BEACHWOOD, Ohio, Oct. 27, 2011 /PRNewswire/ -- DDR Corp. (NYSE:
DDR) today announced operating results for the quarter ended
September 30, 2011.
SIGNIFICANT THIRD QUARTER ACTIVITY
- Reported operating FFO of $0.24
per diluted share, which excludes certain non-operating items
- Continued strong leasing performance with the execution of a
total of 516 new leases and renewals for over 2.5 million square
feet
- Increased the portfolio leased rate to 93.4% at September 30, 2011 from 93.0% at June 30, 2011 and 92.2% at September 30, 2010
- Generated positive leasing spreads, with new leases up 15.8%
and renewals up 5.7%, for a blended overall spread of 7.3%, which
represents a continued improvement from the blended spread of 6.0%
for the second quarter of 2011 and the blended spread of 5.0% for
the third quarter of 2010
- Reported same store net operating income growth of 3.7% as
compared to an increase of 2.0% for the third quarter of 2010
- Completed $59 million of sales of
non-prime assets
- Completed $110 million of
acquisitions of prime assets
- Invested $10 million in a loan
collateralized by a prime shopping center
"We are pleased to report another strong quarter of operating
metrics highlighted by continued momentum in leasing transactions
generated from growing retailers seeking high-quality real estate
in a supply constrained market," commented DDR's president and
chief executive officer, Daniel B.
Hurwitz. "In addition, our ability to source
attractive investment opportunities that support the continuation
of our capital recycling strategy will provide compelling returns
to our shareholders and continue to improve our overall asset
quality."
(Logo:
http://photos.prnewswire.com/prnh/20110912/CL65938LOGO )
FINANCIAL HIGHLIGHTS
The Company's third quarter operating Funds From Operations
("FFO") was $67.4 million, or
$0.24 per diluted share, before
$59.3 million of net adjustments.
The net adjustments do not include approximately $6.6 million of gains recognized on asset sales
already excluded from FFO.
The charges and gains, primarily non-cash, for the periods ended
September 30, 2011, are summarized as
follows (in millions):
|
|
|
|
Three
Months
|
|
Nine
Months
|
|
|
Non-cash impairment charges –
consolidated assets
|
|
$ 51.2
|
|
$ 68.5
|
|
|
Executive separation
charge
|
|
0.3
|
|
11.0
|
|
|
Loss on debt retirement,
net
|
|
0.1
|
|
0.1
|
|
|
Non-cash gain on equity
derivative instruments (Otto Family
warrants)
|
|
—
|
|
(21.9)
|
|
|
Other (income) expense, net
(1)
|
|
(0.2)
|
|
4.8
|
|
|
Equity in net income of joint
ventures – loss on asset sales net
of gain on debt
extinguishment
|
|
6.3
|
|
7.5
|
|
|
Impairment of joint venture
investments
|
|
—
|
|
1.6
|
|
|
Non-cash gain on change in
control of interests
|
|
—
|
|
(22.7)
|
|
|
Discontinued operations –
non-cash consolidated impairment
charges, loss on sales and
gain on debt extinguishment
|
|
10.5
|
|
27.4
|
|
|
Discontinued operations –
non-cash gain on deconsolidation
of interests
|
|
(4.7)
|
|
(4.7)
|
|
|
Gain on disposition of real
estate (land), net
|
|
(0.4)
|
|
(0.4)
|
|
|
Non-controlling interest –
portion of impairment charges
allocated to outside
partners
|
|
(3.8)
|
|
(3.8)
|
|
|
Write-off of original preferred
share issuance costs
|
|
—
|
|
6.4
|
|
|
Total adjustments from FFO
to operating FFO
|
|
$ 59.3
|
|
$ 73.8
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts included in Other (income) expense are detailed as
follows:
|
|
|
|
Three
Months
|
|
Nine
Months
|
|
Loss on sale of mezzanine note
receivable
|
|
$ —
|
|
$ 5.0
|
|
Litigation
expenditures
|
|
—
|
|
2.0
|
|
Settlement gain of lease
liability obligation
|
|
—
|
|
(2.6)
|
|
Debt extinguishment gain,
net
|
|
(0.5)
|
|
(0.3)
|
|
Other
|
|
0.3
|
|
0.7
|
|
|
|
$ (0.2)
|
|
$ 4.8
|
|
|
|
|
|
|
|
|
FFO applicable to common shareholders for the three-month period
ended September 30, 2011, including
the above net adjustments, was $8.1
million, or $0.03 per diluted
share, which compares to FFO of $37.1
million, or $0.14 per diluted
share, for the prior-year comparable period. The decrease in
FFO for the three-month period ended September 30, 2011, is primarily the result of an
increase in the aggregate impairment charges recorded in 2011
offset by the effect of the non-cash valuation adjustments
associated with the warrants issued to the Otto family that were
exercised in full for cash in the first quarter of 2011.
