Attached files
file | filename |
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8-K - FORM 8-K - SITE Centers Corp. | l41710e8vk.htm |
EX-99.2 - EX-99.2 - SITE Centers Corp. | l41710exv99w2.htm |
Exhibit
99.1
DEVELOPERS DIVERSIFIED REALTY CORPORATION
For Immediate Release:
Media Contact: | Investor Contact: | |||||
Marty Richmond | Kate Deck | |||||
216-755-5500 | 216-755-5500 | |||||
mrichmond@ddr.com | kdeck@ddr.com |
DEVELOPERS DIVERSIFIED REALTY REPORTS OPERATING FFO PER
DILUTED SHARE OF $0.27 FOR THE QUARTER ENDED
DECEMBER 31, 2010
DILUTED SHARE OF $0.27 FOR THE QUARTER ENDED
DECEMBER 31, 2010
BEACHWOOD, OHIO, February 17, 2011 - Developers Diversified Realty Corporation (NYSE: DDR) today
announced operating results for the fourth quarter and year ended December 31, 2010.
SIGNIFICANT FOURTH QUARTER ACTIVITY
| Reported operating FFO of $0.27 per diluted share, which excludes certain non-operating items | ||
| Executed 396 total leases for 2.6 million square feet | ||
| Increased the core portfolio leased rate to 92.3% at December 31, 2010 from 92.0% at September 30, 2010 and 91.2% at December 31, 2009 | ||
| Improved the spread on new leases to +8.3% and renewals to +4.8% for a blended overall spread of +5.4%, which compares to a blended spread of +5.0% in the third quarter of 2010 and -4.4% in the fourth quarter of 2009 | ||
| Reported Same Store Net Operating Income growth of 3.6% as compared to an increase of 2.0% in the third quarter of 2010 and a decrease of 3.5% in the fourth quarter of 2009 | ||
| Refinanced two senior unsecured revolving credit facilities providing $1.015 billion of borrowing capacity through February 2014 | ||
| Completed $163.4 million of asset sales, of which the Companys pro-rata share was $62.8 million | ||
| Issued $350 million aggregate principal amount of 1.75% convertible senior notes due November 2040 | ||
| Reduced consolidated indebtedness by nearly $100 million to $4.3 billion at December 31, 2010 |
We are pleased to report continued positive operational trends within our portfolio, specifically
as it relates to leasing momentum and rental rates, and the resulting growth in same store net
operating income. Furthermore, the continued execution of our strategic objectives in the capital
markets continues to improve our credit metrics, and we are keenly focused on delivering additional
progress throughout 2011, commented Developers Diversifieds president and chief executive
officer, Daniel B. Hurwitz.
FINANCIAL HIGHLIGHTS
The Companys fourth quarter operating Funds From Operations (FFO) was $70.9 million, or $0.27
per diluted share, before $114.8 million of net charges. The Companys operating FFO for the year
was $264.3 million, or $1.04 per diluted share, before $275.6 million of net charges.
The charges and gains, primarily non-cash, for the periods ended December 31, 2010, are summarized
as follows (in millions):
Three Months | Year | |||||||
Non-cash impairment charges consolidated
assets |
$ | 28.9 | $ | 116.5 | ||||
Charges related to employee separations |
3.5 | 5.6 | ||||||
Gain on debt retirement, net |
(0.2 | ) | (0.5 | ) | ||||
Non-cash loss on equity derivative
instruments (Otto Family warrants) |
25.5 | 40.2 | ||||||
Other expense, net (1) |
6.0 | 22.0 | ||||||
Equity in net loss of joint ventures
loss on asset sales and impairment charges |
0.4 | 6.8 | ||||||
Loss on change in control of interests |
| 0.4 | ||||||
Tax expense deferred tax assets reserve |
49.9 | 49.9 | ||||||
Discontinued operations non-cash
consolidated impairment charges and loss on
sales |
1.3 | 67.1 | ||||||
Discontinued operations FFO associated
with Mervyns Joint Venture, net of
non-controlling interest |
| 4.8 | ||||||
Discontinued operations gain on
deconsolidation of Mervyns Joint Venture |
| (5.6 | ) | |||||
Gain on disposition of real estate (land) |
(0.5 | ) | (0.4 | ) | ||||
Less non-controlling interests portion
of impairment charges allocated to outside
partners |
| (31.2 | ) | |||||
$ | 114.8 | $ | 275.6 | |||||
(1) | Amounts included in Other expense are detailed as follows: |
Three Months | Year | |||||||
Lease liability reserve primarily for cancelled
development project |
$ | 3.3 | $ | 3.3 | ||||
Litigation expenditures, net of tax benefit |
1.0 | 12.2 | ||||||
Debt extinguishment costs |
0.5 | 3.7 | ||||||
Other |
1.2 | 2.8 | ||||||
$ | 6.0 | $ | 22.0 | |||||
Included in the non-operating items detailed above is a $22.3 million non-cash charge
recognized in the fourth quarter of 2010 associated with a development project the Company no
longer plans to pursue. A subsidiary of the Companys taxable REIT subsidiary (TRS) acquired a
leasehold interest in the development located in Norwood, Massachusetts as part of a portfolio
acquisition in 2003, and no longer expects to fund the ground rent expense. The aggregate charge
includes a $19.3 million impairment and a $3.0 million lease liability associated with the ground
lease. The Company also incurred fourth quarter non-cash income tax expense of $49.9 million
recognized due to the establishment of a reserve against certain deferred tax assets within its
TRS. Based upon the continued loss activity recognized by the TRS, including the $22.3 million
charge associated with the abandoned development project described above, it was determined that it
was more likely than not that the deferred tax assets would not be utilizable, thus requiring a
current reserve.
