Item 8.01 Other Events.
As previously disclosed, on July 18, 2021, Retail Properties of America, Inc., a
Maryland corporation that has elected to be treated as a real estate investment
trust for federal income tax purposes ("RPAI"), Kite Realty Group Trust, a
Maryland real estate investment trust ("Kite Realty"), and KRG Oak, LLC, a
Maryland limited liability company and a wholly owned subsidiary of Kite Realty
("Merger Sub"), entered into a definitive Agreement and Plan of Merger (the
"Merger Agreement"). Pursuant to the Merger Agreement, Kite Realty and RPAI will
combine through a merger of RPAI with and into Merger Sub, with Merger Sub
continuing as the surviving entity and a wholly owned subsidiary of Kite Realty
(the "Merger"). Immediately following the closing of the Merger, Merger Sub will
merge with and into Kite Realty Group, L.P., the operating partnership of Kite
Realty ("Kite Realty Operating Partnership"), so that all of the assets of Kite
Realty continue to be owned at or below the Kite Realty Operating Partnership
level. A definitive joint proxy statement/prospectus (the "joint proxy
statement/prospectus") was filed with the Securities and Exchange Commission
(the "SEC") by Kite Realty on September 14, 2021, in connection with, among
other things, the Merger Agreement.
Certain Litigation
As previously disclosed in the joint proxy statement/prospectus, beginning on
August 27, 2021, two purported RPAI stockholders filed substantially similar
complaints against RPAI and the members of the RPAI board of directors (the
"RPAI Board") in the United States District Court for the Southern District of
New York. One of these complaints also names Kite Realty and Merger Sub as
defendants. The complaints are captioned as follows: Wang v. Retail Properties
of America, Inc. et al., No. 1:21-cv-07237 (S.D.N.Y. filed August 27, 2021); and
Hopkins v. Retail Properties of America, Inc. et al., No. 1:21-cv-07324
(S.D.N.Y. filed August 31, 2021). The complaints variously assert, among other
things, claims under Section 14(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14a-9 promulgated thereunder against RPAI
and the members of the RPAI Board and claims under Section 20(a) of the Exchange
Act against the members of the RPAI Board (and, in one case, Kite Realty and
Merger Sub) for allegedly causing a materially incomplete and misleading
registration statement on Form S-4 filed on August 23, 2021 with the SEC. Among
other remedies, the plaintiffs seek to enjoin the Merger. Three additional
lawsuits were filed against RPAI and the members of the RPAI Board between
September 14, 2021 and October 7, 2021 under the captions Callebs v. Retail
Properties of America, Inc. et al., No. 1:21-cv-07593 (S.D.N.Y. filed
September 10, 2021); Sheridan v. Retail Properties of America, Inc., et al., No.
1:21-cv-04066-SCJ (N.D.Ga. filed October 1, 2021); and Whitfield v. Retail
Properties of America, Inc. et al., No. 2:21-cv-04390 (E.D.Pa. filed October 6,
2021), which are substantially similar to the other two complaints. Also, on
September 15, 2021, a purported Kite Realty shareholder filed a complaint
against Kite Realty and the members of the Kite Realty board of trustees in the
United States District Court for the Eastern District of New York, captioned as
follows: Gentry v. Kite Realty Group Trust et al., No. 1:21-cv-05142 (E.D.N.Y.
filed September 15, 2021). The complaint asserts substantially similar claims
under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 as the other
complaints against RPAI and the RPAI Board. It is possible additional lawsuits
may be filed against RPAI, Kite Realty and/or their respective boards between
the date of this Form 8-K and consummation of the Merger.
RPAI believes that the disclosures set forth in the joint proxy
statement/prospectus comply fully with all applicable laws, and denies the
allegations in the pending actions described above and believes they are without
merit. Nevertheless, in order to moot plaintiffs' disclosure claims, avoid
nuisance and possible expense and business delays, and provide additional
information to its shareholders, RPAI has determined voluntarily to supplement
certain disclosures in the joint proxy statement/prospectus with the
supplemental disclosures set forth below (the "Supplemental Disclosures").
