BEACHWOOD, Ohio, Oct. 25 /PRNewswire-FirstCall/ -- Developers
Diversified Realty Corporation (NYSE: DDR) today announced
operating results for the third quarter ended September 30, 2010.
SIGNIFICANT THIRD QUARTER ACTIVITY
- Reported operating FFO of $0.25
per diluted share before non-operating items
- Executed a Company record 503 total leases for 2.9 million
square feet as compared to 477 total leases in the second quarter
of 2010 and 433 total leases in the third quarter of 2009
- Increased the core portfolio leased rate to 92.0% at
September 30, 2010 from 91.6% at
June 30, 2010 and 90.9% at
September 30, 2009
- Improved the spread on new leases to +6.9% and renewals to
+4.5% for a blended overall spread of +5.0%, which compares to a
blended spread of +3.9% in the second quarter of 2010
- Reported Same Store Net Operating Income growth of 2.0% as
compared to an increase of 1.5% in the second quarter of 2010 and a
decrease of 4.1% in the third quarter of 2009
- Issued $300 million aggregate
principal amount of senior unsecured notes due September 2020
- Reduced consolidated indebtedness by nearly $242.7 million to $4.4 billion at September 30, 2010
- Invested $58.3 million in loans
secured by prime shopping centers
- Issued 5.1 million common shares for $58.3 million
- Sold $76.7 million of non-prime
assets, including joint venture partners' share
- In October 2010, refinanced
unsecured credit facilities and extended the maturity to
February 2014
"Our third quarter operating results illustrate our continued
focus and execution of strategic objectives. Specifically,
the leasing momentum experienced in our portfolio has resulted in
base rent and same store NOI growth as well as occupancy
gains. Non-prime asset sales, further deleveraging of our
balance sheet, the renewal of our unsecured line of credit and
overall extension of our debt maturity profile also contributed to
our considerable progress," commented Developers Diversified's
president and chief executive officer, Daniel B. Hurwitz.
FINANCIAL HIGHLIGHTS
The Company's third quarter operating Funds From Operations
("FFO") was $63.2 million, or
$0.25 per diluted share, before
$26.1 million of net charges.
For the nine-month period ended September 30, 2010 the Company reported operating
FFO of $193.4 million, or
$0.77 per diluted share, before
$160.7 million of net charges.
The charges and gains, primarily non-cash, for the periods ended
September 30, 2010, are summarized as
follows (in millions):
|
|
|
|
Three
Months
|
|
Nine
Months
|
|
Non-cash impairment charges –
consolidated assets
|
|
$ 5.1
|
|
$ 78.2
|
|
Less portion of impairment
charges allocated to non-controlling interests
|
|
-
|
|
(31.2)
|
|
Executive separation
charge
|
|
-
|
|
2.1
|
|
Gain on debt retirement,
net
|
|
(0.3)
|
|
(0.3)
|
|
Non-cash loss on equity
derivative instruments related to Otto investment
|
|
11.3
|
|
14.6
|
|
Litigation, debt extinguishment
costs and other expenses, net of tax
|
|
3.9
|
|
16.0
|
|
Loss on asset sales and
impairment charges – equity method investments
|
|
3.0
|
|
6.4
|
|
Consolidated loss on sales and
impairment charges – discontinued operations
|
|
7.3
|
|
75.3
|
|
Gain on deconsolidation of
interests, net
|
|
(5.2)
|
|
(5.2)
|
|
FFO associated with Mervyns
joint venture, net of non-controlling interest
|
|
1.0
|
|
4.8
|
|
|
|
$ 26.1
|
|
$160.7
|
|
|
|
|
|
|
|
|
FFO applicable to common shareholders for the three-month period
ended September 30, 2010, including
the above net charges, was $37.1
million, or $0.14 per diluted
share, which compares to a FFO loss of $90.1
million, or $0.54 per diluted
share, for the prior-year comparable period.
FFO applicable to common shareholders for the nine-month period
ended September 30, 2010, including
the above net charges, was $32.7
million, or $0.13 per diluted
share, which compares to a FFO loss of $116.6 million, or $0.80 per diluted share, for the prior-year
comparable period. The increase in FFO for both the three-
and nine-month periods ended September 30,
2010, is primarily the result of a decrease in
impairment-related charges, gain on debt retirement and the equity
derivative adjustment associated with the Otto investment.
