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8-K - FORM 8-K - SITE Centers Corp.d39049d8k.htm
EX-99.2 - EX-99.2 - SITE Centers Corp.d39049dex992.htm

Exhibit 99.1

 

LOGO

For immediate release:

 

Media Contact:      Investor Contact:
Matt Schuler      Matt Lougee
mschuler@ddr.com      mlougee@ddr.com
216.755.5500      216.755.5500

DDR REPORTS A 6.9% INCREASE IN OPERATING FFO PER DILUTED SHARE TO $0.31

FOR THE QUARTER ENDED SEPTEMBER 30, 2015

BEACHWOOD, OHIO, October 27, 2015 – DDR Corp. (NYSE: DDR) today announced operating results for the third quarter ended September 30, 2015.

Financial Highlights

 

    Third quarter operating funds from operations attributable to common shareholders (“Operating FFO”) increased $7.3 million to $113.5 million, or $0.31 per diluted share, compared to $106.2 million, or $0.29 per diluted share, for the prior-year comparable period.

 

    Third quarter net income attributable to common shareholders was $54.0 million, or $0.15 per diluted share, compared to net income of $63.0 million, or $0.17 per diluted share, for the prior-year comparable period.

Significant Quarterly Activity

 

    Generated same store net operating income growth of 3.2% on a pro rata basis

 

    Executed 382 new leases and renewals for 2.9 million square feet

 

    Increased the annualized base rent per occupied square foot by 4.0% on a pro rata basis to $14.54 at September 30, 2015 from $13.98 at September 30, 2014

 

    Generated new leasing spreads of 12.3% and renewal leasing spreads of 7.1%, both on a pro rata basis

 

    The portfolio leased rate was 95.8% at September 30, 2015 and June 30, 2015 on a pro rata basis

 

    Sold 21 assets totaling $145 million at DDR’s share

 

    In October 2015, issued $400 million of 4.25% senior unsecured notes due February 2026

 

    In October 2015, called for redemption $350 million of senior convertible notes

“I am proud to report another strong and consistent quarter of same store NOI and earnings growth as our high quality portfolio and the efforts of our team continue to produce impressive results,” commented David J. Oakes, president and chief executive officer of DDR.

2015 Guidance

 

    The Company is revising its 2015 guidance for Operating FFO to a range of $1.21 to $1.24 per diluted share from a range of $1.20 to $1.25 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 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 and losses from disposition of depreciable real estate property, which are presented net of taxes, (iii) impairment charges on depreciable real estate property and related investments, (iv) extraordinary items and (v) certain non-cash items. These non-cash items principally include real property depreciation and amortization of intangibles, equity income from joint ventures and equity income from non-controlling interests and adding the Company’s proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis. The Company calculates Operating FFO by excluding the non-operating charges and gains described below. The Company computes FFO in accordance with the NAREIT definition. Other real estate companies may calculate FFO and Operating FFO in a different manner. Operating FFO is useful to investors as the Company removes these charges and gains to analyze the results of its operations and assess performance of the core operating real estate portfolio. A reconciliation of net income (loss) to FFO and Operating FFO is presented herein.

 

1


Safe Harbor

DDR Corp. considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company’s expectation for future periods. Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved. For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements. There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, local conditions such as supply of space or a reduction in demand for real estate in the area; competition from other available space; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant; constructing properties or expansions that produce a desired yield on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract; our ability to secure equity or debt financing on commercially acceptable terms or at all; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements or our failure to satisfy conditions to the completion of these arrangements; the success of our capital recycling strategy; and the finalization of the financial statements for the three months ended September 30, 2015. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company’s Form 10-K for the year ended December 31, 2014, as amended. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

About DDR Corp.

DDR is an owner and manager of 378 value-oriented shopping centers representing 116 million square feet in 41 states and Puerto Rico. The Company’s portfolio is comprised primarily of large-format power centers located in top markets across the United States, and is actively managed to create long-term shareholder value. DDR is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol DDR. Additional information about the Company is available at www.ddr.com.

Conference Call and Supplemental Information

A copy of the Company’s Supplemental package is available upon request to Brooke Vanek at the Company’s corporate office, 3300 Enterprise Parkway, Beachwood, Ohio 44122 or at www.ddr.com.

