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DDR Reports Third Quarter 2016 Operating Results

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October 26, 2016 5:00 PM EDT

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

Financial Highlights

  • Third quarter net loss attributable to common shareholders was $66.0 million, or $0.18 per diluted share, compared to net income of $54.0 million, or $0.15 per diluted share, for the prior-year comparable period.
  • Third quarter operating funds from operations attributable to common shareholders ("Operating FFO") increased $7.1 million, or 6.3%, to $120.6 million or $0.33 per diluted share, compared to $113.5 million, or $0.31 per diluted share, for the prior-year comparable period.

Significant Quarterly Activity

  • Generated same store net operating income growth of 3.4% on a pro rata basis
  • Executed 310 new leases and renewals for 2.9 million square feet
  • Generated new leasing spreads of 21.1% and renewal leasing spreads of 8.0%, both on a pro rata basis
  • The portfolio leased rate was 95.4% at September 30, 2016, compared to 96.0% at December 31, 2015, on a pro rata basis
  • Increased the annualized base rent per occupied square foot by 5.6% on a pro rata basis to $15.36 at September 30, 2016, from $14.54 at September 30, 2015
  • Sold seven operating assets for $61 million during the quarter, totaling $55 million at DDR's share
  • Sold an additional 17 properties for $402 million in October at DDR's share

"I am pleased to report that we continue to show strong operating and transactional performance as well as remain firmly on track toward our goal of significantly reduced leverage.  Fundamentals are sound, and I am proud of our team's execution this quarter as we make great strides toward our corporate and portfolio objectives," commented Thomas F. August, President and Chief Executive Officer.   

2016 GuidanceThe Company is revising its 2016 Operating FFO and NAREIT defined FFO guidance estimate to a range of $1.26 to $1.28 per diluted share from a range of $1.23 to $1.26 per diluted share primarily driven by the impact of disposition timing.  The Company is also revising its full year disposition guidance estimate to a range of $700 million to $900 million at DDR's pro rata share from $600 million to $800 million at DDR's share.

About DDR Corp.DDR is an owner and manager of 327 value-oriented shopping centers representing 107 million square feet in 36 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 InformationThe Company will hold its quarterly conference call tomorrow, October 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-and-presentations.cfm.  A copy of the Company's Supplemental package is available on the Company's website at www.ddr.com.

Non-GAAP DisclosuresFFO 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 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).  The SSNOI calculation for the three-month period ended September 30, 2016, also excludes a portfolio of 16 assets sold on October 7, 2016, given the significance of the sale and transaction closing proximity to the quarter end.  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 HarborDDR 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 the period ended September 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

3Q16

3Q15

9M16

9M15

Revenues:

Minimum rents (1)

$177,844

$180,523

$533,275

$540,583

Percentage rent

1,193

835

4,783

3,592

Recoveries

59,743

61,915

182,718

188,016

Other property revenues (2)

6,458

5,614

16,563

16,379

245,238

248,887

737,339

748,570

Expenses (3):

Operating and maintenance

31,269

35,963

102,365

110,718

Real estate taxes

36,900

37,385

110,710

112,811

68,169

73,348

213,075

223,529

Net operating income

177,069

175,539

524,264

525,041

Other income (expense):

Fee income

8,562

8,248

28,205

24,713

Interest income

9,304

7,331

27,800

21,703

Interest expense (4)

(53,940)

(58,217)

(165,849)

(182,524)

Depreciation and amortization

(95,451)

(97,155)

(290,051)

(299,470)

General and administrative (5)

(18,785)

(17,596)

(55,160)

(55,462)

Other income (expense), net (6)

(384)

(240)

3,470

(1,300)

Impairment charges (7)

(104,877)

0

(104,877)

(279,021)

(Loss) income before earnings from JVs and other

(78,502)

17,910

(32,198)

(246,320)

Equity in net (loss) income of JVs

(1,457)

648

14,081

2,351

(Loss) gain on sale and change in control

(1,087)

0

(1,087)

7,772

Tax expense

(398)

(528)

(1,101)

(6,001)

Gain on disposition of real estate, net

21,368

41,793

47,470

78,154

Net (loss) income

(60,076)

