Attached files
| file | filename |
|---|---|
| EX-23.1 - EX-23.1 - SITE Centers Corp. | d642815dex231.htm |
Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
Pursuant to Section 13 OR 15(d)
of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) October 1, 2013
DDR Corp.
(Exact name of registrant as specified in its charter)
| Ohio | 1-11690 | 34-1723097 | ||
| (State or other jurisdiction | (Commission | (IRS Employer | ||
| of incorporation) | File Number) | Identification No.) |
| 3300 Enterprise Parkway, Beachwood, Ohio | 44122 | |
| (Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code (216) 755-5500
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| ¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c) |
Table of Contents
Explanatory Note
This Amendment No. 1 (“Amendment No. 1”) to the Current Report on Form 8-K, dated October 1, 2013 and originally filed by DDR Corp. (the “Company”) with the Securities and Exchange Commission on October 2, 2013 (the “Original 8-K”), amends and restates in its entirety Item 9.01 of the Original 8-K to present the required audited and unaudited combined statements of revenues and certain expenses with respect to the portfolio of 30 open-air, value-oriented power centers (the “BRE-DDR Portfolio”) of which the Company acquired sole ownership (the “BRE-DDR Acquisition”) and which were previously owned by BRE DDR Retail Holdings LLC, the Company’s joint venture with an affiliate of The Blackstone Group L.P. (the BRE-DDR JV). In addition, this Amendment No. 1 presents the pro forma financial information required by Item 9.01 of Form 8-K reflecting the impact of the BRE-DDR Acquisition, which constituted a significant acquisition under Rule 3-14 of Regulation S-X, except that the BRE-DDR Portfolio is indirectly owned by an entity that elects to be treated as real estate investment trust for federal income tax purposes and a presentation of estimated taxable operating results is therefore not applicable. The remainder of the information contained in the Original 8-K is not hereby amended or restated. Information regarding these properties is further described in Schedule A.
After a reasonable inquiry, the Company is not aware of any material factors relating to the BRE-DDR Portfolio, other than those described herein, that would cause the reported financial information not to be necessarily indicative of future operating results. The Company and its operations are, however, subject to a number of risks and uncertainties. For a discussion of such risks, see the risks identified in the Company’s Annual Report on Form 10-K, as amended, for the fiscal year ended December 31, 2012.
Item 9.01 Financial Statements and Exhibits.
(a) Financial Statements of Businesses Acquired.
| • | Audited combined statement of revenues and certain expenses for the BRE-DDR Portfolio for the period from January 1, 2012 to June 19, 2012 (the “Predecessor Period”) |
| • | Audited combined statement of revenues and certain expenses for the BRE-DDR Portfolio for the period from June 20, 2012 to December 31, 2012 (the “Successor Period”) |
| • | Unaudited combined statement of revenues and certain expenses for the BRE-DDR Portfolio for the nine-month period ended September 30, 2013 |
(b) Pro Forma Financial Information.
| • | Unaudited pro forma condensed consolidated balance sheet at September 30, 2013 |
| • | Unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2013 |
| • | Unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2012 |
Table of Contents
(d) Exhibits.
| Exhibit |
Description | |
| 2.1 | Agreement of Purchase and Sale between the Parties listed on Schedule A attached thereto, as REIT Seller, BRE Pentagon Retail Holding B, LLC, as Homart Seller, JDN Real Estate – Lakeland, L.P., as REIT Buyer, and the Company, as Homart Buyer, dated as of May 15, 2013 (filed as Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q (Commission File No. 001-11690) for the quarter ended June 30, 2013 and incorporated by reference herein) | |
| 23.1 | Consent of Deloitte & Touche LLP | |
Table of Contents
Schedule A
| Location |
Center |
Total |
Key Tenants (1) | |||||
| 1 | Birmingham, AL | Riverchase Promenade | 228 | 2nd & Charles (U), Jo-Ann, Toys “R” Us (U) | ||||
| 2 | Aurora, CO | Pioneer Hills | 479 | Bed Bath & Beyond, Home Depot (U), Walmart (U) | ||||
| 3 | Parker, CO | FlatAcres MarketCenter/Parker Pavilions | 631 | Bed Bath & Beyond, Home Depot (U), Kohl’s (U), Michaels, Office Depot, Sports Authority, Walmart (U) | ||||
| 4 | Plainville, CT | Connecticut Commons | 566 | A.C. Moore, Dick’s Sporting Goods, DSW, Kohl’s, Loew’s Cinema, Lowe’s, Marshalls, Old Navy, PetSmart | ||||
| 5 | Apopka, FL | Piedmont Plaza | 208 | Bealls | ||||
| 6 | Brandon, FL | Lake Brandon Village | 244 | buybuy BABY, Lowe’s (U), PetSmart, Sports Authority | ||||
