BEACHWOOD, Ohio, July 28, 2011 /PRNewswire/ -- Developers
Diversified Realty Corporation (NYSE: DDR) today announced
operating results for the quarter ended June
30, 2011.
SIGNIFICANT SECOND QUARTER ACTIVITY
- Reported operating FFO of $0.23
per diluted share, which excludes certain non-operating items
- Continued strong leasing performance with the execution of 483
total leases and renewals for over 2.5 million square feet
- Increased the portfolio leased rate to 93.0% at June 30, 2011 from 92.6% at March 31, 2011 and 91.9% at June 30, 2010
- Generated positive leasing spreads, with new leases at 10.8%
and renewals at 4.9% for a blended overall spread of 6.0%, which
represents a continued improvement from the blended spread of 5.4%
in the first quarter of 2011 and the blended spread of 3.9% in the
second quarter of 2010
- Reported same store net operating income growth of 3.6% as
compared to an increase of 1.5% in the second quarter of 2010
- Completed $112 million of asset
sales, of which the Company's pro-rata share was $87 million
- Refinanced its secured term loan, extending the final maturity
to September 2015
- Amended two senior unsecured revolving credit facilities
providing $815 million of borrowing
capacity through the final maturity of February 2016
"We remain encouraged by the continued strong leasing volume and
resulting leasing spreads within our portfolio driven by the demand
and flexibility exhibited by retailers for quality space,"
commented DDR's president and chief executive officer, Daniel B. Hurwitz. "The successful
refinancing of the term loan and revolving credit facilities was
the final step of our capital restructuring and allows us to focus
on corporate growth opportunities with significant financial
flexibility."
FINANCIAL HIGHLIGHTS
The Company's second quarter operating Funds From Operations
("FFO") was $64.4 million, or
$0.23 per diluted share, before
$40.3 million of net adjustments.
The net adjustments exclude the Company's share of
approximately $13.6 million in gains
recognized on asset sales already excluded from FFO.
The charges and gains, primarily non-cash, for the periods ended
June 30, 2011, are summarized as
follows (in millions):
|
|
|
|
Three
Months
|
|
Six
Months
|
|
Non-cash impairment charges –
consolidated assets
|
|
$ 18.4
|
|
$ 22.2
|
|
Executive separation
charge
|
|
—
|
|
10.7
|
|
Non-cash gain on equity
derivative instruments (Otto Family warrants)
|
|
—
|
|
(21.9)
|
|
Other expense, net
(1)
|
|
6.3
|
|
5.0
|
|
Equity in net income of joint
ventures – (gain) on debt extinguishment and loss on asset
sales
|
|
(0.5)
|
|
1.1
|
|
Impairment of joint venture
investments
|
|
1.6
|
|
1.6
|
|
Gain on change in control of
interests
|
|
(1.0)
|
|
(22.7)
|
|
Discontinued operations –
non-cash consolidated impairment charges and loss on
sales
|
|
10.2
|
|
12.0
|
|
Gain on disposition of real
estate (land), net
|
|
(1.1)
|
|
—
|
|
Write-off of original preferred
share issuance costs
|
|
6.4
|
|
6.4
|
|
Total adjustments from FFO
to operating FFO
|
|
$ 40.3
|
|
$ 14.4
|
|
(1) Amounts included in Other
expense are detailed as follows:
|
|
|
|
|
|
Three
Months
|
|
Six
Months
|
|
Loss on sale of mezzanine note receivable
|
|
$
5.0
|
|
$
5.0
|
|
Litigation expenditures
|
|
1.2
|
|
2.2
|
|
Settlement gain of lease liability obligation
|
|
-
|
|
(2.6)
|
|
Debt extinguishment costs
|
|
-
|
|
0.2
|
|
Other
|
|
0.1
|
|
0.2
|
|
|
|
$
6.3
|
|
$
5.0
|
|
|
|
|
|
|
|
|
|
FFO applicable to common shareholders for the three-month period
ended June 30, 2011, including the
above net adjustments, was $24.1
million, or $0.09 per diluted
share, which compares to FFO of a loss of $32.8 million, or $0.13 per diluted share, for the prior-year
comparable period. The increase in FFO for the three-month
period ended June 30, 2011, is
primarily the result of a reduction in the aggregate impairment
charges recorded in 2011 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
partially offset by the write-off of the original issuance costs
from the redemption of the Company's class G cumulative redeemable
preferred shares.
