UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of
The Securities Exchange Act of 1934
Date
of Report (Date of earliest event reported)
August 10, 2009
DEVELOPERS DIVERSIFIED REALTY CORPORATION
(Exact name of registrant as specified in its charter)
|
|
|
|
|
Ohio
|
|
1-11690
|
|
34-1723097
|
|
|
|
|
|
(State or other jurisdiction
|
|
(Commission
|
|
(IRS Employer
|
Of incorporation)
|
|
File Number)
|
|
Identification No.)
|
|
|
|
3300 Enterprise Parkway, Beachwood, Ohio
|
|
44122
|
|
|
|
(Address of principal executive offices)
|
|
(Zip Code)
|
Registrants telephone number, including area code
(216) 755-5500
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the
filing obligation of the registrant under any of the following provisions (see General Instruction
A.2. below):
o
|
|
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
|
|
o
|
|
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
|
|
o
|
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
|
|
o
|
|
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
|
Item 8.01 Other Events
This Form 8-K updates the Annual Report on Form 10-K of Developers Diversified Realty
Corporation (the Company) for the year ended December 31, 2008, which was filed on February 27,
2009 and was amended on April 29, 2009 to incorporate by reference into Part III portions of the
Companys definitive proxy statement for its 2009 Annual Shareholders Meeting (the Form 10-K as
previously amended, the Original Report).
This Form 8-K reflects the impact of the classification of discontinued operations of
properties sold after January 1, 2009, pursuant to the requirements of Statement No. 144
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144), for the five years
ended December 31, 2008. During the
period January 1, 2009 to June 30, 2009, the
Company disposed of 15 shopping center properties aggregating 1.6 million square feet including
six properties that were considered as held for sale at June 30, 2009. In compliance with SFAS 144,
the Company has reported revenues, expenses and losses and/or gains on the disposition of these properties as
income (loss) from discontinued operations for each period presented in the quarterly report filed since
the properties were disposed of (including the comparable period of the prior year). The same
retrospective adjustment of discontinued operations required by SFAS 144 is required for previously
issued annual financial statements, if those financial statements are incorporated by reference in
subsequent filings with the Securities and Exchange Commission under the Securities Act of 1933
even though those financial statements related to periods prior to the date of the sale.
This Form 8-K also reflects the impact of the following accounting standards adopted by the
Company effective January 1, 2009 with retrospective application for the five years ended December
31, 2008, as appropriate.
|
|
|
Non-Controlling Interests in Consolidated Financial Statements an Amendment of
ARB No. 51-SFAS 160
|
|
|
|
|
In December 2007, the Financial Accounting Standards Board (FASB) issued Statement
No. 160, Non-Controlling Interest in Consolidated Financial Statements an Amendment of
ARB No. 51 (SFAS 160). A non-controlling interest, sometimes referred to as minority
equity interest, is the portion of equity in a subsidiary not attributable, directly or
indirectly, to a parent. The objective of this statement is to improve the relevance,
comparability, and transparency of the financial information that a reporting entity
provides in its consolidated financial statements by establishing accounting and reporting
standards that require: (i) the ownership interest in subsidiaries held by other parties
other than the parent be clearly identified, labeled, and presented in the consolidated
statement of financial position within equity, but separate from the parents equity;
(ii) the amount of consolidated net income attributable to the parent and to the
non-controlling interest be clearly identified and presented on the face of the
consolidated statement of operations; (iii) changes in a parents ownership interest while
the parent retains its controlling financial interest in a subsidiary be accounted for
consistently and requires that they be accounted for similarly, as equity transactions;
(iv) when a subsidiary is deconsolidated, any retained non-controlling equity investment in
the former subsidiary be initially measured at fair value (the gain or loss on the
deconsolidation of the subsidiary is measured using the fair value of any non-controlling
equity investments rather than the carrying amount of that retained
investment); and
(v) entities provide sufficient disclosures that clearly identify and distinguish between
the interest of the parent and the interest of the non-controlling owners. This statement
was effective
for fiscal years, and interim reporting periods within those fiscal years, beginning on or
after
|
|
|
|
December 15, 2008, and applied on a prospective basis, except for the presentation
and disclosure requirements, which have been applied on a retrospective basis. Early
adoption was not permitted. The Company adopted SFAS 160 on January 1, 2009. As required by
SFAS 160, the Company adjusted the presentation of non-controlling interests, as
appropriate, in the consolidated balance sheets, consolidated
statements of operations and consolidated statements of cash flows as of and for the five years ended December 31, 2008. The Companys consolidated balance
sheets no longer have a line item referred to as Minority Interests. In connection with
the Companys adoption of SFAS 160, the Company also applied the recent revisions to EITF
Topic D-98, Classification and Measurement of Redeemable Securities (D-98). There have
been no other changes in the measurement of this line item from amounts previously
reported, although, as a result of the Companys adoption of these standards, amounts previously reported as minority equity interests and operating partnership minority
interests on the Companys consolidated balance sheets are now presented as non-controlling
interests within equity. Equity at December 31, 2008, 2007, 2006, 2005 and 2004 was
adjusted to include $127.5 million, $128.3 million, $121.1 million, $129.9 million and
$54.4 million, respectively, attributable to non-controlling interests. The Company
reflected approximately $0.6 million, $1.2 million, $2.5 million, $3.4 million and $3.2
million at December 31, 2008, 2007, 2006, 2005 and 2004, respectively, as redeemable
operating partnership units due to certain redemption features, in the
temporary equity section (between liabilities and equity) of the consolidated balance
sheets.
|
|
|
|
|
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon
Conversion (Including Partial Cash Settlement) FSP APB 14-1
|
|
|
|
|
In May 2008, the FASB issued Staff Position (FSP) Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash
Settlement) (FSP APB 14-1). The FSP prohibits the classification of convertible debt
instruments that may be settled in cash upon conversion, including partial cash settlement,
as debt instruments within the scope of FSP APB 14-1 and requires issuers of such
instruments to separately account for the liability and equity components by allocating the
proceeds from the issuance of the instrument between the liability component and the
embedded conversion option (i.e., the equity component). The liability component of the
debt instrument is accreted to par using the effective yield method; accretion is reported
as a component of interest expense. The equity component is not subsequently re-valued as
long as it continues to qualify for equity treatment. FSP APB 14-1 must be applied
retrospectively to issued cash-settleable convertible instruments as well as prospectively
to newly issued instruments. FSP APB 14-1 is effective for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years.
|
|
|
|
|
FSP APB 14-1 was adopted by the Company as of January 1, 2009 with retrospective
application for the three years ended December 31, 2008. As a result of the adoption, the
initial debt proceeds from the $250 million aggregate principal amount of 3.5% convertible notes, due in 2011, and
$600 million aggregate principal amount of 3.0% convertible notes, due in 2012, issued in October 2006 and March 2007,
respectively, were required to be allocated between a liability component and an equity
component. This allocation was based upon what the assumed interest rate would have been if
the Company had issued similar nonconvertible debt. Accordingly, the Companys consolidated
balance sheets at December 31, 2008, 2007 and 2006 were adjusted to reflect a decrease in
unsecured debt of approximately $50.7 million, $67.1 million and $21.7 million,
respectively, reflecting the unamortized discount. In addition, at
December 31, 2008, 2007 and 2006, real
estate assets increased by $2.9 million, $1.1 million and -0-, respectively, relating to the
impact of capitalized interest and deferred charges decreased by $1.0 million, $1.4 million
and $0.5 million,
|
|
|
|
respectively, relating to the reallocation of original issuance costs to
reflect such amounts as a reduction of proceeds from the reclassification of the equity
component.
|
|
|
|
|
For the years ended December 31, 2008, 2007 and 2006, the Company adjusted the consolidated
statements of operations to reflect additional non-cash interest expense of $14.2 million,
$11.1 million and $1.3 million, respectively, net of the impact of capitalized interest,
pursuant to the provisions of FSP APB 14-1. In addition, in 2008 the Company repurchased
$17.0 million of its senior unsecured notes. As a result of the adoption of this FSP, the
Company recorded an adjustment to the gain on repurchase of senior notes of approximately
$1.1 million for the amount of the unamortized discount allocated to these notes.
|
|
|
|
|
Determining Whether Instruments Granted in Share-Based Payment Transactions Are
Participating Securities FSP EITF 03-6-1
|
|
|
|
|
In June 2008, the FASB issued the FSP Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1), which
addresses whether instruments granted in share-based payment transactions are participating
securities prior to vesting and, therefore, need to be included in the earnings allocation
in computing earnings per share under the two-class method as
described in Statement No. 128,
Earnings per Share. Under the guidance in FSP EITF 03-6-1, unvested share-based payment
awards that contain non-forfeitable rights to dividends or dividend equivalents (whether
paid or unpaid) are participating securities and shall be included in the computation of
earnings per share pursuant to the two-class method. The FSP is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. All prior-period earnings per share data is required to be adjusted retrospectively.
As a result, the Companys earnings per share calculations for the five years ended
December 31, 2008 have been adjusted retrospectively to reflect the provisions of this
FSP. The adoption of this standard did not have a material impact on the Companys
earnings per share.
|
Accordingly, the Company has reflected these retrospective adjustments in, and is amending the
following portions of, the Original Report: Item 6 Selected Financial Data, Item 7 -
Managements Discussion and Analysis of Financial Condition and
Results of Operations, Item 7A Quantitative and Qualitative Disclosures About Market Risk, Item 15(a)(1) Financial Statements
(including the Companys Consolidated Financial Statements for the three years ended December 31,
2008, 2007 and 2006, Notes to the Consolidated Financial Statements and the Report of Independent
Registered Public Accounting Firm) and Item 15(a)(2) Financial Statement Schedules (Schedule
III).
All other items of the Original Report remain unchanged, and no attempt has been made to
update matters in the Original Report, except to the extent expressly provided above. Refer to the
Companys quarterly reports on Form 10-Q for periods subsequent to December 31, 2008.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
23
|
|
Consent of PricewaterhouseCoopers LLP
|
|
|
Item 6.
|
SELECTED
FINANCIAL DATA
|
The consolidated financial data included in the following table
has been derived from the financial statements for the last five
years and includes the information required by Item 301 of
Regulation S-K.
The following selected consolidated financial data should be
read in conjunction with the Companys consolidated
financial statements and related notes and
Item 7 Managements Discussion and
Analysis of Financial Condition and Results of Operations.
COMPARATIVE
SUMMARY OF SELECTED FINANCIAL DATA
(Amounts in thousands, except per share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
(As Adjusted) (1)
|
|
|
|
2008 (2)
|
|
|
2007 (2)
|
|
|
2006 (2)
|
|
|
2005 (2)
|
|
|
2004 (2)
|
|
|
Operating Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
902,295
|
|
|
$
|
905,205
|
|
|
$
|
752,023
|
|
|
$
|
656,073
|
|
|
$
|
515,645
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operations
|
|
|
347,376
|
|
|
|
313,499
|
|
|
|
251,018
|
|
|
|
219,762
|
|
|
|
172,879
|
|
Impairment charges
|
|
|
76,283
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation & amortization
|
|
|
233,611
|
|
|
|
206,465
|
|
|
|
174,535
|
|
|
|
147,805
|
|
|
|
111,849
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
657,270
|
|
|
|
519,964
|
|
|
|
425,553
|
|
|
|
367,567
|
|
|
|
284,728
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,462
|
|
|
|
8,730
|
|
|
|
8,996
|
|
|
|
9,971
|
|
|
|
4,197
|
|
Interest expense
|
|
|
(251,663
|
)
|
|
|
(263,829
|
)
|
|
|
(205,751
|
)
|
|
|
(168,283
|
)
|
|
|
(115,370
|
)
|
Gain on repurchases of senior notes
|
|
|
10,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Abandoned projects and transaction costs
|
|
|
(12,433
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
(15,819
|
)
|
|
|
(3,019
|
)
|
|
|
(446
|
)
|
|
|
(2,533
|
)
|
|
|
(1,779
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(263,998
|
)
|
|
|
(258,118
|
)
|
|
|
(197,201
|
)
|
|
|
(160,845
|
)
|
|
|
(112,952
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before equity in net income from joint ventures,
impairment of joint ventures, income tax
benefit (expense) of taxable REIT subsidiaries and franchise
taxes, discontinued operations, gain on disposition of real
estate and cumulative effect of adoption of a new accounting
standard
|
|
|
(18,973
|
)
|
|
|
127,123
|
|
|
|
129,269
|
|
|
|
127,661
|
|
|
|
117,965
|
|
Equity in net income of joint ventures
|
|
|
17,719
|
|
|
|
43,229
|
|
|
|
30,337
|
|
|
|
34,873
|
|
|
|
40,895
|
|
Impairment of joint venture investments
|
|
|
(106,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax benefit (expense) of taxable REIT subsidiaries and
franchise taxes
|
|
|
17,465
|
|
|
|
14,700
|
|
|
|
2,505
|
|
|
|
(274
|
)
|
|
|
(1,466
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(90,746
|
)
|
|
|
185,052
|
|
|
|
162,111
|
|
|
|
162,260
|
|
|
|
157,394
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2008 (2)
|
|
|
2007 (2)
|
|
|
2006 (2)
|
|
|
2005 (2)
|
|
|
2004 (2)
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
5,606
|
|
|
|
16,564
|
|
|
|
15,226
|
|
|
|
23,524
|
|
|
|
27,184
|
|
(Loss) gain on disposition of real estate, net of tax
|
|
|
(4,830
|
)
|
|
|
12,259
|
|
|
|
11,051
|
|
|
|
16,667
|
|
|
|
8,561
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
776
|
|
|
|
28,823
|
|
|
|
26,277
|
|
|
|
40,191
|
|
|
|
35,745
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before gain on disposition of real estate
|
|
|
(89,970
|
)
|
|
|
213,875
|
|
|
|
188,388
|
|
|
|
202,451
|
|
|
|
193,139
|
|
Gain on disposition of real estate
|
|
|
6,962
|
|
|
|
68,851
|
|
|
|
72,023
|
|
|
|
88,140
|
|
|
|
84,642
|
|
Cumulative effect of adoption of a new accounting standard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,001
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(83,008
|
)
|
|
$
|
282,726
|
|
|
$
|
260,411
|
|
|
$
|
290,591
|
|
|
$
|
274,780
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (income) attributable to non-controlling interests
|
|
|
11,139
|
|
|
|
(8,016
|
)
|
|
|
(8,301
|
)
|
|
|
(7,792
|
)
|
|
|
(4,878
|
)
|
Preferred minority interest
|
|
|
|
|
|
|
(9,690
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss attributable to redeemable operating partnership units
|
|
|
(61
|
)
|
|
|
(78
|
)
|
|
|
(152
|
)
|
|
|
(156
|
)
|
|
|
(140
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,078
|
|
|
|
(17,784
|
)
|
|
|
(8,453
|
)
|
|
|
(7,948
|
)
|
|
|
(5,018
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR
|
|
$
|
(71,930
|
)
|
|
$
|
264,942
|
|
|
$
|
251,958
|
|
|
$
|
282,643
|
|
|
$
|
269,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) earnings per share data Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.52
|
|
|
$
|
1.56
|
|
|
$
|
1.72
|
|
|
$
|
1.92
|
|
Income from discontinued operations attributable to DDR
common shareholders
|
|
|
|
|
|
|
0.24
|
|
|
|
0.24
|
|
|
|
0.37
|
|
|
|
0.37
|
|
Cumulative effect of adoption of a new accounting standard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.76
|
|
|
$
|
1.80
|
|
|
$
|
2.09
|
|
|
$
|
2.26
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
|
|
|
119,843
|
|
|
|
120,879
|
|
|
|
109,002
|
|
|
|
108,310
|
|
|
|
96,638
|
|
(Loss) earnings per share data Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.51
|
|
|
$
|
1.55
|
|
|
$
|
1.71
|
|
|
$
|
1.90
|
|
Income from discontinued operations attributable to DDR
common shareholders
|
|
|
|
|
|
|
0.24
|
|
|
|
0.24
|
|
|
|
0.37
|
|
|
|
0.37
|
|
Cumulative effect of adoption of a new accounting standard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(0.03
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.75
|
|
|
$
|
1.79
|
|
|
$
|
2.08
|
|
|
$
|
2.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares
|
|
|
119,843
|
|
|
|
121,335
|
|
|
|
109,548
|
|
|
|
108,987
|
|
|
|
98,943
|
|
Cash dividends declared
|
|
$
|
2.07
|
|
|
$
|
2.64
|
|
|
$
|
2.36
|
|
|
$
|
2.16
|
|
|
$
|
1.94
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
2004
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate (at cost)
|
|
$
|
9,109,566
|
|
|
$
|
8,985,749
|
|
|
$
|
7,447,459
|
|
|
$
|
7,029,337
|
|
|
$
|
5,603,424
|
|
Real estate, net of accumulated depreciation
|
|
|
7,900,663
|
|
|
|
7,961,701
|
|
|
|
6,586,193
|
|
|
|
6,336,514
|
|
|
|
5,035,193
|
|
Investments in and advances to joint ventures
|
|
|
583,767
|
|
|
|
638,111
|
|
|
|
291,685
|
|
|
|
275,136
|
|
|
|
288,020
|
|
Total assets
|
|
|
9,020,222
|
|
|
|
9,089,514
|
|
|
|
7,179,278
|
|
|
|
6,862,977
|
|
|
|
5,583,547
|
|
Total debt
|
|
|
5,866,655
|
|
|
|
5,523,953
|
|
|
|
4,227,096
|
|
|
|
3,891,001
|
|
|
|
2,718,690
|
|
Equity
|
|
|
2,864,794
|
|
|
|
3,193,302
|
|
|
|
2,636,838
|
|
|
|
2,698,320
|
|
|
|
2,607,039
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended December 31,
|
|
|
|
2008 (2)
|
|
|
2007 (2)
|
|
|
2006 (2)
|
|
|
2005 (2)
|
|
|
2004 (2)
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow provided by (used for):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
392,002
|
|
|
$
|
420,745
|
|
|
$
|
348,630
|
|
|
$
|
357,632
|
|
|
$
|
297,342
|
|
Investing activities
|
|
|
(468,572
|
)
|
|
|
(1,162,287
|
)
|
|
|
(203,047
|
)
|
|
|
(339,428
|
)
|
|
|
(1,136,524
|
)
|
Financing activities
|
|
|
56,235
|
|
|
|
763,333
|
|
|
|
(147,860
|
)
|
|
|
(37,420
|
)
|
|
|
877,360
|
|
Other Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations (3):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(114,199
|
)
|
|
$
|
214,008
|
|
|
$
|
196,789
|
|
|
$
|
227,474
|
|
|
$
|
219,056
|
|
Depreciation and amortization of real estate investments
|
|
|
236,344
|
|
|
|
214,396
|
|
|
|
185,449
|
|
|
|
169,117
|
|
|
|
130,536
|
|
Equity in net income from joint ventures
|
|
|
(17,719
|
)
|
|
|
(43,229
|
)
|
|
|
(30,337
|
)
|
|
|
(34,873
|
)
|
|
|
(40,895
|
)
|
Joint ventures funds from operations (3)
|
|
|
68,355
|
|
|
|
84,423
|
|
|
|
44,473
|
|
|
|
49,302
|
|
|
|
46,209
|
|
Non-controlling interests (OP Units)
|
|
|
1,145
|
|
|
|
2,275
|
|
|
|
2,116
|
|
|
|
2,916
|
|
|
|
2,607
|
|
Gain on disposition of depreciable real estate investments, net
|
|
|
(4,244
|
)
|
|
|
(17,956
|
)
|
|
|
(21,987
|
)
|
|
|
(58,834
|
)
|
|
|
(68,179
|
)
|
Cumulative effect of adoption of a new accounting standard
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,001
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds from operations attributable to DDR common shareholders (3)
|
|
|
169,682
|
|
|
|
453,917
|
|
|
|
376,503
|
|
|
|
355,102
|
|
|
|
292,335
|
|
Preferred share dividends
|
|
|
42,269
|
|
|
|
50,934
|
|
|
|
55,169
|
|
|
|
55,169
|
|
|
|
50,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
211,951
|
|
|
$
|
504,851
|
|
|
$
|
431,672
|
|
|
$
|
410,271
|
|
|
$
|
343,041
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares and OP Units (Diluted) (4)
|
|
|
121,030
|
|
|
|
122,716
|
|
|
|
110,826
|
|
|
|
110,700
|
|
|
|
99,147
|
|
|
|
|
(1)
|
|
See Item 7 Managements Discussion and Analysis of
Financial Condition and Results of Operations, New Accounting
Standards Implemented with Retrospective Application for more
detailed information regarding adjustments.
|
|
(2)
|
|
As described in the consolidated
financial statements, the Company acquired 11 properties in 2008
(all of which were acquired through unconsolidated joint
ventures), 317 properties in 2007 (including 68 of which were
acquired through unconsolidated joint ventures), 20 properties
in 2006 (including 15 of which were acquired through
unconsolidated joint ventures and four of which the Company
acquired through its joint venture partners interest), 52
properties in 2005 (including 36 of which were acquired through
unconsolidated joint ventures and one of which the Company
acquired through its joint venture partners interest), and
112 properties in 2004 (18 of which were acquired through
unconsolidated joint ventures and one of which the Company
acquired through its joint venture partners interest). The
Company sold 22 properties in 2008 including the sale of a
consolidated joint venture interest, 74 properties in 2007
(seven of which were
|
4
|
|
|
|
|
owned through unconsolidated joint
ventures), 15 properties in 2006 (nine of which were owned
through unconsolidated joint ventures), 47 properties in 2005
(12 of which were owned through unconsolidated joint ventures),
and 28 properties in 2004 (13 of which were owned through
unconsolidated joint ventures). All amounts have been presented
in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets. In accordance
with that standard, long-lived assets that were sold or
classified as held for sale as a result of disposal activities
have been classified as discontinued operations for all periods
presented.
|
|
(3)
|
|
Management believes that Funds From
Operations (FFO), which is a non-GAAP financial
measure, provides an additional and useful means to assess the
financial performance of a Real Estate Investment Trust
(REIT.) It is frequently used by securities
analysts, investors and other interested parties to evaluate the
performance of REITs, most of which present FFO along with net
income
attributable to DDR common shareholders
as calculated in accordance with GAAP. FFO applicable to
common shareholders is generally defined and calculated by the
Company as net income attributable to DDR common shareholders, adjusted to exclude: (i) preferred
share dividends, (ii) gains from disposition of depreciable
real estate property, except for those sold through the
Companys merchant building program, which are presented
net of taxes, (iii) extraordinary items and
(iv) certain non-cash items. These non-cash items
principally include real property depreciation, equity income
from joint ventures and adding the Companys proportionate
share of FFO from its unconsolidated joint ventures, determined
on a consistent basis. Management believes that FFO provides the
Company and investors with an important indicator of the
Companys operating performance. This measure of
performance is used by the Company for several business purposes
and for REITs it provides a recognized measure of performance
other than GAAP net income, which may include non-cash items
(often significant). Other real estate companies may calculate
FFO in a different manner.
|
|
(4)
|
|
Represents weighted average shares
and operating partnership units, or OP Units, at the end of the
respective period.
|
|
|
Item 7.
|
MANAGEMENTS
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
|
The following discussion should be read in conjunction with the
consolidated financial statements, the notes thereto and the
comparative summary of selected financial data appearing
elsewhere in this report. Historical results and percentage
relationships set forth in the consolidated financial
statements, including trends that might appear, should not be
taken as indicative of future operations. The Company considers
portions of this information 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
Companys expectations for future periods. Forward-looking
statements include, without limitation, statements related to
acquisitions (including any related pro forma financial
information) and other business development activities, future
capital expenditures, financing sources and availability and the
effects of environmental and other regulations. Although the
Company believes that the expectations reflected in those
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 statements of historical fact should be deemed to
be forward-looking statements. Without limiting the foregoing,
the words believes, anticipates,
plans, expects, seeks,
estimates and similar expressions are intended to
identify forward-looking statements. Readers should exercise
caution in interpreting and relying on forward-looking
statements because they involve known and unknown risks,
uncertainties and other factors that are, in some cases, beyond
the Companys control and that could cause actual results
to differ materially from those expressed or implied in the
forward-looking statements and could materially affect the
Companys actual results, performance or achievements.
Factors that could cause actual results, performance or
achievements to differ materially from those expressed or
implied by forward-looking statements include, but are not
limited to, the following:
|
|
|
|
|
The Company is subject to general risks affecting the real
estate industry, including the need to enter into new leases or
renew leases on favorable terms to generate rental revenues, and
the current economic downturn may adversely affect the ability
of the Companys tenants, or new tenants, to enter into new
leases or the ability of the Companys existing
tenants to renew their leases at rates at least as
favorable as their current rates;
|
|
|
|
The Company could be adversely affected by changes in the local
markets where its properties are located, as well as by adverse
changes in national economic and market conditions;
|
|
|
|
The Company may fail to anticipate the effects on its properties
of changes in consumer buying practices, including catalog sales
and sales over the Internet and the resulting retailing
practices and
|
5
|
|
|
|
|
space needs of its tenants or a general downturn in its
tenants businesses, which may cause tenants to close
stores;
|
|
|
|
|
|
The Company is subject to competition for tenants from other
owners of retail properties, and its tenants are subject to
competition from other retailers and methods of distribution.
The Company is dependent upon the successful operations and
financial condition of its tenants, in particular of its major
tenants, and could be adversely affected by the bankruptcy of
those tenants;
|
|
|
|
The Company relies on major tenants, which makes us vulnerable
to changes in the business and financial condition of, or demand
for our space, by such tenants;
|
|
|
|
The Company may not realize the intended benefits of acquisition
or merger transactions. The acquired assets may not perform as
well as the Company anticipated, or the Company may not
successfully integrate the assets and realize the improvements
in occupancy and operating results that the Company anticipates.
The acquisition of certain assets may subject the Company to
liabilities, including environmental liabilities;
|
|
|
|
The Company may fail to identify, acquire, construct or develop
additional properties that produce a desired yield on invested
capital, or may fail to effectively integrate acquisitions of
properties or portfolios of properties. In addition, the Company
may be limited in its acquisition opportunities due to
competition, the inability to obtain financing on reasonable
terms or any financing at all and other factors;
|
|
|
|
The Company may fail to dispose of properties on favorable
terms. In addition, real estate investments can be illiquid,
particularly as prospective buyers may experience increased
costs of financing or difficulties obtaining financing, and
could limit the Companys ability to promptly make changes
to its portfolio to respond to economic and other conditions;
|
|
|
|
The Company may abandon a development opportunity after
expending resources if it determines that the development
opportunity is not feasible due to a variety of factors,
including a lack of availability of construction financing on
reasonable terms, the impact of the current economic environment
on prospective tenants ability to enter into new leases or
pay contractual rent, or the inability by the Company to obtain
all necessary zoning and other required governmental permits and
authorizations;
|
|
|
|
The Company may not complete development projects on schedule as
a result of various factors, many of which are beyond the
Companys control, such as weather, labor conditions,
governmental approvals, material shortages or general economic
downturn resulting in limited availability of capital, increased
debt service expense and construction costs and decreases in
revenue;
|
|
|
|
The Companys financial condition may be affected by
required debt service payments, the risk of default and
restrictions on its ability to incur additional debt or enter
into certain transactions under its credit facilities and other
documents governing its debt obligations. In addition, the
Company may encounter difficulties in obtaining permanent
financing or refinancing existing debt. Borrowings under the
Companys revolving credit facilities are subject to
certain representations and warranties and customary events of
default, including any event that has had or could reasonably be
expected to have a material adverse effect on the Companys
business or financial condition;
|
|
|
|
Changes in interest rates could adversely affect the market
price of the Companys common shares, as well as its
performance and cash flow;
|
|
|
|
Debt
and/or
equity financing necessary for the Company to continue to grow
and operate its business may not be available or may not be
available on favorable terms or at all;
|
|
|
|
Recent disruptions in the financial markets could affect our
ability to obtain financing on reasonable terms and have other
adverse effects on us and the market price of our common shares;
|
|
|
|
The Company is subject to complex regulations related to its
status as a real estate investment trust, or REIT, and would be
adversely affected if it failed to qualify as a Real Estate
Investment Trust (REIT);
|
6
|
|
|
|
|
The Company must make distributions to shareholders to continue
to qualify as a REIT, and if the Company must borrow funds to
make distributions, those borrowings may not be available on
favorable terms or at all;
|
|
|
|
Joint venture investments may involve risks not otherwise
present for investments made solely by the Company, including
the possibility that a partner or co-venturer may become
bankrupt, may at any time have different interests or goals than
those of the Company and may take action contrary to the
Companys instructions, requests, policies or objectives,
including the Companys policy with respect to maintaining
its qualification as a REIT. In addition, a partner or
co-venturer may not have access to sufficient capital to satisfy
its funding obligations to the joint venture. The partner could
default on the loans outside of the Companys control.