Nothing in the Supplemental Disclosures shall be deemed an admission of the
legal merit of the various litigation matters described above, or of the
necessity or materiality under applicable laws of any of the disclosures set
forth herein. To the contrary, RPAI specifically denies all allegations in the
various litigation matters that any additional disclosure was or is required or
material.
SUPPLEMENTAL DISCLOSURES
The following supplemental disclosures should be read in conjunction with the
joint proxy statement/prospectus, which should be read in its entirety. The
inclusion in this supplement to the joint proxy statement/prospectus of certain
information should not be regarded as an indication that any of RPAI or its
affiliates, officers, directors or other representatives, or any other recipient
of this information, considered, or now considers, it to be material, and
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such information should not be relied upon as such. Defined terms used but not
defined herein have the meanings set forth in the joint proxy
statement/prospectus. For clarity, new text within restated paragraphs from the
joint proxy statement/prospectus is highlighted with bold, underlined text, and
deleted text within restated paragraphs from the joint proxy
statement/prospectus is highlighted with strikethrough text.
The disclosure in the section entitled "Summary-Litigation Relating to the
Merger" on page 22 of the joint proxy statement/prospectus is hereby amended by:
Amending and restating the first paragraph of the above referenced section on
page 22 as follows:
Beginning on August 27, 2021, two purported RPAI stockholders filed
substantially similar complaints against RPAI and the members of the RPAI Board
in the United States District Court for the Southern District of New York. One
of these complaints also names Kite Realty and Merger Sub as defendants. The
complaints variously assert, among other things, claims under Section 14(a) of
the Exchange Act and Rule 14a-9 promulgated thereunder against RPAI and the
members of the RPAI Board and claims under Section 20(a) of the Exchange Act
against the members of the RPAI Board (and, in one case, Kite Realty and Merger
Sub) for allegedly causing a materially incomplete and misleading registration
statement on Form S-4 to be filed on August 23, 2021 with the SEC. Among other
remedies, the plaintiffs seek to enjoin the Merger. Three additional lawsuits
were filed against RPAI and the members of the RPAI Board between September 14,
2021 and October 7, 2021, one in each of the United States District Court for
the Southern District of New York, the United States District Court for the
Northern District of Georgia, and the United States District Court for the
Eastern District of Pennsylvania, which complaints are substantially similar to
the other two complaints. Also, on September 15, 2021, a purported Kite Realty
shareholder filed a complaint against Kite Realty and the members of the Kite
Realty Board in the United States District Court for the Eastern District of New
York. The complaint asserts substantially similar claims under Sections 14(a)
and 20(a) of the Exchange Act and Rule 14a-9 as the other complaints against
RPAI and the RPAI Board. It is possible additional lawsuits may be filed against
RPAI, Kite Realty and/or their respective boards before the consummation of the
Merger.
The disclosure in the section entitled "Risk Factors" under the heading
"Shareholder litigation could prevent or delay the closing of the Merger or
otherwise negatively affect the business and operations of Kite Realty and RPAI"
on page 32 of the joint proxy statement/prospectus is hereby amended by:
Amending and restating the first paragraph of the above referenced risk factor
on page 32 as follows:
Beginning on August 27, 2021, two purported RPAI stockholders filed
substantially similar complaints against RPAI and the members of the RPAI Board
in the United States District Court for the Southern District of New York. One
of these complaints also names Kite Realty and Merger Sub as defendants. The
complaints variously assert, among other things, claims under Section 14(a) of
the Exchange Act and Rule 14a-9 promulgated thereunder against RPAI and the
members of the RPAI Board and claims under Section 20(a) of the Exchange Act
against the members of the RPAI Board (and, in one case, Kite Realty and Merger
Sub) for allegedly causing a materially incomplete and misleading registration
statement on Form S-4 to be filed on August 23, 2021 with the SEC. Among other
remedies, the plaintiffs seek to enjoin the Merger. Three additional lawsuits
were filed against RPAI and the members of the RPAI Board between September 14,
2021 and October 7, 2021, one in each of the United States District Court for
the Southern District of New York, the United States District Court for the
Northern District of Georgia, and the United States District Court for the
Eastern District of Pennsylvania, which complaints are substantially similar to
the other two complaints. Also, on September 15, 2021, a purported Kite Realty
shareholder filed a complaint against Kite Realty and the members of the Kite
Realty Board in the United States District Court for the Eastern District of New
York. The complaint asserts substantially similar claims under Sections 14(a)
and 20(a) of the Exchange Act and Rule 14a-9 as the other complaints against
RPAI and the RPAI Board. It is possible additional lawsuits may be filed against
RPAI, Kite Realty and/or their respective boards before the consummation of the
Merger.
