CLEVELAND, Aug. 2 /PRNewswire-FirstCall/ -- Developers
Diversified Realty (NYSE: DDR) today announced operating results
for the second quarter ended June 30,
2010.
SIGNIFICANT SECOND QUARTER ACTIVITY
- Reported operating FFO of $0.25
per diluted share before non-operating items
- Executed a Company record 477 total leases for 3.2 million
square feet as compared to 422 total leases in the first quarter of
2010 and 406 total leases in the second quarter of 2009
- Increased the core portfolio leased rate to 91.6% at
June 30, 2010 from 90.7% at
June 30, 2009
- Increased the portfolio average annualized base rent per
occupied square foot to $12.54 at
June 30, 2010 from $12.49 at June 30,
2009
- Improved the spread on new leases to +7.0% and renewals to
+3.2% for a blended overall spread of +3.9% which compares to a
blended spread of -2.9% in the first quarter of 2010
- Reported Same Store Net Operating Income growth of positive
1.5% as compared to a decrease of 2.6% in the first quarter of 2010
and a 5% decrease in the second quarter of 2009
- Reduced consolidated indebtedness by nearly $93 million to $4.6 billion at June 30, 2010
- Sold $84.4 million of non-prime
assets, including joint ventures
"Our second quarter operating fundamentals were very solid,
driven by demand for space, positive rental growth, and increased
occupancy levels. Growing same store NOI and the continued
progress on the disposition of non-prime assets were also key
components of our encouraging results. We expect to build on
the momentum established during the second quarter as our operating
platform continues to perform at a very high level and as we remain
extremely focused on successfully executing on our stated
strategy," commented Developers Diversified's president and chief
executive officer, Daniel B.
Hurwitz.
FINANCIAL HIGHLIGHTS
The Company's second quarter operating Funds From Operations
("FFO") was $65.0 million, or
$0.25 per diluted share, before
$97.8 million of net charges.
For the six-month period ended June
30, 2010 the Company reported operating FFO of $130.2 million, or $0.53 per diluted share, before $134.6 million of net charges.
The charges and gains, primarily non-cash, for the periods ended
June 30, 2010, are summarized as
follows (in millions):
|
|
|
|
Three Months
|
|
Six Months
|
|
Non-cash
impairment charges – consolidated assets
|
|
$ 129.7
|
|
$ 131.8
|
|
Less portion
of impairment charges allocated to non-controlling
interests
|
|
(31.2)
|
|
(31.2)
|
|
Executive
separation charge
|
|
-
|
|
2.1
|
|
Loss on debt
retirement
|
|
1.1
|
|
-
|
|
Non-cash
(gain) loss on equity derivative instruments related to Otto
investment
|
|
(21.5)
|
|
3.3
|
|
Litigation,
debt extinguishment costs and other expenses
|
|
9.1
|
|
12.1
|
|
Loss on
asset sales and impairment charges – equity method
investments
|
|
2.0
|
|
3.3
|
|
Consolidated
impairment charges and loss on sales – discontinued
operations
|
|
6.9
|
|
9.4
|
|
FFO
associated with Mervyns joint venture, net of non-controlling
interest
|
|
1.7
|
|
3.8
|
|
|
|
$ 97.8
|
|
$ 134.6
|
|
|
|
|
|
|
|
|
FFO applicable to common shareholders for the three-month period
ended June 30, 2010, including the
above net charges, was a loss of $32.8
million, or $0.13 per diluted
share, which compares to FFO of a loss of $166.5 million, or $1.15 per diluted share, for the prior-year
comparable period.
FFO applicable to common shareholders for the six-month period
ended June 30, 2010, including the
above net charges, was a loss of $4.4
million, or $0.02 per diluted
share, which compares to FFO of a loss of $26.5 million, or $0.19 per diluted share, for the prior-year
comparable period. The decrease in the FFO loss for both the
three- and six-month periods ended June 30,
2010, is primarily the result of a decrease in
impairment-related charges and the equity derivative adjustment
associated with the Otto investment.
Net loss applicable to common shareholders for the three-month
period ended June 30, 2010, was
$97.1 million, or a loss of
$0.39 per diluted share, which
compares to a net loss of $237.2
million, or $1.64 per diluted
share, for the prior-year comparable period.
Net loss applicable to common shareholders for the six-month
period ended June 30, 2010, was
$132.0 million, or a loss of
$0.55 per diluted share, which
compares to a net loss of $160.3
million, or $1.18 per diluted
share, for the prior-year comparable period. The decrease in
net loss for both the three- and six-month periods ended
June 30, 2010, is substantially due
to the same factors impacting FFO for the comparable periods.