Furthermore, if the current constrained credit conditions in the
capital markets persist or deteriorate further, the Company
could be required to reduce the carrying value of its equity
method investments if a loss in the carrying value of the
investment is other than a temporary decline pursuant to
Accounting Principles Board (APB) No. 18, The
Equity Method of Accounting for Investments in Common Stock
(APB 18);
|
|
|
|
The Company may not realize anticipated returns from its real
estate assets outside the United States. The Company expects to
continue to pursue international opportunities that may subject
the Company to different or greater risks than those associated
with its domestic operations. The Company owns assets in Puerto
Rico, an interest in an unconsolidated joint venture that owns
properties in Brazil and an interest in consolidated joint
ventures that will develop and own properties in Canada, Russia
and Ukraine;
|
|
|
|
International development and ownership activities carry risks
that are different from those the Company faces with the
Companys domestic properties and operations. These risks
include:
|
|
|
|
|
|
Adverse effects of changes in exchange rates for foreign
currencies;
|
|
|
|
Changes in foreign political or economic environments;
|
|
|
|
Challenges of complying with a wide variety of foreign laws
including tax laws and addressing different practices and
customs relating to corporate governance, operations and
litigation;
|
|
|
|
Different lending practices;
|
|
|
|
Cultural and consumer differences;
|
|
|
|
Changes in applicable laws and regulations in the United States
that affect foreign operations;
|
|
|
|
Difficulties in managing international operations and
|
|
|
|
Obstacles to the repatriation of earnings and cash;
|
|
|
|
|
|
Although the Companys international activities are
currently a relatively small portion of its business, to the
extent the Company expands its international activities, these
risks could significantly increase and adversely affect its
results of operations and financial condition;
|
|
|
|
The Company is subject to potential environmental liabilities;
|
|
|
|
The Company may incur losses that are uninsured or exceed policy
coverage due to its liability for certain injuries to persons,
property or the environment occurring on its properties and
|
|
|
|
The Company could incur additional expenses in order to comply
with or respond to claims under the Americans with Disabilities
Act or otherwise be adversely affected by changes in government
regulations, including changes in environmental, zoning, tax and
other regulations.
|
New Accounting Standards Implemented with Retrospective Application
The following accounting standards were implemented on January 1, 2009 with retrospective
application, as appropriate. As a result, the financial statements as
of and
for the five years ended December 31, 2008 have been adjusted as required by the provisions of these standards.
Non-Controlling Interests in Consolidated Financial Statements an Amendment of ARB No. 51
SFAS 160
In December 2007, the Financial Accounting Standards Board (FASB) issued Statement
No. 160, Non-Controlling Interest in Consolidated Financial Statements an Amendment of ARB
No. 51 (SFAS 160). A non-controlling interest, sometimes referred to as minority equity
interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a
parent. The objective of this statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards that require: (i) the
ownership interest in subsidiaries held by other parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial position within
equity, but separate from the parents equity; (ii) the amount of consolidated net income
attributable to the parent and to the non-controlling interest be clearly identified and presented
on the face of the consolidated statement of operations; (iii) changes in a parents ownership
interest while the parent retains its controlling financial interest in a subsidiary be accounted
for consistently and requires that they be accounted for similarly, as equity transactions;
(iv) when a subsidiary is deconsolidated, any retained non-controlling equity investment in the
former subsidiary be initially measured at fair value (the gain or loss on the deconsolidation of
the subsidiary is measured using the fair value of any non-controlling equity investments rather
than the carrying amount of that retained investment) and (v) entities provide sufficient
disclosures that clearly identify and distinguish between the interest of the parent and the
interest of the non-controlling owners.
7
This statement was effective for fiscal years, and interim
reporting periods within those fiscal years, beginning on or after December 15, 2008, to be applied
on a prospective basis, except for the presentation and disclosure requirements, which have been
applied on a retrospective basis. Early adoption was not permitted. The Company adopted SFAS 160 on
January 1, 2009. As required by SFAS 160, the Company adjusted the presentation of non-controlling
interests, as appropriate, in the consolidated balance sheets,
consolidated statements of operations and consolidated statements of
cash flows as of and for the five years ended December 31, 2008. In
connection with the Companys adoption of SFAS 160, the Company
also applied the recent revisions
to EITF Topic D-98 Classification and Measurement of Redeemable Securities (D-98). The
Companys consolidated balance sheets no longer have a line item referred to as Minority Interests.
There have been no other changes in the measurement of this line item from amounts previously
reported, although, as a result of the Companys adoption of these standards, amounts
previously reported as minority equity interests and operating partnership minority interests on
the Companys consolidated balance sheets are now presented as non-controlling interests within
equity. Equity at December 31, 2008, 2007, 2006, 2005 and 2004
was adjusted to include $127.5 million, $128.3
million, $121.1 million, $129.9 million and $54.4 million, respectively, attributable to non-controlling interests. The Company reflected
approximately $0.6 million, $1.2 million,
$2.5 million, $3.4 million and $3.2 million at
December 31, 2008, 2007, 2006, 2005 and 2004, respectively, as
redeemable operating partnership units due to certain redemption
features, in the
temporary equity section (between liabilities and equity) of the consolidated balance sheets.
These units are exchangeable, at the election of the OP Unit holder, and under certain
circumstances at the option of the Company, into an equivalent number of the Companys common
shares or for the equivalent amount of cash. Based on the requirements of D-98, the measurement of
the redeemable operating partnership units are now presented at the greater of their carrying
amount or redemption value at the end of each reporting period. The Company will assess the impact
of significant transactions involving changes in controlling interests, if any, as they are
contemplated.
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement) FSP APB 14-1
In May 2008, the FASB issued Staff Position (FSP) Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP
APB 14-1). The FSP prohibits the classification of convertible debt instruments that may be
settled in cash upon conversion, including partial cash settlement, as debt instruments within the
scope of FSP APB 14-1 and requires issuers of such instruments to separately account for the
liability and equity components by allocating the proceeds from the issuance of the instrument
between the liability component and the embedded conversion option (i.e., the equity component).
The liability component of the debt instrument is accreted to par using the effective yield method;
accretion is reported as a component of interest expense. The equity component is not subsequently
re-valued as long as it continues to qualify for equity treatment. FSP APB 14-1 must be applied
retrospectively to issued cash-settleable convertible instruments as well as prospectively to newly
issued instruments. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years.
FSP APB 14-1 was adopted by the Company as of January 1, 2009 with retrospective
application for the three years ended December 31, 2008. As a result of the adoption, the initial
debt proceeds from the $250 million aggregate principal amount of 3.5% convertible notes, due
in 2011, and $600 million aggregate principal amount of 3.0%
convertible notes, due in 2012,
issued in October 2006 and March 2007, respectively,
were required to be allocated between a liability component and an
equity component. This allocation was based upon what the assumed interest rate would have been if
the Company had issued similar nonconvertible debt. Accordingly, the Companys consolidated balance
sheets at December 31, 2008, 2007 and 2006 were adjusted to reflect a decrease in unsecured debt of
approximately $50.7 million, $67.1 million and
$21.7 million, respectively, reflecting the unamortized discount.
In addition, at December 31, 2008, 2007 and 2006, real estate
assets increased by $2.9 million, $1.1
million and -0-, respectively, relating to the impact of capitalized interest and deferred charges
decreased by $1.0 million, $1.4 million and $0.5 million, respectively, relating to the reallocation of original
issuance costs to reflect such amounts as a reduction of proceeds from the reclassification of the
equity component. FSP APB 14-1 also amended the guidance under D-98, whereas the equity component
related to the convertible debt would need to be evaluated in accordance with D-98 if the
convertible debt were currently redeemable at the balance sheet date. As the Companys convertible
debt was not redeemable, no evaluation was required as of
December 31, 2008, 2007 and 2006.
For the years ended December 31, 2008, 2007 and 2006, the Company adjusted the
consolidated statements of operations to reflect additional non-cash interest expense of
$14.2 million, $11.1 million and $1.3 million, respectively, net of the impact of capitalized
interest, pursuant to the provisions of FSP APB 14-1. In addition, in 2008 the Company repurchased
$17.0 million of its senior unsecured notes. As a result of the adoption of this FSP, the Company
recorded an adjustment to the gain on repurchase of senior notes of approximately $1.1 million for
the amount of the unamortized discount allocated to these notes.
Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities FSP EITF 03-6-1
In June 2008, the FASB issued the FSP Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1), which addresses
whether instruments granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in computing earnings per
share under the two-class method as described in SFAS No. 128, Earnings per Share. Under the guidance
in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall
be included in the computation of earnings per share pursuant to the two-class method. The FSP is
effective for financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. All prior-period earnings
per share data is required to be adjusted
retrospectively. As a result, the Companys earnings per share
calculations for the five years
ended December 31, 2008 have been adjusted retrospectively to reflect the provisions of this
FSP. The adoption of this standard did not have a material impact on the Companys financial
position and results of operations.
Executive
Summary
The Company is a self-administered and self-managed REIT, in the
business of acquiring, developing, redeveloping, owning, leasing
and managing shopping centers. As of December 31, 2008, the
Companys portfolio consisted of 702 shopping centers and
six business centers (including 329 properties owned through
unconsolidated
8
joint ventures and 40 properties owned through consolidated
joint ventures). These properties consist of shopping centers,
lifestyle centers and enclosed malls. At December 31, 2008,
the Company owned
and/or
managed approximately 149.5 million total square feet of
Gross Leasable Area (GLA), which includes all of the
aforementioned properties and one property owned by a third
party. The Company also has assets under development in Canada
and Russia. The Company believes that its portfolio of shopping
center properties is one of the largest (measured by the amount
of total GLA) currently held by any publicly-traded REIT. At
December 31, 2008, the aggregate occupancy of the
Companys shopping center portfolio was 92.1%, as compared
to 94.9% at December 31, 2007. The Company owned 702
shopping centers at December 31, 2008, as compared to 710
shopping centers at December 31, 2007. The average
annualized base rent per occupied square foot was $12.33 at
December 31, 2008, as compared to $12.24 at
December 31, 2007. The decrease in the occupancy is a
result of the deteriorating economic environment and increased
tenant bankruptcies.
Current
Strategy
The Company has taken important steps to address current and
ongoing financial market dislocation, and will continue to do
so. The Company seeks to lower leverage and improve liquidity.
This will be achieved through asset sales, retained capital, the
creation of joint ventures and fund structures, new equity and
debt financings, including the proposed financing with Mr.
Alexander Otto, and other means, with the aim of preserving
capital and benefiting from the unique investment opportunities
created by the challenging economic environment.
The Companys portfolio and asset class have demonstrated
limited volatility during prior economic downturns and continue
to generate relatively consistent cash flows. The following
unique set of core competencies is expected to continue to be
utilized by the Company to maintain solid fundamentals:
|
|
|
|
|
Strong tenant relationships with the nations leading
retailers, maintained through a national tenant account program;
|
|
|
|
The recent creation of an internal anchor store redevelopment
department solely dedicated to aggressively identify
opportunities towards releasing vacant anchor space created by
recent bankruptcies and store closings;
|
|
|
|
Tenant credit underwriting team to measure tenant health and
manage potential rent relief requests in the best interest of
the property;
|
|
|
|
Diverse banking relationships to allow access to secured,
unsecured, public and private capital;
|
|
|
|
An experienced funds management team dedicated to generating
consistent returns for institutional partners;
|
|
|
|
A focused dispositions team which was recently expanded and
dedicated to finding buyers for non-core assets;
|
|
|
|
Right-sized development and redevelopment departments equipped
with disciplined standards for development and
|
|
|
|
An ancillary income department to creatively generate revenue at
a low cost of investment and create cash flow streams from empty
or underutilized space.
|
Balance
Sheet and Capital Activities
The Company took the following proactive steps in 2008 to reduce
leverage and enhance financial flexibility:
|
|
|
|
|
Eliminated the common dividend for the fourth quarter of 2008
and reduced the 2009 common dividend to the minimum required to
maintain REIT status;
|
|
|
|
Sold assets in 2008 that generated $136 million in net
proceeds to the Company
|
|
|
|
Maintained a significant pool of unencumbered assets;
|
9
|
|
|
|
|
Raised net proceeds of $43 million through the sale of
common stock via the Companys continuous equity program;
|
|
|
|
Purchased a portion of the Companys outstanding senior
unsecured notes at a discount to par and
|
|
|
|
Raised new debt proceeds of $1.2 billion.
|
Despite current market conditions, asset sales are still
occurring, new debt is still available and mortgages are being
extended or re-financed at acceptable terms. In January, the
Company repaid the remaining outstanding unsecured notes that
had an original par value of $275 million and matured
January 30, 2009. The Company believes it is well-equipped
to address all near-term debt maturities.
Retail
Environment
The retail market in the United States weakened in 2008 and
continues to be challenged in early 2009. Consumer spending has
declined in response to erosion in housing values and stock
market investments, more stringent lending practices and job
losses. Retail sales have declined and tenants have become more
selective in new store openings. Some retailers have closed
existing locations and, as a result, the Company has experienced
a loss in occupancy. In addition, the bankruptcies of Linens
N Things, Circuit City Goodys, Steve &
Barrys and Mervyns led to store closings that created
additional vacancy.
While the retail environment has been generally troubled, many
tenants remain relatively healthy. Those that specialize in
low-cost necessity goods and services are taking market share
from high-end discretionary retailers that dominate the mall
portfolios. The Companys largest tenants, including
Wal-Mart, Sams Club, Target, and Kohls, appeal to
value-oriented consumers, remain well-capitalized, and have
outperformed other retail categories on a relative basis.
The following table lists the Companys 10 largest tenants
based on total annualized rental revenues and Company-owned GLA
of the wholly-owned properties and the Companys
proportionate share of unconsolidated joint venture properties
combined as of December 31, 2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
% of Total
|
|
|
|
|
|
|
Shopping Center
|
|
|
% of Company-Owned
|
|
Tenant
|
|
Base Rental Revenues
|
|
|
Shopping Center GLA
|
|
|
|
1.
|
|
|
Wal-Mart/Sams Club
|
|
|
4.3
|
%
|
|
|
7.3
|
%
|
|
2.
|
|
|
T.J. Maxx/Marshalls/A.J. Wright/Homegoods
|
|
|
2.1
|
|
|
|
2.4
|
|
|
3.
|
|
|
Mervyns(1)
|
|
|
1.9
|
|
|
|
1.7
|
|
|
4.
|
|
|
Lowes Home Improvement
|
|
|
1.9
|
|
|
|
3.2
|
|
|
5.
|
|
|
PetSmart
|
|
|
1.9
|
|
|
|
1.5
|
|
|
6.
|
|
|
Bed Bath & Beyond
|
|
|
1.6
|
|
|
|
1.4
|
|
|
7.
|
|
|
Circuit City(1)
|
|
|
1.6
|
|
|
|
1.1
|
|
|
8.
|
|
|
Kohls
|
|
|
1.4
|
|
|
|
2.0
|
|
|
9.
|
|
|
Michaels
|
|
|
1.4
|
|
|
|
1.3
|
|
|
10.
|
|
|
Rite Aid Corporation
|
|
|
1.4
|
|
|
|
0.7
|
|
|
|
|
(1)
|
|
Leases terminated effective for
2009.
|
10
The following table lists the Companys largest tenants
based on total annualized rental revenues and Company-owned GLA
of the wholly-owned properties and the Companys
unconsolidated joint venture properties as of December 31,
2008:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Wholly-Owned Properties
|
|
Joint Venture Properties
|
|
|
% of
|
|
% of
|
|
% of
|
|
% of
|
|
|
Shopping Center
|
|
Company-Owned
|
|
Shopping Center
|
|
Company-Owned
|
|
|
Base Rental
|
|
Shopping Center
|
|
Base Rental
|
|
Shopping Center
|
Tenant
|
|
Revenues
|
|
GLA
|
|
Revenues
|
|
GLA
|
|
Wal-Mart/Sams Club
|
|
|
5.1
|
%
|
|
|
8.6
|
%
|
|
|
1.9
|
%
|
|
|
3.2
|
%
|
Lowes Home Improvement
|
|
|
2.3
|
|
|
|
3.8
|
|
|
|
0.7
|
|
|
|
1.0
|
|
T.J. Maxx/Marshalls/A.J. Wright/Homegoods
|
|
|
2.0
|
|
|
|
2.4
|
|
|
|
2.7
|
|
|
|
3.2
|
|
PetSmart
|
|
|
1.8
|
|
|
|
1.4
|
|
|
|
2.5
|
|
|
|
2.3
|
|
Circuit City (1)
|
|
|
1.8
|
|
|
|
1.2
|
|
|
|
1.3
|
|
|
|
1.1
|
|
Rite Aid Corporation
|
|
|
1.7
|
|
|
|
0.9
|
|
|
|
0.1
|
|
|
|
0.1
|
|
Bed Bath & Beyond
|
|
|
1.7
|
|
|
|
1.4
|
|
|
|
1.7
|
|
|
|
1.7
|
|
GAP Stores
|
|
|
1.3
|
|
|
|
0.9
|
|
|
|
1.2
|
|
|
|
1.1
|
|
Ahold USA
|
|
|
1.3
|
|
|
|
1.1
|
|
|
|
1.5
|
|
|
|
1.6
|
|
Michaels
|
|
|
1.3
|
|
|
|
1.2
|
|
|
|
1.6
|
|
|
|
1.7
|
|
Dicks Clothing and Sporting Goods
|
|
|
1.2
|
|
|
|
1.2
|
|
|
|
1.6
|
|
|
|
1.5
|
|
Kohls
|
|
|
1.2
|
|
|
|
1.8
|
|
|
|
2.1
|
|
|
|
3.5
|
|
Ross Dress For Less
|
|
|
0.9
|
|
|
|
0.9
|
|
|
|
1.7
|
|
|
|
1.8
|
|
Publix Supermarkets
|
|
|
0.4
|
|
|
|
0.6
|
|
|
|
2.6
|
|
|
|
3.5
|
|
Mervyns (1)
|
|
|
0.2
|
|
|
|
0.2
|
|
|
|
3.5
|
|
|
|
3.5
|
|
|
|
|
(1)
|
|
Lease terminated effective for 2009
|
Retail sales have been trending toward discount retailers for
over a decade, and the Company expects that trend to continue.
11
Company
Fundamentals
The Company has shown relatively consistent occupancy
historically. The Occupancy declined in the fourth quarter of
2008 and the Company expects a continuation of that trend into
2009 until the economic environment improves. However, with
year-end occupancy at 92.1%, the portfolio overall occupancy
remains healthy.
12
Notwithstanding the recent decline in occupancy, the Company
continues to sign a large number of new leases, with overall
leasing spreads that continue to trend positively, consistent
with historical experience and practice for new leases and
renewals have historically.
Long-term performance shows consistently strong rent growth and
occupancy stability throughout multiple economic cycles.
13
The Companys value-oriented shopping center format is
ideal for keeping maintenance costs and capital expenditures
low, while still maintaining an attractive, high quality retail
environment. The Company believes its capital expenditures as a
percentage of net operating income are among the lowest in its
industry. Low capital expenditures contribute to a strong
organic growth rate and a more accurate measure of same store
net operating income growth, which was 1.7% for the year ended
December 31, 2008.
Through February 13, 2009, the Company and its joint
venture investments sold assets for gross proceeds aggregating
$65.8 million in 2009 which was used to repay debt. In
2008, the Company sold 22 assets for gross proceeds aggregating
$132.5 million. As part of its ongoing portfolio
optimization and capital recycling strategies to improve overall
portfolio performance and operating efficiency, the Company
expects to continue to sell assets that are not consistent with
its long-term investment objectives. Although the Company does
not have any binding commitments and the market conditions
require more structuring and opportunistic pricing, the
Companys intention is to continue its historical strategy
of selling certain core assets with stable cash flows to joint
ventures with institutional partners, which will provide both
liquidity and a future stream of fee income. Proceeds from these
sales will generally be used to purchase the Companys debt
at possible discounts to par
and/or
to
reduce credit facility balances.
Year in
Review 2008
For the year ended December 31, 2008, the Company recorded
a loss of approximately $71.9 million, or $0.97 per share
(diluted), compared to net income attributable to DDR of $264.9 million, or
$1.75 per share (diluted), for the prior year. Funds From
Operations (FFO) applicable to common shareholders
for the year ended December 31, 2008, was
$169.7 million compared to $453.9 million for the year
ended December 31, 2007. The decreases in net income attributable to DDR and
FFO applicable to common shareholders for the year ended
December 31, 2008, of approximately $336.9 million and
$284.2 million, respectively, are primarily the result of
non-cash impairment charges recorded relating to the
Companys consolidated real estate assets as well as its
unconsolidated joint venture investments aggregating
$169.2 million, net of amounts applicable to non-controlling
interests; a non-cash charge of $15.8 million related to
the termination of an equity award plan; and costs incurred of
$28.3 million related to abandoned projects, transaction
costs and other expenses partially offset by a gain on the
repurchase of the Companys senior notes of
$10.5 million. In addition, the Company recognized a
reduced amount of transactional income in 2008, primarily
related to gains on disposition of real estate that occurred in
2007, as the Company transferred 62 assets to unconsolidated
joint venture interests and sold 67 assets to third parties in
2007.
Given the dramatic changes in the capital markets over the past
year that have affected most companies, and real estate
companies in particular, the Company has implemented changes to
its business model that the company believes will result in the
Company operating with an increased focus on improving liquidity
and lowering leverage. This strategy should assist the Company
in remaining stable through these difficult times and emerge as
a stronger company. These initiatives were established in the
third quarter of 2008 and represent a top priority for the
executive management team. The Company is firmly committed to
lowering leverage and improving liquidity.
The Company has addressed the current dividend policy,
controlled development expenditures, developed a list of
non-core assets for sale, and purchased
near-term
debt maturities at a discount. The unsecured notes due in
January 2009 were repaid at maturity. Most importantly, there
are not any unsecured debt maturities until May 2010. Because
the next significant maturity is more than one year from
February 2009, the date of this annual report, the Company
intends to use this time to conserve capital and use proceeds
from non-core asset sales and obtain new equity and debt
proceeds.
The Company had several key achievements in 2008, including an
important part of the Companys strategy of selling
non-core assets. In 2008, these transactions generated gross
proceeds of almost $200 million for its wholly-owned and
joint venture assets, of which the Companys proportionate
share aggregated $136.1 million and allowed the Company to
improve its portfolio quality. The Company entered into a
continuous equity program that provided for approximately
$200 million equity issuance proceeds. In December 2008,
the Company sold 8.6 million of its common shares for net
proceeds of approximately $43.0 million at a
weighted-average share price of approximately $5.00 per share.
These proceeds were used to repay revolving credit facility
borrowings and buy unsecured notes at a discount to par.
Although these issuances represents a high cost of equity
capital and is dilutive to certain metrics, this capital raise
demonstrates the Companys commitment to enhancing its
balance sheet. Additionally, the Company and its unconsolidated
joint venture partners raised approximately $1.2 billion of
new mortgage capital in 2008 and the Company purchased
approximately $66.9 million of its unsecured notes at a
discount to par.
14
The Company continues to address its consolidated debt
maturities and is working with lenders to extend or refinance
maturities for the remainder of 2009.
The Company elected not to declare a dividend for the fourth
quarter of 2008 as the Company had distributed enough income
from the first three quarters to maintain its REIT status and
part of the Companys overal strategy of preserving
capital. Consistent with this strategy, the Company intends to
set the 2009 annual dividend at or near the minimum distribution
required to maintain REIT status.
On February 23, 2009, the Company entered into a stock
purchase agreement with Mr. Alexander Otto (the
Investor) to issue and sell 30 million common
shares and warrants to purchase up to 10 million common
shares with an exercise price of $6.00 per share (the
Warrants) to the Investor and certain members of his
family (collectively with the Investor, the Otto
Family) for aggregate gross proceeds of approximately
$112.5 million. The transaction, if approved and
consummated and will occur in two closings, each consisting of
15 million common shares and a warrant to purchase five
million common shares, provided that the Investor also has the
right to purchase all of the common shares and warrants at one
closing. The first closing will occur upon the satisfaction or
waiver of certain closing conditions, including the approval by
the Companys shareholders of the issuance of the
Companys securities, and the second closing will occur
within six months of the shareholder approval.
The Company expects that 2009 will be a challenging year, but
believes that management is prepared to meet these challenges.
The Company is prudently evaluating all sources and uses of cash
to improve liquidity and lower leverage, operating under
conservative assumptions to ensure that the Company should be
able to address all of its near-term needs, even in the event of
a continued financial market dislocation.
CRITICAL
ACCOUNTING POLICIES
The consolidated financial statements of the Company include the
accounts of the Company and all subsidiaries where the Company
has financial or operating control. The preparation of financial
statements in conformity with accounting principles generally
accepted in the United States requires management to make
estimates and assumptions in certain circumstances that affect
amounts reported in the accompanying consolidated financial
statements and related notes. In preparing these financial
statements, management has utilized available information,
including the Companys history, industry standards and the
current economic environment, among other factors, in forming
its estimates and judgments of certain amounts included in the
consolidated financial statements, giving due consideration to
materiality. It is possible that the ultimate outcome as
anticipated by management in formulating its estimates inherent
in these financial statements might not materialize. Application
of the critical accounting policies described below involves the
exercise of judgment and the use of assumptions as to future
uncertainties. As a result, actual results could differ from
these estimates. In addition, other companies may utilize
different estimates that may affect the comparability of the
Companys results of operations to those of companies in
similar businesses.
Revenue
Recognition and Accounts Receivable
Rental revenue is recognized on a straight-line basis that
averages minimum rents over the current term of the leases.
Certain of these leases provide for percentage and overage rents
based upon the level of sales achieved by the tenant. Percentage
and overage rents are recognized after a tenants reported
sales have exceeded the applicable sales break point set forth
in the applicable lease. The leases also typically provide for
tenant reimbursements of common area maintenance and other
operating expenses and real estate taxes. Accordingly, revenues
associated with tenant reimbursements are recognized in the
period in which the expenses are incurred based upon the tenant
lease provision. Management fees are recorded in the period
earned. Ancillary and other property-related income, which
includes the leasing of vacant space to temporary tenants, are
recognized in the period earned. Lease termination fees are
included in other revenue and recognized and earned upon
termination of a tenants lease and relinquishment of space
in which the Company has no further obligation to the tenant.
Acquisition and financing fees are earned and recognized at the
completion of the respective transaction in accordance with the
underlying agreements. Fee income derived from the
Companys unconsolidated joint venture investments is
recognized to the extent attributable to the unaffiliated
ownership interest.
15
The Company makes estimates of the collectibility of its
accounts receivable related to base rents, including
straight-line rentals, expense reimbursements and other revenue
or income. The Company specifically analyzes accounts receivable
and analyzes historical bad debts, customer credit worthiness,
current economic trends and changes in customer payment patterns
when evaluating the adequacy of the allowance for doubtful
accounts. In addition, with respect to tenants in bankruptcy,
the Company makes estimates of the expected recovery of
pre-petition and post-petition claims in assessing the estimated
collectibility of the related receivable. In some cases, the
ultimate resolution of these claims can exceed one year. These
estimates have a direct impact on the Companys net income
because a higher bad debt reserve results in less net income.
