Kite Realty Group (KRG) Risk Analysis

The parties intended that the October 2021 merger with RPAI be treated as a reorganization within the meaning of Section 368(a) of the Code, and it was a condition to the merger that we and RPAI received opinions from each party's respective counsel to the effect that, for U.S. federal income tax purposes, the merger constitutes a reorganization within the meaning of Section 368(a) of the Code. These tax opinions represent the legal judgment of counsel rendering the opinion and are not binding on the Internal Revenue Service (the "IRS") or any court. If the merger fails to qualify as a reorganization, U.S. holders of shares of RPAI common stock generally would recognize gain or loss, as applicable, equal to the difference between (i) the sum of the fair market value of the Company's common shares and cash in lieu of fractional common shares of the Company received by such holder in the merger and (ii) such holder's adjusted tax basis in their RPAI common stock.

We believe that we have qualified for taxation as a REIT for U.S. federal income tax purposes commencing with our taxable year ended December 31, 2004, and that RPAI had operated in a manner that allowed it to qualify as a REIT, and we intend to operate in a manner we believe allows us to continue to qualify as a REIT for U.S. federal income tax purposes. We have not requested and do not plan to request a ruling from the IRS that we qualify as a REIT, and the statements in this Annual Report on Form 10-K are not binding on the IRS or any court. Qualification as a REIT involves the application of highly technical and complex provisions of the Code for which there are only limited judicial and administrative interpretations. Certain facts and circumstances not entirely within our control may affect our ability to qualify as a REIT. In order to qualify as a REIT, we (before and after the merger) and RPAI (before the merger) must satisfy a number of requirements, including the ownership of our stock and the composition of our gross income and assets. Also, a REIT must make annual distributions to shareholders aggregating at least 90% of its net taxable income, excluding any net capital gains. The fact that we own direct or indirect interests in one or more entities that have elected to be taxed as REITs under the U.S. federal income tax laws (each a "Subsidiary REIT") and hold substantially all of our assets through our Operating Partnership and its subsidiaries and joint ventures further complicates the application of the REIT requirements for us. Each Subsidiary REIT is subject to the various REIT qualification requirements that are applicable to us and certain other requirements. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) it would become subject to regular U.S. federal corporate income tax, (ii) our interest in such Subsidiary REIT would cease to be a qualifying asset for purposes of the REIT asset tests, and (iii) it is possible that we would fail certain of the REIT asset tests, in which event we also would fail to qualify as a REIT unless we could avail ourselves of relief provisions. Even a technical or inadvertent mistake could jeopardize our REIT status, and, given the highly complex nature of the rules governing REITs and the ongoing importance of factual determinations, we cannot provide any assurance that we will continue to qualify as a REIT. If we fail to qualify as a REIT for U.S. federal income tax purposes and are unable to avail ourselves of certain savings provisions set forth in the Code, we will face serious tax consequences that would substantially reduce our cash available for distribution because: - we would be subject to U.S. federal income tax on our net income at regular corporate income tax rates for the years we did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to shareholders in computing our taxable income);- we could be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations, including the non-deductible 1% excise tax on certain stock repurchases;- we could be subject to the federal alternative minimum tax and possibly increased state and local taxes for such periods;- unless we are entitled to relief under applicable statutory provisions, neither the Company nor any "successor" corporation, trust, or association could elect to be taxed as a REIT until the fifth taxable year following the year during which we were disqualified;- if we were to re-elect REIT status, we would have to distribute all earnings and profits from non-REIT years before the end of the first new REIT taxable year; and - for five years after re-electing REIT status, any taxable disposition of an owned asset would be subject to corporate-level tax on any built-in gains inherent in such asset at the time of re-election. Even if we retain our REIT status, if RPAI loses its REIT status for a taxable year before the October 2021 merger, we will face serious tax consequences that would substantially reduce our cash available for distribution because: - unless we are entitled to relief under applicable statutory provisions, the Company, as the "successor" trust to RPAI, could not elect to be taxed as a REIT until the fifth taxable year following the year during which RPAI was disqualified;- the Company, as the successor by merger to RPAI, would be subject to any corporate income tax liabilities of RPAI, including penalties and interest;- assuming that we otherwise maintained our REIT qualification, we would be subject to tax on the built-in gain on each asset of RPAI existing at the time of the merger if we were to dispose of the RPAI asset for up to five years following the merger; and - assuming that we otherwise maintained our REIT qualification, we would succeed to any earnings and profits accumulated by RPAI for taxable periods that it did not qualify as a REIT, and we would have to pay a special dividend and/or employ applicable deficiency dividend procedures, including interest payments to the IRS, to eliminate such earnings and profits. In addition, if there is an adjustment to RPAI's taxable income or deductions for dividends paid, we could elect to use the deficiency dividend procedures to maintain RPAI's REIT status, which could require us to make substantial distributions to our shareholders and pay a considerable amount of interest to the IRS. As a result of these factors, our failure (before or after the merger) or RPAI's failure (before the merger) to qualify as a REIT could impair our ability to grow our business and raise capital and would materially adversely affect the value of our common shares.

