BEACHWOOD, Ohio, Feb. 16, 2012 /PRNewswire/ -- DDR Corp. (NYSE:
DDR) today announced operating results for the fourth quarter ended
December 31, 2011.
(Logo: http://photos.prnewswire.com/prnh/20110912/CL65938LOGO
)
SIGNIFICANT 2011 ACTIVITY
- Generated operating FFO of $0.97
per diluted share for the full year 2011 and $0.26 per diluted share for the fourth quarter,
which excludes certain non-operating items
- Executed a total of 2,108 new leases and renewals for over 11.7
million square feet in 2011
- Executed 543 new leases and renewals for over 2.9 million
square feet in the fourth quarter
- Increased the portfolio leased rate to 93.6% at December 31, 2011, an increase of 100 basis
points year over year
- Generated positive leasing spreads for the full year 2011, with
new leases up 11.2% and renewals up 5.0%, for a blended spread of
6.1%
- Generated positive leasing spreads for the fourth quarter, with
new leases up 9.6% and renewals up 4.5%, for a blended spread of
5.8%
- Generated same store net operating income growth of 3.5% for
the full year 2011 as compared to 2010
- Generated same store net operating income growth of 2.9% for
the fourth quarter as compared to the fourth quarter of 2010
- Generated same store net operating income growth on a
sequential basis of 4.0% in the fourth quarter of 2011 as compared
to the third quarter of 2011
- Reduced consolidated debt-to-EBITDA to 7.26 in the fourth
quarter of 2011
- Completed $461 million of asset
sales in 2011 of which $247 million
were sold in the fourth quarter; DDR's total share of dispositions
in 2011 was $371 million,
$205 million of which was in the
fourth quarter
- Completed $270 million of wholly
owned acquisitions of prime assets in 2011 of which $80 million were completed in the fourth
quarter
"We are pleased to report another quarter of positive
operational trends within our portfolio. The strong property
level performance when combined with the execution of our internal
operating platform provided us with the ability to pursue
opportunistic capital raising events to further de-risk our balance
sheet while simultaneously expanding and improving the quality of
our asset base," commented DDR's president and chief executive
officer, Daniel B. Hurwitz.
FINANCIAL HIGHLIGHTS
The Company's fourth quarter operating funds from operations was
$72.1 million, or $0.26 per diluted share, before $24.7 million of net adjustments. The
Company's full year 2011 operating funds from operations was
$267.1 million, or $0.97 per diluted share, before $39.5 million of net adjustments.
The charges and gains, primarily non-cash, for the periods ended
December 31, 2011, are summarized as
follows (in millions):
|
|
|
|
Three
Months
|
|
Year
|
|
|
Non-cash impairment charges –
non-depreciable consolidated assets
|
|
$ 17.1
|
|
$ 63.2
|
|
|
Executive separation and related
compensation and benefit charges
|
|
1.4
|
|
12.4
|
|
|
Loss on debt retirement,
net
|
|
—
|
|
0.1
|
|
|
Non-cash gain on equity
derivative instruments (Otto Family warrants)
|
|
—
|
|
(21.9)
|
|
|
Other (income) expense,
net (1)
|
|
0.2
|
|
5.0
|
|
|
Equity in net income of joint
ventures – gain on sale of land, gain on debt extinguishment and
currency adjustments
|
|
(0.5)
|
|
(1.2)
|
|
|
Non-cash impairment of joint
venture investments on non-depreciable assets
|
|
—
|
|
1.6
|
|
|
Non-cash gain on change in
control and sale of interests, net
|
|
(2.5)
|
|
(25.2)
|
|
|
Discontinued operations – loss
on debt extinguishment
|
|
7.7
|
|
6.8
|
|
|
Discontinued operations –
non-cash gain on deconsolidation of interests
|
|
—
|
|
(4.7)
|
|
|
Gain on disposition of real
estate (land), net
|
|
1.4
|
|
0.9
|
|
|
Non-controlling interest –
portion of impairment charges allocated to outside
partners
|
|
(0.1)
|
|
(3.9)
|
|
|
Write-off of preferred share
original issuance costs
|
|
—
|
|
6.4
|
|
|
Total adjustments from FFO
to operating FFO
|
|
$ 24.7
|
|
$ 39.5
|
|
|
|
|
|
|
|
|
|
|
(1) Amounts included in
Other (income) expense are detailed as follows:
|
|
|
|
Three
Months
|
|
Year
|
|
Loss on sale of mezzanine note
receivable
|
|
$ —
|
|
$ 5.0
|
|
Litigation
expenditures
|
|
0.3
|
|
2.3
|
|
Settlement gain of lease
liability obligation
|
|
—
|
|
(2.6)
|
|
Debt extinguishment costs,
net
|
|
0.9
|
|
0.7
|
|
Other
|
|
(1.0)
|
|
(0.4)
|
|
|
|
$ 0.2
|
|
$ 5.0
|
|
|
|
|
|
|
|
|
Funds From Operations ("FFO") applicable to common
shareholders for the three-month period ended December 31, 2011, including the above net
adjustments, was $47.4 million, or
$0.17 per diluted share, which
compares to a FFO loss of $37.0
million, or $0.14 per diluted
share, for the prior-year comparable period. The increase in
FFO for the three-month period ended December 31, 2011, is primarily the result of a
decrease in impairment charges recorded on non-depreciable assets
(land) in the fourth quarter of 2011, lower income tax expense due
to a $49.9 million non-cash reserve
recorded in the fourth quarter of 2010 and 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 year ended
December 31, 2011, including the
above net adjustments, was $227.6
million, or $0.75 per diluted
share, which compares to FFO of $76.3
million, or $0.30 per diluted
share, for the prior year. The increase in FFO for the year
ended December 31, 2011, is primarily
the result of the gain on change in control and sale of interests
related to the Company's unconsolidated joint ventures; a reduction
in impairment charges recorded on non-depreciable assets (land);
lower income tax expense; and, the effect of the non-cash valuation
adjustments associated with the warrants partially offset by
executive separation charges 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 December 31, 2011, was
$1.8 million, or $0.01 per diluted share, which compares to a net
loss of $94.8 million, or
$0.37 per diluted share, for the
prior-year comparable period. Net loss applicable to common
shareholders for the year ended December 31,
2011, was $53.8 million, or
$0.28 per diluted share, which
compares to a net loss of $251.6
million, or $1.03 per diluted
share, for the prior year. The changes in net loss applicable
to common shareholders for the three-month period and year ended
December 31, 2011, is primarily due
to the same factors impacting FFO as explained above.