Notes
Receivables
Notes receivables include certain loans issued relating to real
estate investment. Loan receivables are recorded at stated
principal amounts. The Company defers certain loan origination
and commitment fees, net of certain origination costs and
amortizes them over the term of the related loan. The Company
evaluates the collectibility of both interest and principal on
each loan to determine whether it is impaired. A loan is
considered to be impaired when, based upon current information
and events, it is probable that the Company will be unable to
collect all amounts due according to the existing contractual
terms. When a loan is considered to be impaired, the amount of
loan loss reserve is calculated by comparing the recorded
investment to the value of the underlying collateral. The
Company is required to make subjective assessments as to whether
there are impairments in the value of collateral. These
assessments have a direct impact on the Companys net
income because recording a reserve results in an immediate
negative adjustment to net income. Interest income on performing
loans is accrued as earned. Interest income on non-performing
loans is recognized on a cost-recovery basis.
As of December 31, 2008, the Company had seven loans with
total commitments of up to $77.7 million, of which
approximately $62.7 million had been funded.
Real
Estate
Land, buildings and fixtures and tenant improvements are
recorded at cost and stated at cost less accumulated
depreciation. Expenditures for maintenance and repairs are
charged to operations as incurred. Significant renovations
and/or
replacements that improve or extend the life of the asset are
capitalized and depreciated over their estimated useful lives.
Properties are depreciated using the straight-line method over
the estimated useful lives of the assets. The Company is
required to make subjective assessments as to the useful lives
of its properties for purposes of determining the amount of
depreciation to reflect on an annual basis with respect to those
properties. These assessments have a direct impact on the
Companys net income. If the Company would lengthen the
expected useful life of a particular asset, it would be
depreciated over more years and result in less depreciation
expense and higher annual net income.
Assessment of recoverability by the Company of certain other
lease-related costs must be made when the Company has a reason
to believe that the tenant may not be able to perform under the
terms of the lease as originally expected. This requires
management to make estimates as to the recoverability of such
assets.
Gains from disposition of outlots, land parcels and shopping
centers are generally recognized using the full accrual or
partial sale method (as applicable) in accordance with the
provisions of Statement of Financial Accounting Standards
(SFAS) No. 66, Accounting for Real Estate
Sales, provided that various criteria relating to the
terms of the sale and any subsequent involvement by the Company
with the properties sold are met.
Long-Lived
Assets
On a periodic basis, management assesses whether there are any
indicators that the value of real estate properties may be
impaired. A propertys value is impaired only if
managements estimate of the aggregate future cash flows
(undiscounted and without interest charges) to be generated by
the property are less than the carrying value of the property.
In managements estimate of cash flows, it considers
factors such as expected future operating income, trends and
prospects, the effects of demand, competition and other factors.
In addition, the undiscounted
16
cash flows may consider a probability-weighted cash flow
estimation approach when alternative courses of action to
recover the carrying amount of a long-lived asset are under
consideration or a range is estimated. The determination of
undiscounted cash flows requires significant estimates by
management and considers the expected course of action at the
balance sheet date. Subsequent changes in estimated undiscounted
cash flows arising from changes in anticipated actions could
affect the determination of whether an impairment exists and
whether the effects could have a material impact on the
Companys net income. To the extent an impairment has
occurred, the loss will be measured as the excess of the
carrying amount of the property over the fair value of the
property.
The Company is required to make subjective assessments as to
whether there are impairments in the value of its real estate
properties and other investments. These assessments have a
direct impact on the Companys net income because recording
an impairment charge results in an immediate negative adjustment
to net income.
The fair value of real estate investments utilized in the
Companys impairment calculations are estimated based on
the price that would be received to sell an asset in an orderly
transaction between marketplace participants at the measurement
date. Investments without a public market are valued based on
assumptions made and valuation techniques used by the Company.
The decline in liquidity and prices of real estate and real
estate related investments, as well as the availability of
observable transaction data and inputs, may have made it more
difficult to determine the fair value of such investments. As a
result, amounts ultimately realized by the Company from
investments sold may differ from the fair values presented, and
the differences could be material.
When assets are identified by management as held for sale, the
Company discontinues depreciating the assets and estimates the
sales price, net of selling costs of such assets. If, in
managements opinion, the net sales price of the assets
that have been identified for sale is less than the net book
value of the assets, an impairment charge is recorded.
The Company allocates the purchase price to assets acquired and
liabilities assumed on a gross basis based on their relative
fair values at the date of acquisition pursuant to the
provisions of SFAS No. 141, Business
Combinations. In estimating the fair value of the tangible
and intangible assets and liabilities acquired, the Company
considers information obtained about each property as a result
of its due diligence, marketing and leasing activities. It
applies various valuation methods, such as estimated cash flow
projections utilizing appropriate discount and capitalization
rates, estimates of replacement costs net of depreciation and
available market information. The Company is required to make
subjective estimates in connection with these valuations and
allocations. These intangible assets are reviewed as part of the
overall carrying basis of an asset for impairment.
Off-Balance
Sheet Arrangements
The Company has a number of
off-balance
sheet joint ventures and other unconsolidated arrangements with
varying structures. The Company consolidates entities in which
it owns less than a 100% equity interest if it is deemed to have
a controlling interest or is the primary beneficiary in a
variable interest entity, as defined in Financial Interpretation
(FIN) No. 46, Consolidation of Variable
Interest Entities (FIN 46(R)); or is the
controlling general partner pursuant to Emerging Issue Task
Force (EITF) No.
04-05.
To the extent that the Company contributes assets to a joint
venture, the Companys investment in the joint venture is
recorded at the Companys cost basis in the assets that
were contributed to the joint venture. To the extent that the
Companys cost basis is different from the basis reflected
at the joint venture level, the basis difference is amortized
over the life of the related asset and included in the
Companys share of equity in net income of joint ventures.
In accordance with the provisions of Statement of Position
78-9,
Accounting for Investments in Real Estate Ventures,
the Company will recognize gains on the contribution of real
estate to joint ventures, relating solely to the outside
partners interest, to the extent the economic substance of
the transaction is a sale.
On a periodic basis, management assesses whether there are any
indicators that the value of the Companys investments in
unconsolidated joint ventures may be impaired. An
investments value is impaired only if managements
estimate of the fair value of the investment is less than the
carrying value of the investment and such difference is deemed
to be other than temporary. To the extent an impairment has
occurred, the loss is measured as the excess of the carrying
amount of the investment over the estimated fair value of the
investment.
17
Measurement
of Fair Value
The Company adopted the provisions of SFAS No. 157,
Fair Value Measurements (SFAS 157),
relating to its financial assets and financial liabilities on
January 1, 2008. Due to the continued deterioration of the
U.S. capital market, the lack of liquidity and the related
impact on the real estate market and retail industry, the
Company determined that several of its unconsolidated joint
venture investments suffered an other than temporary
impairment in December 2008. As a result, the Company was
required to assess several investments for impairment in
accordance with APB 18. The estimated fair value of each joint
venture investment was determined pursuant to the provisions of
SFAS 157 since investments in unconsolidated joint ventures
are considered financial assets subject to the provisions of
this standard. The valuation of these assets was determined
using widely accepted valuation techniques including discounted
cash flow analysis on the expected cash flows of each asset as
well as the income capitalization approach considering
prevailing market capitalization rates. The Company reviews each
investment based on the highest and best use of the investment
and market participation assumptions. For joint ventures with
investments in projects under development, the significant
assumptions included the discount rate, the timing for the
construction completion and project stabilization and the exit
capitalization rate. For joint ventures with investments in
operational real estate assets, the significant assumptions
included the capitalization rate used in the income
capitalization valuation, as well as projected property net
operating income and the valuation of joint venture debt
pursuant to SFAS 157.
These valuation adjustments were calculated based on market
conditions and assumptions made by management at the time the
valuation adjustments were recorded, which may differ materially
from actual results if market conditions or the assumptions
change.
Discontinued
Operations
Pursuant to the definition of a component of an entity as
described in SFAS No. 144, assuming no significant
continuing involvement, the sale of a property is considered a
discontinued operation. In addition, the operations from
properties classified as held for sale are considered a
discontinued operation. The Company generally considers assets
to be held for sale when the transaction has been approved by
the appropriate level of management and there are no known
significant contingencies relating to the sale such that the
sale of the property within one year is considered probable.
Accordingly, the results of operations of operating properties
disposed of or classified as held for sale, for which the
Company has no significant continuing involvement, are reflected
as discontinued operations. On occasion, the Company will
receive unsolicited offers from third parties to buy an
individual shopping center. The Company generally will classify
properties as held for sale when a sales contract is executed
with no contingencies and the prospective buyer has significant
funds at risk to ensure performance.
Interest expense, which is specifically identifiable to the
property, is used in the computation of interest expense
attributable to discontinued operations. Consolidated interest
at the corporate level is allocated to discontinued operations
pursuant to the methods prescribed under EITF
No. 87-24,
Allocation of Interest to Discontinued Operations,
based on the proportion of net assets sold.
Included in discontinued operations as of and for the three
years ended December 31, 2008, are 116 properties
aggregating 10.8 million square feet of GLA. The operations
of such properties have been reflected on a comparative basis as
discontinued operations in the consolidated financial statements
for each of the three years ended December 31, 2008,
included herein.
Stock-Based
Employee Compensation
The Company accounts for its stock-based compensation in
accordance with SFAS No. 123(R), Share-Based
Payment (SFAS 123(R)). SFAS 123(R)
requires all share-based payments to employees, including grants
of stock options, to be recognized in the financial statements
based on their fair value. The fair value is estimated at the
date of grant using a Black-Scholes option pricing model with
weighted average assumptions for the activity under stock plans.
Option pricing model input assumptions, such as expected
volatility, expected term and risk-free interest rate, impact
the fair value estimate. Further, the forfeiture rate impacts
the amount of aggregate compensation. These assumptions are
subjective and generally require significant analysis and
judgment to develop.
18
When estimating fair value, some of the assumptions will be
based on or determined from external data, and other assumptions
may be derived from experience with share-based payment
arrangements. The appropriate weight to place on experience is a
matter of judgment, based on relevant facts and circumstances.
The risk-free interest rate is based upon a U.S. Treasury
Strip with a maturity date that approximates the expected term
of the option. The expected life of an award is derived by
referring to actual exercise experience. The expected volatility
of stock is derived by referring to changes in the
Companys historical share prices over a time frame similar
to the expected life of the award.
Accrued
Liabilities
The Company makes certain estimates for accrued liabilities
including accrued professional fees, interest, real estate
taxes, insurance and litigation reserves. These estimates are
subjective and based on historical payments, executed
agreements, anticipated trends and representations from service
providers. These estimates are prepared based on information
available at each balance sheet date and are reevaluated upon
the receipt of any additional information. Many of these
estimates are for payments that occur in one year. These
estimates have a direct impact on the Companys net income
because a higher accrual will result in less net income.
The Company has made estimates in assessing the impact of
FIN No. 48, Accounting for Uncertainty in Income
Taxes An Interpretation of
FAS No. 109 (FIN 48). The
interpretation prescribes a recognition threshold and
measurement attribute criteria for the financial statement
recognition and measurement of a tax position taken or expected
to be taken in a tax return. The interpretation also provides
guidance on de-recognition, classification, interest and
penalties, accounting in interim periods, disclosure and
transition. The Company makes certain estimates in the
determination on the use of valuation reserves recorded for
deferred tax assets. These estimates could have a direct impact
on the Companys earnings, as a difference in the tax
provision could alter the Companys net income.
Comparison
of 2008 to 2007 Results of Operations
Continuing Operations
Revenues
from Operations (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Base and percentage rental revenues
|
|
$
|
614,960
|
|
|
$
|
623,167
|
|
|
$
|
(8,207
|
)
|
|
|
(1.3
|
)%
|
Recoveries from tenants
|
|
|
193,489
|
|
|
|
198,067
|
|
|
|
(4,578
|
)
|
|
|
(2.3
|
)
|
Ancillary and other property income
|
|
|
22,205
|
|
|
|
19,434
|
|
|
|
2,771
|
|
|
|
14.3
|
|
Management, development and other fee income
|
|
|
62,890
|
|
|
|
50,840
|
|
|
|
12,050
|
|
|
|
23.7
|
|
Other
|
|
|
8,751
|
|
|
|
13,697
|
|
|
|
(4,946
|
)
|
|
|
(36.1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
902,295
|
|
|
$
|
905,205
|
|
|
$
|
(2,910
|
)
|
|
|
(0.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In the aggregate, base and percentage rental revenues for the
Company in 2008 as compared to 2007 decreased by approximately
$8.2 million. However, base and percentage rental revenues
relating to new leasing, re-tenanting and expansion of the Core
Portfolio Properties (shopping center properties owned as of
January 1, 2007, and since March 1, 2007, with regard
to Inland Retail Real Estate Trust, Inc. (IRRETI)
assets, but excluding properties under development/redevelopment
and those classified as discontinued operations) (Core
Portfolio Properties),
19
increased approximately $3.5 million, or 0.7%, for the year
ended December 31, 2008, as compared to the same period in
2007. The decrease in overall base and percentage rental
revenues is due to the following (in millions):
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
Core Portfolio Properties
|
|
$
|
3.5
|
|
IRRETI merger and acquisition of real estate assets
|
|
|
16.9
|
|
Development/redevelopment of shopping center properties
|
|
|
3.8
|
|
Disposition of shopping center properties in 2007
|
|
|
(29.0
|
)
|
Business center properties
|
|
|
0.4
|
|
Straight-line rents(1)
|
|
|
(3.8
|
)
|
|
|
|
|
|
|
|
$
|
(8.2
|
)
|
|
|
|
|
|
|
|
|
(1)
|
|
Straight-line rental revenue
decreased $3.8 million, or 34.8%, for the year ended
December 31, 2008, as compared to the same period in 2007.
This decrease was due in part to a decrease in straight-line
rent recognized on the Mervyns portfolio in the fourth quarter
of 2008.
|
At December 31, 2008, the aggregate occupancy of the
Companys shopping center portfolio was 92.1%, as compared
to 94.9% at December 31, 2007. The Company owned 702
shopping centers at December 31, 2008, as compared to 710
shopping centers at December 31, 2007. The average
annualized base rent per occupied square foot was $12.33 at
December 31, 2008, as compared to $12.24 at
December 31, 2007. The decrease in the occupancy is
primarily a result of the deteriorating economic environment and
increased tenant bankruptcies.
At December 31, 2008, the aggregate occupancy of the
Companys wholly-owned shopping centers was 90.7%, as
compared to 93.9% at December 31, 2007. The Company owned
333 wholly-owned shopping centers at December 31, 2008, as
compared to 353 shopping centers at December 31, 2007. The
average annualized base rent per leased square foot was $11.74
at December 31, 2008, as compared to $11.53 at
December 31, 2007. The decrease in the occupancy is
primarily a result of the deteriorating economic environment and
increased tenant bankruptcies.
At December 31, 2008, the aggregate occupancy rate of the
Companys joint venture shopping centers was 93.4%, as
compared to 95.9% at December 31, 2007. The Companys
joint ventures owned 369 shopping centers including 40
consolidated centers primarily owned through DDR MDT MV LLC
(MV LLC) at December 31, 2008, as compared to
357 shopping centers including 40 consolidated centers at
December 31, 2007. The average annualized base rent per
leased square foot was $12.85 at December 31, 2008, as
compared to $12.86 at December 31, 2007. The decrease in
the occupancy is primarily a result of the deteriorating
economic environment and increased tenant bankruptcies.
At December 31, 2008, the aggregate occupancy of the
Companys business centers was 72.4%, as compared to 70.0%
at December 31, 2007. The business centers consist of six
assets in four states at December 31, 2008. The business
centers consisted of seven assets in five states at
December 31, 2007.
Recoveries from tenants decreased $4.6 million, or 2.3%,
for the year ended December 31, 2008, as compared to the
same period in 2007. This decrease is primarily due to the
transfer of assets to joint ventures in 2007. Recoveries
decreased in the aggregate despite an increase in operating and
maintenance expenses, due in part to the significant increase in
bad debt expense discussed below. Recoveries were approximately
77.5% and 85.3% of operating expenses and real estate taxes
including bad debt expense for the years ended December 31,
2008 and 2007, respectively.
20
The decrease in recoveries from tenants was primarily related to
the following (in millions):
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
IRRETI merger and acquisition of real estate assets
|
|
$
|
5.3
|
|
Development/redevelopment of shopping center properties in 2008
and 2007
|
|
|
2.6
|
|
Transfer of assets to unconsolidated joint ventures in 2007
|
|
|
(10.7
|
)
|
Net increase in operating expenses at the remaining shopping
center and business center properties
|
|
|
(1.8
|
)
|
|
|
|
|
|
|
|
$
|
(4.6
|
)
|
|
|
|
|
|
Ancillary and other property income is a result of pursuing
additional revenue opportunities in the Core Portfolio
Properties. The increase in ancillary and other property income
is offset by the conversion of operating arrangements at one of
the Companys shopping centers into a long-term lease
agreement. This conversion resulted in a decrease in ancillary
and other property income of $4.5 million and a
corresponding increase in base rent. Ancillary revenue
opportunities have in the past included short-term and seasonal
leasing programs, outdoor advertising programs, wireless tower
development programs, energy management programs, sponsorship
programs and various other programs.
The increase in management, development and other fee income for
the year ended December 31, 2008, is primarily due to the
following (in millions):
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
Newly formed unconsolidated joint venture interests
|
|
$
|
7.0
|
|
Development fee income
|
|
|
(1.3
|
)
|
Other income
|
|
|
2.7
|
|
Sale of several of the Companys unconsolidated joint
venture properties
|
|
|
(0.4
|
)
|
Leasing commissions
|
|
|
3.6
|
|
Decrease in management fee income at various unconsolidated
joint ventures
|
|
|
0.5
|
|
|
|
|
|
|
|
|
$
|
12.1
|
|
|
|
|
|
|
Development fee income was primarily earned through the
redevelopment of joint venture assets that are owned through the
Companys investments with the Coventry II Fund
discussed below. In light of current market conditions,
development fees may decline if development or redevelopment
projects are delayed.
Other revenue is composed of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Lease terminations and bankruptcy settlements
|
|
$
|
5.8
|
|
|
$
|
5.0
|
|
Acquisition and financing fees (1)
|
|
|
2.0
|
|
|
|
7.9
|
|
Other
|
|
|
1.0
|
|
|
|
0.8
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
8.8
|
|
|
$
|
13.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes acquisition fees of
$6.3 million earned from the formation of the DDRTC Core
Retail Fund LLC in February 2007, excluding the
Companys retained ownership interest. The Companys
fee was earned in conjunction with services rendered by the
Company in connection with the acquisition of the IRRETI real
estate assets. Financing fees are earned in connection with the
formation and refinancing of unconsolidated joint ventures,
excluding the Companys retained ownership interest. The
Companys fees are earned in conjunction with the closing
and are based upon the amount of the financing transaction by the
joint venture.
|
21
Expenses
from Operations (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Operating and maintenance
|
|
$
|
142,300
|
|
|
$
|
128,129
|
|
|
$
|
14,171
|
|
|
|
11.1
|
%
|
Real estate taxes
|
|
|
107,357
|
|
|
|
104,126
|
|
|
|
3,231
|
|
|
|
3.1
|
|
Impairment charge
|
|
|
76,283
|
|
|
|
|
|
|
|
76,283
|
|
|
|
100.0
|
|
General and administrative
|
|
|
97,719
|
|
|
|
81,244
|
|
|
|
16,475
|
|
|
|
20.3
|
|
Depreciation and amortization
|
|
|
233,611
|
|
|
|
206,465
|
|
|
|
27,146
|
|
|
|
13.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
657,270
|
|
|
$
|
519,964
|
|
|
$
|
137,306
|
|
|
|
26.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance expenses include the Companys
provision for bad debt expense, which approximated 2.0% and 0.9%
of total revenues, including discontinued operations for the years ended December 31, 2008 and
2007, respectively. In 2008, bad debt expense included the write
off of $6.6 million of straight-line rents of which
$5.5 million primarily relates to leases entered into with
Mervyns, of which 50% is allocable to non-controlling interests and $1.1
million relates to major tenant banckruptcies (see Economic
Conditions).
The increase in rental operation expenses, excluding general and
administrative, is due to the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
|
|
|
and
|
|
|
Real Estate
|
|
|
|
|
|
|
Maintenance
|
|
|
Taxes
|
|
|
Depreciation
|
|
|
Core Portfolio Properties
|
|
$
|
5.7
|
|
|
$
|
2.3
|
|
|
$
|
10.7
|
|
IRRETI merger
|
|
|
2.8
|
|
|
|
3.3
|
|
|
|
10.1
|
|
Acquisition and development/redevelopment of shopping center
properties
|
|
|
2.3
|
|
|
|
2.4
|
|
|
|
6.1
|
|
Transfer of assets to unconsolidated joint ventures in 2007
|
|
|
(6.6
|
)
|
|
|
(4.8
|
)
|
|
|
(1.3
|
)
|
Business center properties
|
|
|
0.1
|
|
|
|
|
|
|
|
0.2
|
|
Provision for bad debt expense
|
|
|
9.9
|
|
|
|
|
|
|
|
|
|
Personal property
|
|
|
|
|
|
|
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
14.2
|
|
|
$
|
3.2
|
|
|
$
|
27.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In December 2008, due to the continued deterioration of the
U.S. capital markets, the lack of liquidity and the related
impact on the real estate market and retail industry, that
accelerated during the fourth quarter of 2008, the Company
recorded impairment charges on several consolidated real estate
investments, including both operating shopping centers and land
under development, to the extent that the book basis of the
asset was in excess of the estimated fair market value. A
portion of these charges are allocable to non-controlling interest
thereby providing a partial offset. As a result, the Company
recorded impairment charges of $76.3 million on several
consolidated real estate investments determined pursuant to the
provisions of SFAS 144.
General and administrative expenses included increased expenses
primarily attributable to the merger with IRRETI and additional
stock-based compensation expense. Total general and
administrative expenses were approximately 5.2% and 4.5% of
total revenues, including total revenues of unconsolidated joint
ventures and discontinued operations for the years ended December 31, 2008 and 2007,
respectively. In December 2008, an equity award plan was
terminated because it was determined that the program no longer
provided any motivational or retention value, and therefore
would not help achieve the goals for which it was created. In
connection with the award termination, as the Compensation
Committee of the Board of Directors and the participants agreed
to cancel the awards for no consideration and the termination
was not accompanied by a concurrent grant of (or offer to grant)
replacement awards or other valuable consideration, the Company
recorded a non-cash charge of approximately $15.8 million
of previously unrecognized compensation cost associated with
these awards.
If the transaction discussed in 2009
Activity Current Strategies is approved by the
Companys shareholders and there is a beneficial owner of
20% or more of the Companys outstanding common shares as a
result thereof, a
22
change in control will be deemed to have occurred
under substantially all of the Companys equity award
plans. It is expected that, in accordance with the equity award
plans, all unvested stock options would become fully exercisable
and all restrictions on unvested restricted shares would lapse.
As such, the Company could record an accelerated non-cash charge
in accordance with SFAS 123(R) of approximately $15 million
related to these equity awards, of which approximately
$10 million would have been expensed in periods following
2009.
The Company continues to expense internal leasing salaries,
legal salaries and related expenses associated with certain
leasing and re-leasing of existing space. The Company will cease
the capitalization of these items as assets are placed in
service or upon the temporary suspension of construction.
Because the Company has suspended certain construction
activities, the amount of capitalized costs may be reduced. In
addition, the Company capitalized certain direct and incremental
internal construction and software development and
implementation costs consisting of direct wages and benefits,
travel expenses and office overhead costs of $14.6 million
and $12.8 million in 2008 and 2007, respectively. In
connection with the anticipated reduced level of development
spending, the Company has taken steps to reduce overhead cost in
this area.
Other
Income and Expenses (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Interest income
|
|
$
|
5,462
|
|
|
$
|
8,730
|
|
|
$
|
(3,268
|
)
|
|
|
(37.4
|
)%
|
Interest expense
|
|
|
(251,663
|
)
|
|
|
(263,829
|
)
|
|
|
12,166
|
|
|
|
(4.6
|
)
|
Gain on repurchase of senior notes
|
|
|
10,455
|
|
|
|
|
|
|
|
10,455
|
|
|
|
100.0
|
|
Abandoned projects and transactions costs
|
|
|
(12,433
|
)
|
|
|
|
|
|
|
(12,433
|
)
|
|
|
100.0
|
|
Other expense, net
|
|
|
(15,819
|
)
|
|
|
(3,019
|
)
|
|
|
(12,800
|
)
|
|
|
424.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(263,998
|
)
|
|
$
|
(258,118
|
)
|
|
$
|
(5,880
|
)
|
|
|
2.3
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income for the year ended December 31, 2008,
decreased primarily due to excess cash held by the Company
immediately following the closing of the IRRETI merger in
February 2007.
Interest expense decreased primarily due to the sale of
approximately $1.4 billion of assets in the second and
third quarters of 2007. In addition, interest expense was lower
due to a decrease in short-term interest rates in 2008
offset by additional interest expense as development assets
became operational and the retrospective adoption of FSP APB
14-1.
The weighted-average debt outstanding and
related weighted-average interest rates are as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended,
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Weighted-average debt outstanding (billions)
|
|
$
|
5.8
|
|
|
$
|
5.4
|
|
Weighted-average interest rate
|
|
|
5.0
|
%
|
|
|
5.6
|
%
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Weighted-average interest rate
|
|
|
5.2
|
%
|
|
|
5.2
|
%
|
The reduction in weighted-average interest rates in 2008 is
primarily related to the decline in short-term interest rates.
Interest costs capitalized in conjunction with development and
expansion projects and unconsolidated development joint venture
interests were $41.1 million for the year ended
December 31, 2008, compared to $28.0 million for the
same period in 2007. The Company will cease the capitalization
of interest as assets are placed in service or upon the
temporary suspension of construction. Because the Company has
suspended certain construction activities, the amount of
capitalized interest may be reduced in future periods.
Gain on the repurchase of senior notes relates to the
Companys purchase of approximately $70.3 million face
amount of its outstanding senior notes at a discount to par
during 2008, resulting in a gain of approximately
$10.5 million. During January 2009, the Company purchased
an additional $10 million of senior notes at a discount to
par.
23
Abandoned projects and transactions costs primarily relate to
the write-off costs associated with abandoned development
projects as well as costs incurred for transactions that are no
longer expected to close.
Other expense primarily relates to a $5.4 million loan loss
reserve associated with a note receivable as well as litigation
costs related to a potential liability associated with a legal
verdict.
Other (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Equity in net income of joint ventures
|
|
$
|
17,719
|
|
|
$
|
43,229
|
|
|
$
|
(25,510
|
)
|
|
|
(59.0
|
)%
|
Impairment of joint venture investments
|
|
|
(106,957
|
)
|
|
|
|
|
|
|
(106,957
|
)
|
|
|
100.0
|
|
Income tax benefit of taxable REIT subsidiaries and franchise
taxes
|
|
|
17,465
|
|
|
|
14,700
|
|
|
|
2,765
|
|
|
|
18.8
|
|
A summary of the decrease in equity in net income of joint
ventures for the year ended December 31, 2008, is composed
of the following (in millions):
|
|
|
|
|
|
|
(Decrease)
|
|
|
Decrease in gains from sale transactions and related income as
compared to 2007
|
|
$
|
(9.4
|
)
|
Acquisition of assets by unconsolidated joint ventures
|
|
|
(16.1
|
)
|
|
|
|
|
|
|
|
$
|
(25.5
|
)
|
|
|
|
|
|
The decrease in equity in net income of joint ventures is
primarily due to promoted income of $14.3 million earned in
2007, related to the sale of certain joint venture assets.
Additional losses aggregating $2.9 million that were
recorded in 2008 related to impairment charges recorded by the
Companys joint ventures. In 2007, the Companys
unconsolidated joint ventures recognized an aggregate gain from
the sale of joint venture assets of $96.9 million, of which
the Companys proportionate share was $20.8 million.
However, $18.0 million of such amount was deferred due to
the Companys continuing involvement in certain assets.
Included in equity in net income of joint ventures is the effect
of certain derivative instruments that are marked to market
through earnings from the Companys equity investment in
Macquarie DDR Trust aggregating approximately $29.4 million
of loss for the year ended December 31, 2008.