The Company will hold its quarterly conference call tomorrow, October 28, 2015, at 10:00 a.m. Eastern Time. To participate, please dial 877.249.1119 (domestic) or 412.542.4143 (international) at least ten minutes prior to the scheduled start of the call. The conference call webcast will be recorded and available for replay through the Investors portion of DDR’s website, http://ir.ddr.com/events.cfm.

 

2


DDR Corp.

Income Statement: Consolidated Interests

 

$ in thousands, except per share                         
     3Q15     3Q14     9M15     9M14  

Revenues:

        

Minimum rents (1)

   $ 180,523     $ 171,893     $ 540,583     $ 507,475  

Percentage rent

     835       507       3,592       2,772  

Recoveries

     61,915       58,116       188,016       171,947  

Ancillary income

     4,646       6,326       13,513       18,465  

Other revenues (2)

     968       919       2,866       4,552  
  

 

 

   

 

 

   

 

 

   

 

 

 
     248,887       237,761       748,570       705,211  

Expenses (3):

        

Operating and maintenance

     35,963       36,404       110,718       106,982  

Real estate taxes

     37,385       34,981       112,811       104,042  
  

 

 

   

 

 

   

 

 

   

 

 

 
     73,348       71,385       223,529       211,024  

Net operating income

     175,539       166,376       525,041       494,187  

Other income (expense):

        

Fee income

     8,248       7,594       24,713       23,696  

Interest income

     7,331       2,652       21,703       8,938  

Interest expense (4)

     (58,217     (56,774     (182,524     (176,106

Depreciation and amortization

     (97,155     (97,270     (299,470     (296,093

General and administrative (5)

     (17,596     (19,540     (55,462     (58,878

Other income (expense), net (6)

     (240     (2,758     (1,300     (11,041

Impairment charges (7)

     0       (1,448     (279,021     (18,119
  

 

 

   

 

 

   

 

 

   

 

 

 

Income (loss) before earnings from equity method investments and other items

     17,910       (1,168     (246,320     (33,416

Equity in net income of joint ventures

     648       3,620       2,351       10,241  

Impairment of joint venture investments

     0       0       0       (9,100

Gain on sale and change in control of interests, net

     0       3,984       7,772       87,814  

Income from discontinued operations (8)

     0       57,569       0       67,926  

Tax (expense) benefit

     (528     214       (6,001     (1,113

Gain on disposition of real estate, net of tax

     41,793       2,262       78,154       2,645  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss)

     59,823       66,481       (164,044     124,997  

Non-controlling interests (9)

     (268     2,125       (1,590     2,985  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to DDR

     59,555       68,606       (165,634     127,982  

Write-off of preferred share original issuance costs

     0       0       0       (1,943

Preferred dividends

     (5,594     (5,594     (16,781     (18,460
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income (loss) attributable to Common Shareholders

     53,961       63,012       (182,415     107,579  

FFO:

        

Net income (loss) attributable to common shareholders

     53,961       63,012       (182,415     107,579  

Depreciation and amortization of real estate investments

     95,159       99,542       293,265       304,286  

Equity in net income of joint ventures

     (648     (3,620     (2,351     (10,241

Joint ventures’ FFO

     6,595       8,387       21,114       24,507  

Non-controlling interests (OP units)

     69       223       566       509  

Impairment of depreciable real estate

     0       365       179,748       11,856  

Gain on disposition of depreciable real estate, net

     (41,734     (57,105     (78,282     (159,753
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO attributable to Common Shareholders

     113,402       110,804       231,645       278,743  

Non-operating items, net (10)

     136       (4,589     100,423       29,445  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating FFO

   $ 113,538     $ 106,215     $ 332,068     $ 308,188  

FFO per share – Diluted (11)

   $ 0.31     $ 0.31     $ 0.64     $ 0.77  

Operating FFO per share – Diluted (11)

   $ 0.31     $ 0.29     $ 0.91     $ 0.85  


DDR Corp.

