CLEVELAND, Aug. 4 /PRNewswire/ -- All information contained in this release pertaining to the number of common shares and per share amounts reflect the Company's two-for-one stock split which was effective August 3, 1998. Developers Diversified Realty Corporation (NYSE: DDR), a real estate investment trust ("REIT"), today announced that second quarter 1998 Funds From Operations ("FFO") grew 24.6%, to $26.9 million from second quarter 1997 FFO of $21.6 million. On a per share basis, FFO (basic) was $0.47 and $0.43 for the three month periods ended June 30, 1998 and 1997, respectively. FFO is a widely accepted measure of REIT performance. On a diluted basis, FFO per share was $0.46 and $0.41 for the three month periods ended June 30, 1998 and 1997, respectively.
FFO for the six months ended June 30, 1998 grew 26.6% to $51.9 million from 1997 FFO of $41.0 million. On a per share basis, FFO (basic) was $0.92 and $0.82 for the six month periods ended June 30, 1998 and 1997, respectively. On a diluted basis, FFO per share was $0.90 and $0.79 for the three month periods ended June 30, 1998 and 1997, respectively.
Commenting on today's announcement Scott A. Wolstein, DDR's chairman and chief executive officer commented, "We're pleased with these quarterly results which reflect that our Company continues to perform well on all cylinders, and that our portfolio continues to achieve positive rental growth."
Net income for the three month period ended June 30, 1998 was $19.1 million or $0.27 per share (basic) for the second quarter of 1998, an increase of 20.0% over second quarter 1997 net income of $15.9 million or $0.25 per share (basic). Net income for the six month period ended June 30, 1998 was $36.3 million or $0.52 per share (basic) as compared to $33.5 million or $0.53 per share (basic) in 1997.
Leasing and expansion activity continued to enhance operating results. Average annualized shopping center base rent per leased square foot, including those properties owned through joint ventures increased 3.6% to $8.54 at June 30, 1998, compared to $8.24 at June 30, 1997. Aggregate base and percentage revenues from 1997 Core Portfolio Properties (i.e. shopping center properties owned since January 1, 1997) increased approximately $3.3 million for the six months ended June 30, 1998, as compared to the same period in 1997, representing a 6.3% increase. At June 30, 1998 the in-place occupancy rate of the Company's portfolio was at 95.9% as compared to 94.7% at June 30, 1997. As of June 30, 1998, the Company's portfolio was actually 97.3% leased which includes leases signed where occupancy had not occurred as of that date.
For reporting tenants representing approximately 15.9 million square feet of the Company's shopping center portfolio, same store sales for the latest twelve month period increased 3.3% to $229 per square foot, compared to $222 per square foot for the previous twelve month period.
The Company is currently expanding/redeveloping ten of its shopping centers, listed below:
The Company is also scheduled to commence expansion/redevelopment projects during the latter half of 1998 at seven additional shopping centers.
The following acquisitions occurred subsequent to March 31, 1998:
In April 1998, the Company acquired from Continental Real Estate, interests in three additional shopping centers located in the Columbus, Ohio area. Combined, these shopping centers will have approximately 1.0 million square feet of total gross leasable area. The Company's proportionate share of the investment cost will approximate $93.4 million upon completion of approximately 345,000 square feet which is currently under construction. The portion under construction has an estimated cost of approximately $42.4 million and the Company is scheduled to close on this investment periodically throughout 1998.
In April 1998, the Company acquired the remaining ownership interest in a 584,000 square foot shopping center in Princeton, New Jersey at a total cost of approximately $36.4 million for consideration in the form of $27.8 million of debt assumed and $0.8 million of operating partnership units and cash. The Company had invested approximately $7.8 million in the shopping center at the end of December 1997.
In July 1998, the Company acquired from Hermes Associates of Salt Lake City, Utah, nine shopping centers and eight additional expansion, development or redevelopment projects. The nine shopping centers total 2.8 million square feet of total gross leasable area. The total cost of this portfolio was approximately $310 million.
In July 1998, the Company also acquired the Phase II development of a 156,000 square foot shopping center in Tanasbourne, Oregon at an aggregate cost of approximately $21.9 million.
The Company acquired 13 shopping centers aggregating approximately 1.6 million square feet of GLA in the St. Louis area from the Sansone Company in July 1998. The Company also acquired a 50% investment the Sansone Group's operating company and several development properties. The total purchase price aggregated approximately $167 million.
