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.

Overview

Our Business and Properties

Kite Realty Group Trust, through its majority-owned subsidiary, Kite Realty Group, L.P., is engaged in the ownership, operation, management, leasing, acquisition, construction, expansion and development of neighborhood and community shopping centers and certain commercial real estate properties in selected markets in the United States. 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 our taxable REIT subsidiary. Our operating results therefore depend materially on the ability of our tenants to make required rental payments, our ability to provide such services to third parties, conditions in the U.S. retail sector and overall real estate market conditions.

As of March 31, 2009, we owned interests in a portfolio of 51 operating retail properties totaling approximately 8.0 million square feet of gross leasable area (including non-owned anchor space) and also owned interests in three operating commercial properties totaling approximately 0.5 million square feet of net rentable area and an associated parking garage. Also, as of March 31, 2009, we had an interest in nine properties in our development and redevelopment pipelines. Upon completion, we anticipate our current development and redevelopment properties to have approximately 1.2 million square of total gross leasable area.

In addition to our current development and redevelopment pipelines, we have a "visible shadow" development pipeline which includes land parcels that are undergoing pre-development activity and are in various stages of preparation for construction to commence, including pre-leasing activity and negotiations for third party financings. As of March 31, 2009, this visible shadow pipeline consisted of six projects that are expected to contain approximately 2.8 million square feet of total gross leasable area upon completion.

Finally, as of March 31, 2009, we also owned interests in other land parcels comprising approximately 99 acres that may be used for future expansion of existing properties, development of new retail or commercial properties or sold to third parties. These land parcels are classified as "Land held for development" in the accompanying consolidated balance sheet.

Current Economic Conditions and Impact on Our Retail Tenants

Our business continues to feel the effects of the extended turmoil in the U.S credit markets and the overall softening of the economic environment. We expect the difficult economic conditions that significantly restricted consumer spending in 2008 to continue throughout 2009 and possibly beyond. The U.S. Congress, the Presidential Administration and the Federal Reserve Bank have taken various steps, including various stimulus packages and governmental monetary packages, in an effort to curtail the recession and promote stability in the U.S. economy as a whole. It is not yet clear what effect, if any, these actions will have on banks and other financial institutions, the broader financial and credit markets and the economy in general.

Factors contributing to consumers spending less at stores owned and/or operated by our retail tenants include, among others:

• Decreased Home Values and Increased Home Foreclosures: U.S. home values have decreased sharply, and difficult economic conditions have also contributed to a record number of home foreclosures. The historically high level of delinquencies and foreclosures, particularly among sub-prime mortgage borrowers, may to continue into the foreseeable future.

• Rising Unemployment Rates: The U.S. unemployment rate continues to rise dramatically. According to the Bureau of Labor Statistics, through the first quarter of 2009, approximately 5.1 million, or 8.5%, of Americans were unemployed, the highest level in 25 years. Rising unemployment rates could cause further decreases in consumer spending, thereby negatively affecting the businesses of our retail tenants.

• Decreasing Consumer Confidence: Consumer confidence is at its lowest level in decades, leading to a decline in spending on discretionary purchases. The significant increase in personal and business bankruptcies reflects an economy in distress, with financially over-extended consumers less likely to purchase goods and/or services from our retail tenants.

In the first quarter of 2009, decreasing consumer spending had a negative impact on the businesses of our retail tenants. As discussed below, these conditions in turn had a negative impact on our business. To the extent these conditions persist or deteriorate further, our tenants may be required to curtail or cease their operations, which could materially and negatively affect our business in general and our cash flows in particular.

Impact of Economy on REITs, Including Us

As an owner and developer of community and neighborhood shopping centers, our operating and financial performance is directly affected by economic conditions in the retail sector of those markets in which our operating centers and development properties are located. This is particularly true in the states of Indiana, Florida and Texas, where the majority of our properties are located, and in North Carolina, where a significant portion of our development projects and land parcels held for development are located. As discussed above, due to the challenges facing U.S. consumers, the operations of our retail tenants are being negatively affected. In turn, this is having a negative impact on our business, including in the following ways:

• Difficulty In Collecting Rent; Rent Adjustments. When consumers spend less, our tenants typically experience decreased revenues and cash flows. This makes it more difficult for some of our tenants to pay their rent obligations, which is the primary source of our revenues. A number of tenants requested decreases or deferrals in their rent obligation in the first quarter of 2009. If granted, such decreases or deferrals negatively affect our cash flows in the short-term.

