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Price
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| þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| Ohio | 34-1723097 | |
|
(State or other jurisdiction of
incorporation or organization) |
(I.R.S. Employer
Identification No.) |
|
| Large accelerated filer þ | Accelerated filer o |
Non-accelerated filer o (Do not check if a smaller reporting company) |
Smaller reporting company o |
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Item 1. FINANCIAL STATEMENTS — Unaudited
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| 2 | ||||||||
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| 3 | ||||||||
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| 4 | ||||||||
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| 5 | ||||||||
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| 6 | ||||||||
| EX-31.1 | ||||||||
| EX-31.2 | ||||||||
| EX-32.1 | ||||||||
| EX-32.2 | ||||||||
| EX-101 INSTANCE DOCUMENT | ||||||||
| EX-101 SCHEMA DOCUMENT | ||||||||
| EX-101 CALCULATION LINKBASE DOCUMENT | ||||||||
| EX-101 LABELS LINKBASE DOCUMENT | ||||||||
| EX-101 PRESENTATION LINKBASE DOCUMENT | ||||||||
| EX-101 DEFINITION LINKBASE DOCUMENT | ||||||||
-1-
| June 30, 2011 | December 31, 2010 | |||||||
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Assets
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||||||||
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Land
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$ | 1,843,033 | $ | 1,837,403 | ||||
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Buildings
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5,506,914 | 5,491,489 | ||||||
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Fixtures and tenant improvements
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360,196 | 339,129 | ||||||
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||||||||
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7,710,143 | 7,668,021 | ||||||
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Less: Accumulated depreciation
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(1,538,522 | ) | (1,452,112 | ) | ||||
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||||||||
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6,171,621 | 6,215,909 | ||||||
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Land held for development and construction in progress
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708,365 | 743,218 | ||||||
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Real estate held for sale, net
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195 | — | ||||||
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||||||||
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Total real estate assets, net
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6,880,181 | 6,959,127 | ||||||
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Investments in and advances to joint ventures
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415,584 | 417,223 | ||||||
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Cash and cash equivalents
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15,425 | 19,416 | ||||||
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Restricted cash
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4,068 | 4,285 | ||||||
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Notes receivable, net
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102,196 | 120,330 | ||||||
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Other assets, net
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249,410 | 247,709 | ||||||
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||||||||
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$ | 7,666,864 | $ | 7,768,090 | ||||
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Liabilities and Equity
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||||||||
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Unsecured indebtedness:
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||||||||
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Senior notes
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$ | 2,256,598 | $ | 2,043,582 | ||||
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Revolving credit facilities
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170,555 | 279,865 | ||||||
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||||||||
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2,427,153 | 2,323,447 | ||||||
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Secured indebtedness:
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||||||||
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Term loan
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500,000 | 600,000 | ||||||
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Mortgage and other secured indebtedness
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1,286,998 | 1,378,553 | ||||||
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||||||||
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1,786,998 | 1,978,553 | ||||||
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||||||||
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Total indebtedness
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4,214,151 | 4,302,000 | ||||||
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Accounts payable and accrued expenses
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137,532 | 127,715 | ||||||
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Dividends payable
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18,034 | 12,092 | ||||||
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Equity derivative liability — affiliate
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— | 96,237 | ||||||
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Other liabilities
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83,497 | 95,359 | ||||||
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||||||||
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Total liabilities
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4,453,214 | 4,633,403 | ||||||
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||||||||
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Commitments and contingencies (Note 9)
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||||||||
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Developers Diversified Realty Corporation Equity:
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||||||||
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Class G — 8.0% cumulative redeemable preferred
shares, without par value, $250 liquidation value;
750,000 shares authorized; 720,000 shares issued and
outstanding at December 31, 2010
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— | 180,000 | ||||||
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Class H — 7.375% cumulative redeemable preferred
shares, without par value, $500 liquidation value;
750,000 shares authorized; 410,000 shares issued and
outstanding at June 30, 2011 and December 31, 2010
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205,000 | 205,000 | ||||||
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Class I — 7.5% cumulative redeemable preferred
shares, without par value, $500 liquidation value;
750,000 shares authorized; 340,000 shares issued and
outstanding at June 30, 2011 and December 31, 2010
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170,000 | 170,000 | ||||||
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Common shares, with par value, $0.10 stated value;
500,000,000 shares authorized; 276,711,707 and
256,267,750 shares issued at June 30, 2011 and
December 31, 2010, respectively
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27,671 | 25,627 | ||||||
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Paid-in capital
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4,140,370 | 3,868,990 | ||||||
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Accumulated distributions in excess of net income
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(1,402,858 | ) | (1,378,341 | ) | ||||
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Deferred compensation obligation
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12,661 | 14,318 | ||||||
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Accumulated other comprehensive income
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34,410 | 25,646 | ||||||
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Less: Common shares in treasury at cost: 652,915 and
712,310 shares at June 30, 2011 and December 31,
2010, respectively
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(12,139 | ) | (14,638 | ) | ||||
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|
||||||||
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Total DDR shareholders’ equity
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3,175,115 | 3,096,602 | ||||||
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Non-controlling interests
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38,535 | 38,085 | ||||||
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||||||||
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Total equity
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3,213,650 | 3,134,687 | ||||||
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$ | 7,666,864 | $ | 7,768,090 | ||||
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-2-
| 2011 | 2010 | |||||||
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Revenues from operations:
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Minimum rents
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$ | 133,182 | $ | 131,744 | ||||
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Percentage and overage rents
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871 | 593 | ||||||
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Recoveries from tenants
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44,362 | 41,936 | ||||||
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Fee and other income
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20,080 | 22,327 | ||||||
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198,495 | 196,600 | ||||||
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Rental operation expenses:
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Operating and maintenance
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36,746 | 35,601 | ||||||
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Real estate taxes
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27,091 | 25,048 | ||||||
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Impairment charges
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18,352 | 74,967 | ||||||
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General and administrative
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17,979 | 19,090 | ||||||
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Depreciation and amortization
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56,750 | 54,561 | ||||||
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156,918 | 209,267 | ||||||
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Other income (expense):
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Interest income
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2,417 | 1,525 | ||||||
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Interest expense
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(59,579 | ) | (56,190 | ) | ||||
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Loss on debt retirement, net
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— | (1,090 | ) | |||||
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Gain on equity derivative instruments
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— | 21,527 | ||||||
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Other expense, net
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(6,347 | ) | (11,428 | ) | ||||
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(63,509 | ) | (45,656 | ) | ||||
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Loss before earnings from equity method investments and other items
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(21,932 | ) | (58,323 | ) | ||||
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Equity in net income (loss) of joint ventures
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16,567 | (623 | ) | |||||
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Impairment of joint venture investments
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(1,636 | ) | — | |||||
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Gain on change in control of interests
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981 | — | ||||||
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Loss before tax (expense) benefit of taxable REIT subsidiaries and state franchise and income
taxes
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(6,020 | ) | (58,946 | ) | ||||
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Tax (expense) benefit of taxable REIT subsidiaries and state franchise and income taxes
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(435 | ) | 3,616 | |||||
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Loss from continuing operations
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(6,455 | ) | (55,330 | ) | ||||
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Loss from discontinued operations
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(9,124 | ) | (66,428 | ) | ||||
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Loss before gain on disposition of real estate
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(15,579 | ) | (121,758 | ) | ||||
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Gain on disposition of real estate, net of tax
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2,310 | 592 | ||||||
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Net loss
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$ | (13,269 | ) | $ | (121,166 | ) | ||
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Non-controlling interests
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(114 | ) | 34,591 | |||||