FFO applicable to common shareholders for the six-month period
ended June 30, 2011, including the
above net adjustments, was $113.2
million, or $0.34 per diluted
share, which compares to FFO of a loss of $4.4 million, or $0.02 per diluted share, for the prior-year
comparable period. The increase in FFO for the six-month
period ended June 30, 2011, is
primarily the result of a reduction in the aggregate impairment
charges recorded in 2011 and the gain on change in control of
interests related to the Company's acquisition of two assets from
unconsolidated joint ventures partially offset by the effect of the
non-cash valuation adjustments associated with the warrants, an
executive separation charge and the write-off of the original
issuance costs from the redemption of the Company's preferred
shares.
Net loss applicable to common shareholders for the three-month
period ended June 30, 2011, was
$26.9 million, or $0.10 per diluted share, which compares to a net
loss of $97.1 million, or
$0.47 per diluted share, for the
prior-year comparable period. Net loss applicable to common
shareholders for the six-month period ended June 30, 2011, was $2.1
million, or $0.09 per diluted
share, which compares to a net loss of $132.0 million, or $0.55 per diluted share, for the prior-year
comparable period. The increase in net income applicable to
common shareholders for the three- and six-month periods ended
June 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
June 30, 2011, highlight continued
strong leasing activity throughout the portfolio:
- Executed 208 new leases aggregating approximately 1.0 million
square feet and 275 renewals aggregating approximately 1.6 million
square feet.
- Total portfolio average annualized base rent per occupied
square foot as of June 30, 2011 was
$13.46, as compared to $13.24 at June 30,
2010.
- The portfolio leased rate was 93.0% at June 30, 2011, as compared to 92.6% at
March 31, 2011 and 91.9% at
June 30, 2010.
- On a cash basis, rental rates for new leases increased by 10.8%
over prior rents and renewals increased by 4.9%, resulting in an
overall blended spread of 6.0%.
- Same store net operating income ("NOI") increased 3.6% for the
three-month period ended June 30,
2011 over the prior-year comparable period.
DISPOSITIONS
The Company sold 10 consolidated assets, aggregating
approximately 0.7 million square feet, in the second quarter of
2011, generating gross proceeds of approximately $59.6 million. In addition, the Company
also sold $2.2 million of
consolidated non-income producing assets. The Company
recorded an aggregate net loss of approximately $5.0 million related to asset sales in the second
quarter of 2011.
One of the Company's unconsolidated joint ventures sold a
shopping center in the second quarter of 2011, aggregating
approximately 0.3 million square feet, generating gross proceeds of
approximately $50.3 million.
The joint venture recorded a gain of approximately
$22.8 million of which the Company's
share aggregated approximately $12.6
million.
CAPITAL MARKETS ACTIVITIES
In June 2011, the Company
refinanced its prior secured term loan with a new $500 million senior secured term loan with
KeyBank Capital Markets and J.P. Morgan Securities LLC. The
new secured term loan matures in September
2014 and has a one-year extension option. The secured
term loan currently bears interest at variable rates currently
based on LIBOR plus 170 basis points, subject to adjustment based
upon the Company's current corporate credit ratings from Moody's
and S&P.
In June 2011, the Company also
amended its unsecured revolving credit facility with J.P. Morgan
Securities LLC and Well Fargo Securities, LLC. The size of
the facility was reduced from $950
million to $750 million and
includes an accordion feature for expansion to $1.25 billion. The maturity was extended to
February 2016. In addition, the
Company amended its $65 million
unsecured revolving credit facility with PNC Bank, National
Association to match the terms of the primary unsecured revolving
credit facility. The Company's borrowings under these
facilities bear interest at variable rates currently based on LIBOR
plus 165 basis points, subject to adjustment based on the Company's
current corporate credit ratings from Moody's and S&P.