Net loss applicable to common shareholders for the three-month
period ended September 30, 2010, was
$24.9 million, or $0.10 per diluted share, which compares to a net
loss of $148.4 million, or
$0.90 per diluted share, for the
prior-year comparable period.
Net loss applicable to common shareholders for the nine-month
period ended September 30, 2010, was
$156.8 million, or $0.65 per diluted share, which compares to a net
loss of $308.7 million, or
$2.11 per diluted share, for the
prior-year comparable period. The decrease in net loss for
both the three- and nine-month periods ended September 30, 2010, is primarily due to the same
factors impacting FFO for the comparable periods.
LEASING & PORTFOLIO OPERATIONS
The following results for the three-month period ended
September 30, 2010, highlight
continued strong leasing activity throughout the portfolio,
including a Company record for executed deals:
- Executed 191 new leases aggregating approximately 1.0 million
square feet and 312 renewals aggregating approximately 1.9 million
square feet. In total, the Company executed approximately 2.9
million square feet of leases.
- Total portfolio average annualized base rent per occupied
square foot, excluding assets in Brazil, as of September
30, 2010 was $12.44, as
compared to $12.50 at September 30, 2009. Including the
Brazil portfolio, total portfolio
average annualized base rent per occupied square foot as of
September 30, 2010 was $13.26, as compared to $12.82 at September 30,
2009.
- The core portfolio leased rate was 92.0% as of September 30, 2010, as compared to 90.9% at
September 30, 2009. The core
portfolio and the Brazil portfolio
leased rate was 92.2% at September 30,
2010.
- On a cash basis, including the Brazil portfolio, rental rates for new leases
increased by 6.9% over prior rents and renewals increased by 4.5%
as compared to an increase of 6.0% and 3.9%, respectively, for the
U.S.-portion of the portfolio. On a blended basis, including
the Brazil portfolio, leasing
spreads increased by 5.0% during the quarter as compared to an
increase of 4.3% for the U.S.-portion of the portfolio. The
increase in leasing spreads for new leases marks an improvement
from the increase of 3.9% for the portfolio reported in the second
quarter of 2010.
- Same store net operating income ("NOI") increased 2.0% for the
three-month period ended September 30,
2010 over the prior-year comparable period.
DISPOSITIONS
The Company sold 11 consolidated shopping centers, aggregating
approximately 0.7 million square feet, in the third quarter of
2010, generating gross proceeds of approximately $48.9 million. The Company recorded an
aggregate net gain of approximately $0.9
million related to asset sales in the third quarter.
In the third quarter of 2010, one of the Company's joint
ventures sold a shopping center, aggregating approximately 0.4
million square feet, generating gross proceeds of approximately
$27.2 million. The joint
venture recorded an aggregate net loss of approximately
$13.3 million related to the asset
sale in the third quarter of which the Company's proportionate
share was approximately $2.8
million.
CAPITAL MARKETS ACTIVITIES
In October 2010, the Company
entered into a new unsecured credit facility arranged by JP Morgan
Chase Bank, N.A. and Wells Fargo Bank, N.A. The size of the
facility was reduced to $950 million
with an accordion feature up to $1.2
billion. In addition, the Company also entered into a
new $65 million unsecured credit
facility with PNC Bank, N.A. Both facilities mature in
February 2014. The Company's
borrowings under these facilities bear interest at variable rates
based on LIBOR plus 275 basis points and as determined by the
Company's current corporate credit ratings from Moody's and
S&P.
In October 2010, the Company
amended its secured term loan with KeyBank National Association to
conform the covenants to the new revolving credit facility
provisions and repaid $200 million of
the outstanding balance.
In September 2010, the Company
sold approximately 5.1 million of its common shares through its
continuous equity program, generating gross proceeds of
$58.3 million. Proceeds from
the equity issuance were used to fund $58.3
million of investments in loans secured by prime shopping
centers.
In August 2010, the Company issued
$300 million, aggregate principal
amount of 7.875% senior unsecured notes due September 2020. Proceeds from the offering
were used to repay amounts outstanding on the Company's unsecured
credit facilities.
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
September 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 590 retail
operating and development properties in 41 states, Brazil, Canada and Puerto
Rico. Totaling more than 134 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
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,
October 26, 2010 at 10:00 a.m. Eastern Daylight Time. To
participate, please dial 866.730.5764 (domestic), or 857.350.1588
(international) at least ten minutes prior to the scheduled start
of the call. When prompted, provide the passcode: 27714456.
