 16,300,000 common shares to the public at $13.00 per share, resulting in net proceeds to the Company of $191.3 million.  The net proceeds were contributed by the Company in exchange for a 67.4% controlling interest in Kite Realty Group, L.P. (the “Operating Partnership”).  A total of 833,267 shares were issued to the Principals and an executive of the Predecessor in exchange for their interests in certain properties and service companies.  Also, a total of 15,000 restricted shares were awarded to the non-employee members of the Company’s Board of Trustees.  On September 14, 2004, the underwriters exercised their over-allotment option to purchase an additional 2,000,000 common shares at $13.00 per share, resulting in additional net proceeds of $24.2 million.   In total, 19,148,267 shares were issued in connection with the Company’s formation and IPO.  In addition, a total of 8,281,882 units of the Operating Partnership were issued to the Principals and third parties in exchange for their interests in certain properties.

As a result of the IPO and related formation transactions, the Company, through the Operating Partnership, is engaged in the ownership, operation, management, leasing, acquisition, expansion, construction and development of neighborhood and community shopping centers and certain commercial real estate properties.  As of September 30, 2005, we consolidated 54 of the 56 entities that own properties in which we own interests.  The Company also provides real estate facilities management, construction, development and other advisory services to third parties through its taxable REIT subsidiaries.

Note 2.  Basis of Presentation

The accompanying financial statements of Kite Realty Group Trust are presented on a consolidated basis and include all of the accounts of the Company, the Operating Partnership and the subsidiaries of the Operating Partnership.  The exchange of entities or interests held by the Principals for common shares of the REIT and limited partnership interests in the Operating Partnership was accounted for as a reorganization of entities under common control and, accordingly, related assets and liabilities were reflected at their historical cost basis.  The acquisition of the joint venture and minority partners’ interests in the properties has been accounted for as a purchase.

The Company allocates net operating results of the Operating Partnership based on the partners’ respective weighted average ownership interest.  The Company’s weighted average interest in the Operating Partnership for the three months and nine months ended September 30, 2005 was 69.1% and 69.4%, respectively.  The Company’s interest in the Operating Partnership as of September 30, 2005 was 69.0%.  The Company adjusts the limited partners’ interests in the Operating Partnership at the end of each period to reflect their interest in the Operating Partnership.  This adjustment is reflected in the Company’s shareholders’ equity.  For the three months and nine months ended September 30, 2005, the limited partners’ weighted average interest in the Operating Partnership was 30.9% and 30.6%, respectively.  As of September 30, 2005, the limited partners’ interest was 31.0%.

The Company’s management has 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 principals 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, 2005 and for the three months and nine months ended September 30, 2005 and 2004 include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial information set forth therein. 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 and 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.

Certain reclassifications of prior period amounts were made to conform to the 2005 presentation.  These reclassifications had no effect on net income previously reported.

8

Note 3.  Earnings Per Share

Basic earnings per share is calculated based on the weighted average number of shares outstanding during the period.  Diluted earnings per share is determined based on the weighted average number of shares outstanding combined with the incremental average shares that would have been outstanding assuming all potentially dilutive shares were converted into common shares as of the earliest date possible.  Share options are accounted for based on their fair market value at the date of grant.  Expense related to share options was approximately $73,000 and $221,000 for the three and nine months ended September 30, 2005, respectively.  The following table sets forth the computation for our basic and diluted earnings per share.

		For the		For the
		period from		period from
	For the	August 16, 2004	For the	August 16, 2004
	three months ended	through	nine months ended	through
	September 30,	September 30,	September 30,	September 30,
	2005	2004	2005	2004
Weighted Average Common Shares Outstanding - Basic	19,151,910	17,800,441	19,149,495	17,800,441
Effect of outstanding stock options	137,827	—	112,734	—
Weighted Average Shares Outstanding - Diluted	19,289,737	17,800,441	19,262,229	17,800,441

Potential dilutive securities include outstanding share options and units of limited partnership of the Operating Partnership which may be exchanged for shares under certain circumstances.  The only potentially dilutive securities that had a dilutive effect for the three and nine months ended September 30, 2005 were outstanding share options.  The outstanding share options did not have a dilutive effect in 2004 as the Company recorded a net loss.

Note 4.  Comprehensive Income

The following sets forth comprehensive income for the three and nine months ended September 30, 2005 and 2004:

	Company Three months ended September 30, 2005		Company Period August 16, 2004 through September 30, 2004			Predecessor Period July 1, 2004 through August 15, 2004			Company Nine months ended September 30, 2005			Company Period August 16, 2004 through September 30, 2004			Predecessor Period January 1, 2004 through August 15, 2004
Net income (loss)	$	1,982,241	$	(1,153,797	)	$	(141,994	)	$	5,547,840		$	(1,153,797	)	$	(192,380	)
Other comprehensive income (loss)(1)	144,383		—			—			(228,612		)	—			—
Comprehensive income (loss)	$	2,126,624	$	(1,153,797	)	$	(141,994	)	$	5,319,228		$	(1,153,797	)	$	(192,380	)

(1) Relates to the changes in the fair value of derivative instruments accounted for as cash flow hedges.

Note 5.  Purchase Accounting

The Company allocates the purchase price of properties to tangible and identified intangible assets acquired based on their fair values in accordance with the provisions of Statement of Financial Accounting Standards No 141, “Business Combinations” (“SFAS No. 141”).  The fair value of real estate acquired is allocated to land and buildings, while the fair value of in-place leases, consisting of above-market and below-market rents and other intangibles is allocated to intangible assets and liabilities.

9

Note 6.  Acquisition Activity

During 2004 and the first nine months of 2005, the Company acquired and placed in service the following operating retail properties:

Property Name	Location	Acquisition Date	Acquisition Cost			Financing Method
			(Millions)
Silver Glen Crossings	South Elgin, IL	April 1, 2004	$	23.4		Debt (9)
Cedar Hill Village	Cedar Hill, TX	June 28, 2004	6.8			Debt (9)
Galleria Plaza	Dallas, TX	June 29, 2004	6.2			Debt (9)
Wal-Mart Plaza (1)	Gainesville, FL	July 1, 2004	8.5			Debt (9)
Eagle Creek Pad 2	Naples, FL	July 7, 2004	1.1			Debt (9)
Fishers Station (2)	Fishers, IN	July 23, 2004	2.1		(3)	Debt (9)
Hamilton Crossing	Carmel, IN	August 19, 2004	15.5			IPO Proceeds
Waterford Lakes	Orlando, FL	August 20, 2004	9.1			IPO Proceeds
Publix at Acworth	Acworth, GA	August 20, 2004	9.2			IPO Proceeds
Plaza at Cedar Hill	Cedar Hill, TX	August 31, 2004	38.6		(4)	IPO Proceeds
Sunland Towne Centre	El Paso, TX	September 16, 2004	32.1		(5)	Debt
Centre at Panola	Lithonia, GA	September 30, 2004	9.4		(6)	Debt
Marsh Supermarket (7)	Fishers, IN	November 24, 2004	5.0			Debt
Eastgate Pavilion	Cincinnati, OH	December 1, 2004	27.6			Debt
Four Corner Square	Maple Valley, WA	December 20, 2004	10.5			Debt
Fox Lake Crossing	Fox Lake, IL	February 7, 2005	15.5		(8)	Debt
Plaza Volente	Austin, TX	May 16, 2005	35.9		(10)	Debt
Indian River Square	Vero Beach, FL	May 16, 2005	16.5		(11)	Debt

(1)   This property is owned through a joint venture with a third party.  The Company currently receives 85% of the cash flow from this property, which percentage may decrease under certain circumstances.

