KITE REALTY GROUP TRUST

KITE REALTY GROUP TRUST AND KITE REALTY GROUP, L.P. AND SUBSIDIARIES

Notes to Consolidated Financial Statements

September 30, 2024

($ in thousands, except share, per share, unit and per unit amounts and where indicated in millions or billions)

NOTE 1. ORGANIZATION AND BASIS OF PRESENTATION

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, operation, acquisition, development and redevelopment of high-quality, open-air shopping centers and mixed-use assets that are primarily grocery-anchored and located in high-growth Sun Belt markets and select strategic gateway 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 (“IPO”) 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 (“REIT”) under sections 856-860 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, 2024, owned approximately 98.2% of the common partnership interests in the Operating Partnership (“General Partner Units”). The remaining 1.8% of the common partnership interests (“Limited Partner Units” and, together with the General Partner Units, the “Common Units”) 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.

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). 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 consolidated financial statements as of September 30, 2024 and for the three and nine months ended September 30, 2024 and 2023 include all adjustments, consisting of normal recurring adjustments, necessary in the opinion of management to present fairly the financial information set forth therein. The unaudited 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 combined Annual Report on Form 10-K of the Parent Company and the Operating Partnership for the year ended December 31, 2023.

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

As of September 30, 2024, the Company’s portfolio consisted of the following:

(1)Included within operating retail properties are 10 properties that contain an office component. Excludesone operating retail property classified as held for sale as of September 30, 2024. Of the 179 operating retail properties,176 are consolidated within these financial statements and the remaining three are accounted for under the equity method.

(2)This property is held in an unconsolidated joint venture in which the Company has a 50% ownership interest.

(3)During the three months ended September 30, 2024, the Company began development activities on the retail and office portions of the expansion project at One Loudoun Downtown (the “One Loudoun Expansion”) in the Washington, D.C. metropolitan statistical area (“MSA”). The Company estimates that it will incur net project costs of approximately $65.0 million to $75.0 million related to the One Loudoun Expansion.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Components of Investment Properties

The following table summarizes the composition of the Company’s investment properties as of September 30, 2024 and December 31, 2023(in thousands):

Components of Rental Income including Allowance for Uncollectible Accounts

Rental income related to the Company’s operating leases is comprised of the following for the three and nine months ended September 30, 2024 and 2023(in thousands):

The Company makes estimates as to the collectability of its accounts receivable. In making these estimates, the Company reviews a variety of qualitative and quantitative data and considers such factors as the credit quality of our customer, historical write-off experience and current economic trends, to make a subjective determination. An allowance for uncollectible accounts, including future credit losses of the accrued straight-line rent receivables, is maintained for estimated losses resulting from the inability of certain tenants to meet contractual obligations under their lease agreements.

Short-Term Deposits

In January 2024, the Company invested $265.0 million in short-term deposits at Goldman Sachs Bank USA (“Goldman Sachs”) and KeyBank National Association (“KeyBank”). These short-term deposits earned interest at a weighted average interest rate of 5.34% with a final maturity date of July 22, 2024. During the nine months ended September 30, 2024, the Company earned $6.3 million of interest income on the January 2024 deposits, which is recorded within “Other income, net” in the accompanying consolidated statements of operations and comprehensive income.

In August 2024, the Company invested $350.0 million in short-term deposits at Goldman Sachs and KeyBank. The deposit balance approximates fair value and earns interest at a weighted average interest rate of 5.05% with a final maturity date in February 2025. During the three months ended September 30, 2024, the Company earned $2.2 million of interest income on the August 2024 deposits, which is recorded within “Other income, net” in the accompanying consolidated statements of operations and comprehensive income.

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 subsidiaries (“TRSs”) 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. As of September 30, 2024, we owned investments intwo consolidated joint ventures that were VIEs in which the partners did not have substantive participating rights and we were the primary beneficiary. As of September 30, 2024, these consolidated VIEs had mortgage debt totaling $110.3 million, which was secured by assets of the VIEs totaling $218.1 million. The Operating Partnership guarantees the mortgage debt of these VIEs.

The Operating Partnership is considered a VIE as the limited partners do not hold kick-out rights or substantive participating rights. The Parent Company consolidates the Operating Partnership as it is the primary beneficiary.

As of September 30, 2024, the Company also owned investments infour unconsolidated joint ventures accounted for under the equity method, which are not considered VIEs. On January 31, 2024, the joint venture that owned Glendale Center Apartments, of which we have an 11.5% ownership interest, sold the 267-unit property to a third party, resulting in a gain on sale of $20.2 million. The Company recognized its share of the gain on sale of unconsolidated property of $2.3 million during the nine months ended September 30, 2024. In addition, the Company received a $1.6 million distribution upon the disposition of the property. The Company maintains an investment in the joint venture, which is in the process of winding up its activities and distributing remaining net assets. Glendale Center Apartments is adjacent to our Glendale Town Center operating retail property in the Indianapolis MSA.

