SECTOR: Real EstateSECTOR: Real EstateCOMPANY: Kite Realty Group (KRG)COMPANY: Kite Realty Group (KRG)

SR. ANALYSTS: KESHAV AGNIHOTRI AND STEFAN BELL

SECTOR HEAD: ASHWIN TELEKUNTLAJR. ANALYSTS: Mariam Avila, Spencer Morris, Anand Pariikh, Austen Rabbie, Dejvi Shehu Inna Shulman, Alex Staikos

Investment Recommendation

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Company KRG

Recommendation

Buy

Current Price $4.97

1yr Target Price

$6.40

% Upside 28.7%

Key investment drivers 1. Strategic Land Holdings 2. Advantageous Regional Spread 3. Rebounding Consumer Spending

Industry Definition• Retail Real Estate Investment Trusts that engage in the

acquisition, development and operation of shopping centers. These REITS have their primary operations in the continental United States and manage investment funds that own and operate numerous retail properties such as regional shopping centers, megaplex theaters, and restaurants. Revenue generation stems from leasing properties and earning management fees.

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Industry Breakdown

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By Market Capitalization

Revenue Generation

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Long Term

Contracts

Long Term

Contracts

Kite Realty Group (KRG) Trends and Opportunities

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Company Snapshot

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EV $921.39M

Market Cap $319.41M

EBITDA $63.14M

Beta 1.80

Trends: Consumer Spending

• Purchases up 4.1% in the last 12 months • 1% increase through Jan. and Feb. 2011 alone

• Consumer Debt has fallen for 7 straight quarters

• Down 7% from peak in 2008

• Holiday Season Sales up 5% in 2010

• U.S. Unemployment at lowest since April 2009

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Trends: Diversified Big Box Anchors

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•Top performers in recessionary periods

•Big box stores (e.g. Wal-Mart, Target) provide long-term stability

•Brand recognition lures customers to smaller adjacent stores

U.S. Census BureauIbisworld.com

Opportunities: Land Holdings

Portfolio Expansion of 17.4%• Depressed property values have lowered development costs

• 2007: $126/sq. ft.• 2010: $71/sq. ft.

• Occupancy rate consistent at 92.5%• Retail Stability rate: 90%• Industry average: 87%

• Majority of ongoing developments are preleased• 2010: 92.1% Preleased• 2009: 73.1% Preleased

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Total Portfolio GLA

December, 2007 7.0 million sq. ft.

March, 2011 8.2 million sq. ft.

Opportunities: Regional Breakdown (1)

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Opportunities: Regional Breakdown (2)

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Potential Risk: Leverage • Total Debt: $670mm

• KRG EV/EBITDA at 13.9x• CBL: 11.2x, AKR: 16.2x, RPT: 16.9x

• Q4 2010: Issuance of 28M common shares• Proceeds of $67.5M used to pay off unsecured loans of

$55M and $11M

• $75M of debt maturity in 2011• $37M has already been refinanced

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Total Debt/EBITDA

Q4 2010 9.1x

Q3 2010 10.3x

Valuation

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Year 2011(e) 2012(e) 2013(e) 2014(e) 2015(e)

FCF $109,529

$124,863

$141,095

$155,205 $167,621

DCF

WACC 6.93%

Growth Rate

4.00%

DCF Value $974M

1yr Price $5.96

Comparables

Multiple I (50%)

P/FFO

1yr Price $7.46

Multiple II (50%)

TEV/EBITDA

1yr Price $5.9340% Weight

60% Weight

1yr Target Price 6.40% Upside +28.7%

Risks & Sensitivities

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Recommendation

Key investment drivers 1. Land Holdings 2. Regional Spread 3. Consumer Spending

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Company KRG

Recommendation

Buy

Current Price $4.97

1yr Target Price

$6.40

% Upside +28.7%

Questions?

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Competitive Environment

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