In addition to the sale of the DDR Markaz LLC joint venture
assets in June 2007, the Companys unconsolidated joint
ventures sold one 25.5% effectively owned shopping center and
six sites formerly occupied by Service Merchandise.
Impairment of joint venture investments is a result of the
Companys determination that several of its unconsolidated
joint venture investments suffered an other than temporary
impairment in the fourth quarter of 2008. Therefore, the
Company recorded approximately $107.0 million of impairment
charges associated with certain of its joint venture investments
in accordance with APB 18. The provisions of this opinion
require that a loss in value of an investment under the equity
method of accounting that is an other than temporary decline
must be recognized. A summary of the impairment charge by
investment is as follows (in millions):
|
|
|
|
|
DDRTC Core Retail Fund LLC
|
|
$
|
47.3
|
|
Macquarie DDR Trust
|
|
|
31.7
|
|
DDR-SAU Retail Fund LLC
|
|
|
9.0
|
|
Coventry II DDR Bloomfield LLC
|
|
|
10.8
|
|
Coventry II DDR Merriam Village LLC
|
|
|
3.3
|
|
RO & SW Realty LLC/Central Park Solon LLC
|
|
|
3.2
|
|
DPG Realty Holdings LLC
|
|
|
1.7
|
|
|
|
|
|
|
|
|
$
|
107.0
|
|
|
|
|
|
|
24
During 2008, the Company recognized a $17.5 million income
tax benefit. Approximately $15.6 million of this amount
related to the release of valuation allowances associated with
deferred tax assets that were established in prior years. These
valuation allowances were previously established due to the
uncertainty that the deferred tax assets would be utilizable. As
of December 31, 2008, the Company has no valuation
allowances recorded against its deferred tax assets.
In order to maintain its REIT status, the Company must meet
certain income tests to ensure that its gross income consists of
passive income and not income from the active conduct of a trade
or business. The Company utilizes its taxable REIT subsidiary
(TRS) to the extent certain fee and other
miscellaneous non-real estate related income cannot be earned by
the REIT. During the third quarter of 2008, the Company began
recognizing certain fee and miscellaneous other non-real estate
related income within its TRS. Therefore, based on the
Companys evaluation of the current facts and
circumstances, the Company determined during the third quarter
of 2008 that the valuation allowance should be released as it
was more-likely-than-not that the deferred tax assets would be
utilized in future years. This determination was based upon the
increase in fee and miscellaneous other non-real estate related
income that is projected to be recognized within the
Companys TRS.
In 2007, the Company recognized an aggregate income tax benefit
of approximately $14.7 million. In the first quarter, the
Company recognized $15.4 million of the benefit as a result
of the reversal of a previously established valuation allowance
against deferred tax assets. The reserves were related to
deferred tax assets established in prior years, at which time it
was determined that it was more likely than not that the
deferred tax asset would not be realized and, therefore, a
valuation allowance was required. Several factors were
considered in the first quarter of 2007 that contributed to the
reversal of the valuation allowance. The most significant factor
was the sale of merchant build assets by the Companys TRS
in the second quarter of 2007 and similar projected taxable
gains for future periods. Other factors included the merger of
various TRS and the anticipated profit levels of the
Companys TRS, which will facilitate the realization
of the deferred tax assets. Management regularly assesses
established reserves and adjusts these reserves when facts and
circumstances indicate that a change in estimates is warranted.
Based upon these factors, management determined that it was
more-likely-than-not that the deferred tax assets would be
realized in the future and, accordingly, the valuation allowance
recorded against those deferred tax assets was no longer
required.
Discontinued
Operations (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Income from discontinued operations
|
|
$
|
5,606
|
|
|
$
|
16,564
|
|
|
$
|
(10,958
|
)
|
|
|
(66.2
|
)%
|
(Loss) gain on disposition of real estate, net of tax
|
|
|
(4,830
|
)
|
|
|
12,259
|
|
|
|
(17,089
|
)
|
|
|
(139.4
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
776
|
|
|
$
|
28,823
|
|
|
$
|
(28,047
|
)
|
|
|
(97.3
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in discontinued operations for the years ended
December 31, 2008 and 2007, are 15 properties sold from
January 1, 2009 to June 30, 2009 and six properties considered
held for sale at June 30, 2009, aggregating 2.4 million square feet
of Company-owned GLA, 22 properties sold in 2008 (including one business center and one
property held for sale at December 31,
25
2007) aggregating 1.3 million square feet, and 67
properties sold in 2007 (including one property classified as
held for sale at December 31, 2006, and 22 properties
acquired through the IRRETI merger in 2007), aggregating
6.3 million square feet.
In September 2008, the Company sold its approximate 56% interest
in one of its business centers to its partner for
$20.7 million and recorded an aggregate loss of
$5.8 million. The Companys partner exercised its
buy-sell rights provided under the joint venture agreement in
July 2008 and the Company elected to sell its interest pursuant
to the terms of the buy-sell right in mid-August 2008.
Gain on
Disposition of Real Estate (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Gain on disposition of real estate
|
|
$
|
6,962
|
|
|
$
|
68,851
|
|
|
$
|
(61,889
|
)
|
|
|
(89.9
|
)%
|
The Company recorded gains on disposition of real estate and
real estate investments for the years ended December 31,
2008 and 2007, as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Transfer of assets to Domestic Retail Fund (1)(2)
|
|
$
|
|
|
|
$
|
1.8
|
|
Transfer of assets to TRT DDR Venture I (1)(3)
|
|
|
|
|
|
|
50.3
|
|
Land sales (4)
|
|
|
6.2
|
|
|
|
14.0
|
|
Previously deferred gains and other gains and losses on
dispositions (5)
|
|
|
0.8
|
|
|
|
2.8
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7.0
|
|
|
$
|
68.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
This disposition is not classified
as discontinued operations due to the Companys continuing
involvement through its retained ownership interest and
management agreements.
|
|
(2)
|
|
The Company transferred two
wholly-owned assets. The Company did not record a gain on the
contribution of 54 assets, as these assets were recently
acquired through the merger with IRRETI.
|
|
(3)
|
|
The Company transferred three
recently developed assets.
|
|
(4)
|
|
These dispositions did not meet the
criteria for discontinued operations as the land did not have
any significant operations prior to disposition.
|
|
(5)
|
|
These gains and losses are
primarily attributable to the subsequent leasing of units
related to master lease and other obligations originally
established on disposed properties, which are no longer required.
|
Non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Non-controlling interests
|
|
$
|
11,078
|
|
|
$
|
(17,784
|
)
|
|
$
|
28,862
|
|
|
|
162.3
|
%
|
Non-controlling interest expense decreased for the year ended
December 31, 2008, primarily due to the following
(in millions):
|
|
|
|
|
|
|
Decrease
|
|
|
Preferred operating partnership units (1)
|
|
$
|
9.7
|
|
MV LLC (owned approximately 50% by the Company) (2)
|
|
|
17.0
|
|
Conversion of 0.5 million operating partnership units
(OP Units) to common shares
|
|
|
0.9
|
|
Net decrease in net income from consolidated joint venture
investments
|
|
|
1.3
|
|
|
|
|
|
|
|
|
$
|
28.9
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Preferred operating partnership
units (Preferred OP Units) were issued in February
2007 as part of the financing of the IRRETI merger. These units
were redeemed in June 2007.
|
|
(2)
|
|
Primarily as a result of the
write-off of straight-line rent and impairment charges on the
assets of this joint venture. See discussion above.
|
Net
(Loss) Income attributable to DDR (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
$ Change
|
|
|
% Change
|
|
|
Net (loss) income attributable to DDR
|
|
$
|
(71,930
|
)
|
|
$
|
264,942
|
|
|
$
|
(336,872
|
)
|
|
|
(127.1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The decrease in net income attributable to DDR for the year ended December 31,
2008, is primarily the result of non-cash impairment charges
recorded relating to the Companys consolidated real estate
assets including discontinued operations as well as its unconsolidated joint venture investments
aggregating $169.2 million, net of amounts applicable to
non-controlling interests, a non-cash charge of $15.8 million
related to the termination of an equity award plan and costs
incurred of $28.3 million related to abandoned projects,
transaction costs and other expenses partially offset by a gain
on the repurchase of the Companys senior notes of
$10.5 million and lower transactional income earned during
the same period in 2007
26
relating to the transfer of 62 assets to unconsolidated joint
venture interests and the sale of 67 assets to third parties in
2007. A summary of the changes in net income attributable to DDR in 2008 compared to
2007 is as follows (in millions):
|
|
|
|
|
Decrease in net operating revenues (total revenues in excess of
operating and maintenance expenses and real estate taxes) (1)
|
|
$
|
(20.4
|
)
|
Increase in consolidated impairment charges
|
|
|
(76.3
|
)
|
Increase in general and administrative expenses (2)
|
|
|
(16.5
|
)
|
Increase in depreciation expense
|
|
|
(27.1
|
)
|
Decrease in interest income (3)
|
|
|
(3.3
|
)
|
Decrease in interest expense
|
|
|
12.2
|
|
Increase in gain on repurchase of senior notes
|
|
|
10.5
|
|
Increase in abandoned projects and transaction costs
|
|
|
(12.4
|
)
|
Change in other expense
|
|
|
(12.8
|
)
|
Decrease in equity in net income of joint ventures (4)
|
|
|
(25.5
|
)
|
Increase in impairment of joint ventures investments
|
|
|
(107.0
|
)
|
Change in income tax benefit (expense)
|
|
|
2.8
|
|
Decrease in income from discontinued operations
|
|
|
(11.0
|
)
|
Decrease in gain on disposition of real estate of discontinued
operations properties
|
|
|
(17.1
|
)
|
Decrease in gain on disposition of real estate
|
|
|
(61.9
|
)
|
Decrease in non-controlling interest expense
|
|
|
28.9
|
|
|
|
|
|
|
Decrease in net income attributable to DDR
|
|
$
|
(336.9
|
)
|
|
|
|
|
|
|
|
|
(1)
|
|
Decrease primarily related to
assets sold to joint ventures in 2007 and increased level of bad
debt expense.
|
|
(2)
|
|
Includes non-cash change of
$15.8 million relating to the termination of an equity
award plan.
|
|
(3)
|
|
Increase primarily related to the
IRRETI merger.
|
|
(4)
|
|
Decrease primarily due to a
reduction of promoted income associated with 2007 joint venture
asset sales and impairment charges at two unconsolidated joint
ventures in 2008.
|
Comparison
of 2007 to 2006 Results of Operations
Continuing Operations
Revenues
from Operations (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Base and percentage rental revenues
|
|
$
|
623,167
|
|
|
$
|
522,498
|
|
|
$
|
100,669
|
|
|
|
19.3
|
%
|
Recoveries from tenants
|
|
|
198,067
|
|
|
|
164,990
|
|
|
|
33,077
|
|
|
|
20.0
|
|
Ancillary and other property income
|
|
|
19,434
|
|
|
|
19,384
|
|
|
|
50
|
|
|
|
0.3
|
|
Management, development and other fee income
|
|
|
50,840
|
|
|
|
30,294
|
|
|
|
20,546
|
|
|
|
67.8
|
|
Other
|
|
|
13,697
|
|
|
|
14,857
|
|
|
|
(1,160
|
)
|
|
|
(7.8
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
$
|
905,205
|
|
|
$
|
752,023
|
|
|
$
|
153,182
|
|
|
|
20.4
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Base and percentage rental revenues relating to new leasing,
re-tenanting and expansion of the Core Portfolio Properties
(shopping center properties owned as of January 1, 2006,
but excluding properties under development/redevelopment and
those classified as discontinued operations) (Core
Portfolio Properties) increased
27
approximately $6.3 million, or 1.4%, for the year ended
December 31, 2007, as compared to the same period in 2006.
The increase in base and percentage rental revenues was due to
the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
Increase (Decrease)
|
|
|
Core Portfolio Properties
|
|
$
|
6.3
|
|
|
|
|
|
IRRETI merger
|
|
|
102.0
|
|
|
|
|
|
Development/redevelopment of shopping center properties
|
|
|
7.3
|
|
|
|
|
|
Disposition of shopping center properties in 2007 and 2006
|
|
|
(11.5
|
)
|
|
|
|
|
Business center properties
|
|
|
0.5
|
|
|
|
|
|
Straight-line rents
|
|
|
(3.9
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
100.7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At December 31, 2007, the aggregate occupancy of the
Companys shopping center portfolio was 94.9%, as compared
to 95.2% at December 31, 2006. The Company owned 710
shopping centers at December 31, 2007, as compared to 467
shopping centers at December 31, 2006. The average
annualized base rent per occupied square foot was $12.24 at
December 31, 2007, as compared to $11.56 at
December 31, 2006. The increase was primarily due to the
releasing of space during 2007 at higher amounts combined with
higher rents attributable to the assets acquired from IRRETI.
At December 31, 2007, the aggregate occupancy of the
Companys wholly-owned shopping centers was 93.9%, as
compared to 94.1% at December 31, 2006. The Company owned
353 wholly-owned shopping centers at December 31, 2007, as
compared to 261 shopping centers at December 31, 2006. The
average annualized base rent per leased square foot was $11.53
at December 31, 2007, as compared to $10.80 at
December 31, 2006. The increase was primarily due to the
releasing of space during 2007 at higher amounts combined with
higher rents attributable to the assets acquired from IRRETI.
At December 31, 2007, the aggregate occupancy rate of the
Companys joint venture shopping centers was 95.9%, as
compared to 96.9% at December 31, 2006. The Companys
joint ventures owned 357 shopping centers including 40
consolidated centers primarily owned through the MV LLC joint
venture at December 31, 2007, as compared to 167 shopping
centers and 39 consolidated centers at December 31, 2006.
The average annualized base rent per leased square foot was
$12.86 at December 31, 2007, as compared to $12.69 at
December 31, 2006. The increase was a result of the mix of
shopping center assets in the joint ventures at
December 31, 2007, as compared to December 31, 2006,
primarily related to the 2007 formation of three joint ventures,
TRT DDR Venture I, DDR Domestic Retail Fund I
(Domestic Retail Fund) and DDRTC Core Retail
Fund LLC.
At December 31, 2007, the aggregate occupancy of the
Companys business centers was 70.0%, as compared to 42.1%
at December 31, 2006. The increase in occupancy was
primarily due to a large vacancy filled at a business center in
Boston, Massachusetts. The business centers consisted of seven
assets in five states at both December 31, 2007 and 2006.
Recoveries from tenants increased $33.1 million, or 20.0%,
for the year ended December 31, 2007, as compared to the
same period in 2006. This increase was primarily due to an
increase in operating expenses and real estate taxes that
aggregated $41.9 million, primarily due to the IRRETI
merger in February 2007. Recoveries were approximately 85.3% and
86.7% of operating expenses and real estate taxes for the years
ended December 31, 2007 and 2006, respectively.
28
The increase in recoveries from tenants was primarily related to
the following (in millions):
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
IRRETI merger
|
|
$
|
25.9
|
|
Acquisition and development/redevelopment of shopping center
properties in 2007 and 2006
|
|
|
5.3
|
|
Transfer of assets to unconsolidated joint ventures in 2007 and
2006
|
|
|
(3.3
|
)
|
Net increase in operating expenses at the remaining shopping
center and business center properties
|
|
|
5.2
|
|
|
|
|
|
|
|
|
$
|
33.1
|
|
|
|
|
|
|
Ancillary and other property income increased due to additional
opportunities in the Core Portfolio Properties.
The increase in management, development and other fee income for
the year ended December 31, 2007, was primarily due to the
following (in millions):
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
Newly formed unconsolidated joint venture interests
|
|
$
|
11.4
|
|
Development fee income
|
|
|
3.0
|
|
Asset management fee income
|
|
|
3.3
|
|
Other income
|
|
|
2.3
|
|
Sale of several of the Companys unconsolidated joint
venture properties
|
|
|
(0.2
|
)
|
Leasing commissions
|
|
|
0.7
|
|
|
|
|
|
|
|
|
$
|
20.5
|
|
|
|
|
|
|
Other revenue was composed of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Lease terminations and bankruptcy settlements (1)
|
|
$
|
5.0
|
|
|
$
|
14.0
|
|
Acquisition and financing fees (2)
|
|
|
7.9
|
|
|
|
0.4
|
|
Other
|
|
|
0.8
|
|
|
|
0.5
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
13.7
|
|
|
$
|
14.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For the year ended
December 31, 2006, the Company executed lease terminations
on four vacant Wal-Mart spaces in the Companys
consolidated portfolio.
|
|
(2)
|
|
Included acquisition fees of
$6.3 million earned from the formation of the DDRTC Core
Retail Fund LLC joint venture in February 2007, excluding
the Companys retained ownership interest. The
Companys fee was earned in conjunction with services
rendered by the Company in connection with the acquisition of
the IRRETI real estate assets. Financing fees are earned in
connection with the formation and refinancing of unconsolidated
joint ventures, excluding the Companys retained ownership
interest. The Companys fees are earned in conjunction with
the closing and are based upon the amount of the financing
transaction by the joint venture.
|
29
Expenses
from Operations (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Operating and maintenance
|
|
$
|
128,129
|
|
|
$
|
103,281
|
|
|
$
|
24,848
|
|
|
|
24.1
|
%
|
Real estate taxes
|
|
|
104,126
|
|
|
|
87,058
|
|
|
|
17,068
|
|
|
|
19.6
|
|
General and administrative
|
|
|
81,244
|
|
|
|
60,679
|
|
|
|
20,565
|
|
|
|
33.9
|
|
Depreciation and amortization
|
|
|
206,465
|
|
|
|
174,535
|
|
|
|
31,930
|
|
|
|
18.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
519,964
|
|
|
$
|
425,553
|
|
|
$
|
94,411
|
|
|
|
22.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance expenses included the Companys
provision for bad debt expense, which approximated 0.9% and 0.8%
of total revenues, including discontinued operations for the years ended December 31, 2007 and
2006, respectively (see Economic Conditions).
The increase in rental operation expenses, excluding general and
administrative, was due to the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
|
|
|
|
|
|
|
and
|
|
|
Real Estate
|
|
|
|
|
|
|
Maintenance
|
|
|
Taxes
|
|
|
Depreciation
|
|
|
Core Portfolio Properties
|
|
$
|
4.0
|
|
|
$
|
1.1
|
|
|
$
|
3.4
|
|
IRRETI merger
|
|
|
14.7
|
|
|
|
16.9
|
|
|
|
30.6
|
|
Acquisition and development/redevelopment of shopping center
properties
|
|
|
5.4
|
|
|
|
1.2
|
|
|
|
0.9
|
|
Transfer of assets to unconsolidated joint ventures in 2007 and
2006
|
|
|
(1.7
|
)
|
|
|
(2.1
|
)
|
|
|
(3.5
|
)
|
Business center properties
|
|
|
0.1
|
|
|
|
|
|
|
|
0.1
|
|
Provision for bad debt expense
|
|
|
2.3
|
|
|
|
|
|
|
|
|
|
Personal property
|
|
|
|
|
|
|
|
|
|
|
0.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
24.8
|
|
|
$
|
17.1
|
|
|
$
|
31.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The increase in general and administrative expenses was
primarily attributable to the merger with IRRETI and additional
compensation expense as a result of the former presidents
resignation as an executive officer of the Company effective May
2007. The Company recorded a charge of $4.1 million during
the year ended December 31, 2007, related to this
resignation, which includes, among other items, stock-based
compensation charges recorded under the provisions of
SFAS 123(R). In addition, the Company incurred integration
costs in connection with the IRRETI acquisition that aggregated
approximately $2.8 million for the year ended
December 31, 2007. Total general and administrative
expenses were approximately 4.5% and 4.8% of total revenues,
including total revenues of unconsolidated joint ventures and
discontinued operations, for
the years ended December 31, 2007 and 2006, respectively.
The Company continued to expense internal leasing salaries,
legal salaries and related expenses associated with certain
leasing and re-leasing of existing space. In addition, the
Company capitalized certain direct and incremental internal
construction and software development and implementation costs
consisting of direct wages and benefits, travel expenses and
office overhead costs of $12.8 million and
$10.0 million in 2007 and 2006, respectively.
The Company adopted SFAS 123(R) as required on
January 1, 2006, using the modified prospective method. As
a result, the Companys consolidated financial statements
as of and for the year ended December 31, 2006, reflect the
impact of SFAS 123(R). In accordance with the modified
prospective method, the Companys consolidated financial
statements for prior periods have not been restated to reflect
the impact of SFAS 123(R). The compensation cost recognized
under SFAS 123(R) was approximately $11.9 million and
$8.3 million for the years ended December 31, 2007 and
2006, respectively. In December 2007, the Board of Directors
approved the 2007 Supplemental Equity Award Program for certain
officers of the Company. The Company recognized
$0.4 million of expense related to this plan in 2007. For
the year ended December 31, 2007, the Company
30
capitalized $0.3 million of stock-based compensation. There
were no significant capitalized stock-based compensation costs
in 2006.
Other
Income and Expenses (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Interest income
|
|
$
|
8,730
|
|
|
$
|
8,996
|
|
|
$
|
(266
|
)
|
|
|
(3.0
|
)%
|
Interest expense
|
|
|
(263,829
|
)
|
|
|
(205,751
|
)
|
|
|
(58,078
|
)
|
|
|
28.2
|
|
Other expense, net
|
|
|
(3,019
|
)
|
|
|
(446
|
)
|
|
|
(2,573
|
)
|
|
|
576.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(258,118
|
)
|
|
$
|
(197,201
|
)
|
|
$
|
(60,917
|
)
|
|
|
30.9
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income for the year ended December 31, 2007,
included excess cash held by the Company as a result of the
IRRETI merger. Interest income for the year ended
December 31, 2006, included advances to one of the
Companys joint ventures, which were repaid in August 2006.
Interest expense increased primarily due to the IRRETI merger
and associated borrowing combined with development assets
becoming operational. In addition, the amounts reflect the
retrospective adoption of FSP APB 14-1. The weighted-average debt outstanding and
related weighted-average interest rates were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Weighted-average debt outstanding (billions)
|
|
$
|
5.4
|
|
|
$
|
4.1
|
|
Weighted-average interest rate
|
|
|
5.6
|
%
|
|
|
5.8
|
%
|
|
|
|
|
|
|
|
|
|
|
|
At December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Weighted-average interest rate
|
|
|
5.2
|
%
|
|
|
5.8
|
%
|
The reduction in the weighted-average interest rate in 2007 was
primarily related to the Companys issuance of
$850 million of senior convertible notes in August 2006 and
March 2007 with a weighted-average coupon rate of 3.2% and the
decline in short-term interest rates. Interest costs
capitalized, in conjunction with development and expansion
projects and unconsolidated development joint venture interests,
were $28.0 million for the year ended December 31,
2007, compared to $20.0 million for the same period in 2006.
Other expense primarily relates to abandoned acquisition and
development project costs, litigation costs, formation costs
associated with the Companys joint venture with ECE and
other non-recurring income and expenses. In 2006, the Company
received proceeds of approximately $1.3 million from a
litigation settlement.
Other (in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Equity in net income of joint ventures
|
|
$
|
43,229
|
|
|
$
|
30,337
|
|
|
$
|
12,892
|
|
|
|
42.5
|
%
|
Income tax benefit of taxable REIT subsidiaries and franchise
taxes
|
|
|
14,700
|
|
|
|
2,505
|
|
|
|
12,195
|
|
|
|
486.8
|
|
31
A summary of the increase in equity in net income of joint
ventures for the year ended December 31, 2007, was composed
of the following (in millions):
|
|
|
|
|
|
|
Increase
|
|
|
|
(Decrease)
|
|
|
Increase in gains from sale transactions as compared to 2006
|
|
$
|
6.3
|
|
Purchase of joint venture interests by DDR
|
|
|
(0.7
|
)
|
Acquisition of assets by unconsolidated joint ventures
|
|
|
6.5
|
|
Primarily re-tenanting and refinancing at two joint ventures
|
|
|
0.5
|
|
Various other increases
|
|
|
0.3
|
|
|
|
|
|
|
|
|
$
|
12.9
|
|
|
|
|
|
|
The increase in equity in net income of joint ventures was
primarily due to an increase in promoted income and gains from
the disposition of unconsolidated joint venture assets in 2007.
During the year ended December 31, 2007, the Company
received $14.3 million of promoted income, of which
$13.6 million related to the sale of assets from the DDR
Markaz LLC joint venture to Domestic Retail Fund. During the
year ended December 31, 2006, the Company received
$5.5 million of promoted income from the disposition of a
joint venture asset in Kildeer, Illinois. In 2007, the
Companys unconsolidated joint ventures recognized an
aggregate gain from the sale of joint venture assets of
$96.9 million, of which the Companys proportionate
share was $20.8 million. However, $18.0 million of
such amount was deferred due to the Companys continuing
involvement in certain assets. In 2006, the Companys
unconsolidated joint ventures recognized an aggregate gain from
the sale of joint venture assets of $20.3 million, of which
the Companys proportionate share was $3.1 million.
In addition to the sale of the DDR Markaz LLC joint venture
assets in June 2007, the Companys unconsolidated joint
ventures sold the following assets in 2007 and 2006:
|
|
|
2007 Dispositions
|
|
2006 Dispositions
|
|
One 25.5% effectively owned shopping center
|
|
One 50% effectively owned shopping center
|
Six sites formerly occupied by Service Merchandise
|
|
Four 25.5% effectively owned shopping centers
|
|
|
One 20.75% effectively owned shopping center
|
|
|
Two sites formerly occupied by Service Merchandise
|
|
|
One 10% effectively owned shopping center
|
In 2007, the Company recognized an aggregate income tax benefit
of approximately $14.7 million. In the first quarter, the
Company recognized $15.4 million of the benefit as a result
of the reversal of a previously established valuation allowance
against deferred tax assets. The reserves were related to
deferred tax assets established in prior years, at which time it
was determined that it was more likely than not that the
deferred tax asset would not be realized and, therefore, a
valuation allowance was required. Several factors were
considered in the first quarter of 2007 that contributed to the
reversal of the valuation allowance. The most significant factor
was the sale of merchant build assets by the Companys
taxable REIT subsidiary in the second quarter of 2007 and
similar projected taxable gains for future periods. Other
factors included the merger of various TRS and the
anticipated
32
profit levels of the Companys TRS, which will
facilitate the realization of the deferred tax assets.
Management regularly assesses established reserves and adjusts
these reserves when facts and circumstances indicate that a
change in estimates is necessary. Based upon these factors,
management determined that it was more likely than not that the
deferred tax assets would be realized in the future and,
accordingly, the valuation allowance recorded against those
deferred tax assets was no longer required.
Discontinued
Operations (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Income from discontinued operations
|
|
$
|
16,564
|
|
|
$
|
15,226
|
|
|
$
|
1,338
|
|
|
|
8.8
|
%
|
Gain on disposition of real estate, net of tax
|
|
|
12,259
|
|
|
|
11,051
|
|
|
|
1,208
|
|
|
|
10.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
28,823
|
|
|
$
|
26,277
|
|
|
$
|
2,546
|
|
|
|
9.7
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Included in discontinued operations for the years ended
December 31, 2007 and 2006, are 15 properties sold from January
1, 2009 to June 30, 2009 and six properties considered held for
sale at June 30, 2009, aggregating 2.4 million square feet of
Company-owned GLA, 22
properties sold in 2008 (including one property held for sale at
December 31, 2007), aggregating 1.3 million square
feet, 67 properties sold in 2007 (including one property
classified as held for sale at December 31, 2006, and 22
properties acquired through the IRRETI merger in 2007),
aggregating 6.3 million square feet and six properties sold
in 2006, aggregating 0.8 million square feet.