(2)This property is owned through a joint venture with a third party.  The Company is the primary beneficiary and, therefore, this property is consolidated in the accompanying statement of operations.  The joint venture partner is entitled to an annual preferred payment of $96,000.  All remaining cash flow is distributed to the Company.

(3)Inclusive of debt assumed of $1.4 million.

(4)Inclusive of debt assumed of $27.4 million.

(5)Inclusive of debt assumed of $17.8 million.

(6)Inclusive of debt assumed of $4.5 million.

(7)Part of the Fishers Station property.

(8)Inclusive of debt assumed of $12.3 million.

(9)This acquisition was initially financed with debt, which was repaid with proceeds from the Company’s IPO.

(10)Inclusive of $28.7 million of new debt and $7.2 million of borrowings under the Company’s revolving credit facility incurred in connection with the acquisition.

(11)Inclusive of $13.3 million of new debt and $3.2 million of borrowings under the Company’s revolving credit facility incurred in connection with the acquisition.

The following table summarizes, on an unaudited pro forma basis, the combined results of operations for the three months and nine months ended September 30, 2005 and 2004 as if the Company’s IPO and its 2004 and 2005 property acquisitions occurred on January 1, 2004:

	Three Months Ended September 30,				Nine Months Ended September 30,
	2005		2004		2005		2004
	(unaudited)				(unaudited)
Pro forma revenues	$	24,418,066	$	16,912,173	$	69,118,530	$	48,673,429
Pro forma net income	$	1,982,241	$	828,902	$	5,126,008	$	3,527,640
Pro forma net income per share (basic and diluted) (1)	$	0.10	$	0.04	$	0.27	$	0.18
Pro forma weighted average
number of shares outstanding :
- basic	19,151,910		19,148,267		19,149,495		19,148,267
- diluted	19,289,737		19,148,267		19,262,229		19,148,267

(1)Pro forma net income for the three- and nine-months ended September 30, 2004 excludes one-time costs of approximately $1.7 million incurred in connection with the Company’s initial public offering in August 2004.

10

Note 7.  Mortgage and Other Indebtedness

Mortgage and other indebtedness consist of the following at September 30, 2005 and December 31, 2004:

	Balance at
	September 30,		December 31,
	2005		2004
Line of Credit	$	111,950,000	$	56,200,000
Mortgage Notes Payable - Fixed Rate	204,304,126		152,832,891
Construction Notes Payable - Variable Rate	108,763,747		59,521,968
Mortgage Notes Payable - Variable Rate	6,580,287		10,785,757
Net Premiums on Acquired Debt	3,060,588		4,138,747
Total mortgage and other indebtedness	$	434,658,748	$	283,479,363

Indebtedness, including weighted average maturities and weighted average interest rates at September 30, 2005, is summarized below:

				Weighted	Weighted
				Average	Average		Percentage
				Maturity	Interest		of
	Amount			(Years)	Rate		Total
Fixed Rate Debt	$	204,304,126		6.9	6.29	%	47	%
Floating Rate Debt (Hedged)	65,000,000			1.5	5.57	%	15	%
Total Fixed Rate Debt	269,304,126			5.7	6.13	%	62	%
Variable Rate Debt	227,294,034			1.5	5.55	%	53	%
Floating Rate Debt (Hedged)	(65,000,000		)	-1.6	-5.30	%	-15	%
Total Variable Rate Debt	162,294,034			1.5	5.64	%	38	%
Net Premiums on Acquired Debt	3,060,588			N/A	N/A		N/A
Total Debt	$	434,658,748		4.1	5.95	%	100	%

Mortgage and construction loans are collateralized by certain real estate and are generally due in monthly installments of interest and principal and mature over various terms through 2022.  Variable interest rates on mortgage and construction loans are based on Prime or LIBOR plus a spread in a range of 165 to 275 basis points.  Fixed interest rates on mortgage loans range from 5.11% to 8.85%.

During the third quarter of 2005, the Company used proceeds from its revolving credit facility and other borrowings totaling approximately $28.0 million to acquire several development properties, invest in development projects and for general working capital purposes.  Loan payoffs and scheduled principal payments totaled approximately $2.7 million.

In September 2005, the Company obtained a mortgage loan commitment from a bank for up to $34.8 million to finance construction at the Beacon Hill development property.  As of September 30, 2005, approximately $3.4 million was outstanding.

As of September 30, 2005, the Company’s borrowing base under its revolving credit facility was approximately $128.5 million, of which approximately $15.6 million was available for additional borrowings.  Borrowings under the facility bear interest at a floating rate of LIBOR plus 135 to 160 basis points, depending on the Company’s leverage ratio.As of September 30, 2005, there are eight properties available to be added to the borrowing base (upon completion of the lender’s due diligence process) as additional funds are required for potential additional borrowing capacity of approximately $21 million.

The following properties are encumbered by the revolving credit facility as of September 30, 2005: Silver Glen Crossing, Glendale Mall, Mid-America Clinical Labs, Hamilton Crossing, Kings Lake Square, Waterford Lakes, Publix at Acworth, PEN Products, Union Station Parking Garage, Galleria Plaza, Cedar Hill Village, Shops at Eagle Creek, Burlington Coat, Eastgate Pavilion, Four Corner Square and Stoney Creek Commons.

As of September 30, 2005, the Company had entered into letters of credit totaling approximately $2.9 million.

On October 3, 2005, the Company completed an offering of 8,500,000 common shares at a price of $15.01 per share for gross proceeds of approximately $127.6 million.  On October 28, 2005, the underwriters of the offering exercised a portion of their

11

overallotment option and purchased an additional 900,000 common shares at the public offering price of $15.01 per share, which resulted in additional gross proceeds of approximately $13.5 million.  Of the approximately $133.6 million of net proceeds of this offering, after deducting underwriting discounts, commissions and other expenses, the Company used $127 million:

•to repay outstanding construction indebtedness of approximately $38.6 million and acquisition indebtedness of approximately $0.5 million on our Traders Point property;

•to repay outstanding indebtedness on our Eagle Creek II development property and our Weston Park, Shops at Otty and Circuit City operating properties totaling approximately $13.6 million;

•to pay down our secured revolving credit facility by approximately $60.2 million; and

•to acquire an 85% interest in Bolton Plaza Shopping Center in Jacksonville, Florida for approximately $13.9 million.

The Company expects to use the remaining proceeds for general corporate purposes, including future acquisitions and development of properties.

Reflecting these reductions in indebtedness and reflecting the Company’s hedging activities, its fixed and variable rate debt as of September 30, 2005 were $269.3 million and $49.7 million, respectively.

As a result of the pay down of debt in connection with our offering, the Traders Point, Eagle Creek Phase II, Weston Park, Shops at Otty, and Circuit City properties are available to be added to the borrowing base under the Company’s revolving credit facility.

Note 8.  Derivative Instruments and Hedging Activities

At September 30, 2005, derivatives with a fair value of $228,612 were included in other liabilities.  The change in net unrealized income (loss) for the three and nine months ended September 30, 2005 of income of $144,383 and a loss of $228,612, respectively, for derivatives designated as cash flow hedges is recorded in shareholders’ equity as other comprehensive loss.  No hedge ineffectiveness on cash flow hedges was recognized during the third quarter of 2005.  Amounts reported in accumulated other comprehensive loss related to derivatives will be reclassified to earnings over time as the hedged items are recognized in earnings.

