DDR Reports Operating FFO Per Diluted Share Of $0.28 For The Quarter Ended June 30, 2014

Jul 30, 2014, 16:05 ET from DDR Corp.

BEACHWOOD, Ohio, July 30, 2014 /PRNewswire/ -- DDR Corp. (NYSE: DDR) today announced operating results for the second quarter ended June 30, 2014. 

(Logo: http://photos.prnewswire.com/prnh/20131217/DDRLOGO )

Significant Second Quarter Activity:

  • Generated Operating FFO of $0.28 per diluted share, a 3.7% increase from the second quarter of 2013
  • Executed 364 new leases and renewals for 3.1 million square feet
  • Increased the U.S. portfolio leased rate by 20 basis points to 95.3%, from 95.1% at March 31, 2014 and by 80 basis points from 94.5% at June 30, 2013
  • Generated positive new leasing spreads of 18.8% on a pro rata basis, and positive renewal leasing spreads of 7.5% on a pro rata basis
  • Generated same store net operating income growth of 3.2% at both 100% ownership and on a pro rata basis compared to the prior year
  • Acquired $265 million of wholly-owned prime power centers
  • Sold $79 million of non-prime assets; DDR's pro rata gross proceeds were $51 million
  • Closed on the sale of DDR's 50% ownership interest in Sonae Sierra Brazil BV Sarl ("SSB") for gross proceeds of $344 million
  • Closed on a $75 million, seven-year non-recourse mortgage loan secured by a shopping center in Puerto Rico with an interest rate of 3.59%
  • Redeemed the remaining $55 million of 7.375% Class H Preferred Shares
  • Formed a joint venture with Blackstone to acquire 76 shopping centers for $1.975 billion which is expected to close in the third quarter of 2014

"We are very pleased with our quarterly results highlighted by our ninth consecutive quarter of same store net operating income growth in excess of 3%," commented DDR's Chief Executive Officer Daniel B. Hurwitz.  "We are also optimistic regarding the continued leasing momentum within our portfolio, the expansion of our relationship with Blackstone and the profitable disposition of our interests in Brazil.  Tenant demand for high quality assets remains robust and we expect to benefit as a result going forward."

Financial Highlights

  • Second quarter operating funds from operations attributable to common shareholders ("Operating FFO") increased $15.2 million to $101.3 million, or $0.28 per diluted share, compared to $86.1 million, or $0.27 per diluted share, for the prior-year comparable period.
  • Second quarter net income attributable to common shareholders was $67.8 million, or $0.19 per diluted share, which compares to net loss of $36.0 million, or $0.11 per diluted share, for the prior-year comparable period.

Significant Second Quarter Operating Activity

  • Executed 153 new leases totaling 695,000 square feet at positive spreads of 18.8% on a pro rata basis
  • Executed 211 renewal leases totaling 2.4 million square feet at positive spreads of 7.5% on a pro rata basis
  • Increased the annualized base rent per occupied square foot to $13.50 as of June 30, 2014 as compared to $12.92 at June 30, 2013