Gain on
Disposition of Real Estate (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Gain on disposition of real estate
|
|
$
|
68,851
|
|
|
$
|
72,023
|
|
|
$
|
(3,172
|
)
|
|
|
(4.4
|
)%
|
The Company recorded gains on disposition of real estate and
real estate investments for the years ended December 31,
2007 and 2006, as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
2006
|
|
|
Transfer of assets to Domestic Retail Fund (1)(2)
|
|
$
|
1.8
|
|
|
$
|
|
|
Transfer of assets to TRT DDR Venture I (1)(3)
|
|
|
50.3
|
|
|
|
|
|
Transfer of assets to DPG Realty Holdings LLC (1)(4)
|
|
|
|
|
|
|
0.6
|
|
Transfer of assets to DDR Macquarie Fund (1)(5)
|
|
|
|
|
|
|
9.2
|
|
Transfer of assets to DDR MDT PS LLC (1)(6)
|
|
|
|
|
|
|
38.9
|
|
Transfer of assets to Service Holdings LLC (1)(7)
|
|
|
|
|
|
|
6.1
|
|
Land sales (8)
|
|
|
14.0
|
|
|
|
14.8
|
|
Previously deferred gains and other gains and losses on sales (9)
|
|
|
2.8
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
68.9
|
|
|
$
|
72.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
This disposition was not classified
as discontinued operations due to the Companys continuing
involvement through its retained ownership interest and
management agreements.
|
|
(2)
|
|
The Company transferred two
wholly-owned assets. The Company did not record a gain on the
contribution of 54 assets, as these assets were recently
acquired through the merger with IRRETI.
|
|
(3)
|
|
The Company transferred three
recently developed assets.
|
|
(4)
|
|
The Company transferred a newly
developed expansion area adjacent to a shopping center owned by
the joint venture.
|
|
(5)
|
|
The Company transferred newly
developed expansion areas adjacent to four shopping centers
owned by the joint venture in 2006. The Company did not record a
gain on the contribution of three assets in 2007, as these
assets were recently acquired through the merger with IRRETI.
|
|
(6)
|
|
The Company transferred six
recently developed assets.
|
|
(7)
|
|
The Company transferred 51 retail
sites previously occupied by Service Merchandise.
|
33
|
|
|
(8)
|
|
These dispositions did not meet the
criteria for discontinued operations as the land did not have
any significant operations prior to disposition.
|
|
(9)
|
|
These gains and losses were
primarily attributable to the subsequent leasing of units
related to master lease and other obligations originally
established on disposed properties, which were no longer
required.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Non-controlling interests
|
|
$
|
(17,784
|
)
|
|
$
|
(8,453
|
)
|
|
$
|
(9,331
|
)
|
|
|
110.4
|
%
|
Non-controlling interest expense increased for the year ended
December 31, 2007, primarily due to the following (in
millions):
|
|
|
|
|
|
|
(Increase)
|
|
|
|
Decrease
|
|
|
Preferred OP Units (1)
|
|
$
|
(9.7
|
)
|
MV LLC
|
|
|
(0.1
|
)
|
2007 acquisition of remaining interest in Coventry I
|
|
|
0.3
|
|
Decrease due to newly formed joint venture under development
|
|
|
0.2
|
|
|
|
|
|
|
|
|
$
|
(9.3
|
)
|
|
|
|
|
|
|
|
|
(1)
|
|
Preferred OP Units were issued in
February 2007 as part of the financing of the IRRETI merger.
These units were redeemed in June 2007.
|
Net
Income attributable to DDR (in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
$ Change
|
|
|
% Change
|
|
|
Net Income attributable to DDR
|
|
$
|
264,942
|
|
|
$
|
251,958
|
|
|
$
|
12,984
|
|
|
|
5.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DDR increased primarily due to (i) the merger with
IRRETI, (ii) the release of certain tax valuation reserves
and (iii) income earned from recently formed unconsolidated
joint ventures and promoted income related to the sale of assets
from unconsolidated joint ventures. These increases were
partially offset by (i) IRRETI merger integration related
costs and (ii) a charge relating to the former
presidents resignation as an executive officer. A summary
of the changes in net income in 2007 compared to 2006 was as
follows (in millions):
|
|
|
|
|
Increase in net operating revenues (total revenues in excess of
operating and maintenance expenses and real estate taxes)
|
|
$
|
111.4
|
|
Increase in general and administrative expenses
|
|
|
(20.6
|
)
|
Increase in depreciation expense
|
|
|
(31.9
|
)
|
Decrease in interest income
|
|
|
(0.3
|
)
|
Increase in interest expense
|
|
|
(58.1
|
)
|
Change in other expense
|
|
|
(2.6
|
)
|
Increase in equity in net income of joint ventures
|
|
|
12.9
|
|
Change in income tax benefit (expense)
|
|
|
12.2
|
|
Increase in income from discontinued operations
|
|
|
1.3
|
|
Increase in gain on disposition of real estate of discontinued
operations properties
|
|
|
1.2
|
|
Decrease in gain on disposition of real estate
|
|
|
(3.2
|
)
|
Increase in non-controlling interest expense
|
|
|
(9.3
|
)
|
|
|
|
|
|
Increase in net income attributable to DDR
|
|
$
|
13.0
|
|
|
|
|
|
|
FUNDS
FROM OPERATIONS
The Company believes that FFO, which is a non-GAAP financial
measure, provides an additional and useful means to assess the
financial performance of REITs. FFO is frequently used by
securities analysts, investors and other interested parties to
evaluate the performance of REITs, most of which present FFO
along with net income as calculated in accordance with GAAP.
FFO is intended to exclude GAAP historical cost depreciation and
amortization of real estate and real estate investments, which
assumes that the value of real estate assets diminishes ratably
over time. Historically, however, real estate values have risen
or fallen with market conditions, and many companies utilize
different depreciable lives and methods. Because FFO excludes
depreciation and amortization unique to real estate, gains and
certain losses from depreciable property dispositions and
extraordinary items, it provides a performance measure that,
when compared year over year, reflects the impact on operations
from trends in occupancy rates, rental rates, operating costs,
acquisition and development activities and interest costs. This
provides a perspective of the Companys financial
performance not immediately apparent from net income attributable to DDR determined
in accordance with GAAP.
FFO is generally defined and calculated by the Company as net
income attributable to DDR common shareholders, adjusted to exclude: (i) preferred share dividends,
(ii) gains from disposition of depreciable real estate
property, except for those sold through the Companys
merchant building program, which are presented net of taxes,
(iii) extraordinary items and (iv) certain non-cash
items. These non-cash items principally include real property
depreciation, equity income from joint
34
ventures and equity income from non-controlling interests and
adding the Companys proportionate share of FFO from its
unconsolidated joint ventures and non-controlling interests,
determined on a consistent basis.
For the reasons described above, management believes that FFO
provides the Company and investors with an important indicator
of the Companys operating performance. It provides a
recognized measure of performance other than GAAP net income,
which may include non-cash items (often significant). Other real
estate companies may calculate FFO in a different manner.
This measure of performance is used by the Company for several
business purposes and by other REITs. The Company uses FFO in
part (i) to determine incentives for executive compensation
based on the Companys performance, (ii) as a measure
of a real estate assets performance, (iii) to shape
acquisition, disposition and capital investment strategies and
(iv) to compare the Companys performance to that of
other publicly traded shopping center REITs.
Management recognizes FFOs limitations when compared to
GAAPs income from continuing operations. FFO does not
represent amounts available for needed capital replacement or
expansion, debt service obligations, or other commitments and
uncertainties. Management does not use FFO as an indicator of
the Companys cash obligations and funding requirements for
future commitments, acquisitions or development activities. FFO
does not represent cash generated from operating activities in
accordance with GAAP and is not necessarily indicative of cash
available to fund cash needs, including the payment of
dividends. FFO should not be considered an alternative to net
income (computed in accordance with GAAP) or as an alternative
to cash flow as a measure of liquidity. FFO is simply used as an
additional indicator of the Companys operating performance.
In 2008, FFO attributable to DDR common shareholders was
$169.7 million, as compared to $453.9 million in 2007
and $376.5 million in 2006. The decrease in FFO for the
year ended December 31, 2008, is primarily the result of
non-cash impairment charges recorded relating to the
Companys consolidated real estate assets as well as its
unconsolidated joint venture investments aggregating
approximately $169.2 million, net of amounts applicable to
non-controlling interests, a non-cash charge of $15.8 million
related to the termination of an equity award plan and costs
incurred of $28.3 million related to abandoned projects,
transaction costs and other expenses partially offset by gains
on the repurchase of the Companys senior notes at a
discount of approximately $10.5 million. In addition, the
Company recognized a reduced amount of transactional income,
primarily related to gains on disposition of real estate that
occurred in 2007, as the Company transferred 62 assets to
unconsolidated joint venture interests and sold 67 assets to
third parties in 2007. The Companys calculation of FFO is
as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net (loss) income attributable to DDR common shareholders (1)
|
|
$
|
(114,199
|
)
|
|
$
|
214,008
|
|
|
$
|
196,789
|
|
Depreciation and amortization of real estate investments
|
|
|
236,344
|
|
|
|
214,396
|
|
|
|
185,449
|
|
Equity in net income of joint ventures
|
|
|
(17,719
|
)
|
|
|
(43,229
|
)
|
|
|
(30,337
|
)
|
Joint ventures FFO (2)
|
|
|
68,355
|
|
|
|
84,423
|
|
|
|
44,473
|
|
Non-controlling interests (OP Units)
|
|
|
1,145
|
|
|
|
2,275
|
|
|
|
2,116
|
|
Gain on disposition of depreciable real estate (3)
|
|
|
(4,244
|
)
|
|
|
(17,956
|
)
|
|
|
(21,987
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO attributable to DDR common shareholders
|
|
|
169,682
|
|
|
|
453,917
|
|
|
|
376,503
|
|
Preferred share dividends
|
|
|
42,269
|
|
|
|
50,934
|
|
|
|
55,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total FFO
|
|
$
|
211,951
|
|
|
$
|
504,851
|
|
|
$
|
431,672
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes straight-line rental
revenues of approximately $8.0 million, $12.1 million
and $16.0 million in 2008, 2007 and 2006, respectively
(including discontinued operations).
|
35
|
|
|
(2)
|
|
Joint ventures FFO is
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Years Ended
|
|
|
2008
|
|
2007
|
|
2006
|
|
Net income (a)
|
|
$
|
24,951
|
|
|
$
|
169,195
|
|
|
$
|
92,624
|
|
Depreciation and amortization of real estate investments
|
|
|
241,651
|
|
|
|
193,437
|
|
|
|
83,017
|
|
Loss (gain) on disposition of real estate, net (b)
|
|
|
(7,350
|
)
|
|
|
(91,111
|
)
|
|
|
(22,013
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
259,252
|
|
|
$
|
271,521
|
|
|
$
|
153,628
|
|
|
|
|
|
|
|
|
|
|
|
DDR Ownership interests (c)
|
|
$
|
68,355
|
|
|
$
|
84,423
|
|
|
$
|
44,473
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a)
|
|
Includes straight-line rental
revenues of $6.3 million, $9.3 million and
$5.1 million in 2008, 2007 and 2006, respectively. The
Companys proportionate share of straight-line rental
revenues was $0.8 million, $1.4 million and
$0.9 million in 2008, 2007 and 2006, respectively. These
amounts include discontinued operations.
|
|
(b)
|
|
The gain or loss on disposition of
recently developed shopping centers, generally owned by the
TRS, is included in FFO, as the Company considers these
properties part of the merchant building program. These
properties were either developed through the Retail Value
Investment Program with Prudential Real Estate Investors, or
were assets sold in conjunction with the formation of the joint
venture that holds the designation rights for the Service
Merchandise properties. For the year ended December 31,
2007, an aggregate gain of $5.8 million was recorded, of
which $1.8 million was the Companys proportionate
share. For the year ended December 31, 2006, a loss of
$1.3 million was recorded, of which $0.3 million was
the Companys proportionate share.
|
|
(c)
|
|
The Companys share of joint
venture net income has been increased by $0.4 million,
reduced by $1.2 million and increased by $1.6 million
for the years ended December 31, 2008, 2007 and 2006,
respectively. These amounts are related to basis differences in
depreciation and adjustments to gain on sales. During the year
ended December 31, 2007, the Company received
$14.3 million of promoted income, of which
$13.6 million related to the sale of assets from DDR Markaz
LLC to Domestic Retail Fund, which is included in the
Companys proportionate share of net income and FFO. During
the year ended December 31, 2006, the Company received
$5.5 million of promoted income from the disposition of a
joint venture asset in Kildeer, Illinois.
|
|
|
|
At December 31, 2008, 2007 and
2006, the Company owned unconsolidated joint venture interests
relating to 329, 317 and 167 operating shopping center
properties, respectively.
|
|
|
|
(3)
|
|
The amount reflected as gain on
disposition of real estate and real estate investments from
continuing operations in the consolidated statements of
operations includes residual land sales, which management
considers to be the disposition of non-depreciable real property
and the sale of newly developed shopping centers, for which the
Company maintained continuing involvement. These dispositions
are included in the Companys FFO and therefore are not
reflected as an adjustment to FFO. For the years ended
December 31, 2008, 2007 and 2006, net gains resulting from
residual land sales aggregated $6.2 million,
$14.0 million and $14.8 million, respectively. For the
years ended December 31, 2008, 2007 and 2006, merchant
building gains, net of tax, aggregated $0.4 million,
$49.1 million and $46.3 million, respectively.
|
36
LIQUIDITY
AND CAPITAL RESOURCES
The Company relies on capital to buy, develop and improve its
shopping center properties. Events in 2008 and early 2009,
including recent failures and near failures of a number of large
financial services companies, have made the capital markets
increasingly volatile. The Company periodically evaluates
opportunities to issue and sell additional debt or equity
securities, obtain credit facilities from lenders, or
repurchase, refinance or otherwise restructure long-term debt
for strategic reasons, or to further strengthen the financial
position of the Company.
The Company maintains an unsecured revolving credit facility
with a syndicate of financial institutions, for which JP Morgan
serves as the administrative agent (the Unsecured Credit
Facility). The Unsecured Credit Facility provides for
borrowings of $1.25 billion if certain financial covenants
are maintained and an accordion feature for a future expansion
to $1.4 billion upon the Companys request, provided
that new or existing lenders agree to the existing terms of the
facility and increase their commitment level, and a maturity
date of June 2010, with a one-year extension option. The Company
also maintains a $75 million unsecured revolving credit
facility with National City Bank (together with the Unsecured
Credit Facility, the Revolving Credit Facilities).
This facility has a maturity date of June 2010, with a one-year
extension option at the option of the Company subject to certain
customary closing conditions. The Revolving Credit Facilities
and the indentures under which the Companys senior and
subordinated unsecured indebtedness is, or may be, issued
contain certain financial and operating covenants and require
the Company to comply with certain covenants including, among
other things, leverage ratios, debt service coverage and fixed
charge coverage ratios, as well as limitations on the
Companys ability to incur secured and unsecured
indebtedness, sell all or substantially all of the
Companys assets and engage in mergers and certain
acquisitions. These credit facilities and indentures also
contain customary default provisions including the failure to
timely pay principal and interest payable thereunder, the
failure to comply with the Companys financial and
operating covenants, the occurrence of a material adverse effect
on the Company, and the failure to pay when due any other
Company consolidated indebtedness (including non-recourse
obligations) in excess of $50 million. In the event our
lenders declare a default, as defined in the applicable loan
documentation, this could result in our inability to obtain
further funding
and/or
an
acceleration of any outstanding borrowings.
As of December 31, 2008, the Company was in compliance with
all of its financial covenants. However, due to the economic
environment, the Company has less financial flexibility than
desired given the current market dislocation. The Companys
current business plans indicate that it will be able to operate
in compliance with these covenants in 2009 and beyond; however,
the current dislocation in the global credit markets has
significantly impacted the projected cash flows, financial
position and effective leverage of the Company. If there is a
continued decline in the retail and real estate industries and a
decline in consumer confidence leading to a decline in consumer
spending
and/or
the
Company is unable to successfully execute plans as further
described below, the Company could violate these covenants, and
as a result may be subject to higher finance costs and fees
and/or
accelerated maturities. In addition, certain of the
Companys credit facilities and indentures permit the
acceleration of the maturity of debt issued thereunder in the
event certain other debt of the Company has been accelerated.
Furthermore, a default under a loan to the Company or its
affiliates, a foreclosure on a mortgaged property owned by the
Company or its affiliates or the inability to refinance existing
indebtedness would have a negative impact on the Companys
financial condition, cash flows and results of operations. These
facts and an inability to predict future economic conditions
have encouraged the Company to adopt a strict focus on lowering
leverage and increasing financial flexibility.
At December 31, 2008, the following information summarizes
the availability of the Revolving Credit Facilities (in
billions):
|
|
|
|
|
Revolving Credit Facilities
|
|
$
|
1.325
|
|
Less:
|
|
|
|
|
Amount outstanding
|
|
|
(1.027
|
)
|
Unfunded Lehman Brothers Holdings Commitment
|
|
|
(0.008
|
)
|
Letters of credit
|
|
|
(0.007
|
)
|
|
|
|
|
|
Amount Available
|
|
$
|
0.283
|
|
|
|
|
|
|
37
As of December 31, 2008, the Company had cash of
$29.5 million. As of December 31, 2008, the Company
also had 290 unencumbered consolidated operating properties
generating $465.1 million, or 50.0% of the total revenue of
the Company for the year ended December 31, 2008, thereby
providing a potential collateral base for future borrowings or
to sell to generate cash proceeds, subject to consideration of
the financial covenants on unsecured borrowings.
In 2008, Lehman Brothers Holdings Inc. (Lehman
Holdings) filed for protection under Chapter 11 of
the United States Bankruptcy Code. Subsequently, Lehman
Commercial Paper Inc. (Lehman CPI), a subsidiary of
Lehman Holdings, also filed for protection under Chapter 11
of the United States Bankruptcy Code. Lehman CPI had a
$20.0 million credit commitment under the Companys
Unsecured Credit Facilities and, at the time of the filing of
this annual report, approximately $7.6 million of Lehman
CPIs commitment was undrawn. The Company was notified that
Lehman CPIs commitment would not be assumed. As a result,
the Companys availability under the Unsecured Credit
Facility was effectively reduced by approximately
$7.6 million. The Company does not believe that this
reduction of credit has a material effect on the Companys
liquidity and capital resources.
The Company anticipates that cash flow from operating activities
will continue to provide adequate capital for all scheduled
interest and monthly principal payments on outstanding
indebtedness, recurring tenant improvements and dividend
payments in accordance with REIT requirements.
The retail and real estate markets have been significantly
impacted by the continued deterioration of the global credit
markets and other macro economic factors including, among
others, rising unemployment and a decline in consumer confidence
leading to a decline in consumer spending. Although a majority
of the Companys tenants remain in relatively strong
financial standing, especially the anchor tenants, the current
recession has resulted in tenant bankruptcies affecting the
Companys real estate portfolio including Mervyns, Linens
n Things, Steve & Barrys, Goodys and
Circuit City. In addition, certain other tenants may be
experiencing financial difficulties. Due to the timing of these
bankruptcies in the second half of 2008, they did not have a
significant impact on the cash flows during 2008 as compared to
the Companys internal projections. However, given the
expected decrease in occupancy and the projected timing
associated with re-leasing these vacated spaces, the 2009
forecasts have been revised to reflect these events and the
potential for further deterioration and the incorporation of
expectations associated with the timing it will take to release
the vacant space. This situation has resulted in downward
pressure on the Companys 2009 projected operating results.
The reduced occupancy will likely have a negative impact on the
Companys consolidated cash flows, results of operations,
financial position and financial ratios that are integral to the
continued compliance with the covenants on the Companys
line of credit facilities as further described above. Offsetting
some of the current challenges within the retail environment,
the Company has a low occupancy cost relative to other retail
formats and historical averages, as well as a diversified tenant
base with only one tenant exceeding 2.5% of total consolidated
revenues, Wal-Mart at 4.5%. Other significant tenants include
Target, Lowes Home Improvement, Home Depot, Kohls,
T.J. Maxx/Marshalls, Publix Supermarkets, PetSmart and Bed Bath
& Beyond, all of which have relatively strong credit
ratings. Management believes these tenants should continue
providing the Company with a stable ongoing revenue base for the
foreseeable future given the long-term nature of these leases.
Moreover, the majority of the tenants in the Companys
shopping centers provide day-to-day consumer necessities versus
high priced discretionary luxury items with a focus toward value
and convenience, which should enable many tenants to continue
operating within this challenging economic environment.
Furthermore, LIBOR rates, the rates upon which the
Companys variable-rate debt is based, are at historic lows
and are expected to have a positive impact on the cash flows.
The Company is committed to prudently managing and minimizing
discretionary operating and capital expenditures and raising the
necessary equity and debt capital to maximize liquidity, repay
outstanding borrowings as they mature and comply with financial
covenants in 2009 and beyond. As discussed below, the Company
plans to raise additional equity and debt through a combination
of retained capital, the issuance of common shares, debt
financing and refinancing and asset sales. In addition, the
Company will strategically utilize proceeds from the above
sources to repay outstanding borrowings on its credit facilities
and strategically repurchase our publicly traded debt at a
discount to par to further improve leverage ratios.
|
|
|
|
|
Retained Equity
With regard to retained
capital, the Company has adjusted its dividend policy to the
minimum required to maintain its REIT status. The Company did
not pay a dividend in January 2009 as it
|
38
|
|
|
|
|
had already distributed sufficient funds to comply with its 2008
tax requirements. Moreover, the Company expects to fund a
portion of its 2009 dividend payout through common shares and
has the flexibility to distribute up to 90% of dividends in
shares. This new policy is consistent with the Companys
top priorities to improve liquidity and lower leverage. This
change in dividend payment is expected to save in excess of
$300 million of retained capital in 2009.
|
|
|
|
|
|
Issuance of Common Shares
The Company has
several alternatives to raise equity through the sale of its
common shares. In December 2008, the Company issued
$41.9 million of equity capital through its continuous
equity program. The Company intends to continue to issue
additional shares under this program in 2009. On February 23,
2009, the Company entered into purchase agreements with an
investor for the sale of 30 million of the Companys
common shares and warrants for 10 million of the Companys
common shares for additional potential cash in the future. The
sale of the common shares and warrants is subject to shareholder
approval and the satisfaction or waiver of customary and other
conditions. There can be no assurances the Company will be able
to obtain such approval or satisfy such conditions. The Company
intends to use the estimated $112.5 million in gross
proceeds received from this strategic investment in 2009 to
reduce leverage.
|
|
|
|
Debt Financing and Refinancing
The Company
had approximately $372.8 million of consolidated debt
maturities during 2009, excluding obligations where there is an
extension option. The largest debt maturity in 2009 related to
the repayment of senior unsecured notes in the amount of
$227.0 million in January 2009. Funding of this repayment
was primarily through retained capital and Revolving Credit
Facilities. The remaining $145.8 million in maturities is
related to various loans secured by certain shopping centers.
The Company plans to refinance approximately $80 million of
this remaining indebtedness related to two assets. Furthermore,
the Company has received lender approval to extend three
mortgage loans aggregating $29.6 million. All three loans
are scheduled to mature in the first quarter of 2009. The
Company is planning to either repay the remaining maturities
with its Revolving Credit Facility or financings discussed below
or seek extensions with the existing lender.
|
The Company is also in active discussions with various life
insurance companies regarding the financing of assets that are
currently unencumbered. The total loan proceeds are expected to
range from $100 million to $200 million depending on
the number of assets financed. The loan-to-value ratio required
by these lenders is expected to fall within the 50% to 60% range.
|
|
|
|
|
Asset Sales
During the months of January and
February 2009, the Company and its consolidated joint ventures
sold seven assets generating in excess of $65.8 million in
gross proceeds. During 2008, the Company and its joint ventures
sold 23 assets generating aggregate gross proceeds of almost
$200 million, of which the Companys proportionate
share aggregated $136.1 million. The Company is also in
various stages of discussions with third parties for the sale of
additional assets with aggregate values in excess of
$500 million, including four assets that are under contract
or subject to letters of intent, aggregating $30 million,
of which the Companys share is approximately
$14 million.
|
|
|
|
Debt Repurchases
Given the current economic
environment, the Companys publicly traded debt securities
are trading at significant discounts to par. During the fourth
quarter of 2008 and in January 2009, the Company repurchased
approximately $77.1 million of debt securities at a
discount to par aggregating $15.2 million. Although
$48 million of this debt repurchase reflected above related
to unsecured debt maturing in January 2009 at a small discount,
the debt with maturities in 2010 and beyond are trading at much
wider discounts. The Company intends to utilize the proceeds
from retained capital, equity issuances, secured financing and
asset sales, as discussed above, to repurchase its debt
securities at a discount to par to further improve its leverage
ratios.
|
As further described above, although the Company believes it has
several viable alternatives to address its objectives of
reducing leverage and continuing to comply with its covenants
and repay obligations as they become due, the Company does not
have binding agreements for all of the planned transactions
discussed above, and therefore, there can be no assurances that
the Company will be able to execute these plans, which could
adversely impact the Companys operations including its
ability to remain complaint with its covenants.
39
Part of the Companys overall strategy includes addressing
debt maturing in years following 2009. The Company has been very
careful to balance the amount and timing of its debt maturities.
Additionally, in January 2009, the Company purchased an
additional $10 million of senior notes at a discount to
par. Notably, following the repayment of $227.0 million of
senior notes in January 2009, the Company has no major
maturities until May 2010, providing time to address the larger
maturities, including the Companys credit facilities,
which occur in 2010 through 2012. The Company continually
evaluates its debt maturities, and based on managements
current assessment, believes it has viable financing and
refinancing alternatives that may materially impact its expected
financial results as interest rates in the future will likely be
at levels higher than the amounts we are presently incurring.
Although the credit environment has become much more difficult
since the third quarter of 2008, the Company continues to pursue
opportunities with the largest U.S. banks, select life
insurance companies, certain local banks and some international
lenders. The approval process from the lenders has slowed, but
lenders are continuing to execute financing agreements. While
pricing and loan-to-value ratios remain dependent on specific
deal terms, in general, pricing spreads are higher and
loan-to-values ratios are lower. Moreover, the Company continues
to look beyond 2009 to ensure that the Company is prepared if
the current credit market dislocation continues (See Contractual
Obligations and Other Commitments).
The Companys 2010 debt maturities consist of:
$497.9 million of unsecured notes, of which
$199.5 million mature in May 2010 and $298.4 million
mature in August 2010; $393.9 million of consolidated
mortgage debt; $32.5 million of construction loans;
$1.0 billion of unsecured revolving credit facilities and
$1.6 billion of unconsolidated joint venture mortgage debt.
The Companys unsecured Revolving Credit Facilities allow
for a one-year extension option at the option of the Company. Of
the 2010 unconsolidated joint venture mortgage debt, the Company
or the joint venture has the option to extend approximately
$579.3 million at existing terms. In January 2009, the
Company repurchased approximately $7.2 million of the notes
maturing in 2010 with proceeds from its Unsecured Credit
Facility. The Company may repurchase additional unsecured notes
on the public market as operating cash
and/or
cash
from equity and debt raises becomes available.
These obligations generally require monthly payments of
principal
and/or
interest over the term of the obligation. In light of the
current economic conditions, no assurance can be provided that
the aforementioned obligations will be refinanced or repaid as
currently anticipated. Also, additional financing may not be
available at all or on terms favorable to the Company (See
Contractual Obligations and Other Commitments).
The Companys core business of leasing space to
well-capitalized retailers continues to perform well, as the
Companys primarily discount-oriented tenants gain market
share from retailers offering higher price points and offering
more discretionary goods. These long-term leases generate
consistent and predictable cash flow after expenses, interest
payments and preferred share dividends. This capital is
available for use at the Companys discretion for
investment, debt repayment, share repurchases and the payment of
dividends on the common shares.
The Companys cash flow activities are summarized as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash flow provided by operating activities
|
|
$
|
392,002
|
|
|
$
|
420,745
|
|
|
$
|
348,630
|
|
Cash flow used for investing activities
|
|
|
(468,572
|
)
|
|
|
(1,162,287
|
)
|
|
|
(203,047
|
)
|
Cash flow provided by (used for) financing activities
|
|
|
56,235
|
|
|
|
763,333
|
|
|
|
(147,860
|
)
|
Operating Activities:
The decrease in
operating activities in 2008 as compared to 2007 is primarily
due to the IRRETI merger in 2007, changes in
other operating assets and liabilities and decreased transactional
activity in 2008.