LEASING & PORTFOLIO OPERATIONS
The following results for the three-month period ended
June 30, 2010, highlight continued
strong leasing activity throughout the portfolio, including a
Company record for executed deals:
- Executed 206 new leases aggregating approximately 1.3 million
square feet and 271 renewals aggregating approximately 1.9 million
square feet. In total, the Company executed approximately 3.2
million square feet of leases representing a Company record for
volume of leases and square footage.
- Total portfolio average annualized base rent per occupied
square foot, excluding assets in Brazil, as of June 30,
2010 was $12.54, as compared
to $12.49 at June 30, 2009. Including the Brazil portfolio, total portfolio average
annualized base rent per occupied square foot as of June 30, 2010 was $13.24, as compared to $13.03 at June 30,
2009.
- The core portfolio leased rate was 91.6% as of June 30, 2010, as compared to 90.7% at
June 30, 2009. Including the
Brazil portfolio, the core
portfolio leased rate was 91.9% at June 30,
2010.
- On a cash basis, rental rates for new leases increased by 7.0%
over prior rents and renewals increased by 3.2%. On a blended
basis, leasing spreads increased by 3.9% during the quarter.
The increase in leasing spreads for new leases marks an
improvement from the decrease of 5.9% reported in the first quarter
of 2010.
- Same store net operating income ("NOI") increased 1.5% for the
three-month period ended June 30,
2010 over the prior-year comparable period.
DISPOSITIONS
The Company sold seven consolidated shopping centers,
aggregating approximately 0.5 million square feet, in the second
quarter of 2010, generating gross proceeds of approximately
$37.1 million. The Company
recorded an aggregate net loss of approximately $4.1 million related to asset sales in the second
quarter.
In addition, the Company's joint ventures sold eight shopping
centers, aggregating approximately 0.8 million square feet, in the
second quarter of 2010, generating gross proceeds of approximately
$44.1 million. The joint
ventures recorded an aggregate net loss of approximately
$3.2 million related to asset sales
in the second quarter. No loss was recognized by the Company
as the Company reduced its net investment basis in these assets in
2009.
CAPITAL MARKETS ACTIVITIES
In the second quarter of 2010, the Company purchased
$100.7 million aggregate principal
amount of its outstanding senior unsecured notes at an aggregate
$1.8 million discount to par.
The Company recorded a non-cash net loss of approximately
$1.1 million as a result of the
required write-off of $2.9 million of
unamortized deferred financing costs and accretion related to the
senior unsecured notes repurchased. As of August 2, 2010, the Company's remaining
consolidated wholly-owned 2010 maturities aggregate $11.1 million.
2010 GUIDANCE
There is no change in guidance since the last update provided on
April 22, 2010. The Company
continues to estimate operating FFO for the year of $1.00-$1.05 per diluted share.
NON-GAAP DISCLOSURES
FFO is a supplemental non-GAAP financial measurement used as a
standard in the real estate industry and a widely accepted measure
of real estate investment trust ("REIT") performance. Management
believes that FFO and operating FFO provide additional indicators
of the financial performance of a REIT. The Company also
believes that FFO and operating FFO more appropriately measure the
core operations of the Company and provide benchmarks to its peer
group. Neither FFO nor operating FFO represents cash
generated from operating activities in accordance with generally
accepted accounting principles ("GAAP"), is necessarily indicative
of cash available to fund cash needs and should be considered as an
alternative to net income computed in accordance with GAAP as an
indicator of the Company's operating performance or as an
alternative to cash flow as a measure of liquidity. FFO is
defined and calculated by the Company as net income, adjusted to
exclude: (i) preferred share dividends, (ii) gains from disposition
of depreciable real estate property, except for those sold through
the Company's merchant building program, which are presented net of
taxes, and those gains that represent the recapture of a previously
recognized impairment charge, (iii) extraordinary items and (iv)
certain non-cash items. These non-cash items principally
include real property depreciation and amortization of intangibles,
equity income from joint ventures and equity income from
non-controlling interests and adding the Company's proportionate
share of FFO from its unconsolidated joint ventures and
non-controlling interests, determined on a consistent basis.
The Company calculates operating FFO by excluding the
non-operating charges and gains described above. Other real
estate companies may calculate FFO and operating FFO in a different
manner. FFO excluding the net non-operating items detailed
above is useful to investors as the Company removes these charges
and gains to analyze the results of its operations and assess
performance of the core operating real estate portfolio. A
reconciliation of net (loss) income to FFO and operating FFO is
presented in the financial highlights section.
SAFE HARBOR
Developers Diversified Realty Corporation considers portions of
this information to be forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section
21E of the Securities Exchange Act of 1934, both as amended, with
respect to the Company's expectation for future periods.
