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Kite Realty Trust sees Q2 non-cash impairment charge of approximately $5.4M

As previously disclosed, since October 2012 a wholly-owned subsidiary of Kite Realty Group Trust has been in payment default on a $29.5M non-recourse loan made with respect to the company’s Kedron Village property, due to insufficient cash flow being generated by the property to fully support the debt service on the loan. The lender initiated foreclosure proceedings and acquired the property on July 2. A $2.2M escrow balance was also retained. As a result of the foreclosure sale on July 2, the company reevaluated the Kedron Village property for impairment as of June 30, and determined that the carrying value of the property was not fully recoverable. Accordingly, the company expects to incur a non-cash impairment charge of approximately $5.4M in the second quarter. This non-cash charge will not impact the company’s liquidity nor its funds from operations for such quarter. The company also expects to recognize a non-cash gain of approximately $1.5M resulting from the transfer of the asset to the lender in full satisfaction of the debt. However, because of the timing of the foreclosure sale, under generally accepted accounting principles, the company expects that this gain will be recognized in the third quarter. In the third quarter, the company also expects to reverse an accrual of default interest and other interest of approximately $1.1M, which will be included in funds from operations in that quarter.