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Net loss attributable to DDR
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$ | (13,383 | ) | $ | (86,575 | ) | ||
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Write-off of original preferred share issuance costs
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(6,402 | ) | — | |||||
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Preferred dividends
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(7,085 | ) | (10,567 | ) | ||||
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Net loss attributable to DDR common shareholders
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$ | (26,870 | ) | $ | (97,142 | ) | ||
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Per share data:
|
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Basic earnings per share data:
|
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Loss from continuing operations attributable to DDR common shareholders
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$ | (0.07 | ) | $ | (0.21 | ) | ||
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Loss from discontinued operations attributable to DDR common shareholders
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(0.03 | ) | (0.18 | ) | ||||
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Net loss attributable to DDR common shareholders
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$ | (0.10 | ) | $ | (0.39 | ) | ||
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Diluted earnings per share data:
|
||||||||
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Loss from continuing operations attributable to DDR common shareholders
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$ | (0.07 | ) | $ | (0.30 | ) | ||
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Loss from discontinued operations attributable to DDR common shareholders
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(0.03 | ) | (0.17 | ) | ||||
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Net loss attributable to DDR common shareholders
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$ | (0.10 | ) | $ | (0.47 | ) | ||
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-3-
| 2011 | 2010 | |||||||
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Revenues from operations:
|
||||||||
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Minimum rents
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$ | 266,125 | $ | 264,232 | ||||
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Percentage and overage rents
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2,866 | 2,612 | ||||||
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Recoveries from tenants
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90,573 | 88,003 | ||||||
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Fee and other income
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40,114 | 42,284 | ||||||
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399,678 | 397,131 | ||||||
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Rental operation expenses:
|
||||||||
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Operating and maintenance
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74,476 | 69,669 | ||||||
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Real estate taxes
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53,698 | 52,170 | ||||||
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Impairment charges
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22,208 | 74,967 | ||||||
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General and administrative
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47,357 | 42,366 | ||||||
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Depreciation and amortization
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112,235 | 109,128 | ||||||
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309,974 | 348,300 | ||||||
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Other income (expense):
|
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Interest income
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5,213 | 2,858 | ||||||
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Interest expense
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(119,363 | ) | (111,797 | ) | ||||
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Gain (loss) on equity derivative instruments
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21,926 | (3,340 | ) | |||||
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Other expense, net
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(5,006 | ) | (14,481 | ) | ||||
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|
||||||||
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(97,230 | ) | (126,760 | ) | ||||
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Loss before earnings from equity method investments and other items
|
(7,526 | ) | (77,929 | ) | ||||
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Equity in net income of joint ventures
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18,541 | 1,023 | ||||||
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Impairment of joint venture investments
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(1,671 | ) | — | |||||
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Gain on change in control of interests
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22,710 | — | ||||||
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Income (loss) before tax (expense) benefit of taxable REIT subsidiaries and state franchise and
income taxes
|
32,054 | (76,906 | ) | |||||
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Tax (expense) benefit of taxable REIT subsidiaries and state franchise and income taxes
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(761 | ) | 2,614 | |||||
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Income (loss) from continuing operations
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31,293 | (74,292 | ) | |||||
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Loss from discontinued operations
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(10,632 | ) | (73,375 | ) | ||||
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Income (loss) before gain (loss) on disposition of real estate
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20,661 | (147,667 | ) | |||||
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Gain (loss) on disposition of real estate, net of tax
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1,449 | (83 | ) | |||||
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Net income (loss)
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$ | 22,110 | $ | (147,750 | ) | |||
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Non-controlling interests
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(181 | ) | 36,928 | |||||
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Net income (loss) attributable to DDR
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$ | 21,929 | $ | (110,822 | ) | |||
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Write-off of original preferred share issuance costs
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(6,402 | ) | — | |||||
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Preferred dividends
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(17,653 | ) | (21,134 | ) | ||||
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Net loss attributable to DDR common shareholders
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$ | (2,126 | ) | $ | (131,956 | ) | ||
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Per share data:
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Basic earnings per share data:
|
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Income (loss) from continuing operations attributable to DDR common shareholders
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$ | 0.03 | $ | (0.35 | ) | |||
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Loss from discontinued operations attributable to DDR common shareholders
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(0.04 | ) | (0.20 | ) | ||||
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Net loss attributable to DDR common shareholders
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$ | (0.01 | ) | $ | (0.55 | ) | ||
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Diluted earnings per share data:
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Loss from continuing operations attributable to DDR common shareholders
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$ | (0.05 | ) | $ | (0.35 | ) | ||
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Loss from discontinued operations attributable to DDR common shareholders
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(0.04 | ) | (0.20 | ) | ||||
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Net loss attributable to DDR common shareholders
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$ | (0.09 | ) | $ | (0.55 | ) | ||
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-4-
| 2011 | 2010 | |||||||
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Net cash flow provided by operating activities:
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$ | 133,904 | $ | 127,981 | ||||
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Cash flow from investing activities:
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Real estate developed or acquired, net of liabilities assumed
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(68,595 | ) | (75,804 | ) | ||||
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Equity contributions to joint ventures
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(7,068 | ) | (18,497 | ) | ||||
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Repayments of (advances to) joint venture advances, net
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23,130 | (108 | ) | |||||
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Distributions of proceeds from sale and refinancing of joint venture interests
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14,033 | 3,567 | ||||||
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Return on investments in joint ventures
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5,541 | 14,761 | ||||||
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Repayment (issuance) of notes receivable, net
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13,934 | (4,550 | ) | |||||
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Decrease in restricted cash
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217 | 60,199 | ||||||
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Proceeds from disposition of real estate
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70,883 | 65,682 | ||||||
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Net cash flow provided by investing activities:
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52,075 | 45,250 | ||||||
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Cash flow from financing activities:
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Repayments of revolving credit facilities, net
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(115,908 | ) | (113,007 | ) | ||||
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Repayment of senior notes
|
(93,038 | ) | (389,924 | ) | ||||
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Proceeds from issuance of senior notes, net of underwriting commissions and offering
expenses of $350 and $400 in 2011 and 2010, respectively
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295,495 | 296,785 | ||||||
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Proceeds from mortgages and other secured debt
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121,956 | 4,327 | ||||||
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Repayment of term loans and mortgage debt
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(362,904 | ) | (325,278 | ) | ||||
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Payment of debt issuance costs
|
(9,394 | ) | (2,309 | ) | ||||
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Proceeds from issuance of common shares, net of underwriting commissions and
issuance costs of $686 in 2011 and $524 in 2010
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129,939 | 382,755 | ||||||
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Proceeds from issuance of common shares related to the exercise of warrants
|
59,873 | — | ||||||
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Redemption of preferred shares
|
(180,000 | ) | — | |||||
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(Purchase of) proceeds from the issuance of common shares in conjunction with equity
award plans
|
(979 | ) | 90 | |||||
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Contributions from non-controlling interests
|
187 | 328 | ||||||
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Distributions to non-controlling interests and redeemable operating partnership units
|
(1,269 | ) | (2,017 | ) | ||||
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Dividends paid
|
(34,102 | ) | (30,153 | ) | ||||
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|
||||||||
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Net cash flow used for financing activities
|
(190,144 | ) | (178,403 | ) | ||||
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|
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Cash and cash equivalents
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||||||||
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Decrease in cash and cash equivalents
|
(4,165 | ) | (5,172 | ) | ||||
|
Effect of exchange rate changes on cash and cash equivalents
|
174 | (80 | ) | |||||
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Cash and cash equivalents, beginning of period
|
19,416 | 26,172 | ||||||
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Cash and cash equivalents, end of period
|
$ | 15,425 | $ | 20,920 | ||||
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||||||||
-5-
-6-
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Net (loss) income
|
$ | (13,269 | ) | $ | (121,166 | ) | $ | 22,110 | $ | (147,750 | ) | |||||
|
