Developers Diversified Realty Reports FFO Per Diluted Share of $1.83 For The Year Ended December 31, 2009 Before Non-Operating Gains and Losses
CLEVELAND, Feb. 18 /PRNewswire-FirstCall/ -- Developers Diversified Realty (NYSE: DDR) today announced operating results for the fourth quarter and year ended December 31, 2009.
- The Company's fourth quarter operating Funds From Operations ("FFO") was $62.8 million or $0.31 per diluted share before $90.8 million of net charges summarized below. The Company's operating FFO for the year was $298.2 million or $1.83 per diluted share before $442.8 million of net charges summarized below.
The net charges, primarily non-cash, for the three months and year ended December 31, 2009, aggregating $90.8 million and $442.8 million, respectively, are summarized as follows (in millions):
Three
Months Year
------ ----
Non-cash loss on equity derivative
instruments related to Otto
investment $1.6 $199.8
Non-cash impairment charges –
consolidated and equity method
investments 92.1 265.2
Consolidated impairment charges and
loss on sales included in
discontinued operations 4.6 117.6
Less portion of impairment charges
and losses allocated to non-
controlling interests (Mervyns) (3.9) (35.2)
Non-cash change in control
compensation charge - 15.4
Debt extinguishment costs, net loan
loss reserve and other expenses
offset by gain on sale of MDT units 20.0 30.0
Impairment charges, derivative
(gains)/losses and losses on asset
sales – equity method investments 2.6 19.0
Gain on redemption of joint venture
interests (23.5) (23.9)
Gain on repurchases of senior notes (2.7) (145.1)
---- ------
$90.8 $442.8
===== ======
- The Company reported revised operating FFO for the three-month period ended December 31, 2008 of $86.8 million or $0.71 per diluted share before $206.1 million of net charges summarized below. The Company's operating FFO for the year ended December 31, 2008 was $387.5 million or $3.20 per diluted share before $217.8 million of net charges summarized below.
The net charges, primarily non cash, for the three months and year ended December 31, 2008, aggregating $206.1 million and $217.8 million, respectively, are summarized as follows (in millions):
Three
Months Year
------ ----
Non-cash impairment charges –
consolidated and equity method
investments $182.2 $182.2
Consolidated impairment charges and
loss on sales included in
discontinued operations 7.6 15.3
Less portion of impairment charges
and losses allocated to non-
controlling interests (primarily
Mervyns) (18.7) (18.7)
Non-cash termination of an equity
award plan 15.8 15.8
Net loan loss reserve, abandoned
projects, transaction costs and
other expenses 20.8 27.1
Impairment charges, derivative
(gains)/losses and losses on asset
sales – equity method investments 8.7 6.6
Gain on repurchases of senior notes (10.3) (10.5)
----- -----
$206.1 $217.8
====== ======
- FFO applicable to common shareholders for the three-month period ended December 31, 2009, including the above net charges, was a loss of $28.0 million, or $0.14 per diluted share, which compares to revised FFO loss of $119.3 million, or $0.98 per diluted share, for the prior-year comparable period. Net loss applicable to common shareholders for the three-month period ended December 31, 2009 was $90.1 million, or $0.46 per diluted share, which compares to revised net loss of $194.6 million, or $1.61 per diluted share, for the prior-year comparable period.
- FFO applicable to common shareholders for the year ended December 31, 2009, including the above net charges, was a loss of $144.6 million, or $0.90 per diluted share, which compares to revised FFO of $169.7 million, or $1.40 per diluted share, for the prior year. Net loss applicable to common shareholders for the year ended December 31, 2009 was $398.9 million, or $2.51 per diluted share, which compares to revised net loss of $114.2 million, or $0.96 per diluted share, for the prior year.
- Executed leases during the fourth quarter of 2009 totaled approximately 3.0 million square feet, including 166 new leases and 306 renewals. Executed leases during the year totaled approximately 10.6 million square feet, including 583 new leases and 1,079 renewals.
- On a cash basis, base rental rates on new leases and renewals decreased 4.6% overall for the quarter and 3.4% year over year.
- Core portfolio leased percentage at December 31, 2009 was 91.2%, compared to 90.9% at September 30, 2009.
- Same store net operating income ("NOI") for the year decreased 3.6% compared to 2008 exclusively related to the bankruptcies and subsequent store closings of Circuit City, Linens 'N Things, Goody's and Steve & Barry's which accounted for over 100% of the decline. Absent these bankruptcies, same store NOI would have been slightly positive year over year. Same store NOI excludes the results of the assets not acquired by the Company in connection with the redemption of its interest in the MDT US LLC joint venture for both of the years ended December 31, 2009 and 2008 (see discussion of redemption transaction below).