Access to the live call and replay will also be available
through the Company's website. The replay will be available through
November 26, 2010.
DEVELOPERS
DIVERSIFIED REALTY CORPORATION
Financial
Highlights
(In
thousands – except per share data)
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
Revenues:
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Minimum rents (A)
|
$133,549
|
|
$130,938
|
|
$401,606
|
|
$395,319
|
|
Percentage and overage rents
(A)
|
1,016
|
|
1,183
|
|
3,700
|
|
4,397
|
|
Recoveries from
tenants
|
44,431
|
|
42,475
|
|
133,242
|
|
131,232
|
|
Ancillary and other property
income
|
5,846
|
|
5,223
|
|
15,330
|
|
14,884
|
|
Management, development and
other fee income
|
12,961
|
|
14,693
|
|
40,122
|
|
43,194
|
|
Other
(B)
|
995
|
|
1,191
|
|
6,803
|
|
6,172
|
|
|
198,798
|
|
195,703
|
|
600,803
|
|
595,198
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating and
maintenance (C)
|
33,676
|
|
34,521
|
|
104,599
|
|
99,734
|
|
Real estate taxes
|
29,518
|
|
26,023
|
|
82,466
|
|
76,827
|
|
Impairment charges
(D)
|
5,063
|
|
500
|
|
78,189
|
|
12,739
|
|
General and administrative (E)
|
20,180
|
|
25,886
|
|
62,546
|
|
73,469
|
|
Depreciation and
amortization
|
54,903
|
|
51,379
|
|
165,544
|
|
164,017
|
|
|
143,340
|
|
138,309
|
|
493,344
|
|
426,786
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest income
|
1,614
|
|
3,257
|
|
4,425
|
|
9,420
|
|
Interest expense
(F)
|
(53,774)
|
|
(52,736)
|
|
(166,809)
|
|
(161,691)
|
|
Gain on debt retirement,
net (F)
|
333
|
|
23,881
|
|
333
|
|
142,360
|
|
Loss on equity derivative
instruments (G)
|
(11,278)
|
|
(118,174)
|
|
(14,618)
|
|
(198,199)
|
|
Other income
(expense) (H)
|
(3,899)
|
|
2,235
|
|
(18,398)
|
|
(8,897)
|
|
|
(67,004)
|
|
(141,537)
|
|
(195,067)
|
|
(217,007)
|
|
Loss from
continuing operations before equity in net loss of joint ventures,
tax (expense) benefit of taxable REIT subsidiaries and state
franchise and income taxes, and gain on disposition of real estate,
net of tax
|
(11,546)
|
|
(84,143)
|
|
(87,608)
|
|
(48,595)
|
|
Equity in net loss of joint
ventures (I)
|
(4,801)
|
|
(183)
|
|
(3,777)
|
|
(8,984)
|
|
Impairment of joint venture
investments (D)
|
-
|
|
(61,200)
|
|
-
|
|
(101,571)
|
|
Tax (expense) benefit of taxable
REIT subsidiaries and state franchise and income taxes
|
(1,120)
|
|
(610)
|
|
1,518
|
|
(426)
|
|
Loss from continuing
operations
|
(17,467)
|
|
(146,136)
|
|
(89,867)
|
|
(159,576)
|
|
Income (loss) from discontinued
operations (J)
|
1,562
|
|
(1,642)
|
|
(73,704)
|
|
(165,523)
|
|
Loss before gain on disposition
of real estate
|
(15,905)
|
|
(147,778)
|
|
(163,571)
|
|
(325,099)
|
|
Gain on disposition of real
estate, net of tax
|
145
|
|
7,128
|
|
61
|
|
8,222
|
|
Net loss
|
(15,760)
|
|
(140,650)
|
|
(163,510)
|
|
(316,877)
|
|
Loss attributable to
non-controlling interests
|
1,450
|
|
2,804
|
|
38,378
|
|
39,848
|
|
Net loss attributable to
DDR
|
$(14,310)
|
|
$(137,846)
|
|
$(125,132)
|
|
$(277,029)
|
|
Net loss applicable to common
shareholders
|
$(24,877)
|
|
$(148,413)
|
|
$(156,834)
|
|
$(308,731)
|
|
Funds From Operations
