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.

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, redevelopment, 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 leases at our properties. Our operating results therefore depend materially on the ability of our tenants to make required rental payments, conditions in the United States retail sector, and overall economic and real estate market conditions.

At June 30, 2012, we owned interests in 62 properties consisting of 53 retail operating properties, five retail properties under redevelopment, and four operating commercial properties. As of this date, we also owned interests in four in-process retail development properties.

In addition to our in-process developments and redevelopments, we have future developments which include 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 financing. As of June 30, 2012, these future developments consisted of three projects that are expected to contain 1.1 million square feet of total gross leasable area upon completion.

Finally, as of June 30, 2012, we also owned interests in other land parcels comprising 96 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 sheets.

Current Business Environment

Economic conditions have remained uneven during the first half of 2012. A stabilized economic recovery has not been achieved due to continued challenges in the labor market, consumer spending, and concerns about the U.S. federal government's ability to respond to these challenges. Overall, economic growth in the United States continued to reflect weakness during the second quarter of 2012 with the overall economy growing at 1.3%, which is a decrease from the first quarter of 2012. Meanwhile, the housing sector has finally started to demonstrate signs of momentum with new home sales continuing to increase from recent historically low levels. However, this improvement could also be negatively impacted by declines in consumer spending as retail spending in June declined in nearly every major category.

As noted above, retail sales continue to show weakness. In the face of this, however, some retailers are considering the expansion of their businesses and in certain cases have expressed optimism through expansion plans and capital allocation decisions. Where prudent and consistent with our strategy, we will seek to capitalize on our relationships with tenants to maximize our growth. We believe there will continue to be additional leasing opportunities during 2012 and 2013, particularly as tenants seek to lease new space or renew existing space in connection with lease expirations, expansions, and other considerations.

The lingering overall weakness in the U.S. economy has led to conditions that may continue to impact our business in a number of ways, including soft consumer demand; increasing tenant bankruptcies; curtailment of certain of our tenants' operations; delays or postponements by current or potential tenants from entering into long-term leases with us; decreased demand for retail space; difficulty in collecting rent; our need to make rent adjustments and concessions; the possible need to outlay additional capital to assist a tenant in the opening of its business; and termination by our tenants of their leases with us.

Ongoing Actions Taken to Capitalize on the Current Business Environment

During the current quarter, we continued to execute on our strategy to maximize shareholder value, including:

Development, Redevelopment, and Acquisition Activities: We continued construction at our Delray Marketplace project in Delray Beach, Florida. As of June 30, 2012, the Company has executed 28 leases at this property, including anchors Publix and Frank Theatres, and the property is 75.9% leased or committed. The total estimated costs of this project are expected to be $94 million, and the project is scheduled to open in the fourth quarter of 2012.

The Company also continued construction at its Holly Springs Towne Center (formerly New Hill Place) project in Holly Springs, North Carolina (Raleigh MSA). During the quarter, the Company completed site work for the Target Corporation, which will anchor the first phase of the project in a non-owned 135,000 square foot building. As of June 30, 2012, the project is 79.6% leased or committed.

On May 28, 2012, Whole Foods opened at the Company's Oleander Place redevelopment in Wilmington, North Carolina. As of June 30, 2012, the project is 90.3% leased or committed.

On June 13, 2012, the Company acquired Cove Center in Stuart, Florida for a purchase price of $22.1 million. On July 31, 2012, the Company acquired a shopping center in Vero Beach, Florida for a purchase price of $15.2 million. Both of these centers are anchored by Publix Supermarkets and are part of the strong trade area within the Treasure Coast of Florida.

The Company transitioned Rangeline Crossing (formerly The Centre) to an in-process redevelopment in the current quarter. During the quarter, the Company executed a lease with Earth Fare to anchor the redevelopment, and the property is 87.5% leased or committed as of June 30, 2012. The total estimated costs of this project are expected to be $15.5 million, and the first phase of the project is scheduled to open in fourth quarter of 2012.

Strengthen the Balance Sheet. In April 2012, the Company closed on a $115 million unsecured term loan with a seven-year term and an interest rate of LIBOR plus 210 to 310 basis points, depending on the Company's leverage. In May 2012, the Company closed on an additional $10 million under the unsecured term loan. The net proceeds of this loan were used to pay off the loans secured by Estero Town Commons, Tarpon Bay Plaza (formerly Tarpon Springs Plaza), Cobblestone Plaza, Rivers Edge, and Fox Lake Crossing and to pay down a portion of the Company's unsecured revolving credit facility. On May 4, 2012, the Company entered into a forward-starting interest rate swap that fixed the LIBOR rate on $125 million of variable rate debt at 1.52%. As of June 30, 2012, the effective composite rate was 4.12%, based on the Company's leverage.