Other comprehensive income (loss):
|
||||||||||||||||
|
Settlement/change in fair value of
interest-rate contracts
|
(987 | ) | 4,102 | (2,772 | ) | 7,570 | ||||||||||
|
Amortization of interest-rate contracts
|
47 | (61 | ) | 40 | (154 | ) | ||||||||||
|
Foreign currency translation
|
7,879 | (4,255 | ) | 12,855 | (16,157 | ) | ||||||||||
|
|
||||||||||||||||
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Total other comprehensive income (loss)
|
6,939 | (214 | ) | 10,123 | (8,741 | ) | ||||||||||
|
|
||||||||||||||||
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Comprehensive (loss) income
|
$ | (6,330 | ) | $ | (121,380 | ) | $ | 32,233 | $ | (156,491 | ) | |||||
|
Comprehensive (income) loss attributable to
non-controlling interests
|
(350 | ) | 37,495 | (1,539 | ) | 41,304 | ||||||||||
|
|
||||||||||||||||
|
Total comprehensive (loss) income
attributable to DDR
|
$ | (6,680 | ) | $ | (83,885 | ) | $ | 30,694 | $ | (115,187 | ) | |||||
|
|
||||||||||||||||
-7-
| June 30, 2011 | December 31, 2010 | |||||||
|
Condensed Combined Balance Sheets
|
||||||||
|
Land
|
$ | 1,553,101 | $ | 1,566,682 | ||||
|
Buildings
|
4,747,856 | 4,783,841 | ||||||
|
Fixtures and tenant improvements
|
162,927 | 154,292 | ||||||
|
|
||||||||
|
|
6,463,884 | 6,504,815 | ||||||
|
Less: Accumulated depreciation
|
(779,377 | ) | (726,291 | ) | ||||
|
|
||||||||
|
|
5,684,507 | 5,778,524 | ||||||
|
Land held for development and construction in progress
|
242,917 | 174,237 | ||||||
|
|
||||||||
|
Real estate, net
|
5,927,424 | 5,952,761 | ||||||
|
Receivables, net
|
110,332 | 111,569 | ||||||
|
Leasehold interests
|
9,716 | 10,296 | ||||||
|
Other assets
|
572,537 | 303,826 | ||||||
|
|
||||||||
|
|
$ | 6,620,009 | $ | 6,378,452 | ||||
|
|
||||||||
|
|
||||||||
|
Mortgage debt
|
$ | 3,895,393 | $ | 3,940,597 | ||||
|
Notes and accrued interest payable to DDR
|
95,113 | 87,282 | ||||||
|
Other liabilities
|
220,792 | 186,333 | ||||||
|
|
||||||||
|
|
4,211,298 | 4,214,212 | ||||||
|
Accumulated equity
|
2,408,711 | 2,164,240 | ||||||
|
|
||||||||
|
|
$ | 6,620,009 | $ | 6,378,452 | ||||
|
|
||||||||
|
Company’s share of accumulated equity
|
$ | 496,369 | $ | 480,200 | ||||
|
|
||||||||
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Condensed Combined Statements of Operations
|
||||||||||||||||
|
|
||||||||||||||||
|
Revenues from operations
|
$ | 178,337 | $ | 163,010 | $ | 349,251 | $ | 325,587 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Operating expenses
|
65,667 | 67,988 | 128,124 | 130,972 | ||||||||||||
|
Depreciation and amortization
|
45,117 | 46,594 | 92,549 | 92,174 | ||||||||||||
|
Interest expense
|
56,641 | 58,878 | 114,005 | 116,730 | ||||||||||||
|
|
||||||||||||||||
|
|
167,425 | 173,460 | 334,678 | 339,876 | ||||||||||||
|
|
||||||||||||||||
|
Income (loss) before tax expense and discontinued operations
|
10,912 | (10,450 | ) | 14,573 | (14,289 | ) | ||||||||||
|
Income tax expense (primarily Sonae Sierra Brasil), net
|
(11,386 | ) | (5,035 | ) | (17,530 | ) | (9,833 | ) | ||||||||
|
|
||||||||||||||||
|
Loss from continuing operations
|
(474 | ) | (15,485 | ) | (2,957 | ) | (24,122 | ) | ||||||||
|
Discontinued operations:
|
||||||||||||||||
|
Income (loss) from discontinued operations
|
110 | (12,765 | ) | (471 | ) | (12,227 | ) | |||||||||
|
Gain on debt forgiveness
(A)
|
2,976 | — | 2,976 | — | ||||||||||||
|
Gain (loss) on disposition of real estate, net of tax
(B)
|
22,756 | (3,212 | ) | 21,893 | (11,963 | ) | ||||||||||
|
|
||||||||||||||||
|
Gain (loss) before gain on disposition of real estate, net
|
25,368 | (31,462 | ) | 21,441 | (48,312 | ) | ||||||||||
|
Gain on disposition of real estate, net
|
— | 17 | — | 17 | ||||||||||||
|
|
||||||||||||||||
|
Net income (loss)
|
$ | 25,368 | $ | (31,445 | ) | $ | 21,441 | $ | (48,295 | ) | ||||||
|
|
||||||||||||||||
|
Company’s share of equity in net income (loss) of joint ventures
(C)
|
$ | 16,532 | $ | (1,824 | ) | $ | 20,439 | $ | (164 | ) | ||||||
|
|
||||||||||||||||
-8-
| (A) | Gain on debt forgiveness is related to one property owned by an unconsolidated joint venture that was transferred to the lender pursuant to a consensual foreclosure proceeding. The operations of the asset have been reclassified as discontinued operations in the combined condensed statement of operations presented. | |
| (B) | For the six months ended June 30, 2011, gain on disposition of discontinued operations includes the sale of three properties by three of the Company’s unconsolidated joint ventures, of which one was sold in the second quarter of 2011. The Company’s proportionate share of the aggregate gain for the assets sold for the three- and six-month periods ended June 30, 2011 was approximately $12.6 million and $10.7 million, respectively. | |
| For the six months ended June 30, 2010, loss on disposition of discontinued operations includes the sale of 24 properties by three separate unconsolidated joint ventures, of which eight were sold during the second quarter of 2010. In the fourth quarter of 2009, these joint ventures recorded impairment charges aggregating $170.9 million related to certain of these asset sales. The Company’s proportionate share of the loss on sales approximated $1.3 million for the six months ended June 30, 2010. | ||
| (C) | The difference between the Company’s share of net income (loss), as reported above, and the amounts included in the condensed consolidated statements of operations is attributable to the amortization of basis differentials, deferred gains and differences in gain (loss) on sale of certain assets due to the basis differentials and other than temporary impairment charges. The Company is not recording income or loss from those investments in which its investment basis is zero and the Company does not have the obligation or intent to fund any additional capital. Adjustments to the Company’s share of joint venture net income (loss) for these items are reflected as follows (in millions): |
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Income (expense), net
|
$ | — | $ | 1.2 | $ | (1.9 | ) | $ | 1.2 | |||||||
| June 30, | December 31, | |||||||
| 2011 | 2010 | |||||||
|
Company’s share of accumulated equity
|
$ | 496.4 | $ | 480.2 | ||||
|
Basis differentials
(A)
|
(172.9 | ) | (147.5 | ) | ||||
|
Deferred development fees, net of portion relating to
the Company’s interest
|
(3.4 | ) | (3.4 | ) | ||||
|
Notes receivable from investments
|
0.4 | 0.6 | ||||||
|
Notes and accrued interest payable to DDR
(B)
|
95.1 | 87.3 | ||||||
|
|
||||||||
|
Investments in and advances to joint ventures
|
$ | 415.6 | $ | 417.2 | ||||
|
|
||||||||
| (A) | This amount represents the aggregate difference between the Company’s historical cost basis and the equity basis reflected at the joint venture level. Basis differentials recorded upon transfer of assets are primarily associated with assets previously owned by the Company that have been transferred into an unconsolidated joint venture at fair value. Other basis differentials occur primarily when the Company has purchased interests in existing unconsolidated joint ventures at fair market values, which differ from its proportionate share of the historical net assets of the unconsolidated joint ventures. In addition, certain acquisition, transaction and other costs, including capitalized interest, reserves on notes receivable and impairments of the Company’s investments that were other than temporary may not be reflected in the net assets at the joint venture level. Certain basis differentials indicated above are amortized over the life of the related assets. |
-9-
| (B) | The Company has made advances to several joint ventures that bear annual interest at rates ranging from 10.5% to 12.0%. The Company advanced financing of $66.9 million, which includes accrued interest of $8.8 million, to one of the Coventry II Fund joint ventures, Coventry II DDR Bloomfield, related to a development project in Bloomfield Hills, Michigan (the “Bloomfield Loan”). This loan accrues interest at a base rate of the greater of LIBOR plus 700 basis points or 12% and a default rate of 16% and has a stated maturity of July 2011. This loan is in default and was fully reserved by the Company in 2008. During the three-month period ended June 30, 2011, the Company recorded a $1.6 million reserve associated with a $4.3 million construction loan advanced to a 50% owned joint venture. The impairment was driven by the recent deterioration in value of the real estate collateral supporting the note. The stated terms are payable on demand from available cash flow from the property after debt service on the first mortgage. The reserve is classified as an impairment of joint venture investments in the condensed consolidated statement of operations for the six-month period ended June 30, 2011. |
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Management and other fees
|
$ | 7.3 | $ | 7.7 | $ | 14.7 | $ | 16.9 | ||||||||
|
Financing and other fees
|
0.3 | 0.2 | 0.3 | 0.2 | ||||||||||||
|
Development fees and leasing commissions
|
1.9 | 2.0 | 3.7 | 3.7 | ||||||||||||
|
Interest income
|
— | 0.1 | 0.1 | 0.2 | ||||||||||||
-10-
-11-
|
Land
|
$ | 18,184 | ||
|
Buildings
|
50,683 | |||
|
Tenant improvements
|
752 | |||
|
Intangible assets
(1)
|
10,753 | |||
|
|
||||
|
|
80,372 | |||
|
Less: Mortgage debt assumed
|
(50,127 | ) | ||
|
Less: Below-market leases
|
(672 | ) | ||
|
|
||||
|
Net assets acquired
|
$ | 29,573 | ||
|
|
||||
| (1) | Includes above-market value of leases of approximately $0.7 million. |
| Weighted | ||||||||
| Average | ||||||||
| Amortization | ||||||||
| Period (in Years) | ||||||||
|
In-place leases (including lease
origination costs and fair market
value of leases)
|
$ | 5,586 | 4.9 | |||||
|
Tenant relations
|
5,167 | 9.3 | ||||||
|
|
||||||||
|
Total intangible assets acquired
|
$ | 10,753 | ||||||
|
|
||||||||
| June 30, 2011 | December 31, 2010 | |||||||
|
Loan receivable
(A)
|
$ | 93.1 | $ | 103.7 | ||||
|
Other notes
|
2.9 | 2.8 | ||||||
|
Tax Increment Financing Bonds (“TIF Bonds”):
(B)
|
||||||||
|
Chemung County Industrial Development Agency
|
2.0 | 2.0 | ||||||
|
City of Merriam, Kansas
|
1.0 | 2.3 | ||||||
|
City of St. Louis, Missouri
|
3.2 | 3.2 | ||||||
|
Town of Plainville, Connecticut
(C)
|
— | 6.3 | ||||||
|
|
||||||||
|
|
6.2 | 13.8 | ||||||
|
|
||||||||
|
|
$ | 102.2 | $ | 120.3 | ||||
|
|
||||||||
-12-
| (A) | Amounts exclude notes receivable and advances from unconsolidated joint ventures including the Bloomfield Loan, which was in default and fully reserved at June 30, 2011 and December 31, 2010 (Note 2). | |
| (B) | Principal and interest are payable solely from the incremental real estate taxes, if any, generated by the respective shopping center and development project pursuant to the terms of the financing agreement. | |
| (C) | Repaid during the second quarter of 2011. |
| June 30, 2011 | December 31, 2010 | |||||||
|
Intangible assets:
|
||||||||
|
In-place leases (including lease
origination costs and fair market value of
leases), net
|
$ | 16,288 | $ | 14,228 | ||||
|
Tenant relations, net
|
12,828 | 9,035 | ||||||
|
|
||||||||
|
Total intangible assets
(A)
|
29,116 | 23,263 | ||||||
|
Other assets:
|
||||||||
|
Accounts receivable, net
(B)
|
114,260 | 123,259 | ||||||
|
Deferred charges, net
|
50,088 | 44,988 | ||||||
|
Prepaids
|
12,827 | 11,566 | ||||||
|
Deposits
|
37,559 | 41,160 | ||||||
|
Other assets
|
5,560 | 3,473 | ||||||
|
|
||||||||
|
Total other assets, net
|
$ | 249,410 | $ | 247,709 | ||||
|
|
||||||||
| (A) | The Company recorded amortization expense of $2.0 million and $1.7 million for the three-month periods ended June 30, 2011 and 2010, and $3.5 million and $3.4 million for the six-month periods ended June 30, 2011 and 2010, respectively, related to these intangible assets. | |
| (B) | Includes straight-line rent receivables, net, of $56.2 million for both periods presented. |
-13-
| Weighted- | ||||||||||||
| Carrying | Average Interest | |||||||||||
| Value at | Rate at | |||||||||||
| June 30, 2011 | June 30, 2011 | Maturity Date | ||||||||||
|
Unsecured indebtedness:
|
||||||||||||
|
Unsecured Credit Facility
|
$ | 150.6 | 2.5 | % | February 2016 | |||||||
|
PNC Facility
|
20.0 | 1.8 | % | February 2016 | ||||||||
|
Secured indebtedness:
|
||||||||||||
|
Term loan
|
500.0 | 3.0 | % | September 2014 | ||||||||
-14-
-15-
| Fair Value Measurement at | ||||||||||||||||
| June 30, 2011 | ||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
|
Derivative financial instruments
|
$ | — | $ | 5.6 | $ | — | $ | 5.6 | ||||||||
|
Marketable securities
|
$ | 2.9 | $ | — | $ | — | $ | 2.9 | ||||||||
-16-
| June 30, 2011 | December 31, 2010 | |||||||||||||||
| Carrying | Carrying | |||||||||||||||
| Amount | Fair Value | Amount | Fair Value | |||||||||||||
|
Senior notes
|
$ | 2,256,598 | $ | 2,510,932 | $ | 2,043,582 | $ | 2,237,320 | ||||||||
|
Revolving credit facilities and term loan
|
670,555 | 673,578 | 879,865 | 875,851 | ||||||||||||
|
Mortgage payable and other indebtedness
|
1,286,998 | 1,288,906 | 1,378,553 | 1,394,393 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 4,214,151 | $ | 4,473,416 | $ | 4,302,000 | $ | 4,507,564 | ||||||||
|
|
||||||||||||||||
-17-
| Aggregate Notional | LIBOR Fixed | |||||||
| Amount (in millions) | Rate | Maturity Date | ||||||
| $ | 100 | 4.8 | % |
February 2012
|
||||
| $ | 100 | 1.0 | % |
June 2014
|
||||
| $ | 85 | 2.8 | % |
September 2017
|
||||
| Liability Derivatives | ||||||||||||||||
| June 30, 2011 | December 31, 2010 | |||||||||||||||
| Derivatives Designated as | Balance Sheet | Fair | Balance Sheet | Fair | ||||||||||||
| Hedging Instruments | Location | Value | Location | Value | ||||||||||||
|
Interest rate products
|
Other liabilities | $ | 5.6 | Other liabilities | $ | 5.2 | ||||||||||
| Location of | ||||||||||||||||||||||||||||||
| Gain or | ||||||||||||||||||||||||||||||
| (Loss) | ||||||||||||||||||||||||||||||
| Reclassified | Amount of Gain Reclassified from | |||||||||||||||||||||||||||||
| Amount of Gain (Loss) Recognized in | from | Accumulated OCI into Loss | ||||||||||||||||||||||||||||
| OCI on Derivatives (Effective Portion) | Accumulated | (Effective Portion) | ||||||||||||||||||||||||||||
| Derivatives | Three-Month | Six-Month | OCI into | Three-Month | Six-Month | |||||||||||||||||||||||||
| in Cash | Periods Ended | Periods Ended | Loss | Periods Ended | Periods Ended | |||||||||||||||||||||||||