FFO applicable to common shareholders for the nine-month period
ended September 30, 2011, including
the above net adjustments, was $121.3
million, or $0.36 per diluted
share, which compares to FFO of $32.7
million, or $0.13 per diluted
share, for the prior-year comparable period. The increase in
FFO for the nine-month period ended September 30, 2011, is primarily the result of a
reduction in the aggregate impairment charges recorded in 2011, the
gain on change in control of interests related to the Company's
acquisition of two assets from unconsolidated joint ventures and
the effect of the non-cash valuation adjustments associated with
the warrants partially offset by an executive separation charge and
the write-off of the original issuance costs from the redemption of
the Company's Class G cumulative redeemable preferred shares.
Net loss applicable to common shareholders for the three-month
period ended September 30, 2011, was
$50.0 million, or $0.18 per diluted share, which compares to a net
loss of $24.9 million, or
$0.10 per diluted share, for the
prior-year comparable period. Net loss applicable to common
shareholders for the nine-month period ended September 30, 2011, was $52.1 million, or $0.20 per diluted share, which compares to a net
loss of $156.8 million, or
$0.65 per diluted share, for the
prior-year comparable period. The changes in net loss
applicable to common shareholders for the three- and nine-month
periods ended September 30, 2011, is
primarily due to the same factors impacting FFO as explained
above.
LEASING & PORTFOLIO OPERATIONS
The following results for the three-month period ended
September 30, 2011, highlight
continued strong leasing activity throughout the portfolio:
- Executed 220 new leases aggregating approximately 1.0 million
square feet and 296 renewals aggregating approximately 1.5 million
square feet.
- Total portfolio average annualized base rent per occupied
square foot as of September 30, 2011
was $13.76, as compared to
$13.21 at September 30, 2010.
- The portfolio leased rate was 93.4% at September 30, 2011, as compared to 93.0% at
June 30, 2011 and 92.2% at
September 30, 2010.
- On a cash basis, rental rates for new leases increased by 15.8%
over prior rents and renewals increased by 5.7%, resulting in an
overall blended spread of 7.3%.
- Same store net operating income ("NOI") increased 3.7% for the
three-month period ended September 30,
2011 over the prior-year comparable period.
ACQUISITIONS & INVESTMENTS
In the third quarter of 2011, the Company acquired three prime
assets aggregating 463,677 square feet for a total purchase price
of approximately $110.0 million.
The Company assumed an aggregate of $67.0 million of mortgage debt in connection with
these acquisitions. Two of the prime assets are in
Charlotte, North Carolina
(Cotswold Village and The Terraces at SouthPark) and one prime
asset is in Colorado Springs,
Colorado (Chapel Hills East). The assets range between 96%
and 100% leased and are occupied by many high-quality retailers
typically found in DDR shopping centers including Whole Foods,
Marshalls, PetSmart, Best Buy, Harris
Teeter, ULTA, Old Navy, and DSW.
As previously announced in the third quarter, the Company has an
agreement to acquire Polaris Towne Center in Columbus, Ohio, for $80
million, including the assumption of $45 million in mortgage debt currently
encumbering the property. Polaris is a 720,779 square-foot
prime asset anchored by Target, Lowe's, Kroger, Best Buy,
T.J.Maxx, Old Navy and ULTA.
In connection with this transaction, the Company anticipates
selling Town Center Plaza in Leawood,
Kansas for $139 million.
The Company currently anticipates recognizing a gain,
estimated to be approximately $60
million, in connection with the sale of Town Center Plaza,
which amount is subject to change based on actual closing and other
costs associated with the sale. It is anticipated that this
transaction will close in the fourth quarter of 2011, subject to
the satisfaction or waiver of customary closing conditions.
In September 2011, the Company
invested $10 million in a loan
collateralized by a prime shopping center in Miami, Florida.
DISPOSITIONS
The Company sold nine consolidated non-prime assets, aggregating
approximately 0.9 million square feet, in the third quarter of
2011, generating gross proceeds of approximately $42.0 million. In addition, the Company
sold $17.1 million of consolidated
non-income producing assets. The Company recorded an
aggregate net loss of approximately $1.4
million related to asset sales in the third quarter of 2011.
2011 GUIDANCE
The Company is tightening its guidance for operating FFO for
2011 to a range between $0.95 - $1.00
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 gains generated from
merchant build asset sales, 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 income (loss) to FFO and operating FFO is
presented in the financial highlights section of the Company's
quarterly supplement.