LEASING & PORTFOLIO OPERATIONS
The following results for the full year and fourth quarter of
2011, highlight continued strong leasing activity throughout the
portfolio:
- Executed 876 new leases aggregating 4.0 million square feet and
1,232 renewals aggregating approximately 7.7 million square feet of
which 239 new leases aggregating approximately 1.1 million square
feet and 304 renewals aggregating approximately 1.8 million square
feet were executed in the fourth quarter
- The portfolio leased rate was 93.6% at December 31, 2011, as compared to 92.6% at
December 31, 2010
- On a cash basis, rental rates for new leases increased by 11.2%
over prior rents and renewals increased by 5.0%, resulting in an
overall blended spread of 6.1% for the full year 2011; the fourth
quarter 2011 spreads on new leases increased by 9.6% and renewals
increased by 4.5%, resulting in an overall blended spread of 5.8%
- Same store net operating income ("NOI") increased by 3.5% for
the full year 2011 and 2.9% for the fourth quarter as compared to
the comparable periods in 2010; on a sequential basis, reported
same store NOI growth of 4.0% in the fourth quarter of 2011
compared to the third quarter of 2011
- Total portfolio average annualized base rent per occupied
square foot as of December 31, 2011
was $13.81, as compared to
$13.36 at December 31, 2010
ACQUISITIONS & INVESTMENTS
In January 2012, affiliates of the
Company and The Blackstone Group L.P. ("Blackstone") formed a joint
venture, which is expected to acquire a portfolio of 46 shopping
centers currently owned by EPN Group (the "EDT Retail Portfolio")
valued at approximately $1.4 billion,
including assumed debt of $640
million and at least $305
million of anticipated new financings. An affiliate of
Blackstone will own 95% of the common equity of the joint venture
and the remaining 5% interest will be owned by an affiliate of DDR.
DDR is also expected to invest $150
million in preferred equity in the venture with a fixed
dividend rate of 10%, and will continue to provide leasing and
management services for the portfolio. In addition, DDR will
have the right of first offer to acquire ten of the assets.
In the fourth quarter of 2011, the Company acquired Polaris
Towne Center in Columbus, Ohio, a
700,000 square-foot prime asset anchored by Target, Lowe's, Kroger,
Best Buy, T.J.Maxx, Old Navy and
ULTA, for a total purchase price of approximately $80 million. The Company assumed
$45.2 million of mortgage debt in
conjunction with this acquisition. This asset was purchased
in connection with the sale of Town Center Plaza in Leawood, Kansas to Glimcher Realty Trust for
approximately $139 million.
FINANCINGS
In January 2012, the Company
completed a forward sale agreement to issue 19.0 million of its
common shares at a price of $12.95
per share. The Company expects the settlement of the forward
sale agreements to be on or about June 29,
2012. The Company expects to use the net proceeds to
fund its investment in the joint venture with Blackstone as
previously described.
In January 2012, the Company
completed $353 million in new
long-term financings, comprised of a $250
million unsecured term loan ("Term Loan") and a $103 million mortgage loan ("Mortgage Loan").
These financings address the majority of the Company's 2012
consolidated debt maturities. The Term Loan consists of a
$200 million tranche that currently
bears interest at an annual rate of LIBOR plus 210 basis points and
matures on January 31, 2019; and a
$50 million tranche that currently
bears interest at an annual rate of LIBOR plus 170 basis points and
matures on January 31, 2017.
Borrowings on the Term Loan bear interest at LIBOR plus a
margin based upon DDR's long-term senior unsecured debt ratings.