"Although we continue to operate in a challenging macroeconomic environment, our platform and portfolio continue to perform at a high level," commented Developers Diversified's president and chief executive officer Daniel B. Hurwitz. "We are encouraged by fourth quarter retail sales and profitability results, and signs indicate that leasing deal flow in 2010 will compare favorably to our record performance in 2009. We remain keenly focused on our various balance sheet and operating initiatives to further enhance shareholder value."
Financial Results:
Net loss applicable to common shareholders was $90.1 million, or $0.46 per share (diluted and basic), for the three-month period ended December 31, 2009, as compared to revised net loss of $194.6 million, or $1.61 per share (diluted and basic), for the prior-year comparable period.
FFO applicable to common shareholders was a loss of $28.0 million, or $0.14 per share (diluted and basic), for the three-month period ended December 31, 2009, as compared to revised FFO loss of $119.3 million, or $0.98 per share (diluted and basic) for the three-month period ended December 31, 2008. The decrease in net loss for the three-month period ended December 31, 2009, is primarily the result of a reduction in non-cash impairment charges recognized on consolidated and equity method investments and loss on disposition of assets of $93.1 million as well as the recognition in 2009 of a $23.5 million gain relating to the redemption of the Company's interest in the MDT US LLC joint venture. In addition, excluding the impact of the net non-operating charges detailed above, the core operating results in 2009 compared to 2008 were impacted by several major tenant bankruptcies which occurred in late 2008 and early 2009, as well as asset sales associated with the Company's deleveraging efforts.
Net loss applicable to common shareholders was $398.9 million, or $2.51 per share (diluted and basic), for the year ended December 31, 2009, as compared to revised net loss of $114.2 million, or $0.96 per share (diluted and basic), for the prior year.
FFO applicable to common shareholders was a loss of $144.6 million, or $0.90 per share (diluted and basic), for the year ended December 31, 2009, as compared to revised FFO income of $169.7 million, or $1.40 per share (diluted and basic), for the year ended December 31, 2008. The net loss for the year ended December 31, 2009, is primarily the result of $442.8 million of net charges, generally non-cash as detailed above, in addition to several major tenant bankruptcies, the release of an approximate $16 million deferred tax valuation allowance in 2008 and the impact of asset sales associated with the Company's deleveraging efforts.
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 provides an additional indicator of the financial performance of a REIT. The Company also believes that FFO more appropriately measures the core operations of the Company and provides a benchmark to its peer group. FFO does not represent cash generated from operating activities in accordance with generally accepted accounting principles ("GAAP"), is not necessarily indicative of cash available to fund cash needs and should not 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 those sold through the Company's merchant building program, 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. Other real estate companies may calculate FFO in a different manner. FFO excluding the net non-operating charges detailed above is useful to investors as the Company removes these net charges to analyze the results of its operations and assess performance of the core operating real estate portfolio. A reconciliation of net income to FFO is presented in the financial highlights section.
Leasing:
The following results for the three-month period ended December 31, 2009 highlight continued strong leasing activity throughout the portfolio despite the current economic environment:
- Executed 166 new leases aggregating approximately 1.1 million square feet and 306 renewals aggregating approximately 1.9 million square feet.
- Total portfolio average annualized base rent per occupied square foot, excluding assets in Brazil, as of December 31, 2009 was $12.51, as compared to $12.43 at December 31, 2008.
- Core portfolio leased rate was 91.2% as of December 31, 2009, as compared to 92.2% at December 31, 2008 and 90.9% at September 30, 2009.
- On a cash basis, rental rates for new leases and renewals decreased 4.6%.
Overall, the Company remains encouraged by the leasing activity achieved during the fourth quarter. While the resulting rental spreads and core occupancy level are much less favorable than what the Company has historically achieved, the Company is continuing to make strides in retenanting the bankruptcy driven vacancy that has impacted the retail sector.
Strategic Transactions:
DDR Macquarie Fund:
In October 2009, the Macquarie DDR Trust unitholders approved the redemption of Developers Diversified's interest in the MDT US LLC joint venture. A 100% interest in three shopping center assets was transferred to the Company in October 2009 in exchange for its approximate 14.5% ownership interest and a cash payment of $1.6 million. The Company recognized a $23.5 million gain on the redemption transaction.
Otto Transaction:
In 2009, the Company issued 32.9 million shares to Mr. Alexander Otto (the "Investor") and certain members of his family (collectively with the Investor, the "Otto Family") resulting in aggregate gross equity proceeds of approximately $112.5 million. The Company also issued warrants to purchase up to 10.0 million common shares with an exercise price of $6.00 per share to the Investor. The share issuances, together with the warrant issuances, are collectively referred to as the "Otto Transaction".