SAFE HARBOR
DDR considers portions of the information in this press release
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, 2011. For additional factors
that could cause the results of the Company to differ materially
from those indicated in the forward-looking statements, please
refer to the Company's Form 10-K for the year ended December 31, 2010. The Company undertakes
no obligation to publicly revise these forward-looking statements
to reflect events or circumstances that arise after the date
hereof.
ABOUT DDR
DDR is an owner and manager of 538 value-oriented shopping
centers representing 140 million square feet in 41 states,
Puerto Rico and Brazil. The Company's assets
are concentrated in high barrier-to-entry markets with stable
populations and high growth potential and its portfolio is actively
managed to create long-term shareholder value. DDR is a
self-administered and self-managed REIT operating as a fully
integrated real estate company, and is publicly traded on the New
York Stock Exchange under the ticker symbol DDR. 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 to
Samir Khanal, at the Company's
corporate office, 3300 Enterprise Parkway, Beachwood, Ohio 44122 or at www.ddr.com.
The Company will hold its quarterly conference call tomorrow,
October 28, 2011, at 10:00 a.m. Eastern Daylight Time. To
participate, please dial 800.638.4930 (domestic), or 617.614.3944
(international) at least ten minutes prior to the scheduled start
of the call. When prompted, provide the passcode: 52381365.
Access to the live call and replay will also be available
through the Company's website. The replay will be available
through November 4, 2011.
DDR
Corp.
Financial
Highlights
(In
thousands)
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
Revenues:
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Minimum rents (A)
|
$ 131,457
|
|
$ 129,120
|
|
$ 393,146
|
|
$ 388,393
|
|
Percentage and overage rents
(A)
|
1,110
|
|
895
|
|
3,812
|
|
3,319
|
|
Recoveries from
tenants
|
42,586
|
|
43,331
|
|
131,898
|
|
130,038
|
|
Ancillary and other property
income
|
7,535
|
|
5,692
|
|
21,658
|
|
14,844
|
|
Management, development and
other fee income
|
11,210
|
|
12,961
|
|
34,852
|
|
40,122
|
|
Other (B)
|
2,550
|
|
993
|
|
4,726
|
|
6,798
|
|
|
196,448
|
|
192,992
|
|
590,092
|
|
583,514
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating and maintenance
(C)
|
34,027
|
|
32,473
|
|
106,937
|
|
100,277
|
|
Real estate taxes
|
26,465
|
|
28,747
|
|
79,217
|
|
79,956
|
|
Impairment charges
(D)
|
51,245
|
|
—
|
|
68,457
|
|
59,277
|
|
General and administrative
(E)
|
17,954
|
|
20,180
|
|
65,310
|
|
62,546
|
|
Depreciation and
amortization
|
56,249
|
|
53,052
|
|
166,496
|
|
159,705
|
|
|
185,940
|
|
134,452
|
|
486,417
|
|
461,761
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest income
|
2,459
|
|
1,614
|
|
7,675
|
|
4,425
|
|
Interest expense (F)
|
(58,169)
|
|
(52,014)
|
|
(175,218)
|
|
(161,488)
|
|
(Loss) gain on debt retirement,
net (F)
|
(134)
|
|
333
|
|
(134)
|
|
333
|
|
(Loss) gain on equity derivative
instruments (G)
|
—
|
|
(11,278)
|
|
21,926
|
|
(14,618)
|
|
Other income (expense), net
(H)
|
182
|
|
(3,874)
|
|
(4,825)
|
|
(18,357)
|
|
|
(55,662)
|
|
(65,219)
|
|
(150,576)
|
|
(189,705)
|
|
Loss before earnings from equity
method investments and
other items
|
(45,154)
|
|
(6,679)
|
|
(46,901)
|
|
(67,952)
|
|
Equity in net (loss) income of
joint ventures (I)
|
(2,590)
|
|
(4,801)
|
|
15,951
|
|
(3,777)
|
|
Impairment of joint venture
investments (D)
|
—
|
|
—
|
|
(1,671)
|
|
—
|
|
Gain on change in control of
interests (J)
|
—
|
|
—
|
|
22,710
|
|
—
|
|
Tax (expense) benefit of taxable
REIT subsidiaries and state
franchise and income
taxes
|
(299)
|
|
(1,118)
|
|
(1,041)
|
|
1,527
|
|
Loss from continuing
operations
|
(48,043)
|
|
(12,598)
|
|
(10,952)
|
|
(70,202)
|
|
Loss from discontinued
operations (K)
|
(5,226)
|
|
(3,307)
|
|
(21,656)
|
|
(93,371)
|
|
Loss before gain on disposition