FFO applicable to common shareholders for the three-month period ended December 31, 2010, including
the above net charges, was a loss of $43.9 million, or $0.17 per diluted share, which compares to a
FFO loss of $28.0 million, or $0.14 per diluted share, for the prior-year comparable period. The
increased FFO loss for the three-month period ended December 31, 2010, is primarily the result of
the establishment of a reserve against certain deferred tax assets and an increase in expense
recorded for the equity derivative instruments associated with the Otto investment, partially
offset by a decrease in impairment-related charges.
FFO applicable to common shareholders for the year ended December 31, 2010, including the above net
charges, was a loss of $11.3 million, or $0.05 per diluted share, which compares to a FFO loss of
$144.6 million, or $0.90 per diluted share, for the prior-year comparable period. The increase in
FFO for the year ended December 31, 2010, is primarily the result of a decrease in
impairment-related charges and lower expense associated with the
equity derivative instruments partially offset by the establishment of a reserve against
certain deferred tax assets in 2010 and lower gain on debt
retirement.
Net loss applicable to common shareholders for the three-month period ended December 31, 2010, was
$94.8 million, or $0.37 per diluted share, which compares to a net loss of $90.1 million, or $0.46
per diluted share, for the prior-year comparable period.
Net loss applicable to common shareholders for the year ended December 31, 2010, was $251.6
million, or $1.03 per diluted share, which compares to a net loss of $398.9 million, or $2.51 per
diluted share, for the prior-year comparable period. The decrease in net loss for the year ended
December 31, 2010, is primarily due to the same factors impacting FFO.
LEASING & PORTFOLIO OPERATIONS
The following results for the three-month period ended December 31, 2010, highlight continued
strong leasing activity throughout the portfolio:
| Executed 161 new leases aggregating approximately 1.0 million square feet and 235 renewals aggregating approximately 1.6 million square feet. In total, the Company executed approximately 2.6 million square feet of leases for the quarter and 11.3 million for the full year of 2010. | ||
| Total portfolio average annualized base rent per occupied square foot as of December 31, 2010 was $13.36, as compared to $13.01 at December 31, 2009. Excluding the Brazil portfolio, total portfolio average annualized base rent per occupied square foot as of December 31, 2010 was $12.46, as compared to $12.27 at December 31, 2009. | ||
| The core portfolio leased rate was 92.3% as of December 31, 2010, as compared to 91.2% at December 31, 2009. The core portfolio and the Brazil portfolio blended leased rate was 92.6% at December 31, 2010. | ||
| On a cash basis, rental rates for new leases increased by 8.3% over prior rents and renewals increased by 4.8%. For the U.S.-portion of the portfolio, rental rates increased 6.5% for new leases and 3.1% for renewals. On a blended basis, leasing spreads increased by 5.4% during the quarter for the total portfolio and 3.5% for the U.S.-portion of the portfolio. The increase in the overall leasing spreads marks an improvement from the increase of 5.0% for the portfolio reported in the third quarter of 2010 and an improvement from the decrease of 4.4% for the portfolio reported in the fourth quarter of 2009. Total blended leasing spreads for the full year of 2010 increased 3.7%. | ||
| Same store net operating income (NOI) increased 3.6% for the three-month comparable period and 1.1% for the full year 2010 as compared to 2009. |
DISPOSITIONS
The Company sold eight consolidated shopping centers, aggregating approximately 0.8 million square
feet, in the fourth quarter of 2010, generating gross proceeds of approximately $33.8 million. The
Company recorded an aggregate net gain of approximately $8.4 million related to asset sales in the
fourth quarter. The Company also sold $9.4 million in non-income producing assets.
In the fourth quarter of 2010, five of the Companys joint ventures sold ten shopping centers,
aggregating approximately 0.9 million square feet, generating gross proceeds of approximately
$120.2 million. The joint ventures recorded an aggregate net loss of approximately $1.4 million
related to these asset sales, of which the Companys proportionate share was a net gain of
approximately $4.9 million as a result of an approximate $2.0 million promoted interest recorded
related to one asset.
CAPITAL MARKETS ACTIVITIES
In November 2010, the Company issued $350 million aggregate principal amount of 1.75% convertible
senior notes due November 2040. The notes have an initial conversion rate of approximately 61
common shares per $1,000 principal amount of the notes, representing a conversion price of
approximately $16.38 per common share. The initial conversion rate is subject to adjustment under
certain circumstances. The Company may redeem the notes anytime on or after November 15, 2015 in
whole or in part for cash equal to 100% of the principal amount of the notes plus accrued and
unpaid interest. The adjusted effective interest rate for the liability component of the
convertible notes for GAAP purposes is 5.3%.
In October 2010, the Company refinanced its unsecured credit facility arranged by JP Morgan Chase
Bank, N.A. and Wells Fargo Bank, N.A. The size of the facility was reduced to $950 million with an
accordion feature up to $1.2 billion. In addition, the Company also entered into a new $65 million
unsecured credit facility with PNC Bank, N.A. Both facilities mature in February 2014. The
Companys borrowings under these facilities bear interest at variable rates based on LIBOR plus 275
basis points, subject to adjustment based on the Companys current corporate credit ratings from
Moodys and S&P.