59,823

27,165

(164,044)

Non-controlling interests

(284)

(268)

(894)

(1,590)

Net (loss) income DDR

(60,360)

59,555

26,271

(165,634)

Preferred dividends

(5,594)

(5,594)

(16,781)

(16,781)

Net (loss) income Common Shareholders

(65,954)

53,961

9,490

(182,415)

Depreciation and amortization of real estate

93,334

95,159

283,814

293,265

Equity in net loss (income) of JVs

1,457

(648)

(14,081)

(2,351)

JVs' FFO

6,581

6,595

19,157

21,114

Non-controlling interests

76

69

227

566

Impairment of depreciable real estate

104,877

0

104,877

179,748

Gain on disposition of depreciable real estate, net

(20,234)

(41,734)

(48,484)

(78,282)

FFO Common Shareholders

120,137

113,402

355,000

231,645

Non-operating items, net (8)

499

136

2,306

100,423

Operating FFO

$120,636

$113,538

$357,306

$332,068

FFO per share – Diluted (9)

$0.33

$0.31

$0.97

$0.64

Operating FFO per share – Diluted (9)

$0.33

$0.31

$0.98

$0.91

DDR Corp.Balance Sheet:  Consolidated Interests

$ in thousands

At Period End

3Q16

4Q15

Assets:

Land

$2,122,070

$2,184,145

Buildings

6,890,141

6,965,632

Fixtures and tenant improvements

773,664

743,037

9,785,875

9,892,814

Depreciation

(2,174,268)

(2,062,899)

7,611,607

7,829,915

Construction in progress and land

125,557

235,385

Real estate, net

7,737,164

8,065,300

Investments in JVs

58,318

72,576

Receivable – preferred equity interest

402,291

395,156

Cash

20,658

22,416

Restricted cash

12,696

10,104

Notes receivable, net

44,823

42,534

Receivables, net

127,249

129,089

Other assets, net (10)

317,817

359,913

Total Assets

8,721,016

9,097,088

Liabilities and Equity:

Revolving credit facilities

310,000

210,000

Unsecured debt

2,912,247

3,149,188

Unsecured term loan

398,284

397,934

Secured debt

1,345,848

1,382,415

4,966,379

5,139,537

Dividends payable

75,158

68,604

Other liabilities (11)

398,829

425,478

Total Liabilities

5,440,366

5,633,619

Preferred shares

350,000

350,000

Common shares

36,594

36,529

Paid-in capital

5,480,292

5,466,511

Distributions in excess of net income

(2,590,837)

(2,391,793)

Deferred compensation

15,332

15,537

Other comprehensive income

(4,484)

(6,283)

Common shares in treasury at cost

(14,826)

(15,316)

Non-controlling interests

8,579

8,284

Total Equity

3,280,650

3,463,469

Total Liabilities and Equity

$8,721,016

$9,097,088

DDR Corp. Income Statement:  Unconsolidated Interests at 100%

$ in thousands

3Q16

3Q15

9M16

9M15

Revenues:

Minimum rents

$96,856

$95,218

$290,391

$297,392

Percentage rent

503

383

1,407

1,325

Recoveries

28,875

28,772

89,156

90,234

Other property revenues

1,442

2,325

3,522

8,413

127,676

126,698

384,476

397,364

Expenses:

Operating and maintenance

17,337

18,320

54,980

57,635

Real estate taxes

18,210

17,118

55,196

52,859

35,547

35,438

110,176

110,494

Net operating income

92,129

91,260

274,300

286,870

Other income (expense):

Interest expense

(33,567)

(33,202)

(100,208)

(107,698)

Depreciation and amortization

(47,955)

(49,949)

(146,011)

(158,168)

Impairment charges

(13,598)

0

(13,598)

(448)

Preferred share expense

(8,438)

(6,518)

(25,007)

(19,248)

Other (expense) income, net

(5,829)

(6,309)

(17,959)

(18,503)

(17,258)

(4,718)

(28,483)

(17,195)

Gain (loss) on disposition of real estate, net

658

(2,626)

54,255

(4,197)

Net (loss) income attributable to unconsolidated JVs

(16,600)