Significant Second Quarter Transactional Activity

  • Acquired four consolidated prime power centers totaling 1.2 million square feet for $264.8 million. The acquisitions were funded primarily with proceeds from the sale of the Company's interest in SSB, asset dispositions and the issuance of 1.0 million operating partnership units valued at $17.9 million.
  • Sold seven consolidated non-prime operating shopping centers totaling 341,000 square feet and six consolidated non-income producing assets. Gross proceeds were $44.6 million. A net gain of $8.0 million was recorded related to these sales.
  • Sold four unconsolidated operating shopping centers totaling 409,000 square feet for $34.0 million, of which the Company's pro rata share was $6.3 million. A net gain of $2.0 million was recorded related to these sales, of which the Company's pro rata share was $0.8 million.
  • Sold its entire ownership interest in SSB for gross proceeds of $343.6 million, and recorded a gain on sale in the second quarter of $83.8 million.
  • Closed on a $75 million non-recourse mortgage loan secured by Plaza Escorial, a 636,000-square-foot shopping center in Puerto Rico. The loan obtained from a leading life insurance company, includes a seven-year term and an interest rate of 3.59%.
  • Redeemed the remaining $55.0 million of the Company's 7.375% Class H Cumulative Redeemable Preferred Shares and recorded a charge of $1.9 million to net income attributable to common shareholders related to the write-off of the Class H Preferred Shares' original issuance costs.
  • Formed a joint venture with Blackstone to acquire 76 shopping centers from American Realty Capital Properties, Inc. in a transaction valued at $1.975 billion, including assumed debt of $461 million and approximately $800 million of new financings. An affiliate of Blackstone will own 95% of the common equity of the joint venture and an affiliate of DDR will own the remaining 5%. DDR also is expected to invest up to $300 million in preferred equity in the joint venture with a fixed dividend rate of 8.5% and will provide customary leasing and management services. In addition, DDR will have the right of first offer to acquire ten of the assets under specified conditions consistent with past transactions with Blackstone. The acquisition is expected to close in the third quarter of 2014.

2014 Guidance

  • There has been no change in Operating FFO per share guidance since the last update provided on March 10, 2014.  The Company continues to estimate a range of $1.14 to $1.18 for 2014 Operating FFO 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 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 below.  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 herein.

Safe Harbor

DDR Corp. 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 buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract, including the ability of the joint venture between DDR and Blackstone to successfully complete the acquisition of the portfolio from American Realty Capital Properties, Inc.; 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, 2014.  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, 2013, 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 390 value-oriented shopping centers representing 108 million square feet in 39 states and Puerto Rico.  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 and Facebook.

Conference Call and Supplemental Information

A copy of the Company's Supplemental package is available 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 31, 2014, at 10:00 a.m. Eastern Time.  To participate, please dial 866.515.2914 (domestic), or 617.399.5128 (international) at least ten minutes prior to the scheduled start of the call.  When prompted, provide the passcode: 24154621.  Access to the live call and replay will also be available through the Company's website.  The replay will be available through August 7, 2014.

 

 

DDR Corp.

Income Statement: Consolidated Interests

$ in thousands, except per share

2Q14

2Q13

6M14

6M13

Revenues:

Minimum rents (1)

$178,140

$139,784

$353,049

$275,671

Percentage rent

643

674

2,316

2,364

Recoveries

58,264

44,742

118,324

89,437

Ancillary income

6,146

7,415

12,482

13,025

Other revenues (2)

2,588

4,894

4,484

5,518

245,781

197,509

490,655

386,015

Expenses (3):

Operating and maintenance

35,436

32,871

73,583

64,535

Real estate taxes

36,578

26,258

72,042

52,318

72,014

59,129

145,625

116,853

Net operating income

173,767

138,380

345,030

269,162

Other income (expense):

Fee income

7,879

10,191

16,102

20,912

Interest income

3,158

5,797

6,285

13,674

Interest expense (4)

(62,573)

(53,626)

(125,207)

(105,835)

Depreciation and amortization

(99,826)

(67,047)

(208,295)

(132,671)

General and administrative (5)

(19,085)

(20,117)

(39,338)

(39,877)

Other income (expense), net (6)

(4,510)

1,895

(9,124)

(1,005)

Impairment charges (7)

(14,342)

(13,642)

(24,615)

(13,642)

(Loss) income before earnings from equity method investments and other items

(15,532)

1,831

(39,162)

10,718

Equity in net income (loss) of joint ventures

1,131

(1,191)

6,621

1,763

Impairment of joint venture investments

0

0

(9,100)

0

Gain on sale and change in control of interests, net

83,830

1,066

83,830

1,066

Income (loss) from discontinued operations (8)

6,643

(21,596)

17,280

(26,526)

Tax expense

(649)

(1,703)

(1,335)

(2,063)

Gain (loss) on disposition of real estate, net of tax

1,472

(1,525)

383

(1,582)

Net  income (loss)

76,895

(23,118)