2011 GUIDANCE
The Company is tightening its guidance for operating FFO for
2011 to a range between $0.93 - $1.02
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 June 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 owns and manages approximately 546 retail properties in 41
states, Puerto Rico and
Brazil totaling approximately 126
million square feet. The Company's prime portfolio primarily
features open-air, value-oriented shopping centers in high
barrier-to-entry markets with stable populations and high growth
potential. DDR is the largest landlord in Puerto Rico and owns a premier portfolio of
regional malls primarily clustered around Sao Paulo, Brazil. DDR is a self-administered
and self-managed REIT operating as a fully integrated real estate
company. Additional information about the Company is available on
the Company's website 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
Brooke Vanek, 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,
July 29, 2011, at 10:00 a.m. Eastern Daylight Time. To
participate, please dial 866.314.4483 (domestic), or 617.213.8049
(international) at least ten minutes prior to the scheduled start
of the call. When prompted, provide the passcode: 38336336.
Access to the live call and replay will also be available
through the Company's website. The replay will be available
through August 6, 2011.
DEVELOPERS
DIVERSIFIED REALTY
Financial
Highlights
(In
thousands)
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
Revenues:
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Minimum rents (A)
|
$133,182
|
|
$ 131,744
|
|
$266,125
|
|
$ 264,232
|
|
Percentage and overage rents
(A)
|
871
|
|
593
|
|
2,866
|
|
2,612
|
|
Recoveries from
tenants
|
44,362
|
|
41,936
|
|
90,573
|
|
88,003
|
|
Ancillary and other property
income
|
7,134
|
|
4,643
|
|
14,296
|
|
9,316
|
|
Management, development and
other fee income
|
11,891
|
|
13,145
|
|
23,642
|
|
27,161
|
|
Other (B)
|
1,055
|
|
4,539
|
|
2,176
|
|
5,807
|
|
|
198,495
|
|
196,600
|
|
399,678
|
|
397,131
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Operating and maintenance
(C)
|
36,746
|
|
35,601
|
|
74,476
|
|
69,669
|
|
Real estate taxes
|
27,091
|
|
25,048
|
|
53,698
|
|
52,170
|
|
Impairment charges
(D)
|
18,352
|
|
74,967
|
|
22,208
|
|
74,967
|
|
General and administrative
(E)
|
17,979
|
|
19,090
|
|
47,357
|
|
42,366
|
|
Depreciation and
amortization
|
56,750
|
|
54,561
|
|
112,235
|
|
109,128
|
|
|
156,918
|
|
209,267
|
|
309,974
|
|
348,300
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
Interest income
|
2,417
|
|
1,525
|
|
5,213
|
|
2,858
|
|
Interest expense (F)
|
(59,579)
|
|
(56,190)
|
|
(119,363)
|
|
(111,797)
|
|
Loss on debt retirement, net
(F)
|
—
|
|
(1,090)
|
|
—
|
|
—
|
|
Gain (loss) on equity derivative
instruments (G)
|
—
|
|
21,527
|
|
21,926
|
|
(3,340)
|
|
Other expense, net
(H)
|
(6,347)
|
|
(11,428)
|
|
(5,006)
|
|
(14,481)
|
|
|
(63,509)
|
|
(45,656)
|
|
(97,230)
|
|
(126,760)
|
|
Loss before earnings from equity
method investments and other items
|
(21,932)
|
|
(58,323)
|
|
(7,526)
|
|
(77,929)
|
|
Equity in net income (loss) of
joint ventures (I)
|
16,567
|
|
(623)
|
|
18,541
|
|
1,023
|
|
Impairment of joint venture
investments (D)
|
(1,636)
|
|
—
|
|
(1,671)
|
|
—
|
|
Gain on change in control of
interests (J)
|
981
|
|
—
|
|
22,710
|
|
—
|
|
Tax (expense) income of taxable
REIT subsidiaries and state franchise and income taxes
|
(435)
|
|
3,616
|
|
(761)
|
|
2,614
|
|
(Loss) income from continuing
operations
|
(6,455)
|
|