(7,344)

25,772

(21,392)

Depreciation and amortization

47,955

49,949

146,011

158,168

Impairment of depreciable real estate

13,598

0

13,598

448

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

(658)

2,626

(54,255)

4,197

FFO

44,295

45,231

131,126

141,421

FFO at DDR's ownership interests

6,581

6,595

19,157

21,114

Operating FFO at DDR's ownership interests (8)

$6,587

$6,639

$19,183

$21,162

DDR Corp. Balance Sheet:  Unconsolidated Interests at 100%

$ in thousands

At Period End

3Q16

4Q15

Assets:

Land

$1,296,413

$1,343,889

Buildings

3,398,184

3,551,227

Improvements

198,657

191,581

4,893,254

5,086,697

Depreciation

(854,821)

(817,235)

4,038,433

4,269,462

Land held for development and construction in progress

51,967

52,390

Real estate, net

4,090,400

4,321,852

Cash and restricted cash

76,447

58,916

Receivables, net

50,461

52,768

Other assets, net

268,726

318,546

Total Assets

4,486,034

4,752,082

Liabilities and Equity:

Mortgage debt

3,095,354

3,177,603

Notes and accrued interest payable to DDR

2,481

1,556

Other liabilities

216,229

219,799

Total Liabilities

3,314,064

3,398,958

Redeemable preferred equity

402,291

395,156

Accumulated equity

769,679

957,968

Total Liabilities and Equity

$4,486,034

$4,752,082

DDR Corp. Financial Statements:  Footnotes

$ in millions, except per share

3Q16

3Q15

9M16

9M15

(1)

Minimum rents:

Straight-line rent, net

$1.1

$1.6

$3.7

$3.8

Below-market rent, net

2.2

1.0

3.6

2.2

Ground lease revenue

10.3

9.5

30.6

27.9

(2)

Other property revenues:

Lease termination fees

1.7

0.7

3.2

2.3

(3)

Operating expenses:

Recoverable expenses

(62.8)

(66.9)

(194.0)

(204.1)

Non-recoverable expenses

(5.4)

(6.4)

(19.1)

(19.4)

Straight-line ground rent expense

(0.1)

(0.1)

(0.3)

(0.4)

Expensed costs of suspended developments

(0.1)

(0.1)

(0.3)

(0.4)

(4)

Non-cash interest expense:

Debt fair value amortization

1.6

3.0

4.7

12.7

Loan cost amortization

(2.1)

(2.4)

(6.3)

(7.3)

Interest expense (capitalized)

0.7

1.9

2.6

5.1

(5)

General and administrative expenses:

Executive separation charges

(0.0)

(0.0)

(0.0)

(2.3)

Stock compensation expenses

(1.4)

(1.5)

(4.7)

(5.2)

Internal leasing expenses

(2.0)

(1.8)

(6.1)

(5.5)

Construction administrative costs (capitalized)

1.8

2.3

5.7

7.0

(6)

Other income (expense):

Other income (primarily insurance recovery in 2016), net

0.0

(0.2)

3.9

(0.4)

Debt extinguishment, net

(0.4)

(0.0)

(0.4)

(0.9)

(7)

Impairment charges:

Assets marketed for sale

(104.9)

(0.0)

(104.9)

(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

0.0

0.0

2.3

Transaction, debt extinguishment, litigation, other, net

0.5

0.1

0.5

1.6

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

Loss on disposition of non-depreciable real estate, net

0.0

0.0

2.1

0.6

0.5

0.1

2.3

100.4

DDR Corp. Financial Statements:  Footnotes

$ in millions, except per share

3Q16

3Q15

9M16

9M15

(9)

Outstanding per share information:

Common shares (at quarter end)

365.9

362.1

365.9

362.1

OP units (at quarter end)

0.4

0.4

0.4

0.4

Total shares and units (at quarter end)

