DDR Reports Fourth Quarter And Year End 2016 Operating Results

Feb 13, 2017

DDR Reports Fourth Quarter And Year End 2016 Operating Results

BEACHWOOD, Ohio , Feb. 13, 2017 /PRNewswire/ -- DDR Corp. (NYSE: DDR) today announced operating results for the fourth quarter and year ended December 31, 2016. 

Financial Highlights

  • Fourth quarter net income attributable to common shareholders was $28.1 million , or $0.08 per diluted share
  • Fourth quarter operating funds from operations attributable to common shareholders ("Operating FFO") was $111.1 million or $0.30 per diluted share

Significant Quarterly Activity

  • Named William T. Ross, a seasoned veteran of the retail real estate industry, as chief operating officer to oversee asset and property management
  • Appointed Jane E. DeFlorio, an experienced investment banker with broad retail expertise, as a director
  • Generated same store net operating income growth, excluding Puerto Rico, of 2.5% on a pro rata basis
  • Executed 272 new leases and renewals for 1.9 million square feet
  • Generated new leasing spreads of 21.3% and renewal leasing spreads of 8.3%, both on a pro rata basis and excluding Puerto Rico
  • Achieved a portfolio leased rate of 95.0% at December 31, 2016, compared to 95.4% at September 30, 2016, on a pro rata basis
  • Sold 24 assets and three land parcels for $532 million during the quarter, totaling $497 million at DDR's share

2016 Year-End Highlights

  • Net income attributable to common shareholders for the year ended December 31, 2016, was $37.6 million , or $0.10 per diluted share, which compares to a net loss of $94.5 million , or $0.27 per diluted share for the prior year
  • Generated Operating FFO of $1.28 per diluted share for the full year 2016, an increase of 4.1% compared to 2015
  • Acquired two shopping centers for $148 million at DDR's share
  • Sold 50 assets and nine land parcels for $833 million at DDR's share
  • Executed 1,221 new leases and renewals for 9.0 million square feet in 2016
  • Generated new leasing spreads for the full year 2016 of 25.0% and renewal leasing spreads of 8.4%, both on a pro rata basis and excluding Puerto Rico
  • Increased the annualized base rent per occupied square foot by 4.7% on a pro rata basis to $15.46 at December 31, 2016, from $14.76 at December 31, 2015

"I am pleased to report another strong quarter of executing on our stated near-term goals of asset sales, leverage reduction and organizational advancement. As we look forward, we are highly focused on completing the Company's transition and positioning the portfolio, balance sheet, and organization for years to come," commented Thomas F. August, president and chief executive officer.   

About DDR Corp.
DDR is an owner and manager of 319 value-oriented shopping centers representing 106 million square feet in 35 states and Puerto Rico. The Company owns a high-quality portfolio of open-air shopping centers in major metropolitan areas that provide a highly compelling shopping experience and merchandise mix for retail partners and consumers. The Company actively manages its assets with a focus on creating 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
The Company will hold its quarterly conference call tomorrow, February 14, 2017, at 11:00 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, www.ddr.com/events. A copy of the Company's Supplemental package is available on the Company's website at www.ddr.com.

Non-GAAP Measures
FFO is a supplemental non-GAAP financial measure used as a standard in the real estate industry and is 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 generally defined and calculated by the Company as net income (loss), 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 (loss) from joint ventures and equity income (loss) 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's calculation of FFO is consistent 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 supplemental 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 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. 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 above.

FFO, Operating FFO, NOI 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 this release and the accompanying financial supplement.

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 deleveraging strategy; any impact or results from the Company's portfolio transition or any change in strategy; and the finalization of the financial statements for the three months and year ended December 31, 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














4Q16


4Q15


12M16


12M15


Revenues:













Minimum rents (1)





$167,933


$179,154


$701,208


$719,737


Percentage rent





2,827


2,675


7,610


6,267


Recoveries





55,701


58,703


238,419


246,719


Other property revenues (2)





5,707


5,998


22,270


22,377







232,168


246,530


969,507


995,100


Expenses (3):













Operating and maintenance





28,812


33,893


131,177


144,611


Real estate taxes





35,197


36,271


145,907


149,082







64,009


70,164


277,084


293,693















Net operating income





168,159


176,366


692,423


701,407















Other income (expense):













Fee income





8,093


8,258


36,298


32,971


Interest income





9,254


7,510


37,054


29,213


Interest expense (4)





(51,740)


(59,203)


(217,589)


(241,727)


Depreciation and amortization





(99,468)