Additionally, the Company entered into an interest rate swap
on the $200 million tranche to fix
the interest rate at 3.64%. Proceeds from the Term Loan will
be used to retire the remaining $180
million of convertible notes maturing in March 2012, reduce the outstanding balances under
the Company's revolving credit facilities, and for general
corporate purposes. The Mortgage Loan has a seven-year term
and bears interest at 3.4%.
DISPOSITIONS
The Company sold 13 consolidated assets, aggregating
approximately 1.2 million square feet, in the fourth quarter of
2011, generating gross proceeds of approximately $164.7 million. In addition, the Company
sold $30.6 million of consolidated
non-income producing assets or interests in assets. The
Company recorded an aggregate net gain of approximately
$54.3 million related to asset sales
in the fourth quarter of 2011.
In the fourth quarter of 2011, two of the Company's
unconsolidated joint ventures sold four shopping centers,
aggregating approximately 0.7 million square feet, generating gross
proceeds of approximately $51.3
million. The joint ventures recorded an aggregate net
loss of approximately $2.6 million
related to these asset sales, of which the Company's proportionate
share was approximately $0.3
million.
2012 GUIDANCE
There has been no change in guidance since the last update
provided on January 10, 2012.
The Company continues to estimate operating FFO for 2012
between $0.98 - $1.04 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.
The original NAREIT definition of FFO did not explicitly address
the treatment of impairment charges of depreciable real estate.
As a result, there were different industry views regarding
whether such charges should be excluded from FFO. The
Company's historical calculation of FFO included impairment charges
as well as losses on sale of depreciable real estate. On
October 31, 2011, NAREIT clarified
that the exclusion of impairment charges of depreciable real estate
is consistent with the definition of FFO. Further, NAREIT
indicated that it preferred for companies to restate previously
reported NAREIT FFO in order to provide consistent and comparable
presentation of FFO measures. As a result, in the fourth
quarter of 2011, the Company modified its definition of FFO to
comply with the NAREIT definition as it related to impairment
charges and losses on sale of depreciable real estate and related
investments. The Company has restated prior periods accordingly in
this release. In addition, the Company's presentation of
operating FFO will no longer reflect an adjustment for impairment
charges and losses on sale of depreciable real estate and related
investments.
FFO is defined and calculated by the Company as net income,
adjusted to exclude: (i) preferred share dividends, (ii) gains
and losses from disposition of depreciable real estate property,
which are presented net of taxes, (iii) impairment charges on
depreciable real estate property and related investments, (iv)
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. The Company
computes FFO in accordance with the NAREIT definition as affirmed
by NAREIT on October 31, 2011.
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, the
ability of the joint venture between affiliates of the Company and
Blackstone to successfully complete the acquisition of the EDT
Retail Portfolio; 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 buy or sell assets on
commercially reasonable terms; our ability to complete acquisitions
or dispositions of assets under contract; 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; the
success of our capital recycling strategy; and the finalization of
the financial statements for the three-month period and year ended
December 31, 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 481 value-oriented shopping
centers representing 123 million square feet in 39 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,
February 17, 2012, at 10:00 a.m. Eastern Time. To participate,
please dial 800.901.5217 (domestic), or 617.786.2964
(international) at least ten minutes prior to the scheduled start
of the call. When prompted, provide the passcode: 38873915.
Access to the live call and replay will also be available
through the Company's website. The replay will be available
through February 25, 2012.
DDR
Corp.
Financial
Highlights
(In
thousands)
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
Revenues:
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Minimum rents