Income Taxes and REIT Compliance

Parent Company

The Parent Company has been organized and operated, and intends to continue to operate, in a manner that will enable it to maintain its qualification as a REIT for U.S. federal income tax purposes. As a result, it generally will not be subject to U.S. 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 U.S. federal income tax on its undistributed REIT taxable income at regular corporate income tax rates. 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 U.S. federal income tax on its taxable income at regular corporate income tax rates for a period of four years following the year in which qualification is lost. Additionally, we may also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the nondeductible 1% excise tax on certain stock repurchases. We may also be subject to certain U.S. federal, state and local taxes on our income and property and to U.S. 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 and IWR Protective Corporation as TRSs with respect to the REIT, and we may elect to treat other subsidiaries as TRSs 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 TRSs, is included in the income tax returns of the Operating Partnership’s partners. Accordingly, the only U.S. federal income taxes included in the accompanying consolidated financial statements are in connection with the TRSs.

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 accompanying consolidated financial statements. The following table summarizes the non-redeemable noncontrolling interests in consolidated properties for the nine months ended September 30, 2024 and 2023(in thousands):

(1)During the nine months ended September 30, 2023, we received a $3.2 million distribution from excess proceeds related to a third-party financing.

Noncontrolling Interests – Joint Venture

Prior to the October 2021 merger with Retail Properties of America, Inc. (“RPAI”), RPAI entered into a joint venture related to the development, ownership and operation of the multifamily rental portion of the expansion project at One Loudoun Downtown – Pads G & H. The Company owns 90% of the joint venture.

Under terms defined in the joint venture agreement, after construction completion and stabilization of the development project (as defined in the joint venture agreement), the Company has the ability to call, and the joint venture partner has the ability to put to the Company, subject to certain conditions, the joint venture partner’s interest in the joint venture at fair value. As of September 30, 2024, the conditions for exercising the put and call options have been met but neither the Company nor the joint venture partner has exercised their respective options.

The joint venture is considered a VIE primarily because the Company’s joint venture partner does not have substantive kick-out rights or substantive participating rights. The Company is considered the primary beneficiary as it has a controlling financial interest in the joint venture. As such, the Company has consolidated this joint venture and presented the joint venture partner’s interests as noncontrolling interests.

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. As of September 30, 2024 and December 31, 2023, the redemption value of the redeemable noncontrolling interests in the Operating Partnership exceeded the historical book value, and the balances were accordingly adjusted to redemption value.

We allocate net operating results of the Operating Partnership after 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, 2024 and 2023, the weighted average interests of the Parent Company and the limited partners in the Operating Partnership were as follows:

As of September 30, 2024, the Parent Company’s interest and the limited partners’ redeemable noncontrolling ownership interests in the Operating Partnership were 98.2% and 1.8%. As of December 31, 2023, the Parent Company’s interest and the limited partners’ redeemable noncontrolling ownership interests in the Operating Partnership were 98.4% and 1.6%.

Concurrent with the Parent Company’s IPO and related formation transactions, certain individuals received Limited Partner Units of the Operating Partnership in exchange for their interests in certain properties. The limited partners have the right to redeem Limited Partner Units for cash or, at the Parent Company’s election, common shares of the Parent Company in an amount equal to the market value of an equivalent number of common shares of the Parent Company at the time of redemption. Such common shares must be registered, which is not fully in the Parent Company’s control. Therefore, the limited partners’ interest is not reflected within 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.

There were 3,960,037 and 3,512,868 Limited Partner Units outstanding as of September 30, 2024 and December 31, 2023, respectively. The increase in Limited Partner Units outstanding from December 31, 2023 is due to non-cash compensation awards granted to our executive officers in the form of Limited Partner Units and the exercise of previously granted Appreciation Only Long-Term Incentive Plan (“AO LTIP”) Units in exchange for Limited Partner Units.

The redeemable noncontrolling interests in the Operating Partnership for the nine months ended September 30, 2024 and 2023 were as follows(in thousands):

Fair Value Measurements

We follow the framework established under Financial Accounting Standards Board Accounting Standards Codification (“ASC”) 820, Fair Value Measurements and Disclosures, for measuring fair value of non-financial assets and liabilities that are not required or permitted to be measured at fair value on a recurring basis but only in certain circumstances, such as a business combination or upon determination of an impairment.

Assets and liabilities recorded at fair value in the accompanying 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 consider counterparty creditworthiness in the valuation.

•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 upon 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.

Effects of Accounting Pronouncements

In March 2024, the SEC issued a final rule, The Enhancement and Standardization of Climate-Related Disclosures for Investors. This final rule is effective for the Company for the fiscal year beginning in 2025 and requires companies to annually disclose climate-related information in registration statements and annual reports, including material climate-related risks and impacts on the Company, information about board oversight, risk management activities, and any material climate-related targets or goals. In addition, the final rule requires disclosure of material Scope 1 and/or Scope 2 greenhouse gas emissions, which will be subject to independent third-party assurance, and the financial statement effects of severe weather events and other natural conditions. In April 2024, the SEC announced a stay of these climate disclosure rules pending judicial review. The Company is continuing to evaluate the impact of this final rule until it becomes effective.