In October 2010, the Company amended its secured term loan with KeyBank National Association to
conform the covenants to the new revolving credit facility covenants and repaid $200 million of the
outstanding balance.
2011
GUIDANCE
There has been no change in guidance since the last update provided on January 10, 2011. The Company continues to estimate operating FFO for 2011 between $0.90-$1.05 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 Companys operating performance or as an alternative to cash flow as a measure of
liquidity. FFO is defined and calculated by the Company as net income, adjusted to exclude: (i)
preferred share dividends, (ii) gains from disposition of depreciable real estate property, except
for gains generated from merchant build asset sales, which are presented net of taxes, and those
gains that represent the recapture of a previously recognized impairment charge, (iii)
extraordinary items and (iv) certain non-cash items. These non-cash items principally include real
property depreciation and amortization of intangibles, equity income from joint ventures and equity
income from non-controlling interests and adding the Companys proportionate share of FFO from its
unconsolidated joint ventures and non-controlling interests, determined on a consistent basis. The
Company calculates operating FFO by excluding the non-operating charges and gains described above.
Other real estate companies may calculate FFO and operating FFO in a different manner. FFO
excluding the net non-operating items detailed above is useful to investors as the Company removes
these charges and gains to analyze the results of its operations and assess performance of the core
operating real estate portfolio. A reconciliation of net (loss) income to FFO and operating FFO is
presented in the financial highlights section.
SAFE HARBOR
Developers Diversified Realty Corporation 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
Companys expectation for future periods. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable assumptions, it can give no
assurance that its expectations will be achieved. For this purpose, any statements contained
herein that are not historical fact may be deemed to be forward-looking statements. There are a
number of important factors that could cause our results to differ materially from those indicated
by such forward-looking statements, including, among other factors, local conditions such as
oversupply of space or a reduction in demand for real estate in the area; competition from other
available space; dependence on rental income from real property; the loss of, significant
downsizing of or bankruptcy of a major tenant; constructing properties or expansions that produce a
desired yield on investment; our ability to sell assets on commercially reasonable terms; our
ability to secure equity or debt financing on commercially acceptable terms or at all; our ability
to enter into definitive agreements with regard to our financing and joint venture arrangements or
our failure to satisfy conditions to the completion of these arrangements; and the finalization of
the financial statements for the year ended December 31, 2010. 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 Companys Form 10-K as of December 31, 2009. The Company
undertakes no obligation to publicly revise these forward-looking statements to reflect events or
circumstances that arise after the date hereof.
ABOUT DEVELOPERS DIVERSIFIED REALTY
Developers Diversified owns and manages approximately 570 retail operating and development
properties in 41 states, Brazil, Canada and Puerto Rico. Totaling approximately 132 million square
feet, the Companys 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 primarily clustered 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 Companys website
at www.ddr.com.
CONFERENCE CALL INFORMATION & SUPPLEMENTAL MATERIALS
A copy of the Companys Supplemental Financial/Operational package is available to all interested
parties upon request at the Companys corporate office to Kate Deck, Investor Relations Director,
Developers Diversified Realty Corporation, 3300 Enterprise Parkway, Beachwood, Ohio 44122 or at
www.ddr.com.
The Company will hold its quarterly conference call tomorrow, February 18, 2011 at 10:00 a.m.
Eastern Daylight Time. To participate, please dial 866.831.6267 (domestic), or 617.213.8857
(international) at least ten minutes prior to the scheduled start of the call. When prompted,
provide the passcode: 33462177. Access to the live call and replay will also be available through
the Companys website. The replay will be available through March 18, 2011.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands)
Financial Highlights
(In thousands)
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues: |
||||||||||||||||
Minimum rents (A) |
$ | 134,645 | $ | 133,831 | $ | 535,284 | $ | 528,230 | ||||||||
Percentage and overage rents (A) |
2,653 | 3,413 | 6,299 | 7,751 | ||||||||||||
Recoveries from tenants |
42,041 | 43,823 | 175,309 | 174,826 | ||||||||||||
Ancillary and other property income |