The Company does not use derivatives for trading or speculative purposes nor does the Company currently have any derivatives that are not designated as hedges.

Note 9.  Shareholders’ Equity

On August 4, 2005, the Board of Trustees declared a distribution of $0.1875 per common share for third quarter of 2005.  Simultaneously, the Board of Trustees declared a distribution of $0.1875 per operating partnership unit for the same period.  Both distributions were paid on October 18, 2005.

12

Note 10.  Segment Data

The operations of the Company and its Predecessor are aligned into two business segments: (i) real estate operation and development and (ii) construction and advisory services.  Combined segment data of the Company and its Predecessor for the nine months ended September 30, 2005 and 2004 are as follows:

	Real Estate			Construction
Nine Months Ended	Operation and			and						Intersegment
September 30, 2005	Development			Advisory Services			Subtotal			Eliminations			Total
Revenues	$	52,713,492		$	33,889,728		$	86,603,220		$	(19,649,070	)	$	66,833,616
Operating expenses, cost of construction and services, general, administrative and other	16,215,203			31,493,880			47,709,083			(19,066,557		)	28,521,992
Depreciation and amortization	15,939,847			63,730			16,003,577			—			16,003,577
Operating income	20,558,442			2,332,118			22,890,560			(582,513		)	22,308,047
Interest expense	13,643,748			221,440			13,865,188			(221,219		)	13,643,969
Minority interest	(145,082		)	(571,441		)	(716,523		)	—			(716,523		)
Income tax expense of taxable REIT subsidiary	—			232,285			232,285			—			232,285
Equity in earnings of unconsolidated entities	278,736			—			278,736			—			278,736
Limited partners’ interests in Operating Partnership	(2,446,166		)	—			(2,446,166		)	—			(2,446,166		)
Net income (loss)	$	4,602,182		$	1,306,952		$	5,909,134		$	(361,294	)	$	5,547,840
Total assets	$	706,145,900		$	34,819,425		$	740,965,325		$	(10,902,109	)	$	730,063,216
	Real Estate			Construction
Nine Months Ended	Operation and			and						Intersegment
September 30, 2004	Development			Advisory Services			Subtotal			Eliminations			Total
Revenues	$	19,725,291		$	40,618,650		$	60,343,941		$	(33,769,320	)	$	26,574,621
Operating expenses, cost of construction and services, general, administrative and other	7,593,170			41,303,105			48,896,275			(33,114,858		)	15,781,417
Depreciation and amortization	5,237,341			34,877			5,272,218			—			5,272,218
Operating income (loss)	6,894,780			(719,332		)	6,175,448			(654,462		)	5,520,986
Interest expense	6,041,631			61,071			6,102,702			—			6,102,702
Loan prepayment penalties and expenses	1,671,449						1,671,449						1,671,449
Minority interest	191,237			—			191,237			—			191,237
Equity in loss of unconsolidated entities	216,718			—			216,718			—			216,718
Limited partners’ interests in Operating Partnership	499,033			—			499,033			—			499,033
Net income (loss)	$	88,688		$	(780,403	)	$	(691,715	)	$	(654,462	)	$	(1,346,177	)
Total assets	$	496,770,400		$	22,991,410		$	519,761,810		$	(18,129,939	)	$	501,631,871

Note 11.  New Accounting Pronouncements

In December 2004, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 123 (revised 2004) “Share-Based Payments” (“SFAS No. 123(R)”), which supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees and its related implementation guidance.  SFAS No. 123(R) establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services.  SFAS No 123(R) is effective for fiscal years beginning after June 15, 2005.  The impact of adopting SFAS No. 123(R) is not expected to have a material impact on the Company’s financial condition or results of operations.

Note 12.  Commitments and Contingencies

The Company is not subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against the Company.

13

Note 13.  Subsequent Events

On October 3, 2005, the Company completed an offering of 8,500,000 common shares at a price of $15.01 per share for gross proceeds of approximately $127.6 million.  On October 28, 2005, the underwriters of the offering exercised a portion of their overallotment option and purchased an additional 900,000 common shares at the public offering price of $15.01 per share, which resulted in additional gross proceeds of approximately $13.5 million.  Of the approximately $133.6 million of net proceeds of this offering, after deducting underwriting discounts, commissions and other expenses, the Company used approximately $127 million:

•to repay outstanding construction indebtedness of approximately $38.6 million and acquisition indebtedness of approximately $0.5 million on our Traders Point property;

•to repay outstanding indebtedness on our Eagle Creek II development property and our Weston Park, Shops at Otty and Circuit City operating properties totaling approximately $13.6 million;

•to pay down our secured revolving credit facility by approximately $60.2 million; and

•to acquire an 85% interest in Bolton Plaza Shopping Center in Jacksonville, Florida for approximately $13.9 million

The Company expects to use the remaining proceeds for general corporate purposes, including future acquisitions and development of properties.

On October 3, 2005, the Company acquired approximately 12 acres in Westfield, Indiana (a northern suburb of Indianapolis) for a purchase price of approximately $4.8 million and placed an adjacent 8 acres under contract. Bridgewater Marketplace is anticipated to be a two-phase development. Phase I will be developed on the first 12 acres and will include a Walgreen’s, two outparcels, approximately 25,000 square feet of small shops and a potential junior box. We anticipate the second
phase will be developed subsequent to the time the Company closes on the adjacent 8 acres. The Company financed this acquisition with borrowings on its revolving credit facility.

On October 21, 2005, the Company contributed $16.7 million for a 50% economic interest in a joint venture that owns 32.5 acres of undeveloped land in Delray Beach, Florida.  Delray Beach Marketplace is a planned mixed-use development that is zoned to support up to 322,000 square feet and is anticipated to include two anchors, junior boxes, small shops, restaurants and residential units.  The Company financed this acquisition with borrowings on its revolving credit facility.

On November 1, 2005, the Company contributed $13.9 million for an 85% economic interest in a joint venture that acquired Bolton Plaza Shopping Center in Orange Park, Florida (a suburb of Jacksonville).  Bolton Plaza Shopping Center is a 173,000 square foot community shopping center, including a 131,488 square foot Wal-Mart and 41,500 square feet of small shops.  The property was approximately 92% leased as of September 30, 2005.  Wal-Mart’s lease at this property expires in June 2008 and the Company plans to redevelop the property at that time.  The Company financed this acquisition with proceeds from its equity offering.

On November 3, 2005, the Board of Trustees declared a distribution of $0.1875 per common share for the fourth quarter of 2005.  Simultaneously, the Board of Trustees declared a distribution of $0.1875 per operating partnership unit for the same period.  Both distributions are payable on or about January 17, 2006 to shareholders of record as of January 6, 2006.

On November 10, 2005, a joint venture in which the Company owns a 50% economic interest acquired 22.2 acres of land in Pembroke Pines, Florida for approximately $11.0 million.  The site is zoned to allow for development of up to 255,000 square feet of retail.  The development is expected to be anchored by Whole Foods, which has executed a lease for a 56,250 square foot grocery store, and will also include small shops, restaurant pads and a potential junior box.  The Company financed its portion of this investment with borrowings on its revolving credit facility.

14

Item 2.  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 subsidiaries and the Predecessor.  Kite Property Group is the Predecessor to Kite Realty Group Trust.

Overview

We are a full-service, vertically integrated real estate investment trust focused primarily on the development, construction, acquisition, ownership and operation of high quality neighborhood and community shopping centers in selected growth markets in the United States. We also provide real estate facility management, construction, development and other advisory services to third parties.

