DDR Reports Second Quarter 2016 Operating Results

Jul 26, 2016

BEACHWOOD, Ohio, July 26, 2016 /PRNewswire/ -- DDR Corp. (NYSE: DDR) today announced operating results for the second quarter ended June 30, 2016

(Logo: http://photos.prnewswire.com/prnh/20131217/DDRLOGO )

Financial Highlights

  • Second quarter net income attributable to common shareholders was $35.5 million, or $0.10 per diluted share, compared to net income of $13.0 million, or $0.03 per diluted share, for the prior-year comparable period.
  • Second quarter operating funds from operations attributable to common shareholders ("Operating FFO") increased $11.0 million to $122.4 million, or 6.5%, to $0.33 per diluted share, compared to $111.4 million, or $0.31 per diluted share, for the prior-year comparable period.

Significant Quarterly Activity

  • Generated same store net operating income growth of 3.1% on a pro rata basis
  • Executed 338 new leases and renewals for 2.3 million square feet
  • Generated new leasing spreads of 27.7% and renewal leasing spreads of 7.0%, both on a pro rata basis
  • Increased the portfolio leased rate by 10 basis points to 96.1% at June 30, 2016, from 96.0% at December 31, 2015 and 95.8% at June 30, 2015, on a pro rata basis
  • Increased the annualized base rent per occupied square foot by 3.8% on a pro rata basis to $14.92 at June 30, 2016, from $14.37 at June 30, 2015
  • Sold three operating assets for $45 million and three land parcels for $13 million, totaling $58 million at DDR's share

"While I have only been at DDR for a short time, I am not surprised by this quarter's strong operational results given the quality of the portfolio, the people, and the progress made at this Company in recent years.  We look forward to delivering many more quarters of similar performance as we strive to build a track record of outperformance," commented Thomas F. August , President and Chief Executive Officer.  

2016 Guidance
The Company is revising its 2016 Operating FFO and NAREIT defined FFO guidance estimate to a range of $1.23 to $1.26 per diluted share from a range of $1.20 to $1.25 per diluted share.  The Company's full year disposition guidance of between $600 and $800 million at DDR's pro rata share remains unchanged, but will be weighted to the second half of the year.

About DDR Corp.
DDR is an owner and manager of 349 value-oriented shopping centers representing 113 million square feet in 37 states and Puerto Rico.  The Company's assets are concentrated in high barrier-to-entry markets with stable population and high growth potential and its portfolio is actively managed to create long-term shareholder value.  DDR is a self-administered and self-managed REIT operating as a fully integrated real estate company, and is publicly traded on the New York Stock Exchange under the ticker symbol DDR.  Additional information about the Company is available at www.ddr.com.

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

The Company will hold its quarterly conference call tomorrow, July 27, 2016, at 10:00 a.m. Eastern Time.  To participate, please dial 877-249-1119 (domestic) or 412-542-4143 (international) at least ten minutes prior to the scheduled start of the call.  The conference call webcast will be recorded and available for replay through the Investors portion of DDR's website, http://ir.ddr.com/events.cfm.

Non-GAAP Disclosures
FFO is a supplemental non-GAAP financial measure used as a standard in the real estate industry and a widely accepted measure of real estate investment trust ("REIT") performance.  Management believes that both FFO and Operating FFO provide additional indicators of the financial performance of a REIT.  The Company also believes that FFO and Operating FFO more appropriately measure the core operations of the Company and provide benchmarks to its peer group. 

FFO is defined and calculated by the Company as net income, adjusted to exclude:  (i) preferred share dividends, (ii) gains and losses from disposition of depreciable real estate property and related investments, which are presented net of taxes, (iii) impairment charges on depreciable real estate property and related investments and (iv) certain non-cash items.  These non-cash items principally include real property depreciation and amortization of intangibles, equity income from joint ventures and equity income from non-controlling interests and adding the Company's proportionate share of FFO from its unconsolidated joint ventures and non-controlling interests, determined on a consistent basis.  The Company computes FFO in accordance with the NAREIT definition.  The Company calculates Operating FFO by excluding certain non-operating charges and gains.  Operating FFO is useful to investors as the Company removes non-comparable charges and gains to analyze the results of its operations and assess performance of the core operating real estate portfolio.  Other real estate companies may calculate FFO and Operating FFO in a different manner. 