6,825 | 6,931 | 21,941 | 21,610 | ||||||||||||
Management, development and other fee income |
13,312 | 14,489 | 53,434 | 57,683 | ||||||||||||
Other (B) |
4,000 | 1,128 | 10,802 | 7,299 | ||||||||||||
203,476 | 203,615 | 803,069 | 797,399 | |||||||||||||
Expenses: |
||||||||||||||||
Operating and maintenance (C) |
33,996 | 36,191 | 137,862 | 135,153 | ||||||||||||
Real estate taxes |
25,843 | 25,623 | 108,299 | 102,391 | ||||||||||||
Impairment charges (D) |
28,877 | | 116,462 | 12,745 | ||||||||||||
General and administrative (E) |
23,028 | 20,896 | 85,573 | 94,365 | ||||||||||||
Depreciation and amortization |
57,506 | 54,362 | 222,862 | 217,841 | ||||||||||||
169,250 | 137,072 | 671,058 | 562,495 | |||||||||||||
Other income (expense): |
||||||||||||||||
Interest income |
2,873 | 2,564 | 7,346 | 11,984 | ||||||||||||
Interest expense (F) |
(59,776 | ) | (59,805 | ) | (226,464 | ) | (221,334 | ) | ||||||||
Gain on debt retirement, net (F) |
152 | 2,690 | 485 | 145,050 | ||||||||||||
Loss on equity derivative instruments (G) |
(25,539 | ) | (1,597 | ) | (40,157 | ) | (199,797 | ) | ||||||||
Other expense (H) |
(5,954 | ) | (19,888 | ) | (24,346 | ) | (29,192 | ) | ||||||||
(88,244 | ) | (76,036 | ) | (283,136 | ) | (293,289 | ) | |||||||||
Loss before earnings from equity method investments and other
items |
(54,018 | ) | (9,493 | ) | (151,125 | ) | (58,385 | ) | ||||||||
Equity in net income (loss) of joint ventures (I) |
9,377 | (749 | ) | 5,600 | (9,733 | ) | ||||||||||
Impairment of joint venture investments (D) |
(227 | ) | (83,013 | ) | (227 | ) | (184,584 | ) | ||||||||
Gain (loss) on change in control of interests (J) |
| 23,471 | (428 | ) | 23,865 | |||||||||||
Tax (expense) benefit of taxable REIT subsidiaries and state
franchise and income taxes (K) |
(49,469 | ) | 1,228 | (47,992 | ) | 767 | ||||||||||
Loss from continuing operations |
(94,337 | ) | (68,556 | ) | (194,172 | ) | (228,070 | ) | ||||||||
Income (loss) from discontinued operations (L) |
8,871 | (19,099 | ) | (54,867 | ) | (184,697 | ) | |||||||||
Loss before gain on disposition of real estate |
(85,466 | ) | (87,655 | ) | (249,039 | ) | (412,767 | ) | ||||||||
Gain on disposition of real estate, net of tax |
1,257 | 905 | 1,318 | 9,127 | ||||||||||||
Net loss |
(84,209 | ) | (86,750 | ) | (247,721 | ) | (403,640 | ) | ||||||||
(Income) loss attributable to non-controlling interests |
(17 | ) | 7,186 | 38,363 | 47,047 | |||||||||||
Net loss attributable to DDR |
$ | (84,226 | ) | $ | (79,564 | ) | $ | (209,358 | ) | $ | (356,593 | ) | ||||
Net loss applicable to common shareholders |
$ | (94,793 | ) | $ | (90,131 | ) | $ | (251,627 | ) | $ | (398,862 | ) | ||||
Funds From Operations (FFO): |
||||||||||||||||
Net loss applicable to common shareholders |
$ | (94,793 | ) | $ | (90,131 | ) | $ | (251,627 | ) | $ | (398,862 | ) | ||||
Depreciation and amortization of real estate investments |
55,399 | 53,970 | 217,168 | 224,207 | ||||||||||||
Equity in net (income) loss of joint ventures (I) |
(9,377 | ) | 749 | (5,600 | ) | 9,306 | ||||||||||
Joint ventures FFO (I) |
15,226 | 11,113 | 47,545 | 43,665 | ||||||||||||
Non-controlling interests (OP Units) |
8 | 8 | 32 | 175 | ||||||||||||
Gain on disposition of depreciable real estate |
(10,409 | ) | (3,718 | ) | (18,803 | ) | (23,123 | ) | ||||||||
FFO applicable to common shareholders |
(43,946 | ) | (28,009 | ) | (11,285 | ) | (144,632 | ) | ||||||||
Preferred dividends |
10,567 | 10,567 | 42,269 | 42,269 | ||||||||||||
FFO |
$ | (33,379 | ) | $ | (17,442 | ) | $ | 30,984 | $ | (102,363 | ) | |||||
Per share data: |
||||||||||||||||
Earnings per common share |
||||||||||||||||
Basic |
$ | (0.37 | ) | $ | (0.46 | ) | $ | (1.03 | ) | $ | (2.51 | ) | ||||
Diluted |
$ | (0.37 | ) | $ | (0.46 | ) | $ | (1.03 | ) | $ | (2.51 | ) | ||||
Basic average shares outstanding |
253,872 | 196,399 | 244,712 | 158,816 | ||||||||||||
Diluted average shares outstanding |
253,872 | 196,399 | 244,712 | 158,816 | ||||||||||||
Dividends Declared |
$ | 0.02 | $ | 0.02 | $ | 0.08 | $ | 0.44 | ||||||||
Funds From Operations Basic (M) |
$ | (0.17 | ) | $ | (0.14 | ) | $ | (0.05 | ) | $ | (0.90 | ) | ||||
Funds From Operations Diluted (M) |
$ | (0.17 | ) | $ | (0.14 | ) | $ | (0.05 | ) | $ | (0.90 | ) | ||||
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands)
Financial Highlights
(In thousands)
Selected Balance Sheet Data (N)
December 31, 2010 | December 31, 2009 | |||||||
Assets: |
||||||||
Real estate and rental property: |
||||||||
Land |
$ | 1,837,403 | $ | 1,971,782 | ||||
Buildings |
5,491,489 | 5,694,659 | ||||||
Fixtures and tenant improvements |
339,129 | 287,143 | ||||||
7,668,021 | 7,953,584 | |||||||
Less: Accumulated depreciation |
(1,452,112 | ) | (1,332,534 | ) | ||||
6,215,909 | 6,621,050 | |||||||
Land held for development and construction in progress |
743,218 | 858,900 | ||||||
Real estate held for sale, net |
| 10,453 | ||||||
Real estate, net |
6,959,127 | 7,490,403 | ||||||
Investments in and advances to joint ventures (O) |
417,223 | 420,541 | ||||||
Cash |
19,416 | 26,172 | ||||||
Restricted cash |