(102,575)


(389,519)


(402,045)


General and administrative (5)





(20,941)


(17,920)


(76,101)


(73,382)


Other income (expense), net (6)





(148)


(439)


3,322


(1,739)


Impairment charges (7)





(6,029)


0


(110,906)


(279,021)


Income (loss) before earnings from JVs and other





7,180


11,997


(25,018)


(234,323)















Equity in net income (loss) of JVs





1,618


(5,486)


15,699


(3,135)


Impairment of joint venture investments





0


(1,909)


0


(1,909)


(Loss) gain on sale and change in control





0


0


(1,087)


7,772


Tax expense





(680)


(285)


(1,781)


(6,286)


Gain on disposition of real estate, net





25,916


89,417


73,386


167,571


Net income (loss)





34,034


93,734


61,199


(70,310)


Non-controlling interests





(293)


(268)


(1,187)


(1,858)


Net income (loss) DDR





33,741


93,466


60,012


(72,168)


Preferred dividends





(5,594)


(5,594)


(22,375)


(22,375)


Net income (loss) Common Shareholders





28,147


87,872


37,637


(94,543)


Depreciation and amortization of real estate





97,356


100,582


381,170


393,847


Equity in net (income) loss of JVs





(1,618)


5,486


(15,699)


3,135


Impairment of depreciable joint venture investments





0


1,909


0


1,909


JVs' FFO





6,868


6,465


26,025


27,579


Non-controlling interests





76


69


303


635


Impairment of depreciable real estate





6,029


0


110,906


179,748


Gain on disposition of depreciable real estate, net





(25,698)


(85,728)


(74,182)


(164,010)


FFO Common Shareholders





111,160


116,655


466,160


348,300


Non-operating items, net (8)





(74)


(2,533)


2,232


97,890


Operating FFO





$111,086


$114,122


$468,392


$446,190


FFO per share Diluted (9)





$0.30


$0.32


$1.27


$0.96


Operating FFO per share Diluted (9)





$0.30


$0.31


$1.28


$1.23








































DDR Corp.

Balance Sheet:  Consolidated Interests












$ in thousands






















At Year End











4Q16


4Q15


Assets:













Land









$1,990,406


$2,184,145


Buildings









6,412,532


6,965,632


Fixtures and tenant improvements









735,685


743,037











9,138,623


9,892,814


Depreciation









(1,996,176)


(2,062,899)











7,142,447


7,829,915


Construction in progress and land









105,435


235,385


Real estate, net









7,247,882


8,065,300















Investments in JVs









60,793


72,576


Receivable – preferred equity interest









393,338


395,156


Cash









30,430


22,416


Restricted cash









8,795


10,104


Notes receivable, net









49,503


42,534


Receivables, net









121,367


129,089


Other assets, net (10)









285,410


359,913


Total Assets









8,197,518


9,097,088















Liabilities and Equity:













Revolving credit facilities









0


210,000


Unsecured debt









2,913,217


3,149,188


Unsecured term loan









398,399


397,934


Secured debt









1,182,352


1,382,415











4,493,968


5,139,537


Dividends payable









75,245


68,604


Other liabilities (11)









382,293


425,478


Total Liabilities









4,951,506


5,633,619















Preferred shares









350,000


350,000


Common shares









36,630


36,529


Paid-in capital









5,487,212


5,466,511


Distributions in excess of net income









(2,632,327)


(2,391,793)


Deferred compensation









15,149


15,537


Other comprehensive income









(4,192)


(6,283)


Common shares in treasury at cost









(14,957)


(15,316)


Non-controlling interests









8,497


8,284


Total Equity









3,246,012


3,463,469















Total Liabilities and Equity









$8,197,518


$9,097,088








































DDR Corp.

Income Statement:  Unconsolidated Interests at 100%















$ in thousands


















4Q16


4Q15


12M16


12M15


Revenues:













Minimum rents





$96,587


$95,265


$386,978


$392,657


Percentage rent





1,435


1,106


2,842


2,431


Recoveries





29,323


29,087


118,479


119,321


Other property revenues





1,544


1,875


5,066


10,288







128,889


127,333


513,365


524,697


Expenses:













Operating and maintenance





16,819


18,921


71,799


76,556


Real estate taxes





17,989


17,509


73,185


70,368







34,808


36,430


144,984


146,924















Net operating income





94,081


90,903


368,381


377,773















Other income (expense):













Interest expense





(32,735)


(33,003)


(132,943)


(140,701)


Depreciation and amortization





(49,187)