Although the Company believes that the expectations reflected
in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be
achieved. For this purpose, any statements contained herein
that are not historical fact may be deemed to be forward-looking
statements. There are a number of important factors that
could cause our results to differ materially from those indicated
by such forward-looking statements, including, among other factors,
local conditions such as oversupply of space or a reduction in
demand for real estate in the area; competition from other
available space; dependence on rental income from real property;
the loss of, significant downsizing of or bankruptcy of a major
tenant; constructing properties or expansions that produce a
desired yield on investment; our ability to sell assets on
commercially reasonable terms; our ability to secure equity or debt
financing on commercially acceptable terms or at all; our ability
to enter into definitive agreements with regard to our financing
and joint venture arrangements or our failure to satisfy conditions
to the completion of these arrangements; and the finalization of
the financial statements for the three-month period ended
June 30, 2010. For additional
factors that could cause the results of the Company to differ
materially from these indicated in the forward-looking statements,
please refer to the Company's Form 10-K as of December 31, 2009. The Company undertakes
no obligation to publicly revise these forward-looking statements
to reflect events or circumstances that arise after the date
hereof.
ABOUT DEVELOPERS DIVERSIFIED REALTY CORPORATION
Developers Diversified owns and manages approximately 630 retail
operating and development properties in 43 states, Brazil, Canada and Puerto
Rico. Totaling more than 137 million square feet, the
Company's shopping center portfolio features open-air,
value-oriented neighborhood and community centers, mixed-use
centers and lifestyle centers located in prime markets with stable
populations and high-growth potential. Developers Diversified is
the largest landlord in Puerto
Rico and owns a premier portfolio of regional malls in and
around Sao Paulo, Brazil.
Developers Diversified is a self-administered and self-managed REIT
operating as a fully integrated real estate company. Additional
information about the Company is available at www.ddr.com.
CONFERENCE CALL INFORMATION & SUPPLEMENTAL
MATERIALS
DDR continues to update its property list which can now be
located on the Company's website. A copy of the Company's
Supplemental Financial/Operational package is available to all
interested parties upon request at the Company's corporate office
to Kate Deck, Investor Relations
Director, Developers Diversified Realty Corporation, 3300
Enterprise Parkway, Beachwood,
Ohio 44122 or at www.ddr.com.
The Company will hold its quarterly conference call tomorrow,
August 3, 2010 at 10:00 a.m. Eastern Daylight Time. To
participate, please dial 1-866-800-8651; when prompted, provide the
passcode: 65578822. Access to the live call and replay will
also be available through the Company's website until 12:00 a.m. on September 3,
2010.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
Financial
Highlights
(In thousands – except per share
data)
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
Revenues:
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Minimum rents (A)
|
$135,869
|
|
$ 132,470
|
|
$272,358
|
|
$268,126
|
|
Percentage and overage rents
(A)
|
600
|
|
845
|
|
2,720
|
|
3,274
|
|
Recoveries from
tenants
|
42,926
|
|
43,503
|
|
90,232
|
|
89,843
|
|
Ancillary and other property
income
|
4,936
|
|
4,881
|
|
9,898
|
|
9,797
|
|
Management, development and