58,517

(16,624)

(Loss) income attributable to non-controlling interests

(878)

(195)

860

(386)

Net  income (loss) attributable to DDR

76,017

(23,313)

59,377

(17,010)

Write-off of preferred share original issuance costs

(1,943)

(5,246)

(1,943)

(5,246)

Preferred dividends

(6,259)

(7,475)

(12,867)

(14,505)

Net income (loss) attributable to Common Shareholders

67,815

(36,034)

44,567

(36,761)

FFO:

Net income (loss) attributable to common shareholders

67,815

(36,034)

44,567

(36,761)

Depreciation and amortization of real estate investments

97,677

68,122

204,744

135,138

Equity in net (income) loss of joint ventures

(1,131)

1,191

(6,621)

(1,763)

Joint ventures' FFO

7,377

12,146

16,120

24,372

Non-controlling interests (OP units)

223

54

285

108

Impairment of depreciable real estate

1,102

32,422

11,491

40,101

(Gain) loss on disposition of depreciable real estate, net

(90,937)

2,063

(102,648)

1,285

FFO attributable to Common Shareholders

82,126

79,964

167,938

162,480

Non-operating items, net (9)

19,137

6,130

34,035

9,666

Operating FFO

$101,263

$86,094

$201,973

$172,146

FFO per share – Diluted (10)

$0.23

$0.25

$0.47

$0.51

Operating FFO per share – Diluted (10)

$0.28

$0.27

$0.56

$0.54

 

 

DDR Corp.

Balance Sheet: Consolidated Interests

$ in thousands

At Quarter End

2Q14

4Q13

Assets:

Land

$2,213,794

$2,209,970

Buildings

6,996,560

6,949,440

Fixtures and tenant improvements

621,490

599,221

9,831,844

9,758,631

Less: Accumulated depreciation

(1,918,681)

(1,823,199)

7,913,163

7,935,432

Land held for development and construction in progress

520,167

452,980

Real estate held for sale, net

0

12,670

Real estate, net

8,433,330

8,401,082

Investments in and advances to joint ventures

199,380

448,008

Cash

359,340

86,664

Restricted cash

31,625

33,476

Notes receivable, net

58,863

78,338

Receivables, including straight-line rent, net

121,919

129,513

Other assets, net (11)

477,364

515,992

Total Assets

9,681,821

9,693,073

Liabilities and Equity:

Revolving credit facilities

28,623

29,133

Unsecured debt

2,759,931

2,754,120

Unsecured term loan

350,000

350,000

Mortgage and other secured debt

2,190,384

2,161,421

5,328,938

5,294,674

Dividends payable

61,302

55,107

Other liabilities (12)

442,767

415,413

Total Liabilities

5,833,007

5,765,194

Preferred shares

350,000

405,000

Common shares

35,964

35,938

Paid-in-capital

5,421,087

5,417,363

Accumulated distributions in excess of net income

(1,982,326)

(1,915,638)

Deferred compensation obligation

16,961

16,702

Accumulated other comprehensive income

(11,943)

(36,493)

Less: Common shares in treasury at cost

(16,208)

(18,211)

Non-controlling interests

35,279

23,218

Total Equity

3,848,814

3,927,879

Total Liabilities and Equity

$9,681,821

$9,693,073

 

 

DDR Corp.

Income Statement: Unconsolidated Interests at 100%

$ in thousands

2Q14

2Q13

6M14

6M13

Revenues:

Minimum rents

$92,008

$128,093

$199,448

$256,074

Percentage rent

365

434

775

1,059

Recoveries

23,987

30,874

48,612

62,528

Other revenues

7,929

15,628

23,716

32,137

124,289

175,029

272,551

351,798

Expenses:

Operating and maintenance

30,068

41,207

68,724

80,135

Real estate taxes

14,479

20,289

29,038

40,896

44,547

61,496

97,762

121,031

Net operating income

79,742

113,533

174,789

230,767

Other income (expense):

Interest expense

(45,753)

(55,610)

(99,748)