The Company also uses net operating income ("NOI"), a non-GAAP financial measure, as a performance measure.  NOI is calculated as property revenues less property-related expenses.  The Company believes NOI provides useful information to investors regarding the Company's financial condition and results of operations because it reflects only those income and expense items that are incurred at the property level and when compared across periods, reflects the impact on operations from trends in occupancy rates, rental rates, operating costs and acquisition and disposition activity on an unleveraged basis.  The Company presents NOI information herein on a same store basis or "SSNOI." The Company believes SSNOI provides investors with additional information regarding the operating performances of comparable assets because it excludes certain non-cash and non-comparable items as noted below.

The Company defines SSNOI as property revenues less property-related expenses, which exclude straight-line rental income and expenses, lease termination income, management fee expense, fair market value of leases, expense recovery adjustments and provisions for uncollectible amounts and/or recoveries thereof.  SSNOI also excludes activity associated with development and major redevelopment; and includes assets owned in comparable periods (15 months for quarter comparisons).  SSNOI excludes all non-property and corporate level revenue and expenses.  Other real estate companies may calculate NOI and SSNOI in a different manner. 

This press release includes financial statements presented at DDR's pro rata share.  The amounts shown in the columns labeled "Consolidated'' reflect the line items contained in the Company's consolidated financial statements in accordance with generally accepted accounting principles ("GAAP").  The amounts in the columns labeled ''Share of JVs'' were computed by applying to each financial statement line item the effective ownership interest used to arrive at DDR's share of net income or loss during the period when applying the equity method of accounting to each of the Company's unconsolidated joint ventures.  Other companies may calculate their pro rata interest differently, limiting the usefulness of the amounts as comparative measures.  The Company provides DDR share information because the Company believes it assists investors and analysts in estimating the effective interest in DDR's unconsolidated joint ventures when read in conjunction with the Company's reported results under GAAP. 

FFO, Operating FFO and SSNOI do not represent cash generated from operating activities in accordance with GAAP, are not necessarily indicative of cash available to fund cash needs and should not be considered as alternatives to net income computed in accordance with GAAP as indicators of the Company's operating performance or as alternatives to cash flow as a measure of liquidity. 

Reconciliations of these non-GAAP measures to their most directly comparable GAAP measures are included in the non-GAAP measures section.

Safe Harbor
DDR Corp. considers portions of the information in this press release to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, both as amended, with respect to the Company's expectation for future periods.  Although the Company believes that the expectations reflected in such forward-looking statements are based upon reasonable assumptions, it can give no assurance that its expectations will be achieved.  For this purpose, any statements contained herein that are not historical fact may be deemed to be forward-looking statements.  There are a number of important factors that could cause our results to differ materially from those indicated by such forward-looking statements, including, among other factors, local conditions such as supply of space or a reduction in demand for real estate in the area; competition from other available space; dependence on rental income from real property; the loss of, significant downsizing of or bankruptcy of a major tenant; redevelopment and construction activities may not achieve a desired return on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract; our ability to secure equity or debt financing on commercially acceptable terms or at all; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements or our failure to satisfy conditions to the completion of these arrangements; the success of our capital recycling strategy; any impact on strategy or results from the transition in leadership; and the finalization of the financial statements for period ended June 30, 2016.  For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company's Form 10-K for the year ended December 31, 2015.  The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.