366.3

362.5

366.3

362.5

Weighted average shares and units – Basic – EPS

365.5

361.1

365.1

360.3

Assumed conversion of dilutive securities

0.0

2.5

0.3

0.0

Weighted average shares and units – Diluted – EPS

365.5

363.6

365.4

360.3

Weighted average shares and units – Basic – FFO & OFFO

366.2

362.5

365.9

362.4

Assumed conversion of dilutive securities

0.3

0.4

0.3

0.5

Weighted average shares and units – Diluted – FFO & OFFO

366.5

362.9

366.2

362.9

Earnings per common share – Basic & Diluted

$(0.18)

$0.15

$0.02

$(0.51)

FFO per share – Basic & Diluted

$0.33

$0.31

$0.97

$0.64

Operating FFO per share – Diluted

$0.33

$0.31

$0.98

$0.91

Common stock dividends declared, per share

$0.19

$0.1725

$0.57

$0.5175

(10)

Intangible assets, net (at quarter and year end)

265.6

311.0

(11)

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

151.7

155.3

Additional financial information:

Capital expenditures (DDR share):

Retenanting

$8.8

$13.4

$25.0

$36.1

Maintenance – reimbursable and non reimbursable

7.9

7.4

14.9

13.3

Maintenance PSF of owned GLA – non reimbursable

0.10

0.09

Miscellaneous (DDR share):

Est. value of land owned adjacent to existing centers

$24

Cost basis of headquarters (non-income producing)

40

Guidance Reconciliation:

2016E

2016E

(Per Share – Diluted)

Net income Common Shareholders

$19 - $24 

$0.05 - $0.06 

Depreciation and amortization of real estate

372 - 375 

1.01 -1.02 

Equity in net income of JVs

(14) -(16)

(0.04)

JVs' FFO

25 - 27 

0.07

Impairment of depreciable real estate

105

0.29

Gain on disposition of real estate, net

(48)

(0.13)

FFO (NAREIT)

459 - 467 

1.25 - 1.27 

Loss on disposition of non-depreciable real estate, net

2

0.01

Operating FFO

$461 - $469 

$1.26 - $1.28 

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

$ in millions

At DDR Share

3Q16

3Q15

3Q16

3Q15

GAAP Reconciliation:

Net income attributable to DDR

($60.4)

$59.6

($60.4)

$59.6

Fee income

(8.6)

(8.3)

(8.6)

(8.3)

Interest income

(9.3)

(7.3)

(9.3)

(7.3)

Interest expense

53.9

58.2

53.9

58.2

Depreciation and amortization

95.5

97.2

95.5

97.2

General and administrative

18.8

17.6

18.8

17.6

Other expense

0.4

0.2

0.4

0.2

Impairment charges

104.9

0.0

104.9

0.0

Equity in net income of joint ventures

1.4

(0.7)

1.4

(0.7)

Loss on sale and change in control

1.1

0.0

1.1

0.0

Tax expense

0.4

0.5

0.4

0.5

Gain on disposition of real estate

(21.3)

(41.8)

(21.3)

(41.8)

Income from non-controlling interests

0.3

0.3

0.3

0.3

Consolidated NOI

177.1

175.5

177.1

175.5

DDR's consolidated JV

0.0

0.0

(0.4)

(0.4)

Consolidated NOI, net of non-controlling interests

177.1

175.5

176.7

175.1

Net income from unconsolidated joint ventures

(16.6)

(7.3)

(1.8)

0.3

Interest expense

33.6

33.2

5.3

5.5

Depreciation and amortization

48.0

49.9

5.6

6.2

Impairment charges

13.6

0.0

2.7

0.0

Preferred share expense

8.4

6.5

0.4

0.3

Other expense, net

5.8

6.4

1.0

1.1

(Gain) loss on disposition of real estate, net

(0.7)

2.6

0.0

0.1

Unconsolidated NOI

92.1

91.3

13.2

13.5

Total Consolidated + Unconsolidated NOI

269.2

266.8

189.9

188.6

Less:  Non-Same Store NOI adjustments

29.9

35.2

24.6

28.8

Total SSNOI

$239.3

$231.6

$165.3

$159.8

SSNOI % Increase

3.3%

3.4%

(1)

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

 

Logo - http://photos.prnewswire.com/prnh/20131217/DDRLOGO

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/ddr-reports-third-quarter-2016-operating-results-300352012.html

SOURCE DDR Corp.


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