| Flow | June 30 | June 30 | (Effective | June 30 | June 30 | |||||||||||||||||||||||||
| Hedging | 2011 | 2010 | 2011 | 2010 | Portion) | 2011 | 2010 | 2011 | 2010 | |||||||||||||||||||||
|
Interest rate
|
Interest | |||||||||||||||||||||||||||||
|
products
|
$ | (1.0 | ) | $ | 4.1 | $ | (2.6 | ) | $ | 7.6 | expense | $ — | $ | 0.1 | $ — | $ | 0.2 | |||||||||||||
-18-
| Amount of Gain (Loss) Recognized in OCI on | ||||||||||||||||
| Derivatives (Effective Portion) | ||||||||||||||||
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30 | Ended June 30 | |||||||||||||||
| Derivatives in Net Investment Hedging Relationships | 2011 | 2010 | 2011 | 2010 | ||||||||||||
|
Euro — denominated
revolving credit
facilities
designated as a
hedge of the
Company’s net
investment in its
subsidiary
|
$ | (0.9 | ) | $ | 6.7 | $ | (3.5 | ) | $ | 12.4 | ||||||
|
|
||||||||||||||||
|
Canadian dollar —
denominated
revolving credit
facilities
designated as a
hedge of the
Company’s net
investment in its
subsidiaries
|
$ | (0.1 | ) | $ | 3.1 | $ | (3.1 | ) | $ | (0.2 | ) | |||||
|
|
||||||||||||||||
-19-
-20-
-21-
| Developers Diversified Realty Corporation Equity | ||||||||||||||||||||||||||||||||||||
| Accumulated | ||||||||||||||||||||||||||||||||||||
| Distributions | Accumulated | |||||||||||||||||||||||||||||||||||
| in Excess of | Deferred | Other | Treasury | Non- | ||||||||||||||||||||||||||||||||
| Preferred | Common | Paid-in | Net Income | Compensation | Comprehensive | Stock at | Controlling | |||||||||||||||||||||||||||||
| Shares | Shares | Capital | (Loss) | Obligation | Income (Loss) | Cost | Interests | Total | ||||||||||||||||||||||||||||
|
Balance, December 31, 2010
|
$ | 555.0 | $ | 25.6 | $ | 3,869.0 | $ | (1,378.3 | ) | $ | 14.3 | $ | 25.6 | $ | (14.6 | ) | $ | 38.1 | $ | 3,134.7 | ||||||||||||||||
|
Issuance of common shares
related to the exercise of
stock options, dividend
reinvestment plan and director
compensation
|
0.7 | 0.2 | 0.9 | |||||||||||||||||||||||||||||||||
|
Issuance of common shares
related to exercise of
warrants
|
1.0 | 133.3 | 134.3 | |||||||||||||||||||||||||||||||||
|
Issuance of common shares for
cash offering
|
1.0 | 128.9 | 129.9 | |||||||||||||||||||||||||||||||||
|
Contributions from
non-controlling interests
|
0.2 | 0.2 | ||||||||||||||||||||||||||||||||||
|
Issuance of restricted stock
|
0.1 | (2.3 | ) | 0.2 | 2.2 | 0.2 | ||||||||||||||||||||||||||||||
|
Vesting of restricted stock
|
1.7 | (1.9 | ) | 0.1 | (0.1 | ) | ||||||||||||||||||||||||||||||
|
Stock-based compensation
expense
|
2.7 | 2.7 | ||||||||||||||||||||||||||||||||||
|
Redemption of preferred shares
|
(180.0 | ) | 6.4 | (6.4 | ) | (180.0 | ) | |||||||||||||||||||||||||||||
|
Dividends declared-common
shares
|
(21.7 | ) | (21.7 | ) | ||||||||||||||||||||||||||||||||
|
Dividends declared-preferred
shares
|
(18.3 | ) | (18.3 | ) | ||||||||||||||||||||||||||||||||
|
Distributions to
non-controlling interests
|
(1.3 | ) | (1.3 | ) | ||||||||||||||||||||||||||||||||
|
Comprehensive income:
|
||||||||||||||||||||||||||||||||||||
|
Net income
|
21.9 | 0.2 | 22.1 | |||||||||||||||||||||||||||||||||
|
Other comprehensive (loss)
income:
|
||||||||||||||||||||||||||||||||||||
|
Settlement/change in fair
value of interest rate
contracts
|
(2.8 | ) | (2.8 | ) | ||||||||||||||||||||||||||||||||
|
Foreign currency translation
|
11.6 | 1.3 | 12.9 | |||||||||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Comprehensive income
|
— | — | — | 21.9 | — | 8.8 | — | 1.5 | 32.2 | |||||||||||||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
|
Balance, June 30, 2011
|
$ | 375.0 | $ | 27.7 | $ | 4,140.4 | $ | (1,402.8 | ) | $ | 12.6 | $ | 34.4 | $ | (12.1 | ) | $ | 38.5 | $ | 3,213.7 | ||||||||||||||||
|
|
||||||||||||||||||||||||||||||||||||
-22-
| Three-Month Periods | Six-Month Periods | |||||||||||||||||||
| Derivatives not | Ended June 30, | Ended June 30, | ||||||||||||||||||
| Designated | Income Statement | 2011 | 2010 | 2011 | 2010 | |||||||||||||||
| as Hedging Instruments | Location | Gain (Loss) | Gain (Loss) | |||||||||||||||||
| Warrants |
Gain (loss) on
equity derivative instruments
|
$ | — | $ | 21.5 | $ | 21.9 | $ | (3.3 | ) | ||||||||||
-23-
| Equity | ||||
| Derivative | ||||
| Instruments — | ||||
| Liability | ||||
|
Balance of Level 3 at December 31, 2010
|
$ | 96.2 | ||
|
Unrealized gain
|
(21.9 | ) | ||
|
Transfer out of liability to paid-in capital
|
(74.3 | ) | ||
|
|
||||
|
Balance of Level 3 at June 30, 2011
|
$ | — | ||
|
|
||||
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Management, development and
other fee income
|
$ | 11.9 | $ | 13.2 | $ | 23.6 | $ | 27.2 | ||||||||
|
Ancillary and other property income
|
7.1 | 4.6 | 14.3 | 9.3 | ||||||||||||
|
Lease termination fees
|
0.8 | 3.0 | 1.3 | 3.6 | ||||||||||||
|
Financing fees
|
0.2 | 0.2 | 0.6 | 0.4 | ||||||||||||
|
Other miscellaneous
|
0.1 | 1.3 | 0.3 | 1.8 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 20.1 | $ | 22.3 | $ | 40.1 | $ | 42.3 | ||||||||
|
|
||||||||||||||||
-24-
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Land held for development
(A)
|
$ | — | $ | 54.3 | $ | — | $ | 54.3 | ||||||||
|
Undeveloped land
(B)
|
— | 4.9 | 3.8 | 4.9 | ||||||||||||
|
Assets marketed for sale
(B)
|
18.4 | 15.8 | 18.4 | 15.8 | ||||||||||||
|
|
||||||||||||||||
|
Total continuing operations
|
$ | 18.4 | $ | 75.0 | $ | 22.2 | $ | 75.0 | ||||||||
|
|
||||||||||||||||
|
Sold assets or assets held for sale
|
1.9 | 22.6 | 3.9 | 25.7 | ||||||||||||
|
Assets formerly occupied by Mervyns
(C)
|
— | 35.3 | — | 35.3 | ||||||||||||
|
|
||||||||||||||||
|
Total impairment charges
|
$ | 20.3 | $ | 132.9 | $ | 26.1 | $ | 136.0 | ||||||||
|
|
||||||||||||||||
| (A) | Amounts reported in the second quarter of 2010 related to land held for development in Togliatti and Yaroslavl, Russia, of which the Company’s proportionate share was $41.9 million after adjusting for the allocation of loss to the non-controlling interest in this consolidated joint venture. The asset impairments were triggered primarily due to a change in the Company’s investment plans for these projects. Both investments relate to large-scale development projects in Russia. During the second quarter of 2010, the Company determined that it was no longer committed to invest the necessary amount of capital to complete the projects without alternative sources of capital from third-party investors or lending institutions. | |
| (B) | The impairment charges were triggered primarily due to the Company’s marketing of these assets for sale and management’s assessment as to the likelihood and timing. | |
| (C) | The Company’s proportionate share of these impairments was $16.5 million after adjusting for the allocation of loss to the non-controlling interest in this consolidated joint venture and including those assets classified as discontinued operations, for the three- and six-month periods ended June 30, 2010. The 2010 impairment charges were triggered in the second quarter of 2010 primarily due to a change in the Company’s business plans for these assets and the resulting impact on its holding period assumptions for this substantially vacant portfolio. During the second quarter of 2010, the Company determined it was no longer committed to the long-term management and investment of these assets. As discussed in Note 13, these assets were deconsolidated in 2010 and all operating results, including the impairment charges, have been reclassified as discontinued operations. |
-25-
| Fair Value Measurement at June 30, 2011 | ||||||||||||||||||||
| Total | ||||||||||||||||||||
| Level 1 | Level 2 | Level 3 | Total | Losses | ||||||||||||||||
|
Long-lived assets
— held and used
and held for sale
|
$ | — | $ | — | $ | 51.9 | $ | 51.9 | $ | 26.1 | ||||||||||
| June 30, | ||||
| 2011 | ||||
|
Land
|
$ | 12.3 | ||
|
Building
|
865.8 | |||
|
Fixtures and tenant improvements
|
43.6 | |||
|
|
||||
|
|
921.7 | |||
|
Less: Accumulated depreciation
|
(727.1 | ) | ||
|
|
||||
|
Total assets held for sale
|
$ | 194.6 | ||
|
|
||||
-26-
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Revenues
|
$ | 1,057 | $ | 5,875 | $ | 3,184 | $ | 12,702 | ||||||||
|
|
||||||||||||||||
|
Operating expenses
|
308 | 3,940 | 999 | 8,208 | ||||||||||||
|
Impairment charges
|
1,904 | 57,920 | 3,887 | 60,993 | ||||||||||||
|
Interest, net
|
327 | 4,005 | 878 | 8,400 | ||||||||||||
|
Depreciation and amortization
|
378 | 2,381 | 1,032 | 4,985 | ||||||||||||
|
|
||||||||||||||||
|
|
2,917 | 68,246 | 6,796 | 82,586 | ||||||||||||
|
|
||||||||||||||||
|
Loss from discontinued operations
|
(1,860 | ) | (62,371 | ) | (3,612 | ) | (69,884 | ) | ||||||||
|
Loss on disposition of real estate
|
(7,264 | ) | (4,057 | ) | (7,020 | ) | (3,491 | ) | ||||||||
|
|
||||||||||||||||
|
Net loss
|
$ | (9,124 | ) | $ | (66,428 | ) | $ | (10,632 | ) | $ | (73,375 | ) | ||||
|
|
||||||||||||||||
-27-
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
|
||||||||||||||||
|
Basic Earnings:
|
||||||||||||||||
|
Continuing Operations:
|
||||||||||||||||
|
(Loss) income from continuing operations
|
$ | (6,455 | ) | $ | (55,330 | ) | $ | 31,293 | $ | (74,292 | ) | |||||
|
Plus: Gain (loss) on disposition of real estate
|
2,310 | 592 | 1,449 | (83 | ) | |||||||||||
|
Plus: (Loss) income attributable to non-controlling interests
|
(114 | ) | 12,296 | (181 | ) | 12,194 | ||||||||||
|
|
||||||||||||||||
|
(Loss) income from continuing operations attributable to DDR
|
(4,259 | ) | (42,442 | ) | 32,561 | (62,181 | ) | |||||||||
|
Write-off of original preferred share issuance costs
|
(6,402 | ) | — | (6,402 | ) | — | ||||||||||
|
Preferred dividends
|
(7,085 | ) | (10,567 | ) | (17,653 | ) | (21,134 | ) | ||||||||
|
|
||||||||||||||||
|
Basic — (Loss) income from continuing operations
attributable to DDR common shareholders
|
(17,746 | ) | (53,009 | ) | 8,506 | (83,315 | ) | |||||||||
|
Less: Earnings attributable to unvested shares and operating
partnership units
|
(93 | ) | (31 | ) | (203 | ) | (62 | ) | ||||||||
|
|
||||||||||||||||
|
Basic — (Loss) income from continuing operations
|
$ | (17,839 | ) | $ | (53,040 | ) | $ | 8,303 | $ | (83,377 | ) | |||||
|
|
||||||||||||||||
|
Discontinued Operations:
|
||||||||||||||||
|
Loss from discontinued operations
|
(9,124 | ) | (66,428 | ) | (10,632 | ) | (73,375 | ) | ||||||||
|
Plus: Loss attributable to non-controlling interests
|
— | 22,295 | — | 24,734 | ||||||||||||
|
|
||||||||||||||||
|
Basic — Loss from discontinued operations
|
(9,124 | ) | (44,133 | ) | (10,632 | ) | (48,641 | ) | ||||||||
|
Basic — Net loss attributable to DDR common shareholders
after allocation to participating securities
|
$ | (26,963 | ) | $ | (97,173 | ) | $ | (2,329 | ) | $ | (132,018 | ) | ||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Diluted Earnings:
|
||||||||||||||||
|
Continuing Operations:
|
||||||||||||||||
|
Basic — Net (loss) income attributable to DDR common
shareholders
|
$ | (17,746 | ) | $ | (53,009 | ) | $ | 8,506 | $ | (83,315 | ) | |||||
|
Less: Earnings attributable to unvested shares and operating
partnership units
|
(93 | ) | (31 | ) | (203 | ) | (62 | ) | ||||||||
|
Less: Fair value adjustment for Otto Family warrants
|
— | (21,527 | ) | (21,926 | ) | — | ||||||||||
|
|
||||||||||||||||
|
Diluted — Loss from continuing operations
|
(17,839 | ) | (74,567 | ) | (13,623 | ) | (83,377 | ) | ||||||||
|
|
||||||||||||||||
|
Discontinued Operations:
|
||||||||||||||||
|
Basic — Loss from discontinued operations
|
(9,124 | ) | (44,133 | ) | (10,632 | ) | (48,641 | ) | ||||||||
|
|
||||||||||||||||
|
Diluted—Net loss attributable to DDR common shareholders
after allocation to participating securities
|
$ | (26,963 | ) | $ | (118,700 | ) | $ | (24,255 | ) | $ | (132,018 | ) | ||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Number of Shares:
|
||||||||||||||||
|
Basic — Average shares outstanding
|
274,299 | 248,533 | 265,094 | 237,892 | ||||||||||||
|
Effect of dilutive securities:
|
||||||||||||||||
|
Warrants
|
— | 5,006 | 2,406 | — | ||||||||||||
|
Value sharing equity program
|
— | — | 1,111 | — | ||||||||||||
|
Stock options
|
— | — | 555 | — | ||||||||||||
|
Forward equity agreement
|
— | — | 12 | — | ||||||||||||
|
|
||||||||||||||||
|
Diluted — Average shares outstanding
|
274,299 | 253,539 | 269,178 | 237,892 | ||||||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Basic Earnings Per Share:
|
||||||||||||||||
|
(Loss) income from continuing operations attributable to DDR
common shareholders
|
$ | (0.07 | ) | $ | (0.21 | ) | $ | 0.03 | $ | (0.35 | ) | |||||
|
Loss from discontinued operations attributable to DDR common
shareholders
|
(0.03 | ) | (0.18 | ) | (0.04 | ) | (0.20 | ) | ||||||||
|
|
||||||||||||||||
|
Net loss attributable to DDR common shareholders
|
$ | (0.10 | ) | $ | (0.39 | ) | $ | (0.01 | ) | $ | (0.55 | ) | ||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Dilutive Earnings Per Share:
|
||||||||||||||||
|
Loss from continuing operations attributable to DDR common
shareholders
|
$ | (0.07 | ) | $ | (0.30 | ) | $ | (0.05 | ) | $ | (0.35 | ) | ||||
|
Loss from discontinued operations attributable to DDR common
shareholders
|
(0.03 | ) | (0.17 | ) | (0.04 | ) | (0.20 | ) | ||||||||
|
|
||||||||||||||||
|
Net loss attributable to DDR common shareholders
|
$ | (0.10 | ) | $ | (0.47 | ) | $ | (0.09 | ) | $ | (0.55 | ) | ||||
|
|
||||||||||||||||
-28-
| • | Warrants to purchase 10.0 million common shares issued in 2009 are considered in the computation of diluted EPS for the period outstanding from January 1, 2011 to March 18, 2011 and the three-month period ended June 30, 2010. The warrants were anti-dilutive for the six-month period ended June 30, 2010. | ||
| For the three-month period ended June 30, 2010, the Company’s quarterly report on Form 10-Q excluded the dilutive effect of the warrants and thus overstated diluted earnings per share. Management has concluded that the impact on its diluted earnings per share resulting from this error was not material. The revision to the amounts above for the three-month period ended June 30, 2010, decreased previously reported diluted earnings per share by $0.08. | |||
| • | Shares subject to issuance under the Company’s value sharing equity program (“VSEP”) are considered in the computation of diluted EPS for the six-month period ended June 30, 2011. The shares subject to issuance under the VSEP were not considered in the computation of diluted EPS for the three-month period ended June 30, 2011 and the three- and six-month periods ended June 30, 2010, as the shares were anti-dilutive due to the Company’s loss from continuing operations. | ||