Even if we qualify as a REIT for U.S. federal income tax purposes, we will be required to pay certain U.S. federal, state, and local taxes on our income and property. For example, we will be subject to income tax to the extent we distribute less than 100% of our REIT taxable income, including capital gains. Additionally, we will be subject to a 4% non-deductible excise tax on the amount, if any, by which dividends paid by us in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income, and 100% of our undistributed income from prior years. Moreover, if we have net income from "prohibited transactions," that income will be subject to a 100% penalty tax. In addition, any net taxable income earned directly by our TRSs or through entities that are disregarded for U.S. federal income tax purposes as entities separate from our TRSs will be subject to U.S. federal and possibly state corporate income tax. We have elected to treat Kite Realty Holdings, LLC and IWR Protective Corporation as TRSs of the Operating Partnership, and we may elect to treat other subsidiaries as TRSs in the future. In this regard, several provisions of the laws applicable to REITs and their subsidiaries ensure that a TRS will be subject to an appropriate level of U.S. federal income taxation. For instance, a TRS is limited in its ability to deduct interest payments made to an affiliated REIT. In addition, the REIT is required to pay a 100% penalty tax on some payments that it receives or on some deductions taken by the TRS if the economic arrangements between the REIT, the REIT's tenants, and the TRS are not comparable to similar arrangements between unrelated parties. Finally, some state and local jurisdictions may tax some of our income even though, as a REIT, we are not subject to U.S. federal income tax on that income because not all states and localities treat REITs the same way they are treated for U.S. federal income tax purposes. To the extent that we and our affiliates are required to pay U.S. federal, state, and local taxes, we will have less cash available for distributions to our shareholders.

Legislation has reduced the maximum tax rate applicable to "qualified dividend income" paid by non-REIT "C" corporations to certain non-corporate U.S. shareholders to 23.8%, including the 3.8% Medicare tax applicable to net investment income. Dividends payable by REITs, however, are generally not eligible for the reduced rates. Non-corporate shareholders may deduct 20% of their dividends from REITs, excluding qualified dividend income and capital gains dividends. For non-corporate shareholders who are in the highest marginal tax bracket of 37%, the deduction for REIT dividends yields an effective income tax rate of 29.6% on those dividends, which is higher than the 20% tax rate on qualified dividend income paid by non-REIT "C" corporations. These rules do not adversely affect the taxation of REITs; however, they could cause certain non-corporate investors to perceive investments in REITs to be relatively less attractive than investments in the shares of non-REIT "C" corporations that pay dividends, which could adversely affect the value of our common shares.

We believe that our Operating Partnership has been organized and operated in a manner that allows it to be treated as a partnership and not as an association or a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes. As a partnership, our Operating Partnership is not subject to U.S. federal income tax on its income. Instead, each of its partners is allocated its share of our Operating Partnership's income. We can provide no assurance, however, that the IRS will not challenge our Operating Partnership's status as a partnership for U.S. federal income tax purposes or that a court would not sustain such a challenge. If the IRS were successful in treating our Operating Partnership as an association or a publicly traded partnership taxable as a corporation for U.S. federal income tax purposes, we would fail to meet the gross income tests and certain of the asset tests applicable to REITs and, accordingly, would cease to qualify as a REIT. Failure to qualify as a partnership would subject the Operating Partnership to U.S. federal corporate income tax, which would significantly reduce the amount of cash available for debt service and for distribution to its partners, including the Parent Company.