On August 4, 1998 the Company, in a joint release with American Industrial Properties REIT (NYSE: IND) ("AIP"), announced the execution of a definitive agreement providing for the strategic investment in AIP by the Company. Under the terms of the Share Purchase Agreement dated to be effective as of July 30, 1998, The Company purchased 949,147 newly issued common shares of beneficial interest at $15.50 per share for approximately $14.7 million. Under the terms of a separate agreement, also dated to be effective as of July 30, 1998, the Company, in exchange for five industrial properties previously owned by the Company and valued at approximately $19.5 million, has acquired approximately 1.3 million additional newly issued AIP shares of beneficial interest. Combined, the Company's acquired shares represent 19.9% of AIP's outstanding shares prior to the Company's purchase. A second purchase by the Company of approximately 5.2 million newly issued shares of AIP for $81.0 million is subject to shareholder approval at a Special Meeting of AIP Shareholders to be held before the end of 1998. Concurrent with entering into the Agreement, AIP increased its Board of Trust Managers by four positions and appointed the Company's designees Scott A. Wolstein, Albert T. Adams, Robert H. Gidel and James A. Schoff to the Board. Mr. Wolstein has been named AIP's Chairman of the Board.
The Company has commenced construction on two shopping centers. The first is a 200,000 square foot Phase II development located adjacent to the Company's Erie, Pennsylvania center, and is to be anchored by Home Depot (not owned by the Company), PETsMART and Circuit City. The second is a 445,000 gross square foot shopping center in Merriam, Kansas which is being developed through a joint venture formed in October 1996, 50% of which is owned by the Company. This center will be anchored by Home Depot (not owned by the Company), Cinemark Theaters, Hen House Supermarket, OfficeMax, Marshalls, Old Navy and PETsMART. Both the Erie, Pennsylvania (Phase II) and Merriam, Kansas shopping centers are scheduled for completion during the last half of 1998.
The Company has also commenced the initial development of three additional shopping centers: (i) a 240,000 square foot shopping center in Toledo, Ohio; (ii) a 170,000 square foot shopping center in Solon, Ohio and (iii) a 230,000 square foot shopping center in Oviedo, Florida (a suburb of Orlando). All three centers are scheduled for completion during the fourth quarter of 1998 and first half of 1999.
The Company has entered or intends to enter into agreements for seven additional projects with various developers throughout the country at a projected cost aggregating approximately $277 million. The majority of these projects should commence development in 1998 and are currently scheduled for completion in 1999 and 2000.
In May 1998, the Company formed DDR OliverMcMillian ("DDROM"), a new private REIT with OliverMcMillian, LLC, based in San Diego, California to develop, acquire, operate and manage urban entertainment and retail projects throughout the United States. DDROM's first investments will be the completion of eight OliverMcMillian initiated urban entertainment and retail projects located in Southern California, Reno, Nevada and Tacoma, Washington with a projected cost of approximately $256 million.
In January 1998, the Company issued, through its Medium Term Note program, $100 million of senior unsecured fixed rate notes with a ten year maturity and a 6.63% coupon rate. The proceeds were used to repay variable rate borrowings on the Company's revolving credit facilities.
In March 1998, the Company announced that it increased the amount of its primary unsecured revolving credit facility to $250 million from $150 million, reduced the pricing to .85% over LIBOR from 1.10% over LIBOR and extended the term for an additional year through April 2001. The amended and restated facility also continues to provide for a competitive bid option for up to 50% of the facility amount. The Company recognized a non cash extraordinary charge of approximately $0.9 million ($0.02 per share) in the first quarter of 1998 relating to the write-off of unamortized deferred finance costs associated with the former revolving credit facility. In June 1998, the Company increased the amount of this unsecured revolving credit facility to $300 million from $250 million. The Company also increased the amount of its other unsecured revolving credit facility to $20 million from $10 million.
In June 1998, Moody's Investor Services announced an upgrade of the Company's senior debt to Baa2.
In April 1998, the Company completed a 669,639 common share offering through a registered unit investment trust and received net proceeds of approximately $25.3 million which were primarily used to repay variable rate borrowings on the Company's unsecured revolving credit facilities.
In July 1998, the Company completed the sale of 4,000,000 Class C depository preferred shares. The net proceeds of approximately $96.5 million were used to repay variable rate borrowings on the Company's unsecured revolving credit facilities.
In July 1998, the Company issued, pursuant to its Medium Term Note program, $100 million senior unsecured fixed rate notes with a 20 year maturity and a 7.5% coupon rate. The proceeds were used to repay variable rate borrowings on the Company's revolving credit facilities.
In July 1998, the Company announced that the board of directors approved a two-for-one stock split to shareholders of record on July 27, 1998. On August 3, 1998 each shareholder received one share of common stock for each share of common stock held. This stock split was effected in the form of a stock dividend.