(55,330)
|
|
31,293
|
|
(74,292)
|
|
Loss from discontinued
operations (K)
|
(9,124)
|
|
(66,428)
|
|
(10,632)
|
|
(73,375)
|
|
(Loss) income before gain (loss)
on disposition of real estate
|
(15,579)
|
|
(121,758)
|
|
20,661
|
|
(147,667)
|
|
Gain (loss) on disposition of
real estate, net of tax
|
2,310
|
|
592
|
|
1,449
|
|
(83)
|
|
Net (loss) income
|
(13,269)
|
|
(121,166)
|
|
22,110
|
|
(147,750)
|
|
Non-controlling
interests
|
(114)
|
|
34,591
|
|
(181)
|
|
36,928
|
|
Net (loss) income attributable
to DDR
|
$ (13,383)
|
|
$ (86,575)
|
|
$ 21,929
|
|
$ (110,822)
|
|
Net loss applicable to common
shareholders
|
$ (26,870)
|
|
$ (97,142)
|
|
$ (2,126)
|
|
$ (131,956)
|
|
Funds From Operations
("FFO"):
|
|
|
|
|
|
|
|
|
Net loss applicable to common
shareholders
|
$ (26,870)
|
|
$ (97,142)
|
|
$ (2,126)
|
|
$ (131,956)
|
|
Depreciation and amortization of
real estate investments
|
54,919
|
|
54,148
|
|
108,723
|
|
108,742
|
|
Equity in net income of joint
ventures (I)
|
(16,567)
|
|
623
|
|
(18,541)
|
|
(1,023)
|
|
Joint ventures' FFO
(I)
|
14,781
|
|
10,307
|
|
27,589
|
|
21,862
|
|
Non-controlling interests (OP
Units)
|
16
|
|
8
|
|
32
|
|
16
|
|
Gain on disposition of
depreciable real estate
|
(2,207)
|
|
(788)
|
|
(2,518)
|
|
(2,055)
|
|
FFO applicable to common
shareholders
|
24,072
|
|
(32,844)
|
|
113,159
|
|
(4,414)
|
|
Write-off of original preferred
share issuance costs (L)
|
6,402
|
|
—
|
|
6,402
|
|
—
|
|
Preferred dividends
|
7,085
|
|
10,567
|
|
17,653
|
|
21,134
|
|
FFO
|
$ 37,559
|
|
$ (22,277)
|
|
$ 137,214
|
|
$
16,720
|
|
Per share data:
|
|
|
|
|
|
|
|
|
Earnings per common
share
|
|
|
|
|
|
|
|
|
Basic
|
$
(0.10)
|
|
$
(0.39)
|
|
$
(0.01)
|
|
$
(0.55)
|
|
Diluted
|
$
(0.10)
|
|
$
(0.47)
|
|
$
(0.09)
|
|
$
(0.55)
|
|
Basic – average shares
outstanding
|
274,299
|
|
248,533
|
|
265,094
|
|
237,892
|
|
Diluted – average shares
outstanding
|
274,299
|
|
253,539
|
|
269,178
|
|
237,892
|
|
Dividends Declared
|
$
0.04
|
|
$
0.02
|
|
$
0.08
|
|
$
0.04
|
|
Funds From Operations – Basic
(M)
|
$
0.09
|
|
$
(0.13)
|
|
$
0.42
|
|
$
(0.02)
|
|
Funds From Operations – Diluted
(M)
|
$
0.09
|
|
$
(0.13)
|
|
$
0.34
|
|
$
(0.02)
|
|
|
|
|
|
|
|
|
|
|
|
DEVELOPERS
DIVERSIFIED REALTY
Financial
Highlights
(In
thousands)
|
|
Selected Balance Sheet
Data
|
|
|
|
|
|
June 30,
2011
|
|
December 31,
2010
|
|
Assets:
|
|
|
|
|
Real estate and rental
property:
|
|
|
|
|
Land
|
$ 1,843,033
|
|
$ 1,837,403
|
|
Buildings
|
5,506,914
|
|
5,491,489
|
|
Fixtures and tenant
improvements
|
360,196
|
|
339,129
|
|
|
7,710,143
|
|
7,668,021
|
|
Less: Accumulated
depreciation
|
(1,538,522)
|
|
(1,452,112)
|
|
|
6,171,621
|
|
6,215,909
|
|
Land held
for development and construction in progress
|
708,365
|
|
743,218
|
|
Real estate held for sale,
net
|
195
|
|
—
|
|
Real estate, net
|
6,880,181
|
|
6,959,127
|
|
|
|
|
|
|
Investments in and advances to
joint ventures
|
415,584
|
|
417,223
|
|
Cash
|
15,425
|
|
19,416
|
|
Restricted cash
|
4,068
|
|
4,285
|
|
Notes receivable, net
|
102,196
|
|
120,330
|
|
Receivables, including
straight-line rent, net
|
114,260
|
|
123,259
|
|
Other assets, net
|
135,150
|
|
124,450
|
|
|
$ 7,666,864
|
|
$ 7,768,090
|
|
|
|
|
|
|
Liabilities &
Equity:
|
|
|
|
|
Indebtedness:
|
|
|
|
|
Revolving credit
facilities
|
$
170,555
|
|
$
279,865
|
|
Unsecured debt
|
2,256,598
|
|
2,043,582
|
|
Mortgage and other secured
debt
|
1,786,998
|
|
1,978,553
|
|
|
4,214,151
|
|
4,302,000
|
|
Dividends
payable
|
18,034
|
|
12,092
|
|
Equity derivative
liability (G)