 

 

DDR Corp.
Income Statement: 
Consolidated Interests


$ in thousands, except per share

2Q16


2Q15


Consolidated


Share of JVs


Total
DDR Share
(Non-GAAP)


Consolidated


Share of JVs


Total
DDR Share
(Non-GAAP)

Revenues:












Minimum rents (1)

$178,064


$13,666


$191,730


$179,363


$14,275


$193,638

Percentage rent

1,654


113


1,767


1,372


74


1,446

Recoveries

61,376


4,321


65,697


62,021


4,529


66,550

Other property revenues (2)

4,762


157


4,919


6,176


1,107


7,283


245,856


18,257


264,113


248,932


19,985


268,917

Expenses (3):












Operating and maintenance

34,588


2,684


37,272


36,029


2,866


38,895

Real estate taxes

37,276


2,542


39,818


37,797


2,650


40,447


71,864


5,226


77,090


73,826


5,516


79,342













Net operating income (4)

173,992


13,031


187,023


175,106


14,469


189,575













Other income (expense):












Fee income

11,465


(955)


10,510


8,391


(1,007)


7,384

Interest income

9,446


(415)


9,031


7,211


(321)


6,890

Interest expense (5)

(54,012)


(5,278)


(59,290)


(61,287)


(5,589)


(66,876)

Depreciation and amortization

(97,698)


(5,635)


(103,333)


(99,300)


(6,115)


(105,415)

General and administrative (6)

(18,499)


0


(18,499)


(19,271)


0


(19,271)

Other income (expense), net (7)

2,081


(56)


2,025


2,368


(33)


2,335

Income before earnings from JVs and other

26,775


692


27,467


13,218


1,404


14,622













Equity in net income of JVs

1,117


(1,117)


0


1,642


(1,642)


0

Basis differences of JVs

0


403


403


0


307


307

Loss on sale and change in control

0


0


0


(6,507)


0


(6,507)

Tax expense

(245)


0


(245)


(573)


0


(573)

Gain on disposition of real estate, net

13,721


22


13,743


11,267


(69)


11,198

Net income

41,368


0


41,368


19,047


0


19,047

Non-controlling interests

(310)


0


(310)


(449)


0


(449)

Net income DDR

41,058


0


41,058


18,598


0


18,598

Preferred dividends

(5,594)






(5,594)





Net income Common Shareholders

35,464






13,004





Depreciation and amortization of real estate

95,626






97,239





Equity in net income of JVs

(1,117)






(1,642)





JVs' FFO

6,426






7,502





Non-controlling interests

76






248





Gain on disposition of depreciable real estate, net

(16,154)






(11,312)





FFO Common Shareholders

120,321






105,039





Non-operating items, net (9)

2,120






6,357





Operating FFO

$122,441






$111,396





FFO per share - Diluted (10)

$0.33






$0.29





Operating FFO per share - Diluted (10)

$0.33






$0.31








DDR Corp.
Income Statement: 
Consolidated Interests


$ in thousands, except per share

6M16


6M15


Consolidated


Share of JVs


Total
DDR Share
(Non-GAAP)


Consolidated


Share of JVs


Total
DDR Share
(Non-GAAP)

Revenues:












Minimum rents (1)

$355,431


$27,311


$382,742


$360,060


$29,353


$389,413

Percentage rent

3,590


141


3,731


2,757


174


2,931

Recoveries

122,975


8,549


131,524


126,101


9,200


135,301

Other property revenues (2)

10,105


312


10,417


10,764


1,478


12,242


492,101


36,313


528,414


499,682


40,205


539,887

Expenses (3):












Operating and maintenance

71,096


5,401


76,497


74,755


6,012


80,767

Real estate taxes

73,810


5,141


78,951


75,426


5,406


80,832


144,906


10,542


155,448


150,181


11,418


161,599













Net operating income

347,195


25,771


372,966


349,501


28,787


378,288













Other income (expense):












Fee income

19,643


(1,890)


17,753


16,466


(1,977)


14,489

Interest income

18,496


(828)


17,668


14,372


(636)


13,736

Interest expense (5)

(111,909)


(10,576)


(122,485)


(124,307)


(11,515)


(135,822)

Depreciation and amortization

(194,600)


(11,184)


(205,784)


(202,315)


(13,214)


(215,529)

General and administrative (6)

(36,375)


0


(36,375)


(37,866)


0


(37,866)

Other income (expense), net (7)

3,854


(104)


3,750


(1,060)


(94)


(1,154)

Impairment charges (8)

0


0


0


(279,021)


(90)


(279,111)