of real estate
|
(53,269)
|
|
(15,905)
|
|
(32,608)
|
|
(163,573)
|
|
Gain on disposition of real
estate, net of tax
|
6,587
|
|
145
|
|
8,036
|
|
61
|
|
Net loss
|
(46,682)
|
|
(15,760)
|
|
(24,572)
|
|
(163,512)
|
|
Non-controlling
interests
|
3,693
|
|
1,450
|
|
3,512
|
|
38,380
|
|
Net loss attributable to
DDR
|
$ (42,989)
|
|
$ (14,310)
|
|
$ (21,060)
|
|
$ (125,132)
|
|
Net loss applicable to common
shareholders
|
$ (49,956)
|
|
$ (24,877)
|
|
$ (52,082)
|
|
$ (156,834)
|
|
Funds From Operations
("FFO"):
|
|
|
|
|
|
|
|
|
Net loss applicable to common
shareholders
|
$ (49,956)
|
|
$ (24,877)
|
|
$ (52,082)
|
|
$ (156,834)
|
|
Depreciation and amortization of
real estate investments
|
54,474
|
|
53,026
|
|
163,197
|
|
161,769
|
|
Equity in net loss (income) of
joint ventures (I)
|
2,590
|
|
4,801
|
|
(15,951)
|
|
3,777
|
|
Joint ventures' FFO
(I)
|
7,569
|
|
10,457
|
|
35,158
|
|
32,319
|
|
Non-controlling interests (OP
Units)
|
24
|
|
8
|
|
56
|
|
24
|
|
Gain on disposition of
depreciable real estate
|
(6,602)
|
|
(6,339)
|
|
(9,120)
|
|
(8,394)
|
|
FFO applicable to common
shareholders
|
8,099
|
|
37,076
|
|
121,258
|
|
32,661
|
|
Write-off of original preferred
share issuance costs (L)
|
—
|
|
—
|
|
6,402
|
|
—
|
|
Preferred dividends
|
6,967
|
|
10,567
|
|
24,620
|
|
31,702
|
|
FFO
|
$ 15,066
|
|
$ 47,643
|
|
$ 152,280
|
|
$
64,363
|
|
Per share data:
|
|
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic
|
$
(0.18)
|
|
$
(0.10)
|
|
$
(0.20)
|
|
$
(0.65)
|
|
Diluted
|
$
(0.18)
|
|
$
(0.10)
|
|
$
(0.20)
|
|
$
(0.65)
|
|
Basic – average shares
outstanding
|
274,639
|
|
249,139
|
|
268,270
|
|
241,679
|
|
Diluted – average shares
outstanding
|
274,639
|
|
249,139
|
|
268,270
|
|
241,679
|
|
Dividends Declared
|
$
0.06
|
|
$
0.02
|
|
$
0.14
|
|
$
0.06
|
|
Funds From Operations – Basic
(M)
|
$
0.03
|
|
$
0.15
|
|
$
0.45
|
|
$
0.13
|
|
Funds From Operations – Diluted
(M)
|
$
0.03
|
|
$
0.14
|
|
$
0.36
|
|
$
0.13
|
|
|
|
|
|
|
|
|
|
|
|
DDR
Corp.
Financial
Highlights
(In
thousands)
|
|
Selected Balance Sheet
Data
|
|
|
|
|
|
September
30, 2011
|
|
December 31,
2010
|
|
Assets:
|
|
|
|
|
Real estate and rental
property:
|
|
|
|
|
Land
|
$ 1,852,940
|
|
$ 1,837,403
|
|
Buildings
|
5,494,699
|
|
5,491,489
|
|
Fixtures and tenant
improvements
|
372,670
|
|
339,129
|
|
|
7,720,309
|
|
7,668,021
|
|
Less: Accumulated
depreciation
|
(1,537,709)
|
|
(1,452,112)
|
|
|
6,182,600
|
|
6,215,909
|
|
Land held
for development and construction in progress
|
644,028
|
|
743,218
|
|
Real estate held for sale,
net
|
6,284
|
|
—
|
|
Real estate, net
|
6,832,912
|
|
6,959,127
|
|
|
|
|
|
|
Investments in and advances to
joint ventures
|
376,613
|
|
417,223
|
|
Cash
|
20,681
|
|
19,416
|
|
Restricted cash
|
4,006
|
|
4,285
|
|
Notes receivable, net
|
112,458
|
|
120,330
|
|
Receivables, including
straight-line rent, net
|
118,331
|
|
123,259
|
|
Other assets, net
|
138,180
|
|
124,450
|
|
|
$ 7,603,181
|
|
$ 7,768,090
|
|
|
|
|
|
|
Liabilities &
Equity:
|
|
|
|
|
Indebtedness:
|
|
|
|
|
Revolving credit
facilities
|
$
226,433
|
|
$
279,865
|
|
Unsecured debt
|
2,158,931
|
|
2,043,582
|
|
Mortgage and other secured
debt
|
1,840,357
|
|
1,978,553
|
|
|
4,225,721
|
|
4,302,000
|
|
Dividends
payable
|
23,585
|
|
12,092
|
|
Equity derivative
liability (G)
|
—
|
|
96,237
|
|
Other
liabilities
|
249,557
|
|
223,074
|
|
Total
liabilities
|
4,498,863
|
|
4,633,403
|
|
|
|
|
|
|
Preferred shares (L)
|
375,000
|
|
555,000
|
|
Common shares (M)
|
27,708
|
|
25,627
|
|
Paid-in-capital (G)
|
4,136,752
|
|
3,868,990
|
|
Accumulated distributions in
excess of net income
|
(1,469,432)
|
|
(1,378,341)
|
|
Deferred compensation
obligation
|
12,781
|
|
14,318
|
|
Accumulated other comprehensive
income
|
1,885
|
|
25,646
|
|
Less: Common shares in
treasury at cost
|
(13,347)
|
|
(14,638)
|
|
Non-controlling
interests
|
32,971
|
|
38,085
|
|
Total equity
|
3,104,318
|
|
3,134,687
|
|
|
$ 7,603,181
|
|
$ 7,768,090
|
|
|
|
|
|
|
|
DDR
Corp.