other fee income
|
13,145
|
|
14,040
|
|
27,161
|
|
28,502
|
|
Other (B)
|
4,540
|
|
1,737
|
|
5,809
|
|
4,984
|
|
|
202,016
|
|
197,476
|
|
408,178
|
|
404,526
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating and maintenance
(C)
|
37,197
|
|
33,626
|
|
73,144
|
|
67,773
|
|
Real estate taxes
|
26,517
|
|
26,168
|
|
55,177
|
|
53,160
|
|
Impairment charges
(D)
|
129,727
|
|
48,246
|
|
131,777
|
|
55,551
|
|
General and administrative
(E)
|
19,090
|
|
28,412
|
|
42,366
|
|
47,583
|
|
Depreciation and
amortization
|
56,738
|
|
56,836
|
|
113,531
|
|
116,076
|
|
|
269,269
|
|
193,288
|
|
415,995
|
|
340,143
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest income
|
1,525
|
|
3,228
|
|
2,855
|
|
6,256
|
|
Interest expense (F)
|
(59,692)
|
|
(57,765)
|
|
(118,981)
|
|
(114,793)
|
|
(Loss) gain on repurchases of
senior notes (F)
|
(1,090)
|
|
45,901
|
|
-
|
|
118,479
|
|
Gain (loss) on equity derivative
instruments (G)
|
21,527
|
|
(80,025)
|
|
(3,340)
|
|
(80,025)
|
|
Other expenses (H)
|
(11,850)
|
|
(6,656)
|
|
(14,924)
|
|
(11,161)
|
|
|
(49,580)
|
|
(95,317)
|
|
(134,390)
|
|
(81,244)
|
|
Loss from continuing operations
before equity in net (loss) income of joint ventures, tax
benefit (expense) of taxable REIT subsidiaries and state franchise
and income taxes, and gain (loss) on disposition of real estate,
net of tax
|
(116,833)
|
|
(91,129)
|
|
(142,207)
|
|
(16,861)
|
|
Equity in net (loss) income of
joint ventures (I)
|
(623)
|
|
(9,153)
|
|
1,023
|
|
(8,801)
|
|
Impairment of joint venture
investments (D)
|
-
|
|
(40,371)
|
|
-
|
|
(40,371)
|
|
Tax benefit (expense) of taxable
REIT subsidiaries and state franchise and income taxes
|
3,590
|
|
(909)
|
|
2,574
|
|
127
|
|
Loss from continuing
operations
|
(113,866)
|
|
(141,562)
|
|
(138,610)
|
|
(65,906)
|
|
Loss from discontinued
operations (D), (J)
|
(7,892)
|
|
(120,090)
|
|
(9,057)
|
|
(111,418)
|
|
Loss before gain (loss) on
disposition of real estate
|
(121,758)
|
|
(261,652)
|
|
(147,667)
|
|
(177,324)
|
|
Gain (loss) on disposition of
real estate, net of tax
|
592
|
|
648
|
|
(83)
|
|
1,096
|
|
Net loss
|
(121,166)
|
|
(261,004)
|
|
(147,750)
|
|
(176,228)
|
|
Loss attributable to
non-controlling interests
|
34,591
|
|
34,419
|
|
36,928
|
|
37,044
|
|
Net loss attributable to
DDR
|
$ (86,575)
|
|
$(226,585)
|
|
$(110,822)
|
|
$(139,184)
|
|
Net loss applicable to common
shareholders
|
$ (97,142)
|
|
$(237,152)
|
|
$(131,956)
|
|
$(160,318)
|
|
Funds From Operations
("FFO"):
|
|
|
|
|
|
|
|
|
Net loss applicable to common
shareholders
|
$ (97,142)
|
|
$(237,152)
|
|
$(131,956)
|
|
$(160,318)
|
|
Depreciation and amortization of
real estate investments
|
54,148
|
|
57,565
|
|
108,742
|
|
118,601
|
|
Equity in net loss (income) of
joint ventures (I)
|
623
|
|
9,153
|
|
(1,023)
|
|
8,374
|
|
Joint ventures' FFO
(I)
|
10,307
|
|
3,809
|
|
21,862
|
|
18,968
|
|
Non-controlling interests (OP
Units)
|
8
|
|
80
|
|
16
|
|
159
|
|
(Gain) loss on disposition of
depreciable real estate
|
(788)
|
|
60
|
|
(2,055)
|
|
(12,274)
|
|
FFO applicable to common
shareholders
|
(32,844)
|
|
(166,485)
|
|
(4,414)
|
|
(26,490)
|
|
Preferred dividends
|
10,567
|
|
10,567
|
|
21,134
|
|
21,134
|
|
FFO
|
$ (22,277)
|
|
$(155,918)
|
|
$ 16,720
|
|
$ (5,356)
|
|
Per share data:
|
|
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic
|
$
(0.39)
|
|
$
(1.64)
|
|
$
(0.55)
|
|
$
(1.18)
|
|
Diluted
|
$
(0.39)
|
|
$
(1.64)
|
|
$
(0.55)
|
|
$
(1.18)
|
|
Basic – average shares
outstanding
|
248,533
|
|
144,227
|
|
237,892
|
|
136,514
|
|
Diluted – average shares
outstanding
|
248,533
|
|
144,227
|
|
237,892
|
|
136,514
|
|
Dividends Declared
|
$
0.02
|
|
$
0.20
|
|
$
0.04
|
|
$