Income before earnings from JVs and other

46,304


1,189


47,493


(264,230)


1,261


(262,969)













Equity in net income of JVs

15,538


(15,538)


0


1,703


(1,703)


0

Basis differences of JVs

0


3,632


3,632


0


484


484

Gain on sale and change in control

0


0


0


7,772


0


7,772

Tax expense

(703)


0


(703)


(5,473)


0


(5,473)

Gain on disposition of real estate, net

26,102


10,717


36,819


36,361


(42)


36,319

Net income (loss)

87,241


0


87,241


(223,867)


0


(223,867)

Non-controlling interests

(610)


0


(610)


(1,322)


0


(1,322)

Net income (loss) DDR

86,631


0


86,631


(225,189)


0


(225,189)

Preferred dividends

(11,188)






(11,188)





Net income (loss) Common Shareholders

75,443






(236,377)





Depreciation and amortization of real estate

190,480






198,106





Equity in net income of JVs

(15,538)






(1,703)





JVs' FFO

12,576






14,519





Non-controlling interests

152






497





Impairment of depreciable real estate

0






179,748





Gain on disposition of depreciable real estate, net

(28,250)






(36,548)





FFO Common Shareholders

234,863






118,242





Non-operating items, net (9)

1,807






100,287





Operating FFO

$236,670






$218,529





FFO per share - Diluted (10)

$0.64






$0.33





Operating FFO per share - Diluted (10)

$0.65






$0.60








DDR Corp.
Balance Sheet: 
Consolidated Interests



$ in thousands

At Period End


2Q16


4Q15


Consolidated


Share of JVs


Total
DDR Share
(Non-GAAP)


Consolidated


Share of JVs


Total
DDR Share
(Non-GAAP)

Assets:












Land

$2,137,889


$174,406


$2,312,295


$2,184,145


$181,843


$2,365,988

Buildings

6,893,792


471,139


7,364,931


6,965,632


491,662


7,457,294

Fixtures and tenant improvements

756,617


30,764


787,381


743,037


31,105


774,142


9,788,298


676,309


10,464,607


9,892,814


704,610


10,597,424

Depreciation

(2,115,084)


(152,440)


(2,267,524)


(2,062,899)


(152,035)


(2,214,934)


7,673,214


523,869


8,197,083


7,829,915


552,575


8,382,490

Construction in progress and land

161,663


7,048


168,711


235,385


5,654


241,039

Real estate, net

7,834,877


530,917


8,365,794


8,065,300


558,229


8,623,529













Investments in JVs

65,186


2,330


67,516


72,576


636


73,212

Preferred equity interest

400,203


0


400,203


395,156


0


395,156

Cash

17,981


8,956


26,937


22,416


7,815


30,231

Restricted cash

9,173


727


9,900


10,104


803


10,907

Notes receivable, net

47,294


0


47,294


42,534


0


42,534

Receivables, net

124,878


7,213


132,091


129,089


8,151


137,240

Other assets, net (11)

321,994


19,900


341,894


359,913


21,598


381,511

Total Assets

8,821,586


570,043


9,391,629


9,097,088


597,232


9,694,320













Liabilities and Equity:












Revolving credit facilities

265,000


0


265,000


210,000


0


210,000

Unsecured debt

2,911,277


0


2,911,277


3,149,188


0


3,149,188

Unsecured term loan

398,167


0


398,167


397,934


0


397,934

Secured debt

1,364,363


425,166


1,789,529


1,382,415


441,918


1,824,333


4,938,807


425,166


5,363,973


5,139,537


441,918


5,581,455

Dividends payable

75,078


0


75,078


68,604


0


68,604

Other liabilities (12)

398,909


20,367


419,276


425,478


19,686


445,164

Total Liabilities

5,412,794


445,533


5,858,327


5,633,619


461,604


6,095,223













JVs share of equity

0


22,340


22,340


0


20,393


20,393

Preferred shares

350,000


0


350,000


350,000


0


350,000

Common shares

36,551


0


36,551


36,529


0


36,529

Paid-in capital

5,473,632


0


5,473,632


5,466,511


0


5,466,511

Distributions in excess of net income

(2,455,319)