|
|
Financial
Highlights
|
|
|
(A) Base and percentage rental revenues for the nine-month
period ended September 30, 2011, as
compared to the prior-year comparable period, increased
$6.5 million. This increase
consisted of increased leasing activity at comparable portfolio
properties, contributing $4.0 million
and the acquisition of interests in five shopping centers,
generating an additional $3.7 million
in revenues offset by a net decrease in revenues from development
and redevelopment assets of $1.2
million. Included in rental revenues for the
nine-month periods ended September 30,
2011 and 2010, is approximately $0.2
million and $1.7 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,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Lease termination
fees
|
|
$ 2.6
|
|
$ 0.5
|
|
$ 3.9
|
|
$ 4.1
|
|
Financing fees
|
|
—
|
|
0.3
|
|
0.3
|
|
0.7
|
|
Other miscellaneous
|
|
—
|
|
0.2
|
|
0.5
|
|
2.0
|
|
|
|
$ 2.6
|
|
$ 1.0
|
|
$ 4.7
|
|
$ 6.8
|
|
|
|
|
|
|
|
|
|
|
|
|
(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,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Bad debt
expense
|
|
$ 2.3
|
|
$ 2.9
|
|
$ 7.1
|
|
$ 10.2
|
|
Ground rent expense
(1)
|
|
1.1
|
|
1.2
|
|
3.2
|
|
3.7
|
|
|
|
|
|
|
|
|
|
|
(1) Includes non-cash expense of
approximately $0.5 million for both of the three-month periods
ended September 30, 2011 and 2010, and approximately $1.5 million
for both of the nine-month periods ended September 30, 2011 and
2010, related to straight-line ground rent expense.
|
|
|
(D) The Company recorded impairment charges during the three-
and nine-month periods ended September 30,
2011 and 2010, on the following (in millions):
|
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
Land held for
development (1)
|
|
$ 40.2
|
|
$
—
|
|
$ 40.2
|
|
$ 54.3
|
|
Undeveloped
land
|
|
2.0
|
|
—
|
|
5.9
|
|
5.0
|
|
Assets marketed for
sale
|
|
9.0
|
|
—
|
|
22.4
|
|
—
|
|
Total continuing
operations
|
|
51.2
|
|
—
|
|
68.5
|
|
59.3
|
|
|
|
|
|
|
|
|
|
|
|
Sold assets or assets held
for sale (2)
|
|
2.4
|
|
7.1
|
|
11.3
|
|
48.4
|
|
Assets formerly occupied
by Mervyns (3)
|
|
—
|
|
—
|
|
—
|
|
35.3
|
|
Total
discontinued operations
|
|
2.4
|
|
7.1
|
|
11.3
|
|
83.7
|
|
Joint venture
investments
|
|
—
|
|
—
|
|
1.6
|
|
—
|
|
Total impairment
charges
|
|
$ 53.6
|
|
$ 7.1
|
|
$ 81.4
|
|
$ 143.0
|
|
|
|
|
|
|
|
|
|
|
(1) The 2011 impairment charges
primarily related to land held for development in Yaroslavl, Russia
and Brampton, Canada. The asset impairments were triggered by
the execution of agreements during the third quarter for the sale
of the Company's interest in these projects. The 2010
impairment charges related to land held for development in
Togliatti and Yaroslavl, Russia. The Company's proportionate
share of the impairment charges was $36.4 million and
$41.9 million after adjusting for the allocation of loss to
the non-controlling interest in the consolidated joint venture that
owns the Yaroslavl project for the nine months ended September 30,
2011 and 2010, respectively.