• Termination of Leases. If our tenants continue to struggle to meet their rental obligations, they may be forced to vacate their stores and terminate their leases with us. During the first quarter of 2009, several tenants vacated their stores, and in some cases, terminated their leases with us. When tenants terminate their leases with us, we may be able to negotiate lease termination fees from them but in other cases we may not.

• Tenant Bankruptcies. The number of bankruptcies by U.S. businesses surged in the third and fourth quarters of 2008. This trend continued through the first quarter of 2009 and may continue into the foreseeable future. Likewise, bankruptcies of our retail tenants also increased sharply in 2008 and into 2009. For example, in November 2008, Circuit City Stores, Inc. filed a petition for bankruptcy protection under Chapter 11 of the federal bankruptcy laws and, in January 2009, declared that it would be liquidating and closing all of its stores. At that time, Circuit City had operated stores at three of our properties, and in March 2009 they ceased operations and closed those stores.

• Decrease in Demand for Retail Space. Reflecting the extremely difficult current market conditions, demand for retail space at our shopping centers has decreased while availability has increased due to tenant terminations and bankruptcies. As a result, the overall tenancy at our shopping centers declined over the last 12 months and may continue to decline in the future until financial markets, consumer confidence, the unemployment rate and the economy in general stabilize and begin to improve. As of March 31, 2009, our retail operating portfolio was

• Decrease in Third Party Construction Activity. Although construction activity increased in the first quarter of 2009 compared to the first quarter of 2008, in general, we are anticipating a general decline in third party construction activity in the foreseeable future as a result of the current difficult market conditions, which could have a negative impact on the revenues of our development, construction and advisory services segment.

The factors discussed above, among others, continued to have a negative impact on our business in the first quarter of 2009. We expect that these conditions will continue into the foreseeable future.

Financing Strategy and 2009 Maturities

Our ability to obtain financing on satisfactory terms and to refinance borrowings as they mature has also been affected by the condition of the economy in general and by the current instability of the financial markets in particular. As of March 31, 2009, approximately $73 million of our consolidated indebtedness was scheduled to mature in the remainder of 2009 (approximately $75 million including our share of unconsolidated debt), excluding scheduled monthly principal payments for the remainder of 2009. We believe we have good relationships with a number of banks and other financial institutions that will allow us to refinance these borrowings with the existing lenders or replacement lenders. However, in this current challenging environment, it is imperative that we identify alternative sources of financing and other capital in the event we are not able to refinance these loans on satisfactory terms, or at all. It is also important for us to obtain financing in order to complete our development and redevelopment projects.

We continued to engage in certain refinancing activities in the first quarter of 2009. In March 2009, we exercised a five-year extension on our variable rate debt at our Beacon Hill property and extended the maturity date from March 2009 to March 2014. At the time of the loan's original maturity, approximately $11.9 million was outstanding. As refinanced, at March 31, 2009, $8.4 million was outstanding under the new loan. We funded the $3.5 million pay down on the loan utilizing proceeds from the unsecured revolving credit facility. In addition, in May 2009, we placed a three-year $15.4 million variable rate debt instrument bearing interest at a rate of LIBOR plus 295 on our Eastgate Pavilion property, a previously unencumbered property. We intend to use the proceeds from this loan to further reduce near-term maturities. As of March 31, 2009, approximately $39 million was available to be drawn under our unsecured revolving credit facility.

As part of our financing strategy, we will continue to seek to refinance and/or extend our debt that is maturing in 2009 and 2010. While we can give no assurance, due to these efforts and the current status of negotiations with existing and alternative lenders for our near-term maturing indebtedness, we currently believe we will have the ability to extend, refinance, or repay all of our debt that is maturing through at least 2009, including, to the extent necessary, utilizing the availability on our unsecured credit facility.

Obtaining new financing also is important to our business due to the capital needs of our existing development and redevelopment projects. The properties in our development and redevelopment pipelines, which are primary drivers for our near-term growth, will require a substantial amount of capital to complete. As of March 31, 2009, our unfunded share of the total estimated cost of the properties in our current development and redevelopment pipelines was approximately $37 million. While we believe we will have access to sufficient funding to be able to fund our investments in these projects through a combination of new and existing construction loans and draws on our unsecured credit facility (which, as noted above, has $39 million of availability), a prolonged credit crisis will make it more costly and difficult to raise additional capital, if necessary.