4,285 | 95,673 | ||||||
Notes receivable, net |
120,330 | 74,997 | ||||||
Receivables, including straight-line rent, net |
123,259 | 146,809 | ||||||
Other assets, net (K) |
124,450 | 172,011 | ||||||
$ | 7,768,090 | $ | 8,426,606 | |||||
Liabilities & Equity: |
||||||||
Indebtedness: |
||||||||
Revolving credit facilities |
$ | 279,865 | $ | 775,028 | ||||
Unsecured debt |
2,043,582 | 1,689,841 | ||||||
Mortgage and other secured debt |
1,978,553 | 2,713,794 | ||||||
4,302,000 | 5,178,663 | |||||||
Dividends payable |
12,092 | 10,985 | ||||||
Equity derivative liability (G) |
96,237 | 56,080 | ||||||
Other liabilities |
223,074 | 228,542 | ||||||
Total liabilities |
4,633,403 | 5,474,270 | ||||||
Preferred shares |
555,000 | 555,000 | ||||||
Common shares (M) |
25,627 | 20,174 | ||||||
Paid-in-capital |
3,868,990 | 3,374,528 | ||||||
Accumulated distributions in excess of net income |
(1,378,341 | ) | (1,098,661 | ) | ||||
Deferred compensation obligation |
14,318 | 17,838 | ||||||
Accumulated other comprehensive income |
25,646 | 9,549 | ||||||
Less: Common shares in treasury at cost |
(14,638 | ) | (15,866 | ) | ||||
Non-controlling interests |
38,085 | 89,774 | ||||||
Total equity |
3,134,687 | 2,952,336 | ||||||
$ | 7,768,090 | $ | 8,426,606 | |||||
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands)
Financial Highlights
(In thousands)
(A) | Base and percentage rental revenues for the year ended December 31, 2010, as compared to the prior-year comparable period, increased $7.0 million primarily due to the acquisition of three shopping centers, which generated an additional $8.5 million in revenues offset by a net decrease in operating assets of $1.5 million. Included in rental revenues for the years ended December 31, 2010 and 2009, is approximately $2.5 million and $4.3 million, respectively, of revenue resulting from the recognition of straight-line rents, including discontinued operations. | |
(B) | Other revenues were comprised of the following (in millions): |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Lease termination fees |
$ | 3.4 | $ | 0.6 | $ | 7.5 | $ | 4.0 | ||||||||
Financing fees |
0.5 | 0.2 | 1.2 | 1.1 | ||||||||||||
Other miscellaneous |
0.1 | 0.3 | 2.1 | 2.2 | ||||||||||||
$ | 4.0 | $ | 1.1 | $ | 10.8 | $ | 7.3 | |||||||||
(C) | Operating and maintenance expense, including discontinued operations, includes the following expenses (in millions): |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Bad debt expense |
$ | 3.2 | $ | 5.4 | $ | 13.4 | $ | 16.1 | ||||||||
Ground rent expense (1) |
1.2 | 1.3 | 4.9 | 4.8 |
(1) | Includes non-cash expense of approximately $0.5 million for the three-month periods ended December 31, 2010 and 2009, respectively, and approximately $2.0 million and $1.9 million for the years ended December 31, 2010 and 2009, respectively, related to straight-line ground rent expense. |
(D) | The Company recorded impairment charges during both the three-month periods and years ended December 31, 2010 and 2009, on the following consolidated assets and investments (in millions): |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Land held for development (1) |
$ | | $ | | $ | 54.3 | $ | | ||||||||
Undeveloped land and CIP |
25.6 | | 30.5 | 0.4 | ||||||||||||
Assets marketed for sale |
3.3 | | 31.7 | 12.3 | ||||||||||||
$ | 28.9 | $ | | $ | 116.5 | $ | 12.7 | |||||||||
Sold assets (2) |
| 1.3 | 20.1 | 73.3 | ||||||||||||
Assets formerly occupied by Mervyns
(3) |
| 7.8 | 35.3 | 68.7 | ||||||||||||
Total discontinued operations |
| 9.1 | 55.4 | 142.0 | ||||||||||||
Joint venture investments |
0.2 | 83.0 | 0.2 | 184.6 | ||||||||||||
Total impairment charges |
$ | 29.1 | $ | 92.1 | $ | 172.1 | $ | 339.3 | ||||||||
(1) | Amounts reported relate to land held for development in Togliatti and Yaroslavl, Russia, of which the Companys proportionate share was $41.9 million after adjusting for the allocation of loss to the non-controlling interest in this consolidated joint venture. |
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands)
Financial Highlights
(In thousands)
(2) | See summary of discontinued operations activity in note (L). | ||
(3) | The Companys proportionate share of these impairments was $16.5 million and $33.6 million, after adjusting for the allocation of loss to the non-controlling interest in this previously consolidated joint venture for the years ended December 31, 2010 and 2009, respectively. As discussed in note (N), these assets were deconsolidated in the third quarter of 2010 and all operating results have been reclassified as discontinued operations. |
(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, 2010 and 2009, general and administrative expenses were approximately 5.2% and 5.4% of total revenues, respectively, including joint venture and managed property revenues. | |
During the year ended December 31, 2010, the Company incurred $5.3 million in employee separation charges. During the year ended December 31, 2009, the Company recorded a non-cash charge of $15.4 million as a result of the change in control provisions included in the Companys equity-based award plans. Excluding these charges, general and administrative expenses were 4.9% and 4.5% of total revenues for the years ended December 31, 2010 and 2009, respectively. | ||