In November 2023, the Financial Accounting Standards Board issued Accounting Standards Update 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures. This new guidance became effective for the Company on January 1, 2024 and provides new disclosure requirements on significant segment expenses that will begin with the Company’s Annual Report on Form 10-K for the fiscal year ending December 31, 2024. Public entities with a single reportable segment such as the Company must apply all of the new disclosure requirements as well as all existing segment disclosure and reconciliation requirements in Topic 280 on an annual and interim basis. The adoption of this pronouncement on January 1, 2024 did not have any effect on the Company’s consolidated financial statements. The amended disclosure guidance will be applied prospectively.

NOTE 3. ACQUISITIONS

The Company closed on the following asset acquisition during the nine months ended September 30, 2024(dollars in thousands):

The Company closed on the following asset acquisition during the nine months ended September 30, 2023(dollars in thousands):

The above acquisitions were funded using a combination of available cash on hand, proceeds from dispositions and proceeds from the Company’s unsecured revolving line of credit. Substantially all of the purchase price was allocated to investment properties.

NOTE 4. DISPOSITIONS AND IMPAIRMENT CHARGES

The Company closed on the following disposition during the nine months ended September 30, 2024(dollars in thousands):

In addition, during the three months ended September 30, 2024, the Company received proceeds of $0.6 million and recognized a gain of $0.6 million as a result of the receipt of an escrow related to the disposition of Reisterstown Road Plaza that previously closed on September 11, 2023.

The Company closed on the following dispositions during the nine months ended September 30, 2023(dollars in thousands):

Since June 30, 2024, we have classified City Center, a 362,278 square foot multi-tenant retail property in the New York MSA, as held for sale as the Company has committed to a plan to sell this asset and expects that the sale will be completed within one year. This property qualified for held-for-sale accounting treatment upon meeting all applicable GAAP criteria as of June 30, 2024, at which time depreciation and amortization were ceased. In addition, the assets and liabilities associated with this property remain separately classified as held for sale in the accompanying consolidated balance sheet as of September 30, 2024. No properties qualified for held-for-sale accounting treatment as of December 31, 2023.

As of June 30, 2024, in connection with the preparation and review of the second quarter 2024 financial statements and in conjunction with classifying City Center as held for sale, we evaluated City Center for impairment and recorded a $66.2 million impairment charge due to changes in the facts and circumstances underlying the Company’s expected future hold period of the property. A shortening of the expected future hold period is considered an impairment indicator; therefore, we assessed the recoverability of City Center by comparing the carrying value of long-lived assets of $135.1 million as of June 30, 2024 to its estimated fair value of $69.6 million, which was determined using the income approach, less estimated selling costs of $0.7 million. The income approach involves discounting the estimated income stream and reversion (presumed sale) value of a property over an estimated hold period to a present value at a risk-adjusted rate. We used capitalization rates as a significant assumption in the valuation model, which are considered to be Level 3 inputs within the fair value hierarchy. We applied capitalization rates ranging from 6.0% to 15.0% to property income streams based upon the risk profile of the respective tenants and market rent of the leasable space. Based on this analysis, we recorded a $66.2 million non-cash impairment charge on City Center during the three months ended June 30, 2024.

The following table presents the assets and liabilities associated with City Center, the investment property that remains classified as held for sale as of September 30, 2024(in thousands):

During the three months ended September 30, 2023, in connection with the preparation and review of the third quarter 2023 financial statements, the Company recorded a $0.5 million impairment charge in connection with the sale of Eastside, a 43,640 square foot multi-tenant retail property in the Dallas/Ft. Worth MSA, as a result of a change in the expected hold period. The Company recorded the asset at the lower of cost or fair value less estimated costs to sell, which was approximately $14.1 million. The estimated fair value of Eastside was based upon the expected sales price from an executed sales contract and determined to be a Level 3 input within the fair value hierarchy. Eastside was sold on October 24, 2023 for a gross sales price of $14.4 million.

There were no discontinued operations for the nine months ended September 30, 2024 and 2023 as none of the dispositions or planned dispositions represented a strategic shift that has had, or will have, a material effect on our operations or financial results.