Results of Operations

At March 31, 2009, we owned interests in 55 operating properties (consisting of 51 retail properties, three operating commercial properties and an associated parking garage) and nine entities that held interests in development or redevelopment properties. Of the 64 total properties held at March 31, 2009, one operating property and one parcel of pre-development land were owned through joint ventures and accounted for under the equity method.

The comparability of results of operations is significantly affected by our development, redevelopment, and operating property acquisition and disposition activities in 2008 and 2009. Therefore, we believe it is most useful to review the comparisons of our 2008 and 2009 results of operations (as set forth below under "Comparison of Operating Results for the Three Months Ended March 31, 2009 to the Three Months Ended March 31, 2008") in conjunction with the discussion of our significant development, redevelopment, and operating property acquisition and disposition activities during those periods, which such discussion is set forth directly below.

Development Activities

The following development properties were in our current development pipeline
and were operational or were partially operational at various times from January
1, 2008 through March 31, 2009:



      Property Name               MSA           Economic Occupancy Date1   Owned GLA
 -----------------------   ------------------   ------------------------   ---------

 Cobblestone Plaza         Ft. Lauderdale, FL   March 2009                   157,957
 54th & College            Indianapolis, IN     June 2008                        N/A 2
 Bayport Commons           Tampa, FL            September 2007                94,756
 Tarpon Springs Plaza      Naples, FL           July 2007                     82,546
 Gateway Shopping Center   Marysville, WA       April 2007                   100,949

Property Acquisition Activities

In February 2008, we purchased Rivers Edge, a 110,875 square foot shopping center located in Indianapolis, Indiana, for $18.3 million. We utilized approximately $2.7 million of proceeds from the November 2007 sale of our 176th & Meridian property in a like-kind exchange under Section 1031 of the Internal Revenue Code. The remaining purchase price of $15.6 million was funded initially through a draw on our unsecured credit facility and subsequently refinanced with a variable rate loan bearing interest at LIBOR + 125 basis points and maturing on February 3, 2010. This property was purchased with the intent to redevelop; therefore, it is included in our redevelopment pipeline, as shown in the "Redevelopment Activities" table below. However, for purposes of the comparison of operating results, this property is classified as property acquired during 2008 in the comparison of operating results tables below.

Operating Property Disposition Activities

The following operating properties were sold from January 1, 2008 through March
31, 2009:



         Property Name                    MSA            Disposition Date   Owned GLA
 -----------------------------   ---------------------   ----------------   ---------

 Spring Mill Medical, Phase I1   Indianapolis, Indiana   December 2008         63,431
 Silver Glen Crossing            Chicago, Illinois       December 2008        132,716

Redevelopment Activities

The following properties were in our redevelopment pipeline at various times
during the period from January 1, 2008 through March 31, 2009:



       Property Name                 MSA              Transition Date1   Owned GLA
   ---------------------   ------------------------   ----------------   ---------

   Coral Springs Plaza     Ft. Lauderdale, Florida    March 2009            94,756
   Galleria Plaza          Dallas, Texas              March 2009            44,306
   Courthouse Shadows      Naples, Florida            September 2008       134,867
   Four Corner Square      Maple Valley, Washington   September 2008        73,099
   Bolton Plaza            Jacksonville, Florida      June 2008            172,938
   Rivers Edge             Indianapolis, Indiana      June 2008            110,875
   Glendale Town Center2   Indianapolis, Indiana      March 2007           685,000
   Shops at Eagle Creek3   Naples, Florida            December 2006         75,944

Comparison of Operating Results for the Three Months Ended March 31, 2009 to the
Three Months Ended March 31, 2008

The following table reflects our consolidated statements of operations for the
three months ended March 31, 2009 and 2008 (unaudited):




                                                                            Increase
                                                                           (Decrease)
                                             2009             2008        2009 to 2008
                                       ----------------   -------------   -------------
Revenue:
Rental income (including tenant
reimbursements)                        $     22,681,525    $ 22,903,066    $   (221,541 )
Other property related revenue                1,588,108       5,157,085      (3,568,977 )
Construction and service fee revenue          6,148,995       4,288,522       1,860,473
Expenses:
Property operating expense                    5,590,600       4,361,771       1,228,829
Real estate taxes                             2,793,765       3,054,349        (260,584 )
Cost of construction and services             5,559,316       3,764,234       1,795,082