Dispositions:
The Company sold five shopping center properties, aggregating 0.6 million square feet, in the fourth quarter of 2009, generating gross proceeds of approximately $30.5 million. The Company recorded an aggregate loss on sale of approximately $4.0 million related to these assets in the fourth quarter of 2009. The Company also incurred a $2.3 million net loss on land sales in the fourth quarter. An additional three assets were sold in the first quarter of 2010 for approximately $26 million.
Wholly-Owned and Consolidated Joint Venture Development:
The Company currently has the following wholly-owned and consolidated joint venture shopping center projects under construction:
Expected
Remaining Initial
Owned Cost Anchor
Location GLA ($ Millions) Opening* Description
--------------- ----- ------------ -------- ----------------
Boise (Nampa),
Idaho 431,689 $25.3 2H 07 Community Center
Boston (Norwood),
Massachusetts 56,343 4.1 2H 10 Community Center
Austin (Kyle),
Texas** 443,092 16.5 2H 09 Community Center
------- ------
Total 931,124 $45.9
------- ------
* 2H = Second Half; either actual or anticipated
** Consolidated 50% Joint Venture
In addition to these current projects, several of which will be developed in phases, the Company and its joint venture partners intend to commence construction on various other developments only after substantial tenant leasing has occurred and acceptable construction financing is available, including several international projects.
Wholly-Owned and Consolidated Joint Venture Redevelopments and Expansions:
The Company is currently expanding/redeveloping the following wholly-owned shopping center at a projected aggregate net cost of approximately $89.4 million. At December 31, 2009, approximately $78.2 million of costs had been incurred in relation to this project.
Property Description
--------------------------- ----------------------------------------
Miami (Plantation), Florida Redevelop shopping center to include
Kohl's, Dick's Sporting Goods and other
retail tenants
Financings:
In the fourth quarter of 2009, the Company purchased approximately $142.5 million aggregate principal amount of its outstanding senior unsecured notes (primarily convertible unsecured notes) at a discount to par, resulting in a gross gain of approximately $7.9 million prior to the write off of unamortized deferred financing costs. This gain was reduced by approximately $3.9 million due to the adoption of the accounting standard, "Accounting for Convertible Debt That May Be Settled in Cash Upon Conversion," on January 1, 2009 ("Convertible Debt Restatement").
In November 2009, the Company closed the securitization of a $400 million, five-year loan that was originated in October 2009. The loan has a blended coupon interest rate of 4.225% and is secured by a pool of 28 assets. The triple-A rated portion of the certificates in the securitization constituted "eligible collateral" under the Term Asset-Backed Securities Loan Facility ("TALF"), provided by the Federal Reserve Bank of New York.
Equity Issuances:
The Company sold approximately 5.1 million of its common shares during the three-month period ended December 31, 2009 through its continuous equity program, generating gross proceeds of approximately $50.0 million. In January 2010, the Company sold approximately 5.0 million of its common shares through the continuous equity program generating gross proceeds of approximately $46.1 million. Substantially all net proceeds were used to repay debt.
In February 2010, the Company issued and sold 42.9 million of its common shares in an underwritten offering. Net proceeds from the sale of the common shares of approximately $338.1 million were utilized to repay debt.
Developers Diversified owns and manages approximately 665 retail operating and development properties in 44 states, Brazil, Canada and Puerto Rico. Totaling more than 147 million square feet, the Company's shopping center portfolio features open-air, value-oriented neighborhood and community centers, mixed-use centers and lifestyle centers located in prime markets with stable populations and high-growth potential. Developers Diversified is the largest landlord in Puerto Rico and owns a premier portfolio of regional malls in and around Sao Paulo, Brazil. Developers Diversified 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 Internet at www.ddr.com.
A copy of the Company's Supplemental Financial/Operational package is available to all interested parties upon request at our corporate office to Kate Deck, Investor Relations Director, Developers Diversified Realty Corporation, 3300 Enterprise Parkway, Beachwood, Ohio 44122 or on our Web site, which is located at http://www.ddr.com.