(A)
|
$ 130,696
|
|
$ 127,337
|
|
$514,493
|
|
$ 506,065
|
|
Percentage and overage
rents (A)
|
2,730
|
|
2,448
|
|
6,457
|
|
5,827
|
|
Recoveries from
tenants
|
38,596
|
|
39,870
|
|
166,665
|
|
165,946
|
|
Ancillary and other property
income
|
8,042
|
|
6,492
|
|
29,346
|
|
20,990
|
|
Management, development and
other fee income
|
12,296
|
|
13,312
|
|
47,148
|
|
53,434
|
|
Other (B)
|
2,184
|
|
3,999
|
|
6,909
|
|
10,795
|
|
|
194,544
|
|
193,458
|
|
771,018
|
|
763,057
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating and maintenance
(C)
|
30,983
|
|
32,396
|
|
135,708
|
|
130,406
|
|
Real estate taxes
|
23,198
|
|
24,404
|
|
100,089
|
|
101,944
|
|
Impairment charges
(D)
|
45,654
|
|
25,578
|
|
101,815
|
|
84,855
|
|
General and
administrative (E)
|
19,911
|
|
23,028
|
|
85,221
|
|
85,573
|
|
Depreciation and
amortization
|
59,684
|
|
54,222
|
|
222,655
|
|
209,847
|
|
|
179,430
|
|
159,628
|
|
645,488
|
|
612,625
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest income
|
2,154
|
|
2,874
|
|
9,832
|
|
7,302
|
|
Interest expense
(F)
|
(57,667)
|
|
(57,141)
|
|
(229,718)
|
|
(215,322)
|
|
Gain (loss) on debt retirement,
net (F)
|
45
|
|
152
|
|
(89)
|
|
485
|
|
(Loss) gain on equity derivative
instruments (G)
|
—
|
|
(25,539)
|
|
21,926
|
|
(40,157)
|
|
Other (expense) income,
net (H)
|
(177)
|
|
(5,871)
|
|
(5,002)
|
|
(24,211)
|
|
|
(55,645)
|
|
(85,525)
|
|
(203,051)
|
|
(271,903)
|
|
Loss before earnings from equity
method investments and other items
|
(40,531)
|
|
(51,695)
|
|
(77,521)
|
|
(121,471)
|
|
Equity in net (loss) income of
joint ventures (I)
|
(2,217)
|
|
9,377
|
|
13,734
|
|
5,600
|
|
Impairment of joint venture
investments (D)
|
(1,250)
|
|
(227)
|
|
(2,921)
|
|
(227)
|
|
Gain on change in control of
interests and sale of interests, net (J)
|
2,461
|
|
—
|
|
25,170
|
|
—
|
|
Tax expense of taxable REIT
subsidiaries and state franchise and income taxes
(K)
|
(20)
|
|
(49,496)
|
|
(1,044)
|
|
(47,952)
|
|
Loss from continuing
operations
|
(41,557)
|
|
(92,041)
|
|
(42,582)
|
|
(164,050)
|
|
Income (loss) from discontinued
operations (L)
|
48,112
|
|
6,575
|
|
16,106
|
|
(84,989)
|
|
Income (loss) before gain on
disposition of real estate
|
6,555
|
|
(85,466)
|
|
(26,476)
|
|
(249,039)
|
|
(Loss) gain on disposition of
real estate, net of tax
|
(1,380)
|
|
1,257
|
|
7,079
|
|
1,318
|
|
Net income (loss)
|
5,175
|
|
(84,209)
|
|
(19,397)
|
|
(247,721)
|
|
Loss (income) attributable to
non-controlling interests
|
31
|
|
(17)
|
|
3,543
|
|
38,363
|
|
Net income (loss) attributable
to DDR
|
$ 5,206
|
|
$ (84,226)
|
|
$ (15,854)
|
|
$ (209,358)
|
|
Net loss applicable to common
shareholders
|
$ (1,761)
|
|
$ (94,793)
|
|
$ (53,843)
|
|
$ (251,627)
|
|
Funds From Operations
("FFO"):
|
|
|
|
|
|
|
|
|
Net loss applicable to common
shareholders
|
$ (1,761)
|
|
$ (94,793)
|
|
$ (53,843)
|
|
$ (251,627)
|
|
Depreciation and amortization of
real estate investments
|
58,081
|
|
55,399
|
|
221,278
|
|
217,167
|
|
Equity in net loss (income) of
joint ventures (I)
|
2,217
|
|
(9,377)
|
|
(13,734)
|
|
(5,600)
|
|
Impairment of depreciable joint
venture investments
|
1,250
|
|
227
|
|
1,285
|
|
227
|
|
Joint ventures' FFO
(I)
|
14,234
|
|
17,345
|
|
57,604
|
|
54,737
|
|
Non-controlling interests (OP
Units)
|
32
|
|
8
|
|
88
|
|
32
|
|
Impairment of depreciable real
estate assets, net of non-controlling interests
|
29,037
|
|
3,300
|
|
62,683
|
|
68,240
|
|
Gain on disposition of
depreciable real estate, net
|
(55,675)
|
|
(9,080)
|
|
(47,751)
|
|
(6,837)
|
|
FFO applicable to common
shareholders
|
47,415
|
|
(36,971)
|
|
227,610
|
|
76,339
|
|
Write-off of preferred share
original issuance costs (M)
|
—
|
|
—
|
|
6,402
|
|
—
|
|
Preferred dividends
|
6,967
|
|
10,567
|
|
31,587
|
|
42,269
|
|
FFO
|
$ 54,382
|
|
$ (26,404)
|
|
$ 265,599
|
|
$ 118,608
|
|
Per share data:
|
|
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic
|
$
(0.01)
|
|
$
(0.37)
|
|
$
(0.20)
|
|
$
(1.03)
|
|
Diluted
|
$
(0.01)
|
|
$
(0.37)
|
|
$
(0.28)
|
|
$
(1.03)
|
|
Basic – average shares
outstanding
|
274,718
|
|
253,872
|
|
270,278
|
|
244,712
|
|
Diluted – average shares
outstanding
|
274,718
|
|
253,872
|
|
271,472
|
|
244,712
|
|
Dividends Declared
|
$
0.08
|
|
$
0.02
|
|
$
0.22
|
|
$
0.08
|
|
Funds From Operations –
Basic (N)
|
$
0.17
|
|
$
(0.14)
|
|
$
0.84
|
|
$
0.31
|
|
Funds From Operations –
Diluted (N)
|
$
0.17
|
|
$
(0.14)
|
|
$
0.75
|
|
$
0.30
|
|
|
|
|
|
|
|
|
|
|
|
DDR
Corp.