Investing Activities:
Capital expenditures in
2008 were primarily for the completion of redevelopment projects
and the ongoing construction of several
ground-up
development projects. During the year ended December 31,
2007, the Company completed a $3.1 billion merger with
IRRETI, which closed in February 2007, and sold 62 assets to
joint ventures and 66 assets to third parties.
Financing Activities:
The change in cash
provided by financing activities in 2008 as compared to 2007, is
primarily due to a reduction in both the acquisition and sale of
assets combined with the related financing activities associated
with the transactions partially offset by an increase in
contributions from non-controlling interests.
40
During 2007, the Companys Board of Directors authorized a
common share repurchase program. Under the terms of the program,
the Company may purchase up to a maximum value of
$500 million of its common shares over a two-year period.
Through December 31, 2007, the Company had repurchased
5.6 million of its common shares under this program in open
market transactions at an aggregate cost of approximately
$261.9 million. From January 1, 2008 through
February 13, 2009, the Company has not repurchased any of
its common shares.
The Company satisfied its REIT requirement of distributing at
least 90% of ordinary taxable income with declared common and
preferred share dividends of $290.9 million in 2008, as
compared to $371.0 million and $313.1 million in 2007
and 2006, respectively. Accordingly, federal income taxes were
not incurred at the corporate level for 2008. The Companys
common share dividend payout ratio for the year approximated
135.9% of its 2008 FFO, as compared to 70.4% and 68.8% in 2007
and 2006, respectively.
For each of the first three quarters of 2008, the Company paid a
quarterly dividend of $0.69 per common share. As part of the
Companys strategy of preserving capital and de-leveraging
its balance sheet, the Board of Directors of the Company did not
declare a fourth quarter dividend as the Company had already
complied with its REIIT requirements. In October 2008,
based upon the Companys current results of operations and
debt maturities, the Companys Board of Directors approved
a 2009 dividend policy that will maximize the Companys
free cash flow, while still adhering to REIT payout
requirements. This payout policy will result in a 2009 annual
dividend at or near the minimum distribution required to
maintain REIT status. The Company will continue to monitor the
2009 dividend policy and provide for adjustments as determined
in the best interest of the Company and its shareholders. The
2009 payout policy should result in additional free cash flow,
which is expected to be applied primarily to reduce leverage
(see Off-Balance Sheet Arrangements and Contractual Obligations
and Other Commitments for further discussion of capital
resources).
41
ACQUISITIONS,
DEVELOPMENTS, REDEVELOPMENTS AND EXPANSIONS
During the three years ended December 31, 2008, the Company
and its consolidated and unconsolidated joint ventures expended
$7.9 billion, net of dispositions, to acquire, develop,
redevelop, expand, improve and re-tenant its properties as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Company (including Consolidated Joint Ventures):
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
$
|
10.9
|
|
|
$
|
3,048.7
|
(5)
|
|
$
|
370.2
|
(9)
|
Completed expansions
|
|
|
27.8
|
|
|
|
32.7
|
|
|
|
73.1
|
|
Developments and construction in progress
|
|
|
421.4
|
|
|
|
429.6
|
|
|
|
246.0
|
|
Tenant improvements and building renovations (1)
|
|
|
11.6
|
|
|
|
12.5
|
|
|
|
11.7
|
|
Furniture, fixtures and equipment
|
|
|
6.3
|
(2)
|
|
|
13.0
|
(2)
|
|
|
10.2
|
(2)
|
Foreign currency adjustments
|
|
|
(41.3
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
436.7
|
|
|
|
3,536.5
|
|
|
|
711.2
|
|
Less: Real estate dispositions and property contributed to joint
ventures
|
|
|
(312.9
|
)(3)
|
|
|
(2,001.3
|
)(6)
|
|
|
(289.8
|
)(10)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company total
|
|
|
123.8
|
|
|
|
1,535.2
|
|
|
|
421.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unconsolidated Joint Ventures:
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions/contributions
|
|
|
111.4
|
(4)
|
|
|
4,987.4
|
(7)
|
|
|
729.9
|
(11)
|
Completed expansions
|
|
|
52.8
|
|
|
|
21.9
|
|
|
|
|
|
Developments and construction in progress
|
|
|
315.8
|
|
|
|
142.7
|
|
|
|
139.6
|
(12)
|
Tenant improvements and building renovations (1)
|
|
|
18.4
|
|
|
|
9.8
|
|
|
|
9.1
|
|
Foreign currency adjustments
|
|
|
(106.2
|
)
|
|
|
48.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
392.2
|
|
|
|
5,210.3
|
|
|
|
878.6
|
|
Less: Real estate dispositions
|
|
|
(61.9
|
)(4)
|
|
|
(204.3
|
)(8)
|
|
|
(409.0
|
)(13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint ventures total
|
|
|
330.3
|
|
|
|
5,006.0
|
|
|
|
469.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
454.1
|
|
|
|
6,541.2
|
|
|
|
891.0
|
|
Less: Proportionate joint venture share owned by others
|
|
|
(253.5
|
)
|
|
|
(2,825.5
|
)
|
|
|
(401.0
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total DDR net additions
|
|
$
|
200.6
|
|
|
$
|
3,715.7
|
|
|
$
|
490.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
In 2009, the Company anticipates
recurring capital expenditures, including tenant improvements,
of approximately $13 million associated with its
wholly-owned and consolidated portfolio and $19 million
associated with its unconsolidated joint venture portfolio.
|
|
(2)
|
|
Includes certain information
technology projects, expansion of the Companys
headquarters and fractional ownership interests in corporate
planes.
|
|
(3)
|
|
Includes 22 asset dispositions as
well as outparcel sales.
|
|
(4)
|
|
Reflects the acquisition of a
shopping center by a newly formed joint venture and the
respective sale of this asset by an unrelated joint venture.
|
|
(5)
|
|
Includes the merger with IRRETI,
the redemption of OP units and the acquisition of an additional
interest in a property in San Francisco, California.
|
|
(6)
|
|
Includes the sale of three assets
to TRT DDR Venture I, 56 assets to Domestic Retail Fund,
three assets to DDR Macquarie Fund and other shopping center
assets and outparcel sales.
|
|
(7)
|
|
Includes the formation of the DDRTC
Core Retail Fund LLC joint venture and acquisition of an
additional 73% interest in Metropole Shopping Center by Sonae
Sierra Brazil BV Sarl.
|
|
(8)
|
|
Includes the sale of seven shopping
centers previously owned by DDR Markaz LLC to Domestic Retail
Fund and the sale of vacant land.
|
42
|
|
|
(9)
|
|
Includes the transfer to the
Company from joint ventures (KLA/SM LLC and Salisbury,
Maryland), final earnout adjustments for acquisitions,
redemption of OP Units and the consolidation of a joint venture
asset pursuant to EITF
04-05.
|
|
(10)
|
|
Includes asset dispositions, the
sale of assets formerly owned by the KLA/SM LLC joint venture to
Service Holdings LLC, the sale of properties to DDR Macquarie
Fund and DDR MDT PS LLC, plus the transfer of newly developed
expansion areas adjacent to four shopping centers and the sale
of several outparcels.
|
|
(11)
|
|
Reflects the DPG Realty Holdings
LLC acquisition and adjustments to accounting presentation from
previous acquisitions.
|
|
(12)
|
|
Includes the acquisition of land in
Allen, Texas, and Bloomfield Hills, Michigan, for the
development of shopping centers by the Coventry II Fund.
|
|
(13)
|
|
Includes asset dispositions, the
transfer to DDR of the KLA/SM LLC joint venture assets, five
assets located in Phoenix, Arizona (two properties); Pasadena,
California; Salisbury, Maryland and Apex, North and Carolina.
|
2009
Activity
Current
Strategies
On February 23, 2009, the Company entered into a stock
purchase agreement with Mr. Alexander Otto (the
Investor) to issue and sell 30 million common
shares and warrants to purchase up to 10 million common
shares with an exercise price of $6.00 per share (the
Warrants) to the Investor and certain members of his
family (collectively with the Investor, the Otto
Family) for aggregate gross proceeds of approximately
$112.5 million. The transaction, if approved and
consummated, as further described below, will occur in two
closings, each consisting of 15 million common shares and a
warrant to purchase five million common shares, provided that
the Investor also has the right to purchase all of the common
shares and warrants at one closing. The first closing will occur
upon the satisfaction or waiver of certain closing conditions
including the approval by the Companys shareholders of the
issuance of the Companys securities and the second closing
will occur within six months of the shareholder approval. Under
the terms of the stock purchase agreement, the Company will also
issue additional common shares to Mr. Otto in an amount
equal to any dividends declared by the Company after
February 23, 2009 and prior to the applicable closing to
which Mr. Otto would have been entitled had the common
shares the Investor is purchasing been outstanding on the record
dates for any such dividends.
The purchase price for the first 15 million common shares
will be $3.50 per share, and the purchase price for the second
15 million common shares will be $4.00 per share,
regardless of when purchased and regardless of whether there is
one closing or two closings. No separate consideration will be
paid by the Investor for the shares issued in respect of
dividends. The purchase price for the common shares will be
subject to downward adjustment if the weighted average purchase
price of all additional common shares (or equivalents thereof)
sold by the Company from February 23, 2009 until the
applicable closing is less than $2.94 per share (excluding,
among other things, common shares payable in connection with any
dividends, but including in the calculation all common shares
outstanding as of the date of the stock purchase agreement as if
issued during such period at $2.94 per share). If the weighted
average price for such issuances in the aggregate is less than
$2.94, the applicable purchase price will be reduced by an
amount equal to the difference between $2.94 and such weighted
average price. A five-year warrant for five million shares will
be issued for each 15 million common shares purchased by
the Investor, for a maximum of 10 million common shares.
The warrants have an exercise price of $6.00 per share (subject
to downward adjustment pursuant to their terms) and may be
exercised on a cashless basis in which we may not receive any
consideration upon exercise as the Investor would receive a net
amount of shares equivalent to the appreciation in price (if
any) of our common stock in excess of $6.00 per share. No
separate consideration will be paid for the warrants at closing.
Completion of the transactions contemplated by the stock
purchase agreement depends upon the satisfaction or waiver of a
number of conditions that may be outside of our control,
including, but not limited to, the approval of the
Companys shareholders of the securities being issued, the
receipt by the Company of additional debt financing and no
material adverse change, as defined in the agreement, having
occurred. There can be no assurance that we will satisfy all or
any of these conditions and, accordingly, there can be no
assurance that we will be able to consummate the transaction
with the Investor.
43
If this transaction is approved by the Companys
shareholders and there is a beneficial owner of 20% or more of
the Companys outstanding common shares as a result of the
transaction, a change in control will be deemed to
have occurred under substantially all of the Companys
equity award plans. It is expected that, in accordance with the
equity award plans, all unvested stock options would become
fully exercisable and all restrictions on unvested restricted
shares would lapse. As such, the Company could record an
accelerated non-cash charge in accordance with SFAS 123(R)
of approximately $15 million related to these equity
awards, of which approximately $10 million would have been
expensed in periods following 2009.
In response to the unprecedented events that have recently taken
place in the capital markets, the Company has refined its
strategies in order to mitigate risk and focus on core operating
results. The Companys top priority is to ensure that it is
positioned to navigate this current challenging environment and
emerge as a stronger company. The Company is taking proactive
steps to reduce leverage to protect its long-term financial
strength and expects to continue to enhance liquidity, protect
the quality of its balance sheet and maximize access to a
variety of capital sources.
To improve the Companys liquidity and to lower its
leverage in the current economic environment, the Companys
management and Board of Directors determined that it was in the
best interests to seek significant additional capital to improve
its financial flexibility. The Companys management and
Board of Directors also concluded that in light of a variety of
factors, including capital markets volatility, rating agency
actions and general economic uncertainties, it was important
that any process to raise additional capital be executed
promptly and with a high degree of certainty of completion.
After exploring and considering potential financing and capital
alternatives, the Companys management and Board of
Directors determined that the sale of common shares in this
transaction is the most effective alternative to address the
Companys capital needs. As the sale of common shares for
this transaction requires shareholder approval, there can be no
assurances that the transaction can be completed as contemplated.
2008
Activity
Strategic
Real Estate Transactions
DDR
Macquarie Fund
In 2003, the Company entered into a joint venture with MDT,
which is managed by an affiliate of Macquarie Group Limited
(ASX: MQG), an international investment bank, advisor and
manager of specialized real estate funds, focusing on acquiring
ownership interests in institutional-quality community center
properties in the United States (DDR Macquarie
Fund). The Company has been engaged to provide day-to-day
operations of the properties and receives fees at prevailing
rates for property management, leasing, construction management,
acquisitions, due diligence, dispositions (including outparcel
dispositions) and financing.
In February 2008, the Company began purchasing units of MDT. MDT
is DDRs joint venture partner in the DDR Macquarie Fund.
Through the combination of its purchase of the units in MDT
(8.3% on a weighted-average basis for the year ended
December 31, 2008 and 12.3% as of December 31,
2008) and its 14.5% direct and indirect ownership of the
DDR Macquarie Fund, DDR has an approximate 25.0% effective
economic interest in the DDR Macquarie Fund as of
December 31, 2008. Through December 31, 2008, as
described in filings with the Australian Securities Exchange
(ASX Limited), the Company has purchased an
aggregate 115.7 million units of MDT in open market
transactions at an aggregate cost of approximately
$43.4 million. As the Companys direct and indirect
investments in MDT and the DDR Macquarie Fund gives it the
ability to exercise significant influence over operating and
financial policies, the Company accounts for both its interest
in MDT and the DDR Macquarie Fund using the equity method of
accounting.
At December 31, 2008, MDT owns an approximate 83% interest,
the Company owns an effective 14.5% ownership interest, and MQG
effectively owns the remaining 2.5% in the DDR Macquarie Fund
portfolio of assets. At December 31, 2008, DDR Macquarie
Fund owned 50 operating shopping center properties. MDT is
governed by a board of directors that includes three members
selected by DDR, three members selected by MQG and three
independent members.
44
At December 31, 2008, the market price of the MDT shares as
traded on the Australian Securities Exchange was $0.04 per
share, as compared to $0.25 per share at September 30,
2008. This represents a decline of over 80% in value in the
fourth quarter of 2008. Due to the significant decline in the
unit value of this investment, as well as the continued
deterioration of the global capital markets and the related
impact on the real estate market and retail industry, the
Company determined that the loss in value was other than
temporary pursuant to the provisions of APB 18. Accordingly, the
Company recorded an impairment charge of approximately
$31.7 million related to this investment reducing its
investment in MDT to $4.8 million at December 31, 2008.
Developments,
Redevelopments and Expansions
In the fourth quarter of 2008, the Company reduced its
anticipated spending in 2009 for its developments and
redevelopments, both for consolidated and unconsolidated
projects, as the Company considers this funding to be
discretionary spending. One of the important benefits of the
Companys asset class is the ability to phase development
projects over time until appropriate leasing levels can be
achieved. To maximize the return on capital spending and balance
the Companys de-leveraging strategy, the Company has
revised its investment criteria thresholds. The revised
underwriting criteria includes a higher
cash-on-cost
project return threshold, a longer
lease-up
period and a higher stabilized vacancy rate. The Company will
apply this revised strategy to both its consolidated and certain
unconsolidated joint ventures that own assets under development;
as the Company has significant influence and, in some cases,
approval rights over decisions relating to capital expenditures.
Development
(Wholly-Owned and Consolidated Joint Ventures)
The Company currently has the following wholly-owned and
consolidated joint venture shopping center projects under
construction:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expected
|
|
|
|
|
|
Owned
|
|
|
Net Cost
|
|
|
|
Location
|
|
GLA
|
|
|
($ Millions)
|
|
|
Description
|
|
Ukiah (Mendocino), California *
|
|
|
228,943
|
|
|
$
|
66.9
|
|
|
Mixed Use
|
Guilford, Connecticut
|
|
|
137,527
|
|
|
|
48.0
|
|
|
Lifestyle Center
|
Miami (Homestead), Florida
|
|
|
272,610
|
|
|
|
79.7
|
|
|
Community Center
|
Miami, Florida
|
|
|
391,351
|
|
|
|
148.8
|
|
|
Mixed Use
|
Boise (Nampa), Idaho
|
|
|
431,689
|
|
|
|
126.7
|
|
|
Community Center
|
Boston (Norwood), Massachusetts
|
|
|
56,343
|
|
|
|
26.7
|
|
|
Community Center
|
Boston, Massachusetts (Seabrook, New Hampshire)
|
|
|
210,855
|
|
|
|
54.5
|
|
|
Community Center
|
Elmira (Horseheads), New York
|
|
|
350,987
|
|
|
|
55.0
|
|
|
Community Center
|
Raleigh (Apex), North Carolina (Promenade)
|
|
|
72,830
|
|
|
|
16.9
|
|
|
Community Center
|
Austin (Kyle), Texas *
|
|
|
443,092
|
|
|
|
77.2
|
|
|
Community Center
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
2,596,227
|
|
|
$
|
700.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
Consolidated 50% joint venture
|
At December 31, 2008, approximately $472.6 million of
costs were incurred in relation to the Companys 10
wholly-owned and consolidated joint venture development projects
under construction.
In addition to these current developments, several of which will
be phased in, the Company and its joint venture partners intend
to commence construction on various other developments only
after substantial tenant leasing has occurred, acceptable
construction financing is available and equity capital
contributions can be funded, including several international
projects.
45
The wholly-owned and consolidated joint venture development
estimated funding schedule, net of reimbursements, as of
December 31, 2008, is as follows (in millions):
|
|
|
|
|
Funded as of December 31, 2008
|
|
$
|
472.6
|
|
Projected net funding during 2009
|
|
|
46.1
|
|
Projected net funding thereafter
|
|
|
181.7
|
|
|
|
|
|
|
Total
|
|
$
|
700.4
|
|
|
|
|
|
|
Development
(Unconsolidated Joint Ventures)
The Companys unconsolidated joint ventures have the
following shopping center projects under construction. At
December 31, 2008, approximately $479.7 million of
costs had been incurred in relation to these development
projects.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DDRs
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
|
Expected
|
|
|
|
|
|
Ownership
|
|
|
Owned
|
|
|
Net Cost
|
|
|
|
Location
|
|
Percentage
|
|
|
GLA
|
|
|
($ Millions)
|
|
|
Description
|
|
Kansas City (Merriam), Kansas
|
|
|
20.0
|
%
|
|
|
158,632
|
|
|
$
|
43.7
|
|
|
Community Center
|
Detroit (Bloomfield Hills), Michigan
|
|
|
10.0
|
%
|
|
|
623,782
|
|
|
|
189.8
|
|
|
Lifestyle Center
|
Dallas (Allen), Texas
|
|
|
10.0
|
%
|
|
|
797,665
|
|
|
|
171.2
|
|
|
Lifestyle Center
|
Manaus, Brazil
|
|
|
47.4
|
%
|
|
|
477,630
|
|
|
|
98.2
|
|
|
Enclosed Mall
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
2,057,709
|
|
|
$
|
502.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The unconsolidated joint venture development estimated funding
schedule, net of reimbursements, as of December 31, 2008,
is as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Anticipated
|
|
|
|
|
|
|
DDRs
|
|
|
JV Partners
|
|
|
Proceeds from
|
|
|
|
|
|
|
Proportionate
|
|
|
Proportionate
|
|
|
Construction
|
|
|
|
|
|
|
Share
|
|
|
Share
|
|
|
Loans
|
|
|
Total
|
|
|
Funded as of December 31, 2008
|
|
$
|
70.8
|
|
|
$
|
173.4
|
|
|
$
|
235.5
|
|
|
$
|
479.7
|
|
Projected net funding during 2009
|
|
|
13.7
|
|
|
|
28.9
|
|
|
|
21.2
|
|
|
|
63.8
|
|
Projected net funding (reimbursements) thereafter
|
|
|
(10.0
|
)
|
|
|
(40.2
|
)
|
|
|
9.6
|
|
|
|
(40.6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
74.5
|
|
|
$
|
162.1
|
|
|
$
|
266.3
|
|
|
$
|
502.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redevelopments
and Expansions (Wholly-Owned and Consolidated Joint
Ventures)
The Company is currently expanding/redeveloping the following
wholly-owned and consolidated joint venture shopping centers at
a projected aggregate net cost of approximately
$106.9 million. At December 31, 2008, approximately
$76.6 million of costs had been incurred in relation to
these projects.
|
|
|
Property
|
|
Description
|
|
Miami (Plantation), Florida
|
|
Redevelop shopping center to include Kohls and additional
junior tenants
|
Chesterfield, Michigan
|
|
Construct 25,400 sf of small shop space and retail space
|
Fayetteville, North Carolina
|
|
Redevelop 18,000 sf of small shop space and construct an
outparcel building
|
Redevelopments
and Expansions (Unconsolidated Joint Ventures)
The Companys unconsolidated joint ventures are currently
expanding/redeveloping the following shopping centers at a
projected net cost of $154.2 million, which includes
original acquisition costs related to assets acquired
46
for redevelopment. At December 31, 2008, approximately
$116.7 million of costs had been incurred in relation to
these projects. The following is a summary of these joint
venture redevelopment and expansion projects:
|
|
|
|
|
|
|
|
|
DDRs
|
|
|
|
|
|
Effective
|
|
|
|
|
|
Ownership
|
|
|
|
Property
|
|
Percentage
|
|
|
Description
|
|
Buena Park, California
|
|
|
20
|
%
|
|
Large-scale re-development of enclosed mall to open-air format
|
Los Angeles (Lancaster), California
|
|
|
21
|
%
|
|
Relocate Wal-Mart and redevelop former Wal-Mart space
|
Benton Harbor, Michigan
|
|
|
20
|
%
|
|
Construct 89,000 square feet of anchor space and retail
shops
|
Dispositions
In 2008, the Company sold the following properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
|
|
|
|
|
|
|
|
|
|
Square Feet
|
|
|
Sales Price
|
|
|
Net Gain
|
|
Location
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
Shopping Center Properties
|
|
|
|
|
|
|
|
|
|
|
|
|
Core Portfolio Properties (1)
|
|
|
981
|
|
|
$
|
111.8
|
|
|
$
|
1,330
|
|
Business Center Properties (2)
|
|
|
291
|
|
|
|
20.7
|
|
|
|
(5,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,272
|
|
|
$
|
132.5
|
|
|
$
|
(4,489
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company sold 21 shopping center
properties in various states.
|
|
(2)
|
|
Represents the sale of a
consolidated joint venture asset. The Companys ownership
was 55.84% and the amount reflected above represents the
proceeds received by the Company.
|
2007
Activity
Strategic Real Estate Transactions
Inland
Retail Real Estate Trust, Inc.
On February 27, 2007, the Company acquired IRRETI through a
merger with a subsidiary. The Company acquired all of the
outstanding shares of IRRETI for a total merger consideration of
$14.00 per share, of which $12.50 per share was funded in cash
and $1.50 per share in the form of DDR common shares. As a
result, the Company issued 5.7 million of DDR common shares
to the IRRETI shareholders with an aggregate value of
approximately $394.2 million.
The IRRETI merger was initially recorded at a total cost of
approximately $6.2 billion. Real estate related assets of
approximately $3.1 billion were recorded by the Company and
approximately $3.0 billion were recorded by the joint
venture with TIAA-CREF (DDRTC Core Retail
Fund LLC). The IRRETI real estate portfolio consisted
of 315 community shopping centers, neighborhood shopping centers
and single tenant/net leased retail properties, comprising
approximately 35.2 million square feet of total GLA, of
which 66 shopping centers comprising approximately
15.6 million square feet of total GLA are in the joint
venture with TIAA-CREF. The Company sold 78 assets acquired from
IRRETI to third parties throughout 2007.
Domestic
Retail Fund
In June 2007, the Company formed Domestic Retail Fund, a Company
sponsored, fully-seeded commingled fund. The Domestic Retail
Fund acquired 63 shopping center assets aggregating
8.3 million square feet from the Company and a joint
venture of the Company for approximately $1.5 billion. The
Domestic Retail Fund is composed of 54 assets acquired by the
Company through its acquisition of IRRETI, seven assets formerly
held in a joint venture with Kuwait Financial Centre (DDR
Markaz LLC Joint Venture), in which the Company had a 20%
47
ownership interest, and two assets from the Companys
wholly-owned portfolio. The Company recognized a gain of
approximately $9.6 million, net of its 20% retained
interest, from the sale of the two wholly-owned assets, which is
included in gain on disposition of real estate in the
Companys statements of operations. In conjunction with the
sale of assets to the Domestic Retail Fund and identification of
the equity partners, the Company paid a $7.8 million fee to
a third party consulting firm and recognized this amount as a
reduction to gain on disposition of real estate. The DDR Markaz
LLC Joint Venture recorded a gain of approximately
$89.9 million. The Companys proportionate share of
approximately $18.0 million of the joint venture gain was
deferred, as the Company retained an effective 20% ownership
interest in these assets. The Company has been engaged by the
Domestic Retail Fund to perform
day-to-day
operations of the properties and receives ongoing fees for asset
management and property management, leasing, construction
management and ancillary income in addition to a promoted
interest. In addition, upon the sale of the assets from the DDR
Markaz LLC Joint Venture to the Domestic Retail Fund, the
Company recognized promoted income of approximately
$13.6 million, which was included in equity in net income
of joint ventures and FFO.
TRT DDR
Venture I
In May 2007, the Company formed a $161.5 million joint
venture (TRT DDR Venture I). The Company contributed
three recently developed assets aggregating 0.7 million of
Company-owned square feet to the joint venture and retained an
effective ownership interest of 10%. The Company recorded an
after-tax merchant building gain, net of its retained interest,
of approximately $45.7 million, which was included in gain
on disposition of real estate and FFO. The Company receives
ongoing asset management and property management fees, plus fees
on leasing and ancillary income, in addition to a promoted
interest.
ECE
Projektmanagement Joint Venture
In May 2007, ECE Projektmanagement G.m.b.H & Co. KG
(ECE), a fully integrated international developer
and manager of shopping centers based in Hamburg, Germany, and
the Company formed a new joint venture (ECE Joint
Venture) to fund investments in retail developments
located in western Russia and Ukraine. The joint venture is
owned 75% by the Company and 25% by ECE of which the Investor is
currently the Chairman of the Executive Board. This joint
venture is consolidated by the Company. The Company intends to
commence construction on various developments only after
substantial tenant leasing has occurred and construction
financing is available, including these projects and the Company
can meet its capital obligations. While there are no assurances
any of these proposed development projects will be undertaken,
they provide a source of potential development projects over the
next several years.
DDR
Macquarie Fund
During August and September 2007, the Company contributed three
shopping center properties, aggregating 0.5 million square
feet, to DDR Macquarie Fund. The aggregate purchase price for
the properties was $49.8 million. The assets were recently
acquired by the Company as part of its acquisition of IRRETI,
and, as a result, the Company did not record a gain on the
transaction.