As of September 30, 2005, we owned interests in a portfolio of 37 operating retail properties totaling approximately 5.7 million square feet of gross leasable area (including non-owned anchor space) and 13 retail properties under development that are expected to contain approximately 1.8 million square feet of gross leasable area (including non-owned anchor space) upon completion. As of September 30, 2005, we also owned interests in five operating commercial properties totaling approximately 663,000 square feet of net rentable area and a related parking garage. In addition, at that date we owned interests in land parcels comprising approximately 130 acres that may be used for expansion of existing properties or future development of new retail or commercial properties.

We derive revenues primarily from rents and reimbursement payments received from tenants under existing leases at each of our properties. We also derive revenues from providing management, leasing, real estate development, construction and real estate advisory services through subsidiaries of our taxable REIT subsidiaries. Our operating results therefore depend materially on the ability of our tenants to make required payments and overall real estate market conditions.

In the future, we intend to focus on internal growth and pursuing targeted development and acquisitions of neighborhood and community shopping centers. We expect to incur additional debt in connection with any future development or acquisitions of real estate.

Results of Operations

Acquisition and Development Activities

The comparability of results of operations is significantly affected by our development and acquisition activities in 2005 and 2004 and the effects of the formation transactions related to our IPO.  At September 30, 2005, we owned interests in 43 operating properties (consisting of 37 retail properties, five commercial operating properties and a related parking garage) and had 13 properties under development. Of the 56 total properties held at September 30, 2005, two operating properties (Spring Mill Medical and The Centre) were owned through joint ventures and accounted for under the equity method.

During 2004 and the first nine months of 2005, we acquired and placed in service the following operating retail properties:

Property Name	Location	Acquisition Date	Acquisition Cost			Financing Method
			(Millions)
Silver Glen Crossings	South Elgin, IL	April 1, 2004	$	23.4		Debt (8)
Cedar Hill Village	Cedar Hill, TX	June 28, 2004	6.8			Debt (8)
Galleria Plaza	Dallas, TX	June 29, 2004	6.2			Debt (8)
Wal-Mart Plaza (1)	Gainesville, FL	July 1, 2004	8.5			Debt (8)
Eagle Creek Pad 2	Naples, FL	July 7, 2004	1.1			Debt (8)
Fishers Station (2)	Fishers, IN	July 23, 2004	2.1		(3)	Debt (8)
Hamilton Crossing	Carmel, IN	August 19, 2004	15.5			IPO Proceeds
Waterford Lakes	Orlando, FL	August 20, 2004	9.1			IPO Proceeds
Publix at Acworth	Acworth, GA	August 20, 2004	9.2			IPO Proceeds
Plaza at Cedar Hill	Cedar Hill, TX	August 31, 2004	38.6		(4)	IPO Proceeds
Sunland Towne Centre	El Paso, TX	September 16, 2004	32.1		(5)	Debt
Centre at Panola	Lithonia, GA	September 30, 2004	9.4		(6)	Debt
Marsh Supermarket (7)	Fishers, IN	November 24, 2004	5.0			Debt
Eastgate Pavilion	Cincinnati, OH	December 1, 2004	27.6			Debt
Four Corner Square	Maple Valley, WA	December 20, 2004	10.5			Debt
Fox Lake Crossing	Fox Lake, IL	February 7, 2005	15.5		(9)	Debt
Plaza Volente	Austin, TX	May 16, 2005	35.9		(10)	Debt
Indian River Square	Vero Beach, FL	May 16, 2005	16.5		(11)	Debt

15

(1)This property is owned through a joint venture with a third party.  We currently receive 85% of the cash flow from this property, which percentage may decrease under certain circumstances.

(2)This property is owned through a joint venture with a third party.  We are the primary beneficiary and, therefore, this property is consolidated in the accompanying statement of operations.  The joint venture partner is entitled to an annual preferred payment of $96,000.  All remaining cash flow is distributed to us.

(3)Inclusive of debt assumed of $1.4 million.

(4)Inclusive of debt assumed of $27.4 million.

(5)Inclusive of debt assumed of $17.8 million.

(6)Inclusive of debt assumed of $4.5 million.

(7)Part of the Fishers Station property.

(8)This acquisition was initially financed with debt, which was repaid with proceeds from our IPO.

(9)Inclusive of debt assumed of $12.3 million.

(10)Inclusive of $28.7 million of new debt and $7.2 million of borrowings on our revolving credit facility incurred in connection with the acquisition.

(11)Inclusive of $13.3 million of new debt and $3.2 million of borrowings on our revolving credit facility incurred in connection with the acquisition.

The following development properties became operational or partially operational during 2004 and the first nine months of 2005:

Property Name	MSA	Operational Date
Boulevard Crossing	Kokomo, IN	February 2004
Circuit City Plaza	Ft. Lauderdale, FL	March 2004
50th & 12th	Seattle, WA	August 2004
176th & Meridian	Seattle, WA	August 2004
Traders Point	Indianapolis, IN	October 2004
Cool Creek Commons	Indianapolis, IN	October 2004
82nd & Otty	Portland, OR	November 2004
Indiana State Motor Pool	Indianapolis, IN	November 2004
Weston Park Phase I	Indianapolis, IN	March 2005
Greyhound Commons	Indianapolis, IN	March 2005
Martinsville Shops	Martinsville, IN	June 2005
Red Bank Commons	Evansville, IN	June 2005

Glendale Mall was consolidated on March 31, 2004 in accordance with the provisions of FASB Interpretation No. 46. Previously, it had been accounted for under the equity method.  In connection with our IPO, we acquired the remaining joint venture and outside partner interests in a total of nine properties, including Glendale Mall.  As a result, these properties are now consolidated in the accompanying financial statements.

At September 30, 2004, we owned interests in 32 operating properties (consisting of 27 retail properties, four commercial properties and a related parking garage) and had 11 properties under development. Of the 43 total properties held at September 30, 2004, two operating properties were owned through joint ventures and were accounted for under the equity method.

16

Comparison of Operating Results for the Three Months Ended September 30, 2005 to the Three Months Ended September 30, 2004

The following table reflects key line items from our consolidated and combined statements of operations for the three months ended September 30, 2005 and 2004 (unaudited):

				Combined
				The Company and
	The Company			The Predecessor
	Three Months Ended			Three Months Ended
	September 30,			September 30,			Increase (Decrease)
	2005			2004			2004 to 2005
Rental income (including tenant reimbursements)	$	17,033,634		$	8,582,947		$	8,450,687		98.5	%
Other property related revenue	2,409,900			233,655			2,176,245			931.4	%
Construction and service fee revenue	4,916,774			3,073,897			1,842,877			60.0	%
Other income, net	57,758			52,929			4,829			9.1	%
Property operating expenses	2,961,408			2,285,735			675,673			29.6	%
Real estate taxes	1,634,920			972,896			662,024			68.0	%
Cost of construction and services	4,355,163			2,879,544			1,475,619			51.2	%
General, administrative, and other	1,112,313			929,989			182,324			19.6	%
Depreciation and amortization	5,568,967			2,819,318			2,749,649			97.5	%
Operating income	8,785,295			2,055,946			6,729,349
Interest expense	5,176,658			2,633,621			2,543,037			96.6	%
Loan prepayment penalties and expenses	—			1,671,449			(1,671,449		)
Income tax expense of taxable REIT subsidiary	197,800			—			197,800
Minority interest (income) loss	(623,574		)	263,280			(886,854		)
Equity in earnings of unconsolidated entities	76,385			191,020			(114,635		)
Limited partners’ interest in operating partnership	(881,407		)	499,033			(1,380,440		)
Net income (loss)	$	1,982,241		$	(1,295,791	)	$	3,278,032

Rental income (including tenant reimbursements) increased approximately $8.5 million or 99%.  Approximately $5.9 million of this increase was attributable to properties acquired in 2004 or 2005, approximately $2.7 million was attributable to properties that became operational or partially operational in 2004 or 2005 and, therefore, had incremental rental income in 2005.  Approximately $0.6 million of the increase reflects the consolidation of properties following our acquisition of joint venture partners’ interests in connection with our IPO and related formation transactions and approximately $0.2 million of the increase is due to temporary ground lease payments under a license agreement.  Offsetting these increases was a decrease of approximately $0.3 million due to the rejection of leases by Ultimate Electronics at Cedar Hill Village and Galleria Plaza and a decrease of approximately $0.6 million at Glendale, largely due to a decline in tenant reimbursement revenue as a result of a successful property tax appeal that reduced tenant billings at this property.