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The disclosure in the section entitled "The Merger-Opinion of Kite Realty's
Financial Advisor" beginning on page 73 of the joint proxy statement/prospectus
is hereby amended by:
Amending and restating the second full paragraph on page 76 as follows:
The overall low to high estimated calendar year 2022 EBITDA multiples observed
for the selected publicly traded companies were 15.3x to 22.7x (with an average
of 17.9x and a median of 17.3x), and the overall low to high estimated calendar
year 2022 FFO multiples observed for the selected publicly traded companies were
12.4x to 22.1x (with an average of 15.9x and a median of 15.6x), respectively.
Estimated financial data of the selected publicly traded companies were based on
the publicly available research analysts' estimates reviewed by BofA Securities,
and estimated financial data of RPAI were based on the RPAI Forecasts.
Amending and restating the third full paragraph on page 77 as follows:
Discounted Cash Flow Analysis. BofA Securities performed a discounted cash flow
analysis of RPAI to calculate the estimated present value of the unlevered,
after-tax free cash flows that RPAI was forecasted to generate during RPAI's
fiscal years 2022 through 2026 based on the RPAI Forecasts and the projected
amounts of unlevered free cash flow prepared by BofA Securities and authorized
for its use by RPAI, as described below under "Certain Unaudited Prospective
Financial Information - RPAI Prospective Financial Information", in each case
(i) on a stand-alone basis and (ii) inclusive of the Kite Realty Projected
Synergies. BofA Securities calculated terminal values for RPAI in each case by
applying terminal forward multiples of 14.0x to 18.0x to RPAI's fiscal year 2026
estimated EBITDA, which multiple range was selected based on BofA Securities'
professional judgment and experience and after taking into consideration, among
other things, the observed historical trading range of RPAI common stock from
April 5, 2012, the date of the pricing of RPAI's initial listing, through
July 16, 2021 (prior to the issuance by RPAI and Kite Realty of a joint press
release on July 19, 2021 announcing the execution of the Merger Agreement), as
adjusted by applying a 1.5% terminal growth rate to net operating income and
changes in net working capital, and a 1.0% terminal growth rate to general and
administrative expenses. The cash flows and terminal values were then discounted
to present value as of December 31, 2021 using discount rates ranging from 6.50%
to 8.00%, which were based on an estimate of RPAI's weighted average cost of
capital, derived using the capital asset pricing model for the estimated cost of
equity (which takes into account the risk-free rate, RPAI's levered beta and the
applicable equity market risk premium) and the estimated after-tax cost of debt
of RPAI. From the resulting enterprise values, BofA Securities deducted
estimated net debt and NCI of RPAI as of July 16, 2021 of $1,728 million, as
provided by RPAI management, and divided the result by the 216.581 million fully
diluted shares of RPAI common stock outstanding as of June 30, 2021, based on
information provided by RPAI management.
Amending and restating the first full paragraph on page 78 as follows:
The overall low to high estimated calendar year 2022 EBITDA multiples observed
for the selected publicly traded companies were 15.3x to 22.7x (with an average
of 17.7x and a median of 17.1x), and the overall low to high estimated calendar
year 2022 FFO multiples observed for the selected publicly traded companies were
12.4x to 22.1x (with an average of 15.7x and a median of 15.6x), respectively.
Estimated financial data of the selected publicly traded companies were based on
the publicly available research analysts' estimates reviewed by BofA Securities,
and estimated financial data of Kite Realty were based on the Kite Realty
Forecasts.