(113,278)

Depreciation and amortization

(38,652)

(55,766)

(84,063)

(116,832)

Impairment charges

(600)

(38,323)

(600)

(38,323)

Tax expense

(2,425)

(7,238)

(6,565)

(13,853)

Other income (expense), net

235

620

(2,837)

(313)

(87,195)

(156,317)

(193,813)

(282,599)

Loss from continuing operations

(7,453)

(42,784)

(19,024)

(51,832)

Loss from discontinued operations

(373)

(8,410)

(1,053)

(11,611)

Gain (loss) on disposition of discontinued operations, net

2,038

(369)

23,511

(5,906)

Gain on disposition of real estate, net

0

164

0

643

Net (loss) income

(5,788)

(51,399)

3,434

(68,706)

Loss attributable to non-controlling interests

(535)

(6,695)

(2,023)

(13,914)

Net (loss) income attributable to unconsolidated joint ventures

(6,323)

(58,094)

1,411

(82,620)

Depreciation and amortization of real estate investments

38,272

57,591

82,447

122,365

Impairments on depreciable real estate

600

44,563

600

44,563

(Gain) loss on disposition of depreciable real estate, net

(1,947)

369

(23,420)

5,427

FFO

30,602

44,429

61,038

89,735

FFO at DDR's ownership interest

7,377

12,146

16,120

24,372

Operating FFO at DDR's ownership interests

7,158

11,640

16,253

24,082

Net income (loss) at DDR's ownership interests

1,436

(1,522)

6,167

1,528

Basis differences

(305)

331

454

235

Equity in net income (loss) of joint ventures

$1,131

$(1,191)

$6,621

$1,763

 

 

DDR Corp.

Balance Sheet: Unconsolidated Interests at 100%

$ in thousands

At Quarter End

2Q14

4Q13

Assets:

Land

$1,158,271

$1,275,232

Buildings

3,166,873

3,940,806

Fixtures and tenant improvements

171,229

266,851

4,496,373

5,482,889

Less: Accumulated depreciation

(803,548)

(839,867)

3,692,825

4,643,022

Land held for development and construction in progress

60,621

116,088

Real estate, net

3,753,446

4,759,110

Cash and restricted cash

93,386

282,866

Receivables, including straight-line rent, net

63,493

101,003

Other assets, net

145,677

196,615

Total Assets

4,056,002

5,339,594

Liabilities and Equity:

Mortgage debt

2,834,997

3,282,643

Notes and accrued interest payable to DDR

138,256

127,679

Other liabilities

158,833

245,368

Total Liabilities

3,132,086

3,655,690

Redeemable preferred equity

72,470

71,771

Accumulated equity

851,446

1,612,133

Total Liabilities and Equity

$4,056,002

$5,339,594

 

 

DDR Corp.

Financial Statements: Footnotes

$ in millions, except per share

Includes discontinued operations

2Q14

2Q13

6M14

6M13

(1)

Minimum rents:

Straight-line rent, net

$1.5

$1.7

$2.5

$3.1

Below-market rent, net

0.7

0.0

0.6

(0.1)

Ground lease revenue

8.1

5.9

16.0

11.6

(2)

Other revenues:

Lease termination fees

2.0

4.7

3.3

5.2

Other miscellaneous

0.6

0.2

1.2

0.3

(3)

Operating expenses:

Recoverable expenses (excludes discontinued operations)

(65.1)

(50.2)

(130.9)

(100.0)

Non-recoverable expenses (excludes discontinued operations)

(6.9)

(8.9)

(14.7)

(16.9)

Straight-line ground rent expense

(0.3)

(0.3)

(0.6)

(0.6)

Expensed costs of suspended developments

(0.3)

(0.5)

(0.7)

(1.1)

(4)

Non-cash interest expense:

Convertible debt accretion

(2.8)

(2.7)

(5.6)

(5.3)

Debt fair value amortization

4.1

0.6

8.4

1.2

Loan cost amortization

(3.1)

(2.9)

(6.3)

(5.9)