| 7 | Naples, FL | Carillon Place | 283 | Bealls, hhgregg, OfficeMax, Ross Dress For Less, T.J. Maxx, Walmart | ||||
| 8 | Plant City, FL | Lake Walden Square | 257 | Premiere Cinemas, Ross Dress For Less, Sweetbay Supermarket | ||||
| 9 | Lithonia, GA | Shops At Turner Hill | 32 | — | ||||
| 10 | Lithonia, GA | Turner Hill Marketplace | 255 | Bed Bath & Beyond, Best Buy, Sam’s Club (U), Toys “R” Us | ||||
| 11 | Schaumburg, IL | Woodfield Village Green | 674 | Bloomingdale’s The Outlet Store, Container Store, Costco (U), hhgregg, Homegoods, Marshalls, Michaels, Nordstrom Rack, Off 5th, PetSmart | ||||
| 12 | Merriam, KS | Merriam Town Center | 474 | Cinemark, Dick’s Sporting Goods, Hen House, Home Depot (U), Marshalls, OfficeMax, PetSmart | ||||
| 13 | Overland Park, KS | Overland Pointe Marketplace | 382 | Babies “R” Us, Home Depot (U), Party City (U), Sam’s Club (U) | ||||
| 14 | Framingham, MA | Shoppers World | 778 | A.C. Moore, AMC Theatres, Babies “R” Us, Barnes & Noble, Best Buy, Bob’s Stores, DSW, Kohl’s, Macy’s, Marshalls, Nordstrom Rack, PetSmart, Sports Authority, T.J. Maxx, Toys “R” Us | ||||
| 15 | Grandville, MI | Grandville Marketplace | 351 | Gander Mountain, Hobby Lobby, Lowe’s (U), OfficeMax | ||||
| 16 | Coon Rapids, MN | Riverdale Village | 941 | Bed Bath & Beyond, Best Buy, Costco (U), Dick’s Sporting Goods, DSW, JCPenney, Jo-Ann, Kohl’s, Old Navy, Sears, T.J. Maxx | ||||
| 17 | St. Paul, MN | Midway Marketplace | 487 | Cub Foods, Herberger’s (U), LA Fitness, T.J. Maxx, Walmart | ||||
| 18 | Clarence, NY | Jo-Ann Plaza | 203 | Big Lots, Jo-Ann, OfficeMax | ||||
| 19 | North Canton, OH | Belden Park Crossings | 594 | Dick’s Sporting Goods, DSW, hhgregg, Jo-Ann, Kohl’s, PetSmart, Target (U), Value City Furniture | ||||
| 20 | North Olmsted, OH | Great Northern Plaza | 669 | Bed Bath & Beyond, Best Buy, Big Lots, Burlington Coat Factory, DSW, Home Depot, Jo-Ann, K & G Menswear, Marc’s, PetSmart | ||||
| 21 | Monaca, PA | Township Marketplace | 299 | Cinemark, Lowe’s, Michaels, Party City | ||||
| 22 | Columbia, SC | Harbison Court | 298 | Anna’s Linens, Babies “R” Us (U), Barnes & Noble, Golfsmith, Marshalls, Ross Dress For Less | ||||
| 23 | Brentwood, TN | Cool Springs Pointe | 201 | Best Buy, DSW, Ross Dress For Less | ||||
| 24 | Frisco, TX | Frisco Marketplace | 108 | Kohl’s | ||||
| 25 | Irving, TX | MacArthur Marketplace | 599 | Hollywood Theaters, Kohl’s, Sam’s Club (U), Walmart (U) | ||||
| 26 | McKinney, TX | McKinney Marketplace | 184 | Albertson’s (U), Kohl’s | ||||
| 27 | Mesquite, TX | Marketplace At Towne Center | 404 | Cavender’s Boot City (U), Home Depot (U), Kohl’s (U), Michaels, PetSmart, Ross Dress For Less | ||||
| 28 | Fairfax, VA | Fairfax Towne Center | 253 | Bed Bath & Beyond, Jo-Ann, Regal Cinemas, Safeway, T.J. Maxx | ||||
| 29 | Brookfield, WI | Shoppers World Brookfield | 265 | Burlington Coat Factory, OfficeMax, Pick ’N Save (U), T.J. Maxx, Xperience Fitness | ||||
| 30 | Brown Deer, WI | Marketplace Of Brown Deer | 405 | Anna’s Linens, Burlington Coat Factory, hhgregg, Kohl’s, Michaels, OfficeMax, Old Navy, Pick ’N Save, T.J. Maxx | ||||
| (1) | (U) indicates unowned |
Table of Contents
DDR Corp.
September 30, 2013
Table of Contents
To the Board of Directors and Shareholders of DDR Corp.:
We have audited the accompanying combined statements of revenues and certain expenses of the BRE-DDR Portfolio, a portfolio of 30 open-air value oriented power centers located throughout the United States, (collectively, the “Properties”) for the periods January 1, 2012, to June 19, 2012, (the “Predecessor Period”) and June 20, 2012, the date of acquisition by BRE-DDR Retail Holdings LLC, to December 31, 2012, (the “Successor Period”) and the related notes (the “Statements”). These Properties are under common ownership and management.
Management’s Responsibility for the Statements
Management is responsible for the preparation and fair presentation of the Statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statements that is free from material misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on the Statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Properties’ preparation and fair presentation of the Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties’ internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion
In our opinion, the Statements referred to above present fairly, in all material respects, the combined revenues and certain expenses described in Note 1 of the BRE-DDR Portfolio for the periods from January 1, 2012, to June 19, 2012, (the “Predecessor Period”) and June 20, 2012, the date of acquisition by BRE-DDR Retail Holdings LLC, to December 31, 2012, (the “Successor Period”), in accordance with accounting principles generally accepted in the United States of America.