Access the Capital Markets. We are party to Equity Distribution Agreements with certain sales agents pursuant to which we may sell, from time to time, up to an aggregate of $50 million of our common shares. We continue to monitor the capital markets and may consider raising additional capital through the issuance of our common shares, preferred shares or other securities. During the three and six months ended June 30, 2012, the Company issued 86,012 common shares at an average price of $5.16 per share for net proceeds of $0.4 million, and 184,200 common shares at an average price of $5.21 per share for net proceeds of $0.8 million, respectively.

Continued Focus on Operations. We continued to execute on our operating and leasing strategy. During the current quarter, we executed comparable new and renewal leases totaling 234,000 square feet and improved the net operating income of our operating retail properties. Our same property net operating income improved 2.4% due to higher rental rates and lower property operating expenses.

Results of Operations

At June 30, 2012, we owned interests in 62 properties consisting of 53 retail operating properties, five retail properties under redevelopment, and four operating commercial properties. As of this date, we also owned interests in four in-process retail development properties.

At June 30, 2011, we owned interests in 63 properties consisting of 53 retail operating properties, six retail properties under redevelopment, and four operating commercial properties. As of this date, we also owned interests in three in-process retail development properties.

The comparability of results of operations in 2011 and 2012 is affected by our development, redevelopment, and operating property acquisition and disposition activities during these periods. Therefore, we believe it is useful to review the comparisons of our results of operations for these periods in conjunction with the discussion of our development, redevelopment, and operating property acquisition and disposition activities during those periods, which is set forth below.

Development Activities

The following development properties were partially operational at various times
from January 1, 2011 through June 30, 2012:

                                           Economic
                                          Occupancy
    Property Name            MSA            Date1        Owned GLA

South Elgin Commons,
Phase II2                Chicago, IL    September 2011      83,000
                         Ft.
                         Lauderdale,
Cobblestone Plaza2       FL             March 2009         133,214

1 Represents the date on which we started receiving rental payments under tenant leases or ground leases at the property or the tenant took possession of the property, whichever was earlier.

2 Construction of each of these properties was completed in phases. The Economic Occupancy Date indicated for each of these properties refers to its initial phase. South Elgin Commons was sold in June 2012.

Property Acquisition Activities

In June 2012, the Company acquired Cove Center in Stuart, Florida for a purchase price of $22.1 million. Cove Center is a 160,000 square foot unencumbered shopping center anchored by Publix Supermarket and Beall's Department Store. As of June 30, 2012, the center was 96.3% leased.

In June 2011, the Company acquired Lithia Crossing, an unencumbered shopping center in Tampa, Florida, for a purchase price of $13.3 million.

In February 2011, the Company acquired Oleander Place in Wilmington, North Carolina for a purchase price of $3.5 million. Subsequent to the acquisition, the Company executed a lease termination agreement with the former anchor and a new lease with Whole Foods and transitioned the property to an in-process redevelopment. In connection with the lease termination agreement, the Company received a lease termination fee of $0.8 million. During the three months ended June 30, 2011, the Company completed plans for the redevelopment and recognized $0.5 million of accelerated depreciation and amortization related to the demolition of a portion of the property's building.

Property Disposition Activities

In February 2012, the Company and its joint venture partner sold Gateway Shopping Center in Marysville, Washington for a sales price of $29.4 million. The net proceeds were utilized to retire the variable-rate loan of $20.4 million, and the Company's share of the remaining proceeds was approximately $7 million.

In June 2012, the Company sold South Elgin Commons in South Elgin, Illinois for a sales price of $25 million. The net proceeds were utilized to retire the construction loan of $15.4 million and to fund a portion of the purchase price of Cove Center.

Redevelopment Activities


The following properties were in redevelopment status at various times during
the period from January 1, 2011 through June 30, 2012:

     Property Name                MSA          Transition Date1   Owned GLA

Courthouse Shadows          Naples, Florida    September 2008       134,867
                            Maple Valley,
Four Corner Square          Washington         September 2008        29,167
                            Jacksonville,
Bolton Plaza                Florida            June 2008            172,938
                            Indianapolis,
Rivers Edge2                Indiana            June 2008            149,209
                            Wilmington,
Oleander Place              North Carolina     March 2011            43,806
Rangeline Crossing
(formerly The Centre)       Carmel, Indiana    March 2011            77,455

Other Property Activities

In February 2011, the Company completed the acquisition of the remaining 40% interest in Rangeline Crossing (formerly The Centre), a redevelopment property in Indianapolis, Indiana from its joint venture partners and assumed all leasing and management responsibilities for the property. The purchase price of the 40% interest was $2.2 million, including the settlement of a $0.6 million loan made by the Company.