0.40
|
|
Funds From Operations –
Basic (K)
|
$
(0.13)
|
|
$
(1.15)
|
|
$
(0.02)
|
|
$ (0.19)
|
|
Funds From Operations – Diluted
(K)
|
$
(0.13)
|
|
$
(1.15)
|
|
$
(0.02)
|
|
$ (0.19)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Balance Sheet Data
(L)
|
|
|
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
Assets:
|
|
|
|
|
Real estate and rental
property:
|
|
|
|
|
Land
|
$1,932,469
|
|
$1,971,782
|
|
Buildings
|
5,593,976
|
|
5,694,659
|
|
Fixtures and tenant
improvements
|
308,128
|
|
287,143
|
|
|
7,834,573
|
|
7,953,584
|
|
Less: Accumulated
depreciation
|
(1,403,028)
|
|
(1,332,534)
|
|
|
6,431,545
|
|
6,621,050
|
|
Land held
for development and construction in progress
|
796,093
|
|
858,900
|
|
Real estate held for sale,
net
|
3,000
|
|
10,453
|
|
Real estate, net
|
7,230,638
|
|
7,490,403
|
|
|
|
|
|
|
Investments in and advances to
joint ventures (M)
|
415,829
|
|
420,541
|
|
Cash
|
20,920
|
|
26,172
|
|
Restricted cash
|
35,474
|
|
95,673
|
|
Notes receivable, net
|
60,547
|
|
74,997
|
|
Receivables, including
straight-line rent, net
|
135,761
|
|
146,809
|
|
Other assets, net
|
152,774
|
|
172,011
|
|
|
$8,051,943
|
|
$8,426,606
|
|
|
|
|
|
|
Liabilities &
Equity:
|
|
|
|
|
Indebtedness:
|
|
|
|
|
Revolving credit
facilities
|
$ 649,844
|
|
$ 775,028
|
|
Unsecured debt
|
1,596,505
|
|
1,689,841
|
|
Mortgage and other secured
debt
|
2,391,702
|
|
2,713,794
|
|
|
4,638,051
|
|
5,178,663
|
|
Dividends payable
|
11,969
|
|
10,985
|
|
Equity derivative liability
(G)
|
59,420
|
|
56,080
|
|
Other liabilities
|
213,536
|
|
227,915
|
|
Total liabilities
|
4,922,976
|
|
5,473,643
|
|
|
|
|
|
|
Redeemable operating partnership
units
|
627
|
|
627
|
|
|
|
|
|
|
Preferred shares
|
555,000
|
|
555,000
|
|
Common shares (K)
|
25,012
|
|
20,174
|
|
Paid-in-capital
|
3,756,218
|
|
3,374,528
|
|
Accumulated distributions in
excess of net income
|
(1,248,469)
|
|
(1,098,661)
|
|
Deferred compensation
obligation
|
12,874
|
|
17,838
|
|
Accumulated other comprehensive
income
|
5,184
|
|
9,549
|
|
Less: Common shares in
treasury at cost
|
(11,877)
|
|
(15,866)
|
|
Non-controlling
interests
|
34,398
|
|
89,774
|
|
Total equity
|
3,128,340
|
|
2,952,336
|
|
|
$8,051,943
|
|
$8,426,606
|
|
|
|
|
|
|
|
(A) Base and percentage rental revenues for the six-month period
ended June 30, 2010, as compared to
the prior-year comparable period, increased $3.7 million primarily due to the acquisition of
three shopping centers and the completion of certain developments
in 2009 aggregating $6.8 million.
This increase was partially offset by store closings related
to major tenant bankruptcies in the first quarter of 2009, which
approximated $3.0 million and other
decreases in operating assets of $0.1
million.
(B) Other revenues were comprised of the following (in
millions):
|
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Lease termination
fees
|
|
$3.0
|
|
$1.1
|
|
$3.6
|
|
$2.6
|
|
Financing fees
|
|
0.2
|
|
0.3
|
|
0.4
|
|
0.6
|
|
Other miscellaneous
|
|
1.3
|
|
0.3
|
|
1.8
|
|
1.8
|
|
|
|
$4.5
|
|
$1.7
|
|
$5.8
|
|
$5.0
|
|
|
|
|
|
|
|
|
|
|
|
|
(C) Operating and maintenance expense, including discontinued
operations, includes the following expenses (in millions):
|
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Bad debt
expense
|
|
$4.1
|
|
$3.1
|
|
$7.3
|
|
$5.9
|
|
Ground rent
expense (a)
|
|
1.2
|
|
1.1
|
|
2.5
|
|
2.2
|
|
|
|
(a) Includes non-cash expense of
approximately $0.5 million and $0.4 million for the three-month
periods
ended June 30, 2010 and 2009,
respectively, and approximately $1.0 million and $0.8 million for
the
six-month periods ended June 30,
2010 and 2009, respectively, related to straight-line ground
rent
expense.