Emphasis of a matter
We draw attention to Note 1 to the Statements, which describes that the accompanying Statements were prepared for the purpose of complying with provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the “SEC”) (for inclusion in the Current Report on Form 8-K of DDR Corp.), and were not intended to be a complete presentation of the Properties’ revenues and expenses. Our opinion is not modified with respect to this matter.
/s/ Deloitte & Touche LLP
Cleveland, Ohio
December 13, 2013
F-1
Table of Contents
BRE-DDR Portfolio
Combined Statements of Revenues and Certain Expenses
| Nine-Month Period Ended September 30, 2013 (unaudited) |
Period from June 20, 2012 to December 31, 2012 (Successor Period) |
Period from January 1, 2012 to June 19, 2012 (Predecessor Period) |
||||||||||
| Revenues: |
||||||||||||
| Minimum rents |
$ | 77,911,284 | $ | 54,328,246 | $ | 46,775,994 | ||||||
| Overage rents |
62,073 | 27,534 | 198,032 | |||||||||
| Recoveries from tenants |
28,768,615 | 18,759,685 | 17,200,437 | |||||||||
| Ancillary and other income |
533,430 | 675,920 | 347,835 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total revenues |
107,275,402 | 73,791,385 | 64,522,298 | |||||||||
| Certain expenses: |
||||||||||||
| Operating and maintenance |
11,240,865 | 6,808,678 | 8,315,298 | |||||||||
| Real estate taxes |
20,359,809 | 13,898,997 | 11,260,033 | |||||||||
| General and administrative |
412,313 | 308,643 | 697,513 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total certain expenses |
32,012,987 | 21,016,318 | 20,272,844 | |||||||||
|
|
|
|
|
|
|
|||||||
| Revenues in excess of certain expenses |
$ | 75,262,415 | $ | 52,775,067 | $ | 44,249,454 | ||||||
|
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|
|
|
|
|
|||||||
See accompanying notes.
F-2
Table of Contents
BRE-DDR Portfolio
Notes to Combined Statements of Revenues and Certain Expenses
1. Basis of Presentation
On October 1, 2013, DDR Corp. (“DDR” or the “Company”) acquired sole ownership of 30 open-air value oriented power centers (“BRE-DDR Portfolio” or the “Properties”) that were previously owned by BRE DDR Retail Holdings LLC, the Company’s joint venture with certain affiliates of The Blackstone Group L.P. (the “BRE-DDR JV” or “Successor”). The Properties were acquired by the BRE-DDR JV on June 20, 2012 and were previously owned by EDT Fund LLC (the “Predecessor”) and managed by DDR Corp. The Properties consist of retail shopping centers located throughout the United States. The specific properties and terms of sale are outlined in the Agreement of Purchase and Sale, dated as of May 15, 2013.
The combined statements of revenues and certain expenses (the “Statements”) have been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X and Item 9.01 of Form 8-K, promulgated by the Securities and Exchange Commission (the “SEC”), which require certain information with respect to real estate operations to be included in certain filings with the SEC. The Statements include the combined historical revenues and certain expenses of the Properties, exclusive of items which may not be comparable to the proposed future operations of the Properties. Material amounts that would not be directly attributable to future operating results of the Properties are excluded, and the Statements are not intended to be a complete presentation of the Properties’ revenues and expenses. Revenues excluded consist primarily of the amortization of minimum rent related to above- or below-market leases recorded in conjunction with the original purchase price accounting, interest income and lease termination fees. Expenses excluded consist primarily of property management fees, interest expense, transactional expenses, depreciation and amortization.
The revenues and certain expenses of the BRE-DDR Portfolio for the year ended December 31, 2012, includes combined statements of revenues and certain expenses for the periods from June 20, 2012, the date of acquisition of the Properties by the BRE-DDR JV, to December 31, 2012, (the “Successor Period”) and from January 1, 2012 to June 19, 2012, (the “Predecessor Period”).
The unaudited interim Statement for the nine-month period ended September 30, 2013, was prepared on the same basis as the Statements for the Successor Period and Predecessor Period and reflects all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the combined revenues and certain expenses for the period presented. The combined statements of revenues and certain expenses for the nine-month period ended September 30, 2013, is not necessarily indicative of the expected results for an entire fiscal year.
2. Summary of Significant Accounting Principles
Principles of Combination
The Statements were prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP).
Revenue Recognition
Minimum rents from tenants are recognized using the straight-line method over the lease term. Percentage and overage rents are recognized after the reported tenant’s sales have exceeded the applicable sales breakpoint. Revenues associated with tenant reimbursements are recognized in the period in which the expenses are incurred based upon provisions of the individual tenant leases.
Repairs and Maintenance
Expenditures for maintenance and repairs are charged to operations as incurred. Renovations and expenditures which improve or extend the life of the asset are capitalized.