Developers Diversified Realty Corporation considers portions of this information 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 year ended December 31, 2009. For additional factors that could cause the results of the Company to differ materially from these indicated in the forward-looking statements, please refer to the Company's Form 10-K as of December 31, 2008. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands - except per share data)
Three-Month Period Year Ended
Ended December 31, December 31,
Revenues: 2009 2008 (F) 2009 2008 (F)
-------- --------- -------- ---------
Minimum rents (A) $138,056 $146,265 $543,911 $589,775
Percentage and
overage rents (A) 3,490 4,002 8,061 8,950
Recoveries from
tenants 44,794 45,127 179,181 189,650
Ancillary and
other property
income 7,502 6,182 23,103 21,760
Management,
development
and other fee
income 14,489 15,588 57,684 62,890
Other (B) 1,189 1,359 7,367 8,743
----- ----- ----- -----
209,520 218,523 819,307 881,768
------- ------- ------- -------
Expenses:
Operating and
maintenance (C) 38,629 38,395 144,842 139,665
Real estate
taxes 27,447 26,001 109,627 104,154
Impairment
charges (D) 9,055 75,263 80,641 75,263
General and
administrative (E) 20,896 20,275 79,003 81,882
Termination of
equity award
plan and
change in
control (E) - 15,837 15,362 15,837
Depreciation
and
amortization 56,463 61,760 227,185 228,619
------ ------ ------- -------
152,490 237,531 656,660 645,420
------- ------- ------- -------
Other income
(expense):
Interest income 2,564 2,687 12,109 5,458
Interest
expense (F) (64,863) (62,097) (237,943) (245,368)
Gain on
repurchases
of senior
notes 2,690 10,255 145,050 10,455
Loss on equity
derivative
instruments (G) (1,597) - (199,797) -
Other expenses (H) (19,925) (20,792) (29,412) (28,251)
------- ------- ------- -------
(81,131) (69,947) (309,993) (257,706)
------- ------- -------- --------
Loss before
equity in net
loss of joint
ventures,
impairment of
joint venture
investments,
gain on
redemption of
joint venture
interests,
tax benefit
of taxable REIT
subsidiaries
and state
franchise and
income taxes,
discontinued
operations
and gain on
disposition
of real estate,
net of tax (24,101) (88,955) (147,346) (21,358)
Equity in net
loss of joint
ventures (I) (749) (4,205) (9,733) 17,719
Impairment of
joint venture
investments (J) (83,013) (106,957) (184,584) (106,957)
Gain on
redemption of
joint venture
interests (K) 23,471 - 23,865 -
Tax benefit of
taxable REIT
subsidiaries
and state
franchise and
income taxes 1,202 2,383 691 17,501
----- ----- --- ------
Loss from
continuing
operations (83,190) (197,734) (317,107) (93,095)
(Loss) income
from discontinued
operations (L) (4,465) (3,916) (95,647) 3,125
------ ------ ------- -----
Loss before
gain on
disposition
of real estate (87,655) (201,650) (412,754) (89,970)
Gain on
disposition
of real estate,
net of tax (M) 905 594 9,127 6,962
--- --- ----- -----
Net loss (86,750) (201,056) (403,627) (83,008)
Loss
attributable
to non-controlling
interests 7,186 17,053 47,034 11,078
----- ------ ------ ------
Net loss
attributable
to DDR $(79,564) $(184,003) $(356,593) $(71,930)
======== ========= ========= ========
Net loss
applicable to
common shareholders $(90,131) $(194,570) $(398,862) $(114,199)
======== ========= ========= =========
Funds From
Operations ("FFO"):
Net loss
applicable to
common
shareholders $(90,131) $(194,570) $(398,862) $(114,199)
Depreciation
and amortization
of real estate
investments 53,970 63,603 224,207 236,344
Equity in net
loss (income)
of joint
ventures (I) 749 4,205 9,306 (17,719)
Joint ventures'
FFO (I) 11,113 7,433 43,665 68,355
Non-controlling
interests (OP
Units) 8 - 175 1,145
(Gain) loss on
disposition
of depreciable
real estate (3,718) 77 (23,123) (4,244)
------ --- ------- ------
FFO applicable
to common
shareholders (28,009) (119,252) (144,632) 169,682
Preferred dividends 10,567 10,567 42,269 42,269
------ ------ ------ ------
FFO $(17,442) $(108,685) $(102,363) $211,951
======== ========= ========= ========
Per share data:
Earnings per
common share
Basic $(0.46) $(1.61) $(2.51) $(0.96)
====== ====== ====== ======
Diluted $(0.46) $(1.61) $(2.51) $(0.96)
====== ====== ====== ======
Dividends Declared $0.02 $- $0.44 $2.07
===== == ===== =====
Funds From
Operations –
Basic (N) $(0.14) $(0.98) $(0.90) $1.40
====== ====== ====== =====
Funds From
Operations –
Diluted (N) $(0.14) $(0.98) $(0.90) $1.40
====== ====== ====== =====
Basic – average
shares
outstanding 196,399 121,019 158,816 119,843
======= ======= ======= =======
Diluted – average
shares
outstanding 196,399 121,019 158,816 119,843
======= ======= ======= =======
(A) Base and percentage rental revenues for the year ended December 31,
2009, as compared to the prior year, decreased $44.3 million
primarily due to store closings related to five major tenant
bankruptcies, which approximated $46.1 million, the most significant
of which related to the assets formerly occupied by Mervyns, which is
50% owned by the Company through a consolidated joint venture. There
was also a decrease in base and percentage rental revenue of $0.3
million related to the Company's business centers. These decreases
were partially offset by an increase of $2.1 million due to the three
additional shopping centers acquired as a result of the redemption of
the Company's interest in the MDT US LLC joint venture. Also
included in rental revenues for the years ended December 31, 2009 and
2008 is approximately $4.3 million and $8.0 million, respectively, of
revenue resulting from the recognition of straight-line rents,
including discontinued operations. The decrease in straight-line
rents relates primarily to the Mervyns portfolio.