Same Property Net Operating Income

The Company believes that net operating income ("NOI") is helpful to investors as a measure of its operating performance because it excludes various items included in net income that do not relate to or are not indicative of its operating performance, such as depreciation and amortization, interest expense, and impairment, if any. The Company believes that NOI for our "same properties" ("Same Property NOI") is helpful to investors as a measure of its operating performance because it includes only the NOI of properties that have been owned for the full period presented, which eliminates disparities in net income due to the redevelopment, acquisition or disposition of properties during the particular period presented, and thus provides a more consistent metric for the comparison of the Company's properties. NOI and Same Property NOI should not, however, be considered as alternatives to net income (calculated in accordance with GAAP) as indicators of the Company's financial performance.

The following table reflects same property net operating income (and reconciliation to net loss attributable to common shareholders) for the three and six months ended June 30, 2012 and 2011:

                                    Three Months Ended June 30,                 Six Months Ended June 30,
                                  2012            2011        % Change       2012            2011        % Change
Number of properties at
period end1                              52              52                         52              52

Leased percentage at
period-end                            92.7%           92.9%                      92.7%           92.9%

Net operating income - same
properties (52 properties)2      14,155,019      13,816,995        2.4 %    28,158,798      27,106,568        3.9 %

Reconciliation to Most
Directly Comparable GAAP
Measure:

Net operating income - same
properties                    $  14,155,019   $  13,816,995              $  28,158,798   $  27,106,568
Other income (expense), net     (14,758,656 )   (13,430,381 )              (27,215,697 )   (27,426,772 )
Less: dividends on preferred
shares                           (2,114,063 )    (1,443,750 )               (3,691,876 )    (2,887,500 )
Net loss attributable to
common shareholders           $  (2,717,700 ) $  (1,057,136 )            $  (2,748,775 ) $  (3,207,704 )

1 Same Property analysis excludes Courthouse Shadows, Oleander Place, Four Corner Square, Rangeline Crossing, and Bolton Plaza as the Company pursues redevelopment of these properties

2 Same Property net operating income is considered a non-GAAP measure because it excludes net gains from outlot sales, write offs of straight-line rent and lease intangibles, bad debt expense and related recoveries, the litigation charge, lease termination fees and significant prior year expense recoveries and adjustments, if any.

Comparison of Operating Results for the Three Months Ended June 30, 2012 to the Three Months Ended June 30, 2011

The following table reflects our consolidated statements of operations for the three months ended June 30, 2012 and 2011 (unaudited):

                                                                                         Net change
                                                         2012             2011          2011 to 2012
Revenue:
  Rental income (including tenant reimbursements)    $ 24,228,724     $ 22,885,162     $    1,343,562
  Other property related revenue                          847,453        1,414,060           (566,607 )
  Construction and service fee revenue                     54,613           76,483            (21,870 )
Total revenue                                          25,130,790       24,375,705            755,085
Expenses:
  Property operating                                    4,240,446        4,415,221           (174,775 )
  Real estate taxes                                     3,169,255        3,522,033           (352,778 )
  Cost of construction and services                        82,115          114,254            (32,139 )
  General, administrative, and other                    1,843,087        1,413,918            429,169
  Depreciation and amortization                        10,486,899        9,611,307            875,592
Total Expenses                                         19,821,802       19,076,733            745,069
Operating income                                        5,308,988        5,298,972             10,016
  Interest expense                                     (6,398,553 )     (5,497,349 )         (901,204 )
  Income tax benefit of taxable REIT subsidiary            30,174           30,760               (586 )
  Income from unconsolidated entities                         382           92,220            (91,838 )
  Other income                                             47,835           93,582            (45,747 )
Loss from continuing operations                        (1,011,174 )         18,185         (1,029,359 )
Discontinued operations:
  Discontinued operations                                  42,425           85,883            (43,458 )
  Gain on sale of operating property, net of tax
expense                                                    93,891                -             93,891
Income from discontinued operations                       136,316           85,883             50,433
Consolidated net income (loss)                           (874,858 )        104,068           (978,926 )
  Net (income) loss attributable to noncontrolling
interests                                                 271,221          282,545            (11,324 )
Net income (loss) attributable to Kite Realty
Group
  Trust                                                  (603,637 )        386,613           (990,250 )
Dividends on preferred shares                          (2,114,063 )     (1,443,750 )         (670,313 )
Net loss attributable to common shareholders         $ (2,717,700 )   $ (1,057,137 )   $   (1,660,563 )

Rental income (including tenant reimbursements) increased $1.3 million, or 5.9%, due to the following:

                                                                          Net change
                                                                         2011 to 2012
Development properties that became operational or were partially
 operational in 2011 and/or 2012                                         $     612,350
Properties acquired subsequent to March 31, 2011                               441,148
Properties under redevelopment during 2011 and/or 2012                         199,854
Properties fully operational during 2011 and 2012 and other                     90,210
Total                                                                    $   1,343,562

Excluding the changes due to transitioned development properties, acquired properties and the properties under redevelopment, the net $0.1 million increase in rental income is primarily attributable to improvement in rental rates and meeting co-tenancy requirements due to anchor leasing activity. The leased percentage of the retail operating portfolio was 93.0% as of June 30, 2012, which was the same as of June 30, 2011. In addition as noted below, the increase in minimum rent was offset by decreases in reimbursable expenses, notably real estate taxes, which resulted in lower tenant reimbursement revenue. For the total portfolio and excluding the effect of parking operations, the overall recovery ratio for reimbursable expenses was 74.0% for the three months ended June 30, 2012 compared to 72.7% for the three months ended June 30, 2011.