F-3
Table of Contents
BRE-DDR Portfolio
Notes to Combined Statements of Revenues and Certain Expenses
Use of Estimates in Preparation of Financial Statements
The preparation of the Statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.
3. Transactions with Related Parties
DDR was the property manager for all of the Properties for all periods presented in the Statements. All management fees associated with the Properties have been excluded as discussed in Note 1.
4. Commitments
The Properties lease space to tenants pursuant to agreements which provide for terms ranging from one to 30 years; and, in some cases, for annual rentals, which are subject to upward adjustments based on operating expense levels, sales volume, or contractual increases, as defined in the lease agreements.
The scheduled future minimum revenues from rental properties under the terms of all non-cancelable tenant leases, assuming no new or renegotiated leases or option extensions for such premises, for the subsequent period from October 1, 2013, to December 31, 2013 (unaudited), and five years ending December 31, and thereafter, are as follows:
| Oct. 1 to Dec. 31, 2013 |
$ | 24,974,200 | ||
| 2014 |
99,271,199 | |||
| 2015 |
84,425,607 | |||
| 2016 |
70,033,865 | |||
| 2017 |
60,211,650 | |||
| 2018 |
46,267,071 | |||
| Thereafter |
102,380,719 |
5. Subsequent Events
The BRE-DDR Portfolio was evaluated with respect to subsequent events through December 13, 2013, the date the financial statements were available to be issued, to determine if either recognition or disclosure of significant events or transactions is required. Management has determined that no such recognition or disclosure is required.
F-4
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2013
(Unaudited)
The following unaudited pro forma condensed consolidated balance sheet is presented as if (i) the BRE-DDR Acquisition and (ii) the issuance and sale of 35.14 million DDR common shares in a forward equity offering, which the Company settled on October 1, 2013, were completed on September 30, 2013. This unaudited pro forma condensed consolidated balance sheet should be read in conjunction with the unaudited pro forma condensed consolidated statement of operations of the Company and the notes thereto presented herein and the historical financial statements and notes thereto of the Company included in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013 and Annual Report on Form 10-K, as amended, for the year ended December 31, 2012.
The unaudited pro forma condensed consolidated balance sheet does not purport to represent what the actual financial position of the Company would have been at September 30, 2013 if the BRE-DDR Acquisition had been completed as of that date, nor does it purport to represent the future financial position of the Company. The Company accounted for the BRE-DDR Acquisition utilizing the purchase price method of accounting pursuant to the provisions of ASC 805, Business Combinations. The pro forma adjustments relating to the purchase price allocation of the BRE-DDR Acquisition are based on the Company’s best estimates and are subject to change based upon the final determination of the fair value of the assets and liabilities acquired.
F-5
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2013 (continued)
(In thousands)
(Unaudited)
| Company Historical |
Pro Forma Adjustments (a) |
Company Pro Forma |
||||||||||
| Assets |
||||||||||||
| Real estate assets, net |
$ | 7,139,441 | $ | 1,363,797 | (b) | $ | 8,503,238 | |||||
| Investments in and advances to joint ventures |
631,983 | (169,264 | ) (c) | 462,719 | ||||||||
| Cash and cash equivalents |
35,351 | 8,227 | (d) | 90,392 | ||||||||
| 46,814 | (e) | |||||||||||
| Restricted cash |
25,853 | 9,848 | (f) | 35,701 | ||||||||
| Notes receivable, net |
77,857 | — | 77,857 | |||||||||
| Other assets, net |
434,658 | 247,973 | (g) | 682,631 | ||||||||
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| $ | 8,345,143 | $ | 1,507,395 | $ | 9,852,538 | |||||||
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| Liabilities and Equity |
||||||||||||
| Unsecured indebtedness: |
||||||||||||
| Senior notes |
$ | 2,453,336 | $ | — | $ | 2,453,336 | ||||||
| Unsecured term loan |
350,000 | — | 350,000 | |||||||||
| Revolving credit facilities |
42,869 | (42,869 | ) (h) | — | ||||||||
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| 2,846,205 | (42,869 | ) | 2,803,336 | |||||||||
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| Secured indebtedness: |
||||||||||||
| Secured term loan |
400,000 | — | 400,000 | |||||||||
| Mortgage indebtedness |
1,349,852 | 818,237 | (i) | 2,168,089 | ||||||||
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| 1,749,852 | 818,237 | 2,568,089 | ||||||||||
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| Total indebtedness |
4,596,057 | 775,368 | 5,371,425 | |||||||||
| Accounts payable and other liabilities |
346,933 | 82,317 | (j) | 429,250 | ||||||||
| Dividends payable |
49,826 | — | 49,826 | |||||||||
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| Total liabilities |
4,992,816 | 857,685 | 5,850,501 | |||||||||
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| Total DDR shareholders’ equity |
3,328,553 | 630,244 | (k) | 3,978,263 | ||||||||
| 19,466 | (l) | |||||||||||
| Non-controlling interests |
23,774 | — | 23,774 | |||||||||
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| Total equity |
3,352,327 | 649,710 | 4,003,237 | |||||||||
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| $ | 8,345,143 | $ | 1,507,395 | $ | 9,852,538 | |||||||
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F-6