| • | Options to purchase 3.2 million and 3.4 million common shares were outstanding at June 30, 2011 and 2010, respectively. A portion of these options are considered in the computation of diluted EPS using the treasury stock method for the six-month period ended June 30, 2011. Options aggregating 2.1 million were anti-dilutive in the calculation and, accordingly, were excluded from the computation for the three-month period ended June 30, 2011. Options aggregating 3.4 million were not considered in the computation of diluted EPS for the three-and six-month periods ended June 30, 2010, as the options were anti-dilutive due to the Company’s loss from continuing operations. | ||
| • | The forward equity agreement entered into in March 2011 for 9.5 million common shares was included in the computation of diluted EPS using the treasury stock method for the six-month period ended June 30, 2011. The forward equity agreement was anti-dilutive for the three-month period ended June 30, 2011. These shares were issued in April 2011. This agreement was not in effect in 2010. | ||
| Anti-dilutive Securities: | |||
| • | The Company’s three series of senior convertible notes, which are convertible into common shares of the Company with conversion prices of approximately $74.56, $64.23 and $16.33, respectively, at June 30, 2011, were not included in the computation of diluted EPS for the three- and six-month periods ended June 30, 2011 and 2010, because the Company’s common share price did not exceed the conversion prices of the conversion features in these periods and |
-29-
| would therefore be anti-dilutive. The senior convertible notes with a conversion price of $16.33 were not outstanding at June 30, 2010. In addition, the purchased options related to two of the senior convertible notes issuances are not included in the computation of diluted EPS as the purchase options are anti-dilutive. |
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Shopping centers owned
|
458 | 533 | ||||||
|
Unconsolidated joint ventures
|
183 | 201 | ||||||
|
Consolidated joint ventures
|
3 | 29 | ||||||
|
States
(A)
|
39 | 42 | ||||||
|
Office properties
|
5 | 6 | ||||||
|
States
|
3 | 4 | ||||||
| (A) | Excludes shopping centers owned in Puerto Rico and Brazil. |
| Three-Month Period Ended June 30, 2011 | ||||||||||||||||||||
| Other | Shopping | Brazil Equity | ||||||||||||||||||
| Investments | Centers | Investment | Other | Total | ||||||||||||||||
|
Total revenues
|
$ | 1,355 | $ | 197,140 | $ | 198,495 | ||||||||||||||
|
Operating expenses
|
(447 | ) | (81,742 | ) (A) | (82,189 | ) | ||||||||||||||
|
|
||||||||||||||||||||
|
Net operating income
|
908 | 115,398 | 116,306 | |||||||||||||||||
|
Unallocated expenses
(B)
|
$ | (137,692 | ) | (137,692 | ) | |||||||||||||||
|
Equity in net income of joint
ventures and impairment of joint
ventures
|
9,100 | $ | 5,831 | 14,931 | ||||||||||||||||
|
|
||||||||||||||||||||
|
Loss from continuing operations
|
$ | (6,455 | ) | |||||||||||||||||
|
|
||||||||||||||||||||
-30-
| Three-Month Period Ended June 30, 2010 | ||||||||||||||||||||
| Other | Shopping | Brazil Equity | ||||||||||||||||||
| Investments | Centers | Investment | Other | Total | ||||||||||||||||
|
Total revenues
|
$ | 1,177 | $ | 195,423 | $ | 196,600 | ||||||||||||||
|
Operating expenses
|
(478 | ) | (135,138 | ) (A) | (135,616 | ) | ||||||||||||||
|
|
||||||||||||||||||||
|
Net operating income
|
699 | 60,285 | 60,984 | |||||||||||||||||
|
Unallocated expenses
(B)
|
$ | (115,691 | ) | (115,691 | ) | |||||||||||||||
|
Equity in net income of joint
ventures
|
(2,409 | ) | $ | 1,786 | (623 | ) | ||||||||||||||
|
|
||||||||||||||||||||
|
Loss from continuing operations
|
$ | (55,330 | ) | |||||||||||||||||
|
|
||||||||||||||||||||
| Six-Month Period Ended June 30, 2011 | ||||||||||||||||||||
| Other | Shopping | Brazil Equity | ||||||||||||||||||
| Investments | Centers | Investment | Other | Total | ||||||||||||||||
|
Total revenues
|
$ | 2,777 | $ | 396,901 | $ | 399,678 | ||||||||||||||
|
Operating expenses
|
(928 | ) | (149,454 | ) (A) | (150,382 | ) | ||||||||||||||
|
|
||||||||||||||||||||
|
Net operating income
|
1,849 | 247,447 | 249,296 | |||||||||||||||||
|
Unallocated expenses
(B)
|
$ | (234,873 | ) | (234,873 | ) | |||||||||||||||
|
Equity in net income of joint
ventures and impairment of joint
ventures
|
6,087 | $ | 10,783 | 16,870 | ||||||||||||||||
|
|
||||||||||||||||||||
|
Income from continuing operations
|
$ | 31,293 | ||||||||||||||||||
|
|
||||||||||||||||||||
|
Total gross real estate assets
|
$ | 47,483 | $ | 8,371,947 | $ | 8,419,430 | ||||||||||||||
|
|
||||||||||||||||||||
| Six-Month Period Ended June 30, 2010 | ||||||||||||||||||||
| Other | Shopping | Brazil Equity | ||||||||||||||||||
| Investments | Centers | Investment | Other | Total | ||||||||||||||||
|
Total revenues
|
$ | 2,596 | $ | 394,535 | $ | 397,131 | ||||||||||||||
|
Operating expenses
|
(1,226 | ) | (195,580 | ) (A) | (196,806 | ) | ||||||||||||||
|
|
||||||||||||||||||||
|
Net operating income
|
1,370 | 198,955 | 200,325 | |||||||||||||||||
|
Unallocated expenses
(B)
|
$ | (275,640 | ) | (275,640 | ) | |||||||||||||||
|
Equity in net income of joint
ventures
|
(2,304 | ) | $ | 3,327 | 1,023 | |||||||||||||||
|
|
||||||||||||||||||||
|
Loss from continuing operations
|
$ | (74,292 | ) | |||||||||||||||||
|
|
||||||||||||||||||||
|
Total gross real estate assets
|
$ | 49,907 | $ | 8,585,380 | $ | 8,635,287 | ||||||||||||||
|
|
||||||||||||||||||||
| (A) | Includes impairment charges of $18.4 million and $75.0 million for the three-month periods ended June 30, 2011 and 2010, respectively, and $22.2 million and $75.0 million for the six-month periods ended June 30, 2011 and 2010, respectively. | |
| (B) | Unallocated expenses consist of general and administrative, depreciation and amortization, other income/expense and tax benefit/expense as listed in the condensed consolidated statements of operations. |
-31-
-32-
| • | refinanced the Company’s secured term loan, extending the final maturity to September 2015; | ||
| • | amended two senior unsecured revolving credit facilities reducing the borrowing capacity to $815 million through the final maturity of February 2016; | ||
| • | extended the Company’s weighted average debt maturity, including option periods, to 4.5 years as of June 30, 2011 as compared to 3.1 years as of June 30, 2010; | ||
| • | improved the Company’s consolidated debt maturity schedule such that there are no future years in which the scheduled consolidated debt maturities exceed $1 billion; and | ||
| • | raised $190.2 million of equity proceeds from the issuance of 9.5 million common shares and the issuance of 10 million common shares from the exercise of warrants, of which the proceeds were used to redeem $180 million of 8.0% Class G cumulative redeemable preferred shares. |
-33-
| Three-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Base and percentage rental revenues
|
$ | 134,053 | $ | 132,337 | $ | 1,716 | 1.3 | % | ||||||||
|
Recoveries from tenants
|
44,362 | 41,936 | 2,426 | 5.8 | ||||||||||||
|
Fee and other income
|
20,080 | 22,327 | (2,247 | ) | (10.1 | ) | ||||||||||
|
|
||||||||||||||||
|
Total revenues
|
$ | 198,495 | $ | 196,600 | $ | 1,895 | 1.0 | % | ||||||||
|
|
||||||||||||||||
| Six-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Base and percentage rental revenues
(A)
|
$ | 268,991 | $ | 266,844 | $ | 2,147 | 0.8 | % | ||||||||
|
Recoveries from tenants
(B)
|
90,573 | 88,003 | 2,570 | 2.9 | ||||||||||||
|
Fee and other income
(C)
|
40,114 | 42,284 | (2,170 | ) | (5.1 | ) | ||||||||||
|
|
||||||||||||||||
|
Total revenues
|
$ | 399,678 | $ | 397,131 | $ | 2,547 | 0.6 | % | ||||||||
|
|
||||||||||||||||
| (A) | The increase is due to the following (in millions): |
| Increase | ||||
| (Decrease) | ||||
|
Comparable Portfolio Properties
|
$ | 2.4 | ||
|
Acquisition of real estate assets
|
2.1 | |||
|
Development/redevelopment of shopping center properties
|
(1.3 | ) | ||
|
Straight-line rents
|
(1.1 | ) | ||
|
|
||||
|
|
$ | 2.1 | ||
|
|
||||
-34-
| Shopping Center | Office Property | |||||||||||||||
| Portfolio (1) | Portfolio | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Centers owned
|
458 | 533 | 5 | 6 | ||||||||||||
|
Aggregate occupancy rate
|
89.1 | % | 86.6 | % | 81.76 | % | 72.3 | % | ||||||||
|
Average annualized base
rent per occupied
square foot
|
$ | 13.46 | $ | 13.14 | $ | 10.98 | $ | 12.10 | ||||||||
| Wholly-Owned | Joint Venture | |||||||||||||||
| Shopping Centers | Shopping Centers (1) | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Centers owned
|
272 | 303 | 183 | 201 | ||||||||||||
|
Consolidated centers
(primarily owned
through a joint venture
previously occupied by
Mervyns in 2010)
|
n/a | n/a | 3 | 29 | ||||||||||||
|
Aggregate occupancy rate
|
89.0 | % | 88.5 | % | 89.1 | % | 84.6 | % | ||||||||
|
Average annualized base
rent per occupied
square foot
|
$ | 12.28 | $ | 12.09 | $ | 14.97 | $ | 14.48 | ||||||||
| (1) | Excludes shopping centers owned by unconsolidated joint ventures in which the Company has written its investment basis down to zero and is receiving no allocation of income. | |
| (B) | The increase in recoveries is a result of the acquisition of two assets in 2011 as well as an increase in recoverable operating and maintenance expenses. Recoveries were approximately 70.7% and 72.2% of operating expenses and real estate taxes including the impact of bad debt expense recognized for the six months ended June 30, 2011 and 2010, respectively. The decrease in the recoveries percentage in 2011 is primarily due to an increase in non-reimbursable operating expenses as further discussed below. | |
| (C) | Composed of the following (in millions): |
| Three-Month Periods | ||||||||||||
| Ended June 30, | ||||||||||||
| (Decrease) | ||||||||||||
| 2011 | 2010 | Increase | ||||||||||
|
Management, development and
financing fees
|
$ | 12.1 | $ | 13.4 | $ | (1.3 | ) | |||||
|
Ancillary and other property income
|
7.1 | 4.6 | 2.5 | |||||||||
|
Lease termination fees
|
0.8 | 3.0 | (2.2 | ) | ||||||||
|
Other
|
0.1 | 1.3 | (1.2 | ) | ||||||||
|
|
||||||||||||
|
|
$ | 20.1 | $ | 22.3 | $ | (2.2 | ) | |||||
|
|
||||||||||||
-35-
| Six-Month Periods | ||||||||||||
| Ended June 30, | ||||||||||||
| (Decrease) | ||||||||||||
| 2011 | 2010 | Increase | ||||||||||
|
Management fees, development and
financing fees
|
$ | 24.2 | $ | 27.6 | $ | (3.4 | ) | |||||
|
Ancillary and other property income
|
14.3 | 9.3 | 5.0 | |||||||||
|
Lease termination fees
|
1.3 | 3.6 | (2.3 | ) | ||||||||
|
Other
|
0.3 | 1.8 | (1.5 | ) | ||||||||
|
|
||||||||||||
|
|
$ | 40.1 | $ | 42.3 | $ | (2.2 | ) | |||||
|
|
||||||||||||
| Three-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Operating and maintenance
|
$ | 36,746 | $ | 35,601 | $ | 1,145 | 3.2 | % | ||||||||
|
Real estate taxes
|
27,091 | 25,048 | 2,043 | 8.2 | ||||||||||||
|
Impairment charges
|
18,352 | 74,967 | (56,615 | ) | (75.5 | ) | ||||||||||
|
General and administrative
|
17,979 | 19,090 | (1,111 | ) | (5.8 | ) | ||||||||||
|
Depreciation and amortization
|
56,750 | 54,561 | 2,189 | 4.0 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 156,918 | $ | 209,267 | $ | (52,349 | ) | (25.0 | )% | |||||||
|
|
||||||||||||||||
| Six-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Operating and maintenance
(A)
|
$ | 74,476 | $ | 69,669 | $ | 4,807 | 6.9 | % | ||||||||
|
Real estate taxes
(A)
|
53,698 | 52,170 | 1,528 | 2.9 | ||||||||||||
|
Impairment charges
(B)
|
22,208 | 74,967 | (52,759 | ) | (70.4 | ) | ||||||||||
|
General and administrative
(C)
|
47,357 | 42,366 | 4,991 | 11.8 | ||||||||||||
|
Depreciation and amortization
(A)
|
112,235 | 109,128 | 3,107 | 2.8 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 309,974 | $ | 348,300 | $ | (38,326 | ) | (11.0 | )% | |||||||
|
|
||||||||||||||||
| (A) | The changes for the six months ended June 30, 2011 compared to 2010, are due to the following (in millions): |
| Operating | ||||||||||||
| and | Real Estate | |||||||||||
| Maintenance | Taxes | Depreciation | ||||||||||
|
Comparable Portfolio Properties
|
$ | 4.4 | $ | 0.2 | $ | 0.7 | ||||||
|
Acquisitions of real estate assets
|
0.2 | 0.5 | 1.4 | |||||||||
|
Development/redevelopment of
shopping center properties
|
2.4 | 0.8 | 0.9 | |||||||||
|
Office properties
|
(0.1 | ) | — | 0.1 | ||||||||
|
Provision for bad debt expense
|
(2.1 | ) | — | — | ||||||||
|
|
||||||||||||
|
|
$ | 4.8 | $ | 1.5 | $ | 3.1 | ||||||
|
|
||||||||||||
-36-
| The increase in operating and maintenance expenses in 2011 is primarily due to higher insurance related costs and various other property level expenditures. | ||
| (B) | The Company recorded impairment charges during the three- and six-month periods ended June 30, 2011 and 2010, on the following consolidated assets (in millions): |
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Land held for development
(1)
|
$ | — | $ | 54.3 | $ | — | $ | 54.3 | ||||||||
|
Undeveloped land
(2)
|
— | 4.9 | 3.8 | 4.9 | ||||||||||||
|
Assets marketed for sale
(2)
|
18.4 | 15.8 | 18.4 | 15.8 | ||||||||||||
|
|
||||||||||||||||
|
Total continuing operations
|
$ | 18.4 | $ | 75.0 | $ | 22.2 | $ | 75.0 | ||||||||
|
|
||||||||||||||||
|
|
||||||||||||||||
|
Sold assets or assets held for sale
|
1.9 | 22.6 | 3.9 | 25.7 | ||||||||||||
|
Assets formerly occupied by Mervyns
(3)
|
— | 35.3 | — | 35.3 | ||||||||||||
|
|
||||||||||||||||
|
Total discontinued operations
|
$ | 1.9 | $ | 57.9 | $ | 3.9 | $ | 61.0 | ||||||||
|
|
||||||||||||||||
|
Total impairment charges
|
$ | 20.3 | $ | 132.9 | $ | 26.1 | $ | 136.0 | ||||||||
|
|
||||||||||||||||
| (1) | Amounts reported in the second quarter of 2010 related to land held for development in Togliatti and Yaroslavl, Russia, of which the Company’s proportionate share was $41.9 million after adjusting for the allocation of loss to the non-controlling interest in this consolidated joint venture. The asset impairments were triggered primarily due to a change in the Company’s investment plans for these projects. Both investments relate to large-scale development projects in Russia. During 2010, the Company determined that it was no longer committed to invest the necessary amount of capital to complete the projects without alternative sources of capital from third-party investors or lending institutions. | |