Other property related revenue primarily consists of parking revenues, lease settlement income and gains on land sales. This revenue increased approximately $2.2 million or 931%.   Approximately $2.1 million of the increase is attributable to the sale of outlots at Traders Point ($1.0 million) and Beacon Hill ($1.1 million) and approximately $0.1 million is attributable to overage rent.  The Beacon Hill outlot was owned in a joint venture and, accordingly, 50%, or approximately $0.6 million, of this gain is recorded as a minority interest.

Construction revenue and service fees increased approximately $1.8 million or 60%.  This increase is due to an increase of $1.7 million in construction contracts with third-party customers, and $0.2 million in third-party development-related fees, offset by declines in advisory revenue of approximately $0.1 million due to the expiration of several contracts.

Property operating expenses increased approximately $0.7 million or 30%.   Approximately $0.6 million of this increase was attributable to properties acquired in 2004 and 2005, approximately $0.3 million was attributable to properties that became operational or partially operational in 2005 and 2004 and, therefore, had incremental property operating expense in 2005 and approximately $0.1 million was due to the consolidation of properties following our acquisition of joint venture partners’ interests in connection with our IPO and related formation transactions.  Offsetting these increases was a decrease of $0.2 million in expenses incurred at properties operating for all of the third quarter of 2005 and 2004.

17

Real estate taxes increased approximately $0.7 million or 68%. Approximately $0.8 million of this increase was attributable to properties acquired in 2004 or 2005, approximately $0.2 million was attributable to properties that became operational or partially operational in 2005 and 2004 and, therefore, had incremental real estate tax expense in 2005, approximately $0.1 million was due to the consolidation of properties following our acquisition of joint venture partners’ interests in connection with our IPO and related formation transactions and approximately $0.1 million was attributable to properties that were fully operational for the third quarter of 2005 and 2004.  Offsetting these increases was a decrease of approximately $0.6 million at Glendale from a successful property tax appeal at this property.

Cost of construction and services increased approximately $1.5 million or 51%.  This increase was primarily due to an increase in construction contracts with third-party customers.

General, administrative and other expenses increased approximately $0.2 million or 20%.  This increase is due to increased staffing attributable to our growth and to incremental costs associated with operating as a public company.

Depreciation and amortization expense increased approximately $2.7 million or 98%. Approximately $1.9 million of the increase was attributable to properties acquired in 2004 and 2005, approximately $0.7 million was attributable to properties that became operational or partially operational in 2005 or 2004 and, therefore, had incremental depreciation and amortization expense in 2005.  Approximately $0.3 million of the increase was due to the consolidation of properties following our acquisition of joint venture and minority partners’ interests in connection with our IPO and related formation transactions.  Offsetting these increases was a decrease of $0.1 million at properties that were fully operational for the third quarter of 2005 and 2004.

Interest expense increased approximately $2.5 million, or 97%.  Approximately $1.2 million of the increase was attributable to properties acquired in 2004 and 2005, approximately $1.0 million was attributable to properties that became operational or partially operational in 2005 or 2004 and, therefore, had incremental interest expense in 2005.  Approximately $1.0 million of the increase was due to higher borrowings on our revolving credit facility used primarily to finance property acquisition and land development activities and for working capital requirements and approximately $0.2 million was due to the consolidation of properties following our acquisition of the joint venture partners’ interests in connection with our IPO and related formation transactions.  Offsetting these increases was a decrease of $0.8 million at properties that were fully operational for the third quarter of 2005 and 2004 due to debt pay downs in connection with our initial public offering in 2004.

In 2004, we incurred approximately $1.7 million in loan prepayment penalties in connection with our initial public offering and related formation transactions.

In 2005, we recorded $0.2 million in income taxes associated primarily with the gain on the sale of a land parcel by our taxable REIT subsidiary.

Minority interest (income) loss was a loss of approximately $0.3 million in 2004 and income of $0.6 million in 2005.  The loss in 2004 is largely attributable to joint venture and minority interests that were acquired in connection with our initial public offering and related formation transactions, while the income in 2005 is primarily due to our joint venture partner’s interest in the gain on the sale of an outlot at Beacon Hill.

Equity in the earnings of unconsolidated entities decreased approximately $0.1 million.  This decrease is attributable to the consolidation of properties following our acquisition of the joint venture partners’ interests in connection with our IPO and related formation transactions.

The change in the limited partners’ interests in the operating partnership is largely related to our results before the limited partners’ interest, which was income of $2.9 million in 2005 and a loss of $1.8 million in 2004.

18

Comparison of Operating Results for the Nine Months Ended September 30, 2005 to the Nine months Ended September 30, 2004

The following table reflects key line items from our consolidated and combined statements of operations for the nine months ended September 30, 2005 and 2004 (unaudited):

				Combined
				The Company and
	The Company			The Predecessor
	Nine Months Ended			Nine Months Ended
	September 30,			September 30,			Increase (Decrease)
	2005			2004			2004 to 2005
Rental income (including tenant reimbursements)	$	49,320,993		$	17,881,192		$	31,439,801		175.8	%
Other property related revenue	3,765,989			1,446,367			2,319,622			160.4	%
Construction and service fee revenue	13,596,417			7,119,323			6,477,094			91.0	%
Other income, net	150,217			127,739			22,478			17.6	%
Property operating expenses	8,212,466			5,269,656			2,942,810			55.8	%
Real estate taxes	5,067,826			2,201,385			2,866,441			130.2	%
Cost of construction and services	11,620,017			6,253,326			5,366,691			85.8	%
General, administrative, and other	3,621,683			2,057,050			1,564,633			76.1	%
Depreciation and amortization	16,003,577			5,272,218			10,731,359			203.5	%
Operating income	22,308,047			5,520,986			16,787,061
Interest expense	13,643,969			6,102,702			7,541,267			123.6	%
Loan prepayment penalties and expenses	—			1,671,449			(1,671,449		)
Income tax expense of taxable REIT subsidiary	232,285			—			232,285
Minority interest (income) loss	(716,523		)	191,237			(907,760		)
Equity in earnings of unconsolidated entities	278,736			216,718			62,018
Limited partners’ interest in operating partnership	(2,446,166		)	499,033			(2,945,199		)
Net income (loss)	$	5,547,840		$	(1,346,177	)	$	6,894,017

Rental income (including tenant reimbursements) increased approximately $31.4 million or 176%.  Approximately $20.5 million of this increase was attributable to properties acquired in 2004 or 2005, approximately $7.3 million was attributable to properties that became operational or partially operational in 2004 or 2005 and, therefore, had incremental rental income in 2005.  Approximately $4.2 million of the increase reflects the consolidation of properties following our acquisition of joint venture partners’ interests in connection with our IPO and related formation transactions and approximately $0.5 million is due to temporary ground lease payments under a license agreement.   Approximately $0.3 million of the increase is from properties fully operational in both years and is largely due to the conversion of the contractual arrangement at the Union Station Parking Garage from a daily fee arrangement to a net lease.  Offsetting these increases was a decrease of approximately $0.3 million due to the rejection of leases by Ultimate Electronics at Cedar Hill Village and Galleria Plaza and a decrease of approximately $0.9 million at Glendale Mall, largely due to a decline in tenant reimbursement revenue as a result of a successful property tax appeal that reduced tenant billings at this property and a decline in it’s occupancy.