("FFO"):
|
|
|
|
|
|
|
|
|
Net loss applicable to common
shareholders
|
$(24,877)
|
|
$(148,413)
|
|
$(156,834)
|
|
$(308,731)
|
|
Depreciation and amortization of
real estate investments
|
53,026
|
|
51,635
|
|
161,769
|
|
170,236
|
|
Equity in net loss of joint
ventures (I)
|
4,801
|
|
183
|
|
3,777
|
|
8,557
|
|
Joint ventures' FFO
(I)
|
10,457
|
|
13,584
|
|
32,319
|
|
32,553
|
|
Non-controlling interests (OP
Units)
|
8
|
|
8
|
|
24
|
|
167
|
|
Gain on disposition of
depreciable real estate
|
(6,339)
|
|
(7,130)
|
|
(8,394)
|
|
(19,405)
|
|
FFO applicable to common
shareholders
|
37,076
|
|
(90,133)
|
|
32,661
|
|
(116,623)
|
|
Preferred dividends
|
10,567
|
|
10,567
|
|
31,702
|
|
31,702
|
|
FFO
|
$ 47,643
|
|
$ (79,566)
|
|
$ 64,363
|
|
$ (84,921)
|
|
Per share data:
|
|
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic
|
$ (0.10)
|
|
$ (0.90)
|
|
$ (0.65)
|
|
$ (2.11)
|
|
Diluted
|
$ (0.10)
|
|
$ (0.90)
|
|
$ (0.65)
|
|
$ (2.11)
|
|
Basic – average shares
outstanding
|
249,139
|
|
165,073
|
|
241,679
|
|
146,151
|
|
Diluted – average shares
outstanding
|
249,139
|
|
165,073
|
|
241,679
|
|
146,151
|
|
Dividends Declared
|
$ 0.02
|
|
$ 0.02
|
|
$ 0.06
|
|
$ 0.42
|
|
Funds From Operations –
Basic (K)
|
$ 0.15
|
|
$ (0.54)
|
|
$ 0.13
|
|
$ (0.80)
|
|
Funds From Operations – Diluted
(K)
|
$ 0.14
|
|
$ (0.54)
|
|
$ 0.13
|
|
$ (0.80)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Selected Balance
Sheet Data (L)
|
|
|
September
30, 2010
|
|
December 31,
2009
|
|
Assets:
|
|
|
|
|
Real estate and rental
property:
|
|
|
|
|
Land
|
$ 1,834,172
|
|
$ 1,971,782
|
|
Buildings
|
5,451,694
|
|
5,694,659
|
|
Fixtures and tenant
improvements
|
320,067
|
|
287,143
|
|
|
7,605,933
|
|
7,953,584
|
|
Less: Accumulated
depreciation
|
(1,412,607)
|
|
(1,332,534)
|
|
|
6,193,326
|
|
6,621,050
|
|
Land held
for development and construction in progress
|
817,742
|
|
858,900
|
|
Real estate held for sale,
net
|
2,471
|
|
10,453
|
|
Real estate, net
|
7,013,539
|
|
7,490,403
|
|
|
|
|
|
|
Investments in and advances to
joint ventures (M)
|
417,750
|
|
420,541
|
|
Cash
|
21,335
|
|
26,172
|
|
Restricted cash
|
14,383
|
|
95,673
|
|
Notes receivable, net
|
119,585
|
|
74,997
|
|
Receivables, including
straight-line rent, net
|
134,066
|
|
146,809
|
|
Other assets, net
|
156,421
|
|
172,011
|
|
|
$ 7,877,079
|
|
$ 8,426,606
|
|
|
|
|
|
|
Liabilities &
Equity:
|
|
|
|
|
Indebtedness:
|
|
|
|
|
Revolving credit
facilities
|
$
483,138
|
|
$
775,028
|
|
Unsecured debt
|
1,746,387
|
|
1,689,841
|
|
Mortgage and other secured
debt
|
2,165,777
|
|
2,713,794
|
|
|
4,395,302
|
|
5,178,663
|
|
Dividends
payable
|
12,044
|
|
10,985
|
|
Equity derivative
liability (G)
|
70,698
|
|
56,080
|
|
Other
liabilities
|
229,226
|
|
227,915
|
|
Total
liabilities
|
4,707,270
|
|
5,473,643
|
|
|
|
|
|
|
Redeemable operating partnership
units
|
627
|
|
627
|
|
|
|
|
|
|
Preferred shares
|
555,000
|
|
555,000
|
|
Common shares
(K)
|
25,616
|
|
20,174
|
|
Paid-in-capital
|
3,813,293
|
|
3,374,528
|
|
Accumulated distributions in
excess of net income
|
(1,278,423)
|
|
(1,098,661)
|
|