Balance Sheet: Consolidated Interests

 

$ in thousands    At Period End  
     3Q15     4Q14  

Assets:

    

Land

   $ 2,187,720     $ 2,208,468  

Buildings

     6,931,911       7,087,040  

Fixtures and tenant improvements

     709,548       645,035  
  

 

 

   

 

 

 
     9,829,179       9,940,543  

Less: Accumulated depreciation

     (2,038,635     (1,909,585
  

 

 

   

 

 

 
     7,790,544       8,030,958  

Construction in progress and land

     326,196       395,242  
  

 

 

   

 

 

 

Real estate, net

     8,116,740       8,426,200  

Investments in and advances to joint ventures

     393,520       414,848  

Cash

     21,040       20,937  

Restricted cash

     41,920       11,375  

Notes receivable, net

     47,430       56,245  

Receivables, including straight-line rent, net

     131,209       132,661  

Other assets, net (12)

     403,620       479,629  
  

 

 

   

 

 

 

Total Assets

     9,155,479       9,541,895  

Liabilities and Equity:

    

Revolving credit facilities

     395,000       29,009  

Unsecured debt

     3,118,656       2,765,893  

Unsecured term loan

     300,000       350,000  

Mortgage and other secured debt

     1,409,921       2,089,805  
  

 

 

   

 

 

 
     5,223,577       5,234,707  

Dividends payable

     68,059       61,468  

Other liabilities (13)

     425,507       448,192  
  

 

 

   

 

 

 

Total Liabilities

     5,717,143       5,744,367  

Preferred shares

     350,000       350,000  

Common shares

     36,223       36,071  

Paid-in-capital

     5,467,413       5,438,778  

Accumulated distributions in excess of net income

     (2,416,655     (2,047,212

Deferred compensation obligation

     15,516       16,609  

Accumulated other comprehensive income

     (6,662     (7,352

Less: Common shares in treasury at cost

     (16,039     (16,646

Non-controlling interests

     8,540       27,280  
  

 

 

   

 

 

 

Total Equity

     3,438,336       3,797,528  
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 9,155,479     $ 9,541,895  


DDR Corp.

Income Statement: Unconsolidated Interests at 100%

 

$ in thousands       
     3Q15     3Q14     9M15     9M14  

Revenues:

        

Minimum rents

   $ 95,218     $ 78,647     $ 297,392     $ 260,122  

Percentage rent

     383       318       1,325       1,051  

Recoveries

     28,772       21,469       90,234       64,661  

Other revenues

     2,325       7,900       8,413       31,141  
  

 

 

   

 

 

   

 

 

   

 

 

 
     126,698       108,334       397,364       356,975  

Expenses:

        

Operating and maintenance

     30,558       22,287       94,213       84,032  

Real estate taxes

     17,118       12,596       52,859       37,852  
  

 

 

   

 

 

   

 

 

   

 

 

 
     47,676       34,883       147,072       121,884  

Net operating income

     79,022       73,451       250,292       235,091  

Other income (expense):

        

Interest expense

     (33,202     (37,667     (107,698     (129,514

Depreciation and amortization

     (49,949     (31,435     (158,168     (107,165

Impairment charges

     0       0       (448     (600

Tax expense

     0       0       0       (6,565

Other income (expense), net

     (589     (173     (1,173     (2,964
  

 

 

   

 

 

   

 

 

   

 

 

 
     (83,740     (69,275     (267,487     (246,808

(Loss) income from continuing operations

     (4,718     4,176       (17,195     (11,717

Loss from discontinued operations

     0       (12,906     0       (17,090

Gain on disposition of discontinued operations, net

     0       4,713       0       28,224  

(Loss) gain on disposition of real estate, net

     (2,626     3,833       (4,197     3,833  

Non-controlling interests

     0       0       0       (2,023
  

 

 

   

 

 

   

 

 

   

 

 

 

Net (loss) income attributable to unconsolidated joint ventures

     (7,344     (184     (21,392     1,227  

Depreciation and amortization of real estate investments

     49,949       35,574       158,168       118,020  

Impairment of depreciable real estate

     0       11,093       448       11,693  

Loss (gain) on disposition of depreciable real estate, net

     2,626       (8,546     4,197       (31,965
  

 

 

   

 

 

   

 

 

   

 

 

 

FFO

     45,231       37,937       141,421       98,975  

FFO at DDR’s ownership interests

     6,595       8,387       21,114       24,507  

Operating FFO at DDR’s ownership interests

     6,639       8,387       21,162       24,643  

Net income at DDR’s ownership interests

     336       3,316       1,406       9,483  

Basis differences

     312       304       945       758  
  

 

 

   

 

 

   

 

 

   

 

 

 

Equity in net income of joint ventures

   $ 648     $ 3,620     $ 2,351     $ 10,241  


DDR Corp.

