Vital Statistics: Kite Realty Group Trust Headquarters Address: 30 South Meridan StreetSuite 1100 Indianapolis, IN 46204 Telephone: 317-577-5600 Web site: www.kiterealty.com Ticker: NYSE: KRG Key Executives: Chairman Alvin Kite, Jr.; CEO John Kite; CFO Dan Sink 52-week high: $16.52 52-week low: $14.04

By Lynn Novelli

Kite Realty Group Trust (NYSE: KRG) is a small REIT that thinks big. Kite Realty started out in Indianapolis in 1960 as Alvin Kite, Jr.’s interior finish contracting business. Since then, the Kite family built the business into one of the Midwest’s largest specialty construction companies. The company has a portfolio of nearly 50 properties spread across nine states (Florida, Georgia, Illinois, Indiana, New Jersey, Ohio, Oregon, Texas and Washington). The portfolio includes not only shopping centers, but also industrial properties, an office park and a parking facility.

Along the way, the Kite family’s reputation for integrity has led to several opportunities to partner with other investors in local development projects, such as small shopping centers and an occasional office building.

All in the Family
When the founder’s eldest son, Paul, joined the business in 1985, the father-son team decided that they would try real estate investment and development on their own. They established Kite Real Estate Investment Co., developing and constructing small shopping centers and other projects, most to be sold for a profit on completion.

Kite Realty’s Plaza Volente property in Austin, TX.

Five years later, Alvin Kite’s youngest son, John, joined the business after a stint at Harris Bank as a business development officer. At the time, the interior construction company was still a major part of the family business. Together the family decided that the greatest growth potential was in real estate development.

As a result, “We started to take on more retail development projects,” John Kite says. “By the mid-1990s, we were hitting our stride and involved in several major projects.”

Eventually, Alvin moved to chairman of the board, John took on the role as president and CEO and Paul chose to leave the company to pursue private real estate opportunities.

Kite Realty’s Traders Point property in Indianapolis, IN.

Going Public with a Big Bang
The company’s development projects eventually added up to more than $1.5 billion, including several impressive high-end hotels—a Marriott hotel and a Conrad hotel with a condominium development in Indianapolis—and a $120 million office campus, for pharmaceutical manufacturer Eli Lilly.

With that track record and an eye toward future expansion, it was clear to John Kite that the time was right to take the 40-year-old company public as a REIT. “Our long-term strategy for the business included becoming a public company so that we could take it to the next level,” he says.

Opening new avenues for capitalization to create the financial base for serious corporate growth was a crucial element of John Kite’s vision for the company. “We needed to make the transition from being a family-owned company making decisions based on what was best for the family to being a public company with the potential to become a major player in the retail arena,” he says.

The company launched an August 2004 IPO of $240 million that was followed in November 2005 by a second offering of $140 million. “The offerings were close together,” Kite admits. “But we believed it represented short-term dilution for long-term accretion.” Now, he says, “We are happy with our ability to position the company for growth.”

The company has displayed a remarkable ability to grow. At the time of the IPO, Kite Realty Group had a total market capitalization (debt and equity) of approximately $500 million. In the ensuing two years, the REIT has doubled that figure to approximately $1 billion and increased square footage by 40 percent to 6.7 million square feet.

The momentum that started two years ago with the capital raised from the IPO has continued. In 2006, the company’s development activities have shifted into high gear. Kite Realty Group looks for appropriate acquisitions, but there’s no doubt in John Kite’s mind that the REIT’s immediate future lies in ground-up development.

“In today’s interest environment, it’s more difficult to achieve a strong, consistent yield from just acquiring property,” he says.

The company’s current $176 million development pipeline currently includes more than a dozen projects that will add nearly 2 million square feet to the portfolio. Top tenants include some of retail’s heavy hitters like Lowe’s, Wal-Mart, Target, Circuit City, Kmart, Publix and Federated Department Stores, plus an assortment of “junior boxes” and theaters.

Three of the current development projects are in Florida, a high-growth state where the company has been developing properties for 10 years, Kite says. One of those new projects is a “lifestyle center” in Delray Beach—a fresh-air, upscale mall that includes retail, restaurants and entertainment venues as well as hotels and residential areas—which is a slight departure from the large, big-box-anchored centers that are the company’s bread and butter, he adds.

“When the opportunity for a lifestyle center surfaces, and the city planners want mixed-use development, we can handle it,” Kite says. “However, that concept doesn’t work in every situation.”

As Kite and his management team move the company into its next phase, two issues are of prime importance to him. The first is to communicate to investors, potential investors, analysts and the business media that Kite Realty Group has the experience and expertise needed to develop major retail projects.

“I want to spread the word that our company has been in real estate development for 26 years,” he says. “Although we have been a publicly traded REIT for only a short time, the company has solid experience and a proven track record in ground-up development.”

Cook Creek Commons, Carmel, IN

Vision and Mission
John Kite says that the company’s experience in large-scale development as a private entity has served well in the public arena on a regional level. His instincts have proven valid as the REIT has successfully parlayed its extensive construction experience into merchant building activities and third-party construction for major retailers, often while using these contacts to source new development opportunities.

With growth and public capital, however, come serious responsibilities that bring Kite’s second major concern into sharp focus. Daily, he faces the challenge of positioning the company for continued growth while maintaining current shareholder value.

To accomplish that dual objective, “We need to be able to manage the assets that we have and look at creative forms of capital,” Kite says.

Kite Realty Group has demonstrated its capability in asset management. Kite-owned shopping centers maintain an average 95 percent occupancy, and the company has a strong balance sheet. The debt to market value ratio is in the mid-40 percent range, with a fixed charge coverage ratio of 3-to-1.

Meanwhile, Kite is actively pursuing new sources of capital needed to safely sustain the company’s rapid growth. He has been successful in establishing joint ventures with partners such as private developers, financial institutions and private investors, and recycling capital through repositioning of existing assets.

So far, Kite’s strategies have been met with success. Shareholders enjoyed approximately 24 percent total return since its IPO, and the REIT’s performance continued strong for the first two quarters of 2006.

However, Kite emphasizes the company’s goal is not just to be bigger. “At the end of the day, investors are attracted to one thing: our ability to create value,” he says. “Success is less about size than it is about where and how you are creating value for shareholders.”

Although Kite says he believes the company is already proving its ability to deliver for shareholders, Kite Realty Group still needs potential investors to “get comfortable with the company’s ability to execute. However, patience is required,” he says. “I can’t wait to look back in a few years and say ‘thank you’ to all of the people who had faith and stuck with us,” he says.