(B) Other revenue for the three-month periods and years ended December
31, 2009 and 2008 was comprised of the following (in millions):
Three-Month
Period Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Lease termination fees $0.7 $0.8 $4.1 $5.8
Financing fees 0.2 0.1 1.1 2.0
Other
miscellaneous 0.3 0.5 2.2 0.9
--- --- --- ---
$1.2 $1.4 $7.4 $8.7
==== ==== ==== ====
(C) Included in operating and maintenance, including discontinued
operations, is the following:
Three-Month
Period Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
---- ---- ---- ----
Bad debt
expense $5.4 $8.5 $16.1 $18.7
Ground rent
expense (a) 1.3 1.1 4.8 4.2
(a) Includes non-cash expense for each of the three-month periods
ended December 31, 2009 and 2008 of approximately $0.5 million,
and for the years ended December 31, 2009 and 2008, of
approximately $1.9 million and $1.8 million, respectively,
related to the straight-line of ground leases.
(D) The Company recorded impairment charges during both the three-month
period and year ended December 31, 2009 on consolidated assets that
are either under contract or being marketed for sale, as the book
basis of the assets was in excess of the estimated fair market value.
Of this amount, $7.8 million and $68.7 million was recorded in the
three months and year ended December 31, 2009, related to impairment
charges on 14 assets formerly occupied by Mervyns, of which the
Company's proportionate share was $3.9 million and $33.6 million,
respectively, after adjusting for the allocation of loss to the
non-controlling interest in this consolidated joint venture. An
additional $74.1 million in impairment charges were reported for the
year ended December 31, 2009 as part of discontinued operations (see
footnote L).
(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 years ended December 31, 2009 and 2008, general and
administrative expenses were approximately 5.4% and 5.2% of total
revenues, respectively, including joint venture and managed property
revenues. During the year ended December 31, 2009, the Company
recorded $15.4 million of non-cash charges as a result of the change
in control provisions included in the Company's equity-based award
plans triggered by the Otto Transaction. In addition, during the
year ended December 31, 2008, the Company recorded a non-cash charge
of approximately $15.8 million related to the termination of a
supplemental equity award plan. Excluding these charges, general and
administrative expenses were 4.5% and 4.3% of total revenues for the
years ended December 31, 2009 and 2008, respectively.
(F) In 2009, the Company adopted the standard, "Accounting for
Convertible Debt That May be Settled in Cash Upon Conversion." The
adoption of this standard required the Company to restate its
interest expense and record non-cash interest-related charges of $3.3
million and $13.1 million, net of capitalized interest, for the
three-month period and year ended December 31, 2008, respectively.
In addition, as a result of the adoption of this standard, the gain
on repurchases of senior notes was reduced by $1.1 million for the
three-month period and year ended December 31, 2008. The Company
recorded non-cash interest expense of approximately $2.5 million and
$12.2 million for the three-month period and year ended December 31,
2009, respectively, in accordance with this new accounting standard.
(G) Represents the non-cash impact of the valuation adjustments for the
equity derivative instruments issued as part of the Otto Transaction.
(H) Other income (expenses) for the fourth quarter primarily related to
the write off of costs related to abandoned development projects and
other transactions of $4.0 million, debt extinguishment costs of
$13.9 million and litigation-related expenditures of $2.1 million.
Other expenses for the year ended December 31, 2009 also included a
reserve associated with a mezzanine note receivable of $5.4 million
and additional litigation-related expenditures offset by a $2.8
million gain on the sale of Macquarie DDR Trust units ("MDT units").
Other income (expense) in 2008 primarily related to abandoned
development projects and other transactions of $13.6 million, a $5.4
million loan loss reserve associated with a note receivable as well
as litigation costs related to a potential liability associated with
a legal verdict.