Balance Sheet: Unconsolidated Interests at 100%

 

$ in thousands    At Period End  
     3Q15     4Q14  

Assets:

    

Land

   $ 1,319,519     $ 1,439,849  

Buildings

     3,457,212       3,854,585  

Fixtures and tenant improvements

     183,108       200,696  
  

 

 

   

 

 

 
     4,959,839       5,495,130  

Less: Accumulated depreciation

     (799,161     (773,256
  

 

 

   

 

 

 
     4,160,678       4,721,874  

Land held for development and construction in progress

     52,215       55,698  
  

 

 

   

 

 

 

Real estate, net

     4,212,893       4,777,572  

Cash and restricted cash

     62,751       100,812  

Receivables, including straight-line rent, net

     52,903       80,508  

Other assets, net

     299,625       394,751  
  

 

 

   

 

 

 

Total Assets

     4,628,172       5,353,643  

Liabilities and Equity:

    

Mortgage debt

     3,116,584       3,552,764  

Notes and accrued interest payable to DDR

     2,926       144,831  

Other liabilities

     198,804       276,998  
  

 

 

   

 

 

 

Total Liabilities

     3,318,314       3,974,593  

Redeemable preferred equity

     310,763       305,310  

Accumulated equity

     999,095       1,073,740  
  

 

 

   

 

 

 

Total Liabilities and Equity

   $ 4,628,172     $ 5,353,643  


DDR Corp.

Financial Statements: Footnotes

 

$ in millions, except per share              
Includes discontinued operations    3Q15      3Q14      9M15      9M14  

(1)

 

Minimum rents:

           
 

Straight-line rent, net

   $ 1.6      $ 1.5      $ 3.8      $ 4.0  
 

Below-market rent, net

     1.0        0.3        2.2        0.8  
 

Ground lease revenue

     9.5        8.5        27.9        24.5  

(2)

 

Other revenues:

           
 

Lease termination fees

     0.7        0.7        2.3        4.1  
 

Other miscellaneous

     0.3        0.2        0.6        0.5  

(3)

 

Operating expenses:

           
 

Recoverable expenses (2014 excludes sold assets)

     (67.7      (64.0      (206.2      (189.3
 

Non-recoverable expenses (2014 excludes sold assets)

     (5.6      (7.4      (17.3      (21.7
 

Straight-line ground rent expense

     (0.1      (0.2      (0.4      (0.8
 

Expensed costs of suspended developments

     (0.1      (0.1      (0.4      (0.8

(4)

 

Non-cash interest expense:

           
 

Convertible debt accretion

     (3.0      (2.9      (8.9      (8.5
 

Debt fair value amortization

     3.0        4.1        12.7        12.5  
 

Loan cost amortization

     (2.4      (3.1      (7.3      (9.5
 

Interest expense (capitalized)

     1.9        2.7        5.1        6.6  

(5)

 

General and administrative expenses:

           
 

Executive separation charges

     (0.0      (0.0      (2.3      (0.0
 

Stock compensation expenses

     (1.5      (1.9      (5.2      (5.8
 

Internal leasing expenses

     (1.8      (1.7      (5.5      (5.6
 

Construction administrative costs (capitalized)

     2.3        2.5        7.0        7.3  

(6)

 

Other income (expense):

           
 

Transactions and other, net

     (0.2      (1.6      (0.4      (8.8
 

Litigation expenses

     (0.0      (1.2      (0.0      (2.2
 

Debt extinguishment, net

     (0.0      (0.0      (0.9      (0.0

(7)

 

Impairment charges:

           
 

Assets marketed for sale

     (0.0      (0.4      (179.7      (11.9
 

Land previously held for development

     (0.0      (1.4      (99.3      (15.1


DDR Corp.

