DDR Reports Operating FFO Per Diluted Share Of $0.28 For The Quarter Ended March 31, 2014

BEACHWOOD, Ohio, May 6, 2014 /PRNewswire/ -- DDR Corp. (NYSE: DDR) today announced operating results for the first quarter ended March 31, 2014. 

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

Significant First Quarter Activity:

  • Generated Operating FFO of $0.28 per diluted share, 3.7% greater than the first quarter of 2013
  • Executed 378 new leases and renewals for 3.1 million square feet, the highest square footage volume in 19 quarters
  • Increased the U.S. portfolio leased rate by 10 basis points to 95.1% at March 31, 2014, from 95.0% at December 31, 2013 and by 90 basis points from 94.2% at March 31, 2013
  • Generated positive new leasing spreads of 15.1% at 100% ownership and 20.4% on a pro rata basis, and positive renewal leasing spreads of 6.7% at 100% ownership and 7.6% on a pro rata basis
  • Generated same store net operating income growth of 3.1% at 100% ownership and 3.2% on a pro rata basis compared to the prior year
  • Sold $198 million of non-prime assets; DDR's pro rata gross proceeds were $142 million
  • Announced the sale of 50% ownership interest in Sonae Sierra Brazil BV Sarl for gross proceeds of $344 million and closed subsequent to quarter end

"We are extremely pleased to report consistently strong operating results with momentum accelerating during the first quarter.  We are also pleased to close on the sale of our investment in Brazil and encouraged by the prospects of reallocating the capital into high-quality prime power centers in the U.S.  The simplification and portfolio quality enhancement strategy continues," commented DDR's Chief Executive Officer Daniel B. Hurwitz.

Financial Highlights

  • First quarter operating funds from operations attributable to common shareholders ("Operating FFO") increased to $100.7 million, or $0.28 per diluted share, which compares to $86.1 million, or $0.27 per diluted share, for the prior-year comparable period.  The increase in Operating FFO primarily is due to organic growth as well as prime shopping center acquisitions, partially offset by non-prime asset dispositions.
  • First quarter net loss attributable to common shareholders was $23.2 million, or $0.07 per diluted share, which compares to net loss of $0.7 million, or $0.00 per diluted share, for the prior-year comparable period.  The change in net loss attributable to common shareholders primarily is due to higher impairment charges partially offset by the impact of organic growth and net acquisition activity.

Significant First Quarter Operating Activity

  • New leases totaling 0.8 million square feet at spreads of 15.1% at 100% ownership and 20.4% at pro rata share
  • Renewal leases totaling 2.3 million square feet at spreads of 6.7% at 100% ownership and 7.6% at pro rata share
  • Increase in the total U.S. portfolio average annualized base rent per occupied square foot to $13.44 as of March 31, 2014 as compared to $12.90 at March 31, 2013

Significant First Quarter Transactional Activity

  • Sold nine consolidated operating shopping centers totaling 1.3 million square feet and one consolidated non-income producing asset. Gross proceeds were $132.3 million. A net gain of $9.6 million was recorded related to these sales.
  • Sold four unconsolidated operating shopping centers totaling 0.4 million square feet for $65.7 million, of which the Company's pro rata share was $13.1 million. A net gain of $21.5 million was recorded related to these sales, of which the Company's pro rata share was $5.4 million.
  • Announced the sale of its 50% ownership interest in Sonae Sierra Brazil BV Sarl ("SSB BV Sarl") for $343.6 million which closed on April 28, 2014. DDR's interest in SSB BV Sarl represents DDR's entire investment in Brazil.

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. The major assumptions include:
    • same store NOI growth of 2.5% to 3.5% excluding redevelopment activity
    • increase in the 2013 year-end leased rate by 75 basis points
    • annual common stock dividend of $0.62 per 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; 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 March 31, 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 396 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, May 7, 2014, at 10:00 a.m. Eastern Time.  To participate, please dial 877.703.6109 (domestic), or 857.244.7308 (international) at least ten minutes prior to the scheduled start of the call.  When prompted, provide the passcode: 80437826.  Access to the live call and replay will also be available through the Company's website.  The replay will be available through May 14, 2014.

 

DDR Corp.