(I) The following is a summary of the combined operating results of the
Company's joint ventures. The results of the DDR Macquarie Fund are
included below through October 20, 2009, the date that the Company's
interest in MDT US LLC was redeemed:
Three-Month Period Year Ended
Ended December 31, December 31,
2009 2008 2009 2008
-------- -------- -------- --------
Revenues from
operations (a) $190,444 $226,433 $852,710 $925,358
-------- -------- -------- --------
Operating expenses 74,076 80,904 328,080 322,103
Impairment charges (b) 389,412 - 389,412 -
Depreciation and
amortization of
real estate
investments 55,528 64,667 242,384 236,748
Interest expense (c) 70,408 81,574 308,368 303,532
------ ------ ------- -------
589,424 227,145 1,268,244 862,383
------- ------- --------- -------
(Loss) income
from operations
before tax
expense and
discontinued
operations (398,980) (712) (415,534) 62,975
Income tax expense (2,948) (3,485) (10,013) (15,479)
(Loss) income
from discontinued
operations, net
of tax (d) (74) (2,652) (31,140) 1,476
Income (loss) on
disposition of
discontinued
operations, net
of tax (e) 64 7,364 (19,448) 7,364
Gain (loss) on
disposition of
assets (f) 843 (18) (25,973) (67)
Other, net (g) - (47,791) 7,153 (31,318)
--- ------- ----- -------
Net (loss) income $(401,095) $(47,294) $(494,955) $24,951
========= ======== ========= =======
DDR ownership
interests (h) $(22,147) $(5,482) $(34,522) $17,335
======== ======= ======== =======
FFO from joint ventures are summarized as follows:
Net (loss) income $(401,095) $(47,294) $(494,955) $24,951
Gain on disposition
of real estate,
including discontinued
operations (843) (7,364) (843) (7,350)
Depreciation and
amortization of real
estate investments 55,528 65,928 245,000 241,651
------ ------ ------- -------
$(346,410) $11,270 $(250,798) $259,252
========= ======= ========= ========
DDR ownership
interests (h) $11,113 $7,433 $43,665 $68,355
======= ====== ======= =======
DDR joint venture
distributions
received, net (i) $7,963 $24,467 $31,455 $65,957
====== ======= ======= =======
(a) Revenues for the three-month periods ended December 31, 2009 and
2008 reflect an approximate $0.3 million reduction and $0.7
million increase, respectively, resulting from the recognition
of straight-line rents, of which the Company's proportionate
share was minimal. Revenues for the years ended December 31,
2009 and 2008 included approximately $2.7 million and $6.3
million, respectively, resulting from the recognition of
straight-line rents, of which the Company's proportionate share
was $0.2 million and $1.4 million, respectively. Excluding the
impact of the redemption of the Company's interest in MDT US
LLC, revenues from operations for the year ended December 31,
2009, as compared to the prior year, decreased primarily due to
store closings related to four major tenant bankruptcies, the
impact of which approximated $24 million.
(b) Impairment charges of $145.0 million and $25.9 million were
recorded by the DDRTC Core Retail Fund LLC and DPG Realty
Holdings LLC joint ventures, respectively, for both the
three-month period and year ended December 31, 2009, related to
a combined 22 shopping centers that were under contract to be
sold as of December 31, 2009. The Company's proportionate share
of each charge was $0.9 million and $1.7 million, respectively,
and was reduced by the impact of the other than temporary
impairments recorded on these investments. In addition,
Coventry II DDR Bloomfield LLC recorded an impairment charge of
$218.5 million related to the development project that is
currently suspended, of which the Company's proportionate share
of loss is included in the investment impairment recognized as
disclosed in footnote (J).
(c) Interest expense includes net non-cash charges related to
ineffective derivative instruments at the DDR Macquarie Fund of
$0.2 million and $6.6 million for the three-month period and
year ended December 31, 2009 and $5.8 million and $6.4 million
for the three-month period and year ended December 31, 2008,
respectively.
(d) Includes $33.9 million of impairment charges relating to three
assets in the DDR Macquarie Fund joint venture that were sold in
the third quarter of 2009. The Company's proportionate share of
these impairment losses aggregated $5.5 million, and was reduced
by the impact of the other than temporary impairment recorded on
this investment in the fourth quarter of 2008.
(e) Loss on disposition of discontinued operations includes the sale
of 13 properties by three separate unconsolidated joint ventures
in 2009. These dispositions resulted in a loss of $19.4 million
for the year ended December 31, 2009 and excludes the impact of
the previously recognized impairments discussed in (d) above.
The Company's proportionate share of the loss on disposition for
the year ended December 31, 2009 was $1.4 million and was
reduced by the impact of previously recorded impairments on the
respective unconsolidated joint ventures, as appropriate.
(f) An unconsolidated joint venture disposed of a property in the
first quarter of 2009, resulting in a loss of $26.7 million of
which the Company's proportionate share was $5.8 million.