102,170


(2,353,149)


(2,391,793)


115,235


(2,276,558)

Deferred compensation

15,425


0


15,425


15,537


0


15,537

Other comprehensive income

(5,157)


0


(5,157)


(6,283)


0


(6,283)

Common shares in treasury at cost

(14,919)


0


(14,919)


(15,316)


0


(15,316)

Non-controlling interests

8,579


0


8,579


8,284


0


8,284

Total Equity

3,408,792


124,510


3,533,302


3,463,469


135,628


3,599,097













Total Liabilities and Equity

$8,821,586


$570,043


$9,391,629


$9,097,088


$597,232


$9,694,320




DDR Corp.
Income Statement: 
Unconsolidated Interests at 100%


$ in thousands

















2Q16


2Q15


6M16


6M15

Revenues:












Minimum rents





$96,960


$98,437


$193,535


$202,174

Percentage rent





573


353


904


942

Recoveries





30,312


30,603


60,281


61,462

Other property revenues





1,045


3,673


2,080


6,088






128,890


133,066


256,800


270,666

Expenses:












Operating and maintenance





18,644


18,620


37,643


39,315

Real estate taxes





18,329


17,470


36,986


35,741






36,973


36,090


74,629


75,056













Net operating income (4)





91,917


96,976


182,171


195,610













Other income (expense):












Interest expense





(33,319)


(33,593)


(66,641)


(74,496)

Depreciation and amortization





(49,021)


(51,482)


(98,056)


(108,219)

Impairment charges





0


0


0


(448)

Preferred share expense





(8,305)


(6,415)


(16,569)


(12,729)

Other (expense) income, net





(6,319)


(6,126)


(12,130)


(12,195)






(5,047)


(640)


(11,225)


(12,477)

Gain (loss) on disposition of real estate, net


114


(1,358)


53,597


(1,571)

Net (loss) income attributable to unconsolidated JVs


(4,933)


(1,998)


42,372


(14,048)

Depreciation and amortization





49,021


51,482


98,056


108,219

Impairment of depreciable real estate


0


0


0


448

(Gain) loss on disposition of depreciable real estate, net


(114)


1,358


(53,597)


1,571

FFO





43,974


50,842


86,831


96,190

FFO at DDR's ownership interests


6,426


7,502


12,576


14,519

Operating FFO at DDR's ownership interests



$6,446


$7,501


$12,596


$14,523




DDR Corp.
Balance Statement
:  Unconsolidated Interests at 100%













$ in thousands





















At Period End










2Q16


4Q15

Assets:












Land









$1,306,704


$1,343,889

Buildings









3,449,494


3,551,227

Improvements









192,647


191,581










4,948,845


5,086,697

Depreciation









(840,227)


(817,235)










4,108,618


4,269,462

Land held for development and construction in progress






58,654


52,390

Real estate, net









4,167,272


4,321,852

Cash and restricted cash









69,815


58,916

Receivables, net









48,568


52,768

Other assets, net









286,501


318,546

Total Assets









4,572,156


4,752,082













Liabilities and Equity:












Mortgage debt









3,118,908


3,177,603

Notes and accrued interest payable to DDR






2,555


1,556

Other liabilities









223,109


219,799

Total Liabilities









3,344,572


3,398,958













Redeemable preferred equity









400,203


395,156

Accumulated equity









827,381


957,968

Total Liabilities and Equity









$4,572,156


$4,752,082
















DDR Corp.
Financial Statements: 
Footnotes


$ in millions, except per share













2Q16


2Q15


6M16


6M15














(1)

Minimum rents:












Straight-line rent, net




$1.3


$0.7


$2.6


$2.1


Below-market rent, net




1.1


0.9


1.4


1.2


Ground lease revenue




10.2


9.3


20.3


18.4














(2)

Other property revenues:












Lease termination fees




0.3


1.4


1.5


1.6














(3)

Operating expenses:












Recoverable expenses




(65.0)


(67.0)


(131.1)


(137.2)


Non-recoverable expenses




(6.9)


(6.8)


(13.8)