Financial
Highlights
(In
thousands)
|
|
Selected Balance Sheet
Data
|
|
|
|
|
|
December 31,
2011
|
|
December 31,
2010
|
|
Assets:
|
|
|
|
|
Real estate and rental
property:
|
|
|
|
|
Land
|
$ 1,844,125
|
|
$ 1,837,403
|
|
Buildings
|
5,461,122
|
|
5,491,489
|
|
Fixtures and tenant
improvements
|
379,965
|
|
339,129
|
|
|
7,685,212
|
|
7,668,021
|
|
Less: Accumulated
depreciation
|
(1,550,066)
|
|
(1,452,112)
|
|
|
6,135,146
|
|
6,215,909
|
|
Land held
for development and construction in progress
|
581,627
|
|
743,218
|
|
Real estate held for sale,
net
|
2,290
|
|
—
|
|
Real estate, net
|
6,719,063
|
|
6,959,127
|
|
|
|
|
|
|
Investments in and advances to
joint ventures
|
353,907
|
|
417,223
|
|
Cash
|
41,206
|
|
19,416
|
|
Restricted cash
|
30,983
|
|
28,139
|
|
Notes receivable, net
|
93,905
|
|
120,330
|
|
Receivables, including
straight-line rent, net
|
117,463
|
|
123,259
|
|
Other assets, net
|
112,898
|
|
100,596
|
|
|
$ 7,469,425
|
|
$ 7,768,090
|
|
|
|
|
|
|
Liabilities &
Equity:
|
|
|
|
|
Indebtedness:
|
|
|
|
|
Revolving credit
facilities
|
$
142,421
|
|
$
279,865
|
|
Unsecured debt
|
2,139,718
|
|
2,043,582
|
|
Mortgage and other secured
debt
|
1,822,445
|
|
1,978,553
|
|
|
4,104,584
|
|
4,302,000
|
|
Equity derivative
liability
|
—
|
|
96,237
|
|
Dividends
payable
|
29,128
|
|
12,092
|
|
Other
liabilities
|
257,821
|
|
223,074
|
|
Total
liabilities
|
4,391,533
|
|
4,633,403
|
|
|
|
|
|
|
Preferred shares
(L)
|
375,000
|
|
555,000
|
|
Common shares
(M)
|
27,711
|
|
25,627
|
|
Paid-in-capital
(G)
|
4,138,812
|
|
3,868,990
|
|
Accumulated distributions in
excess of net income
|
(1,493,353)
|
|
(1,378,341)
|
|
Deferred compensation
obligation
|
13,934
|
|
14,318
|
|
Accumulated other comprehensive
income
|
(1,403)
|
|
25,646
|
|
Less: Common shares in
treasury at cost
|
(15,017)
|
|
(14,638)
|
|
Non-controlling
interests
|
32,208
|
|
38,085
|
|
Total equity
|
3,077,892
|
|
3,134,687
|
|
|
$ 7,469,425
|
|
$ 7,768,090
|
|
|
|
|
|
|
|
(A) Base and percentage rental revenues for the year ended
December 31, 2011, as compared to the
prior year increased $10.4 million.
This increase consisted of increased leasing activity at
comparable portfolio properties, contributing $4.4 million, the acquisition of interests in six
shopping centers, generating an additional $7.7 million in revenues offset by a net decrease
in revenues from development and redevelopment assets of
$1.7 million. Included in
rental revenues for the years ended December
31, 2011 and 2010, is approximately $0.9 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
December 31,
|
|
Years
Ended
December
31,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Lease termination
fees
|
|
$ 2.0
|
|
$ 3.4
|
|
$ 5.9
|
|
$ 7.5
|
|
Financing fees
|
|
0.1
|
|
0.5
|
|
0.4
|
|
1.2
|
|
Other miscellaneous
|
|
0.1
|
|
0.1
|
|
0.6
|
|
2.1
|
|
|
|
$ 2.2
|
|
$ 4.0
|
|
$ 6.9
|
|
$ 10.8
|
|
|
|
|
|
|
|
|
|
|
|
|
(C) Operating and maintenance expense, including
discontinued operations, includes the following expenses (in
millions):
|
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Bad debt
expense
|
|
$ 2.0
|
|
$ 3.2
|
|
$ 9.1
|
|
$ 13.4
|
|
Ground rent expense
(1)
|
|
1.1
|
|
1.2
|
|
4.2
|
|
4.9
|
|
(1) Includes non-cash
expense of approximately $0.5 million for both of the
three-month periods ended
December 31, 2011 and 2010, and approximately
$2.0 million for both of the
years ended December 31, 2011 and 2010, related
to straight-line ground rent
expense.