(g) Includes the effects of certain derivative instruments that are
marked-to-market through earnings from the Company's equity
investment in Macquarie DDR Trust aggregating approximately $7.2
million of income through the Company's ownership period in the
MDT units for the year ended December 31, 2009 and $45.9 million
and $29.4 million of loss for the three-month period and year
ended December 31, 2008, respectively.
(h) The Company's share of joint venture equity in net loss was
decreased by $21.4 million and $1.2 million for the three-month
periods ended December 31, 2009 and 2008, respectively. The
Company's share of joint venture net loss was decreased by $24.8
million and the equity in net income was increased by $0.4
million for the years ended December 31, 2009 and 2008,
respectively. These adjustments relate primarily to basis
differences impacting amortization and depreciation, impairment
charges and (loss) gain on dispositions.
At December 31, 2009 and 2008, the Company owned joint venture
interests, excluding consolidated joint ventures, in 274 and 329
shopping center properties, respectively.
(i) Distributions for 2009 include $2.5 million from a foreign
investment that have yet to be expatriated to the United States.
(J) The Company recorded $83.0 million and $184.6 million in impairment
charges, for the three-month period and year ended December 31, 2009,
as a result of the Company's determination that certain of its
unconsolidated joint venture investments suffered an "other than
temporary impairment." During the three months ended December 31,
2009, these charges primarily related to the Company's investments in
the Coventry II joint ventures and the establishment of a full
reserve on a note advanced to that joint venture ($78.3 million).
During the year ended December 31, 2009, the Company recorded
aggregate charges relating to its interest in the Coventry II joint
ventures ($119.3 million), DDRTC Core Retail Fund LLC ($55.0
million), DDR-SAU Retail Fund LLC ($6.2 million) and DPG Realty
Holdings LLC ($3.6 million) and Central Park Solon LLC ($0.5
million).
(K) In October 2009, the Company's approximate 14.5% interest in the MDT
US LLC joint venture was redeemed in exchange for a 100% interest in
three shopping center assets and a cash payment of $1.6 million. The
Company accounted for this transaction as a step acquisition and as a
result recognized a $23.5 million gain.
(L) The operating results relating to assets classified as discontinued
operations are summarized as follows:
Three-Month Period Ended Year Ended
December 31, December 31,
2009 2008 2009 2008
------- ------- ------- -------
Revenues from
operations $761 $13,964 $24,002 $61,885
---- ------- ------- -------
Operating expenses 421 3,540 7,279 17,356
Impairment charges - 4,601 74,077 4,601
Interest, net 624 3,204 7,484 14,218
Depreciation and
amortization of
real estate investments 120 3,535 6,782 17,755
--- ----- ----- ------
Total expenses 1,165 14,880 95,622 53,930
----- ------ ------ ------
(Loss) income
before loss on
disposition of
real estate (404) (916) (71,620) 7,955
Loss on disposition
of real estate, net (4,061) (3,000) (24,027) (4,830)
------ ------ ------- ------
Net (loss) income $(4,465) $(3,916) $(95,647) $3,125
======= ======= ======== ======
(M) Includes $2.3 million in loss, net of tax, relating to the sale of
land parcels.
(N) For purposes of computing FFO per share (basic), the weighted average
shares outstanding were adjusted to reflect the assumed conversion of
approximately 0.4 million Operating Partnership Units ("OP Units")
outstanding at December 31, 2009 and 2008, into 0.4 million common
shares for the three-month periods ended December 31, 2009 and 2008,
on a weighted-average basis, and 0.4 million common shares and 0.6
million common shares for the year ended December 31, 2009 and 2008,
respectively, on a weighted-average basis. The weighted average
diluted shares and OP Units outstanding, for purposes of computing
FFO were approximately 198.3 million and 121.5 million for the
three-month periods ended December 31, 2009 and 2008, respectively,
and 160.1 million and 121.0 million for the years ended December 31,
2009 and 2008, respectively. For purposes of calculating operating
FFO, the weighted average diluted shares and OP Units were 203.5
million and 121.5 million for the three-month periods ended December
31, 2009 and 2008, respectively, and 163.2 million and 121.0 million
for the year ended December 31, 2009 and 2008, respectively, which
include common stock equivalents relating to equity awards and
warrants, which are otherwise anti-dilutive in a net loss position.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands)
Selected Balance Sheet Data (A):
December 31, 2009 December 31, 2008 (B)
----------------- --------------------
Assets:
Real estate and rental property:
Land $1,971,782 $2,073,947
Buildings 5,694,659 5,890,332
Fixtures and tenant
improvements 287,143 262,809