|
—
|
|
96,237
|
|
Other
liabilities
|
221,029
|
|
223,074
|
|
Total
liabilities
|
4,453,214
|
|
4,633,403
|
|
|
|
|
|
|
Preferred shares (L)
|
375,000
|
|
555,000
|
|
Common shares (M)
|
27,671
|
|
25,627
|
|
Paid-in-capital (G)
|
4,140,370
|
|
3,868,990
|
|
Accumulated distributions in
excess of net income
|
(1,402,858)
|
|
(1,378,341)
|
|
Deferred compensation
obligation
|
12,661
|
|
14,318
|
|
Accumulated other comprehensive
income
|
34,410
|
|
25,646
|
|
Less: Common shares in
treasury at cost
|
(12,139)
|
|
(14,638)
|
|
Non-controlling
interests
|
38,535
|
|
38,085
|
|
Total equity
|
3,213,650
|
|
3,134,687
|
|
|
$ 7,666,864
|
|
$ 7,768,090
|
|
|
|
|
|
|
|
DEVELOPERS
DIVERSIFIED REALTY
Financial
Highlights
|
|
|
(A) Base and percentage rental revenues for the six-month period
ended June 30, 2011, as compared to
the prior-year comparable period, increased $3.2 million. This increase consisted of
increased leasing activity at comparable portfolio properties,
contributing $2.4 million and the
acquisition of two shopping centers from unconsolidated interests,
generating an additional $2.1 million
in revenues offset by a net decrease in revenues from development
and redevelopment assets of $1.3
million. Included in rental revenues for the six-month
periods ended June 30, 2011 and 2010,
is approximately $0.1 million and
$1.3 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 June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Lease termination
fees
|
|
$ 0.8
|
|
$ 3.0
|
|
$ 1.3
|
|
$ 3.6
|
|
Financing fees
|
|
0.2
|
|
0.2
|
|
0.6
|
|
0.4
|
|
Other miscellaneous
|
|
0.1
|
|
1.3
|
|
0.3
|
|
1.8
|
|
|
|
$ 1.1
|
|
$ 4.5
|
|
$ 2.2
|
|
$ 5.8
|
|
|
|
|
|
|
|
|
|
|
(C) Operating and maintenance expense, including discontinued
operations, includes the following expenses (in millions):
|
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
|
|
|
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
Bad debt
expense
|
|
$ 2.4
|
|
$ 4.1
|
|
$ 4.8
|
|
$ 7.3
|
|
|
|
|
|
|
|
Ground rent expense
(a)
|
|
1.1
|
|
1.2
|
|
2.1
|
|
2.5
|
|
|
|
|
|
|
|
(a) Includes non-cash expense of
approximately $0.5 million for both the three-month periods ended
June 30, 2011 and 2010, and approximately $1.0 million for both the
six-month periods ended June 30, 2011 and 2010, related to
straight-line ground rent expense.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(D) The Company recorded impairment charges during the three-
and six-month periods ended June 30,
2011 and 2010, on the following (in millions):
|
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
Land held for
development (1)
|
|
$ —
|
|
$ 54.3
|
|
$ —
|
|
$ 54.3
|
|
Undeveloped
land
|
|
—
|
|
4.9
|
|
3.8
|
|
4.9
|
|
Assets marketed for
sale
|
|
18.4
|
|
15.8
|
|
18.4
|
|
15.8
|
|
Total continuing
operations
|
|
18.4
|
|
75.0
|
|
22.2
|
|
75.0
|
|
|
|
|
|
|
|
|
|
|
|
Sold assets or assets held
for sale (2)
|
|
1.9
|
|
22.6
|
|
3.9
|
|
25.7
|
|
Assets formerly occupied
by Mervyns (3)
|
|
—
|
|
35.3
|
|
—
|
|
35.3
|
|
Total
discontinued operations
|
|
1.9
|
|
57.9
|
|
3.9
|
|
61.0
|
|
Joint venture
investments
|
|
1.6
|
|
—
|
|
1.6
|
|
—
|
|
Total impairment
charges
|
|
$ 21.9
|
|
$ 132.9
|
|
$ 27.7
|
|
$ 136.0
|
|
|
|
(1) Amounts reported in 2010
related 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 (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 three- and six-month
periods ended June 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
releasing of space, which are charged to operations as incurred.