Other property related revenue primarily consists of parking revenues, lease settlement income and gains on land sales. This revenue increased approximately $2.3 million or 160%.  Approximately $2.8 million of the increase is attributable to the sale of outlots at Traders Point ($1.0 million), Beacon Hill ($1.1 million) and Noblesville ($0.7 million).  The Beacon Hill outlot was owned in a joint venture and, accordingly, 50%, or approximately $0.6 million, of this gain is recorded as minority interest income.  Approximately $0.2 million is from the sale of land development rights, approximately $0.2 million is attributable to lease termination income and approximately $0.1 million of the increase is attributable to overage rent.  The conversion of the contractual arrangement at the Union Station Parking Garage from a daily fee arrangement to a net lease resulted in a decrease of $0.6 million.  We also sold a land parcel in 2004 for a net gain of $0.4 million.

Construction revenue and service fees increased approximately $6.5 million or 91%.  This increase is due to an increase of $6.3 million in construction contracts with third-party customers and $0.9 million in development-related fees, offset by declines in advisory revenue of approximately $0.7 million due to the expiration of several contracts.

Property operating expenses increased approximately $2.9 million or 56%.   Approximately $2.5 million of this increase was attributable to properties acquired in 2004 and 2005, approximately $0.8 million was attributable to properties that became operational or partially operational in 2005 and 2004 and, therefore, had incremental property operating expense in 2005 and approximately $0.9 million was due to the consolidation of properties following our acquisition of joint venture partners’ interests in connection with our IPO and related formation transactions.  Offsetting these increases was a decrease of $0.9 million in expenses incurred at properties that were fully operational in both years, primarily due to the conversion of the contractual arrangement at the Union Station Parking Garage from a daily fee arrangement to a net lease and a decrease of $0.3 million at Glendale Mall.

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Real estate taxes increased approximately $2.9 million or 130%. Approximately $2.6 million of this increase was attributable to properties acquired in 2004 or 2005, $0.6 million was attributable to properties that became operational or partially operational in 2005 and 2004 and, therefore, had incremental real estate tax expense in 2005 and approximately $0.4 million was due to the consolidation of properties following our acquisition of joint venture partners’ interests in connection with our IPO and related formation transactions.  Offsetting these increases was a decrease of approximately $0.7 million at Glendale Mall from a successful property tax appeal at this property.

Cost of construction and services increased approximately $5.4 million or 86%.  This increase was primarily due to an increase in construction contracts with third-party customers.

General, administrative and other expenses increased approximately $1.6 million or 76%.  This increase is largely due to incremental costs associated with operating as a public company, such as professional fees and insurance.

Depreciation and amortization expense increased approximately $10.7 million or 204%. Approximately $6.4 million of the increase was attributable to properties acquired in 2004 and 2005, $1.8 million was attributable to properties that became operational or partially operational in 2005 or 2004 and, therefore, had incremental depreciation and amortization expense in 2005.  Approximately $1.4 million of the increase was due to the consolidation of properties following our acquisition of joint venture and minority partners’ interests in connection with our IPO and related formation transactions and approximately $1.1 million was attributable to properties that were fully operational in both years, primarily as a result of the consolidation of Glendale Mall as of March 31, 2004 and the write off of fixed assets as a result of lease terminations at this property.

Interest expense increased approximately $7.5 million, or 124%. Approximately $3.1 million was attributable to properties that became operational or partially operational in 2005 or 2004 and, therefore, had incremental interest expense in 2005.  Approximately $2.9 million was due to increased borrowings on our revolving credit facility used primarily to finance property acquisition activities and for working capital requirements.  Approximately $2.3 million of the increase was attributable to properties acquired in 2004 and 2005, and approximately $1.3 million was due to the consolidation of properties following our acquisition of joint venture partners’ interests in connection with our IPO and related formation transactions.  These increases were partially offset by decreases totaling approximately $2.0 million due to incremental financing costs incurred in 2004 and to the pay down of debt in 2004 both in connection with our initial public offering and related formation transactions in 2004.

In 2004, we incurred approximately $1.7 million in loan prepayment penalties in connection with our initial public offering and related formation transactions.

In 2005, we recorded $0.2 million in income taxes associated primarily with the gain on the sale of a land parcel in our taxable REIT subsidiary.

Minority interest (income) loss was a loss of approximately $0.2 million in 2004 and income of $0.7 million in 2005.  The loss in 2004 is largely attributable to joint venture and minority interests that were acquired in connection with our initial public offering and related formation transactions, while the income in 2005 is largely attributable to our joint venture partner’s interest in the gain on the sale of an outlot at Beacon Hill.

The change in the limited partners’ interests in the operating partnership is largely related to our results before the limited partners’ interest, which was income of $8.0 million in 2005 and a loss of $1.8 million in 2004.

Liquidity and Capital Resources

As of September 30, 2005, we had cash and cash equivalents on hand of $14.1 million.

As of September 30, 2005, our borrowing base under the revolving credit facility was approximately $128.5 million, of which approximately $15.6 million was available for additional borrowings.  Borrowings under the credit facilitybear interest at a floating rate of LIBOR plus 135 to 160 basis points, depending on our leverage ratio.  As of September 30, 2005, there are eight properties available to be added to the borrowing base (upon completion of the lender’s due diligence process) as additional funds are required for potential additional borrowing capacity of approximately $21 million.

In October 2005, we completed an offering of common shares that provided us with an aggregate of approximately $133.6 million of net proceeds (including the underwriters’ exercise of their option and after deducting underwriting discounts, commissions and other expenses).  We used approximately $112.9 million of these net proceeds to pay down outstanding indebtedness.  As a result, we believe that our balance sheet has been significantly improved, and additional amounts are available for future borrowing to fund acquisitions and development of properties and other cash needs.  As a result of the pay down of debt in connection with our October 2005 offering, our Traders Point, Eagle Creek Phase II, Weston Park, Shops at Otty, and Circuit City properties are available to be added to the borrowing base.

Our objective in using derivatives is to add stability to interest expense and to manage our exposure to interest rate movements and other identified risks.  To accomplish this objective, we use interest rate swaps as part of our cash flow hedging

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strategy.  Interest rate swaps designated as cash flow hedges involve the receipt of variable-rate amounts in exchange for fixed-rate payments over the life of the agreements without exchange of the underlying principal amount.  During 2005, such derivatives were used to hedge the variable cash flows associated with certain of our existing variable-rate debt.

We derive the majority of our revenue from tenants who lease space from us at our properties. Therefore, our ability to generate cash from operations is dependent on the rents that we are able to charge and collect from our tenants. While we believe that the nature of the properties in which we typically invest—primarily neighborhood and community shopping centers—provides a relatively stable revenue flow in uncertain economic times, general economic downturns or downturns in the markets in which we own properties may still adversely affect the ability of our tenants to meet their lease obligations. In that event, our cash flow from operations could be materially affected.

