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ACQUISITIONS | 12 Months Ended
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Dec. 31, 2021
Business Combination and Asset Acquisition [Abstract] |
ACQUISITIONS | ACQUISITIONS RPAI Merger On October 22, 2021, we completed a Merger with RPAI pursuant to which RPAI merged with and into Merger Sub, with the Company continuing as the surviving public company. Immediately following the closing of the Merger, Merger Sub merged with and into the Operating Partnership so that all of the assets and liabilities of the Company continue to be held at or below the Operating Partnership level. The aggregate value of the Merger consideration paid or payable to former holders of RPAI common stock was approximately $2.8 billion, excluding the value of RPAI restricted stock units that vested at closing and certain restricted share awards assumed by the Company at closing. The total purchase price was calculated based on the closing price of the Company’s common stock on October 21, 2021, the last business day prior to the effective time of the Merger, which was $21.18 per share. At the effective time of the Merger, each share of RPAI common stock issued and outstanding immediately prior to the effective time was converted into the right to receive 0.623 newly issued Company common shares. In addition, holders of (i) options to purchase shares of RPAI common stock, (ii) certain awards of restricted shares of RPAI common stock (as agreed in accordance with the Merger Agreement), and (iii) restricted stock units representing the right to vest in and be issued shares of RPAI common stock became entitled to receive cash and/or Company common shares in accordance with the terms of the Merger Agreement. The Company assumed certain existing awards of restricted shares of RPAI common stock, each of which were converted into 0.623 awards of restricted Company common shares in accordance with the Merger Agreement. In connection with the Merger, the Operating Partnership issued an equivalent amount of General Partner Units to the Parent Company. The number of RPAI common stock outstanding as of October 21, 2021 converted to shares of the Company’s common stock was determined as follows:
RPAI common stock outstanding as of October 21, 2021 | 214,797,869 |
Exchange ratio | 0.623 |
Company common shares issued for outstanding RPAI common stock | 133,814,066 |
Company common shares issued for RPAI restricted stock units | 1,117,399 |
Total Company common shares issued | 134,931,465 |
The following table presents the purchase price and total value of equity consideration paid by the Company at the close of the Merger (in thousands except the share price of Company common shares):
| Price of Company common shares |  | Equity Consideration Given (Company common shares issued) |  | Total Value of Stock Consideration 1
As of October 21, 2021 | $ | 21.18 |  |  | 134,931 |  |  | $ | 2,847,369 |
1 The total value of stock consideration is the total of the common shares issued multiplied by the closing price of the Company’s common stock on October 21, 2021 excluding the value of certain RPAI restricted stock that vested at the closing of the Merger and share awards assumed by the Company at the closing of the Merger. As a result of the Merger, the Company acquired 100 operating retail properties and five active development projects under construction along with multiple parcels of entitled land for future value creation. The consolidated net assets and results of operations of RPAI are included in the accompanying consolidated financial statements from the closing date, October 22, 2021. During the year ended December 31, 2021, the Company incurred $86.5 million of merger and acquisition costs consisting primarily of fairness opinion, severance charges, legal, professional and data migration costs, which are recorded within “Merger and acquisition costs” in the accompanying consolidated statements of operations and comprehensive income. In addition, the Company assumed approximately $1.8 billion of debt in connection with the Merger. “Rental income” and “Net loss attributable to Kite Realty Group Trust common shareholders” in the accompanying consolidated statements of operations and comprehensive income include revenues from the RPAI portfolio of $94.9 million and net loss of $22.8 million for the period from October 22, 2021 through December 31, 2021, which includes $74.7 million of depreciation and amortization, as a result of the Merger during the year ended December 31, 2021. Provisional Purchase Price Allocation In accordance with ASC 805-10, Business Combinations, the Company accounted for the Merger as a business combination using the acquisition method of accounting. Based on the value of the common shares issued, the total fair value of the assets acquired and liabilities assumed in the Merger was $2.8 billion as of October 22, 2021, the date of the Merger. The following table summarizes the provisional purchase price allocation based on the Company’s initial valuation, including estimates and assumptions of the acquisition date fair value of the tangible and intangible assets acquired and liabilities assumed:
| Provisional Allocation
Investment properties | $ | 4,439,387 |
Acquired lease intangible assets | 524,058 |
Cash, accounts receivable and other assets | 84,632 |
Total assets acquired | 5,048,077 |
Mortgage and other indebtedness | (1,848,476) |
Accounts payable, other liabilities, tenant security deposits and prepaid rent | (176,391) |
In-place lease liabilities | (171,378) |
Noncontrolling interests | (4,463) |
Total liabilities assumed | (2,200,708) |
Total purchase price | $ | 2,847,369 |
The fair market value of the acquired properties is based upon a valuation prepared by the Company with assistance of a third-party valuation specialist. As it relates to certain leases and related intangibles, development projects and land held for development, the Company and valuation specialist are still in the process of reviewing the inputs used by the third-party specialist to ensure reasonableness and that the procedures are performed in accordance with management’s policy. Therefore, the final acquisition accounting adjustments, including the purchase price and its allocation, are not yet complete as of this filing. Once the purchase price and allocation are complete, an adjustment to the provisional purchase price or allocation may occur. The range of the most significant Level 3 assumptions utilized in determining the value of the real estate and related assets acquired through the Merger with RPAI are as follows:
| 2021
Net rental rate per square foot – Anchors | $4.00 to $45.00
Net rental rate per square foot – Small Shops | $7.00 to $140.00
Capitalization rate | 5.25% to 9.00%
The following table details the provisional weighted average amortization periods, in years, of the purchase price provisionally allocated to real estate and related intangible assets and liabilities acquired arising from the Merger:
| Weighted Average Amortization Period (in years)
Land | N/A
Building | 18.9
Tenant improvements | 6.6
In-place lease intangibles | 5.3
Above-market leases | 8.1
Below-market leases (including below-market option periods) | 17.6
Fair market value of debt adjustments | 6.8
Pro Forma Financial Information (unaudited) The pro forma financial information set forth below is based upon the Company’s historical consolidated statements of operations for the years ended December 31, 2021 and 2020, adjusted to give effect for the properties assumed through the Merger as if they were acquired as of January 1, 2020. The pro forma financial information is presented for informational purposes only and may not be indicative of what actual results of income would have been, nor does it purport to represent the results of income for future periods.