Amending and restating the last paragraph beginning on page 78 as follows:
Discounted Cash Flow Analysis. BofA Securities performed a discounted cash flow
analysis of Kite Realty to calculate the estimated present value of the
stand-alone unlevered, after-tax free cash flows that Kite Realty was forecasted
to generate during Kite Realty's fiscal years 2022 through 2026 based on the
Kite Realty Forecasts and the projected amounts of unlevered free cash flow
prepared by BofA Securities and authorized for its use by Kite Realty, as
described below under "Certain Unaudited Prospective Financial Information -
Kite Realty Prospective Financial Information." BofA Securities calculated
terminal values for Kite Realty by applying terminal forward multiples of 14.0x
to 18.0x to Kite Realty's terminal year estimated EBITDA, which multiple range
was selected based on BofA Securities' professional judgment and experience and
after taking into consideration, among other things, the observed historical
trading range of Kite Realty common shares for the thirteen-year period from
fiscal year 2008 through fiscal year 2020 and year to date through July 16, 2021
(prior to the issuance by RPAI and Kite Realty of a joint press release on
July 19, 2021 announcing the execution of the Merger Agreement). The cash flows
and terminal values were then discounted to present value as
--------------------------------------------------------------------------------
of December 31, 2021 using discount rates ranging from 6.50% to 8.00%, which
were based on an estimate of Kite Realty's weighted average cost of capital,
derived using the capital asset pricing model for the estimated cost of equity
(which takes into account the risk-free rate, Kite Realty's levered beta and the
applicable equity market risk premium) and the estimated after-tax cost of debt
of Kite Realty. From the resulting enterprise values, BofA Securities deducted
estimated net debt and NCI of Kite Realty as of July 16, 2021 of $1,119 million,
as provided by Kite Realty management, and divided the result by the
88.140 million fully diluted Kite Realty common shares outstanding as of
June 30, 2021, based on information provided by Kite Realty management.
Amending and restating the disclosure under "The Merger-Opinion of Kite Realty's
Financial Advisor-Other Factors" on page 79 as follows:
In rendering its opinion, BofA Securities also noted certain additional factors
that were not considered part of BofA Securities' material financial analyses
with respect to its opinion but were referenced for informational purposes,
including, among other things, the following:
• historical trading prices of RPAI common stock and the Kite Realty common
shares during the 52-week period ended July 16, 2021;
• Wall Street research analyst price targets of RPAI common stock ranging
between $11.00 and $14.00 per share and net asset value estimates of RPAI
common stock ranging between $11.77 and the $14.92 per share;
• Wall Street research analyst price targets of Kite Realty common shares
ranging between $19.00 and $25.00 per share and net asset value estimates
of Kite Realty common shares ranging between $18.61 and $25.70 per share;
and
• the potential pro forma financial effect of the Merger on Kite Realty's
FFO, which indicated that the Merger could be accretive to Kite Realty's
estimated FFO for fiscal year 2022.
The disclosure in the section entitled "The Merger-Opinion of RPAI's Financial
Advisor" beginning on page 81 of the joint proxy statement/prospectus is hereby
amended by:
Amending and restating the last full paragraph on page 83 as follows:
In its analyses, Citi considered industry performance, general business,
economic, market and financial conditions and other matters existing as of the
date of its opinion, many of which are beyond the control of RPAI and Kite
Realty. No company, business or transaction reviewed is identical or directly
comparable to RPAI or Kite Realty or the Merger, nor were individual multiples
derived for each of the selected companies independently determinative of Citi's
views with respect to its selected public companies analyses, and an evaluation
of these analyses is not entirely mathematical; rather, the analyses involve
complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the public trading,
acquisition or other values of the companies, business segments or transactions
reviewed or the results from any particular analysis.