NOTE 5. DEFERRED COSTS AND INTANGIBLES, NET

Deferred costs consist primarily of acquired lease intangible assets, broker fees and capitalized internal commissions incurred in connection with lease originations. Deferred leasing costs, lease intangibles and similar costs are amortized on a straight-line basis over the terms of the related leases. As of September 30, 2024 and December 31, 2023, deferred costs consisted of the following(in thousands):

The amortization of deferred leasing costs, lease intangibles and other is included within “Depreciation and amortization” in the accompanying consolidated statements of operations and comprehensive income. The amortization of above-market lease intangibles is included as a reduction to “Rental income” in the accompanying consolidated statements of operations and comprehensive income. The amounts of such amortization included in the accompanying consolidated statements of operations and comprehensive income are as follows(in thousands):

NOTE 6. DEFERRED REVENUE, INTANGIBLES, NET AND OTHER LIABILITIES

Deferred revenue and other liabilities consist of (i) the unamortized fair value of below-market lease liabilities recorded in connection with purchase accounting, (ii) retainage payables for development and redevelopment projects, (iii) tenant rent payments received in advance of the month in which they are due, and (iv) lease liabilities recorded upon adoption of ASU 2016-02, Leases (Topic 842). The amortization of below-market lease liabilities is recognized as revenue over the remaining life of the leases (including option periods for leases with below-market renewal options) through 2085. 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.

As of September 30, 2024 and December 31, 2023, deferred revenue, intangibles, net and other liabilities consisted of the following(in thousands):

The amortization of below-market lease intangibles is included as a component of “Rental income” in the accompanying consolidated statements of operations and comprehensive income and totaled $14.2 million and $18.5 million for the nine months ended September 30, 2024 and 2023, respectively.

NOTE 7. MORTGAGE AND OTHER INDEBTEDNESS

The following table summarizes the Company’s indebtedness as of September 30, 2024 and December 31, 2023(in thousands):

Consolidated indebtedness, including weighted average interest rates and weighted average maturities as of September 30, 2024, considering the impact of interest rate swaps, is summarized below(dollars in thousands):

(1)Fixed rate debt includes the portion of variable rate debt that has been hedged by interest rate swaps. As of September 30, 2024, $700.0 million in variable rate debt is hedged to a fixed rate for a weighted average of 1.1 years.

(2)Variable rate debt includes the portion of fixed rate debt that has been hedged by interest rate swaps. As of September 30, 2024, $155.0 million in fixed rate debt is hedged to a floating rate for a weighted average of 0.9 years.

Mortgages Payable

The following table summarizes the Company’s mortgages payable(dollars in thousands):

(1)The fixed rate mortgages had interest rates ranging from 3.75% to 5.73% as of September 30, 2024 and December 31, 2023.

(2)The interest rate on the variable rate mortgage is based on Bloomberg Short Term Bank Yield Index (“BSBY”) plus 215 basis points. The one-month BSBY rate was 4.87% and 5.44% as of September 30, 2024 and December 31, 2023, respectively. Subsequent to September 30, 2024, the Secured Overnight Financing Rate (“SOFR”) replaced BSBY as the index for the variable rate mortgage.

Mortgages payable, which are secured by certain real estate and, in some cases, by guarantees from the Operating Partnership, are generally due in monthly installments of principal and interest and mature over various terms through 2033. During the nine months ended September 30, 2024, we made scheduled principal payments of $3.8 million related to amortizing loans.

Unsecured Notes

The following table summarizes the Company’s senior unsecured notes and exchangeable senior notes(dollars in thousands):

(1)$80,000 of 4.47% senior unsecured notes due 2025 has been swapped to a variable rate of three-month SOFR plus 3.65% through September 10, 2025.

(2)$75,000 of 4.57% senior unsecured notes due 2027 has been swapped to a variable rate of three-month SOFR plus 3.75% through September 10, 2025.

(3)The coupon rate of the Notes Due 2034 (defined below) is 5.50%; however, as a result of hedging activities, the Company’s interest rate is 4.60%.

In January 2024, the Company completed a public offering of $350.0 million in aggregate principal amount of 5.50% senior unsecured notes due 2034 (the “Notes Due 2034”). The Notes Due 2034 were priced at 98.670% of the principal amount to yield 5.673% to maturity and will mature on March 1, 2034, unless earlier redeemed. The proceeds were used to repay the $149.6 million principal balance of the 4.58% senior unsecured notes that matured on June 30, 2024 and the $120.0 million unsecured term loan that matured on July 17, 2024 (the “$120 M Term Loan”) and for general corporate purposes.

In August 2024, the Company completed a public offering of $350.0 million in aggregate principal amount of 4.95% senior unsecured notes due 2031 (the “Notes Due 2031”). The Notes Due 2031 were priced at 99.328% of the principal amount to yield 5.062% to maturity and will mature on December 15, 2031, unless earlier redeemed. The Company expects the proceeds will be used to repay the $350.0 million principal balance of the 4.00% senior unsecured notes due 2025 (the “Notes Due 2025”) and for general corporate purposes.

Exchangeable Senior Notes

In March 2021, the Operating Partnership issued $175.0 million aggregate principal amount of 0.75% exchangeable senior notes maturing in April 2027 (the “Exchangeable Notes”). The Exchangeable Notes are governed by an indenture between the Operating Partnership, the Company and U.S. Bank National Association, as trustee. The net proceeds from the offering of the Exchangeable Notes were approximately $169.7 million after deducting the underwriting fees and other expenses paid by the Company. The Exchangeable Notes bear interest at a rate of 0.75% per annum, payable semi-annually in arrears, and will mature on April 1, 2027. During the nine months ended September 30, 2024 and 2023, we recognized approximately $1.0 million of interest expense related to the Exchangeable Notes.