(F) | The Company recorded the following in connection with its outstanding convertible debt (in millions): |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Non-cash interest
expense related to
amortization of the
debt discount |
$ | 3.0 | $ | 2.5 | $ | 8.2 | $ | 12.2 | ||||||||
Non-cash adjustment to
gain on repurchase |
0.1 | 3.9 | 4.9 | 20.9 |
(G) | Represents the non-cash impact of the valuation adjustments of the equity derivative instruments (warrants) issued as part of the share purchase transaction with the Otto Family completed in 2009, as a result of changes in the Companys stock price. The liability will be reclassified into equity upon ultimate exercise or expiration of the warrants. | |
(H) | Other (expenses) income were comprised of the following (in millions): |
Three-Month Periods Ended | Year Ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Litigation-related expenses (1) |
$ | (1.0 | ) | $ | (2.1 | ) | $ | (14.6 | ) | $ | (6.4 | ) | ||||
Lease liability reserve (2) |
(3.3 | ) | | (3.3 | ) | | ||||||||||
Debt extinguishment costs |
(0.5 | ) | (13.9 | ) | (3.7 | ) | (14.2 | ) | ||||||||
Note receivable reserve |
| | 0.1 | (5.4 | ) | |||||||||||
Sale of MDT units |
| | | 2.8 | ||||||||||||
Abandoned projects and other expenses |
(1.2 | ) | (3.9 | ) | (2.8 | ) | (6.0 | ) | ||||||||
$ | (6.0 | ) | $ | (19.9 | ) | $ | (24.3 | ) | $ | (29.2 | ) | |||||
(1) | The year ended December 31, 2010 includes a $5.1 million reserve recorded in connection with a legal matter at a property in Long Beach, California. This reserve was offset by a tax benefit of approximately $2.4 million, classified in the tax expense (benefit) line item in the consolidated statements of operations, because the asset is owned through the Companys TRS. Total litigation-related expenditures, net of the tax benefit, were $1.0 |
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands)
Financial Highlights
(In thousands)
million and $12.2 million for the three-month period and year ended December 31, 2010, respectively. | |||
(2) | Represents the liability recorded pursuant to ASC 420, Exit or Disposal Cost Obligations, primarily relating to the contractual obligations associated with the ground lease for an abandoned development project in Norwood, Massachusetts. |
(I) | At December 31, 2010 and 2009, the Company owned joint venture interests, excluding consolidated joint ventures, in 236 and 274 shopping center properties, respectively. See below for a summary of the combined condensed operating results and select balance sheet data of the Companys unconsolidated joint ventures. | |
(J) | In October 2009, the Companys 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. | |
(K) | The Company incurred a fourth quarter non-cash income tax expense of $49.9 million recognized due to the establishment of a reserve against certain deferred tax assets within its TRS. Based upon the continued loss activity recognized by the TRS, including a fourth quarter impairment and lease liability charge of $22.3 million associated with an abandoned development project, it was determined that it was more likely than not that the deferred tax assets would not be utilizable, thus requiring a current reserve. Net deferred tax assets are classified within Other assets on the consolidated balance sheet at December 31, 2009. | |
(L) | The operating results relating to assets classified as discontinued operations are summarized as follows: |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues from operations |
$ | 892 | $ | 6,666 | $ | 12,015 | $ | 45,910 | ||||||||
Operating expenses |
70 | 4,844 | 8,535 | 24,915 | ||||||||||||
Impairment charges |
| 9,055 | 55,438 | 141,973 | ||||||||||||
Interest, net |
134 | 5,583 | 9,892 | 23,566 | ||||||||||||
Depreciation and amortization |
194 | 2,222 | 4,441 | 16,126 | ||||||||||||
Total expenses |
398 | 21,704 | 78,306 | 206,580 | ||||||||||||
Loss before disposition of real estate |
494 | (15,038 | ) | (66,291 | ) | (160,670 | ) | |||||||||
Gain on deconsolidation of interests |
| | 5,649 | | ||||||||||||
Gain (loss) on disposition of real
estate, net |
8,377 | (4,061 | ) | 5,775 | (24,027 | ) | ||||||||||
Net income (loss) |
$ | 8,871 | $ | (19,099 | ) | $ | (54,867 | ) | $ | (184,697 | ) | |||||
Discontinued operations for all periods presented include the activity associated with the 50% owned joint venture, DDR MDT MV LLC (MV LLC or the Mervyns Joint Venture), which was deconsolidated during the third quarter of 2010. See further discussion in note (N). |
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Financial Highlights
(In thousands)
Financial Highlights
(In thousands)
(M) | For purposes of computing FFO and operating FFO per share, the following share information was utilized (in millions): |
At December 31, | ||||||||
2010 | 2009 | |||||||
Common shares outstanding |
256.2 | 201.6 | ||||||
OP Units outstanding (OP Units) |