Amending and restating the disclosure under "The Merger-Opinion of RPAI's
Financial Advisor-Financial Analyses-Discounted Cash Flow Analyses" beginning on
page 84 as follows:
RPAI. Citi performed a discounted cash flow analysis of RPAI by calculating the
estimated present value of the unlevered, free cash flows that RPAI was expected
to generate during the period from April 1, 2021 through December 31, 2026 based
on the RPAI Forecasts. With respect to Citi's discounted cash flow analysis of
RPAI, unlevered free cash flow was calculated by taking EBITDA, adjusting for
maintenance capital expenditures, tenant improvements and leasing commissions as
well as straight line rent, changes in net working capital and investments in
developments in progress. Citi calculated a range of terminal values of RPAI at
the end of the forecast period ending December 31, 2026 by applying a one-year
growth rate to the net operating income of RPAI during the final year of the
forecast period and applying a selected range of terminal capitalization rates
of 6.15% to 7.15% of terminal year NOI, which Citi chose based on relevant
analyst views of RPAI's capitalization rate and Citi's professional judgment and
experience. The forecasted unlevered free cash flows for RPAI and the derived
--------------------------------------------------------------------------------
terminal values were then discounted to present values, as of March 31, 2021,
using discount rates ranging from 7.42% to 8.40% based upon an analysis of
RPAI's weighted average cost of capital, which Citi performed utilizing the
capital asset pricing model with inputs that Citi determined were relevant based
on publicly available data and Citi's professional judgment. The present value
of unlevered free cash flows and the range of terminal values were then adjusted
for net debt and non-controlling interests. Based on the above-described
analysis, Citi derived a range of implied values per share for RPAI as of
March 31, 2021 of $12.95 to $16.76, as compared to the implied transaction
consideration of $12.98.
Kite Realty. Citi performed a discounted cash flow analysis of Kite Realty on a
standalone basis by calculating the estimated present value of the unlevered
free cash flows that Kite Realty was expected to generate during the period from
April 1, 2021 through December 31, 2026 based on the Kite Realty Forecasts. With
respect to Citi's discounted cash flow analysis of Kite Realty, unlevered free
cash flow was calculated by taking EBITDA, adjusting for change in net working
capital, maintenance capital expenditures, tenant improvements and leasing
commissions as well as straight line rent, development and/or redevelopment
spend, and amortization of in place leases. Citi calculated a range of terminal
values of Kite Realty at the end of the forecast period ending December 31, 2026
by applying a one-year growth rate to the net operating income of Kite Realty
during the final year of the forecast period and applying a selected range of
terminal capitalization rates of 6.15% to 7.15% of terminal year NOI, which Citi
chose based on relevant analyst views of Kite Realty's capitalization rate and
Citi's professional judgment and experience. The forecasted unlevered free cash
flows for Kite Realty and the derived terminal values were then discounted to
present values, as of March 31, 2021, using discount rates ranging from 7.69% to
8.72% based upon an analysis of Kite Realty's weighted average cost of capital,
which Citi performed utilizing the capital asset pricing model with inputs that
Citi determined were relevant based on publicly available data and Citi's
professional judgment. The present value of unlevered free cash flows and the
range of terminal values were then adjusted for net debt and non-controlling
interests. Based on the above-described analysis, Citi derived a range of
implied values per share for Kite Realty as of March 31, 2021 of $19.06 to
$24.82.
Amending and restating the last bullet under "The Merger-Opinion of RPAI's
Financial Advisor-Financial Analyses-Certain Additional Information" on page 88
as follows:
• the illustrative discounted cash flow analysis of the combined company
(including synergies) with respect to the unlevered free cash flows that the
combined company was expected to generate during the period from April 1,
2021 through December 31, 2026, (utilizing a selected range of terminal
implied capitalization rates of 6.15% to 7.15%, which Citi chose based on
relevant analyst views of Kite Realty's capitalization rate and RPAI's
capitalization rate and Citi's professional judgment and experience, and a
selected range of discount rates of 7.42% to 8.40%), which resulted in a
range of implied values per share for the combined company which, as of
March 31, 2021, which based on an exchange ratio of 0.623x, resulted in an
implied value per RPAI common stock of $13.07 to $16.73 as compared to a
stand-alone value of RPAI common stock under the discounted cash flow
analysis of $12.95 to $16.76.
The disclosure in the section entitled "The Merger-Litigation Relating to the
Merger" on page 103 of the joint proxy statement/prospectus is hereby amended
by:
Amending and restating the first paragraph of the above referenced section on
page 103 as follows:
Beginning on August 27, 2021, two purported RPAI stockholders filed
substantially similar complaints against RPAI and the members of the RPAI Board
in the United States District Court for the Southern District of New York. One
of these complaints also names Kite Realty and Merger Sub as defendants. The
complaints are captioned as follows: Wang v. Retail Properties of America, Inc.
et al., No. 1:21-cv-07237 (S.D.N.Y. filed August 27, 2021); and Hopkins v.