Income Statement:  Consolidated Interests 








$ in thousands, except per share






Three Months Ended







1Q14


1Q13

Revenues:









Minimum rents (1)






$175,807


$136,715

Percentage rent






1,674


1,690

Recoveries






60,304


44,942

Ancillary income






6,342


5,615

Other revenues (2)






1,896


624







246,023


189,586

Expenses (3):









Operating and maintenance






38,201


31,718

Real estate taxes






35,742


26,343







73,943


58,061










Net operating income






172,080


131,525










Other income (expense):









Fee income






8,223


10,721

Interest income






3,127


7,878

Interest expense (4)






(62,881)


(52,444)

Depreciation and amortization






(108,762)


(65,911)

General and administrative (5)






(20,253)


(19,760)

Other income (expense), net (6)






(4,613)


(2,900)

Impairment charges (7)






(10,841)


0

(Loss) income before earnings from equity method

   investments and other items






(23,920)


9,109










Equity in net income of joint ventures






5,490


2,954

Impairment of joint venture investments






(9,100)


0

Income (loss) from discontinued operations (8)






10,930


(5,151)

Tax expense






(688)


(361)

Loss on disposition of real estate, net of tax






(1,090)


(57)

Net (loss) income






(18,378)


6,494

Income (loss) attributable to non-controlling interests






1,738


(191)

Net (loss) income attributable to DDR






(16,640)


6,303

Preferred dividends






(6,608)


(7,030)

Net loss attributable to Common Shareholders






(23,248)


(727)










FFO:









Net loss attributable to common shareholders






(23,248)


(727)

Depreciation and amortization of real estate

   investments






101,489


67,016

Equity in net income of joint ventures






(5,490)


(2,954)

Joint ventures' FFO






8,743


12,226

Non-controlling interests (OP units)






62


54

Impairment of depreciable real estate






10,390


7,679

Gain on disposition of depreciable real estate, net






(6,134)


(778)

FFO attributable to Common Shareholders






85,812


82,516

Non-operating items, net (9)






14,898


3,536

Operating FFO






$100,710


$86,052










FFO per share – Diluted (10)






$0.24


$0.26

Operating FFO per share – Diluted (10)






$0.28


$0.27

 

 

DDR Corp.

Balance Sheet:  Consolidated Interests 



$ in thousands

At Quarter End


1Q14


4Q13

Assets:




Land

$2,173,601


$2,209,970

Buildings

6,862,392


6,949,440

Fixtures and tenant improvements

597,916


599,221


9,633,909


9,758,631

Less: Accumulated depreciation

(1,854,710)


(1,823,199)


7,779,199


7,935,432

Land held for development and construction in progress

463,513


452,980

Real estate held for sale, net

0


12,670

Real estate, net

8,242,712


8,401,082





Investments in and advances to joint ventures

441,265


448,008

Cash

163,835


86,664

Restricted cash

30,137


33,476

Notes receivable, net

78,945


78,338

Receivables, including straight-line rent, net

118,335


129,513

Other assets, net (11)

488,957


515,992

Total Assets

9,564,186


9,693,073





Liabilities and Equity:




Revolving credit facilities

28,318


29,133

Unsecured debt

2,757,007


2,754,120

Unsecured term loan

350,000


350,000

Mortgage and other secured debt

2,108,591


2,161,421


5,243,916


5,294,674

Dividends payable

62,312


55,107

Other liabilities (12)

408,017


415,413

Total Liabilities

5,714,245


5,765,194





Preferred shares

405,000


405,000

Common shares

35,947


35,938

Paid-in-capital

5,418,437


5,417,363

Accumulated distributions in excess of net income

(1,994,590)


(1,915,638)

Deferred compensation obligation

16,664


16,702

Accumulated other comprehensive income

(31,036)


(36,493)

Less: Common shares in treasury at cost

(17,231)


(18,211)

Non-controlling interests

16,750


23,218

Total Equity

3,849,941


3,927,879





Total Liabilities and Equity

$9,564,186


$9,693,073

 

 

DDR Corp.

Income Statement:  Unconsolidated Interests at 100% 







$ in thousands





Three Months Ended






1Q14


1Q13

Revenues:








Minimum rents





$108,031


$128,475

Percentage rent





409


624

Recoveries





24,836


31,842

Other revenues





15,790


16,514






149,066


177,455

Expenses:








Operating and maintenance





41,880


40,083

Real estate taxes





14,674


20,723






56,554


60,806









Net operating income





92,512


116,649









Other income (expense):








Interest expense





(54,149)


(57,885)

Depreciation and amortization





(45,716)


(62,218)

Tax expense





(4,140)


(6,615)






(104,005)


(126,718)









Loss from continuing operations





(11,493)


(10,069)

Loss from discontinued operations





(758)


(2,180)

Gain (loss) on disposition of discontinued operations, net





21,473


(5,537)

Gain on disposition of real estate, net





0


479

Net income (loss)





9,222


(17,307)

Loss attributable to non-controlling interests





(1,488)


(7,219)

Net income (loss) attributable to unconsolidated joint

   ventures





7,734


(24,526)

Depreciation and amortization of real estate

   investments





44,175


64,774

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





(21,473)


5,058

FFO





30,436


45,306

FFO at DDR's ownership interest





8,743


12,226

Operating FFO at DDR's ownership interests





9,095


12,442









Net income at DDR's ownership interests





4,731


3,049

Basis differences





759


(95)

Equity in net income of joint ventures





$5,490


$2,954

 

 

DDR Corp.