| Year Ended December 31,
($ in thousands) | 2021 |  | 2020
Rental income | $ | 740,954 |  |  | $ | 683,093 |
Net income (loss) | $ | 21,283 |  |  | $ | (109,775) |
Net income (loss) attributable to common shareholders | $ | 20,535 |  |  | $ | (107,341) |
Net income (loss) attributable to common shareholders per common share: |  |  |
Basic 1 | $ | 0.09 |  |  | $ | (0.49) |
Diluted 1 | $ | 0.09 |  |  | $ | (0.49) |
1 The pro forma earnings for the year ended December 31, 2021 were adjusted to exclude $86.5 million of merger costs incurred while the pro forma earnings for the year ended December 31, 2020 were adjusted to include these costs. Supplemental Schedule of Non-Cash Investing and Financing Activities Related to the Merger The following table summarizes the Merger-related non-cash investing and financing activities of the Company for the year ended December 31, 2021:
($ in thousands) | Year Ended December 31, 2021
Investment properties | $ | 4,439,387 |
Acquired lease intangible assets | $ | 524,058 |
Mortgage and other indebtedness | $ | (1,848,476) |
In-place lease liabilities | $ | (171,378) |
Noncontrolling interests | $ | (4,463) |
Other assets and liabilities, net 1 | $ | (106,751) |
Company common shares issued in exchange for RPAI common stock | $ | (2,847,369) |
1 Includes lease liabilities arising from obtaining right-of-use assets of $41,086, which was determined using an estimate of our incremental borrowing rate that was specific to each lease based upon the term and underlying asset with a weighted average incremental borrowing rate of 5.4%. Asset Acquisitions The Company closed on the following asset acquisitions during the years ended December 31, 2021, 2020 and 2019, respectively: (i) one multi-tenant retail outparcel at Nora Plaza, an existing operating property, for $13.5 million, (ii) one retail operating property for $65.3 million, and (iii) one retail operating property for $29.0 million and one parking garage for $29.5 million. The fair value of the real estate and other assets acquired were primarily determined using the income approach, which required us to make assumptions about market leasing rates, tenant-related costs, discount rates, and disposal rates. The estimates of fair value primarily relied upon Level 2 and Level 3 inputs, as previously defined. The following table summarizes the fair value of assets acquired and liabilities assumed for the asset acquisitions completed during the years ended December 31, 2021, 2020 and 2019:
| Year Ended December 31,
($ in thousands) | 2021 |  | 2020 |  | 2019
Investment properties, net | $ | 13,488 |  |  | $ | 63,570 |  |  | $ | 56,393 |
Lease-related intangible assets, net 1 | 304 |  |  | 2,254 |  |  | 2,458 |
Other assets | — |  |  | — |  |  | 320 |
Total acquired assets | 13,792 |  |  | 65,824 |  |  | 59,171 |
Mortgage payable | 3,578 |  |  | — |  |  | — |
Accounts payable and accrued expenses | 100 |  |  | 280 |  |  | 595 |
Deferred revenue and other liabilities | 189 |  |  | 246 |  |  | 371 |
Total assumed liabilities | 3,867 |  |  | 526 |  |  | 966 |
Fair value of acquired net assets | $ | 9,925 |  |  | $ | 65,298 |  |  | $ | 58,205 |
1 The weighted average remaining life of leases at the acquired properties is approximately 5.3 years, 3.2 years and 5.6 years for asset acquisitions completed during the years ended December 31, 2021, 2020 and 2019, respectively. The range of the most significant Level 3 assumptions utilized in determining the value of the real estate and related assets acquired through asset acquisitions are as follows:
| 2021 |  | 2020 |  | 2019
Net rental rate per square foot – Anchors | N/A to N/A |  | $22.50 to $27.50 |  | $11.00 to $12.96
Net rental rate per square foot – Small Shops | $31.50 to $45.00 |  | $15.00 to $65.00 |  | $6.33 to $32.00
Discount rate | 9.0% |  | 9.0% |  | 9.0%
The results of operations for each of the properties acquired through asset acquisitions during the years ended December 31, 2021, 2020 and 2019 have been included in operations since their respective dates of acquisition.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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