| (2) | The impairment charges were triggered primarily due to the Company’s marketing of these assets for sale and management’s assessment as to the likelihood and timing. The operating assets were not classified as held for sale as of June 30, 2011, due to outstanding substantive contingencies associated with the respective contracts. | |
| (3) | The Company’s proportionate share of these impairments was $16.5 million after adjusting for the allocation of loss to the non-controlling interest in this previously consolidated joint venture for the three- and six-month periods ended June 30, 2010. The 2010 impairment charges were triggered in the three months ended June 30, 2010 primarily due to a change in the Company’s business plans for these assets and the resulting impact on its holding period assumptions for this substantially vacant portfolio. During the second quarter of 2010, the Company determined it was no longer committed to the long-term management and investment of these assets. These assets were deconsolidated in the third quarter of 2010 and all operating results, including the impairment changes, have been reclassified as discontinued operations. |
| (C) | General and administrative expenses were approximately 5.7% and 5.1% of total revenues, including total revenues of unconsolidated joint ventures and managed properties and discontinued operations, for the six-month periods ended June 30, 2011 and 2010, respectively. In 2011, the Company has reduced its general and administrative expenses through cost cutting measures. The Company continues to expense internal leasing salaries, legal salaries and related expenses associated with certain leasing and re-leasing of existing space. | |
| During the six months ended June 30, 2011, the Company recorded a charge of $10.7 million as a result of the termination without cause of its Executive Chairman, the terms of which were pursuant to his |
-37-
| amended and restated employment agreement. During the six months ended June 30, 2010, the Company incurred a $2.1 million separation charge related to the departure of another executive officer. |
| Three-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Interest income
|
$ | 2,417 | $ | 1,525 | $ | 892 | 58.5 | % | ||||||||
|
Interest expense
|
(59,579 | ) | (56,190 | ) | (3,389 | ) | 6.0 | |||||||||
|
Loss on retirement of debt, net
|
— | (1,090 | ) | 1,090 | (100.0 | ) | ||||||||||
|
Gain on equity derivative instruments
|
— | 21,527 | (21,527 | ) | (100.0 | ) | ||||||||||
|
Other expense, net
|
(6,347 | ) | (11,428 | ) | 5,081 | (44.5 | ) | |||||||||
|
|
||||||||||||||||
|
|
$ | (63,509 | ) | $ | (45,656 | ) | $ | (17,853 | ) | 39.1 | % | |||||
|
|
||||||||||||||||
| Six-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Interest income
(A)
|
$ | 5,213 | $ | 2,858 | $ | 2,355 | 82.4 | % | ||||||||
|
Interest expense
(B)
|
(119,363 | ) | (111,797 | ) | (7,566 | ) | 6.8 | |||||||||
|
Gain (loss) on equity derivative
instruments
(C)
|
21,926 | (3,340 | ) | 25,266 | (756.5 | ) | ||||||||||
|
Other expense, net
(D)
|
(5,006 | ) | (14,481 | ) | 9,475 | (65.4 | ) | |||||||||
|
|
||||||||||||||||
|
|
$ | (97,230 | ) | $ | (126,760 | ) | $ | 29,530 | (23.3 | )% | ||||||
|
|
||||||||||||||||
| (A) | Increased primarily relating to $58.3 million in loan receivables originated and purchased in September 2010. | |
| (B) | The weighted-average debt outstanding and related weighted-average interest rates including amounts allocated to discontinued operations are as follows: |
| Six-Month Periods Ended | ||||||||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Weighted-average debt outstanding (in billions)
|
$ | 4.3 | $ | 4.8 | ||||
|
Weighted-average interest rate
|
5.6 | % | 5.0 | % | ||||
| The weighted average interest rate at June 30, 2011 and 2010 was 5.1% and 4.6%, respectively. | ||
| The increase in 2011 interest expense is primarily due to the repayment of shorter-term, lower interest rate debt with the proceeds from long-term, higher cost debt, partially offset by a reduction in outstanding debt. The Company ceases the capitalization of interest as assets are placed in service or upon the suspension of construction. Interest costs capitalized in conjunction with development and expansion projects and unconsolidated development joint venture interests were $3.1 million and $6.2 million for the three- and six-month periods ended June 30, 2011, respectively, as compared to $3.2 million and $6.3 million for the respective periods in 2010. | ||
| (C) | Represents the impact of the valuation adjustments for the equity derivative instruments issued as part of the stock purchase agreement with Mr. Alexander Otto (the “Investor”) and certain members of the Otto family (collectively with the Investor, the “Otto Family”). The valuation and resulting charges/gains primarily relate to the difference between the closing trading value of the Company’s common shares from the beginning of the period through the end of the respective period presented |
-38-
| except that in 2011, the final valuation was done as of March 18, 2011, the exercise date of the warrants. Because all of the warrants were exercised in March 2011, the Company no longer records the changes in fair value of these instruments in its earnings. The liability at the date of exercise was reclassified into paid-in capital upon the receipt of cash from the Otto Family and the issuance of the Company’s common shares. | ||
| (D) | Other income (expenses) were comprised of the following (in millions): |
| Six-Month Periods | ||||||||
| Ended June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Litigation-related expenses
|
$ | (2.2 | ) | $ | (10.0 | ) | ||
|
Note receivable reserve
|
(5.0 | ) | — | |||||
|
Debt extinguishment costs
|
(0.2 | ) | (3.6 | ) | ||||
|
Settlement of lease liability obligation
|
2.6 | — | ||||||
|
Abandoned projects and other expenses
|
(0.2 | ) | (0.9 | ) | ||||
|
|
||||||||
|
|
$ | (5.0 | ) | $ | (14.5 | ) | ||
|
|
||||||||
| In June 2011, the Company sold a note receivable with a face value, including accrued interest, of $11.8 million for proceeds of $6.8 million. This transaction resulted in the recognition of a reserve of $5.0 million prior to the sale to reduce the loan receivable to fair value. | ||
| In the fourth quarter of 2010, the Company established a lease liability reserve in the amount of $3.3 million for three operating leases as a result of an abandoned development project and two office closures. The Company reversed $2.6 million of this previously recorded charge due to the termination of the ground lease related to the abandoned development project in the first quarter of 2011. |
| Three-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Equity in net income (loss) of joint ventures
|
$ | 16,567 | $ | (623 | ) | $ | 17,190 | (2,759.2 | )% | |||||||
|
Impairment of joint venture investments
|
(1,636 | ) | — | (1,636 | ) | — | ||||||||||
|
Gain on change in control of interests
|
981 | — | 981 | — | ||||||||||||
|
Tax (expense) benefit of taxable REIT subsidiaries and
state franchise and income taxes
|
(435 | ) | 3,616 | (4,051 | ) | (112.0 | ) | |||||||||
| Six-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Equity in net income of joint ventures
(A)
|
$ | 18,541 | $ | 1,023 | $ | 17,518 | 1,712.4 | % | ||||||||
|
Impairment of joint venture investments
|
(1,671 | ) | — | (1,671 | ) | — | ||||||||||
|
Gain on change in control of interests
(B)
|
22,710 | — | 22,710 | — | ||||||||||||
|
Tax (expense) benefit of taxable REIT subsidiaries
and state franchise and income taxes
|
(761 | ) | 2,614 | (3,375 | ) | (129.1 | ) | |||||||||
| (A) | The increase in equity in net income of joint ventures for the six months ended June 30, 2011 compared to the prior-year period is primarily a result of the gain recognized on the sale of an asset by one unconsolidated joint venture of which the Company’s share was $12.6 million and higher income from the Company’s investment in Sonae Sierra Brasil discussed below, partially offset by the Company’s |
-39-
| proportionate share of loss on sale and the elimination of equity income from the sale of unconsolidated joint venture assets in 2010. | ||
| At June 30, 2011 and 2010, the Company had an approximate 33% and 48% interest, respectively, in an unconsolidated joint venture, Sonae Sierra Brasil, which owns real estate in Brazil and is headquartered in San Paulo, Brazil. In February 2011, Sonae Sierra Brasil, completed an initial public offering (“IPO”) of its common shares on the Sao Paulo Stock Exchange, raising total proceeds of approximately US$280 million. The Company’s effective ownership interest in Sonae Sierra Brasil decreased during the first quarter of 2011 due to the IPO. This entity uses the functional currency of Brazilian Reais. The Company has generally chosen not to mitigate any of the residual foreign currency risk through the use of hedging instruments for this entity. The operating cash flow generated by this investment has been retained by the joint venture and reinvested in ground up developments and expansions in Brazil. The weighted average exchange rate used for recording the equity in net income was 1.64 and 1.81 for the six months ended June 30, 2011 and 2010, respectively. The increase in equity in net income from the Sonae Sierra Brasil joint venture primarily is due to shopping center expansion activity coming on line, increases in parking revenue and increases in ancillary income and interest income. | ||
| (B) | In the first quarter of 2011, the Company acquired its partners’ 50% interest in two shopping centers. The Company accounted for both of these transactions as step acquisitions. Due to the change in control that occurred, the Company recorded an aggregate gain associated with the acquisitions related to the difference between the Company’s carrying value and fair value of the previously held equity interests. |
| Three-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Loss from discontinued operations
|
$ | (1,860 | ) | $ | (62,371 | ) | $ | 60,511 | (97.0 | )% | ||||||
|
Loss on disposition of real estate, net of tax
|
(7,264 | ) | (4,057 | ) | (3,207 | ) | 79.0 | |||||||||
|
|
||||||||||||||||
|
|
$ | (9,124 | ) | $ | (66,428 | ) | $ | 57,304 | (86.3 | )% | ||||||
|
|
||||||||||||||||
| Six-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Loss from discontinued operations
(A)
|
$ | (3,612 | ) | $ | (69,884 | ) | $ | 66,272 | (94.8 | )% | ||||||
|
Loss on disposition of real estate, net of tax
|
(7,020 | ) | (3,491 | ) | (3,529 | ) | 101.1 | |||||||||
|
|
||||||||||||||||
|
|
$ | (10,632 | ) | $ | (73,375 | ) | $ | 62,743 | (85.5 | )% | ||||||
|
|
||||||||||||||||
| (A) | The Company sold 12 properties during the six-month period ended June 30, 2011 and had one property held for sale at June 30, 2011, aggregating 0.8 million square feet. In addition, the Company sold 31 properties in 2010 (including two properties held for sale at December 31, 2009) aggregating 2.9 million square feet. Also, included in discontinued operations are 25 other properties that were deconsolidated for accounting purposes in 2010, aggregating 1.9 million square feet, which represents the activity associated with a joint venture that owns the underlying real estate of certain assets formerly occupied by Mervyns. These assets were classified as discontinued operations for the six-month period ended June 30, 2010 as the Company has no significant continuing involvement. In addition, included in the reported loss for the six-month periods ended June 30, 2011 and 2010, is $3.9 million and $61.0 million, respectively, of impairment charges related to assets classified as discontinued operations. |
-40-
| Three-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Gain on disposition of real estate, net
|
$ | 2,310 | $ | 592 | $ | 1,718 | 290.2 | % | ||||||||
| Six-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Gain (loss) on disposition of real estate, net
(A)
|
$ | 1,449 | $ | (83 | ) | $ | 1,532 | (1,845.8 | )% | |||||||
| (A) | Amounts generally attributable to the sale of land. The sales of land did not meet the criteria for discontinued operations because the land did not have any significant operations prior to disposition. |
| For the Three Months | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Non-controlling interests
|
$ | (114 | ) | $ | 34,591 | $ | (34,705 | ) | (100.3 | )% | ||||||
| For the Six Months Ended | ||||||||||||||||
| June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Non-controlling interests
(A)
|
$ | (181 | ) | $ | 36,928 | $ | (37,109 | ) | (100.5 | )% | ||||||
| (A) | The change is a result of the net loss attributable to a consolidated joint venture, which held assets previously occupied by Mervyns, that was deconsolidated in the third quarter of 2010, and the operating results are reported as a component of discontinued operations. Also, in 2010, non-controlling interests included losses associated with the impairment charges by one of the Company’s 75% owned consolidated investments, which owns land held for development in Togliatti and Yaroslavl, Russia. |
| Three-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Net loss attributable to DDR
|
$ | (13,383 | ) | $ | (86,575 | ) | $ | 73,192 | (84.5 | )% | ||||||
|
|
||||||||||||||||
| Six-Month Periods | ||||||||||||||||
| Ended June 30, | ||||||||||||||||
| 2011 | 2010 | $ Change | % Change | |||||||||||||
|
Net income (loss) attributable to DDR
|
$ | 21,929 | $ | (110,822 | ) | $ | 132,751 | (119.8 | )% | |||||||
|
|
||||||||||||||||
-41-
| Three-Month | Six-Month | |||||||
| Period Ended | Period Ended | |||||||
| June 30, | June 30, | |||||||
|
Decrease in net operating revenues (total revenues in excess of
operating and maintenance expenses and real estate taxes)
|
$ | (1.3 | ) | $ | (3.8 | ) | ||
|
Decrease in consolidated impairment charges
|
56.6 | 52.8 | ||||||
|
Decrease (increase) in general and administrative expenses
(A)
|
1.1 | (5.0 | ) | |||||
|
Increase in depreciation expense
|
(2.2 | ) | (3.1 | ) | ||||
|
Increase in interest income
|
0.9 | 2.4 | ||||||
|
Increase in interest expense
|
(3.4 | ) | (7.6 | ) | ||||
|
Reduction of loss on retirement of debt, net