Deferred compensation
obligation
|
12,984
|
|
17,838
|
|
Accumulated other comprehensive
income
|
14,283
|
|
9,549
|
|
Less: Common shares in
treasury at cost
|
(11,887)
|
|
(15,866)
|
|
Non-controlling
interests
|
38,316
|
|
89,774
|
|
Total equity
|
3,169,182
|
|
2,952,336
|
|
|
$ 7,877,079
|
|
$ 8,426,606
|
|
|
|
|
|
|
|
(A) Base and percentage rental revenues for the nine-month
period ended September 30, 2010, as
compared to the prior-year comparable period, increased
$6.2 million primarily due to the
acquisition of three shopping centers and the completion of certain
developments in 2009 which generated an additional $8.0 million in revenues. Store closings
related to major tenant bankruptcies in the first quarter of 2009
contributed an approximate $3.0
million decrease in revenues offset by other increases in
operating assets of $1.2 million.
Included in rental revenues for the nine-month periods ended
September 30, 2010 and 2009, is
approximately $1.7 million and
$2.5 million, respectively, of
revenue resulting from the recognition of straight-line rents,
including discontinued operations.
(B) Other revenues were comprised of the following (in
millions):
|
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Lease termination
fees
|
|
$0.5
|
|
$0.8
|
|
$4.1
|
|
$3.4
|
|
Financing fees
|
|
0.3
|
|
0.2
|
|
0.7
|
|
0.9
|
|
Other miscellaneous
|
|
0.2
|
|
0.2
|
|
2.0
|
|
1.9
|
|
|
|
$1.0
|
|
$1.2
|
|
$6.8
|
|
$6.2
|
|
|
|
|
|
|
|
|
|
|
|
|
(C) Operating and maintenance expense, including
discontinued operations, includes the following expenses (in
millions):
|
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Bad debt
expense
|
|
$2.9
|
|
$4.8
|
|
$10.2
|
|
$10.8
|
|
Ground rent
expense (a)
|
|
1.2
|
|
1.3
|
|
3.7
|
|
3.5
|
|
(a) Includes non-cash
expense of approximately $0.5 million and $0.6 million for the
three-month periods ended September 30, 2010 and 2009,
respectively, and approximately $1.5 million and
$1.4 million for the nine-month periods ended September 30,
2010 and 2009, respectively, related to straight-line ground rent
expense.
|
|
|
|
|
|
|
|
|
|
|
(D) The Company recorded impairment charges during the
three- and nine-month periods ended September 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
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
Land held for
development (1)
|
|
$
-
|
|
$
-
|
|
$ 54.3
|
|
$
-
|
|
Undeveloped
land
|
|
-
|
|
-
|
|
4.9
|
|
0.4
|
|
Assets marketed for
sale
|
|
5.1
|
|
0.5
|
|
19.0
|
|
12.3
|
|
|
|
$ 5.1
|
|
$ 0.5
|
|
$ 78.2
|
|
$ 12.7
|
|
|
|
|
|
|
|
|
|
|
|
Sold assets included in
discontinued operations (2)
|
|
2.0
|
|
2.2
|
|
29.5
|
|
71.9
|
|
Assets formerly occupied
by Mervyns included in discontinued operations
(3)
|
|
-
|
|
-
|
|
35.3
|
|
61.0
|
|
Total discontinued
operations
|
|
2.0
|
|
2.2
|
|
64.8
|
|
132.9
|
|
|
|
|
|
|
|
|
|
|
|
Joint venture
investments
|
|
-
|
|
61.2
|
|
-
|
|
101.6
|
|
Total impairment
charges
|
|
$ 7.1
|
|
$ 63.9
|
|
$143.0
|
|
$247.2
|
|
|
|
(1) 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.
(2) See summary of
discontinued operations activity in note (J).