For the six-month periods ended June
30, 2011 and 2010, general and administrative expenses were
approximately 5.7% and 5.1% of total revenues, respectively,
including joint venture and managed property revenues.
During the six-month period ended June
30, 2011, the Company recorded a charge of $10.7 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 six-month period ended June
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 4.8% of total
revenues for the six-month periods ended June 30, 2011 and 2010, respectively.
(F) The Company recorded the following in connection with its
outstanding convertible debt (in millions):
|
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Non-cash interest expense
related to amortization of the debt discount
|
|
$ 3.8
|
|
$ 1.7
|
|
$ 7.6
|
|
$ 3.8
|
|
Non-cash adjustment to
gain on repurchase
|
|
—
|
|
2.2
|
|
—
|
|
4.8
|
|
|
|
|
|
|
|
|
|
|
|
|
(G) Represents the non-cash impact of the valuation adjustments
of 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 expenses were comprised of the following (in
millions):
|
|
|
|
Three-Month
Periods Ended
June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Litigation-related
expenses
|
|
$ (1.2)
|
|
$ (8.3)
|
|
$ (2.2)
|
|
$ (10.0)
|
|
Loss on sale of mezzanine
note receivable
|
|
(5.0)
|
|
—
|
|
(5.0)
|
|
—
|
|
Debt extinguishment
costs
|
|
—
|
|
(2.4)
|
|
(0.2)
|
|
(3.6)
|
|
Settlement of lease
liability obligation
|
|
—
|
|
—
|
|
2.6
|
|
—
|
|
Abandoned projects and
other expenses
|
|
(0.1)
|
|
(0.7)
|
|
(0.2)
|
|
(0.9)
|
|
|
|
$ (6.3)
|
|
$ (11.4)
|
|
$ (5.0)
|
|
$ (14.5)
|
|
|
|
|
|
|
|
|
|
|
|
|
(I) At June 30, 2011 and 2010, the
Company had an investment in joint ventures, excluding consolidated
joint ventures, in 183 and 201 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 six-month period ended June 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 June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues from
operations
|
$ 1,057
|
|
$ 5,875
|
|
$ 3,184
|
|
$ 12,702
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
308
|
|
3,940
|
|
999
|
|
8,208
|
|
Impairment
charges
|
1,904
|
|
57,920
|
|
3,887
|
|
60,993
|
|
Interest, net
|
327
|
|
4,005
|
|
878
|
|
8,400
|
|
Depreciation
and amortization
|
378
|
|
2,381
|
|
1,032
|
|
4,985
|
|
Total expenses
|
2,917
|
|
68,246
|
|
6,796
|
|
82,586
|
|
Loss before disposition of
real estate
|
(1,860)
|
|
(62,371)
|
|
(3,612)
|
|
(69,884)
|
|
Loss on disposition of
real estate, net
|
(7,264)
|
|
(4,057)
|
|
(7,020)
|
|
(3,491)
|
|
Net loss
|
$ (9,124)
|
|
$ (66,428)
|
|
$ (10,632)
|
|
$ (73,375)
|
|
|
|
|
|
|
|
|
|
|
|
(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 income/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 June
30,
|
|
|
|
|
|
|
2011
|
|
2010
|
|
|
|
|
|
Common shares
outstanding
|
276.6
|
|
250.1
|
|
|
|
|
|
OP Units outstanding ("OP
Units")
|
0.4
|
|
0.4
|
|
|
|
|
|