|
|
(2) See summary of discontinued
operations activity in note (K).
|
|
(3) The Company's proportionate
share of these impairments was $16.5 million after adjusting for
the allocation of loss to the non-controlling interest in this
previously consolidated joint venture for the nine-month period
ended September 30, 2010. These assets were deconsolidated in
the third quarter of 2010 and all operating results, including the
impairment charges, have been reclassified as discontinued
operations. See note (K).
|
|
|
|
|
(E) General and administrative expenses include internal leasing
salaries, legal salaries and related expenses associated with the
re-leasing of space, which are charged to operations as incurred.
For the nine-month periods ended September 30, 2011 and 2010, general and
administrative expenses were approximately 5.3% and 5.0% of total
revenues, respectively, including joint venture and managed
property revenues.
During the nine-month period ended September 30, 2011, the Company recorded a charge
of $11.0 million as a result of the
termination without cause of its Executive Chairman, the terms of
which were pursuant to his amended and restated employment
agreement. During the nine-month period ended September 30, 2010, the Company incurred a
$2.1 million separation charge
related to the departure of an executive officer. Excluding
these separation charges, general and administrative expenses were
4.4% and 4.9% of total revenues for the nine-month periods ended
September 30, 2011 and 2010,
respectively.
(F) The Company recorded the following in connection with its
outstanding convertible debt (in millions):
|
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Non-cash interest expense
related to
amortization of the debt
discount
|
|
$ 3.8
|
|
$ 1.4
|
|
$11.5
|
|
$ 5.2
|
|
Non-cash adjustment to (loss)
gain
on repurchase
|
|
0.1
|
|
—
|
|
0.1
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) Represents the non-cash impact of the valuation adjustments
for the equity derivative instruments (warrants) issued as part of
the share purchase transaction with the Otto Family completed in
2009. The warrants were exercised in full for cash in
March 2011 and the related equity
derivative liability was reclassified into paid-in-capital at the
date of exercise.
(H) Other income (expenses) were comprised of the following (in
millions):
|
|
|
|
Three-Month
Periods Ended
September
30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Litigation-related
expenses
|
|
$ —
|
|
$ (3.5)
|
|
$ (2.0)
|
|
$ (13.5)
|
|
Loss on sale of mezzanine
note receivable
|
|
—
|
|
—
|
|
(5.0)
|
|
—
|
|
Debt extinguishment gain
(costs)
|
|
0.5
|
|
0.3
|
|
0.3
|
|
(3.3)
|
|
Settlement of lease
liability obligation
|
|
—
|
|
—
|
|
2.6
|
|
—
|
|
Abandoned projects and
other expenses
|
|
(0.3)
|
|
(0.7)
|
|
(0.7)
|
|
(1.6)
|
|
|
|
$ 0.2
|
|
$ (3.9)
|
|
$ (4.8)
|
|
$ (18.4)
|
|
|
|
|
|
|
|
|
|
|
|
|
(I) At September 30, 2011 and
2010, the Company had an investment in joint ventures, excluding
consolidated joint ventures, in 184 and 198 shopping center
properties, respectively. See below for a summary of the
combined condensed operating results and select balance sheet data
of the Company's unconsolidated joint ventures.
(J) During the nine-month period ended September 30, 2011, the Company acquired its
partners' 50% interest in two shopping centers. The Company
accounted for both of these transactions as step acquisitions.
Due to the change in control that occurred, the Company
recorded an aggregate gain associated with the acquisitions related
to the difference between the Company's carrying value and fair
value of the previously held equity interest.
(K) The operating results relating to assets classified as
discontinued operations are summarized as follows (in
thousands):
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues from
operations
|
$ 1,563
|
|
$ 7,890
|
|
$ 10,782
|
|
$ 27,201
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
109
|
|
3,571
|
|
3,640
|
|
14,638
|
|
Impairment
charges
|
2,389
|
|
7,062
|
|
11,272
|
|
83,745
|
|
Interest, net
|
500
|
|
4,234
|
|
3,695
|
|
14,909
|
|
Depreciation
and amortization
|
474
|
|
2,440
|
|
3,495
|
|
9,899
|
|
Total expenses
|
3,472
|
|
17,307
|
|
22,102
|
|
123,191
|
|
Loss before disposition of
real estate
|
(1,909)
|
|
(9,417)
|
|
(11,320)
|
|
(95,990)
|
|
Gain on deconsolidation of
interests
|
4,716
|
|
5,221
|
|
4,716
|
|
5,221
|
|
(Loss) gain on disposition
of real estate, net
|
(8,033)
|
|
889
|
|
(15,052)
|
|
(2,602)
|
|
Net loss
|
$ (5,226)
|
|
$ (3,307)
|
|
$ (21,656)
|
|
$ (93,371)
|
|
|
|
|
|
|
|
|
|
|
|
(L) In April 2011, the Company
redeemed all of its 8.0% Class G cumulative redeemable
preferred shares. The Company recorded a non-cash charge of
approximately $6.4 million to
net loss available to common shareholders in the second quarter of
2011 related to the write-off of the original issuance costs.