(3) 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 previously
consolidated joint venture for the nine-month periods ended
September 30, 2010 and 2009, respectively. As discussed in
note (L), these assets were deconsolidated in the third quarter of
2010 and all operating results have been reclassified as
discontinued operations.
|
|
|
|
|
|
|
|
|
|
|
(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 nine-month periods ended September 30, 2010 and 2009, general and
administrative expenses were approximately 5.0% and 5.6% of total
revenues, respectively, including joint venture and managed
property revenues. During the nine months ended September 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 4.9% of total
revenues for the nine months ended September
30, 2010. During the nine months ended September 30, 2009, the Company recorded a
non-cash charge of $15.4 million as a
result of the change in control provisions included in the
Company's equity-based award plans in 2009. Excluding this
charge, general and administrative expenses were 4.5% of total
revenues for the nine-month period ended September 30, 2009.
(F) The Company recorded the following in connection with
its outstanding convertible debt (in millions):
|
|
|
|
Three-Month
Period
Ended
September 30,
|
|
Nine-Month
Period
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Non-cash interest expense
related to amortization of the debt discount
|
|
$1.4
|
|
$2.7
|
|
$5.2
|
|
$ 9.8
|
|
Non-cash adjustment to
gain on repurchase
|
|
-
|
|
2.4
|
|
4.8
|
|
17.0
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
September 30,
|
|
Nine-Month
Period
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Litigation-related
expenses (1)
|
|
$(3.5)
|
|
$(0.6)
|
|
$(13.5)
|
|
$(4.3)
|
|
Debt extinguishment
costs
|
|
0.3
|
|
(0.3)
|
|
(3.3)
|
|
(0.3)
|
|
Note receivable
reserve
|
|
-
|
|
-
|
|
0.1
|
|
(5.4)
|
|
Gain from change in
control
|
|
-
|
|
0.4
|
|
-
|
|
0.4
|
|
Sale of MDT
units
|
|
-
|
|
3.5
|
|
-
|
|
2.7
|
|
Abandoned projects and
other expenses
|
|
(0.7)
|
|
(0.8)
|
|
(1.7)
|
|
(2.0)
|
|
|
|
$(3.9)
|
|
$2.2
|
|
$(18.4)
|
|
$(8.9)
|
|
|
|
(1) The nine-month period
ended September 30, 2010 includes a $5.1 million reserve recorded
in connection with a legal matter at a property in Long Beach,
California. This reserve was offset by a tax benefit of
approximately $2.4 million, classified in the tax expense (benefit)
line item in the statement of operations, because the asset
is owned through the Company's taxable REIT subsidiary. Total
litigation-related expenditures, net of the tax benefit, were $3.5
million and $11.1 million for the three- and nine-month periods
ended September 30, 2010, respectively.
|
|
|
|
|
|
|
|
|
|
|
(I) At September 30, 2010
and 2009, the Company owned joint venture interests, excluding
consolidated joint ventures, in 245 and 318 shopping center
properties, respectively. See pages 14-16 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
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Revenues from
operations
|
$ 2,084
|
|
$ 8,762
|
|
$ 9,913
|
|
$ 37,830
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
1,571
|
|
5,326
|
|
7,754
|
|
19,275
|
|
Impairment
charges
|
2,000
|
|
2,153
|
|
64,833
|
|
132,924
|
|
Interest, net
|
2,473
|
|
4,588
|
|
9,588
|
|
17,822
|
|
Depreciation
and amortization
|
588
|
|
2,785
|
|
4,061
|
|
13,367
|
|
Total expenses
|
6,632
|
|
14,852
|
|
86,236
|
|
183,388
|
|
Loss before disposition of
real estate
|
(4,548)
|
|
(6,090)
|
|
(76,323)
|
|
(145,558)
|
|
Gain on deconsolidation of
interests
|
5,221
|
|
-
|
|
5,221
|
|
-
|
|
Gain (loss) on disposition
of real estate, net
|
889
|
|
4,448
|
|
(2,602)
|
|
(19,965)
|
|
Net income
(loss)
|
$ 1,562
|
|
$ (1,642)
|
|
$(73,704)
|
|
$(165,523)
|
|
|
|
Discontinued operations for all
periods presented include the activity associated with the 50%
owned joint venture, DDR MDT MV LLC ("MV LLC"), which was
deconsolidated during the three-month period ended
September 30, 2010. See
further discussion in note (L).