0.4 | 0.4 |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Weighted
average common shares outstanding |
256.2 | 197.9 | 246.6 | 159.7 | ||||||||||||
Assumed conversion of OP Units |
0.4 | 0.4 | 0.4 | 0.4 | ||||||||||||
FFO Weighted average common
shares and OP Units Basic and Diluted |
256.6 | 198.3 | 247.0 | 160.1 | ||||||||||||
Assumed conversion of dilutive securities |
8.2 | 5.2 | 7.4 | 3.1 | ||||||||||||
Operating FFO Weighted
average common shares and OP Units Diluted |
264.8 | 203.5 | 254.4 | 163.2 | ||||||||||||
(N) | The December 31, 2009 balance sheet reflects the consolidation of a 50% owned joint venture, MV LLC, which as of that date owned 31 sites formerly occupied by Mervyns. |
December 31, 2009 | ||||
Real estate, net |
$ | 218.7 | ||
Restricted cash |
$ | 50.5 | ||
Mortgage debt |
$ | 225.4 | ||
Non-controlling interests |
$ | 22.4 |
The 25 assets owned by MV LLC in August 2010 were placed in the control of a court appointed receiver and as a result, the entity that holds the assets and nonrecourse mortgage loan was deconsolidated for accounting purposes pursuant to the provisions of Accounting Standards Codification No. 810, Consolidation (ASC 810). Upon deconsolidation in the third quarter of 2010, the Company recorded a gain of approximately $5.6 million because the carrying value of the nonrecourse debt exceeded the carrying value of the collateralized assets. Following the deconsolidation, the Company no longer has any economic rights or obligations in MV LLC. The revenues and expenses associated with MV LLC for the current and prior periods, including the $5.6 million gain, are classified within discontinued operations in the statements of operations. | ||
(O) | Included in the Companys balance sheet as of December 31, 2009, was $28.5 million of assets owned by a consolidated joint venture that was deconsolidated in accordance with the adoption of ASC 810 as of January 1, 2010. |
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Summary Results of Combined Unconsolidated Joint Ventures
(In thousands)
Summary Results of Combined Unconsolidated Joint Ventures
(In thousands)
Combined condensed income statements
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Revenues from operations (A) |
$ | 171,846 | $ | 172,531 | $ | 668,946 | $ | 778,770 | ||||||||
Operating expenses |
61,309 | 67,630 | 256,380 | 301,637 | ||||||||||||
Impairment charges (B) |
1,304 | 218,479 | 12,291 | 218,479 | ||||||||||||
Depreciation and amortization of real estate
investments |
47,752 | 49,619 | 187,876 | 218,547 | ||||||||||||
Interest expense |
59,285 | 63,440 | 230,649 | 280,345 | ||||||||||||
169,650 | 399,168 | 687,196 | 1,019,008 | |||||||||||||
Income (loss) from operations before tax expense
and discontinued operations |
2,196 | (226,637 | ) | (18,250 | ) | (240,238 | ) | |||||||||
Income tax expense |
(6,502 | ) | (2,948 | ) | (20,449 | ) | (10,013 | ) | ||||||||
Income (loss) from discontinued operations, net of
tax (C) |
219 | (172,417 | ) | (9,674 | ) | (206,436 | ) | |||||||||
(Loss) gain on disposition of discontinued
operations, net of tax (D) |
(1,371 | ) | 64 | (26,674 | ) | (19,448 | ) | |||||||||
Gain (loss) on disposition of assets (E) |
| 843 | 17 | (25,973 | ) | |||||||||||
Other, net (F) |
| | | 7,153 | ||||||||||||
Net loss |
$ | (5,458 | ) | $ | (401,095 | ) | $ | (75,030 | ) | $ | (494,955 | ) | ||||
Net gain (loss) at DDR ownership interests
(G) |
$ | 10,676 | $ | (22,147 | ) | $ | 6,319 | $ | (34,522 | ) | ||||||
FFO at DDRs ownership interests (H) |
$ | 15,226 | $ | 11,113 | $ | 47,545 | $ | 43,665 | ||||||||
Combined condensed balance sheets
December 31, 2010 | December 31, 2009 | |||||||
Land |
$ | 1,566,682 | $ | 1,782,431 | ||||
Buildings |
4,783,841 | 5,207,234 | ||||||
Fixtures and tenant improvements |
154,292 | 146,716 | ||||||
6,504,815 | 7,136,381 | |||||||
Less: Accumulated depreciation |
(726,291 | ) | (636,897 | ) | ||||
5,778,524 | 6,499,484 | |||||||
Land held for development and construction in progress (I) |
174,237 | 130,410 | ||||||
Real estate, net |
5,952,761 | 6,629,894 | ||||||
Receivables, including straight-line rent, net |
111,569 | 113,630 | ||||||
Leasehold interests |
10,296 | 11,455 | ||||||
Other assets, net |
303,826 | 342,192 | ||||||
$ | 6,378,452 | $ | 7,097,171 | |||||
Mortgage debt (J) |
$ | 3,950,794 | $ | 4,547,711 | ||||
Notes and accrued interest payable to DDR |
87,282 | 73,477 | ||||||
Other liabilities |
186,728 | 194,065 | ||||||
4,224,804 | 4,815,253 | |||||||
Accumulated equity |
2,153,648 | 2,281,918 | ||||||
$ | 6,378,452 | $ | 7,097,171 | |||||
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Summary Results of Combined Unconsolidated Joint Ventures
(In thousands)
Summary Results of Combined Unconsolidated Joint Ventures
(In thousands)
(A) | Revenues for the three-month periods and years ended reflect the following (in millions): |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Straight-line rents |
$ | 1.0 | $ | (0.3 | ) | $ | 3.9 | $ | 2.7 | |||||||
DDRs proportionate share |
0.2 | | 0.6 | 0.2 |