Prior to January 1, 2027, the Exchangeable Notes will be exchangeable into cash up to the principal amount of the Exchangeable Notes exchanged and, if applicable, cash or common shares or a combination thereof only upon certain circumstances and during certain periods. On or after January 1, 2027, the Exchangeable Notes will be exchangeable into cash up to the principal amount of the Exchangeable Notes exchanged and, if applicable, cash or common shares or a combination thereof at the option of the holders at any time prior to the close of business on the second scheduled trading day preceding the maturity date. The initial exchange rate is 39.6628 common shares per $1,000 principal amount of Exchangeable Notes, which is equivalent to an initial exchange price of approximately $25.21 per common share and an exchange premium of approximately 25% based upon the closing price of $20.17 per common share on March 17, 2021. The exchange rate is subject to adjustment upon the occurrence of certain events but will not be adjusted for any accrued and unpaid interest. As of September 30, 2024, the exchange rate of the Exchangeable Notes is 40.6713 common shares per $1,000 principal amount of Exchangeable Notes due to adjustments related to dividends paid.

The Operating Partnership may redeem the Exchangeable Notes at its option, in whole or in part, on any business day on or after April 5, 2025, if the last reported sale price of the common shares has been at least 130% of the exchange price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period ending on, and including, the trading day immediately preceding the date on which the Operating Partnership provides notice of redemption at a redemption price equal to 100% of the principal amount of the Exchangeable Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

In connection with the Exchangeable Notes, the Operating Partnership entered into privately negotiated capped call transactions (the “Capped Call Transactions”) with certain of the initial purchasers of the Exchangeable Notes or their respective affiliates. The Capped Call Transactions initially cover, subject to anti-dilution adjustments substantially similar to those applicable to the Exchangeable Notes, the number of common shares underlying the Exchangeable Notes. The Capped Call Transactions are generally expected to reduce the potential dilution to holders of common shares upon exchange of the Exchangeable Notes. The cap price of the Capped Call Transactions was initially approximately $30.26, which represented a premium of approximately 50% over the last reported sale price of our common shares on March 17, 2021 and is subject to anti-dilution adjustments under the terms of the Capped Call Transactions. We incurred $9.8 million of costs related to the Capped Call Transactions, which are included within “Additional paid-in capital” in the accompanying consolidated balance sheets.

Unsecured Term Loans and Revolving Line of Credit

The following table summarizes the Company’s term loans and revolving line of credit(dollars in thousands):

(1)As of December 31, 2023, $120,000 of SOFR-based variable rate debt had been swapped to a fixed rate of 1.58% plus a credit spread based on a ratings grid ranging from 0.80% to 1.65% through July 17, 2024. The applicable credit spread was 1.10% as of December 31, 2023.

(2)$250,000 of SOFR-based variable rate debt has been swapped to a fixed rate of 5.09% through October 24, 2025. The maturity date of the term loan may be extended for up tothree additional periods ofone year each at the Operating Partnership’s option, subject to certain conditions.

(3)$150,000 of SOFR-based variable rate debt has been swapped to a fixed rate of 1.68% plus a credit spread based on a ratings grid ranging from 0.75% to 1.60% through July 17, 2026. The applicable credit spread was 1.05% as of September 30, 2024 and December 31, 2023.

(4)$300,000 of SOFR-based variable rate debt has been swapped to a fixed rate of 2.47% plus a credit spread based on a ratings grid ranging from 1.15% to 2.20% through August 1, 2025. The applicable credit spread was 1.35% as of September 30, 2024 and December 31, 2023.

(5)The revolving line of credit hastwo six-month extension options that the Company can exercise, at its election, subject to (i) customary representations and warranties, including, but not limited to, the absence of an event of default as defined in the unsecured credit agreement and (ii) payment of an extension fee equal to 0.075% of the revolving line of credit capacity.

Unsecured Revolving Credit Facility

In July 2022, the Operating Partnership, as borrower, and the Company entered into the Second Amendment (the “Second Amendment”) to the Sixth Amended and Restated Credit Agreement, dated as of July 8, 2021 (as amended, the “Credit Agreement”) with a syndicate of financial institutions to provide for an unsecured revolving credit facility aggregating $1.1 billion (the “Revolving Facility”) and aseven-year $300.0 million unsecured term loan (the “$300 M Term Loan”). Under the Second Amendment, the Operating Partnership has the option, subject to certain customary conditions, to increase the Revolving Facility and/or incur additional term loans in an aggregate amount for all such increases and additional loans of up to $600.0 million, for a total facility amount of up to $2.0 billion. The Revolving Facility has a scheduled maturity date of January 8, 2026, which maturity date may be extended for up totwo additional periods ofsix months at the Operating Partnership’s option, subject to certain conditions.