In January 2005, Ultimate Electronics filed for Chapter 11 bankruptcy protection to reorganize its business operations.  During the second quarter of 2005 this tenant rejected its leases with us at Galleria Plaza and at Cedar Hill Plaza.  During the third quarter of 2005, we re-leased the former Ultimate Electronics spaces at Galleria Plaza to Shoe Pavilion and at Cedar Hill Village to 24 Hour Fitness.  These two leases represent a total of approximately 64,000 square feet. We anticipate that both tenants will open in the spring of 2006.

On February 21, 2005, Winn-Dixie filed for Chapter 11 bankruptcy protection to reorganize its business operations.  This tenant operates in two locations in our portfolio totaling approximately 103,400 square feet at an average base rent of $7.80 per square foot, representing approximately 1.5% of our total annualized base rent as of September 30, 2005.  The tenant continues to operate in both locations and has paid rent through September 2005 but there can be no assurance of its ability to pay rent prospectively.  As of September 30, 2005, Winn-Dixie had not announced plans to close the stores at either of our properties, nor had it rejected either lease.

The delay or failure of Winn-Dixie to make payments under its leases or its rejection of both of the leases under federal bankruptcy laws could affect our short-term liquidity in the event we are not able to timely identify a replacement tenant.  In addition, Winn-Dixie’s termination of leases or closure of stores could result in lease terminations or reductions in rent by other tenants in the same shopping centers under the terms of some leases.

Our Glendale Mall property in Indianapolis, Indiana has an annualized base rent of approximately $2.6 million as of September 30, 2005, or approximately 4.5% of our total annualized base rent.  As of September 30, 2005, Glendale Mall was approximately 85% leased.  We are currently evaluating several strategic alternatives with respect to this property including continuing to lease space in its current configuration and the possibility of redeveloping or selling the property.

The nature of our business, coupled with the requirements for qualifying for REIT status (which includes the requirement that we distribute to shareholders at least 90% of our annual REIT taxable income) and to avoid paying tax on our income, necessitate that we distribute a substantial majority of our income on an annual basis which will cause us to have substantial liquidity needs over both the short term and the long term. Our short-term liquidity needs consist primarily of funds necessary to pay operating expenses associated with our operating properties, interest expense and scheduled principal payments on our debt, expected dividend payments (including distributions to persons who hold units in our operating partnership) and recurring capital expenditures. When we lease space to new tenants, or renew leases for existing tenants, we also incur expenditures for tenant improvements and leasing commissions. This amount, as well as the amount of recurring capital expenditures that we incur, will vary from year to year. During the first nine months of 2005, we incurred approximately $420,000 of costs for recurring capital expenditures and $370,000 of costs for tenant improvements and leasing commissions, all exclusive of amounts incurred under construction loans for our development properties.  We expect to meet our short-term liquidity needs through cash generated from operations and, to the extent necessary, borrowings under the revolving credit facility.

Our long-term liquidity needs consist primarily of funds necessary to pay for development of new properties, redevelopment of existing properties, non-recurring capital expenditures, acquisitions of properties and payment of indebtedness at maturity. As of September 30, 2005, we have 13 development projects underway that are expected to cost approximately $164 million, of which approximately $99 million had been incurred as of September 30, 2005. In addition, we are actively pursuing the acquisition and development of other properties, which will require additional capital. We do not expect that we will have sufficient funds on hand to meet these long-term cash requirements. We will have to satisfy these needs through either additional borrowings, sales of common or preferred shares and/or cash generated through property dispositions and joint venture transactions.  However, we believe our October 2005 equity offering will allow us to complete our existing development pipeline.

We believe that we will have access to these sources of capital to fund our long-term liquidity requirements but we cannot assure that this will be the case. Our ability to access the equity capital markets will be dependent on a number of factors as well, including general market conditions for REITs and market perceptions about us.

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Cash Flows

Comparison of the Nine months Ended September 30, 2005 to the Nine months Ended September 30, 2004

Cash provided by operating activities was $9.0 million for the nine months ended September 30, 2005, an increase of $2.3 million from 2004. The increase in cash provided by operations resulted from the addition of eleven properties in connection with and subsequent to our IPO.  The increase in cash provided by operations was partially offset by cash used by decreases in the changes in accounts payable and accrued expenses between years of $4.6 million and by increases in the changes in tenant receivables and deferred costs between years totaling $11.6 million.

Cash used in investing activities was $124.1 million for the nine months ended September 30, 2005, a decrease of $46.5 million compared to 2004.  During the first nine months of 2005, we acquired three operating properties for an aggregate purchase price of approximately $95.4 million, approximately $15 million less than was invested in property acquisitions during the same period of the prior year.  We invested approximately $36.6 million in our development properties compared to approximately $55.1 million in the first nine months of 2004.  During 2004, we also acquired the remaining joint venture and outside minority interests in nine properties in connection with our initial public offering and related formation transactions for an aggregate purchase price of approximately $12.7 million.

Cash provided by financing activities was $119.1 million for the nine months ended September 30, 2005, a decrease of $45.7 million compared to 2004.  In 2004, we recognized net proceeds from our initial public offering of approximately $215.5 million.   Proceeds from loan transactions increased from $123.6 million in the first nine months of 2004 to $165.2 million in the first nine months of 2005.  These proceeds were primarily used to finance acquisition and development activity.  Loan payments decreased by $133.3 million between years largely as a result of the pay down of indebtedness totaling approximately $100 million in connection with our 2004 initial public offering.   We also paid distributions in 2005 to shareholders and unitholders totaling approximately $15.5 million and paid net distributions in 2004 to principals of the Predecessor totaling approximately $11.8 million.

Funds From Operations

Funds from Operations (“FFO”), is a widely used performance measure for real estate companies and is provided here as a supplemental measure of operating performance. We calculate FFO in accordance with the best practices described in the April 2002 National Policy Bulletin of the National Association of Real Estate Investment Trusts (NAREIT), which we refer to as the White Paper. The White Paper defines FFO as net income (computed in accordance with GAAP), excluding gains (or losses) from sales of property, plus depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.

Given the nature of our business as a real estate owner and operator, we believe that FFO is helpful to investors as a starting point in measuring our operational performance because it excludes various items included in net income that do not relate to or are not indicative of our operating performance such as gains (or losses) from sales of property and depreciation and amortization, which can make periodic and peer analyses of operating performance more difficult. FFO should not be considered as an alternative to net income (determined in accordance with GAAP) as an indicator of our financial performance, is not an alternative to cash flow from operating activities (determined in accordance with GAAP) as a measure of our liquidity, and is not indicative of funds available to fund our cash needs, including our ability to make distributions. Our computation of FFO may not be comparable to FFO reported by other REITs that do not define the term in accordance with the current NAREIT definition or that interpret the current NAREIT definitions differently than we do.