(49,648)


(195,198)


(207,816)


Impairment charges





0


(52,252)


(13,598)


(52,700)


Preferred share expense





(8,411)


(6,743)


(33,418)


(25,991)


Other (expense) income, net





(5,554)


(11,732)


(23,513)


(30,235)







(1,806)


(62,475)


(30,289)


(79,670)


Gain on disposition of real estate, net





3,006


21,385


57,261


17,188


Net income (loss) attributable to unconsolidated JVs





1,200


(41,090)


26,972


(62,482)


Depreciation and amortization





49,187


49,648


195,198


207,816


Impairment of depreciable real estate





0


52,252


13,598


52,700


Gain on disposition of depreciable real estate, net





(2,688)


(21,385)


(56,943)


(17,188)


FFO





47,699


39,425


178,825


180,846


FFO at DDR's ownership interests





6,868


6,465


26,025


27,579


Operating FFO at DDR's ownership interests (8)





$6,866


$6,667


$26,049


$27,829








































DDR Corp.

Balance Sheet:  Unconsolidated Interests at 100%












$ in thousands






















At Year End











4Q16


4Q15


Assets:













Land









$1,287,675


$1,343,889


Buildings









3,376,720


3,551,227


Improvements









203,824


191,581











4,868,219


5,086,697


Depreciation









(884,356)


(817,235)











3,983,863


4,269,462


Construction in progress and land









56,983


52,390


Real estate, net









4,040,846


4,321,852


Cash and restricted cash









50,378


58,916


Receivables, net









50,685


52,768


Other assets, net









248,664


318,546


Total Assets









4,390,573


4,752,082















Liabilities and Equity:













Mortgage debt









3,034,399


3,177,603


Notes and accrued interest payable to DDR









1,584


1,556


Other liabilities









206,949


219,799


Total Liabilities









3,242,932


3,398,958















Redeemable preferred equity









393,338


395,156


Accumulated equity









754,303


957,968


Total Liabilities and Equity









$4,390,573


$4,752,082








































DDR Corp.

Financial Statements:  Footnotes






$ in millions, except per share













4Q16


4Q15


12M16


12M15














(1)

Minimum rents:













Straight-line rent, net





$0.9


$1.5


$4.6


$5.3


Below-market rent, net





2.0


0.7


5.7


2.9


Ground lease revenue





10.3


9.5


40.9


37.4














(2)

Other property revenues:













Lease termination fees





0.4


0.5


3.5


2.8














(3)

Operating expenses:













Recoverable expenses





(59.2)


(64.2)


(253.2)


(268.3)


Non-recoverable expenses





(4.8)


(6.0)


(23.9)


(25.4)


Straight-line ground rent income (expense)





0.6


(0.1)


0.3


(0.5)


Expensed costs of suspended developments





(0.1)


(0.1)


(0.4)


(0.5)














(4)

Non-cash interest expense:













Debt fair value amortization





1.5


1.6


6.3


14.4


Loan cost amortization





(2.0)


(2.3)


(8.4)


(9.6)


Interest expense (capitalized)





0.4


1.5


3.1


6.7














(5)

General and administrative expenses:













Executive separation charges





(0.0)


(0.3)


(0.0)


(2.6)


Stock compensation expenses





(2.3)


(1.4)


(7.0)


(6.6)


Internal leasing expenses





(1.6)


(2.0)


(7.7)


(7.5)


Construction administrative costs (capitalized)





2.4


2.1


8.1


9.1














(6)

Other income (expense):













Other income (primarily insurance recovery in 2016), net





(0.1)


(0.3)


3.8


(0.7)


Debt extinguishment, net





(0.0)


(0.1)


(0.5)


(1.0)














(7)

Impairment charges:













Assets marketed for sale





(6.0)


(0.0)


(110.9)


(179.7)


Land previously held for development





(0.0)


(0.0)


(0.0)


(99.3)














(8)

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


0.3


0.0


2.6


Transaction, debt extinguishment, litigation, other, net





0.1


0.7


0.6


2.3


Joint ventures – transaction, currency, other





0.0


0.2


0.0


0.2


Gain on sale and change in control of interests, net





0.0


0.0


0.0


(7.8)


Tax expense (primarily Puerto Rico restructuring), net





0.0


0.0


(0.3)


4.4


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





(0.2)


(3.7)


1.9


(3.1)







(0.1)


(2.5)


2.2


97.9








































DDR Corp.