|
|
|
|
|
|
|
|
|
|
(K) For purposes of computing FFO and operating FFO per
share, the following share information was utilized (in
millions):
|
|
|
At September
30,
|
|
|
2010
|
|
2009
|
|
Common shares
outstanding
|
256.2
|
|
196.6
|
|
OP Units outstanding ("OP
Units")
|
0.4
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
251.2
|
|
165.1
|
|
243.3
|
|
146.1
|
|
Assumed conversion of OP
Units
|
0.4
|
|
0.4
|
|
0.4
|
|
0.4
|
|
FFO Weighted average common
shares and OP Units – Basic
|
251.6
|
|
165.5
|
|
243.7
|
|
146.5
|
|
FFO Weighted average common
shares and OP Units – Diluted for FFO Loss
|
N/A
|
|
165.5
|
|
N/A
|
|
146.5
|
|
Assumed conversion of dilutive
securities
|
6.3
|
|
4.0
|
|
6.5
|
|
2.1
|
|
FFO Weighted average common
shares and OP Units – Diluted for FFO Income
|
257.9
|
|
N/A
|
|
250.2
|
|
N/A
|
|
Operating FFO Weighted average
common shares and OP Units – Diluted
|
257.9
|
|
169.5
|
|
250.2
|
|
148.6
|
|
|
|
|
|
|
|
|
|
|
|
(L) The December 31, 2009
balance sheet reflects the consolidation of a 50% owned joint
venture, MV LLC, which as of that date owned 31 sites formerly
occupied by Mervyns.
|
|
|
December 31,
2009
|
|
|
|
|
Real estate, net
|
$218.7
|
|
Restricted cash
|
$ 50.5
|
|
Mortgage debt
|
$225.4
|
|
Non-controlling
interests
|
$ 22.4
|
|
|
|
|
|
In August 2010, the 25 assets
owned by MV LLC were placed in the control of a court appointed
receiver and as a result, the entity that holds the assets and
nonrecourse mortgage loan was deconsolidated for accounting
purposes pursuant to the provisions of Accounting Standards
Codification No. 810, "Consolidation" ("ASC 810"). Upon
deconsolidation, the Company recorded a gain of approximately
$5.6 million because the carrying
value of the nonrecourse debt exceeded the carrying value of the
collateralized assets. Following the deconsolidation, the
Company will no longer have any economic rights or obligations in
MV LLC. The revenues and expenses associated with MV LLC for the
current and prior periods, including the $5.6 million gain, are classified within
discontinued operations in the statements of operations.
(M) 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 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
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Revenues from
operations (A)
|
$169,730
|
|
$206,423
|
|
$507,766
|
|
$617,278
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
60,838
|
|
81,076
|
|
196,846
|
|
237,446
|
|
Impairment charges
(B)
|
8,815
|
|
-
|
|
19,737
|
|
-
|
|
Depreciation and amortization of
real estate investments
|
47,684
|
|
57,267
|
|
143,227
|
|
172,153
|
|
Interest
expense
|
54,025
|
|
78,686
|
|
174,186
|
|
219,696
|
|
|
171,362
|
|
217,029
|
|
533,996
|
|
629,295
|
|
Loss from operations before tax
expense and discontinued operations
|
(1,632)
|
|
(10,606)
|
|
(26,230)
|
|
(12,017)
|
|
Income tax expense
|
(4,114)
|
|
(2,513)
|
|
(13,947)
|
|
(7,065)
|
|
Loss from discontinued
operations, net of tax
|
(2,192)
|
|
(1,682)
|
|
(4,110)
|
|
(35,263)
|
|
Loss on disposition of
discontinued operations, net of tax (C)
|
(13,340)
|
|
(13,767)
|
|
(25,303)
|
|
(19,852)
|
|
(Loss) gain on disposition
of assets (D)
|
-
|
|
(74)
|
|
17
|
|
(26,815)
|
|
Other, net
(E)
|
-
|
|
(3,602)
|
|
-
|
|
5,833
|
|
Net loss
|
$(21,278)
|
|
$(32,244)
|
|
$(69,573)
|
|
$(95,179)
|
|
Net loss at DDR
ownership interests (F)
|
$ (4,193)
|
|
$ (1,302)
|
|
$ (4,362)
|
|
$(12,375)
|
|
FFO at DDR's
ownership interest (G)
|
$ 10,457
|
|
$ 13,584
|
|
$ 32,319
|
|
$ 32,553
|
|
|
|
|
|
|
|
|
|
|
|
Combined condensed balance sheets
|
|
|
September
30, 2010
|
|
December 31,
2009
|
|
|
|