Balance Sheet:  Unconsolidated Interests at 100% 



$ in thousands

At Quarter End


1Q14


4Q13

Assets:




Land

$1,269,063


$1,275,232

Buildings

3,984,505


3,940,806

Fixtures and tenant improvements

277,942


266,851


5,531,510


5,482,889

Less: Accumulated depreciation

(872,565)


(839,867)


4,658,945


4,643,022

Land held for development and construction in progress

79,550


116,088

Real estate, net

4,738,495


4,759,110

Cash and restricted cash

276,806


282,866

Receivables, including straight-line rent, net

102,830


101,003

Other assets, net

199,100


196,615

Total Assets

5,317,231


5,339,594





Liabilities and Equity:




Mortgage debt

3,259,136


3,282,643

Notes and accrued interest payable to DDR

133,534


127,679

Other liabilities

243,930


245,368

Total Liabilities

3,636,600


3,655,690





Redeemable preferred equity

72,096


71,771

Accumulated equity

1,608,535


1,612,133

Total Liabilities and Equity

$5,317,231


$5,339,594

 

 

DDR Corp.

Financial Statements:  Footnotes 







$ in millions, except per share





Three Months Ended

Includes discontinued operations





1Q14


1Q13










(1)

Minimum rents:









Straight-line rent, net





$1.0


$1.4


Below-market rent, net





(0.1)


(0.1)


Ground lease revenue





7.9


5.8










(2)

Other revenues:









Lease termination fees





1.3


0.5


Other miscellaneous





0.6


0.1










(3)

Operating expenses:









Recoverable expenses (excludes discontinued operations)





(66.1)


(50.1)


Non-recoverable expenses (excludes discontinued operations)





(7.8)


(8.0)


Straight-line ground rent expense





(0.3)


(0.3)


Expensed costs of suspended developments





(0.4)


(0.6)










(4)

Non-cash interest expense:









Convertible debt accretion





(2.8)


(2.6)


Debt fair value amortization





4.2


0.7


Loan cost amortization





(3.2)


(3.0)


Interest expense  (capitalized)





1.8


2.7










(5)

General and administrative expenses:









Stock compensation expenses





(1.9)


(1.8)


Internal leasing expenses





(1.9)


(2.1)


Construction administrative costs (capitalized)





2.4


2.2










(6)

Other income (expense):









Transactions and other





(4.4)


(0.5)


Litigation expenses





(0.2)


(0.3)


Debt extinguishment, net





(0.0)


(2.1)










(7)

Impairment charges:









Undeveloped land





(0.4)


(0.0)


Assets marketed for sale





(10.4)


(0.0)










(8)

Discontinued operations:









Revenues





1.7


11.3


Expenses





(1.5)


(9.4)


Impairments





(0.0)


(7.7)


Gain on disposition of real estate, net





10.7


0.6


Net income (loss)





10.9


(5.2)

 

 

DDR Corp.

Financial Statements:  Footnotes







$ in millions, except per share





Three Months Ended

Includes discontinued operations





1Q14


1Q13










(9)

Non-operating items excluded from Operating FFO:









Non-cash impairment charges – non-depreciable assets





$9.5


$0.0


Transaction, litigation, debt extinguishment costs, other





4.8


3.1


Joint ventures – currency, other





0.4


0.2


Loss  on sale of non-depreciable real estate, net





0.2


0.2







14.9


3.5










(10)

Outstanding per share information:









Common shares (at quarter end)





359.3


317.5


OP units (at quarter end)





0.4


0.4


Total shares and units (at quarter end)





359.7


317.9


Weighted average shares and units – Basic  – EPS





357.6


313.2


Assumed conversion of dilutive securities





0.0


0.7


Weighted average shares and units – Diluted – EPS





357.6


313.9


Weighted average shares and units – Basic – FFO & OFFO





359.6


315.9


Assumed conversion of dilutive securities





0.5


0.7


Weighted average shares and units – Diluted – FFO & OFFO





360.1


316.6


Earnings per common share – Basic





$(0.07)


$0.00


Earnings per common share – Diluted





$(0.07)


$0.00


FFO per share – Basic





$0.24


$0.26


FFO per share – Diluted





$0.24


$0.26


Operating FFO per share – Diluted





$0.28


$0.27


Common stock dividends declared, per share





$0.155


$0.135










(11)

Intangible assets, net (at quarter and year end)





377.9


409.6










(12)

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





120.9


123.9










Additional financial information:


















Capital expenditures (DDR share):









Leasing





$11.4


$9.7


Maintenance





1.1


0.6


Maintenance PSF of owned GLA





0.03


0.02











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.



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