|
|
|
|
|
|
|
|
|
|
|
(D) The Company recorded impairment charges during both
the three-month periods and years ended December 31, 2011 and 2010, on the following (in
millions):
|
|
|
|
Three-Month
Periods
Ended December
31,
|
|
Years
Ended
December 31,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
Land held for
development (1)
|
|
$ 14.0
|
|
$
—
|
|
$ 54.2
|
|
$ 54.3
|
|
Undeveloped
land
|
|
3.1
|
|
25.6
|
|
9.0
|
|
30.5
|
|
Assets marketed for
sale
|
|
28.5
|
|
—
|
|
38.6
|
|
—
|
|
Total continuing
operations
|
|
45.6
|
|
25.6
|
|
101.8
|
|
84.8
|
|
|
|
|
|
|
|
|
|
|
|
Sold assets or assets held
for sale (2)
|
|
0.5
|
|
3.3
|
|
24.0
|
|
51.8
|
|
Assets formerly occupied
by Mervyns (3)
|
|
—
|
|
—
|
|
—
|
|
35.3
|
|
Total
discontinued operations
|
|
0.5
|
|
3.3
|
|
24.0
|
|
87.1
|
|
Joint venture
investments
|
|
1.3
|
|
0.2
|
|
2.9
|
|
0.2
|
|
Total impairment
charges
|
|
$ 47.4
|
|
$ 29.1
|
|
$ 128.7
|
|
$ 172.1
|
|
(1) The 2011 impairment
charges were primarily related to land held for development in
Russia and Canada. The asset impairments primarily were
triggered by the execution of agreements for the sale or partial
sale of the Company's interest in these projects. The land
held for development in Brampton, Canada was impaired in the third
quarter of 2011 and sold in the fourth quarter of 2011. The
2010 impairment charges were related to land held for development
in Russia. The Company's proportionate share of the
impairment charges was $50.4 million and $41.9 million after
adjusting for the allocation of loss to the non-controlling
interest in the consolidated joint venture that owns certain of the
projects for the years ended December 31, 2011 and 2010,
respectively.
(2) See summary of
discontinued operations activity in note (L).
(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 year
ended December 31, 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 (L).
|
|
|
|
|
|
|
|
|
|
|
(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 both the years ended December 31, 2011 and 2010, general and
administrative expenses were approximately 5.2% of total revenues,
including joint venture and managed property revenues.
During the year ended December 31,
2011, the Company recorded a charge of $12.4 million primarily related to the
termination without cause of its Executive Chairman, the terms of
which were pursuant to his amended and restated employment
agreement. During the year ended December 31, 2010, the Company incurred
$5.3 million in employee separation
charges. Excluding these separation charges, general and
administrative expenses were 4.4% and 4.9% of total revenues for
the years ended December 31, 2011 and
2010, respectively.
(F) The Company recorded the following in connection with
its outstanding convertible debt (in millions):
|
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Non-cash interest expense
related to amortization of the debt discount
|
|
$ 3.4
|
|
$ 3.0
|
|
$14.9
|
|
$ 8.2
|
|
Non-cash adjustment to
(loss) gain on repurchase
|
|
—
|
|
0.1
|
|
0.1
|
|
4.9
|
|
|
|
|
|
|
|
|
|
|
|
|
(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
December
31,
|
|
Years
Ended
December
31,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Litigation-related
expenses
|
|
$ (0.3)
|
|
$ (1.0)
|
|
$ (2.3)
|
|
$ (14.6)
|
|
Loss on sale of mezzanine
note receivable
|
|
—
|
|
—
|
|
(5.0)
|
|
—
|
|
Debt extinguishment costs,
net
|
|
(0.9)
|
|
(0.5)
|
|
(0.7)
|
|
(3.7)
|
|
Lease liability obligation
and related settlement gain
|
|
—
|
|
(3.3)
|
|
2.6
|
|
(3.3)
|
|
Abandoned projects and
other (expenses) income
|
|
1.0
|
|
(1.1)
|
|
0.4
|
|
(2.6)
|
|
|
|
$ (0.2)
|
|
$ (5.9)
|
|
$ (5.0)
|
|
$ (24.2)
|
|
|
|
|
|
|
|
|
|
|
|
|
(I) At December 31, 2011 and
2010, the Company had an investment in joint ventures, excluding
consolidated joint ventures, in 177 and 189 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 year ended December
31, 2011, the Company acquired its partners' 50% interest in
two shopping centers. The Company accounted for both of these
transactions as step acquisitions. In December 2011, the Company sold its 10% interest
in an unconsolidated joint venture, which owned three shopping
centers, to its partner. In December
2011, the Company also sold its 50% interest in an
unconsolidated joint venture, which owned a development project in
Oconomowoc, Wisconsin, to its
partner. Due to the changes in control that occurred, the
Company recorded an aggregate net gain associated with these
transactions related to the difference between the Company's
carrying value and fair value of the previously held equity
interest.
(K) In the fourth quarter of 2010, the Company incurred a
non-cash income tax expense of $49.9
million recognized due to the establishment of a reserve
against certain deferred tax assets within its taxable REIT
subsidiary ("TRS"). Based upon the continued loss activity
recognized by the TRS, including a 2010 fourth quarter impairment
and lease liability charge of $22.3
million associated with an abandoned development project, it
was determined that it was more likely than not that the deferred
tax assets would not be usable, thus requiring a reserve.