We do not carry insurance for generally uninsurable losses, such as those from riots, war, or acts of God and, in some cases, floods. Furthermore, insurance companies may stop providing coverage against certain types of losses, such as environmental liabilities or other catastrophic events, or if offered, the expense of obtaining that coverage may not be justified. Some of our insurance policies, such as those covering losses due to terrorism and floods, like the flood we experienced in July 2025 at Eastgate Crossing, are insured subject to limitations, and in the future, we may be unable to renew our current insurance coverage or initiate new coverage at adequate levels or at reasonable prices. Given the increase in severe climate-related events, we have experienced a significant increase in insurance rates for property insurance and may continue to do so in the future. The rates for casualty insurance have also continued to increase significantly due to an increase in litigation. In addition, tenants generally are required to indemnify and hold us harmless from liabilities resulting from injury to persons or damage to personal or real property on the leased premises due to activities conducted by them (including, without limitation, any environmental contamination). Tenants are also required, at their expense, to obtain and keep in full force during the term of their lease liability and property damage insurance. However, some tenants may not properly maintain their insurance policies or have the ability to pay the deductibles associated with them, in which case we would have to cover the cost to repair any property damage. If we experience a loss that is either uninsured or exceeds our policy limits, we could lose all or a portion of the capital invested in the damaged property, along with the anticipated future cash flows, while still being obligated for any recourse indebtedness, even if the property is irreparably damaged. Inflation, changes in building codes and ordinances, environmental considerations, and other factors might also make it impractical or undesirable for us to use insurance proceeds to replace a property after it has been damaged or destroyed. As a result, our financial condition, operating results, and cash flows could be materially and adversely affected.

As of December 31, 2025, we had nine properties in our portfolio that are either completely or partially on land that is owned by third parties and leased to us pursuant to ground leases. If we are found to be in breach of a ground lease and that breach cannot be cured, or we are unable to extend the lease terms or purchase the fee interest in the underlying land prior to expiration, for which no assurance can be given, we could lose our interest in the improvements and the right to operate the property. As a result, we would be unable to derive income from such property, which could materially and adversely affect us. Assuming we exercise all available options to extend the terms, our ground leases will expire between 2045 and 2115. In certain cases, our ability to exercise the extension option is subject to the condition that we are not in default under the terms of the ground lease at the time we exercise such option, and we can provide no assurances that we will be able to exercise the extension options at such times.

Our primary business is the ownership, operation, acquisition, development, and redevelopment of high-quality, open-air, grocery-anchored shopping centers and vibrant mixed-use and lifestyle assets in the United States. Our business, financial condition, results of operations, cash flows, per share trading price of our common shares, and ability to satisfy our debt service obligations and make distributions to our shareholders are subject to, and could be materially and adversely affected by, risks associated with acquiring, owning, and operating these types of real estate assets. These risks include events and conditions that are beyond our control, such as periods of economic slowdown or recession, federal government shutdowns, disruptions related to tariffs and other trade or sanction issues, declines in the financial condition of our tenants, natural disasters such as fires, earthquakes, or floods, rising interest rates, difficulty in leasing vacant space or renewing existing tenants, a decline in the value of our assets, or the public perception that any of these events may occur. Additionally, certain costs of our business, such as insurance, real estate taxes, utilities, and corporate expenses, are relatively inflexible and generally do not decrease if a property is not fully occupied, rental rates decline, a tenant fails to pay rent, or other circumstances cause our revenues to decrease. If we are unable to lower our operating costs when revenues decline and/or fully recover cost increases from our tenants, our financial condition, operating results, and cash flows could be materially and adversely impacted.

Our business and financial condition depend on the financial stability of our tenants and our ability to lease space to them on economically favorable terms. From time to time, certain of our tenants have declared bankruptcy and other tenants may declare bankruptcy in the future. A bankruptcy filing by one of our tenants would legally prohibit us from collecting any unpaid rent from that tenant unless we receive an order from the bankruptcy court permitting us to do so. Such bankruptcies have in the past and could in the future delay, reduce, or ultimately preclude the collection of amounts owed to us, including both past and future rent. A tenant in bankruptcy may attempt to renegotiate their lease or request significant rent concessions. If a lease is assumed by a tenant in bankruptcy, all pre-bankruptcy amounts owed under the lease must be paid in full to us. However, if a lease is rejected by a tenant in bankruptcy, we would have only a general unsecured claim for damages that would be paid only to the extent that funds are available and in the same percentage as is paid to all other holders of unsecured claims. As a result, it is likely that we would recover substantially less than the full amount of any unsecured claim we hold from a tenant in bankruptcy, if at all, which would reduce our cash flows and could have a material adverse effect on us.