|
1.1 | — | ||||||
|
Change in equity derivative instrument valuation adjustments
|
(21.5 | ) | 25.3 | |||||
|
Change in other expense
|
5.1 | 9.5 | ||||||
|
Increase in equity in net income of joint ventures
|
17.2 | 17.5 | ||||||
|
Increase in impairment of joint venture investments
|
(1.6 | ) | (1.6 | ) | ||||
|
Increase in gain on change in control of interests
|
1.0 | 22.7 | ||||||
|
Increase in income tax expense
|
(4.1 | ) | (3.4 | ) | ||||
|
Decrease in loss from discontinued operations
|
57.3 | 62.7 | ||||||
|
Increase in gain on disposition of real estate
|
1.7 | 1.5 | ||||||
|
Change in non-controlling interests
|
(34.7 | ) | (37.1 | ) | ||||
|
|
||||||||
|
Increase in net income attributable to DDR
|
$ | 73.2 | $ | 132.8 | ||||
|
|
||||||||
| (A) | Included in general and administrative expenses are executive separation charges of $10.7 million and $2.1 million, for the six-month periods ended June 30, 2011 and 2010, respectively. |
-42-
-43-
-44-
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Net loss applicable to DDR common
shareholders
(A) (B)
|
$ | (26,870 | ) | $ | (97,142 | ) | $ | (2,126 | ) | $ | (131,956 | ) | ||||
|
Depreciation and amortization of real
estate investments
|
54,919 | 54,148 | 108,723 | 108,742 | ||||||||||||
|
Equity in net (income) loss of joint
ventures
|
(16,567 | ) | 623 | (18,541 | ) | (1,023 | ) | |||||||||
|
Joint ventures’ FFO
(C)
|
14,781 | 10,307 | 27,589 | 21,862 | ||||||||||||
|
Non-controlling interests (OP Units)
|
16 | 8 | 32 | 16 | ||||||||||||
|
Gain on disposition of depreciable real
estate
(D)
|
(2,207 | ) | (788 | ) | (2,518 | ) | (2,055 | ) | ||||||||
|
|
||||||||||||||||
|
FFO applicable to DDR common
shareholders
|
$ | 24,072 | $ | (32,844 | ) | $ | 113,159 | $ | (4,414 | ) | ||||||
|
|
||||||||||||||||
|
Total non-operating items
(E)
|
40,349 | 97,838 | 14,453 | 134,590 | ||||||||||||
|
|
||||||||||||||||
|
Operating FFO applicable to
DDR common shareholders
|
$ | 64,421 | $ | 64,994 | $ | 127,612 | $ | 130,176 | ||||||||
|
|
||||||||||||||||
| (A) | Includes the deduction of preferred dividends of $7.1 million and $10.6 million for the three-month periods ended June 30, 2011 and 2010, respectively, and $17.7 million and $21.1 million for the six-month periods ended June 30, 2011 and 2010, respectively. Also includes a charge of $6.4 million related to the write off of the Class G cumulative redeemable preferred shares’ original issuance costs for both the three- and six-month periods ended June 30, 2011. | |
| (B) | Includes negative straight-line rental revenue of approximately $0.2 million and straight-line rental revenue of approximately $0.3 million for the three-month periods ended June 30, 2011 and 2010, respectively (including discontinued operations), and straight-line rental revenue of $0.1 million and $1.3 million for the six-month periods ended June 30, 2011 and 2010, respectively. In addition, includes straight-line ground rent expense of approximately $0.5 million for both the three-month periods ended June 30, 2011 and 2010, and $1.0 million for both the six-month periods ended June 30, 2011 and 2010, respectively (including discontinued operations). |
-45-
| (C) | At June 30, 2011 and 2010, the Company had an economic investment in joint ventures relating to 183 and 201 operating shopping center properties, respectively. These joint ventures represent the investments in which the Company was recording its share of equity in net income or loss and accordingly, FFO. | |
| Joint ventures’ FFO is summarized as follows (in thousands): |
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Net income (loss)
(1)
|
$ | 25,368 | $ | (31,445 | ) | $ | 21,441 | $ | (48,295 | ) | ||||||
|
Gain on sale of real estate
|
(22,749 | ) | (47 | ) | (22,749 | ) | (47 | ) | ||||||||
|
Depreciation and amortization
of real estate investments
|
45,240 | 51,688 | 93,076 | 102,001 | ||||||||||||
|
|
||||||||||||||||
|
FFO
|
$ | 47,859 | $ | 20,196 | $ | 91,768 | $ | 53,659 | ||||||||
|
|
||||||||||||||||
|
FFO at DDR ownership interests
|
$ | 14,781 | $ | 10,307 | $ | 27,589 | $ | 21,862 | ||||||||
|
|
||||||||||||||||
| (1) | Revenues for the three-month periods include the following (in millions): |
| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Straight-line rents
|
$ | 1.2 | $ | 0.9 | $ | 2.6 | $ | 2.1 | ||||||||
|
DDR’s proportionate share
|
0.3 | 0.1 | 0.7 | 0.3 | ||||||||||||
| (D) | The amount reflected as gains on disposition of real estate and real estate investments from continuing operations in the condensed consolidated statements of operations includes residual land sales, which management considers being the disposition of non-depreciable real property. These dispositions are included in the Company’s FFO and therefore are not reflected as an adjustment to FFO. For the three-month periods ended June 30, 2011 and 2010, the Company recorded $1.1 million and $0.3 million of gain on land sales, respectively. For the six-month periods ended June 30, 2011 and 2010, the Company recorded $0.2 million and $0.3 million of gain on land sales, respectively. | |
| (E) | Amounts are described below in the Operating FFO Adjustments section. |
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| Three-Month Periods | Six-Month Periods | |||||||||||||||
| Ended June 30, | Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Impairment charges — consolidated assets
(A)
|
$ | 18.4 | $ | 75.0 | $ | 22.2 | $ | 75.0 | ||||||||
|
Executive separation charges
(B)
|
— | — | 10.7 | 2.1 | ||||||||||||
|
Gain on debt retirement, net
(A)
|
— | 1.1 | — | — | ||||||||||||
|
(Gain) loss on equity derivative instruments
(A)
|
— | (21.5 | ) | (21.9 | ) | 3.3 | ||||||||||
|
Other expense, net — litigation-related expenses, debt
extinguishment costs, lease liability settlement, note receivable
reserve and other expenses
(C)
|
6.3 | 9.1 | 5.0 | 12.1 | ||||||||||||
|
Equity in net income of joint ventures — gain on debt
forgiveness, loss on asset sales and impairment charges
|
(0.5 | ) | 2.0 | 1.1 | 3.3 | |||||||||||
|
Impairment of joint venture investments
|
1.6 | — | 1.6 | — | ||||||||||||
|
Gain on change in control of interests
(A)
|
(1.0 | ) | — | (22.7 | ) | — | ||||||||||
|
Discontinued operations — consolidated impairment charges and
loss on sales
|
10.2 | 62.0 | 12.0 | 65.8 | ||||||||||||
|
Discontinued operations — FFO associated with Mervyns Joint
Venture, net of non-controlling interest
|
— | 1.7 | — | 3.8 | ||||||||||||
|
(Gain) loss on disposition of real estate (land), net
|
(1.1 | ) | (0.4 | ) | — | 0.4 | ||||||||||
|
Non-controlling interest — portion of impairment charges allocated
to outside partners
|
— | (31.2 | ) | — | (31.2 | ) | ||||||||||
|
Write-off of original preferred share issuance costs
(A)
|
6.4 | — | 6.4 | — | ||||||||||||
|
|
||||||||||||||||
|
Total non-operating items
|
$ | 40.3 | $ | 97.8 | $ | 14.4 | $ | 134.6 | ||||||||
|
FFO applicable to DDR common shareholders
|
24.1 | (32.8 | ) | 113.2 | (4.4 | ) | ||||||||||
|
|
||||||||||||||||
|
Operating FFO applicable to DDR common shareholders
|
$ | 64.4 | $ | 65.0 | $ | 127.6 | $ | 130.2 | ||||||||
|
|
||||||||||||||||
| (A) | Amount agrees to the face of the condensed consolidated statements of operations. | |
| (B) | Amounts included in general and administrative expenses. | |
| (C) | Amounts included in other (income) expenses in the condensed consolidated statements of operations and detailed as follows: |
| For the Three-Month | For the Six-Month | |||||||||||||||
| Periods Ended June 30, | Periods Ended June 30, | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Note receivable reserve
|
$ | 5.0 | $ | — | $ | 5.0 | $ | — | ||||||||
|
Litigation-related expenses
|
1.2 | 8.3 | 2.2 | 10.0 | ||||||||||||
|
Debt extinguishment costs
|
— | 2.4 | 0.2 | 3.6 | ||||||||||||
|
Settlement of lease liability
obligation
|
— | — | (2.6 | ) | — | |||||||||||
|
Abandoned projects and other
expenses
|
0.1 | 0.7 | 0.2 | 0.9 | ||||||||||||
|
|
||||||||||||||||
|
|
$ | 6.3 | $ | 11.4 | $ | 5.0 | $ | 14.5 | ||||||||
|
|
||||||||||||||||
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|
Cash and cash equivalents
|
$ | 15.4 | ||
|
|
||||
|
|
||||
|
Revolving Credit Facilities
|
$ | 815.0 | ||
|
Less:
|
||||
|
Amount outstanding
|
(170.6 | ) | ||
|
Letters of credit
|
(10.2 | ) | ||
|
|
||||
|
Borrowing capacity available
|
$ | 634.2 | ||
|
|
||||
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| Six-Month Periods Ended | ||||||||
| June 30, | ||||||||
| 2011 | 2010 | |||||||
|
Cash flow provided by operating activities
|
$ | 133,904 | $ | 127,981 | ||||
|
Cash flow provided by investing activities
|
52,075 | 45,250 | ||||||
|
Cash flow used for financing activities
|
(190,144 | ) | (178,403 | ) | ||||
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| Company- | ||||||||||||
| Effective | Owned Square | |||||||||||
| Unconsolidated Real Estate | Ownership | Feet | Total Debt | |||||||||
| Ventures | Percentage (A) | Assets Owned | (Millions) | (Millions) | ||||||||
|
DDRTC Core Retail Fund LLC
|
15.0% | 41 shopping centers in several states | 11.6 | $ | 1,212.9 | |||||||
|
DDR Domestic Retail Fund I
|
20.0% | 63 shopping centers in several states | 8.2 | 958.1 | ||||||||
|
Sonae Sierra Brasil BV Sarl
|
33.3% | 10 shopping centers, a management company and three development projects in Brazil | 3.9 | 190.2 | ||||||||
|
DDR — SAU Retail Fund LLC
|
20.0% | 27 shopping centers in several states | 2.3 | 183.1 | ||||||||
| (A) | Ownership may be held through different investment structures. Percentage ownerships are subject to change, as certain investments contain promoted structures. |
-53-
| Loan | ||||||||
| Shopping Center or | Balance | |||||||
| Unconsolidated Real Estate Ventures | Development Owned | Outstanding | ||||||
|
Coventry II DDR Bloomfield LLC
|
Bloomfield Hills, Michigan | $ | 39.7 | (A), (B), (D), (E) | ||||
|
Coventry II DDR Buena Park LLC
|
Buena Park, California | 61.0 | (B) | |||||
|
Coventry II DDR Fairplain LLC
|
Benton Harbor, Michigan | 15.5 | (B), (C) | |||||
|
Coventry II DDR Phoenix Spectrum LLC
|
Phoenix, Arizona | 65.0 | ||||||
|
Coventry II DDR Marley Creek Square LLC
|
Orland Park, Illinois | 10.7 | (B), (C), (E) | |||||
|
Coventry II DDR Montgomery Farm LLC
|
Allen, Texas | 135.9 | (B), (C) | |||||
|
Coventry II DDR Totem Lakes LLC
|
Kirkland, Washington | 27.8 | (B), (C), (E) | |||||
|
Coventry II DDR Westover LLC
|
San Antonio, Texas | 20.5 | (B) | |||||
|
Coventry II DDR Tri-County LLC
|
Cincinnati, Ohio | 150.6 | (B), (D), (E) | |||||
|
Service Holdings LLC
|
38 retail sites in several states | 95.7 | (B), (C), (E) | |||||
| (A) | In 2009, the senior secured lender sent to the borrower a formal notice of default and filed a foreclosure action. The Company paid its 20% guaranty of this loan in 2009, and the senior secured lender initiated legal proceedings against the Coventry II Fund for its failure to fund its 80% payment guaranty. The senior secured lender and the Coventry II Fund, subsequently entered into a settlement arrangement in connection with the legal proceedings. The above-referenced $66.9 million Bloomfield Loan from the Company related to the Bloomfield Hills, Michigan, project is cross-defaulted with this third-party loan. The Bloomfield Loan is considered past due and has been fully reserved by the Company. | |
| (B) | As of June 30, 2011, lenders are managing the cash receipts and expenditures related to the assets collateralizing these loans. | |
| (C) | As of June 30, 2011, the Company provided payment guaranties that are not greater than the proportion to its investment interest. | |
| (D) | As of July 29, 2011, these loans are in default, and the Coventry II Fund is exploring a variety of strategies with the lenders. |
-54-
| (E) | The Company has written its investment basis in this joint venture down to zero and is no longer reporting an allocation of income or loss. |
-55-
-56-
-57-
-58-
| • | The Company is subject to general risks affecting the real estate industry, including the need to enter into new leases or renew leases on favorable terms to generate rental revenues, and |
-59-
| the economic downturn may adversely affect the ability of the Company’s tenants, or new tenants, to enter into new leases or the ability of the Company’s existing tenants to renew their leases at rates at least as favorable as their current rates; | |||
| • | The Company could be adversely affected by changes in the local markets where its properties are located, as well as by adverse changes in national economic and market conditions; | ||
| • | The Company may fail to anticipate the effects on its properties of changes in consumer buying practices, including catalog sales and sales over the Internet and the resulting retailing practices and space needs of its tenants, or a general downturn in its tenants’ businesses, which may cause tenants to close stores or default in payment of rent; | ||
| • | The Company is subject to competition for tenants from other owners of retail properties, and its tenants are subject to competition from other retailers and methods of distribution. The Company is dependent upon the successful operations and financial condition of its tenants, in particular of its major tenants, and could be adversely affected by the bankruptcy of those tenants; | ||
| • | The Company relies on major tenants, which makes it vulnerable to changes in the business and financial condition of, or demand for its space by, such tenants; | ||
| • | The Company may not realize the intended benefits of acquisition or merger transactions. The acquired assets may not perform as well as the Company anticipated, or the Company may not successfully integrate the assets and realize improvements in occupancy and operating results. The acquisition of certain assets may subject the Company to liabilities, including environmental liabilities; | ||
| • | The Company may fail to identify, acquire, construct or develop additional properties that produce a desired yield on invested capital, or may fail to effectively integrate acquisitions of properties or portfolios of properties. In addition, the Company may be limited in its acquisition opportunities due to competition, the inability to obtain financing on reasonable terms or any financing at all, and other factors; | ||