Borrowings under the Revolving Facility bear interest at a rate per annum equal to SOFR plus a margin based on the Operating Partnership’s leverage ratio or credit rating, respectively, plus a facility fee based on the Operating Partnership’s leverage ratio or credit rating, respectively. The SOFR rate is also subject to an additional 0.10% spread adjustment as specified in the Second Amendment. The Revolving Facility is currently priced on the leverage-based pricing grid. In accordance with the Credit Agreement, the credit spread set forth in the leverage grid resets quarterly based on the Company’s leverage, as calculated at the previous quarter end. The Company may irrevocably elect to convert to the ratings-based pricing grid at any time. As of September 30, 2024, making such an election would have resulted in a lower interest rate; however, the Company had not made the election to convert to the ratings-based pricing grid. The Credit Agreement includes a sustainability metric based on targeted greenhouse gas emission reductions, which results in a reduction of the otherwise applicable interest rate margin byone basis point upon achievement of targets set forth therein. The greenhouse gas emission reduction targets have not been achieved as of September 30, 2024.

The following table summarizes the key terms of the Revolving Facility as of September 30, 2024(dollars in thousands):

The Operating Partnership’s ability to borrow under the Credit Agreement is subject to ongoing compliance by the Operating Partnership and its subsidiaries with various restrictive covenants, including with respect to liens, transactions with affiliates, dividends, mergers and asset sales. In addition, the Credit Agreement requires that the Operating Partnership satisfy certain financial covenants, including (i) a maximum leverage ratio; (ii) a minimum fixed charge coverage ratio; (iii) a maximum secured indebtedness ratio; (iv) a maximum unsecured leverage ratio; and (v) a minimum unencumbered interest coverage ratio. As of September 30, 2024, we were in compliance with all such covenants.

Subsequent to September 30, 2024, the Operating Partnership and the Company entered into the Third Amendment (the “Third Amendment”) to the Sixth Amended and Restated Credit Agreement, dated as of July 8, 2021 (as amended, the “Amended Credit Agreement”) that extended the maturity date of the Revolving Facility to October 3, 2028 with the option to extend such maturity date for eitherone one-year period or up totwo six-month periods at the Company’s election, subject to the payment of an extension fee and certain other customary conditions. The credit spreads and facility fees for both the leverage-based and investment grade pricing grids remain the same; however, the Company has the ability to obtain more favorable pricing in certain circumstances when its total leverage ratio is (x) less than or equal to 35.0% or (y) greater than 35.0% but less than or equal to 37.5% with respect to not more than one fiscal quarter following a period in which the condition described in clause (x) was satisfied (the “Leverage Toggle”). In addition, the Third Amendment includes an adjustment to the sustainability-linked pricing provisions that allows the otherwise applicable interest rate margin to be reduced by up totwo basis points if certain greenhouse gas emission reduction targets are achieved.

Unsecured Term Loans

As of September 30, 2024, the Operating Partnership has the following unsecured term loans: (i) a $250.0 million unsecured term loan due October 2025 (the “$250 M Term Loan”), (ii) a $150.0 million unsecured term loan due July 2026 (the “$150 M Term Loan”), and (iii) the $300 M Term Loan that matures in July 2029, each of which bears interest at a rate of SOFR plus a credit spread. The $150 M Term Loan and the $300 M Term Loan are each priced on a ratings-based pricing grid while the $250 M Term Loan is priced on a leverage-based pricing grid. The agreements related to the $150 M Term Loan and $300 M Term Loan include a sustainability metric based on targeted greenhouse gas emission reductions, which results in a reduction of the otherwise applicable interest rate margin byone basis point upon achievement of targets set forth in each agreement. The greenhouse gas emission reduction targets have not been achieved as of September 30, 2024.

The following table summarizes the key terms of the unsecured term loans as of September 30, 2024(dollars in thousands):

(1)The maturity date may be extended for up tothree additional periods ofone year each at the Operating Partnership’s option, subject to certain conditions.

The Operating Partnership has the option to increase the $150 M Term Loan to $250.0 million upon the Operating Partnership’s request, subject to certain conditions including obtaining commitments from any one or more lenders, whether or not currently party to the term loan agreement, to provide such increased amounts. The Operating Partnership is permitted to prepay the $150 M Term Loan in whole or in part, at any time, without being subject to a prepayment fee.

The Operating Partnership has the option to increase the $250 M Term Loan to $300.0 million, subject to certain conditions including obtaining commitments from any one or more lenders, whether or not currently party to the term loan agreement, to provide such increased amounts. The Operating Partnership is permitted to prepay the $250 M Term Loan in whole or in part, without premium or penalty.

The Operating Partnership is permitted to prepay the $300 M Term Loan in whole or in part, at any time, without premium or penalty.

The unsecured term loan agreements contain representations, financial and other affirmative and negative covenants and events of default that are substantially similar to those contained in the Credit Agreement. The unsecured term loan agreements all rank pari passu with the Operating Partnership’s Revolving Facility and other unsecured indebtedness of the Operating Partnership.