Interest expense (capitalized)

2.2

2.1

4.0

4.8

(5)

General and administrative expenses:

Stock compensation expenses

(2.0)

(1.9)

(3.9)

(3.7)

Internal leasing expenses

(1.8)

(1.8)

(3.8)

(3.9)

Construction administrative costs (capitalized)

2.5

2.3

4.9

4.5

(6)

Other income (expense):

Transactions and other

(3.8)

0.0

(8.1)

(0.6)

Litigation expenses

(0.7)

(0.4)

(1.0)

(0.7)

Debt extinguishment, net

0.0

2.3

0.0

0.3

(7)

Impairment charges:

Land held for development

13.2

0.0

13.2

0.0

Undeveloped land

0.0

2.6

0.4

2.6

Assets marketed for sale

1.1

11.0

11.0

11.0

(8)

Discontinued operations:

Revenues

0.3

11.1

3.2

23.5

Expenses

(0.2)

(9.3)

(2.5)

(19.5)

Impairments

0.0

(21.3)

(0.6)

(29.0)

Gain (loss) on disposition of real estate, net

6.5

(2.1)

17.2

(1.5)

Net income (loss)

6.6

(21.6)

17.3

(26.5)

 

 

DDR Corp.

Financial Statements: Footnotes

$ in millions, except per share

Includes discontinued operations

2Q14

2Q13

6M14

6M13

(9)

Non-operating items excluded from Operating FFO:

Non-cash impairment charges – non-depreciable assets

$13.2

$2.6

$22.8

$2.6

Transaction, litigation, debt extinguishment costs, other

4.5

(1.6)

9.3

1.5

Joint ventures – currency, other

(0.2)

(0.5)

0.1

(0.3)

(Gain) loss on sale of non-depreciable real estate, net

(0.3)

1.5

(0.1)

1.8

Non-cash gain on sale and change in control of interests, net

0.0

(1.1)

0.0

(1.1)

Non-cash write-off of preferred share original issuance costs

1.9

5.2

1.9

5.2

19.1

6.1

34.0

9.7

(10)

Outstanding per share information:

Common shares (at quarter end)

359.6

320.1

359.6

320.1

OP units (at quarter end)

1.4

0.4

1.4

0.4

Total shares and units (at quarter end)

361.0

320.5

361.0

320.5

Weighted average shares and units – Basic  – EPS

357.8

317.0

357.7

315.1

Assumed conversion of dilutive securities

0.5

0.0

0.5

0.0

Weighted average shares and units – Diluted – EPS

358.3

317.0

358.2

315.1

Weighted average shares and units – Basic – FFO & OFFO

360.1

319.6

359.8

317.8

Assumed conversion of dilutive securities

0.5

0.5

0.5

0.5

Weighted average shares and units – Diluted – FFO & OFFO

360.6

320.1

360.3

318.3

Earnings per common share – Basic

$0.19

$(0.11)

$0.12

$(0.12)

Earnings per common share – Diluted

$0.19

$(0.11)

$0.12

$(0.12)

FFO per share – Basic

$0.23

$0.25

$0.47

$0.51

FFO per share – Diluted

$0.23

$0.25

$0.47

$0.51

Operating FFO per share – Diluted

$0.28

$0.27

$0.56

$0.54

Common stock dividends declared, per share

$0.155

$0.135

$0.31

$0.27

(11)

Intangible assets, net (at quarter and year end)

377.1

409.6

(12)

Below-market leases, net (at quarter and year end)

135.1

123.9

Additional financial information:

Capital expenditures (DDR share):

Leasing

$9.3

$10.6

$20.6

$20.3

Maintenance

2.1

1.9

3.2

2.5

Maintenance PSF of owned GLA

0.10

0.08

Miscellaneous (DDR share):

Est. value of land owned adjacent to existing centers (at 12/31/13)

$35.0

Cost basis of headquarters (non-income producing, at quarter end)

42.0

 

 

SOURCE DDR Corp.



RELATED LINKS

http://www.ddr.com