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2013 (continued)
| (a) | Represents the purchase price of the BRE-DDR Acquisition assuming the BRE-DDR Acquisition was consummated on September 30, 2013. The purchase price of the Properties was funded through the assumption of mortgage debt, repayment of the preferred equity interest and mezzanine loan previously funded by the Company to the BRE-DDR JV and the issuance and sale of the Company’s common shares in a forward equity offering. The purchase price allocation was accounted for pursuant to the provisions of ASC 805, Business Combinations. The Company allocates the purchase price to assets acquired and liabilities assumed on a gross basis based on their relative fair values at the date of acquisition. The allocation of purchase price shown in the table below is based upon the Company’s best estimates and is subject to change based upon the final determination of the fair value of the assets and liabilities acquired. |
The fair value of assets acquired and consideration given is as follows (in thousands):
| Fair value of net assets acquired |
$ | 755,491 | ||
|
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|
|||
| Cash (including $25,000 escrow deposit) |
$ | 565,561 | ||
| Repayment of the preferred equity interest and mezzanine loan related to the BRE-DDR Portfolio acquired |
160,123 | |||
| Fair value of previously held equity interests |
29,807 | |||
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|
|||
| Total consideration |
$ | 755,491 | ||
|
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| (b) | The purchase price allocation of the fair value of the assets acquired and liabilities assumed is as follows (in thousands): |
| Land |
$ | 325,374 | ||
| Buildings |
1,012,803 | |||
| Tenant improvements |
25,620 | |||
|
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|||
| 1,363,797 | ||||
| Intangible assets |
265,192 | |||
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| 1,628,989 | ||||
| Cash and cash equivalents |
9,427 | |||
| Restricted cash |
9,848 | |||
| Other assets assumed, net |
7,781 | |||
| Less: Mortgage debt assumed, net |
(818,237 | ) | ||
| Less: Other liabilities assumed, net |
(19,534 | ) | ||
| Less: Below-market leases |
(62,783 | ) | ||
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| Net assets acquired |
$ | 755,491 | ||
|
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|
| (c) | Represents the reduction of the Company’s investment in the BRE-DDR JV as follows (in thousands): |
| Investment basis in BRE-DDR JV related to the BRE-DDR Portfolio |
$ | 9,141 | ||
| Repayment of the preferred equity interest plus accrued interest related to the BRE-DDR Portfolio acquired |
128,159 | |||
| Repayment of mezzanine loan plus accrued interest |
31,964 | |||
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|
|||
| Pro forma adjustments to Investments In and Advances to Joint Ventures |
$ | 169,264 | ||
|
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|
| (d) | Represents operating cash related to the BRE-DDR Portfolio acquired in the transaction less amounts paid for transaction costs. |
| (e) | Represents excess cash received from the issuance and sale of the Company’s common shares in a forward equity offering. See footnote (k). |
F-7
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
September 30, 2013 (continued)
| (f) | Represents cash assumed upon acquisition primarily related to required mortgage escrows. |
| (g) | Represents an increase in Other Assets as follows (in thousands): |
| Intangible Assets: |
||||
| In-place leases |
$ | 110,933 | ||
| Fair market value of leases |
23,185 | |||
| Tenant relations |
131,074 | |||
| Escrow deposit |
(25,000 | ) | ||
| Other assets assumed |
7,781 | |||
|
|
|
|||
| Pro forma adjustments to Other Assets |
$ | 247,973 | ||
|
|
|
| (h) | Represents a decrease in the revolving credit facilities as follows (in thousands): |
| Proceeds from common share issuance (k) |
$ | (630,244 | ) | |
| Cash paid (less escrow deposit) |
540,561 | |||
| Excess cash (e) |
46,814 | |||
|
|
|
|||
| Pro forma adjustments to Revolving Credit Facilities |
$ | (42,869 | ) | |
|
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|
| (i) | Represents the fair value of mortgage debt assumed. See footnote (f) in the unaudited pro forma condensed consolidated statement of operations. |
| (j) | Represents Accounts Payable and Other Liabilities assumed as follows (in thousands): |
| Below-market leases |
$ | 62,783 | ||
| Other liabilities assumed |
19,534 | |||
|
|
|
|||
| Pro forma adjustments to Accounts Payable and Other Liabilities |
$ | 82,317 | ||
|
|
|
| (k) | Represents the net proceeds from the issuance of 35.14 million of the Company’s common shares in a forward equity offering, which the Company settled on October 1, 2013, at $17.94 per share. |
| (l) | Represents a non-recurring adjustment for the gain on change in control related to the difference between the Company’s carrying value and fair value of the previously held equity interest in the BRE-DDR JV and transaction costs of $1.2 million that are not included as pro forma adjustments in the income statement. |
F-8
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2013
For the Year Ended December 31, 2012
(In thousands, except share and per share data)
(Unaudited)
The unaudited pro forma condensed consolidated statements of operations for the nine months ended September 30, 2013 and the year ended December 31, 2012 is presented as if (i) the BRE-DDR Acquisition and (ii) the issuance and sale of 35.14 million DDR common shares in a forward equity offering, which the Company settled on October 1, 2013, were completed on January 1, 2012.