(L) The operating results related to assets classified as
discontinued operations are summarized as follows (in
thousands):
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues from
operations
|
$ 3,398
|
|
$ 10,910
|
|
$ 27,798
|
|
$ 52,027
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
1,473
|
|
3,164
|
|
10,174
|
|
22,112
|
|
Impairment
charges
|
461
|
|
3,300
|
|
24,029
|
|
87,045
|
|
Interest, net
|
636
|
|
2,771
|
|
7,500
|
|
20,989
|
|
Debt extinguishment costs,
net
|
7,698
|
|
—
|
|
7,191
|
|
409
|
|
Depreciation
and amortization
|
657
|
|
3,477
|
|
7,677
|
|
17,457
|
|
Total expenses
|
10,925
|
|
12,712
|
|
56,571
|
|
148,012
|
|
Loss before disposition of
real estate
|
(7,527)
|
|
(1,802)
|
|
(28,773)
|
|
(95,985)
|
|
Gain on deconsolidation of
interests
|
—
|
|
—
|
|
4,716
|
|
5,221
|
|
Gain on disposition of
real estate, net
|
55,639
|
|
8,377
|
|
40,163
|
|
5,775
|
|
Net gain (loss)
|
$ 48,112
|
|
$ 6,575
|
|
$ 16,106
|
|
$ (84,989)
|
|
|
|
|
|
|
|
|
|
|
|
(M) 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.
(N) For purposes of computing FFO and operating FFO per
share, the following share information was used (in millions):
|
|
|
At December
31,
|
|
|
2011
|
|
2010
|
|
Common shares
outstanding
|
276.9
|
|
256.2
|
|
OP Units outstanding ("OP
Units")
|
0.4
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
277.0
|
|
256.2
|
|
272.1
|
|
246.6
|
|
Assumed conversion of OP
Units
|
0.4
|
|
0.4
|
|
0.4
|
|
0.4
|
|
FFO Weighted average common
shares and OP Units – Basic
|
277.4
|
|
256.6
|
|
272.5
|
|
247.0
|
|
FFO Weighted average common
shares and OP Units – Diluted for FFO Loss
|
N/A
|
|
256.6
|
|
N/A
|
|
N/A
|
|
Assumed conversion of dilutive
securities
|
0.7
|
|
8.2
|
|
1.9
|
|
7.4
|
|
FFO Weighted average common
shares and OP Units – Diluted for FFO Income
|
278.1
|
|
N/A
|
|
274.4
|
|
254.4
|
|
Operating FFO Weighted average
common shares and OP Units – Diluted
|
278.1
|
|
264.8
|
|
274.4
|
|
254.4
|
|
|
|
|
|
|
|
|
|
|
|
|
DDR
Corp.
Summary
Results of Combined Unconsolidated Joint Ventures
(In
thousands)
Combined condensed income
statements
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues from
operations (A)
|
$ 177,286
|
|
$ 167,066
|
|
$ 697,103
|
|
$ 649,225
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
56,960
|
|
59,125
|
|
235,370
|
|
247,408
|
|
Impairment charges
(B)
|
209,421
|
|
—
|
|
213,296
|
|
65
|
|
Depreciation and amortization of
real estate investments
|
44,872
|
|
46,384
|
|
182,545
|
|
182,667
|
|
Interest
expense
|
57,755
|
|
57,911
|
|
227,597
|
|
226,304
|
|
|
369,008
|
|
163,420
|
|
858,808
|
|
656,444
|
|
(Loss) income before other
items
|
(191,722)
|
|
3,646
|
|
(161,705)
|
|
(7,219)
|
|
Income tax expense
|
(11,887)
|
|
(6,502)
|
|
(38,850)
|
|
(20,449)
|
|
Other income
|
—
|
|
10,591
|
|
—
|
|
10,591
|
|
(Loss) income from continuing
operations
|
(203,609)
|
|
7,735
|
|
(200,555)
|
|
(17,077)
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
Income (loss) from
operations (C)
|
807
|
|
(1,026)
|
|
(57,947)
|
|
(20,247)
|
|
Gain on debt forgiveness
(D)
|
—
|
|
—
|
|
2,976
|
|
—
|
|
(Loss) gain on
disposition (E)
|
(2,595)
|
|
(1,371)
|
|
18,705
|
|
(26,674)
|
|
(Loss) income before gain on
disposition of assets
|
(205,397)
|
|
5,338
|
|
(236,821)
|
|
(63,998)
|
|
Gain on disposition of
assets
|
1,751
|
|
—
|
|
1,733
|
|
17
|
|
Net (loss)
income
|
(203,646)
|
|
5,338
|
|
(235,088)
|
|
(63,981)
|
|
Non-controlling
interests
|
(4,568)
|
|
(204)
|
|
(16,132)
|
|
(458)
|
|
Net (loss) income attributable
to unconsolidated joint ventures
|
$ (208,214)
|
|
$
5,134
|
|
$(251,220)
|
|
$ (64,439)
|
|
Net (loss) income at DDR's
ownership interests (F)
|
$ (27,219)
|
|
$ 10,676
|
|
$ (12,979)
|
|
$ 6,319
|
|
FFO at DDR's ownership
interests (G)
|
$ 14,234
|
|
$ 17,345
|
|
$ 57,604
|
|
$ 54,737
|
|
|
|
|
|
|
|
|
|
|
|
Combined condensed balance
sheets
|
|
|
December
31,
2011
|
|
December
31,
2010
|
|
|
|
|
|
|
Land
|
$ 1,400,469
|
|
$ 1,566,682
|
|
Buildings
|
4,334,097
|
|
4,783,841
|
|
Fixtures and tenant
improvements
|
189,940
|
|
154,292
|
|
|
5,924,506
|
|
6,504,815
|
|