| • | The Company may fail to dispose of properties on favorable terms. In addition, real estate investments can be illiquid, particularly as prospective buyers may experience increased costs of financing or difficulties obtaining financing, and could limit the Company’s ability to promptly make changes to its portfolio to respond to economic and other conditions; | ||
| • | The Company may abandon a development opportunity after expending resources if it determines that the development opportunity is not feasible due to a variety of factors, including a lack of availability of construction financing on reasonable terms, the impact of the economic environment on prospective tenants’ ability to enter into new leases or pay contractual rent, or the inability of the Company to obtain all necessary zoning and other required governmental permits and authorizations; | ||
| • | The Company may not complete development projects on schedule as a result of various factors, many of which are beyond the Company’s control, such as weather, labor conditions, |
-60-
| governmental approvals, material shortages or general economic downturn resulting in limited availability of capital, increased debt service expense and construction costs, and decreases in revenue; | |||
| • | The Company’s financial condition may be affected by required debt service payments, the risk of default, and restrictions on its ability to incur additional debt or to enter into certain transactions under its credit facilities and other documents governing its debt obligations. In addition, the Company may encounter difficulties in obtaining permanent financing or refinancing existing debt. Borrowings under the Company’s revolving credit facilities are subject to certain representations and warranties and customary events of default, including any event that has had or could reasonably be expected to have a material adverse effect on the Company’s business or financial condition; | ||
| • | Changes in interest rates could adversely affect the market price of the Company’s common shares, as well as its performance and cash flow; | ||
| • | Debt and/or equity financing necessary for the Company to continue to grow and operate its business may not be available or may not be available on favorable terms; | ||
| • | Disruptions in the financial markets could affect the Company’s ability to obtain financing on reasonable terms and have other adverse effects on the Company and the market price of the Company’s common shares; | ||
| • | The Company is subject to complex regulations related to its status as a REIT and would be adversely affected if it failed to qualify as a REIT; | ||
| • | The Company must make distributions to shareholders to continue to qualify as a REIT, and if the Company must borrow funds to make distributions, those borrowings may not be available on favorable terms or at all; | ||
| • | Joint venture investments may involve risks not otherwise present for investments made solely by the Company, including the possibility that a partner or co-venturer may become bankrupt, may at any time have different interests or goals than those of the Company and may take action contrary to the Company’s instructions, requests, policies or objectives, including the Company’s policy with respect to maintaining its qualification as a REIT. In addition, a partner or co-venturer may not have access to sufficient capital to satisfy its funding obligations to the joint venture. The partner could cause a default under the joint venture loan for reasons outside of the Company’s control. Furthermore, the Company could be required to reduce the carrying value of its equity method investments if a loss in the carrying value of the investment is other than temporary; | ||
| • | The outcome of pending or future litigation, including litigation with tenants or joint venture partners, may adversely affect the Company’s results of operations and financial condition; | ||
| • | The Company may not realize anticipated returns from its real estate assets outside the United States. The Company may continue to pursue international opportunities that may subject the Company to different or greater risks than those associated with its domestic operations. The Company owns assets in Puerto Rico, an interest in an unconsolidated joint venture that owns |
-61-
| properties in Brazil and an interest in consolidated joint ventures that were formed to develop and own properties in Canada and Russia; |
| • | International development and ownership activities carry risks in addition to those the Company faces with the Company’s domestic properties and operations. These risks include the following: |
| • | Adverse effects of changes in exchange rates for foreign currencies; | ||
| • | Changes in foreign political or economic environments; | ||
| • | Challenges of complying with a wide variety of foreign laws, including tax laws, and addressing different practices and customs relating to corporate governance, operations and litigation; | ||
| • | Different lending practices; | ||
| • | Cultural and consumer differences; | ||
| • | Changes in applicable laws and regulations in the United States that affect foreign operations; | ||
| • | Difficulties in managing international operations; and | ||
| • | Obstacles to the repatriation of earnings and cash. |
| • | Although the Company’s international activities are currently a relatively small portion of its business, to the extent the Company expands its international activities, these risks could significantly increase and adversely affect its results of operations and financial condition; | ||
| • | The Company is subject to potential environmental liabilities; | ||
| • | The Company may incur losses that are uninsured or exceed policy coverage due to its liability for certain injuries to persons, property or the environment occurring on its properties; | ||
| • | The Company could incur additional expenses to comply with or respond to claims under the Americans with Disabilities Act or otherwise be adversely affected by changes in government regulations, including changes in environmental, zoning, tax and other regulations and | ||
| • | The Company may have to restate certain financial statements as a result of changes in, or the adoption of, new accounting rules and regulations to which the Company is subject, including accounting rules and regulations affecting the Company’s accounting policies. |
-62-
| June 30, 2011 | December 31, 2010 | |||||||||||||||||||||||||||||||
| Weighted- | Weighted- | Weighted- | Weighted- | |||||||||||||||||||||||||||||
| Average | Average | Average | Average | |||||||||||||||||||||||||||||
| Amount | Maturity | Interest | Percentage | Amount | Maturity | Interest | Percentage | |||||||||||||||||||||||||
| (Millions) | (Years) | Rate | of Total | (Millions) | (Years) | Rate | of Total | |||||||||||||||||||||||||
|
Fixed-Rate
Debt
(A)
|
$ | 3,647.4 | 4.4 | 5.6 | % | 86.6 | % | $ | 3,428.1 | 4.3 | 5.8 | % | 79.7 | % | ||||||||||||||||||
|
Variable-Rate
Debt
(A)
|
$ | 566.7 | 4.3 | 2.0 | % | 13.4 | % | $ | 873.9 | 1.7 | 2.3 | % | 20.3 | % | ||||||||||||||||||
| (A) | Adjusted to reflect the $285 million and $150 million of variable-rate debt that LIBOR was swapped to a fixed-rate of 2.9% and 3.4% at June 30, 2011 and December 31, 2010, respectively. |
| June 30, 2011 | December 31, 2010 | |||||||||||||||||||||||||||||||
| Joint | Company’s | Weighted- | Weighted- | Joint | Company’s | Weighted- | Weighted- | |||||||||||||||||||||||||
| Venture | Proportionate | Average | Average | Venture | Proportionate | Average | Average | |||||||||||||||||||||||||
| Debt | Share | Maturity | Interest | Debt | Share | Maturity | Interest | |||||||||||||||||||||||||
| (Millions) | (Millions) | (Years) | Rate | (Millions) | (Millions) | (Years) | Rate | |||||||||||||||||||||||||
|
Fixed-Rate Debt
|
$ | 3,193.7 | $ | 658.1 | 3.6 | 5.7 | % | $ | 3,279.1 | $ | 705.3 | 4.1 | 5.6 | % | ||||||||||||||||||
|
Variable-Rate Debt
|
$ | 701.7 | $ | 133.2 | 3.4 | 5.4 | % | $ | 661.5 | $ | 128.5 | 1.8 | 4.0 | % | ||||||||||||||||||
-63-
| June 30, 2011 | December 31, 2010 | |||||||||||||||||||||||
| 100 Basis | 100 Basis | |||||||||||||||||||||||
| Point | Point | |||||||||||||||||||||||
| Increase in | Increase in | |||||||||||||||||||||||
| Market | Market | |||||||||||||||||||||||
| Carrying | Interest | Carrying | Interest | |||||||||||||||||||||
| Value | Fair Value | Rates | Value | Fair Value | Rates | |||||||||||||||||||
|
Company’s fixed-rate debt
|
$ | 3,647.4 | $ | 3,916.1 | (A) | $ | 3,845.5 | (B) | $ | 3,428.1 | $ | 3,647.2 | (A) | $ | 3,527.0 | (B) | ||||||||
|
Company’s proportionate
share of joint venture
fixed-rate debt
|
$ | 658.1 | $ | 643.4 | $ | 626.4 | $ | 705.3 | $ | 689.3 | $ | 670.3 | ||||||||||||
| (A) | Includes the fair value of interest rate swaps, which was a liability of $5.6 million and $5.2 million at June 30, 2011 and December 31, 2010, respectively. | |
| (B) | Includes the fair value of interest rate swaps, which was an asset of $2.8 million and a liability of $3.1 million at June 30, 2011 and December 31, 2010, respectively. |
-64-
-65-
-66-
| (c) Total Number | (d) Maximum Number | |||||||||||||||
| of Shares | (or Approximate | |||||||||||||||
| Purchased as Part | Dollar Value) of | |||||||||||||||
| of Publicly | Shares that May Yet | |||||||||||||||
| (a) Total number of | (b) Average Price | Announced Plans | Be Purchased Under | |||||||||||||
| shares purchased (1) | Paid per Share | or Programs | the Plans or Programs | |||||||||||||
|
April 1 — 30, 2011
|
— | — | — | — | ||||||||||||
|
May 1 — 31, 2011
|
— | — | — | — | ||||||||||||
|
June 1 — 30, 2011
|
309 | $ | 14.49 | — | — | |||||||||||
|
|
||||||||||||||||
|
Total
|
309 | $ | 1 4.49 | — | — | |||||||||||
| (1) | Consists of common shares surrendered or deemed surrendered to the Company to satisfy statutory minimum tax withholding obligations in connection with the vesting and/or exercise of awards under the Company’s equity-based compensation plans. |
-67-
|
4.1
|
Second Amended and Restated Secured Term Loan Agreement, dated June 28, 2011, among the Company, DDR PR Ventures LLC, S.E., KeyBank National Association, as Administrative Agent, and the other several banks, financial institutions and other entities from time to time parties to such loan agreement | |
|
|
||
|
4.2
|
Amendment No. 1 to the Eighth Amended and Restated Credit Agreement, dated June 28, 2011, by and among the Company, DDR PR Ventures LLC, S.E., the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent | |
|
|
||
|
31.1
|
Certification of principal financial officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934 | |
|
|
||
|
31.2
|
Certification of principal financial officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934 | |
|
|
||
|
32.1
|
Certification of CEO pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 1 | |
|
|
||
|
32.2
|
Certification of CFO pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 1 | |
|
|
||
|
101.INS
|
XBRL Instance Document. 2 | |
|
|
||
|
101.SCH
|
XBRL Taxonomy Extension Schema Document. 2 | |
|
|
||
|
101.CAL
|
XBRL Taxonomy Extension Calculation Linkbase Document. 2 | |
|
|
||
|
101.DEF
|
XBRL Taxonomy Extension Definition Linkbase Document. 2 | |
|
|
||
|
101.LAB
|
XBRL Taxonomy Extension Label Linkbase Document. 2 | |
|
|
||
|
101.PRE
|
XBRL Taxonomy Extension Presentation Linkbase Document. 2 |
| 1 | Pursuant to SEC Release No. 34-4751, these exhibits are deemed to accompany this report and are not “filed” as part of this report. | |
| 2 | Submitted electronically herewith. |
68
69
|
DEVELOPERS DIVERSIFIED REALTY CORPORATION
|
||||
| (Date) August 8, 2011 | /s/ Christa A. Vesy | |||
| Christa A. Vesy, | ||||
|
Senior Vice President and
Chief Accounting Officer (Authorized Officer) |
||||
70
| Exhibit No. | Filed Herewith or | |||||||
| Under Reg. S-K | Form 10-Q | Incorporated Herein | ||||||
| Item 601 | Exhibit No. | Description | by Reference | |||||
|
4
|
4.1 | Second Amended and Restated Secured Term Loan Agreement, dated June 28, 2011, among the Company, DDR PR Ventures LLC, S.E., KeyBank National Association, as Administrative Agent, and the other several banks, financial institutions and other entities from time to time parties to such loan agreement | Current Report on 8-K (Filed with the SEC on July 1, 2011; file No. 001-11690) | |||||
|
|
||||||||
|
4
|
4.2 | Amendment No. 1 to the Eighth Amended and Restated Credit Agreement, dated June 28, 2011, by and among the Company, DDR PR Ventures LLC, S.E., the lenders party thereto, and JPMorgan Chase Bank, N.A., as Administrative Agent | Current Report on 8-K (Filed with the SEC on July 1, 2011; file No. 001-11690) | |||||
|
|
||||||||
|
31
|
31.1 | Certification of principal executive officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934 | Filed herewith | |||||
|
|
||||||||
|
31
|
31.2 | Certification of principal financial officer pursuant to Rule 13a-14(a) of the Exchange Act of 1934 | Filed herewith | |||||
|
|
||||||||
|
32
|
32.1 | Certification of CEO pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 1 | Filed herewith | |||||
|
|
||||||||
|
32
|
32.2 | Certification of CFO pursuant to Rule 13a-14(b) of the Exchange Act and 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of this report pursuant to the Sarbanes-Oxley Act of 2002 1 | Filed herewith | |||||
|
|
||||||||
|
101
|
101.INS | XBRL Instance Document | Submitted electronically herewith | |||||
|
|
||||||||
|
101
|
101.SCH | XBRL Taxonomy Extension Schema Document | Submitted electronically herewith | |||||
|
|
||||||||
|
101
|
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | Submitted electronically herewith | |||||
|
|
||||||||
|
101
|
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | Submitted electronically herewith | |||||
|
|
||||||||
|
101
|
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | Submitted electronically herewith | |||||
|
|
||||||||
|
101
|
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | Submitted electronically herewith | |||||
71
No information found
* THE VALUE IS THE MARKET VALUE AS OF THE LAST DAY OF THE QUARTER FOR WHICH THE 13F WAS FILED.
| FUND | NUMBER OF SHARES | VALUE ($) | PUT OR CALL |
|---|
| DIRECTORS | AGE | BIO | OTHER DIRECTOR MEMBERSHIPS |
|---|
No information found
No Customers Found
No Suppliers Found
Price
Yield
| Owner | Position | Direct Shares | Indirect Shares |
|---|