Other property related revenue primarily consists of parking revenues, overage rent, lease settlement income and gains related to land sales. This revenue decreased $0.6 million, or 40%, primarily as a result of lower lease termination fee revenue of $0.6 million and lower insurance recoveries of $0.3 million partially offset by higher gains on land sales of $0.4 million.

Property operating expenses decreased $0.2 million, or 4.0%, due to the following:

                                                                          Net change
                                                                         2011 to 2012
Development properties that became operational or were partially
 operational in 2011 and/or 2012                                         $     35,005
Properties acquired subsequent to March 31, 2011                               68,511
Properties under redevelopment during 2011 and/or 2012                         78,776
Properties fully operational during 2011 and 2012 and other                  (357,067 )
Total                                                                    $   (174,775 )

Excluding the changes due to transitioned development properties, acquired properties, and the properties under redevelopment, the net $0.4 million decrease in property operating expenses relates primarily to a decrease in bad debt expense, due to a general improvement in the condition of our receivables.

Real estate taxes decreased $0.4 million, or 10.0 %, due to the following:

                                                                          Net change
                                                                         2011 to 2012
Development properties that became operational or were partially
 operational in 2011 and/or 2012                                         $     14,477
Properties acquired subsequent to March 31, 2011                               30,666
Properties under redevelopment during 2011 and/or 2012                         20,667
Properties fully operational during 2011 and 2012 and other                  (418,588 )
Total                                                                    $   (352,778 )

Excluding the changes due to transitioned development properties, acquired properties and the properties under redevelopment, the net $0.4 million decrease in real estate taxes was primarily due to lower assessments at two of our operating properties. The majority of increases and decreases in our real estate tax expense from increased assessments and subsequent appeals is recoverable from (or reimbursable to) tenants and, therefore, reflected in tenant reimbursement revenue.

General, administrative and other expenses increased $0.4 million, or 30%, due to an increase in certain public company and legal costs and personnel costs.

Depreciation and amortization expense increased $0.9 million, or 9.1%, due to the following:

                                                                         Net change
                                                                           2011 to
                                                                            2012
Development properties that became operational or were partially
 operational in 2011 and/or 2012                                         $   187,363
Properties acquired subsequent to March 31, 2011                             280,898
Properties under redevelopment during 2011 and/or 2012                       397,124
Properties fully operational during 2011 and 2012 and other                   10,207
Total                                                                    $   875,592

The overall increase of $0.9 million in depreciation and amortization expense was due to the following significant items:

· An increase of $0.6 million related to accelerated depreciation related to the demolition of a portion of the Four Corner Square redevelopment.A redevelopment plan for this property was finalized during the first quarter of 2012, resulting in a reduction of theuseful lives of certain assets that were scheduled to be demolished.

· An increase of $0.6 million related to tenants opening at recently completed development and redevelopmentproperties including Cobblestone Plaza, Rivers Edge, and Eddy Street Commons.

· An increase of $0.7 million related to accelerated depreciation related to the demolition of a portion of the Rangeline Crossing (formerly The Centre) redevelopment. A redevelopment plan for this property was finalized during the second quarter of 2012, resulting in a reduction of the useful lives of certain assets that were scheduled to be demolished.

· A decrease of $1.1 million related to Oleander Place reflecting accelerated depreciation and amortization expenserecorded for the three months ended June 30, 2011 as development plans were finalized during that period.

Interest expense increased $0.9 million, or 16%. This increase was primarily due to the Cobblestone Plaza and Rivers Edge properties being transitioned to the operating portfolio. All of these properties were under various stages of construction during 2011. In addition, the Company's average debt balance for the three months ended June 30, 2012 increased over the same period of the prior year.

The Company had income related to discontinued operations of $0.1 million for the three months ended June 30, 2012 compared to income of $0.1 million for the three months ended June 30, 2011. In June 2012, the Company sold South Elgin Commons in South Elgin, Illinois for a consolidated net gain of $0.1 million.

Comparison of Operating Results for the Six Months Ended June 30, 2012 to the Six Months Ended June 30, 2011

The following table reflects our consolidated statements of operations for the six months ended June 30, 2012 and 2011 (unaudited):

. . .