------- -------
7,953,584 8,227,088
Less: Accumulated depreciation (1,332,534) (1,208,903)
---------- ----------
6,621,050 7,018,185
Construction in progress
and land held for development 858,900 882,478
Assets held for sale 10,453 -
------ ---
Real estate, net 7,490,403 7,900,663
Investments in and advances
to joint ventures 420,541 583,767
Cash 26,172 29,494
Restricted cash (C) 95,673 111,792
Notes receivable 74,997 75,781
Receivables, including straight-line
rent, net 146,809 164,356
Other assets, net 172,011 154,369
------- -------
$8,426,606 $9,020,222
========== ==========
Liabilities:
Indebtedness:
Revolving credit facilities $775,028 $1,027,183
Unsecured debt 1,689,841 2,402,032
Mortgage and other secured debt 2,713,794 2,437,440
--------- ---------
5,178,663 5,866,655
Dividends payable 10,985 6,967
Other liabilities (D) 283,995 281,179
------- -------
5,473,643 6,154,801
Redeemable operating
partnership units 627 627
Equity 2,952,336 2,864,794
--------- ---------
$8,426,606 $9,020,222
========== ==========
(A) Amounts include the consolidation of a 50% owned joint venture, DDR
MDT MV LLC ("MV LLC"), that owns 31 sites formerly occupied by
Mervyns at December 31, 2009, which includes the following (in
millions):
December 31, 2009 December 31, 2008
----------------- -----------------
Real estate, net $218.7 $325.1
Restricted cash 50.5 64.8
Mortgage debt 225.4 258.5
Non-controlling interests 22.4 70.2
(B) The December 31, 2008 selected balance sheet data was revised to
reflect the adoption of two accounting standards in the first quarter
of 2009.
-- In connection with the Convertible Debt Restatement, the Company
increased real estate assets by $2.9 million and equity by $52.6
million and decreased unsecured debt by $50.7 million and
deferred charges by $1.0 million.
-- The Company adopted the provisions of the standard, "Non-
controlling Interests in Consolidated Financial Statements – an
Amendment of ARB No. 51," which impacted the accounting for
transactions with non-controlling shareholders. The Company no
longer has a line item in its balance sheet referred to as
Minority Interests. Equity at December 31, 2008 has been
revised to include $120.1 million attributable to non-
controlling interests. Equity at December 31, 2009 includes
$89.8 million attributable to non-controlling interests.
(C) Included in restricted cash are amounts held by MV LLC as noted
above. The MV LLC restricted cash is comprised of proceeds received
from the seller of the Mervyns portfolio relating to Mervyn's
bankruptcy filing in the third quarter 2008, a capital contribution
by the members of MV LLC, and proceeds related to a security deposit
letter of credit, net of debt service payments, all of which are
required to be held in escrow by the lender. Also included in
restricted cash is $45.2 million and $47.0 million at December 31,
2009 and December 31, 2008, respectively, relating to the terms of a
bond issue for one of the Company's projects in Mississippi.
(D) Includes a $56.1 million non-cash liability relating to the warrants
issued in connection with the Otto Transaction as of December 31,
2009. The liability will be reclassified into equity upon ultimate
exercise or expiration of the warrants.
Selected Balance Sheet Data (continued):
Combined condensed balance sheets relating to the Company's joint ventures
are as follows:
December 31, 2009 (a) December 31, 2008
-------------------- -----------------
Land $1,782,431 $2,378,033
Buildings 5,207,234 6,353,985
Fixtures and tenant improvements 146,716 131,622
------- -------
7,136,381 8,863,640
Less: Accumulated depreciation (636,897) (606,530)
-------- --------
6,499,484 8,257,110
Construction in progress 130,410 412,357
------- -------
Real estate, net 6,629,894 8,669,467
Receivables, including straight-
line rent, net 113,630 136,410
Leasehold interests 11,455 12,615
Other assets 342,192 315,591
------- -------
$7,097,171 $9,134,083
========== ==========
Mortgage debt (b) $4,547,711 $5,776,897
Notes and accrued interest payable
to DDR 73,477 64,967
Other liabilities 194,065 237,363
------- -------
4,815,253 6,079,227
Accumulated equity 2,281,918 3,054,856
--------- ---------
$7,097,171 $9,134,083
========== ==========
(a) Decreases in real estate assets and mortgage debt from 2008 to
2009 of $2,009.2 million and $1,229.2 million, respectively, are
as a result of $1,759.2 million and $1,150.7 million,
respectively, relating to the redemption of the Company's
interest in the MDT US LLC joint venture and its liquidation of
the MDT units.
(b) The Company's proportionate share of joint venture debt
aggregated approximately $917.0 million and $1,216.1 million at
December 31, 2009 and 2008, respectively. The 2009 amount
reflects a decrease of $291.9 million due to the redemption of
DDR's interest in the MDT US LLC joint venture and its
liquidation of the MDT units.
SOURCE Developers Diversified Realty Corporation
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