Acquisitions
In 2007, the Company acquired the following shopping center
assets:
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
|
|
|
Gross
|
|
|
|
Square Feet
|
|
|
Purchase Price
|
|
Location
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
IRRETI merger (see 2007 Strategic Real Estate Transactions)
|
|
|
17,273
|
|
|
$
|
3,054.4
|
|
Coventry I (1)
|
|
|
|
|
|
|
13.8
|
|
San Antonio, Texas (2)
|
|
|
207
|
|
|
|
16.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,480
|
|
|
$
|
3,085.1
|
|
|
|
|
|
|
|
|
|
|
48
|
|
|
(1)
|
|
Reflects the Companys
purchase price associated with the acquisition of its
partners approximate 25% ownership interest.
|
|
(2)
|
|
The Company purchased a 50% equity
interest through its investment in this joint venture. This
asset is consolidated into the Company in accordance with
FIN 46.
|
In 2007, the Companys unconsolidated joint ventures
acquired the following shopping center properties, excluding
those assets purchased from the Company or its unconsolidated
joint ventures:
|
|
|
|
|
|
|
|
|
|
|
Company-
|
|
|
Gross
|
|
|
|
Owned
|
|
|
Purchase
|
|
|
|
Square Feet
|
|
|
Price
|
|
Location
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
DDR SAU Retail Fund LLC (1)
|
|
|
2,277
|
|
|
$
|
30.4
|
|
DDRTC Core Retail Fund LLC (2)
|
|
|
15,638
|
|
|
|
2,998.6
|
|
Homestead, Pennsylvania (3)
|
|
|
99
|
|
|
|
5.4
|
|
Lyndhurst, New Jersey (4)
|
|
|
78
|
|
|
|
20.9
|
|
Sao Bernardo Do Campo, Brazil (5)
|
|
|
|
|
|
|
24.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
18,092
|
|
|
$
|
3,079.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company acquired a 20% equity
interest in this joint venture, consisting of 28 properties in
nine states. The Companys equity interest in these
properties was acquired as part of the IRRETI merger (see 2007
Strategic Real Estate Transactions).
|
|
(2)
|
|
The Company purchased a 15% equity
interest in this joint venture, consisting of 66 properties in
14 states. This investment was acquired as part of the
IRRETI merger (see 2007 Strategic Real Estate Transactions).
|
|
(3)
|
|
The DDRTC Core Retail Fund LLC
joint venture acquired one shopping center asset.
|
|
(4)
|
|
The DDR SAU Retail
Fund LLC joint venture acquired one shopping center asset.
|
|
(5)
|
|
Reflects the Companys
purchase price associated with the acquisition of its
partners 73% ownership interest.
|
Development,
Redevelopment & Expansions
As of December 31, 2007, the Company had substantially
completed the construction of the Chicago (McHenry), IL and
San Antonio (Stone Oak), TX shopping centers, at an
aggregate net cost of $151.2 million.
During the year ended December 31, 2007, the Company
completed expansions and redevelopment projects located in
Hamilton, NJ and Ft. Union, UT at an aggregate net cost of
$32.7 million. During the year ended December 31,
2007, the Companys unconsolidated joint ventures completed
an expansion and redevelopment project located in Phoenix, AZ at
an aggregate net cost of $21.9 million.
Dispositions
In 2007, the Company sold the following properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
|
|
|
|
|
|
|
|
|
|
Square Feet
|
|
|
Sales Price
|
|
|
Net Gain
|
|
Location
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
Core Portfolio Properties (1)
|
|
|
6,301
|
|
|
$
|
589.4
|
|
|
$
|
12.3
|
|
Transfer to Unconsolidated Joint Venture Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
Domestic Retail Fund (2)
|
|
|
8,342
|
|
|
|
1,201.3
|
|
|
|
1.8
|
|
TRT DDR Venture I (3)
|
|
|
682
|
|
|
|
161.5
|
|
|
|
50.3
|
|
DDR Macquarie Fund (4)
|
|
|
515
|
|
|
|
49.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,840
|
|
|
$
|
2,002.0
|
|
|
$
|
64.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company sold 67 shopping center
properties in various states.
|
49
|
|
|
(2)
|
|
The Company contributed 54 assets
acquired through the acquisition of IRRETI and two assets from
the Companys wholly-owned portfolio to the joint venture.
The Company retained a 20% effective interest in these assets.
The amount includes 100% of the selling price; the Company
eliminated the portion of the gain associated with its 20%
ownership interest (see 2007 Strategic Real Estate Transactions).
|
|
(3)
|
|
The Company contributed three
wholly-owned assets to the joint venture. The Company retained
an effective 10% ownership interest in these assets. The amount
includes 100% of the selling price; the Company deferred the
portion of the gain associated with its 10% ownership interest
(see 2007 Strategic Real Estate Transactions).
|
|
(4)
|
|
The Company contributed three
wholly-owned assets to the joint venture. The Company retained
an effective 14.5% ownership interest in these assets. The
amount includes 100% of the selling price. The Company did not
record a gain on the contribution of these assets, as they had
been recently acquired through the merger with IRRETI.
|
In 2007, the Companys unconsolidated joint ventures sold
the following properties, excluding those purchased by other
unconsolidated joint venture interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys
|
|
|
|
Companys
|
|
|
|
|
|
|
|
|
Proportionate
|
|
|
|
Effective
|
|
|
Company-Owned
|
|
|
|
|
|
Share of
|
|
|
|
Ownership
|
|
|
Square Feet
|
|
|
Sales Price
|
|
|
Gain
|
|
Location
|
|
Percentage
|
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
Overland Park, Kansas
|
|
|
25.50
|
%
|
|
|
61.0
|
|
|
$
|
8.2
|
|
|
$
|
0.3
|
|
Service Merchandise (6 sites)
|
|
|
20.00
|
%
|
|
|
356.4
|
|
|
|
27.2
|
|
|
|
1.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
417.4
|
|
|
$
|
35.4
|
|
|
$
|
1.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In addition to the gains reflected above, in 2007 the Company
received $13.6 million of promoted income relating to the
sale of assets from DDR Markaz LLC to Domestic Retail Fund,
which is included in the Companys proportionate share of
net income.
2006
Activity
Strategic Real Estate Transactions
Sonae
Sierra Brazil BV Sarl
In October 2006, the Company acquired a 50% joint venture
interest in Sonae Sierra Brazil BV Sarl, a fully integrated
retail real estate company based in Sao Paulo, Brazil, for
approximately $147.5 million. The Companys partner in
Sonae Sierra Brazil BV Sarl is Sonae Sierra, an international
owner, developer and manager of shopping centers based in
Portugal. Sonae Sierra Brazil BV Sarl is the managing partner of
a partnership that owns direct and indirect interests in nine
retail assets aggregating 3.6 million square feet and a
property management company in Sao Paulo, Brazil, that oversees
the leasing and management operations of the portfolio and the
development of new shopping centers. Sonae Sierra Brazil BV Sarl
owned approximately 95% of the partnership and Enplanta
Engenharia, a third party, owned approximately 5%.
DDR MDT
PS LLC
During June 2006, the Company sold six properties, aggregating
0.8 million owned square feet, to a newly formed joint
venture (DDR MDT PS LLC) with MDT for approximately
$122.7 million and recognized gains totaling approximately
$38.9 million, of which $32.8 million represented
merchant building gains from recently developed shopping centers.
The Company has been engaged to perform all
day-to-day
operations of the properties and earns
and/or
may
be entitled to receive ongoing fees for property management,
leasing and construction management, in addition to a promoted
interest, along with other periodic fees such as financing fees.
DDR
Macquarie Fund
In 2006, the Company sold four additional expansion areas in
McDonough, Georgia; Coon Rapids, Minnesota; Birmingham, Alabama
and Monaca, Pennsylvania to DDR Macquarie Fund for approximately
$24.7 million.
50
These expansion areas are adjacent to shopping centers currently
owned by the joint venture. The Company recognized an aggregate
merchant build gain of $9.2 million and deferred gains of
approximately $1.6 million relating to the Companys
effective 14.5% ownership interest in the venture.
Coventry II
Fund
The Coventry II Fund was formed with several institutional
investors and Coventry Real Estate Advisors (CREA)
as the investment manager (Coventry II Fund).
Neither the Company nor any of its officers owns a common equity
interest in the Coventry II Fund or has any incentive
compensation tied to this fund. The Coventry II Funds
strategy is to invest in a variety of retail properties that
present opportunities for value creation, such as re-tenanting,
market repositioning, redevelopment or expansion. The
Coventry II Fund and the Company, through a joint venture,
acquired 11 value-added retail properties and sites formerly
occupied by Service Merchandise in the United States. The
Company will not acquire additional assets through the
Coventry II Fund, but may continue to advance funds
associated with those projects undergoing development or
redevelopment activities (see Off-Balance Sheet Arrangements).
The Company co-invested approximately 20% in each joint venture
and is generally responsible for
day-to-day
management of the properties. Pursuant to the terms of the joint
venture, the Company may earn fees for property management,
leasing and construction management. The Company also could earn
a promoted interest, along with CREA, above a preferred return
after return of capital to fund investors.
Service
Merchandise Joint Venture
In March 2002, the Company entered into a joint venture with
Lubert-Adler Real Estate Funds and Klaff Realty, L.P. (the
KLA/SM LLC) that was awarded asset designation
rights for all of the retail real estate interests of the
bankrupt estate of Service Merchandise Corporation. The Company
had an approximate 25% interest in the joint venture.
In August 2006, the Company purchased its then partners
approximate 75% interest in the remaining 52 assets formerly
occupied by Service Merchandise, owned by the KLA/SM LLC joint
venture, at a gross purchase price of approximately
$138 million relating to the partners ownership,
based on a total valuation of approximately $185 million
for all remaining assets, including outstanding indebtedness. In
September 2006, the Company sold 51 of the assets formerly
occupied by Service Merchandise to the Coventry II Fund, as
discussed above. The Company retained a 20% interest in the
joint venture. The Company recorded a gain of approximately
$6.1 million, of which $3.2 million was included in
FFO.
Acquisitions
In 2006, the Company acquired the following shopping center
assets:
|
|
|
|
|
|
|
|
|
|
|
Company-
|
|
|
|
|
|
|
Owned
|
|
|
Gross Purchase
|
|
|
|
Square Feet
|
|
|
Price
|
|
Location
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
Phoenix, Arizona (1)
|
|
|
197
|
|
|
$
|
15.6
|
|
Pasadena, California (2)
|
|
|
557
|
|
|
|
55.9
|
|
Valencia, California
|
|
|
76
|
|
|
|
12.4
|
|
Salisbury, Maryland (1)
|
|
|
126
|
|
|
|
1.5
|
|
Apex, North Carolina (3)
|
|
|
324
|
|
|
|
4.4
|
|
San Antonio, Texas (4)
|
|
|
Development Asset
|
|
|
|
22.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,280
|
|
|
$
|
112.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Reflects the Companys
purchase price, net of debt assumed, associated with the
acquisition of its partners 50% ownership interest.
|
51
|
|
|
(2)
|
|
Reflects the Companys
purchase price, net of prepayment of debt, associated with the
acquisition of its partners 75% ownership interest.
|
|
(3)
|
|
Reflects the Companys
purchase price associated with the acquisition of its
partners 80% and 20% ownership interests in two separate
phases, respectively.
|
|
(4)
|
|
Reflects the Companys
purchase price associated with the acquisition of its
partners 50% ownership interest.
|
In 2006, the Companys unconsolidated joint ventures
acquired the following shopping center properties, not including
those assets purchased from the Company or its unconsolidated
joint ventures:
|
|
|
|
|
|
|
|
|
|
|
Company-
|
|
|
|
|
|
|
Owned
|
|
|
|
|
|
|
Square Feet
|
|
|
Gross Purchase
|
|
Location
|
|
(Thousands)
|
|
|
Price (Millions)
|
|
|
San Diego, California (1)
|
|
|
74
|
|
|
$
|
11.0
|
|
Orland Park, Illinois (2)
|
|
|
58
|
|
|
|
12.2
|
|
Benton Harbor, Michigan (3)
|
|
|
223
|
|
|
|
27.1
|
|
Bloomfield Hills, Michigan (2)
|
|
|
Development Asset
|
|
|
|
68.4
|
|
Cincinnati, Ohio (4)
|
|
|
668
|
|
|
|
194.4
|
|
Allen, Texas (2)
|
|
|
Development Asset
|
|
|
|
10.9
|
|
Sonae Sierra Brazil BV Sarl (5)
|
|
|
3,469
|
|
|
|
180.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,492
|
|
|
$
|
504.3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company purchased a 50% equity
interest through its investment in the DDR MDT MV LLC (MV
LLC).
|
|
(2)
|
|
The Company purchased a 10% equity
interest through its investment in the Coventry II Fund.
|
|
(3)
|
|
The Company purchased a 20% equity
interest through its investment in the Coventry II Fund.
There is approximately 89,000 sq. ft. under
redevelopment.
|
|
(4)
|
|
The Company purchased an 18% equity
interest through its investment in the Coventry II Fund.
There is approximately 160,000 sq. ft. under
redevelopment.
|
|
(5)
|
|
The Company purchased an initial
50% interest in an entity which owned a 93% interest in nine
properties located in Sao Paulo, Brazil.
|
Development,
Redevelopments & Expansions
As of December 31, 2006, the Company had substantially
completed the construction of the Freehold, New Jersey; Apex,
North Carolina (Beaver Creek Crossings Phase
I) and Pittsburgh, Pennsylvania, shopping centers, at an
aggregate gross cost of $156.7 million.
During the year ended December 31, 2006, the Company
completed eight expansions and redevelopment projects located in
Birmingham, Alabama; Lakeland, Florida; Ocala, Florida;
Stockbridge, Georgia; Rome, New York; Mooresville, North
Carolina; Bayamon, Puerto Rico (Rio Hondo) and Ft. Union,
Utah, at an aggregate gross cost of $73.4 million.
Dispositions
In 2006, the Company sold the following properties:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Company-Owned
|
|
|
|
|
|
|
|
|
|
Square Feet
|
|
|
Sales Price
|
|
|
Net Gain
|
|
Location
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
Core Portfolio Properties (1)
|
|
|
822
|
|
|
$
|
54.8
|
|
|
$
|
11.1
|
|
Transfer to Unconsolidated Joint Venture Interests
|
|
|
|
|
|
|
|
|
|
|
|
|
DDR Macquarie Fund (2)
|
|
|
1,024
|
|
|
|
24.7
|
|
|
|
9.2
|
|
DDR MDT PS LLC (3)
|
|
|
644
|
|
|
|
122.7
|
|
|
|
38.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,490
|
|
|
$
|
202.2
|
|
|
$
|
59.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
|
|
|
(1)
|
|
The Company sold six shopping
center properties located in three states.
|
|
(2)
|
|
The Company contributed four newly
developed expansion areas adjacent to shopping centers currently
owned by DDR Macquarie Fund. The Company retained a 14.5%
effective interest in these assets. The amount includes 100% of
the selling price; the Company eliminated the portion of the
gain associated with its 14.5% ownership interest (see 2006
Strategic Real Estate Transactions).
|
|
(3)
|
|
The Company contributed six
wholly-owned assets to the joint venture. The Company did not
retain an ownership interest in the joint venture, but
maintained a promoted interest. The amount includes 100% of the
selling price (see 2006 Strategic Real Estate Transactions).
|
In 2006, the Companys unconsolidated joint ventures sold
the following shopping center properties, excluding the
properties purchased by the Company as described above:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys
|
|
|
|
|
|
|
|
|
|
|
|
|
Proportionate
|
|
|
|
Companys Effective
|
|
|
Company-Owned
|
|
|
|
|
|
Share of
|
|
|
|
Ownership
|
|
|
Square Feet
|
|
|
Sales Price
|
|
|
Gain (loss)
|
|
Location
|
|
Percentage
|
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
Olathe, Kansas; Shawnee, Kansas and Kansas City, Missouri
|
|
|
25.50
|
%
|
|
|
432
|
|
|
$
|
20.0
|
|
|
$
|
(0.5
|
)
|
Fort Worth, Texas
|
|
|
50.00
|
%
|
|
|
235
|
|
|
|
22.0
|
|
|
|
0.2
|
|
Everett, Washington
|
|
|
20.75
|
%
|
|
|
41
|
|
|
|
8.1
|
|
|
|
1.2
|
|
Kildeer, Illinois
|
|
|
10.00
|
%
|
|
|
162
|
|
|
|
47.3
|
|
|
|
7.3
|
(1)
|
Service Merchandise Site
|
|
|
24.63
|
%
|
|
|
52
|
|
|
|
3.2
|
|
|
|
|
|
Service Merchandise Site
|
|
|
20.00
|
%
|
|
|
|
|
|
|
1.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
922
|
|
|
$
|
102.0
|
|
|
$
|
8.2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes promoted income.
|
OFF-BALANCE
SHEET ARRANGEMENTS
The Company has a number of off balance sheet joint ventures and
other unconsolidated entities with varying economic structures.
Through these interests, the Company has investments in
operating properties, development properties and two management
and development companies. Such arrangements are generally with
institutional investors and various developers located
throughout the United States.
The unconsolidated joint ventures that have total assets greater
than $250 million (based on the historical cost of
acquisition by the unconsolidated joint venture) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
Company-Owned
|
|
|
|
|
Unconsolidated
|
|
Ownership
|
|
|
|
|
Square Feet
|
|
|
Total Debt
|
|
Real Estate Ventures
|
|
Percentage (1)
|
|
|
Assets Owned
|
|
(Thousands)
|
|
|
(Millions)
|
|
|
Sonae Sierra Brazil BV Sarl
|
|
|
47.4
|
%
|
|
Nine shopping centers, one shopping center under development and
a management company in Brazil
|
|
|
3,510
|
|
|
$
|
57.3
|
|
Domestic Retail Fund
|
|
|
20.0
|
|
|
63 shopping center assets in several states
|
|
|
8,250
|
|
|
|
967.8
|
|
DDR SAU Retail Fund LLC
|
|
|
20.0
|
|
|
29 shopping center assets located in several states
|
|
|
2,375
|
|
|
|
226.2
|
|
DDRTC Core Retail Fund LLC
|
|
|
15.0
|
|
|
66 assets in several states
|
|
|
15,747
|
|
|
|
1,771.0
|
|
DDR Macquarie Fund
|
|
|
25.0
|
|
|
50 shopping centers in several states
|
|
|
12,077
|
|
|
|
1,236.7
|
|
53
|
|
|
(1)
|
|
Ownership may be held through
different investment structures. Percentage ownerships are
subject to change, as certain investments contain promoted
structures.
|
In connection with the development of shopping centers owned by
certain affiliates, the Company
and/or
its
equity affiliates have agreed to fund the required capital
associated with approved development projects aggregating
approximately $63.3 million at December 31, 2008.
These obligations, comprised principally of construction
contracts, are generally due in 12 to 18 months as the
related construction costs are incurred and are expected to be
financed through new or existing construction loans, revolving
credit facilities and retained capital.
The Company has provided loans and advances to certain
unconsolidated entities
and/or
related partners in the amount of $4.1 million at
December 31, 2008, for which the Companys joint
venture partners have not funded their proportionate share. In
addition to these loans, the Company has advanced
$58.1 million of financing to one of its unconsolidated
joint ventures, which accrues interest at the greater of LIBOR
plus 700 basis points or 12% and has an initial maturity of
July 2011. These entities are current on all debt service owed
to DDR. The Company guaranteed base rental income from one to
three years at certain centers held through Service Holdings
LLC, aggregating $3.0 million at December 31, 2008.
The Company has not recorded a liability for the guarantee, as
the subtenants of Service Holdings LLC are paying rent as due.
The Company has recourse against the other parties in the joint
venture for their pro rata share of any liability under this
guarantee.
The Coventry II Fund and the Company, through a joint
venture, acquired 11 value-added retail properties and owns 44
sites formerly occupied by Service Merchandise in the United
States. The Company co-invested approximately 20% in each joint
venture and is generally responsible for
day-to-day
management of the properties. Pursuant to the terms of the joint
venture, the Company earns fees for property management, leasing
and construction management. The Company also could earn a
promoted interest, along with CREA, above a preferred return
after return of capital to fund investors.
As of December 31, 2008, the aggregate amount of the
Companys net investment in the Coventry II joint
ventures is $72.0 million. As discussed above, the Company
has also advanced $58.1 million of financing to one of the
Coventry II joint ventures. In addition to its existing
equity and note receivable, the Company has provided payment
guaranties to third-party lenders in connection with financing
for seven of the projects. The amount of each such guaranty is
not greater than the proportion to the Companys investment
percentage in the underlying project, and the aggregate amount
of the Companys guaranties is approximately
$35.3 million.
Although the Company will not acquire additional assets through
the Coventry II Fund, additional funds are required to
address ongoing operational needs and costs associated with
those projects undergoing development or redevelopment. The
Coventry II Fund is exploring a variety of strategies to
obtain such funds, including potential dispositions, financings
and additional investments by the existing investors.
Three of the Coventry II Funds third-party credit
facilities have matured. For the Bloomfield Hills, Michigan
project, a $48.0 million land loan matured on
December 31, 2008 and on February 24, 2009, the lender
sent to the borrower a formal notice of default (the Company
provided a payment guaranty in the amount of $9.6 million
with respect to such loan). The above referenced
$58.1 million Company loan relating to the Bloomfield
Hills, Michigan project is cross defaulted with this third party
loan. For the Kansas City, Missouri project, a
$35.0 million loan matured on January 2, 2009, and on
January 6, 2009, the lender sent to the borrower a formal
notice of default (the Company did not provide a payment
guaranty with respect to such loan). For the Merriam, Kansas
project, a $17.0 million land loan matured on
January 20, 2009, and on February 17, 2009, the lender
sent to the borrower a formal notice of default (the Company
provided a payment guaranty in the amount of $2.2 million
with respect to such loan). The Coventry II Fund is
exploring a variety of strategies to pay-down, extend or
refinance the outstanding obligations.
As a result of the IRRETI merger, the Company assumed certain
environmental and non-recourse obligations of DDR-SAU Retail
Fund LLC pursuant to eight guaranty and environmental
indemnity agreements. The Companys guaranty is capped at
$43.1 million in the aggregate except for certain events,
such as fraud, intentional misrepresentation or misappropriation
of funds.
54
The Company is involved with overseeing the development
activities for several of its unconsolidated joint ventures that
are constructing, redeveloping or expanding shopping centers.
The Company earns a fee for its services commensurate with the
level of oversight provided. The Company generally provides a
completion guarantee to the third party lending institution(s)
providing construction financing.
The Companys unconsolidated joint ventures have aggregate
outstanding indebtedness to third parties of approximately
$5.8 billion and $5.6 billion at December 31,
2008 and 2007, respectively (see Item 7A. Quantitative and
Qualitative Disclosures About Market Risk). Such mortgages and
construction loans are generally non-recourse to the Company and
its partners; however, certain mortgages may have recourse to
the Company and its partners in certain limited situations, such
as misuse of funds and material misrepresentations. In
connection with certain of the Companys unconsolidated
joint ventures, the Company agreed to fund any amounts due the
joint ventures lender if such amounts are not paid by the
joint venture based on the Companys pro rata share of such
amount aggregating $40.2 million at December 31, 2008.
The Company entered into an unconsolidated joint venture that
owns real estate assets in Brazil and has generally chosen not
to mitigate any of the residual foreign currency risk through
the use of hedging instruments for this entity. The Company will
continue to monitor and evaluate this risk and may enter into
hedging agreements at a later date.
The Company entered into consolidated joint ventures that own
real estate assets in Canada and Russia. The net assets of these
subsidiaries are exposed to volatility in currency exchange
rates. As such, the Company uses nonderivative financial
instruments to hedge this exposure. The Company manages currency
exposure related to the net assets of the Companys
Canadian and European subsidiaries primarily through foreign
currency-denominated debt agreements that the Company enters
into. Gains and losses in the parent companys net
investments in its subsidiaries are economically offset by
losses and gains in the parent companys foreign
currency-denominated debt obligations.
For the year ended December 31, 2008, $25.5 million of
net losses related to the foreign currency-denominated debt
agreements was included in the Companys cumulative
translation adjustment. As the notional amount of the
nonderivative instrument substantially matches the portion of
the net investment designated as being hedged and the
nonderivative instrument is denominated in the functional
currency of the hedged net investment, the hedge ineffectiveness
recognized in earnings was not material.
FINANCING
ACTIVITIES
The Company has historically accessed capital sources through
both the public and private markets. The Companys
acquisitions, developments, redevelopments and expansions are
generally financed through cash provided from operating
activities, revolving credit facilities, mortgages assumed,
construction loans, secured debt, unsecured public debt, common
and preferred equity offerings, joint venture capital, preferred
OP Units and asset sales. Total debt outstanding at
December 31, 2008, was approximately $5.9 billion, as
compared to approximately $5.5 billion and
$4.2 billion at December 31, 2007 and 2006,
respectively.
The volatility in the debt markets during 2008 has caused
borrowing spreads over treasury rates to reach higher levels
than previously experienced. This uncertainty re-emphasizes the
need to access diverse sources of capital, maintain liquidity
and stage debt maturities carefully. Most significantly, it
underscores the importance of a conservative balance sheet that
provides flexibility in accessing capital and enhances the
Companys ability to manage assets with limited
restrictions. A conservative balance sheet would allow the
Company to be opportunistic in its investment strategy and in
accessing the most efficient and lowest cost financing available.
55
Financings through the issuance of common shares, preferred
shares, construction loans, medium term notes, convertible
notes, term loans and preferred OP Units (units issued by
the Companys partnerships) aggregated $5.1 billion
during the three years ended December 31, 2008, and are
summarized as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
Common shares
|
|
$
|
41.9
|
(1)
|
|
$
|
1,140.8
|
(2)
|
|
$
|
|
|
Preferred OP Units
|
|
|
|
|
|
|
484.2
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
41.9
|
|
|
|
1,625.0
|
|
|
|
|
|
Debt:
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
|
|
|
116.9
|
|
|
|
104.3
|
|
|
|
11.1
|
|
Permanent financing
|
|
|
350.0
|
|
|
|
30.0
|
|
|
|
|
|
Mortgage debt assumed
|
|
|
17.5
|
|
|
|
446.5
|
|
|
|
132.3
|
|
Convertible notes
|
|
|
|
|
|
|
657.8
|
(4)
|
|
|
273.1
|
(7)
|
Unsecured term loan
|
|
|
|
|
|
|
750.0
|
(5)
|
|
|
|
|
Secured term loan
|
|
|
|
|
|
|
400.0
|
(6)
|
|
|
180.0
|
(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total debt
|
|
|
484.4
|
|
|
|
2,388.6
|
|
|
|
596.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
526.3
|
|
|
$
|
4,013.6
|
|
|
$
|
596.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The Company issued 8.3 million
shares for approximately $41.9 million in December 2008.
|
|
(2)
|
|
Approximately 5.7 million
shares, aggregating approximately $394.2 million, were
issued to IRRETI shareholders in February 2007. The Company
issued 11.6 million common shares in February 2007 for
approximately $746.6 million upon the settlement of the
forward sale agreements entered into in December 2006.
|
|
(3)
|
|
Issuance of 20 million
preferred OP Units with a liquidation preference of $25 per
unit, aggregating $500 million of the net assets of the
Companys consolidated subsidiary in February 2007. In
accordance with the terms of the agreement, the preferred OP
Units were redeemed at 97.0% of par in June 2007.
|
|
(4)
|
|
Issuance of 3.00% convertible
senior unsecured notes due 2012. Included in the $657.8 million
disclosed above is $57.8 million of debt accretion recorded in
accordance with FSP APB 14-1. The notes have an initial
conversion rate of approximately 13.3783 common shares per
$1,000 principal amount of the notes, which represents an
initial conversion price of approximately $74.75 per common
share and a conversion premium of approximately 20.0% based on
the last reported sale price of $62.29 per common share on
March 7, 2007. The initial conversion rate is subject to
adjustment under certain circumstances. Upon closing of the sale
of the notes, the Company repurchased $117.0 million of its
common shares. In connection with the offering, the Company
entered into an option agreement, settled in the Companys
common shares, with an investment bank that had the economic
impact of effectively increasing the initial conversion price of
the notes to $87.21 per common share, which represents a 40%
premium based on the March 7, 2007 closing price of $62.29
per common share. The cost of this arrangement was approximately
$32.6 million and has been recorded as an equity
transaction in the Companys consolidated balance sheet. The
Company repurchased $17.0 million of the 2007 Senior Convertible Notes
through 12/31/2008.
|
|
(5)
|
|
This facility bore interest at
LIBOR plus 0.75% and was repaid in June 2007.
|
|
(6)
|
|
This facility bears interest at
LIBOR plus 0.70% and matures in February 2011. This facility
allows for a one-year extension option.
|
|
(7)
|
|
Issuance of 3.50% convertible
senior unsecured notes due 2011. The notes have an initial
conversion rate of approximately 15.3589 common shares per
$1,000 principal amount of the notes, which represents an
initial conversion price of approximately $65.11 per common
share and a conversion premium of approximately 22.5% based on
the last reported sale price of $53.15 per common share on
August 22, 2006. The initial conversion rate is subject to
adjustment under certain circumstances. Upon closing of the sale
of the notes, the Company repurchased $48.3 million of its
common shares. In connection with the offering, the Company
entered into an option arrangement, settled in the
Companys common shares, with an investment bank that had
the economic impact of effectively increasing the initial
conversion price of the notes to $74.41 per common share, which
represents a 40.0% premium based on the August 22, 2006
closing price of $53.15 per common share. The cost of this
arrangement was approximately $10.3 million and has been
recorded as an equity transaction in the Companys
consolidated balance sheet. Included in the $273.1 million
disclosed above is $23.1 million of debt accretion recorded in
accordance with FSP APB 14-1.
|
56
CAPITALIZATION
At December 31, 2008, the Companys capitalization
consisted of $5.9 billion of debt, $555 million of
preferred shares and $0.6 billion of market equity (market
equity is defined as common shares and OP Units outstanding
multiplied by $4.88, the closing price of the common shares on
the New York Stock Exchange at December 31, 2008),
resulting in a debt to total market capitalization ratio of 0.83
to 1.0, as compared to the ratios of 0.52 to 1.0 and 0.36 to
1.0, at December 31, 2007 and 2006, respectively. The
closing price of the common shares on the New York Stock
Exchange was $38.29 and $62.95 at December 31, 2007 and
2006, respectively. At December 31, 2008, the
Companys total debt consisted of $4.4 billion of
fixed-rate debt and $1.5 billion of variable-rate debt,
including $600 million of variable-rate debt that had been
effectively swapped to a fixed rate through the use of interest
rate derivative contracts. At December 31, 2007, the
Companys total debt consisted of $4.5 billion of
fixed-rate debt and $1.1 billion of variable-rate debt,
including $600 million of variable-rate debt that had been
effectively swapped to a fixed rate through the use of interest
rate derivative contracts.