(13.0)


Straight-line ground rent expense




(0.2)


(0.1)


(0.3)


(0.3)


Expensed costs of suspended developments


(0.1)


(0.2)


(0.2)


(0.3)














(4)

Same Store NOI:












Consolidated NOI





174.0


175.1






Less: Non-controlling interests



(0.4)


(0.4)






Unconsolidated NOI at DDR Share



13.0


14.5











186.6


189.2






Less: Non-Same Store NOI


(14.2)


(22.0)






Same Store NOI





172.4


167.2






% Increase at DDR share


3.1%




















(5)

Non-cash interest expense:










Debt fair value amortization

1.6


4.5


3.1


9.8


Loan cost amortization


(2.1)


(2.4)


(4.3)


(5.0)


Interest expense (capitalized)


0.7


1.6


1.9


3.2














(6)

General and administrative expenses:










Executive separation charges


(0.0)


(1.7)


(0.0)


(2.3)


Stock compensation expenses


(1.7)


(1.5)


(3.3)


(3.6)


Internal leasing expenses


(2.0)


(1.7)


(4.1)


(3.7)


Construction administrative costs (capitalized)


1.9


2.2


3.9


4.6














(7)

Other income (expense):










Other income (primarily insurance recovery), net

2.1


(0.0)


3.9


(0.2)


Debt extinguishment, net


(0.0)


2.4


(0.0)


(0.9)














(8)

Impairment charges:










Assets marketed for sale


(0.0)


(0.0)


(0.0)


(179.7)


Land previously held for development


(0.0)


(0.0)


(0.0)


(99.3)




$ in millions, except per share






2Q16


2Q15


6M16


6M15














(9)

Non-operating items excluded from Operating FFO:










Impairment charges - non-depreciable assets


$0.0


$0.0


$0.0


$99.3


Executive separation charges


0.0


1.7


0.0


2.3


Transaction, debt extinguishment, litigation, other, net


0.0


(1.9)


0.0


1.5


Loss (gain) on sale and change in control of interests, net


0.0


6.5


0.0


(7.8)


Tax expense (primarily Puerto Rico restructuring), net


(0.3)


0.0


(0.3)


4.4


Loss on disposition of non-depreciable real estate, net


2.4


0.1


2.1


0.6




2.1


6.4


1.8


100.3











(10)

Outstanding per share information:










Common shares (at quarter end)


365.5


361.1


365.5


361.1


OP units (at quarter end)


0.4


1.4


0.4


1.4


Total shares and units (at quarter end)


365.9


362.5


365.9


362.5


Weighted average shares and units - Basic - EPS


365.0


360.1


364.9


359.9


Assumed conversion of dilutive securities


0.3


4.1


0.3


0.0


Weighted average shares and units - Diluted - EPS


365.3


364.2


365.2


359.9


Weighted average shares and units - Basic - FFO & OFFO


365.9


362.5


365.8


362.4


Assumed conversion of dilutive securities


0.3


0.4


0.3


0.5


Weighted average shares and units - Diluted - FFO & OFFO


366.2


362.9


366.1


362.9


Earnings per common share - Basic & Diluted


$0.10


$0.03


$0.21


$(0.66)


FFO per share - Basic & Diluted


$0.33


$0.29


$0.64


$0.33


Operating FFO per share - Diluted


$0.33


$0.31


$0.65


$0.60


Common stock dividends declared, per share


$0.19


$0.1725


$0.38


$0.345











(11)

Intangible assets, net (at quarter and year end)






271.5


311.0











(12)

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






152.2


155.3














Additional financial information:























Capital expenditures (DDR share):











Retenanting



$7.9


$10.7


$16.3


$22.7


Maintenance - reimbursable and non reimbursable


6.0


4.3


7.0


5.9


Maintenance PSF of owned GLA - non reimbursable






0.04


0.04















Miscellaneous (DDR share):










Est. value of land owned adjacent to existing centers






$26




Cost basis of headquarters (non-income producing)






40










 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/ddr-reports-second-quarter-2016-operating-results-300304368.html

SOURCE DDR Corp.

 

 

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