Financial Statements: Footnotes

 

$ in millions, except per share              
Includes discontinued operations    3Q15      3Q14      9M15      9M14  

(8)

  Discontinued operations:            
  Revenues      n/a      $ 10.8        n/a      $ 36.4  
  Expenses      n/a        (5.4      n/a        (19.0
  Impairments      n/a        (0.4      n/a        (8.9
  Depreciation      n/a        (4.5      n/a        (14.9
  Gain on disposition of real estate, net      n/a        57.1        n/a        74.3  
    

 

 

    

 

 

    

 

 

    

 

 

 
  Net income      n/a        57.6        n/a        67.9  
  Note: Presented for 2014 only as DDR adopted the new accounting guidance on January 1, 2015, which changed the definition for reporting.    

(9)

  Non-controlling interests:            
  FFO attributable to non-controlling interests      (0.2      2.3        (1.2      1.9  
  Operating FFO attributable to non-controlling interests      (0.2      (0.3      (0.8      (0.7

(10)

  Non-operating items excluded from Operating FFO:            
  Non-cash impairment charges – non-depreciable assets      0.0        1.4        99.3        24.2  
  Executive separation charges      0.0        0.0        2.3        0.0  
  Transaction, debt extinguishment, litigation, other, net      0.1        2.8        1.6        12.1  
  Joint ventures – transaction, currency, other      0.0        0.0        0.0        0.1  
  Non-cash gain on sale and change in control of interests, net      0.0        (4.0      (7.8      (4.0
  Tax expense (primarily Puerto Rico restructuring)      0.0        0.0        4.4        0.0  
  (Gain) loss on sale of non-depreciable real estate, net      0.0        (4.8      0.6        (4.9
  Non-cash write-off of preferred share original issuance costs      0.0        0.0        0.0        1.9  
    

 

 

    

 

 

    

 

 

    

 

 

 
       0.1        (4.6      100.4        29.4  

(11)

  Outstanding per share information:            
  Common shares (at quarter end)      362.1        360.2        362.1        360.2  
  OP units (at quarter end)      0.4        1.4        0.4        1.4  
    

 

 

    

 

 

    

 

 

    

 

 

 
  Total shares and units (at quarter end)      362.5        361.6        362.5        361.6  
  Weighted average shares and units – Basic – EPS      361.1        358.0        360.3        357.8  
  Assumed conversion of dilutive securities      2.5        0.5        0.0        0.5  
    

 

 

    

 

 

    

 

 

    

 

 

 
  Weighted average shares and units – Diluted – EPS      363.6        358.5        360.3        358.3  
  Weighted average shares and units – Basic – FFO & OFFO      362.5        361.0        362.4        360.2  
  Assumed conversion of dilutive securities      0.4        0.5        0.5        0.5  
    

 

 

    

 

 

    

 

 

    

 

 

 
  Weighted average shares and units – Diluted – FFO & OFFO      362.9        361.5        362.9        360.7  
  Earnings per common share – Basic & Diluted    $ 0.15      $ 0.17      $ (0.51    $ 0.30  
  FFO per share – Basic & Diluted    $ 0.31      $ 0.31      $ 0.64      $ 0.77  
  Operating FFO per share – Diluted    $ 0.31      $ 0.29      $ 0.91      $ 0.85  
  Common stock dividends declared, per share    $ 0.1725      $ 0.155      $ 0.5175      $ 0.465  

(12)

  Intangible assets, net (at quarter and year end)            323.1        389.2  

(13)

  Below-market leases, net (at quarter and year end)            146.0        139.3  


DDR Corp.

Financial Statements: Footnotes

 

         3Q15      3Q14      9M15      9M14  
Additional financial information            
 

Capital expenditures (DDR share):

           
 

Retenanting

   $ 13.4      $ 9.8      $ 36.1      $ 30.5  
 

Maintenance – total

     7.4        6.0        13.3        9.2  
 

Maintenance PSF of owned GLA – non reimbursable

           0.09        0.10  
 

Miscellaneous (DDR share):

           
 

Est. value of land owned adjacent to existing centers (at quarter end)

           26.0     
  Cost basis of headquarters (non-income producing at quarter end)            40.0