(M) For purposes of computing FFO and operating FFO per share,
the following share information was used (in millions):
|
|
|
At September
30,
|
|
|
2011
|
|
2010
|
|
Common shares
outstanding
|
277.0
|
|
256.2
|
|
OP Units outstanding ("OP
Units")
|
0.4
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares
outstanding
|
276.8
|
|
251.2
|
|
270.4
|
|
243.3
|
|
Assumed conversion of OP
Units
|
0.4
|
|
0.4
|
|
0.4
|
|
0.4
|
|
FFO Weighted average common
shares
and OP Units –
Basic
|
277.2
|
|
251.6
|
|
270.8
|
|
243.7
|
|
Assumed conversion of
dilutive
securities
|
0.5
|
|
6.3
|
|
2.2
|
|
6.5
|
|
FFO and Operating FFO
Weighted
average common shares and
OP
Units – Diluted
|
277.7
|
|
257.9
|
|
273.0
|
|
250.2
|
|
|
|
|
|
|
|
|
|
|
|
|
DDR
Corp.
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,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues from operations
(A)
|
$ 174,735
|
|
$ 160,440
|
|
$ 518,279
|
|
$ 479,095
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
57,988
|
|
57,847
|
|
172,669
|
|
181,256
|
|
Impairment charges
(B)
|
63,041
|
|
65
|
|
63,041
|
|
65
|
|
Depreciation and amortization
of
real estate
investments
|
45,211
|
|
46,247
|
|
140,501
|
|
138,789
|
|
Interest
expense
|
56,574
|
|
52,532
|
|
170,580
|
|
169,330
|
|
|
222,814
|
|
156,691
|
|
546,791
|
|
489,440
|
|
(Loss) income from operations
before tax
expense and discontinued
operations
|
(48,079)
|
|
3,749
|
|
(28,512)
|
|
(10,345)
|
|
Income tax expense
|
(9,434)
|
|
(4,114)
|
|
(26,963)
|
|
(13,947)
|
|
Loss from continuing
operations
|
(57,513)
|
|
(365)
|
|
(55,475)
|
|
(24,292)
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
Income (loss) from operations
(C)
|
228
|
|
(7,583)
|
|
(244)
|
|
(19,742)
|
|
Gain on debt forgiveness
(D)
|
—
|
|
—
|
|
2,976
|
|
—
|
|
(Loss) gain on disposition
(E)
|
(593)
|
|
(13,340)
|
|
21,300
|
|
(25,303)
|
|
Loss before gain on disposition
of assets
|
(57,878)
|
|
(21,288)
|
|
(31,443)
|
|
(69,337)
|
|
Gain on disposition of
assets
|
—
|
|
—
|
|
—
|
|
17
|
|
Net loss
|
$ (57,878)
|
|
$ (21,288)
|
|
$ (31,443)
|
|
$ (69,320)
|
|
Non-controlling
interests
|
(6,570)
|
|
10
|
|
(11,564)
|
|
(253)
|
|
Net loss attributable to
unconsolidated joint ventures
|
(64,448)
|
|
(21,278)
|
|
(43,007)
|
|
(69,573)
|
|
Net (loss) income at DDR's
ownership
interests (F)
|
$ (6,199)
|
|
$ (4,193)
|
|
$ 14,240
|
|
$ (4,362)
|
|
FFO at DDR's ownership
interests (G)
|
$ 7,569
|
|
$ 10,457
|
|
$ 35,158
|
|
$ 32,319
|
|
|
|
|
|
|
|
|
|
|
|
Combined condensed balance
sheets
|
|
|
September
30, 2011
|
|
December 31,
2010
|
|
|
|
|
|
|
Land
|
$ 1,519,924
|
|
$ 1,566,682
|
|
Buildings
|
4,646,659
|
|
4,783,841
|
|
Fixtures and tenant
improvements
|
162,398
|
|
154,292
|
|
|
6,328,981
|
|
6,504,815
|
|
Less: Accumulated
depreciation
|
(805,568)
|
|
(726,291)
|
|
|
5,523,413
|
|
5,778,524
|
|
Land held for development and
construction in progress (H)
|
258,986
|
|
174,237
|
|
Real estate, net
|
5,782,399
|
|
5,952,761
|
|
Cash and restricted
cash
|
342,013
|
|
122,439
|
|
Receivables, including
straight-line rent, net
|
108,486
|
|
111,569
|
|
Leasehold interests
|
9,426
|
|
10,296
|
|
Other assets, net
|
177,188
|
|
181,387
|
|
|
$ 6,419,512
|
|
$ 6,378,452
|
|
|
|
|
|
|
Mortgage debt (I)
|
$ 3,891,045
|
|
$ 3,940,597
|
|
Notes and accrued interest
payable to DDR
|
98,512
|
|
87,282
|
|
Other liabilities
|
227,569
|
|
186,333
|
|
|
4,217,126
|
|
4,214,212
|
|
Accumulated equity
|
2,202,386
|
|
2,164,240
|
|
|
$ 6,419,512
|
|
$ 6,378,452
|
|
|
|
|
|
|
|
DDR
Corp.