The following unaudited pro forma condensed consolidated financial statements of operations is based upon the historical consolidated results of operations of the Company and the Properties for the nine months ended September 30, 2013 and the year ended December 31, 2012, giving effect to the items listed above. The unaudited pro forma condensed consolidated financial statements of operations should be read in conjunction with the historical financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2013 and Annual Report on Form 10-K, as amended, for the year ended December 31, 2012.
The unaudited pro forma condensed consolidated financial statements of operations does not purport to represent what the actual results of operations of the Company would have been assuming the transactions listed above had been completed as set forth above, nor do they purport to represent the Company’s results of operations for future periods. The pro forma adjustments relating to the BRE-DDR Acquisition are based on the Company’s preliminary purchase price allocation and certain estimates. The Company accounted for the BRE-DDR Acquisition utilizing the purchase method of accounting pursuant to the provisions of ASC 805, Business Combinations. The pro forma adjustments relating to the purchase price allocation of the BRE-DDR Acquisition are based on the Company’s best estimates and are subject to change based upon the final determination of the fair value of the assets and liabilities acquired.
F-9
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2013
(In thousands, except share and per share data)
(Unaudited)
| Company Historical |
Pro Forma Adjustments |
Company Pro Forma (Unaudited) |
||||||||||
| Revenues from rental properties |
$ | 581,107 | $ | 106,742 | (a) | $ | 687,590 | |||||
| (259 | ) (b) | |||||||||||
| Fee and other income |
58,934 | 533 | (a) | 52,876 | ||||||||
| (6,591 | ) (c) | |||||||||||
|
|
|
|
|
|
|
|||||||
| 640,041 | 100,425 | 740,466 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Rental operation expenses: |
||||||||||||
| Operating and maintenance |
101,412 | 11,241 | (a) | 112,653 | ||||||||
| Real estate taxes |
82,940 | 20,360 | (a) | 103,300 | ||||||||
| Impairment charges |
54,134 | — | 54,134 | |||||||||
| General and administrative |
59,123 | 412 | (a) | 59,535 | ||||||||
| Depreciation and amortization |
211,200 | 87,726 | (d) | 298,926 | ||||||||
|
|
|
|
|
|
|
|||||||
| 508,809 | 119,739 | 628,548 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Other income (expense): |
||||||||||||
| Interest income |
20,365 | (11,040 | ) (e) | 9,325 | ||||||||
| Interest expense |
(166,990 | ) | (40,397 | ) (f) | (206,684 | ) | ||||||
| 703 | (g) | |||||||||||
| Other income (expense), net |
(3,288 | ) | — | (3,288 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| (149,913 | ) | (50,734 | ) | (200,647 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Loss before earnings from equity method investments and other items |
(18,681 | ) | (70,048 | ) | (88,729 | ) | ||||||
| Equity in net income of joint ventures |
5,543 | 1,347 | (h) | 6,890 | ||||||||
| Gain on change in control of interests |
1,066 | — | 1,066 | |||||||||
|
|
|
|
|
|
|
|||||||
| Loss before tax expense of taxable REIT subsidiaries and state franchise and income taxes |
(12,072 | ) | (68,701 | ) | (80,773 | ) | ||||||
| Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
(2,481 | ) | — | (2,481 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Loss from continuing operations |
(14,553 | ) | (68,701 | ) | (83,254 | ) | ||||||
| Write-off of preferred share original issuance costs |
(5,246 | ) | (5,246 | ) | ||||||||
| Preferred dividends |
(21,113 | ) | (21,113 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net loss from continuing operations attributable to DDR common shareholders |
$ | (40,912 | ) | $ | (109,613 | ) | ||||||
|
|
|
|
|
|||||||||
| Per share data: |
||||||||||||
| Basic earnings per share data: |
||||||||||||
| Income attributable to common shareholders from continuing operations |
$ | (0.13 | ) | $ | (0.32 | ) (i) | ||||||
| Diluted earnings per share data: |
||||||||||||
| Income attributable to common shareholders from continuing operations |
$ | (0.13 | ) | $ | (0.32 | ) (i) | ||||||
| Weighted average number of common shares (in thousands): |
||||||||||||
| Basic |
316,146 | 351,286 | (i) | |||||||||
| Diluted |
316,146 | 351,286 | (i) | |||||||||
F-10
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2013 (continued)
| (a) | Reflects the revenues and certain expenses of the BRE-DDR Portfolio for the nine months ended September 30, 2013. |
| (b) | Reflects the revenue related to the amortization of the above- and below-market leases of the BRE-DDR Portfolio for the nine months ended September 30, 2013. |
| (c) | Reduction in management fee and other income previously earned by the Company from the BRE-DDR JV and reflected in the Company’s historical results for the nine months ended September 30, 2013. |
| (d) | Reflects depreciation and amortization expense as follows: |
| Fair market value of tangible real estate assets |
$ | 1,363,797 | ||