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares
outstanding
|
276.2
|
|
250.1
|
|
267.2
|
|
239.4
|
|
Assumed conversion of OP
Units
|
0.4
|
|
0.4
|
|
0.4
|
|
0.4
|
|
FFO Weighted average common
shares and OP Units – Basic
|
276.6
|
|
250.5
|
|
267.6
|
|
239.8
|
|
FFO Weighted average common
shares and OP Units – Diluted for FFO Loss
|
N/A
|
|
250.5
|
|
N/A
|
|
239.8
|
|
Assumed conversion of dilutive
securities
|
1.8
|
|
7.7
|
|
4.1
|
|
7.2
|
|
FFO Weighted average common
shares and OP Units – Diluted for FFO Income
|
278.4
|
|
N/A
|
|
271.7
|
|
N/A
|
|
Operating FFO Weighted average
common shares and OP Units –Diluted
|
278.4
|
|
258.2
|
|
271.7
|
|
247.0
|
|
|
|
|
|
|
|
|
|
|
|
DEVELOPERS
DIVERSIFIED REALTY
Summary
Results of Combined Unconsolidated Joint Ventures
(In
thousands)
Combined condensed income
statements
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Revenues from operations
(A)
|
$ 178,337
|
|
$ 163,010
|
|
$ 349,251
|
|
$ 325,587
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
65,667
|
|
67,988
|
|
128,124
|
|
130,972
|
|
Depreciation and amortization of
real estate investments
|
45,117
|
|
46,594
|
|
92,549
|
|
92,174
|
|
Interest
expense
|
56,641
|
|
58,878
|
|
114,005
|
|
116,730
|
|
|
167,425
|
|
173,460
|
|
334,678
|
|
339,876
|
|
Income (loss) from operations
before tax expense and discontinued operations
|
10,912
|
|
(10,450)
|
|
14,573
|
|
(14,289)
|
|
Income tax expense
|
(11,386)
|
|
(5,035)
|
|
(17,530)
|
|
(9,833)
|
|
Loss from continuing
operations
|
(474)
|
|
(15,485)
|
|
(2,957)
|
|
(24,122)
|
|
Discontinued
operations:
|
|
|
|
|
|
|
|
|
Income (loss) from operations
(B)
|
110
|
|
(12,765)
|
|
(471)
|
|
(12,227)
|
|
Gain on debt forgiveness
(C)
|
2,976
|
|
—
|
|
2,976
|
|
—
|
|
Gain (loss) on disposition
(D)
|
22,756
|
|
(3,212)
|
|
21,893
|
|
(11,963)
|
|
Gain (loss) before gain on
disposition of assets
|
25,368
|
|
(31,462)
|
|
21,441
|
|
(48,312)
|
|
Gain on disposition of
assets
|
—
|
|
17
|
|
—
|
|
17
|
|
Net income
(loss)
|
$ 25,368
|
|
$ (31,445)
|
|
$ 21,441
|
|
$ (48,295)
|
|
Net income (loss) at DDR's
ownership interests (E)
|
$ 16,532
|
|
$ (1,824)
|
|
$ 20,439
|
|
$
(164)
|
|
FFO at DDR's ownership
interests (F)
|
$ 14,781
|
|
$ 10,307
|
|
$ 27,589
|
|
$ 21,862
|
|
|
|
|
|
|
|
|
|
|
|
Combined condensed balance
sheets
|
|
|
June 30,
2011
|
|
December 31,
2010
|
|
|
|
|
|
|
Land
|
$ 1,553,101
|
|
$ 1,566,682
|
|
Buildings
|
4,747,856
|
|
4,783,841
|
|
Fixtures and tenant
improvements
|
162,927
|
|
154,292
|
|
|
6,463,884
|
|
6,504,815
|
|
Less: Accumulated
depreciation
|
(779,377)
|
|
(726,291)
|
|
|
5,684,507
|
|
5,778,524
|
|
Land held for development and
construction in progress (G)
|
242,917
|
|
174,237
|
|
Real estate, net
|
5,927,424
|
|
5,952,761
|
|
Receivables, including
straight-line rent, net
|
110,332
|
|
111,569
|
|
Leasehold interests
|
9,716
|
|
10,296
|
|
Other assets, net
|
572,537
|
|
303,826
|
|
