DDR Ddr Corp.

BEACHWOOD, Ohio, July 31, 2013 /PRNewswire/ -- DDR Corp. (NYSE: DDR) today announced operating results for the second quarter ended June 30, 2013.

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SIGNIFICANT SECOND QUARTER ACTIVITY

• Generated Operating FFO of $0.27 per diluted share, an increase of 8.0% compared to second quarter of 2012
• Executed 461 new leases and renewals for 2.8 million square feet
• Increased the portfolio leased rate by 20 basis points to 94.6% at June 30, 2013 from 94.4% at March 31, 2013 and by 90 basis points from 93.7% at June 30, 2012
• Generated positive leasing spreads, with new leases up 12.0% at 100% ownership and 12.8% on a pro rata basis, and renewals up 7.0% at 100% ownership and 7.7% on a pro rata basis; blended spreads were up 7.9% at 100% ownership and 8.6% on a pro rata basis
• Generated same store net operating income growth of 3.1% at 100% ownership and 3.0% on a pro rata basis as compared to the prior year
• Opened Belgate Shopping Center, a 100% leased, 900,000-square-foot prime power center located in Charlotte, North Carolina, anchored by IKEA, Walmart and a complementary line-up of junior anchors including Marshalls, ULTA, Old Navy, Petco, World Market, Hobby Lobby and Shoe Carnival
• Acquired $106 million of prime assets
• Completed the disposition of $64 million of non-prime assets; DDR's pro rata gross proceeds were $60 million
• Issued $45 million of common shares to fund the net investment in prime assets
• Issued $150 million of 6.250% Class K preferred shares, the net proceeds of which were used to redeem $150 million of 7.375% Class H preferred shares
• Entered into an agreement to acquire 30 prime assets from its existing joint venture with an affiliate of The Blackstone Group L.P. ("Blackstone"), which is expected to close in the fourth quarter of 2013
• Issued $300 million of 3.375% senior unsecured notes due 2023 and entered into forward sale agreements to sell 39.1 million common shares for gross proceeds of $739 million to fund the Blackstone transaction.  The Company expects to settle the forward sale agreements no later than October 31, 2013

"We are very pleased with the consistently strong performance of our assets during the quarter and year-to-date. The day-to-day momentum within the portfolio combined with opportunistic transactional activity and support from the capital markets has enabled continued execution of our strategic objectives for the benefit of all stakeholders," commented DDR's chief executive officer, Daniel B. Hurwitz. 

FINANCIAL HIGHLIGHTS
The Company's second quarter Operating Funds From Operations attributable to common shareholders ("Operating FFO") increased to $86.1 million, or $0.27 per diluted share, which compares to $71.6 million, or $0.25 per diluted share, for the prior-year comparable period.  The increase in Operating FFO for the three-month period ended June 30, 2013, as compared to the same period in 2012, primarily is due to organic growth and shopping center acquisitions, partially offset by asset dispositions.

Funds From Operations attributable to common shareholders ("FFO") for the three-month period ended June 30, 2013, increased to $80.0 million, or $0.25 per diluted share, which compares to $78.1 million, or $0.27 per diluted share, for the prior-year comparable period.  The increase in FFO for the three-month period ended June 30, 2013, as compared to the same period in 2012, primarily is due to the same factors impacting Operating FFO, as well as a reduction in impairment charges of non-depreciable assets and the loss on debt retirement related to the Company's repurchase of unsecured senior notes partially offset by the write-off of the original issuance costs from the redemption of the Company's 7.375% Class H cumulative redeemable preferred shares ("Class H Preferred Shares") in 2013 and the gain on change in control of interests recorded in 2012.

Operating FFO for the six-month period ended June 30, 2013 increased to $172.1 million, or $0.54 per diluted share, which compares to $138.4 million, or $0.49 per diluted share, for the prior-year comparable period.  The increase in Operating FFO for the six-month period ended June 30, 2013, as compared to the same period in 2012, primarily is due to the same factors impacting Operating FFO for the three-month period.

FFO for the six-month period ended June 30, 2013 increased to $162.5 million, or $0.51 per diluted share, which compares to $137.8 million, or $0.49 per diluted share, for the prior-year comparable period.  The increase in FFO for the six-month period ended June 30, 2013, as compared to the same period in 2012, primarily is due to the same factors impacting FFO for the three-month period.

Net loss attributable to common shareholders for the three-month period ended June 30, 2013, was $36.0 million, or $0.11 per diluted share, which compares to net loss of $44.5 million, or $0.16 per diluted share, for the prior-year comparable period.  Net loss attributable to common shareholders for the six-month period ended June 30, 2013, was $36.8 million, or $0.12 per diluted share, which compares to net loss of $66.5 million, or $0.24 per diluted share, for the prior-year comparable period.  The decrease in net loss attributable to common shareholders for the three- and six-month periods ended June 30, 2013, as compared to the same periods in 2012, primarily is due to the same factors impacting FFO.