Developers Diversified Realty Corporation is a fully-integrated real estate company which acquires, develops, owns, leases and manages shopping centers and business centers operating as a self-administered and self-managed Real Estate Investment Trust.
Developers Diversified Realty Corporation considers portions of this information to be forward-looking statements within the meaning of Section 27A of the Securities Exchange Act of 1993 and Section 21 E 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 the results of the Company to differ materially from those indicated by such forward-looking statements, including among other factors, local conditions such as oversupply 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 or the loss of a major tenant.
DEVELOPERS DIVERSIFIED REALTY CORPORATION Financial Highlights (In thousands - except per share data)(a) Three Month Period Six Month Period Ended June 30, Ended June 30, 1998 1997 1998 1997 Revenues: Minimum rent (b) $39,713 $29,637 $75,846 $57,204 Percentage and overage rents (b) 824 550 1,927 1,607 Recoveries from tenants 9,790 7,545 18,827 14,770 Management fee income 808 792 1,564 1,515 Other (c) 1,845 2,342 4,315 3,224 Total 52,980 40,866 102,479 78,320 Expenses: Operating and maintenance 4,210 3,450 8,264 7,124 Real estate taxes 6,536 4,933 12,494 9,325 General and administrative (b) 3,071 2,667 6,003 5,026 Interest 13,314 8,431 24,767 16,478 Depreciation and amortization 10,084 7,800 19,220 15,206 Total 37,215 27,281 70,748 53,159 Income before equity in net income of joint ventures, minority equity interests, gain on sales of real estate and extraordinary item 15,765 13,585 31,731 25,161 Equity in net income of joint ventures (c) 3,473 2,617 5,712 5,334 Minority equity interests (101) (261) (291) (526) Gain on sales of real estate -- -- -- 3,526 Income before extraordinary item 19,137 15,941 37,152 33,495 Extraordinary item - write off of unamortized deferred finance costs -- -- (882) -- Net income $19,137 $15,941 $36,270 $33,495 Net income, applicable to common shareholders $15,587 $12,391 $29,170 $26,395 Funds From Operations ("FFO"): Net income applicable to common shareholders $15,587 $12,391 $29,170 $26,395 Depreciation and amortization of real property 9,933 7,711 18,969 15,302 Equity in net income of joint ventures (3,473) ( 2,617) (5,712) (5,334) Joint ventures' FFO (e) 4,706 4,072 8,437 8,123 Minority interest expense (OP Units) 101 -- 111 -- Extraordinary item -- -- 882 -- Gain on sales of real estate -- -- -- (3,526) Total $26,854 $21,557 $51,857 $40,960 Per share data: (a) Basic earnings per common share: Income before extraordinary item $0.27 $0.25 $0.54 $0.53 Extraordinary item -- -- (.02) -- Net income $0.27 $0.25 $0.52 $0.53 Diluted earnings per common share: Income before extraordinary item $0.27 $0.24 $0.52 $0.52 Extraordinary item -- -- (.02) -- Net income $0.27 $0.24 $0.50 $0.52 Dividends $0.3275 $0.315 $0.655 $0.63 Funds From Operations - Basic (f) $0.47 $0.43 $0.92 $0.82 Funds From Operations - Diluted (f) $0.46 $0.41 $0.90 $0.79 Basic - average shares outstanding (thousands) 56,703 50,328 56,105 49,682 Diluted - average shares outstanding (thousands)58,003 51,226 57,394 $50,545 (a) Effective August 3, 1998, the Company executed a two-for-one stock split, for shareholders of record on July 27, 1998. All per share information and number of shares outstanding reflects the stock split. (b) Increases in shopping center base, percentage and overage rental revenues for the six months ended June 30, 1998 as compared to 1997, aggregated $19.0 million and consisted of $3.3 million relating to leasing and expansion of core portfolio properties (an increase of 6.3% over 1997), $13.8 million relating to 1997 and 1998 acquisitions and $2.2 million relating to developments. These increases were offset by a decrease of $0.3 million relating to the sale of one shopping center in December 1997. Included in the rental revenues for the six months ended June 30, 1998 and 1997 is approximately $1.5 million and $0.8 million, respectively, of revenue resulting from the recognition of straight line rents primarily associated with recent acquisitions and developments. (c) Other income for the six months ended June 30, 1998 included approximately $1.7 million in lease termination revenues and development fee income of which approximately $0.5 million is reflected in the three month period ended June 30, 1998. Other income for the six month period ended June 30, 1997 included approximately $1.8 million of lease termination revenues and development fee income of which approximately $1.5 million is reflected in the three