|
|
|
Land
|
$1,605,772
|
|
$1,782,431
|
|
Buildings
|
4,858,997
|
|
5,207,234
|
|
Fixtures and tenant
improvements
|
150,455
|
|
146,716
|
|
|
6,615,224
|
|
7,136,381
|
|
Less: Accumulated
depreciation
|
(707,053)
|
|
(636,897)
|
|
|
5,908,171
|
|
6,499,484
|
|
Land held for development and
construction in progress (H)
|
173,293
|
|
130,410
|
|
Real estate, net
|
6,081,464
|
|
6,629,894
|
|
Receivables, including
straight-line rent, net
|
126,394
|
|
113,630
|
|
Leasehold interests
|
10,586
|
|
11,455
|
|
Other assets, net
|
305,909
|
|
342,192
|
|
|
$6,524,353
|
|
$7,097,171
|
|
|
|
|
|
|
Mortgage debt
(I)
|
$3,997,117
|
|
$4,547,711
|
|
Notes and accrued interest
payable to DDR
|
85,780
|
|
73,477
|
|
Other liabilities
|
211,362
|
|
194,065
|
|
|
4,294,259
|
|
4,815,253
|
|
Accumulated equity
|
2,230,094
|
|
2,281,918
|
|
|
$6,524,353
|
|
$7,097,171
|
|
|
|
|
|
|
|
(A) Revenues for the three- and nine-month periods include
the following (in millions):
|
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Straight-line
rents
|
|
$0.9
|
|
$1.4
|
|
$3.0
|
|
$3.0
|
|
DDR's proportionate
share
|
|
0.1
|
|
0.2
|
|
0.4
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) For the three and nine months ended September 30, 2010, impairment charges were
recorded on three and four assets, respectively, of which the
Company's proportionate share of the loss was approximately
$0.3 million and $0.7 million, respectively.
(C) Loss on disposition of discontinued operations
includes the sale of properties by four separate unconsolidated
joint ventures in the first nine months of 2010. In 2009,
$170.9 million of impairment charges were recorded by these joint
ventures in anticipation of the sales transactions. The
Company's proportionate share of the loss for the assets sold
during the three- and nine-month periods ended September 30, 2010
was approximately $2.8 and $4.1 million, respectively.
Loss on disposition of discontinued operations included the sale
of 12 properties by three separate unconsolidated joint ventures
for the nine months ended September 30,
2009, resulting in a loss of $19.9
million of which the Company's proportionate share was
$1.4 million.
(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
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
(Loss) income,
net
|
|
$(0.6)
|
|
$1.2
|
|
$0.6
|
|
$3.4
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) FFO from unconsolidated joint ventures are summarized
as follows:
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
2010
|
|
2009
|
|
2010
|
|
2009
|
|
Net loss
|
$(21,278)
|
|
$(32,244)
|
|
$(69,573)
|
|
$(95,179)
|
|
Loss on sale of real
estate
|
-
|
|
-
|
|
(47)
|
|
-
|
|
Depreciation and
amortization of real estate investments
|
47,814
|
|
62,434
|
|
149,815
|
|
189,472
|
|
FFO
|
$26,536
|
|
$ 30,190
|
|
$80,195
|
|
$ 94,293
|
|
DDR's share of FFO
|
$10,457
|
|
$ 13,584
|
|
$32,319
|
|
$ 32,553
|
|
DDR joint venture
distributions received, net
|
$ 7,279
|
|
$ 7,757
|
|
$29,299
|
|
$ 23,493
|
|
|
|
|
|
|
|
|
|
|
|
(H) The Company's proportionate share of joint venture
land held for development and construction in progress aggregated
approximately $69.9 million and
$37.6 million at September 30, 2010 and December 31, 2009, respectively.
The combined condensed balance sheet at September 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 13 of this release).
(I) The Company's proportionate share of joint venture
debt aggregated approximately $841.6
million and $917.0 million at
September 30, 2010 and December 31, 2009, respectively.
SOURCE Developers Diversified Realty Corporation
Copyright . 25 PR Newswire