The Third Amendment also applied the Leverage Toggle and adjustment to the sustainability-linked pricing provisions to the $300 M Term Loan.

In addition, subsequent to September 30, 2024, the Operating Partnership entered into the Second Amendment (the “Second Amendment”) to the term loan agreement related to the $250 M Term Loan that extended the maturity date of the $250 M Term Loan to October 24, 2027 with the option to extend such maturity date byone one-year period at the Company’s election, subject to the payment of an extension fee and certain other customary conditions. In conjunction with the Second Amendment, the $250 M Term Loan will be priced on a ratings-based pricing grid with the interest rate equal to (x) a margin ranging from 0.75% to 1.60% or (y) a base rate plus a margin ranging from 0.00% to 0.60% and includes the same Leverage Toggle for determining pricing and sustainability-linked pricing provisions as described above for the Third Amendment to the Amended Credit Agreement.

Debt Issuance Costs

Debt issuance costs are amortized over the terms of the respective loan agreements. The following amounts of amortization of debt issuance costs are included as a component of “Interest expense” in the accompanying consolidated statements of operations and comprehensive income(in thousands):

Debt Discounts and Premiums

Debt discounts and premiums, including the related value of interest rate swaps that were assumed in the October 2021 merger with RPAI, are amortized over the terms of the respective loan agreements. The following amounts of amortization are included as a component of “Interest expense” in the accompanying consolidated statements of operations and comprehensive income(in thousands):

In addition, the estimated amounts of the reduction to interest expense as of September 30, 2024 for each of the next five years and thereafter related to the amortization of debt discounts, premiums and assumed hedge instruments, assuming these instruments are held to maturity, are as follows(in thousands):

The following table reconciles total unamortized debt discounts, premiums and hedge instruments as of September 30, 2024 to the balance of unamortized discounts and premiums, net(in thousands):

Fair Value of Fixed and Variable Rate Debt

As of September 30, 2024, the estimated fair value of fixed rate debt was $2.5 billion compared to the book value of $2.5 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 5.18% to 6.26%. As of September 30, 2024, the estimated fair value of variable rate debt was $717.0 million compared to the book value of $715.2 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 6.00% to 6.05%.

NOTE 8. DERIVATIVE INSTRUMENTS, HEDGING ACTIVITIES AND OTHER COMPREHENSIVE INCOME

In order to manage potential future variable interest rate risk, we enter into interest rate derivative agreements from time to time. We do not use interest rate derivative agreements for trading or speculative purposes. 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.

The following table summarizes the terms and fair values of the Company’s derivative financial instruments that were designated and qualified as part of a hedging relationship as of September 30, 2024 and December 31, 2023(dollars in thousands):

(1)Derivatives in an asset position are included within “Prepaid and other assets” and derivatives in a liability position are included within “Accounts payable and accrued expenses” in the accompanying consolidated balance sheets.

(2)The derivative agreements swap a blended fixed rate of 4.52% for a blended floating rate of three-month SOFR plus 3.70%.

(3)The forward-starting interest rate swaps were terminated in conjunction with the issuance of the Notes Due 2034.

In August 2024, we entered intotwo intraday interest rate lock agreements with notional amounts totaling $350.0 million that fixed the interest rate on a portion of the Notes Due 2031, which were issued in August 2024, at 3.75%. We paid $0.1 million upon termination, which is included as a component of “Accumulated other comprehensive income” in the accompanying consolidated balance sheets and is being reclassified as an increase to interest expense over the term of the debt.

In December 2023, we entered into three forward-starting interest rate swap agreements with notional amounts totaling $150.0 million that swap a floating rate of compound SOFR for a fixed rate of 3.44% with an effective date of June 28, 2024 and a maturity date of June 28, 2034. These interest rate swaps fixed the interest rate on a portion of the Notes Due 2034, which were issued in January 2024, and were subsequently terminated upon issuance of the Notes Due 2034. We received $0.7 million upon termination, which is included as a component of “Accumulated other comprehensive income” in the accompanying consolidated balance sheets and is being reclassified as a reduction to interest expense over the term of the debt.

In October 2022, we terminatedtwo forward-starting interest rate swaps with notional amounts totaling $150.0 million and a maturity date of June 1, 2032 and received $30.9 million upon termination. This settlement is included as a component of “Accumulated other comprehensive income” in the accompanying consolidated balance sheets and is being reclassified to earnings over time as the hedged items are recognized in earnings. During the year ended December 31, 2023, we accelerated the reclassification of $3.1 million in accumulated other comprehensive income as a reduction to interest expense as a result of a portion of the hedged forecasted transaction becoming probable not to occur. In January 2024, we completed a public offering of the Notes Due 2034. The remaining balance in accumulated other comprehensive income is being reclassified as a reduction to interest expense over the term of the debt.

These interest rate derivative 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.