| Less: Non-depreciable real estate assets |
(325,374 | ) | ||
|
|
|
|||
| Depreciable buildings and improvements |
$ | 1,038,423 | ||
|
|
|
|||
| Intangible assets (excluding above-market leases) |
$ | 242,007 | ||
|
|
|
|||
| Depreciation expense based on a 20-year to 31.5-year life |
$ | 40,051 | ||
| Amortization expense based on a 1-year to 27-year life |
76,916 | |||
|
|
|
|||
| Depreciation and amortization expense adjustment |
$ | 116,967 | ||
|
|
|
|||
| Depreciation and amortization expense for the nine-months ended September 30, 2013 |
$ | 87,726 | ||
|
|
|
| (e) | Reflects a reduction in interest income recorded in the Company’s historical results from a portion of the preferred equity interest and mezzanine loan previously funded by the Company to the BRE-DDR JV at September 30, 2013, which was repaid upon closing of the BRE-DDR Acquisition. |
| (f) | Reflects an increase in interest expense for the nine-month period ended September 30, 2013, as follows (in thousands): |
| Estimated interest expense of mortgage debt assumed |
$ | 32,102 | ||
| Amortization of excess fair value over historical cost of mortgage debt assumed |
8,295 | |||
|
|
|
|||
| $ | 40,397 | |||
|
|
|
| (g) | Reflects the reduction of interest costs related to variable rate indebtedness assumed to be repaid with the proceeds from the sale of 35.14 million common shares issued and sold by the Company in a forward equity offering, which the Company settled on October 1, 2013, based on the Company’s borrowing rate at October 1, 2013 of 2.2%. |
Assumes utilization of the Company’s revolving credit facilities, which bear interest at LIBOR plus 140 basis points. Since the interest rate on the revolving credit facilities is based on a spread over LIBOR, the rates will periodically change. If the interest rate on the revolving credit facilities, based upon a principal amount of $42.9 million, increases or decreases by 12.5 basis points, the following adjustment would be made to interest expense for the nine month period (in thousands):
| Adjustment to interest expense if rate increases 12.5 basis points |
$ | 1 | ||
| Adjustment to interest expense if rate decreases 12.5 basis points |
$ | (1 | ) |
| (h) | Reflects the elimination of equity in net loss of joint ventures reflected in the Company’s historical results associated with its previous 5% common equity interest in the BRE-DDR Portfolio. |
F-11
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2013 (continued)
| (i) | Pro forma income per common share is based upon the historical basic and diluted weighted-average number of common shares outstanding at September 30, 2013 and adjusted to include 35.14 million common shares issued and sold by the Company in a forward equity offering, which the Company settled on October 1, 2013, as if as if the shares had been issued as of January 1, 2012. |
F-12
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2012
(In thousands, except share and per share data)
(Unaudited)
| Company Historical |
Pro Forma Adjustments |
Company Pro Forma (Unaudited) |
||||||||||
| Revenues from rental properties |
$ | 722,114 | $ | 137,289 | (a) | $ | 859,058 | |||||
| (345 | ) (b) | |||||||||||
| Fee and other income |
78,261 | 1,024 | (a) | 70,532 | ||||||||
| (8,753 | ) (c) | |||||||||||
|
|
|
|
|
|
|
|||||||
| 800,375 | 129,215 | 929,590 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Rental operation expenses: |
||||||||||||
| Operating and maintenance |
128,821 | 15,124 | (a) | 143,945 | ||||||||
| Real estate taxes |
104,256 | 25,159 | (a) | 129,415 | ||||||||
| Impairment charges |
105,395 | — | 105,395 | |||||||||
| General and administrative |
76,444 | 1,006 | (a) | 77,450 | ||||||||
| Depreciation and amortization |
248,781 | 116,967 | (d) | 365,748 | ||||||||
|
|
|
|
|
|
|
|||||||
| 663,697 | 158,256 | 821,953 | ||||||||||
|
|
|
|
|
|
|
|||||||
| Other income (expense): |
||||||||||||
| Interest income |
15,799 | (9,114 | ) (e) | 6,685 | ||||||||
| Interest expense |
(221,424 | ) | (54,304 | ) (f) | (274,791 | ) | ||||||
| 937 | (g) | |||||||||||
| Loss on debt retirement, net |
(13,495 | ) | — | (13,495 | ) | |||||||
| Other income (expense), net |
(17,880 | ) | — | (17,880 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| (237,000 | ) | (62,481 | ) | (299,481 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Loss before earnings from equity method investments and other items |
(100,322 | ) | (91,522 | ) | (191,844 | ) | ||||||
| Equity in net income of joint ventures |
35,250 | 982 | (h) | 36,232 | ||||||||
| Impairment of joint venture investments |
(26,671 | ) | — | (26,671 | ) | |||||||
| Gain on change in control of interests |
78,127 | — | 78,127 | |||||||||
|
|
|
|
|
|
|
|||||||
| Loss before tax expense of taxable REIT subsidiaries and state franchise and income taxes |
(13,616 | ) | (90,540 | ) | (104,156 | ) | ||||||
| Tax expense of taxable REIT subsidiaries and state franchise and income taxes |
(1,160 | ) | — | (1,160 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Loss from continuing operations |
(14,776 | ) | (90,540 | ) | (105,316 | ) | ||||||