|
|
|
|
|
|
|
|
|
|
|
(D) The Company recorded impairment charges during the three-
and six-month periods ended June 30,
2010 and 2009, on the following consolidated assets and
investments because the book basis of the assets was in excess of
the estimated fair market value (in millions):
|
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Assets
formerly occupied by Mervyns (a)
|
|
$ 32.2
|
|
$ 43.3
|
|
$ 32.2
|
|
$ 43.3
|
|
Land held
for development (b)
|
|
54.3
|
|
-
|
|
54.3
|
|
-
|
|
Undeveloped
land
|
|
4.9
|
|
0.4
|
|
4.9
|
|
0.4
|
|
Assets
marketed for sale
|
|
38.3
|
|
4.5
|
|
40.4
|
|
11.8
|
|
|
|
$129.7
|
|
$ 48.2
|
|
$131.8
|
|
$ 55.5
|
|
Sold assets
included in discontinued operations (J)
|
|
3.2
|
|
83.9
|
|
4.2
|
|
87.5
|
|
Joint
venture investments
|
|
-
|
|
40.4
|
|
-
|
|
40.4
|
|
Total
impairment charges
|
|
$132.9
|
|
$172.5
|
|
$136.0
|
|
$183.4
|
|
|
|
(a) The Company's proportionate
share of these impairments was $16.5 million and $29.7 million,
after
adjusting for the allocation of
loss to the non-controlling interest in this consolidated joint
venture and
including those impairments
classified as discontinued operations, for the three- and six-month
periods
ended June 30, 2010 and 2009,
respectively.
(b) Amounts reported in 2010
relate to land held for development in Togliatti and Yaroslavl,
Russia, of
which the Company's
proportionate share was $41.9 million after adjusting for the
allocation of loss to the
non-controlling interest in this
consolidated joint venture.
|
|
|
|
|
|
|
|
|
|
|
(E) General and administrative expenses include internal leasing
salaries, legal salaries and related expenses associated with the
releasing of space, which are charged to operations as incurred.
For the six-month periods ended June
30, 2010 and 2009, general and administrative expenses were
approximately 5.1% and 5.4% of total revenues, respectively,
including joint venture and managed property revenues. During
the six months ended June 30, 2010,
the Company incurred a $2.1 million
separation charge relating to the departure of an executive
officer. Excluding this charge, general and administrative
expenses were 4.8% of total revenues for the six months ended
June 30, 2010. In the second
quarter of 2009, the Company recorded a non-cash charge of
$10.5 million as a result of the
potential change in control provisions included in the Company's
equity-based award plans triggered from the shareholder approval of
the share purchase transaction completed in 2009. Excluding
this charge, general and administrative expenses were 4.2% of total
revenues for the six-month period ended June
30, 2009.
(F) The Company recorded the following in connection with its
outstanding convertible debt (in millions):
|
|
|
|
Three-Month
Period
Ended June 30,
|
|
Six-Month Period
Ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Non-cash
interest expense related to amortization of the debt
discount
|
|
$1.7
|
|
$3.3
|
|
$3.8
|
|
$7.1
|
|
Non-cash
adjustment to gain on repurchase
|
|
2.2
|
|
7.2
|
|
4.8
|
|
14.7
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) Represents the non-cash impact of the valuation adjustments
of the equity derivative instruments (warrants) issued as part of
the share purchase transaction completed in 2009, as a result of
changes in the Company's stock price. The liability will be
reclassified into equity upon ultimate exercise or expiration of
the warrants.
(H) Other (expenses) income were comprised of the following (in
millions):
|
|
|
|
Three-Month
Period
Ended June 30,
|
|
Six-Month Period
Ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Litigation-related
expenses
|
|
$ (8.3)
|
|
$(0.6)
|
|
$(10.0)
|
|
$ (3.7)
|
|
Debt
extinguishment costs
|
|
(2.9)
|
|
-
|
|
(4.0)
|
|
-
|
|
Note
receivable reserve
|
|
-
|
|
(5.4)
|
|
0.1
|
|
(5.4)
|
|
Sale of MDT
units
|
|
-
|
|
0.1
|
|
-
|
|
(0.8)
|
|
Abandoned
projects and other expenses
|
|
(0.7)
|
|
(0.8)
|
|
(1.0)
|
|
(1.3)
|
|
|
|
$(11.9)
|
|
$(6.7)
|
|
$(14.9)
|
|
$(11.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
(I) At June 30, 2010 and 2009, the
Company owned joint venture interests, excluding consolidated joint
ventures, in 250 and 324 shopping center properties, respectively.
See pages 11-13 of this release for a summary of the combined
condensed operating results and select balance sheet data of the
Company's unconsolidated joint ventures.