Financial Statements:  Footnotes



$ in millions, except per share








4Q16


4Q15


12M16


12M15











(9)

Outstanding per share information:










Common shares (at quarter end)


366.3


365.3


366.3


365.3


OP units (at quarter end)


0.4


0.4


0.4


0.4


Total shares and units (at quarter end)


366.7


365.7


366.7


365.7


Weighted average shares and units – Basic – EPS


366.0


362.7


365.3


360.9


Assumed conversion of dilutive securities


0.1


2.5


0.3


0.0


Weighted average shares and units – Diluted – EPS


366.1


365.2


365.6


360.9


Weighted average shares and units – Basic – FFO & OFFO


366.6


364.0


366.1


362.9


Assumed conversion of dilutive securities


0.1


0.4


0.3


0.4


Weighted average shares and units – Diluted – FFO & OFFO


366.7


364.4


366.4


363.3


Earnings per common share – Basic & Diluted


$0.08


$0.24


$0.10


$(0.27)


FFO per share – Basic & Diluted


$0.30


$0.32


$1.27


$0.96


Operating FFO per share – Diluted


$0.30


$0.31


$1.28


$1.23


Common stock dividends declared, per share


$0.19


$0.1725


$0.76


$0.69











(10)

Intangible assets, net (at year end)






241.6


311.0











(11)

Below-market leases, net (at year end)






147.9


155.3











Additional financial information:




















Capital expenditures (DDR share):










Retenanting


$7.3


$12.9


$32.3


$49.0


Maintenance – reimbursable and non reimbursable


2.4


2.9


17.4


16.2


Maintenance PSF of owned GLA – non reimbursable






0.14


0.13












Miscellaneous (DDR share):










Est. value of land owned adjacent to existing centers






$28




Cost basis of headquarters (non-income producing)






40







































DDR Corp.

Reconciliation of Net Income Attributable to DDR to Same Store NOI (1)







$ in millions






















At DDR Share

(Non-GAAP)







4Q16


4Q15


4Q16


4Q15


GAAP Reconciliation:













Net income attributable to DDR





$33.7


$93.5


$33.7


$93.5


Fee income





(8.1)


(8.3)


(8.1)


(8.3)


Interest income





(9.2)


(7.5)


(9.2)


(7.5)


Interest expense





51.7


59.2


51.7


59.2


Depreciation and amortization





99.5


102.6


99.5


102.6


General and administrative





20.9


17.9


20.9


17.9


Other expense





0.1


0.4


0.1


0.4


Impairment charges





6.0


0.0


6.0


0.0


Equity in net (income) loss of joint ventures





(1.6)


5.5


(1.6)


5.5


Impairment of joint venture investments





0.0


1.9


0.0


1.9


Tax expense





0.7


0.3


0.7


0.3


Gain on disposition of real estate





(25.9)


(89.4)


(25.9)


(89.4)


Income from non-controlling interests





0.3


0.3


0.3


0.3


Consolidated NOI





168.1


176.4


168.1


176.4


DDR's consolidated JV





0.0


0.0


(0.4)


(0.4)


Consolidated NOI, net of non-controlling interests





168.1


176.4


167.7


176.0















Net income (loss) from unconsolidated joint ventures





1.2


(41.1)


1.2


(6.7)


Interest expense





32.7


33.0


5.2


5.5


Depreciation and amortization





49.2


49.7


5.7


6.1


Impairment charges





0.0


52.3


0.0


10.5


Preferred share expense





8.4


6.7


0.4


0.3


Other expense, net





5.6


11.7


1.0


1.2


Gain on disposition of real estate, net





(3.0)


(21.4)


(0.1)


(3.4)


Unconsolidated NOI





94.1


90.9


13.4


13.5















Total Consolidated + Unconsolidated NOI





262.2


267.3


181.1


189.5


Less:  Non-Same Store NOI adjustments





(21.6)


(33.3)


(15.6)


(27.2)


Total SSNOI





240.6


234.0


165.5


162.3


Less:  Puerto Rico Same Store NOI





(22.9)


(23.2)


(22.9)


(23.2)


Total SSNOI excluding Puerto Rico





$217.7


$210.8


$142.6


$139.1


SSNOI % Increase





2.8%




2.0%




SSNOI % Increase excluding Puerto Rico





3.3%




2.5%





(1)

Excludes major redevelopment activity; see Investments section for additional detail.  See calculation definition in the Non-GAAP Measures
section.

 

PRER

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/ddr-reports-fourth-quarter-and-year-end-2016-operating-results-300406414.html

SOURCE DDR Corp.

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