|
$ 6,620,009
|
|
$ 6,378,452
|
|
|
|
|
|
|
Mortgage debt (H)
|
$ 3,895,393
|
|
$ 3,940,597
|
|
Notes and accrued interest
payable to DDR
|
95,113
|
|
87,282
|
|
Other liabilities
|
220,792
|
|
186,333
|
|
|
4,211,298
|
|
4,214,212
|
|
Accumulated equity
|
2,408,711
|
|
2,164,240
|
|
|
$ 6,620,009
|
|
$ 6,378,452
|
|
|
|
|
|
|
|
DEVELOPERS
DIVERSIFIED REALTY
Summary
Results of Combined Unconsolidated Joint Ventures
|
|
|
(A) Revenues for the three- and six-month periods include the
following (in millions):
|
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Straight-line
rents
|
|
$1.2
|
|
$0.9
|
|
$2.6
|
|
$2.1
|
|
DDR's proportionate
share
|
|
0.3
|
|
0.1
|
|
0.7
|
|
0.3
|
|
|
|
|
|
|
|
|
|
|
|
|
(B) For the three- and six-month periods ended June 30, 2010, an impairment charge aggregating
$10.9 million was reclassified to
discontinued operations of which the Company's proportionate share
was approximately $0.4 million.
(C) 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 presented.
(D) Gain (loss) 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 three- and six-month periods ended
June 30, 2011 was approximately
$12.6 million and $10.7 million, respectively.
(E) Adjustments to the Company's share of joint venture equity
in net 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 June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Income (loss)
|
|
$ —
|
|
$1.2
|
|
$(1.9)
|
|
$1.2
|
|
|
|
|
|
|
|
|
|
|
|
|
(F) FFO from unconsolidated joint ventures are summarized as
follows (in millions):
|
|
|
Three-Month
Periods
Ended June
30,
|
|
Six-Month
Periods
Ended June
30,
|
|
|
2011
|
|
2010
|
|
2011
|
|
2010
|
|
Net income (loss)
|
$ 25.4
|
|
$ (31.4)
|
|
$ 21.4
|
|
$ (48.3)
|
|
Gain on sale of real
estate
|
(22.7)
|
|
(0.1)
|
|
(22.7)
|
|
(0.1)
|
|
Depreciation and
amortization of real estate investments
|
45.2
|
|
51.7
|
|
93.0
|
|
102.0
|
|
FFO
|
$ 47.9
|
|
$ 20.2
|
|
$ 91.7
|
|
$ 53.6
|
|
FFO at DDR ownership
interests
|
$ 14.8
|
|
$ 10.3
|
|
$ 27.6
|
|
$ 21.9
|
|
Operating FFO at DDR's
ownership interests (1)
|
$ 14.3
|
|
$ 12.3
|
|
$ 28.7
|
|
$ 25.2
|
|
DDR joint venture
distributions received, net (2)
|
$ 18.8
|
|
$ 11.2
|
|
$ 45.7
|
|
$ 22.0
|
|
|
|
(1) Excluded from operating FFO
is the Company's pro rata share of net charges 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.
|
|
|
|
|
|
|
|
|
|
(G) The Company's proportionate share of joint venture land held
for development and construction in progress aggregated
approximately $81.4 million and
$71.7 million at June 30, 2011 and December
31, 2010, respectively.
(H) The Company's proportionate share of joint venture debt
aggregated approximately $791.3
million and $833.8 million at
June 30, 2011 and December 31, 2010, respectively. The
$791.3 million includes approximately
$50.3 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 or FFO.
SOURCE Developers Diversified Realty Corporation