(J) The operating results relating to assets classified as
discontinued operations are summarized as follows:
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Revenues from
operations
|
$ 459
|
|
$ 11,180
|
|
$ 1,655
|
|
$ 24,036
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
426
|
|
4,449
|
|
1,244
|
|
8,946
|
|
Impairment
charges
|
3,160
|
|
83,859
|
|
4,182
|
|
87,459
|
|
Interest,
net
|
504
|
|
3,636
|
|
1,213
|
|
7,490
|
|
Depreciation and
amortization
|
204
|
|
3,303
|
|
582
|
|
7,143
|
|
Total expenses
|
4,294
|
|
95,247
|
|
7,221
|
|
111,038
|
|
Loss before
disposition of real estate
|
(3,835)
|
|
(84,067)
|
|
(5,566)
|
|
(87,002)
|
|
Loss on
disposition of real estate, net
|
(4,057)
|
|
(36,023)
|
|
(3,491)
|
|
(24,416)
|
|
Net
loss
|
$(7,892)
|
|
$(120,090)
|
|
$ (9,057)
|
|
$(111,418)
|
|
|
|
|
|
|
|
|
|
|
|
(K) For purposes of computing FFO and operating FFO per share,
the following share information was utilized (in millions):
|
|
|
At June 30,
|
|
|
|
2010
|
|
2009
|
|
|
Common
shares outstanding
|
250.1
|
|
153.7
|
|
|
OP Units
outstanding ("OP Units")
|
0.4
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Weighted
average common shares outstanding
|
250.1
|
|
144.2
|
|
239.4
|
|
136.5
|
|
Assumed
conversion of OP Units
|
0.4
|
|
0.4
|
|
0.4
|
|
0.4
|
|
FFO Weighted
average common shares and OP Units – Basic & Diluted
|
250.5
|
|
144.6
|
|
239.8
|
|
136.9
|
|
Assumed
conversion of dilutive securities
|
7.7
|
|
-
|
|
7.2
|
|
-
|
|
Operating
FFO Weighted average common shares and OP Units –Diluted
|
258.2
|
|
144.6
|
|
247.0
|
|
136.9
|
|
|
|
|
|
|
|
|
|
|
|
|
(L) Amounts include the consolidation of a 50% owned joint
venture, DDR MDT MV LLC ("MV LLC"), that owns 27 sites formerly
occupied by Mervyns at June 30, 2010,
which includes the following (in millions):
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
|
|
|
|
|
Real estate, net
|
$151.9
|
|
$218.7
|
|
Restricted cash
|
21.0
|
|
50.5
|
|
Mortgage debt
|
179.8
|
|
225.4
|
|
Non-controlling
interests
|
(2.3)
|
|
22.4
|
|
|
|
|
|
|
|
(M) In addition, included in the Company's balance sheet as of
December 31, 2009, was $28.5 million of assets owned by a consolidated
joint venture that was deconsolidated in accordance with the
adoption of Accounting Standards Codification No. 810, "Amendments
to FASB Interpretation No. 46(R)" ("ASC 810") as of January 1, 2010.
DEVELOPERS DIVERSIFIED REALTY
CORPORATION
Summary Results of Combined
Unconsolidated Joint Ventures
(In thousands)
Combined condensed income
statements
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Revenues from operations
(A)
|
$170,347
|
|
$201,206
|
|
$340,440
|
|
$413,399
|
|
|
|
|
|
|
|
|
|
|
Operating expenses
|
71,124
|
|
76,104
|
|
137,237
|
|
157,672
|
|
Impairment charge (B)
|
10,922
|
|
-
|
|
10,922
|
|
-
|
|
Depreciation and amortization of
real estate investments
|
51,352
|
|
57,240
|
|
99,194
|
|
115,908
|
|
Interest expense
|
60,838
|
|
77,348
|
|
120,488
|
|
141,264
|
|
|
194,236
|
|
210,692
|
|
367,841
|
|
414,844
|
|
Loss from operations before tax
expense and discontinued operations
|
(23,889)
|
|
(9,486)
|
|
(27,401)
|
|
(1,445)
|
|
Income tax expense
|
(5,035)
|
|
(2,562)
|
|
(9,833)
|
|
(4,552)
|
|
Income (loss) from discontinued
operations, net of tax
|
674
|
|
(34,115)
|
|
885
|
|
(33,556)
|
|
Loss on disposition of
discontinued operations, net of tax (C)
|
(3,212)
|
|
(6,048)
|
|
(11,963)
|
|
(6,077)
|
|
Income (loss) on disposition of
assets (D)
|
17
|
|
-
|
|
17
|
|
(26,741)
|
|
Other, net (E)
|
-
|
|
(2,241)
|
|
-
|
|
9,437
|
|
Net loss
|
$ (31,445)
|
|
$(54,452)
|
|
$(48,295)
|
|
$(62,934)
|
|
Net loss at DDR ownership
interests (F)
|
$ (1,824)
|
|
$(11,876)
|
|
$ (164)
|
|
$(11,073)
|
|
FFO at DDR's ownership interest
(G)
|
$ 10,307
|
|
$ 3,809
|
|
$ 21,862
|
|
$ 18,968
|
|
|
|
|
|
|
|
|
|
|
|
Combined condensed balance
sheets
|
|
|
June 30, 2010
|
|
December 31, 2009
|
|
|
|
|
|
|
Land
|
$1,616,270
|
|
$1,782,431
|
|
Buildings
|
4,846,362
|
|
5,207,234
|
|
Fixtures and tenant
improvements
|
147,186
|
|
146,716
|
|
|
6,609,818
|
|
7,136,381
|
|