We have 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 use 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, 2024 and December 31, 2023, we assessed the significance of the impact of the credit valuation adjustments on the overall valuation of our derivative positions and determined that the credit valuation adjustments were not significant to the overall valuation of our derivatives. As a result, we have determined that our derivative valuations were classified within Level 2 of the fair value hierarchy.

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. Approximately $4.1 million and $13.9 million was reclassified as a reduction to interest expense during the three and nine months ended September 30, 2024, respectively. Approximately $5.5 million and $13.2 million was reclassified as a reduction to interest expense during the three and nine months ended September 30, 2023, respectively. As interest payments on our derivatives are made over the next 12 months, we estimate the decrease to interest expense to be approximately $12.8 million, assuming the current SOFR curve.

Unrealized gains and losses on our interest rate derivative agreements are the only components of the change in accumulated other comprehensive income.

NOTE 9. SHAREHOLDERS’ EQUITY

Distributions

Our Board of Trustees declared a cash distribution of $0.26 per common share and Common Unit for the third quarter of 2024. This distribution was paid on October 16, 2024 to common shareholders and common unitholders of record as of October 9, 2024. For the nine months ended September 30, 2024, we declared cash distributions totaling $0.76 per common share and Common Unit.

For the three and nine months ended September 30, 2023, we declared cash distributions of $0.24 and $0.72 per common share and Common Unit, respectively.

Share Repurchase Program

The Company has an existing share repurchase program under which it may repurchase, from time to time, up to a maximum of $300.0 million of its common shares (the “Share Repurchase Program”). The Company intends to fund any future repurchases under the Share Repurchase Program with cash on hand or availability under the Revolving Facility, subject to any applicable restrictions. The timing of share repurchases and the number of common shares to be repurchased under the Share Repurchase Program will depend upon prevailing market conditions, regulatory requirements and other factors. In February 2024, the Company extended the Share Repurchase Program for an additional year to February 28, 2025, if not terminated or extended prior to that date. As of September 30, 2024, the Company hasnot repurchased any shares under the Share Repurchase Program.

NOTE 10. 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 calculated based on the weighted average number of common 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 (i) outstanding options to acquire common shares; (ii) Limited Partner Units, which may be exchanged for either cash or common shares at the Parent Company’s option and under certain circumstances; (iii) AO LTIP Units; (iv) deferred common share units, which may be credited to the personal accounts of non-employee trustees in lieu of compensation paid in cash or the issuance of common shares to such trustees, and (v) common shares issuable upon the exchange of the Company’s Exchangeable Notes. The Company calculates the potential dilutive effect of the Exchangeable Notes under the if-converted method, which considers only the amounts settled in excess of the principal in diluted earnings per share as the principal must be paid in cash. Limited Partner Units have been omitted from the Parent Company’s denominator for the purpose of computing diluted earnings per share since the effect of including those amounts in the denominator would have no dilutive impact. Weighted average Limited Partner Units outstanding were 3.9 million and 3.7 million for the three and nine months ended September 30, 2024, and 3.3 million and 3.1 million for the three and nine months ended September 30, 2023, respectively.

The following summarizes the calculation of basic and diluted earnings per share for the Parent Company. We have omitted the calculation of basic and diluted earnings per unit since the dilutive securities for the Operating Partnership are the same as those for the Parent Company(dollars in thousands, except per share data):

Due to the net loss allocable to common shareholders and common unitholders for the nine months ended September 30, 2024, no securities had a dilutive impact for that period.

NOTE 11. COMMITMENTS AND CONTINGENCIES

Other Commitments and Contingencies

We are obligated under various completion guarantees with certain lenders and lease agreements with tenants to complete all or portions of a development project and tenant-specific space currently under construction. We believe we currently have sufficient financing in place to fund these projects and expect to do so primarily through free cash flow or borrowings on the Revolving Facility.

In 2017, we provided a repayment guaranty on a $33.8 million construction loan associated with the development of the Embassy Suites at the University of Notre Dame, consistent with our 35% ownership interest. Our portion of the repayment guaranty was limited to $5.9 million, and the guaranty’s term was through July 1, 2024, the maturity date of the construction loan. In July 2024, the joint venture repaid the construction loan and we contributed $10.2 million representing our 35% share of the debt repaid.

In 2021, we provided repayment and completion guaranties on loans totaling $66.2 million associated with the development of The Corner mixed-use project in the Indianapolis MSA. As of September 30, 2024, the outstanding balance of the loans was $69.9 million, of which our share was $35.0 million.

Legal Proceedings

We are not subject to any material litigation nor, to management’s knowledge, is any material litigation currently threatened against us. We are parties to routine litigation, claims, and administrative proceedings arising in the ordinary course of business. Management believes that such matters will not have a material adverse impact on our consolidated financial condition, results of operations or cash flows taken as a whole.

NOTE 12. SUBSEQUENT EVENTS

Subsequent to September 30, 2024, we entered into the third amendment to the sixth amended and restated unsecured credit agreement and amended the terms of the $250 M Term Loan. See Note 7 to the consolidated financial statements for further details.