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The following table reconciles our net income (loss) for the three months ended September 30, 2005 and for the period from August 16, 2004 through September 30, 2004, and for the Predecessor for the period from July 1, 2004 through August 15, 2004 (unaudited):

				Three Months Ended September 30, 2004
				The Company			The Predecessor			Combined
	The Company			Period			Period			Period
	Three Months Ended			August 16, 2004			July 1, 2004			July 1, 2004
	September 30,			through			through			through
	2005			September 30, 2004			August 15, 2004			September 30, 2004
Funds From Operations:
Net income (loss)	$	1,982,241		$	(1,153,797	)	$	(141,994	)	$	(1,295,791	)
Add Limited Partners’ interests	881,407			(499,033		)	—			(499,033		)
Add depreciation and amortization of consolidated entities, net of minority interest	5,531,581			1,648,904			1,110,276			2,759,180
Add depreciation and amortization of unconsolidated entities	50,534			33,737			128,821			162,558
Deduct minority interest*	—			—			(286,930		)	(286,930		)
Add joint venture partners’ interests in net income of unconsolidated entities*	—			—			109,495			109,495
Add joint venture partners’ interests in depreciation and amortization of unconsolidated entities*	—			—			18,570			18,570
Funds From Operations of the Kite Portfolio	8,445,763			29,811			938,238			968,049
Less minority interest	—			—			286,930			286,930
Less minority interest share of depreciation and amortization	—			—			(357,799		)	(357,799		)
Less joint venture partners’ interests in net income of unconsolidated entities	—			—			(109,495		)	(109,495		)
Less joint venture partners’ interests in depreciation and amortization of unconsolidated entities	—			—			(18,570		)	(18,570		)
Less Limited Partners’ interests	(2,609,741		)	(9,003		)	—			(9,003		)
Funds From Operations allocable to the Company	$	5,836,022		$	20,808		$	739,304		$	760,112

* 2004 amounts represent the minority and joint venture partners’ interests acquired in connection with the our initial public offering and related formation transactions.

The following table reconciles our net income (loss) for the nine months ended September 30, 2005 and for the period from August 16, 2004 through September 30, 2004, and for the Predecessor for the period from January 1, 2004 through August 15, 2004 (unaudited):

				Nine Months Ended September 30, 2004
				The Company			The Predecessor			Combined
	The Company			Period			Period			Period
	Nine Months Ended			August 16, 2004			January 1, 2004			January 1, 2004
	September 30,			through			through			through
	2005			September 30, 2004			August 15, 2004			September 30, 2004
Funds From Operations:
Net income (loss)	$	5,547,840		$	(1,153,797	)	$	(192,380	)	$	(1,346,177	)
Add Limited Partners’ interests	2,446,166			(499,033		)	—			(499,033		)
Add depreciation and amortization of consolidated entities, net of minority interest	15,895,620			1,648,904			3,563,176			5,212,080
Add depreciation and amortization of unconsolidated entities	199,165			33,737			493,571			527,308
Deduct minority interest*							(214,887		)	(214,887		)
Add joint venture partners’ interests in net income of unconsolidated entities*	—			—			288,675			288,675
Add joint venture partners’ interests in depreciation and amortization of unconsolidated entities*	—			—			519,277			519,277
Funds From Operations of the Kite Portfolio	24,088,791			29,811			4,457,432			4,487,243
Less minority interest	—			—			214,887			214,887
Less minority interest share of depreciation and amortization	—			—			(1,014,248		)	(1,014,248		)
Less joint venture partners’ interests in net income of unconsolidated entities	—			—			(288,675		)	(288,675		)
Less joint venture partners’ interests in depreciation and amortization of unconsolidated entities	—			—			(519,277		)	(519,277		)
Less Limited Partners’ interests	(7,371,170		)	(9,003		)	—			(9,003		)
Funds From Operations allocable to the Company	$	16,717,621		$	20,808		$	2,850,119		$	2,870,927

* 2004 amounts represent the minority and joint venture partners’ interests acquired in connection with the our initial public offering and related formation transactions.

Off-Balance Sheet Arrangements

We do not currently have any off-balance sheet arrangements that have, or are reasonably likely to have, a material current or future effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

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Impact of Recent Hurricanes and Recent Increases in Construction Costs

We did not incur any significant damage as a result of recent hurricanes.  Only two of our 10 Florida shopping center properties and development projects were affected by Hurricane Wilma, and the damage to those centers was minimal.  Hurricanes Katrina and Rita did not cause any damage to any of our properties.

As a result of the recent hurricanes significant construction activity and rising oil prices, the cost of raw materials, labor and other elements of our construction activities has increased in recent months.  While we expect construction costs will continue to increase in the coming months, we presently do not believe such increases will have a materially adverse impact on our development activities as over 65% of the total estimated costs of our current development pipeline have already been incurred and a portion of the remaining costs are subject to existing contracts.  In addition, we mitigate the impact on our business of rising construction costs though value engineering, guaranteed contracts and pre-purchases of materials, and regularly adjust our analysis of possible future development opportunities to take into account, among other things, anticipated construction costs.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Our future income, cash flows and fair values relevant to financial instruments depend upon prevailing interest rates.  Market risk refers to the risk of loss from adverse changes in interest rates of debt instruments of similar maturities and terms.

Market Risk Related to Fixed Rate Debt

We had approximately $434.7 million of outstanding consolidated indebtedness as of September 30, 2005 (inclusive of net premiums on acquired debt of $3.1 million).  During the first nine months of 2005, we entered into interest rate swaps totaling $65 million to hedge variable cash flows associated with existing variable rate debt.  Including the effects of these swaps, our fixed and variable rate debt would have been approximately $269.3 million (62%) and $162.3 million (38%), respectively, of our total consolidated indebtedness at September 30, 2005.  Reflecting our interest in unconsolidated debt, our fixed and variable rate debt would have been 63% and 37%, respectively, of our total indebtedness at September 30, 2005.

Based on the amount of our fixed rate debt, a 100 basis point increase in market interest rates would result in a decrease in its fair value of approximately $9.6 million. A 100 basis point decrease in market interest rates would result in an increase in the fair value of our fixed rate debt of approximately $10.3 million. A 100 basis point increase or decrease in interest rates on our variable rate debt as of September 30, 2005 would increase or decrease our annual cash flow by approximately $1.6 million.

Item 4.  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

An evaluation was performed under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, of the effectiveness of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended) as of the end of the period covered by this report.  Based on that evaluation, the 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 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, 2005 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.  However, we completed our initial public offering in August 2004 and, in conjunction with being a public company, we are in the process of reviewing our policies and procedures on internal control over financial reporting in anticipation of the requirement that we comply with Section 404 of the Sarbanes-Oxley Act of 2002 for the fiscal year ending December 31, 2005.

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Part II.  Other Information

Item 1.Legal Proceedings

The Company is party to various actions representing routine litigation and administrative proceedings arising out of 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 2.  Unregistered Sales of Equity Securities and Use of Proceeds

Not Applicable

Item 3.  Defaults Upon Senior Securities

Not Applicable

Item 4.  Submission of Matters to a Vote of Security Holders

Not Applicable

Item 5.  Other Information

Not Applicable

Item 6.  Exhibits

Exhibit  No.	Description	Location
10.1	Underwriting Agreement, dated as of September 27, 2005, by and among the Company, Kite Realty Group, L.P. and the underwriters named therein	Incorporated by reference to Exhibit 1.1 of Kite Realty Group Trust’s Form 8-K, filed on September 29, 2005
10.2*	Amendment No. 1 to Registration Rights Agreement, dated August 29, 2005, by and among the Company and the other parties listed on the signature pages thereto	Filed herewith
31.1*	Certification of principal executive officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
31.2*	Certification of principal financial officer required by Rule 13a-14(a)/15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002	Filed herewith
32.1*	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Filed herewith

* Filed herewith

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	KITE REALTY GROUP TRUST
		/s/ John A. Kite
		John A. Kite
November 11, 2005		Chief Executive Officer and President (Principal Executive Officer)
(Date)
		/s/ Daniel R. Sink
		Daniel R. Sink
		Chief Financial Officer
November 11, 2005		(Principal Financial Officer and
(Date)		Principal Accounting Officer)

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