Less: Accumulated
depreciation
|
(808,352)
|
|
(726,291)
|
|
|
5,116,154
|
|
5,778,524
|
|
Land held for development and
construction
in progress
(H)
|
239,036
|
|
174,237
|
|
Real estate, net
|
5,355,190
|
|
5,952,761
|
|
Cash and restricted
cash
|
308,008
|
|
122,439
|
|
Receivables, including
straight-line rent, net
|
108,038
|
|
111,569
|
|
Leasehold interests
|
9,136
|
|
10,296
|
|
Other assets, net
|
168,115
|
|
181,387
|
|
|
$ 5,948,487
|
|
$ 6,378,452
|
|
|
|
|
|
|
Mortgage debt
(I)
|
$ 3,742,241
|
|
$ 3,940,597
|
|
Notes and accrued interest
payable to DDR
|
100,470
|
|
87,282
|
|
Other liabilities
|
214,370
|
|
186,333
|
|
|
4,057,081
|
|
4,214,212
|
|
Accumulated equity
|
1,891,406
|
|
2,164,240
|
|
|
$ 5,948,487
|
|
$ 6,378,452
|
|
|
|
|
|
|
|
(A) Revenues for the three-month periods and years ended
include the following (in millions):
|
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Straight-line
rents
|
|
$1.0
|
|
$ 1.0
|
|
$4.6
|
|
$ 3.9
|
|
DDR's proportionate
share
|
|
—
|
|
0.2
|
|
0.9
|
|
0.6
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) For the three-month period and year ended December 31, 2011, impairment charges were
recorded primarily on assets that are in the process of being
recapitalized of which the Company's proportionate share of the
charges was approximately $6.7
million and $7.1 million,
respectively.
(C) For the year ended December 31, 2011, impairment
charges associated with depreciable asset sales aggregating $59.2
million were reclassified to discontinued operations of which the
Company's proportionate share was approximately $5.8 million.
For the three-month period and year ended December 31, 2010,
impairment charges associated with depreciable asset sales
aggregating $1.3 million and $21.0 million, respectively, were
reclassified to discontinued operations of which the Company's
proportionate share was zero for the three-month period and
approximately $0.7 million for the year.
(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) Reflects the sale of seven properties by four separate
unconsolidated joint ventures in 2011. The Company's
proportionate share of the aggregate net gain for the assets sold
for the year ended December 31, 2011
was approximately $10.2 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
December 31,
|
|
Years
Ended
December
31,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Income (loss)
|
|
$ 25.0
|
|
$ (1.2)
|
|
$ 26.7
|
|
$ (0.7)
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) FFO from unconsolidated joint ventures are summarized
as follows (in millions):
|
|
|
Three-Month
Periods
Ended
December 31,
|
|
Years
Ended
December
31,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Net (loss) income
attributable to unconsolidated joint ventures
|
$ (208.2)
|
|
$ 5.1
|
|
$ (251.2)
|
|
$ (64.4)
|
|
Loss (gain) on sale of
depreciable real estate
|
2.6
|
|
1.4
|
|
(18.7)
|
|
26.7
|
|
Impairment of
depreciable real estate assets
|
209.4
|
|
1.3
|
|
272.5
|
|
21.0
|
|
Depreciation and
amortization of real estate investments
|
44.2
|
|
48.5
|
|
182.7
|
|
198.3
|
|
FFO
|
$ 48.0
|
|
$ 56.3
|
|
$ 185.3
|
|
$ 181.6
|
|
FFO at DDR ownership
interests
|
$ 14.2
|
|
$ 17.3
|
|
$ 57.6
|
|
$ 54.7
|
|
Operating FFO at DDR's
ownership interests (1)
|
$ 13.7
|
|
$ 15.4
|
|
$ 56.4
|
|
$ 54.1
|
|
DDR joint venture
distributions received, net (2)
|
$ 6.1
|
|
$ 24.5
|
|
$ 63.2
|
|
$ 53.8
|
|
(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 on non-depreciable real estate
assets, gain on debt forgiveness and losses on the disposition of
non-depreciable real estate assets as disclosed earlier in this
press release.
(2) Includes loan
repayments in 2011 of $22.4 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 $75.9 million and
$71.7 million at December 31, 2011 and December 31, 2010, respectively.
(I) The Company's proportionate share of joint venture
debt aggregated approximately $772.9
million and $833.8 million at
December 31, 2011 and December 31, 2010, respectively. The
$772.9 million includes approximately
$48.1 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.