| Write-off of preferred share original issuance costs |
(5,804 | ) | (5,804 | ) | ||||||||
| Preferred dividends |
(28,645 | ) | (28,645 | ) | ||||||||
|
|
|
|
|
|||||||||
| Net loss from continuing operations attributable to DDR common shareholders |
$ | (49,225 | ) | $ | (139,765 | ) | ||||||
|
|
|
|
|
|||||||||
| Per share data: |
||||||||||||
| Basic earnings per share data: |
||||||||||||
| Income attributable to common shareholders from continuing operations |
$ | (0.15 | ) | $ | (0.41 | ) (i) | ||||||
| Diluted earnings per share data: |
||||||||||||
| Income attributable to common shareholders from continuing operations |
$ | (0.15 | ) | $ | (0.41 | ) (i) | ||||||
| Weighted average number of common shares (in thousands): |
||||||||||||
| Basic |
291,726 | 326,866 | (i) | |||||||||
| Diluted |
291,726 | 326,866 | (i) | |||||||||
F-13
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2012 (continued)
| (a) | Reflects the revenues and certain expenses of the BRE-DDR Portfolio for the year ended December 31, 2012. |
| (b) | Reflects the revenue related to the amortization of the above- and below-market leases of the BRE-DDR Portfolio. |
| (c) | Reduction in management fee and other income previously earned by the Company from the BRE-DDR JV and reflected in the Company’s historical results for the year ended December 31, 2012. |
| (d) | Reflects depreciation and amortization expense calculated as follows: |
| Fair market value of tangible real estate assets |
$ | 1,363,797 | ||
| Less: Non-depreciable real estate assets |
(325,374 | ) | ||
|
|
|
|||
| Depreciable buildings and improvements |
$ | 1,038,423 | ||
|
|
|
|||
| Intangible assets (excluding above-market leases) |
$ | 242,007 | ||
|
|
|
|||
| Depreciation expense based on a 20-year to 31.5-year life |
$ | 40,051 | ||
| Amortization expense based on a 1-year to 27-year life |
76,916 | |||
|
|
|
|||
| Depreciation and amortization expense adjustment |
$ | 116,967 | ||
|
|
|
| (e) | Reflects a reduction in interest income recorded in the Company’s historical results from a portion of the preferred equity interest and mezzanine loan previously funded by the Company to the BRE-DDR JV at December 31, 2012, which was repaid upon closing of the BRE-DDR Acquisition. Adjustment is from the date of original issuance, June 20, 2012 through December 31, 2012. |
| (f) | Reflects an increase in interest expense for the year ended December 31, 2012, as follows (in thousands): |
| Estimated interest expense of mortgage debt assumed |
$ | 43,221 | ||
| Amortization of excess fair value over historical cost of mortgage debt assumed |
11,083 | |||
|
|
|
|||
| $ | 54,304 | |||
|
|
|
| (g) | Reflects the reduction of interest costs related to variable rate indebtedness assumed to be repaid with the proceeds from the sale of 35.14 million common shares issued and sold by the Company in a forward equity offering, which the Company settled on October 1, 2013, based on the Company’s borrowing rate at October 1, 2013 of 2.2%. |
Assumes utilization of the Company’s revolving credit facilities, which bear interest at LIBOR plus 140 basis points. Since the interest rate on the revolving credit facilities is based on a spread over LIBOR, the rates will periodically change. If the interest rate on the revolving credit facilities, based upon a principal amount of $42.9 million, increases or decreases by 12.5 basis points, the following adjustment would be made to interest expense for the nine month period (in thousands):
| Adjustment to interest expense if rate increases 12.5 basis points |
$ | 1 | ||
| Adjustment to interest expense if rate decreases 12.5 basis points |
$ | (1 | ) |
| (h) | Reflects the elimination of equity in net loss of joint ventures reflected in the Company’s historical results associated with its previous 5% common equity interest in the BRE-DDR Portfolio. |
F-14
Table of Contents
DDR Corp.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2012 (continued)
| (i) | Pro forma income per common share is based upon the historical basic and diluted weighted-average number of common shares outstanding at December 31, 2012 and adjusted to include 35.14 million common shares issued and sold by the Company in a forward equity offering, which the Company settled on October 1, 2013, as if the shares had been issued as of January 1, 2012. |
F-15
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| DDR CORP. (Registrant) | ||||
| Date: December 13, 2013 | /s/ Christa A. Vesy | |||
| Christa A. Vesy | ||||
| Executive Vice President and Chief Accounting Officer | ||||
Table of Contents
EXHIBIT INDEX
| Exhibit |
Description | |
| 2.1 | Agreement of Purchase and Sale between the Parties listed on Schedule A attached thereto, as REIT Seller, BRE Pentagon Retail Holding B, LLC, as Homart Seller, JDN Real Estate – Lakeland, L.P., as REIT Buyer, and DDR Corp., as Homart Buyer, dated as of May 15, 2013 (filed as Exhibit 2.1 to DDR Corp.’s Quarterly Report on Form 10-Q (Commission File No. 001-11690) for the quarter ended June 30, 2013 and incorporated by reference herein) | |
| 23.1 | Consent of Deloitte & Touche LLP | |