month period ended June 30, 1997. (d) General and administrative expenses include internal leasing salaries, legal salaries and related expenses associated with the leasing of space which are charged to operations as incurred. All internal costs associated with acquisitions are expensed as incurred. (e) The following is a summary of the Company's combined operating results relating to joint ventures (in thousands): Three month period Six month period ended June 30, ended June 30, 1998 1997 1998 1997 Revenues from operations (a) $24,436 $20,648 $44,946 $39,952 Operating expenses 5,740 5,067 10,529 9,726 Depreciation 3,492 2,962 6,537 5,666 Interest expense 9,515 7,291 17,642 13,719 Total 18,747 15,320 34,708 29,111 Income before gain on sales of real estate 5,689 5,328 10,238 10,841 Gain on sales of real estate 2,812 -- 2,812 -- Net income $8,501 $5,328 $13,050 $10,841 DDRC Ownership interests (b) $3,688 $2,617 $5,927 $5,334 Joint Venture Funds From Operations are summarized as follows: Net income $8,501 $5,328 $13,050 $10,841 Gain on sales of real estate ($2,812) -- ($2,812) -- Depreciation of real property 3,492 2,962 6,537 5,666 Total $9,181 $8,290 $16,775 $16,507 DDRC Ownership interests (b) $4,706 $4,072 $8,437 $8,123 (a) Revenues for the three month periods ended June 30, 1998 and 1997 include approximately $0.7 million and $0.8 million resulting from the recognition of straight line rents of which the Company's proportionate share is $0.3 million and $0.4 million respectively. Revenues for the six month periods ended June 30, 1998 and 1997 include approximately $1.3 million and $1.4 million resulting from the recognition of straight line rents of which the Company's proportionate share is $0.6 million and $0.7 million respectively. (b) At June 30, 1998, the Company owned a 50% joint venture interest relating to 15 shopping center properties, an 80% joint venture interest in two shopping center properties, a 35% joint venture interest in one shopping center property and a 25% interest in the Prudential Retail Value Fund. At June 30, 1997, the Company owned a 50% joint venture interest relating to 13 shopping center properties and a 35% joint venture interest in one shopping center property. (f) For purposes of computing FFO per share, the weighted average shares outstanding were adjusted to reflect the conversion, on a weighted average basis, of 353,058 Operating Partnership Units outstanding at June 30, 1998 into common shares of the Company of 292,966 and 162,366 for the three and six months ended June 30, 1998, respectively. The weighted average diluted shares outstanding were 60.4 million and 54.9 million, respectively for the three month period ended June 30, 1998 and 1997, and 59.7 million and 54.2 million, for the six month period ended June 30, 1998 and 1997, respectively. DEVELOPERS DIVERSIFIED REALTY CORPORATION Financial Highlights (In thousands) Selected Balance Sheet Data: June 30, 1998 December 31, 1997 Assets: Real estate and rental property: Land $ 216,137 $ 183,809 Land under development 32,013 23,668 Buildings 1,216,996 1,071,717 Fixtures and tenant improvements 21,092 18,418 Construction in progress 45,964 28,130 Total 1,532,202 1,325,742 Less accumulated depreciation (190,903) (171,737) Total 1,341,299 1,154,005 Other real estate investments -- 72,149 Cash 1,882 18 Advances to and investments in joint ventures 185,148 136,267 Other assets 39,227 29,479 Total $1,567,556 $1,391,918 Liabilities: Indebtedness: Revolving credit facilities $139,000 $139,700 Senior unsecured fixed rate debt 492,075 392,254 Mortgage debt 152,276 89,676 Subordinated debentures 41,277 46,891 Total 824,628 668,521 Other liabilities 41,473 37,701 Total 866,101 706,222 Minority interest 6,978 16,646 Shareholders' equity 694,477 669,050 Total $1,567,556 $1,391,918 Combined condensed balance sheets relating to the Company's joint ventures: June 30, December 31, 1998 1997 Land $ 165,732 $ 147,466 Buildings 552,065 482,153 Fixtures and tenant improvements 1,704 1,315 Construction in progress 97,664 19,172 Total 817,165 650,106 Accumulated depreciation (47,554) (26,113) Real estate, net 769,611 623,993 Other assets 54,093 25,817 Total $ 823,704 $ 649,810 Mortgage debt (a) $ 482,069 $ 389,160 Notes and accrued interest payable to DDRC 41,022 32,667 Other liabilities 20,368 9,549 Total 543,459 431,376 Accumulated equity 280,245 218,434 Total $ 823,704 $ 649,810 (a) The Company's proportionate share of joint venture mortgage debt aggregated approximately $250.4 million and $190.3 million at June 30, 1998 and December 31, 1997, respectively. SOURCE Developers Diversified Realty Corporation