Retail Properties of America, Inc. et al., No. 1:21-cv-07324 (S.D.N.Y. filed
August 31, 2021). The complaints variously assert, among other things, claims
under Section 14(a) of the Exchange Act and Rule 14a-9 promulgated thereunder
against RPAI and the members of the RPAI Board and claims under Section 20(a) of
the Exchange Act against the members of the RPAI Board (and, in one case, Kite
Realty and Merger Sub) for allegedly causing a materially incomplete and
misleading registration statement on Form S-4 to be filed on August 23, 2021
--------------------------------------------------------------------------------
with the SEC. Among other remedies, the plaintiffs seek to enjoin the Merger.
Three additional lawsuits were filed against RPAI and the members of the RPAI
Board between September 14, 2021 and October 7, 2021 under the captions Callebs
v. Retail Properties of America, Inc. et al., No. 1:21-cv-07593 (S.D.N.Y. filed
September 10, 2021); Sheridan v. Retail Properties of America, Inc., et al., No.
1:21-cv-04066-SCJ (N.D.Ga. filed October 1, 2021); and Whitfield v. Retail
Properties of America, Inc. et al., No. 2:21-cv-04390 (E.D.Pa. filed October 6,
2021), which are substantially similar to the other two complaints. Also, on
September 15, 2021, a purported Kite Realty shareholder filed a complaint
against Kite Realty and the members of the Kite Realty Board in the United
States District Court for the Eastern District of New York, captioned as
follows: Gentry v. Kite Realty Group Trust et al., No. 1:21-cv-05142 (E.D.N.Y.
filed September 15, 2021). The complaint asserts substantially similar claims
under Sections 14(a) and 20(a) of the Exchange Act and Rule 14a-9 as the other
complaints against RPAI and the RPAI Board. It is possible additional lawsuits
may be filed against RPAI, Kite Realty and/or their respective boards before the
consummation of the Merger.
-END OF SUPPLEMENT TO JOINT PROXY STATEMENT/PROSPECTUS-
FORWARD LOOKING STATEMENTS
This Current Report on Form 8-K contains certain "forward-looking" statements
within the meaning of Section 27A of the Securities Act of 1933, as amended (the
"Securities Act"), and Section 21E of the Exchange Act. RPAI intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Litigation Reform
Act of 1995 and includes this statement for purposes of complying with the safe
harbor provisions. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "will," "should," "may," "projects," "could," "estimates"
or variations of such words and other similar expressions are intended to
identify such forward-looking statements, which generally are not historical in
nature, but not all forward-looking statements include such identifying words.
Forward-looking statements include, but are not limited to, statements related
to the anticipated merger with Kite Realty and the anticipated timing and
benefits thereof; and other statements that are not historical facts. These
forward-looking statements are based on RPAI's current plans, objectives,
estimates, expectations and intentions and inherently involve significant risks
and uncertainties. Actual results and the timing of events could differ
materially from those anticipated in such forward-looking statements as a result
of these risks and uncertainties, which include, without limitation, risks and
uncertainties associated with: the possibility that the proposed transaction is
not completed on the proposed terms or on the anticipated timeline, or at all,
including risks and uncertainties related to securing the necessary shareholder
approvals and satisfaction of other closing conditions to consummate the
acquisition; the occurrence of any event, change or other circumstance that
could give rise to the termination of the definitive transaction agreement
relating to the proposed transaction; risks related to diverting the attention
of the RPAI and Kite Realty management from ongoing business operations; failure
to realize the expected benefits of the acquisition; unexpected costs or
liabilities relating to the proposed transaction; the risk of shareholder
litigation in connection with the proposed transaction, including resulting
expense or delay; the risk that RPAI's business will not be integrated
successfully or that such integration may be more difficult, time-consuming or
costly than expected; risks related to future opportunities and plans for the
combined company, including the uncertainty of expected future financial
performance and results of the combined company following completion of the
acquisition; effects relating to the announcement of the acquisition or any
further announcements or the consummation of the acquisition on the market price
of Kite Realty's common shares or RPAI's common stock; the possibility that, if
. . .
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RETAIL PROPERTIES OF AMERICA, INC. 