Less: Accumulated
depreciation
|
(670,233)
|
|
(636,897)
|
|
|
5,939,585
|
|
6,499,484
|
|
Land held for development and
construction in progress (H)
|
173,793
|
|
130,410
|
|
Real estate, net
|
6,113,378
|
|
6,629,894
|
|
Receivables, including
straight-line rent, net
|
124,504
|
|
113,630
|
|
Leasehold interests
|
10,876
|
|
11,455
|
|
Other assets, net
|
309,325
|
|
342,192
|
|
|
$6,558,083
|
|
$7,097,171
|
|
|
|
|
|
|
Mortgage debt (I)
|
$4,047,156
|
|
$4,547,711
|
|
Notes and accrued interest
payable to DDR
|
82,522
|
|
73,477
|
|
Other liabilities
|
202,523
|
|
194,065
|
|
|
4,332,201
|
|
4,815,253
|
|
Accumulated equity
|
2,225,882
|
|
2,281,918
|
|
|
$6,558,083
|
|
$7,097,171
|
|
|
|
|
|
|
|
(A) Revenues for the three- and six-month periods includes the
following (in millions):
|
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Straight-line rents
|
|
$0.9
|
|
$0.9
|
|
$2.1
|
|
$1.7
|
|
DDR's
proportionate share
|
|
0.1
|
|
0.1
|
|
0.3
|
|
0.1
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) Impairment charge recorded on one asset of which the
Company's proportionate share of the loss was approximately
$0.4 million.
(C) Loss on disposition of discontinued operations includes the
sale of properties by three separate unconsolidated joint ventures
in the first and second quarters of 2010. In 2009, $170.9
million of impairment charges were recorded by these joint ventures
in anticipation of the sales transactions. No loss was
recognized by the Company in the second quarter of 2010 as the
investment basis of these assets had been previously reduced.
The Company's proportionate share of the loss for the assets
sold in the first quarter of 2010 was approximately $1.3 million.
Loss on disposition of discontinued operations included the sale
of four properties by two separate unconsolidated joint ventures in
the second quarter of 2009 resulting in a loss of $6.0 million of which the Company's proportionate
share was $1.4 million for the three
and six months ended June 30,
2009.
(D) In the first quarter of 2009, an unconsolidated joint
venture disposed of a property resulting in a loss of $26.7 million, of which the Company's
proportionate share was $5.8
million.
(E) Activity relates to the Company's investment in the MDT
units primarily liquidated in the third quarter of 2009.
(F) Adjustments to the Company's share of joint venture equity
in net loss is related primarily to basis differences impacting
amortization and depreciation, impairment charges and (loss) gain
on dispositions as follows (in millions):
|
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Income
|
|
$1.2
|
|
$2.6
|
|
$1.2
|
|
$2.2
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) FFO from unconsolidated joint ventures are summarized as
follows:
|
|
|
Three-Month
Periods
Ended June 30,
|
|
Six-Month Periods
Ended June 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Net loss
|
$(31,445)
|
|
$(54,452)
|
|
$(48,295)
|
|
$(62,934)
|
|
Loss on sale
of real estate
|
(47)
|
|
-
|
|
(47)
|
|
-
|
|
Depreciation
and amortization of real estate investments
|
51,688
|
|
62,947
|
|
102,001
|
|
127,037
|
|
|
$ 20,196
|
|
$ 8,495
|
|
$ 53,659
|
|
$ 64,103
|
|
DDR ownership
interests
|
$ 10,307
|
|
$ 3,809
|
|
$ 21,862
|
|
$ 18,968
|
|
DDR joint
venture distributions received, net
|
$ 11,221
|
|
$ 7,061
|
|
$22,020
|
|
$ 15,736
|
|
|
|
|
|
|
|
|
|
|
|
(H) The Company's proportionate share of joint venture land held
for development and construction in progress aggregated
approximately $62.9 million and
$37.6 million at June 30, 2010 and December
31, 2009, respectively.
The combined condensed balance sheet at June 30, 2010 included a joint venture under
development that was deconsolidated by the Company as of
January 1, 2010 due to the adoption
of ASC 810 (Footnote M on page 10 of this release).
(I) The Company's proportionate share of joint venture debt
aggregated approximately $850.5
million and $917.0 million at
June 30, 2010 and December 31, 2009, respectively.
SOURCE Developers Diversified Realty Corporation
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