The 2009 combined condensed income statement includes the results of operation of the EDT joint venture. In October 2009, the Company redeemed its ownership interest in this joint venture and are not reflected in discontinued operations. | ||
(B) | For the three months and year ended December 31, 2010, impairment charges were recorded by two of the Companys unconsolidated joint ventures relating to three assets, of which the Companys proportionate share of these impairment charges for the year ended was approximately $0.5 million. The Companys proportionate share of the fourth quarter charge was immaterial. For the three months and year ended December 31, 2009, an impairment charge of $218.5 million was recorded by one of the Companys unconsolidated joint ventures related to a suspended development project. The Companys proportionate share of the loss was zero as the Company had written off its basis in the investment in the second quarter of 2009. | |
(C) | Impairment charges reclassified to discontinued operations relating to assets sales were $8.8 million for the year ended December 31, 2010 and $170.9 million and $204.8 for the three months and year ended December 31, 2009, respectively. The Companys proportionate share of these impairment charges was $0.3 million for the year ended December 31, 2010 and $2.6 million and $8.1 million for the three months and year ended December 31, 2009, respectively. | |
(D) | For the three months ended December 31, 2010, a $4.9 million net gain was recorded for the Companys proportionate share of the assets sold during that period as a result of promoted interests from one of the asset sales. For the year ended December 31, 2010, loss on disposition of discontinued operations includes the sale of 35 properties by five separate unconsolidated joint ventures. In 2009, $170.9 million of impairment charges were recorded by these joint ventures in anticipation of the sales transactions as noted in (C) above. The Companys proportionate share of the aggregate loss for the assets sold for the year ended December 31, 2010 was a gain of approximately $0.8 million. | |
For the year ended December 31, 2009, loss on disposition of discontinued operations included the sale of 12 properties by three separate unconsolidated joint ventures resulting in a loss of $19.4 million of which the Companys proportionate share was $1.4 million. | ||
(E) | In the first quarter of 2009, an unconsolidated joint venture disposed of a property resulting in a loss of $26.7 million, of which the Companys proportionate share was $5.8 million. | |
(F) | Activity related to the Companys investment in the MDT units that were liquidated in 2009. |
DEVELOPERS DIVERSIFIED REALTY CORPORATION
Summary Results of Combined Unconsolidated Joint Ventures
(In thousands)
Summary Results of Combined Unconsolidated Joint Ventures
(In thousands)
(G) | Adjustments to the Companys share of joint venture equity in net loss is related primarily to basis differences impacting amortization and depreciation, impairment charges and (loss) gain on dispositions as follows (in millions): |
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(Loss) income, net |
$ | (1.2 | ) | $ | 21.4 | $ | (0.7 | ) | $ | 24.8 | ||||||
(H) FFO from unconsolidated joint ventures are summarized as follows: | ||||||||||||||||
Three-Month Periods | Year Ended | |||||||||||||||
Ended December 31, | December 31, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Net loss |
$ | (5,458 | ) | $ | (401,095 | ) | $ | (75,030 | ) | $ | (494,955 | ) | ||||
Loss on sale of real estate |
(24,687 | ) | (843 | ) | (24,734 | ) | (843 | ) | ||||||||
Depreciation and amortization
of real estate investments |
48,508 | 55,528 | 198,323 | 245,000 | ||||||||||||
FFO |
$ | 18,363 | $ | (346,410 | ) | $ | 98,559 | $ | (250,798 | ) | ||||||
FFO at DDRs ownership interests |
$ | 15,226 | $ | 11,113 | $ | 47,545 | $ | 43,665 | ||||||||
Operating FFO at DDRs
ownership interests
(1) |
$ | 15,721 | $ | 13,722 | $ | 54,433 | $ | 62,690 | ||||||||
DDR joint venture distributions
received, net (2) |
$ | 24,470 | $ | 7,963 | $ | 53,768 | $ | 31,455 | ||||||||
(1) | Excluded from operating FFO is the Companys pro rata share of net charges primarily related to impairment charges and losses on the disposition of assets as disclosed on page 2 of this press release. | |
(2) | Distributions for 2009 included $2.5 million from a foreign investment that have yet to be expatriated to the United States. |
(I) | The Companys proportionate share of joint venture land held for development and construction in progress aggregated approximately $71.7 million and $37.6 million at December 31, 2010 and December 31, 2009, respectively. | |
The combined condensed balance sheet at December 31, 2010 included a joint venture under development that was deconsolidated by the Company as of January 1, 2010 due to the adoption of ASC 810 (Footnote O in this release). | ||
(J) | The Companys proportionate share of joint venture debt aggregated approximately $835.8 million and $917.0 million at December 31, 2010 and December 31, 2009, respectively. |