  General, administrative, and other       1,343,470       1,709,950         (366,480 )
  Depreciation and amortization            7,511,438       8,028,663         (517,225 )
                                           ---------      ----------      -----------
  Operating income                         7,620,039      11,429,706       (3,809,667 )
  Add:
  Other income, net                           48,899          65,232          (16,333 )
  Income from unconsolidated entities         31,500          61,174          (29,674 )
  Deduct:
  Interest expense                         6,776,508       7,253,566         (477,058 )
  Income tax expense of taxable REIT
  subsidiary                                  37,952       1,153,228       (1,115,276 )
                                           ---------      ----------      -----------
  Income from continuing operations          885,978       3,149,318       (2,263,340 )
  Operating income from discontinued
  operations                                      -          330,823         (330,823 )
                                           ---------      ----------      -----------
  Consolidated net income                    885,978       3,480,141       (2,594,163 )
  Net income attributable to
  noncontrolling interests                  (184,736 )      (772,842 )        588,106
                                           ---------      ----------      -----------
  Net income attributable to Kite
  Realty Group Trust                     $   701,242    $  2,707,299    $  (2,006,057 )
                                           ---------      ----------      -----------

Rental income (including tenant reimbursements) decreased approximately $0.2 million, or 1%, due to the following:

                                                         Increase (Decrease)
                                                             2009 to 2008
                                                         --------------------
       Development properties that became operational
       or were partially operational in 2008 and/or
       2009                                                 $    538,436
       Property acquired during 2008                             129,019
       Properties under redevelopment during 2008
       and/or 2009                                              (345,383 )
       Properties fully operational during 2008 and
       2009 & other                                             (543,613 )
                                                              ----------
       Total                                                $   (221,541 )
                                                              ----------

Excluding the changes due to transitioned development properties, the acquisition of a property, and the properties under redevelopment, the net $0.5 million decrease in rental income was primarily due to the following:

• $0.4 million decrease at three of our properties due to the termination of tenants in 2008 and the first three months of 2009; and

• $0.2 million real estate tax refund, net of related professional fees, reimbursable to tenants at one of our operating properties for fiscal year 2007, which was received in the first quarter of 2009.

Other property related revenue primarily consists of parking revenues, overage rent, lease settlement income and gains on land sales. This revenue decreased approximately $3.6 million, or 69%, primarily as a result of a decrease of $2.9 million in gains on land sales as well as a $0.6 million decrease in lease settlement income.

Construction revenue and service fees increased approximately $1.9 million, or 43%, primarily due to the timing and level of third party construction contracts.

Property operating expenses increased approximately $1.2 million, or 28%, due to the following:

Increase 2009 to 2008
Development properties that became operational or were partially operational in 2008 and/or 2009 $ 96,438 Property acquired during 2008 40,130

     Properties under redevelopment during 2008 and/or 2009          339,406
     Properties fully operational during 2008 and 2009 & other       752,855
                                                                   ---------
     Total                                                       $ 1,228,829
                                                                   ---------

Excluding the changes due to transitioned development properties, the acquisition of a property, and the properties under redevelopment, the net $0.8 million increase in property operating expenses was primarily due to the following:

• $0.5 million net increase in bad debt expense at a number of our operating properties; and

• $0.3 million increase in landscaping and parking lot expense, primarily related to snow removal at our Indiana and Illinois properties, most of which is recoverable from tenants.

Real estate taxes decreased approximately $0.3 million, or 9%, due to the following:

                                                         Increase (Decrease)
                                                             2009 to 2008
                                                         --------------------
       Development properties that became operational
       or were partially operational in 2008 and/or
       2009                                                 $     64,851
       Property acquired during 2008                               7,898
       Properties under redevelopment during 2008
       and/or 2009                                               (25,695 )
       Properties fully operational during 2008 and
       2009 & other                                             (307,638 )
                                                              ----------
       Total                                                $   (260,584 )
                                                              ----------

Excluding the changes due to transitioned development properties, the acquisition of a property, and the properties under redevelopment, the net $0.3 million decrease in real estate taxes was primarily due to a net decrease in real estate tax expenses, including a $0.2 million real estate tax refund, net of related professional fees, at one of our operating properties for fiscal year 2007, which was received in the first quarter of 2009, most of which is reimbursable to tenants.

Cost of construction and services increased approximately $1.8 million, or 48%, primarily due to the timing and level of third party construction contracts.

General, administrative and other expenses decreased approximately $0.4 million, or 21%. For the three months ended March 31, 2009, general, administrative and other expenses were 4.4% of total revenue compared to 5.3% for the three months . . .