LEASING & PORTFOLIO OPERATIONS
The following results for the three-month period ended June 30, 2013, highlight continued strong leasing activity throughout the portfolio:

• Executed 190 new leases aggregating approximately 0.9 million square feet and 271 renewals aggregating 1.9 million square feet
• Generated positive leasing spreads for the second quarter, with new leases up 12.0% at 100% ownership and 12.8% on a pro rata basis, and renewals up 7.0% at 100% ownership and 7.7% on a pro rata basis; blended spreads were up 7.9% at 100% ownership and 8.6% on a pro rata basis
• The portfolio leased rate increased to 94.6% at June 30, 2013, as compared to 94.4% at March 31, 2013 and 93.7% at June 30, 2012
• Same store net operating income ("NOI") increased by 3.1% at 100% ownership for the three-month period ended June 30, 2013 as compared to the prior-year comparable period and 3.0% on a pro rata basis

In May 2013, the Company opened Belgate Shopping Center, a 100% leased, 900,000-square-foot prime power center located in Charlotte, North Carolina, anchored by IKEA, Walmart and a complementary line-up of junior anchors including Marshalls, ULTA, Old Navy, Petco, World Market, Hobby Lobby and Shoe Carnival. The project, which was initially acquired in June 2012, was completed ahead of schedule with a total net projected cost of $20 million.

ACQUISITIONS & FINANCINGS
In May 2013, the Company entered into a purchase agreement to acquire its partner's 95% interest in a portfolio of 30 prime shopping centers.  The acquisition, which is expected to close in the fourth quarter of 2013, is subject to customary closing conditions.  The portfolio is comprised primarily of market dominant prime power centers located in top 40 MSA's and includes Shoppers World in Boston, Woodfield Village Green in Chicago, Fairfax Towne Center in Washington DC, and Riverdale Village in Minneapolis.  The properties have been owned, developed, leased and managed through various ventures since 1995.  The portfolio is comprised of 11.8 million total square feet, is 95% leased, and consists of large format centers with an average size of approximately 400,000 square feet, 20% larger than the average DDR prime power center.  

In April 2013, the Company acquired its partner's 85% interest in five prime unencumbered power centers for $94 million.  The Company funded its investment primarily with proceeds from asset sales and the issuance of common equity.  The acquisitions include The Walk at Highwoods Preserve (Tampa, FL), Douglasville Pavilion (Atlanta, GA), Commonwealth Center and Chesterfield Crossing (Richmond, VA) and Jefferson Plaza (Newport News, VA).  The 1.3 million square foot, 98% leased portfolio is anchored by national high credit quality retailers such as Walmart, Target, Costco, Home Depot, T.J. Maxx, Ross Dress for Less, PetSmart, The Fresh Market, and Pier One.

In the second quarter of 2013, the Company originated $28.5 million of mezzanine loans on two retail assets in Chicago.  These loans are secured by a development project and a stabilized prime shopping center.  The interest rates are 9.5% and 9.0%, respectively.

In the second quarter of 2013, the Company issued 2.5 million new common shares at a weighted-average price of $17.83 per share, generating gross proceeds of $45 million, which were used to partially fund the acquisition of five prime assets.

In May 2013, the Company issued $300 million aggregate principal amount of 3.375% senior unsecured notes due May 2023.  The Company also entered into forward sale agreements to issue 39.1 million common shares at a price of $18.90 per share.  The Company expects to settle the forward sale agreements no later than October 31, 2013.  The net proceeds from these two financings are expected to be used to fund the Blackstone acquisition.

In April 2013, the Company issued $150 million of 6.250% Class K cumulative redeemable preferred shares at a price of $25.00 per depositary share.  In addition, the Company redeemed $150 million of its Class H Preferred Shares at a redemption price of $25.1127 per depositary share (the sum of $25.00 per depositary share and dividends per share of $0.1127 prorated to the redemption date).  The Company recorded a non-cash charge of $5.2 million to net income attributable to common shareholders in the second quarter of 2013 related to the prorated write-off of the Class H Cumulative Redeemable Preferred Shares' original issuance costs.

DISPOSITIONS
In the second quarter of 2013, the Company sold 10 consolidated operating shopping centers, aggregating approximately 0.5 million square feet, plus non-income producing assets generating gross proceeds of approximately $59.3 million.  The Company's unconsolidated joint ventures sold one operating shopping center aggregating approximately 0.1 million square feet generating gross proceeds of approximately $5.1 million.  The Company's pro rata share of the gross proceeds was $60 million and it recorded an aggregate net loss of approximately $3.6 million related to asset sales in the second quarter of 2013. 

2013 GUIDANCE
There has been no change in Operating FFO per share guidance since the last update provided on May 15, 2013, when the Company raised the bottom end of the range from $1.07 to $1.08.  The Company continues to estimate Operating FFO for 2013 between $1.08 and $1.11 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 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 (v) 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.  Other real estate companies may calculate FFO and Operating FFO in a different manner.  Operating FFO 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, our ability to successfully complete the proposed acquisition of properties from the Blackstone joint venture, 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 ended June 30, 2013.  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, 2012, as amended.  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 CORP.
DDR is an owner and manager of 435 value-oriented shopping centers representing 115 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, as well as on Twitter, LinkedIn, Facebook and Pinterest.

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, August 1, 2013, at 10:00 a.m. Eastern Time.  To participate, please dial 877.415.3181 (domestic), or 857.244.7324 (international) at least ten minutes prior to the scheduled start of the call.  When prompted, provide the passcode: 80759747.  Access to the live call and replay will also be available through the Company's website.  The replay will be available through August 8, 2013.

SOURCE DDR Corp.