Summary
Results of Combined Unconsolidated Joint Ventures
|
|
|
(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,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Straight-line
rents
|
|
$1.0
|
|
$0.9
|
|
$3.6
|
|
$3.0
|
|
DDR's proportionate
share
|
|
0.2
|
|
0.1
|
|
0.9
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) For the three- and nine-month periods ended September 30, 2011, impairment charges were
recorded on four assets being marketed for sale, of which the
Company's proportionate share of the impairment charges was
approximately $6.2 million.
(C) For the three- and nine-month periods ended September 30,
2010, impairment charges aggregating $8.8 million and $19.7
million, respectively, were reclassified to discontinued operations
of which the Company's proportionate share was approximately $0.3
million and $0.7 million, respectively.
(D) Gain on debt forgiveness is related to one property owned by
an unconsolidated joint venture that was transferred to the lender
pursuant to a consensual foreclosure proceeding. The
operations of the asset have been reclassified as discontinued
operations in the combined condensed income statements for all
periods presented.
(E) Gain on disposition includes the sale of three properties by
three separate unconsolidated joint ventures in 2011. The
Company's proportionate share of the aggregate gain for the assets
sold for the nine-month period ended September 30, 2011 was approximately $10.5 million.
(F) Adjustments to the Company's share of joint venture equity
in net income or loss primarily is related 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,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Income (loss)
|
|
$ 3.6
|
|
$ (0.6)
|
|
$ 1.7
|
|
$ 0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) FFO from unconsolidated joint ventures are summarized as
follows (in millions):
|
|
|
Three-Month
Periods
Ended
September 30,
|
|
Nine-Month
Periods
Ended
September 30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Net loss attributable to
unconsolidated joint ventures
|
$ (64.5)
|
|
$ (21.3)
|
|
$ (43.0)
|
|
$ (69.6)
|
|
Gain on sale of real
estate
|
—
|
|
—
|
|
(22.7)
|
|
—
|
|
Depreciation and
amortization of real estate investments
|
45.4
|
|
47.8
|
|
138.5
|
|
149.8
|
|
FFO
|
$ (19.1)
|
|
$ 26.5
|
|
$ 72.8
|
|
$ 80.2
|
|
FFO at DDR ownership
interests
|
$ 7.6
|
|
$ 10.5
|
|
$ 35.2
|
|
$ 32.3
|
|
Operating FFO at DDR's
ownership interests (1)
|
$ 13.9
|
|
$ 13.6
|
|
$ 42.7
|
|
$ 38.7
|
|
DDR joint venture
distributions received, net (2)
|
$ 11.3
|
|
$ 7.3
|
|
$ 57.0
|
|
$ 29.3
|
|
|
|
|
|
|
|
|
|
|
|
(1) Excluded from operating FFO
is the Company's pro rata share of net charges included in equity
in net income of joint ventures primarily related to impairment
charges, gain on debt forgiveness and losses on the disposition of
assets as disclosed earlier in this press release.
|
|
(2) Includes loan repayments in
2011 of $23.0 million from the Company's unconsolidated joint
venture, which has assets located in Brazil.
|
|
|
(H) The Company's proportionate share of joint venture land held
for development and construction in progress aggregated
approximately $86.7 million and
$71.7 million at September 30, 2011 and December 31, 2010, respectively.
(I) The Company's proportionate share of joint venture debt
aggregated approximately $789.1
million and $833.8 million at
September 30, 2011 and December 31, 2010, respectively. The
$789.1 million includes approximately
$48.2 million of non-recourse debt
associated with joint ventures for which the Company has written
its investment down to zero and is receiving no allocation of
income, loss or FFO.
SOURCE DDR Corp.