It is managements current strategy to have access to the
capital resources necessary to manage its balance sheet, to
repay upcoming maturities and to consider making prudent
investments should such opportunities arise. Accordingly, the
Company may seek to obtain funds through additional debt or
equity financings
and/or
joint
venture capital in a manner consistent with its intention to
operate with a conservative debt capitalization policy and
maintain investment grade ratings with Moodys Investors
Service and Standard and Poors. The security rating is not
a recommendation to buy, sell or hold securities, as it may be
subject to revision or withdrawal at any time by the rating
organization. Each rating should be evaluated independently of
any other rating. In light of the current economic conditions,
the Company may not be able to obtain financing on favorable
terms, or at all, which may negatively impact future ratings. In
October 2008, one of the Companys rating agencies reduced
the Companys debt ratings.
The Companys credit facilities and the indentures under
which the Companys senior and subordinated unsecured
indebtedness is, or may be, issued contain certain financial and
operating covenants, including, among other things, debt service
coverage and fixed charge coverage ratios, as well as
limitations on the Companys ability to incur secured and
unsecured indebtedness, sell all or substantially all of the
Companys assets and engage in mergers and certain
acquisitions. Although the Company intends to operate in
compliance with these covenants, if the Company were to violate
these covenants, the Company may be subject to higher finance
costs and fees or accelerated maturities. In addition, certain
of the Companys credit facilities and indentures may
permit the acceleration of maturity in the event certain other
debt of the Company has been accelerated. Foreclosure on
mortgaged properties or an inability to refinance existing
indebtedness would have a negative impact on the Companys
financial condition and results of operations.
CONTRACTUAL
OBLIGATIONS AND OTHER COMMITMENTS
The Company has debt obligations relating to its revolving
credit facilities, term loan, fixed-rate senior notes and
mortgages payable with maturities ranging from one to
25 years. In addition, the Company has non-cancelable
operating leases, principally for office space and ground leases.
These obligations are summarized as follows for the subsequent
five years ending December 31 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
Year
|
|
Debt
|
|
|
Leases
|
|
|
2009
|
|
$
|
399,685
|
|
|
$
|
4,895
|
|
2010
|
|
|
1,983,887
|
|
|
|
4,585
|
|
2011
|
|
|
1,596,036
|
|
|
|
4,524
|
|
2012
|
|
|
1,003,926
|
|
|
|
4,421
|
|
2013
|
|
|
432,348
|
|
|
|
3,977
|
|
Thereafter
|
|
|
450,773
|
|
|
|
141,049
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,866,655
|
|
|
$
|
163,451
|
|
|
|
|
|
|
|
|
|
|
57
At December 31, 2008, the Company had letters of credit
outstanding of approximately $77.2 million. The Company has
not recorded any obligation associated with these letters of
credit. The majority of the letters of credit are collateral for
existing indebtedness and other obligations of the Company.
In conjunction with the development of shopping centers, the
Company has entered into commitments aggregating approximately
$111.4 million with general contractors for its
wholly-owned and consolidated joint venture properties at
December 31, 2008. These obligations, comprised principally
of construction contracts, are generally due in 12 to
18 months as the related construction costs are incurred
and are expected to be financed through operating cash flow
and/or
new
or existing construction loans or revolving credit facilities.
In connection with the transfer of one of the properties to the
DDR Macquarie Fund in 2003, the Company deferred the recognition
of approximately $2.3 million of the gain on disposition of
real estate related to a shortfall agreement guarantee
maintained by the Company. DDR Macquarie Fund is obligated to
fund any shortfall amount caused by the failure of the landlord
or tenant to pay taxes on the shopping center when due and
payable. The Company is obligated to pay any shortfall to the
extent that it is not caused by the failure of the landlord or
tenant to pay taxes on the shopping center when due and payable.
No shortfall payments have been made on this property since the
completion of construction in 1997.
The Company entered into master lease agreements from 2004
through 2007 in connection with the transfer of properties to
certain unconsolidated joint ventures that are recorded as a
liability and reduction of its related gain. The Company is
responsible for the monthly base rent, all operating and
maintenance expenses and certain tenant improvements and leasing
commissions for units not yet leased at closing for a three-year
period. At December 31, 2008, the Companys master
lease obligations, included in accounts payable and other
expenses, in the following amounts, were incurred with the
properties transferred to the following unconsolidated joint
ventures (in millions):
|
|
|
|
|
DDR Markaz II
|
|
$
|
0.1
|
|
DDR MDT PS LLC
|
|
|
0.3
|
|
TRT DDR Venture I
|
|
|
0.5
|
|
|
|
|
|
|
|
|
$
|
0.9
|
|
|
|
|
|
|
Related to one of the Companys developments in Long Beach,
California, the Company guaranteed the payment of any special
taxes levied on the property within the City of Long Beach
Community Facilities District No. 6 and attributable to the
payment of debt service on the bonds for periods prior to the
completion of certain improvements related to this project. In
addition, an affiliate of the Company has agreed to make an
annual payment of approximately $0.6 million to defray a
portion of the operating expenses of a parking garage through
the earlier of October 2032 or the date when the citys
parking garage bonds are repaid. There are no assets held as
collateral or liabilities recorded related to these obligations.
The Company has guaranteed certain special assessment and
revenue bonds issued by the Midtown Miami Community Development
District. The bond proceeds were used to finance certain
infrastructure and parking facility improvements. As of
December 31, 2008, the remaining debt service obligation
guaranteed by the Company was $10.6 million. In the event
of a debt service shortfall, the Company is responsible for
satisfying the shortfall. There are no assets held as collateral
or liabilities recorded related to these guarantees. To date,
tax revenues have exceeded the debt service payments for these
bonds.
The Company routinely enters into contracts for the maintenance
of its properties, which typically can be cancelled upon 30 to
60 days notice without penalty. At December 31, 2008,
the Company had purchase order obligations, typically payable
within one year, aggregating approximately $4.6 million
related to the maintenance of its properties and general and
administrative expenses.
The Company has entered into employment contracts with certain
executive officers. These contracts generally provide for base
salary, bonuses based on factors including the financial
performance of the Company and personal performance,
participation in the Companys equity plans, reimbursement
of various expenses, and health and welfare benefits, and may
also provide for certain perquisites (which may include
automobile expenses, insurance coverage, country or social club
expenses,
and/or
personal aircraft use). The contracts for the Companys
Chairman and Chief Executive Officer and President and Chief
Operating Officer contain a two-year evergreen term
that can be
58
terminated by giving notice at least 30 days prior to a new
extension of the term. The contracts for the other executive
officers contain a one-year evergreen term and are
subject to cancellation without cause upon at least 90 days
notice.
The Company continually monitors its obligations and
commitments. There have been no other material items entered
into by the Company since December 31, 2003, through
December 31, 2008, other than as described above. See
discussion of commitments relating to the Companys joint
ventures and other unconsolidated arrangements in Off
Balance Sheet Arrangements.
INFLATION
Substantially all of the Companys long-term leases contain
provisions designed to mitigate the adverse impact of inflation.
Such provisions include clauses enabling the Company to receive
additional rental income from escalation clauses that generally
increase rental rates during the terms of the leases
and/or
percentage rentals based on tenants gross sales. Such
escalations are determined by negotiation, increases in the
consumer price index or similar inflation indices. In addition,
many of the Companys leases are for terms of less than 10
years, permitting the Company to seek increased rents at market
rates upon renewal. Most of the Companys leases require
the tenants to pay their share of operating expenses, including
common area maintenance, real estate taxes, insurance and
utilities, thereby reducing the Companys exposure to
increases in costs and operating expenses resulting from
inflation.
ECONOMIC
CONDITIONS
The retail market in the United States significantly weakened in
2008 and continues to be challenged in early 2009. Consumer
spending has declined in response to erosion in housing values
and stock market investments, more stringent lending practices
and job losses. Retail sales have declined and tenants have
become more selective in new store openings. Some retailers have
closed existing locations and as a result, the Company has
experienced a loss in occupancy. The reduced occupancy will
likely have a negative impact on the Companys consolidated
cash flows, results of operations and financial position in
2009. Offsetting some of the current challenges within the
retail environment, the Company has a low occupancy cost
relative to other retail formats and historic averages as well
as a diversified tenant base with only one tenant exceeding 2.5%
of total 2008 consolidated revenues (Wal-Mart at 4.5%). Other
significant tenants include Target, Lowes Home
Improvement, Home Depot, Kohls, T.J. Maxx/Marshalls,
Publix Supermarkets, PetSmart and Bed Bath & Beyond,
all which have relatively strong credit ratings, remain
well-capitalized, and have outperformed other retail categories
on a relative basis. The Company believes these tenants should
continue providing us with a stable ongoing revenue base for the
foreseeable future given the long-term nature of these leases.
Moreover, the majority of the tenants in the Companys
shopping centers provide
day-to-day
consumer necessities versus high priced discretionary luxury
items with a focus towards value and convenience, which the
Company believes will enable many of the tenants to continue
operating within this challenging economic environment.
The Company monitors potential credit issues of its tenants, and
analyzes the possible effects to the financial statements of the
Company and its unconsolidated joint ventures. In addition to
the collectibility assessment of outstanding accounts
receivable, the Company evaluates the related real estate for
recoverability pursuant to the provisions of SFAS 144, as
well as any tenant related deferred charges for recoverability,
which may include straight-line rents, deferred lease costs,
tenant improvements, tenant inducements and intangible assets
(Tenant Related Deferred Charges). The Company has
evaluated its exposure relating to tenants in financial distress
(e.g., the bankruptcy cases filed by Mervyns, Circuit City,
Linens N Things, Goodys and Steve &
Barrys). Where appropriate, the Company has either written
off the unamortized balance or accelerated depreciation and
amortization expense associated with the Tenant Related Deferred
Charges. The Company does not believe its exposure associated
with past due accounts receivable for these tenants, net of
related reserves at December 31, 2008, is significant to
the financial statements as most of these tenants were current
with their rental payments at the date they filed for bankruptcy
protection.
The retail shopping sector has been affected by the competitive
nature of the retail business and the competition for market
share as well as general economic conditions where stronger
retailers have out-positioned some of the weaker retailers.
These shifts have forced some market share away from weaker
retailers and required
59
them, in some cases, to declare bankruptcy
and/or
close
stores. Certain retailers have announced store closings even
though they have not filed for bankruptcy protection. However,
these store closings often represent a relatively small
percentage of the Companys overall gross leasable area and
therefore, the Company does not expect these closings to have a
material adverse effect on the Companys overall long-term
performance. Overall, the Companys portfolio remains
stable. While negative news relating to troubled retail tenants
tends to attract attention, the vacancies created by
unsuccessful tenants may also create opportunities to increase
rent. However, there can be no assurances that these events will
not adversely affect the Company (see Risk Factors).
Historically, the Companys portfolio has performed
consistently throughout many economic cycles, including downward
cycles. Broadly speaking, national retail sales have grown
consistently since World War II, including during several
recessions and housing slowdowns. In the past the Company has
not experienced significant volatility in its long-term
portfolio occupancy rate. The Company has experienced downward
cycles before and has made the necessary adjustments to leasing
and development strategies to accommodate the changes in the
operating environment and mitigate risk. In many cases, the loss
of a weaker tenant creates an opportunity to re-lease space at
higher rents to a stronger retailer. More importantly, the
quality of the property revenue stream is high and consistent,
as it is generally derived from retailers with good credit
profiles under long-term leases, with very little reliance on
overage rents generated by tenant sales performance. The Company
believes that the quality of its shopping center portfolio is
strong, as evidenced by the high historical occupancy rates,
which have ranged from 92% to 96% since the Companys
initial public offering in 1993. We experienced a decline in the
fourth quarter of 2008 occupancy and expect continuation of that
trend into 2009. However, with year-end occupancy at 92.1%, the
portfolio occupancy remains healthy. Notwithstanding the recent
decline in occupancy, the Company continues to sign a large
number of new leases, with overall leasing spreads that continue
to trend positively, as new leases and renewals have
historically. Moreover, the Company has been able to achieve
these results without significant capital investment in tenant
improvements or leasing commissions. In 2008, the Company
assembled an Anchor Store Redevelopment Department staffed with
seasoned leasing professionals dedicated to releasing vacant
anchor space created by recent bankruptcies and store closings.
While tenants may come and go over time, shopping centers that
are well-located and actively managed are expected to perform
well. The Company is very conscious of, and sensitive to, the
risks posed to the economy, but is currently comfortable that
the position of its portfolio and the general diversity and
credit quality of its tenant base should enable it to
successfully navigate through these challenging economic times.
LEGAL
MATTERS
The Company is a party to litigation filed in November 2006 by a
tenant in a Company property located in Long Beach, California.
The tenant filed suit against the Company and certain
affiliates, claiming the Company and its affiliates failed to
provide adequate valet parking at the property pursuant to the
terms of the lease with the tenant. After a six-week trial, the
jury returned a verdict in October 2008, finding the Company
liable for compensatory damages in the amount of approximately
$7.8 million. The Company strongly disagrees with the
verdict and has filed a motion for new trial and a motion for
judgment notwithstanding the verdict. In the event the
Companys post-trial motions are unsuccessful, the Company
intends to appeal the verdict. The Company recorded a charge
during the year ended December 31, 2008, which represents
managements best estimate of loss based upon a range of
liability pursuant to SFAS No. 5, Accounting for
Contingencies. The accrual, as well as the related
litigation costs incurred to date, was recorded in Other
Expense, net in the consolidated statements of operations. The
Company will continue to monitor the status of the litigation
and revise the estimate of loss as appropriate. Although the
Company believes it has meritorious defenses, there can be no
assurance that the Companys post-trial motions will be
granted or that an appeal will be successful.
In addition to the litigation discussed above, the Company and
its subsidiaries are subject to various legal proceedings,
which, taken together, are not expected to have a material
adverse effect on the Company. The Company is also subject to a
variety of legal actions for personal injury or property damage
arising in the ordinary course of its business, most of which
are covered by insurance. While the resolution of all matters
cannot be predicted with certainty, management believes that the
final outcome of such legal proceedings and claims will not have
a material adverse effect on the Companys liquidity,
financial position or results of operations.
60
NEW
ACCOUNTING STANDARDS
New
Accounting Standards Implemented
The
Fair Value Option for Financial Assets and Financial Liabilities
Including an Amendment of FASB Statement
No. 115 SFAS 159
In February 2007, the FASB issued Statement No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159), which gives
entities the option to measure eligible financial assets,
financial liabilities and firm commitments at fair value on an
instrument-by-instrument
basis, that are otherwise not permitted to be accounted for at
fair value under other accounting standards. The election to use
the fair value option is available when an entity first
recognizes a financial asset or financial liability or upon
entering into a firm commitment. Subsequent changes (i.e.,
unrealized gains and losses) in fair value must be recorded in
earnings. Additionally, SFAS 159 allows for a one-time
election for existing positions upon adoption, with the
transition adjustment recorded to beginning retained earnings.
The Company adopted SFAS 159 on January 1, 2008, and
did not elect to measure any assets, liabilities or firm
commitments at fair value.
Fair
Value Measurements SFAS 157
In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements (SFAS 157).
SFAS 157 provides guidance for using fair value to measure
assets and liabilities. This statement clarifies the principle
that fair value should be based on the assumptions that market
participants would use when pricing the asset or liability.
SFAS 157 establishes a fair value hierarchy, giving the
highest priority to quoted prices in active markets and the
lowest priority to unobservable data. SFAS 157 applies
whenever other standards require assets or liabilities to be
measured at fair value. SFAS 157 also provides for certain
disclosure requirements, including, but not limited to, the
valuation techniques used to measure fair value and a discussion
of changes in valuation techniques, if any, during the period.
The Company adopted this statement for disclosure requirements
and its financial assets and liabilities, including valuations
associated with the impairment assessment of unconsolidated
joint ventures on January 1, 2008.
For nonfinancial assets and nonfinancial liabilities that are
not recognized or disclosed at fair value on a recurring basis,
the statement is effective for fiscal years beginning after
November 15, 2008. The Company is currently evaluating the
impact that this statement, for nonfinancial assets and
liabilities, will have on its financial position and results of
operations.
FSP
FAS 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities
In December 2008, the FASB issued Staff Position
(FSP)
FAS No. 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities (FSP
FAS 140-4).
The purpose of this FSP is to improve disclosures by public
entities and enterprises until pending amendments to
SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS 140), and
FIN 46(R) are finalized and approved by the FASB. The FSP
amends SFAS 140 to require public entities to provide
additional disclosures about transferors continuing
involvements with transferred financial assets. It also amends
FIN 46(R) to require public enterprises, to provide
additional disclosures about their involvement with variable
interest entities. FSP
FAS 140-4
and FIN 46(R)-8 is effective for financial statements
issued for fiscal years and interim periods ending after
December 15, 2008. For periods after the initial adoption
date, comparative disclosures are required. The Company adopted
the FSP and FIN 46(R)-8 on December 31, 2008.
Determining
the Fair Value of a Financial Asset When the Market for That
Asset is Not Active FSP
FAS 157-3
In October 2008, the FASB issued FSP
FAS No. 157-3,
Fair Value Measurements (FSP
FAS 157-3),
which clarifies the application of SFAS 157 in an inactive
market and provides an example to demonstrate how the fair value
of a financial asset is determined when the market for that
financial asset is inactive. FSP
FAS 157-3
was effective upon issuance, including prior periods for which
financial statements had not been issued. The adoption of
61
this standard as of September 30, 2008, did not have a
material impact on the Companys financial position and
results of operations.
New
Accounting Standards to be Implemented
Business
Combinations SFAS 141(R)
In December 2007, the FASB issued Statement No. 141
(revised 2007), Business Combinations
(SFAS 141(R)). The objective of this statement
is to improve the relevance, representative faithfulness and
comparability of the information that a reporting entity
provides in its financial reports about a business combination
and its effects. To accomplish that, this statement establishes
principles and requirements for how the acquirer:
(i) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any
non-controlling interest of the acquiree, (ii) recognizes
and measures the goodwill acquired in the business combination
or a gain from a bargain purchase and (iii) determines what
information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the
business combination. This statement applies prospectively to
business combinations for which the acquisition date is on or
after the first annual reporting period beginning on or after
December 15, 2008. Early adoption is not permitted. The
Company adopted SFAS 141(R) on January 1, 2009. To the
extent that the Company enters into new acquisitions in 2009 and
beyond that qualify as businesses, this standard will require
that acquisition costs and certain fees, which are currently
capitalized and allocated to the basis of the acquisition, be
expensed as these costs are incurred. Because of this change in
accounting for costs, the Company expects that the adoption of
this standard could have a negative impact on the Companys
results of operations depending on the size of a transaction and
the amount of costs incurred. The Company is currently
assessing the impact, if any, the adoption of SFAS 141(R)
will have on its financial position and results of operations.
The Company will assess the impact of significant transactions,
if any, as they are contemplated.
Disclosures
about Derivative Instruments and Hedging Activities
SFAS 161
In March 2008, the FASB issued SFAS 161, Disclosures
about Derivative Instruments and Hedging Activities
(SFAS 161), which is intended to help investors
better understand how derivative instruments and hedging
activities affect an entitys financial position, financial
performance and cash flows through enhanced disclosure
requirements. The enhanced disclosures primarily surround
disclosing the objectives and strategies for using derivative
instruments by their underlying risk as well as a tabular format
of the fair values of the derivative
62
instruments and their gains and losses. SFAS 161 is
effective for financial statements issued for fiscal years and
interim periods beginning after November 15, 2008, with
early application encouraged. The Company is currently assessing
the impact, if any, that the adoption of SFAS 161 will have
on its financial statement disclosures.
Accounting
for Transfers of Financial Assets and Repurchase Financing
Transactions FSP
FAS 140-3
In February 2008, the FASB issued an FSP, Accounting for
Transfers of Financial Assets and Repurchase Financing
Transactions (FSP
FAS 140-3).
FSP
FAS No. 140-3
addresses the issue of whether or not these transactions should
be viewed as two separate transactions or as one
linked transaction. FSP
FAS 140-3
includes a rebuttable presumption linking the two
transactions unless the presumption can be overcome by meeting
certain criteria. FSP
FAS 140-3
is effective for fiscal years beginning after November 15,
2008, and will apply only to original transfers made after that
date; early adoption is not permitted. The Company is currently
evaluating the impact, if any, the adoption of FSP
FAS 140-3
will have on its financial position and results of operations.
Determination
of the Useful Life of Intangible Assets FSP
FAS 142-3
In April 2008, the FASB issued an FSP Determination of the
Useful Life of Intangible Assets
(FSP 142-3),
which amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under SFAS 142.
FSP 142-3
is intended to improve the consistency between the useful life
of an intangible asset determined under SFAS 142 and the
period of expected cash flows used to measure the fair value of
the asset under SFAS 141(R) and other U.S. Generally
Accepted Accounting Principles. The guidance for determining the
useful life of a recognized intangible asset in this FSP shall
be applied prospectively to intangible assets acquired after the
effective date. The disclosure requirements in this FSP shall be
applied prospectively to all intangible assets recognized as of,
and subsequent to, the effective date.
FSP 142-3
is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is not permitted. The
Company is currently evaluating the impact, if any, the adoption
of FSP,142-3 will have on its financial position and results of
operations.
EITF
Issue
No. 08-6,
Equity Method Investment Accounting Considerations
In November 2008, the FASB issued EITF Issue
No. 08-6,
Equity Method Investment Accounting Considerations
(EITF 08-6).
EITF 08-6
clarifies the accounting for certain transactions and impairment
considerations involving equity method investments.
EITF 08-6
applies to all investments accounted for under the equity
method.
EITF 08-6
is effective for fiscal years and interim periods beginning on
or after December 15, 2008. The Company is currently
assessing the impact, if any, the adoption of
EITF 08-6
will have on its financial position and results of operations.
63
|
|
ITEM 7A.
|
QUANTITATIVE
AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|
The Companys primary market risk exposure is interest rate
risk. The Companys debt, excluding unconsolidated joint
venture debt, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
|
|
Average
|
|
|
Average
|
|
|
|
|
|
|
Amount
|
|
|
Maturity
|
|
|
Interest
|
|
|
Percentage
|
|
|
Amount
|
|
|
Maturity
|
|
|
Interest
|
|
|
Percentage
|
|
|
|
(Millions)
|
|
|
(Years)
|
|
|
Rate
|
|
|
of Total
|
|
|
(Millions)
|
|
|
(Years)
|
|
|
Rate
|
|
|
of Total
|
|
|
Fixed-Rate Debt (1)
|
|
$
|
4,375.5
|
|
|
|
3.0
|
|
|
|
5.1
|
%
|
|
|
74.6
|
%
|
|
$
|
4,466.1
|
|
|
|
3.9
|
|
|
|
5.2
|
%
|
|
|
80.8
|
%
|
Variable-Rate Debt (1)
|
|
$
|
1,491.2
|
|
|
|
2.7
|
|
|
|
1.7
|
%
|
|
|
25.4
|
%
|
|
$
|
1,057.9
|
|
|
|
4.1
|
|
|
|
5.3
|
%
|
|
|
19.2
|
%
|
|
|
|
(1)
|
|
Adjusted to reflect the
$600 million of variable-rate debt that LIBOR was swapped
to a fixed-rate of 5.0% at December 31, 2008 and 2007.
|
The Companys unconsolidated joint ventures
fixed-rate indebtedness, including $557.3 million of
variable-rate LIBOR debt that was swapped to a weighted-average
fixed rate of approximately 5.3% at December 31, 2007 is
summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
Joint
|
|
|
Companys
|
|
|
Weighted-
|
|
|
Weighted-
|
|
|
Joint
|
|
|
Companys
|
|
|
Weighted
|
|
|
Weighted
|
|
|
|
Venture
|
|
|
Proportionate
|
|
|
Average
|
|
|
Average
|
|
|
Venture
|
|
|
Proportionate
|
|
|
Average
|
|
|
Average
|
|
|
|
Debt
|
|
|
Share
|
|
|
Maturity
|
|
|
Interest
|
|
|
Debt
|
|
|
Share
|
|
|
Maturity
|
|
|
Interest
|
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
(Years)
|
|
|
Rate
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
(Years)
|
|
|
Rate
|
|
|
Fixed-Rate Debt
|
|
$
|
4,581.6
|
|
|
$
|
982.3
|
|
|
|
5.3
|
|
|
|
5.5
|
%
|
|
$
|
4,516.4
|
|
|
$
|
860.5
|
|
|
|
5.9
|
|
|
|
5.3
|
%
|
Variable-Rate Debt
|
|
$
|
1,195.3
|
|
|
$
|
233.8
|
|
|
|
1.2
|
|
|
|
2.2
|
%
|
|
$
|
1,035.4
|
|
|
$
|
173.6
|
|
|
|
1.5
|
|
|
|
5.5
|
%
|
The Company intends to utilize retained cash flow, including
proceeds from asset sales, construction financing and
variable-rate indebtedness available under its Revolving Credit
Facilities, to initially fund future acquisitions, developments
and expansions of shopping centers. Thus, to the extent the
Company incurs additional variable-rate indebtedness, its
exposure to increases in interest rates in an inflationary
period would increase. The Company does not believe, however,
that increases in interest expense as a result of inflation will
significantly impact the Companys distributable cash flow.
64
The interest rate risk on a portion of the Companys and
its unconsolidated joint ventures variable-rate debt
described above has been mitigated through the use of interest
rate swap agreements (the Swaps) with major
financial institutions. At December 31, 2008 and 2007, the
interest rate on the Companys $600 million
consolidated floating rate debt was swapped to fixed rates. At
December 31, 2007, the interest rate on the Companys
$557.3 million of unconsolidated joint venture floating
rate debt (of which $80.8 million is the Companys
proportionate share) was swapped to fixed rates. The Company is
exposed to credit risk in the event of non-performance by the
counter-parties to the Swaps. The Company believes it mitigates
its credit risk by entering into Swaps with major financial
institutions.
In November 2007, the Company entered into a treasury lock with
a notional amount of $100 million. The treasury lock was
terminated in connection with the issuance of mortgage debt in
March 2008. The treasury lock was executed to hedge the
benchmark interest rate associated with forecasted interest
payments associated with the anticipated issuance of fixed-rate
borrowings. The effective portion of these hedging relationships
has been deferred in accumulated other comprehensive income and
will be reclassified into earnings over the term of the debt as
an adjustment to earnings, based on the effective-yield method.
The Companys unconsolidated joint ventures have various
interest rate swaps, which had an aggregate fair value that
represented a net liability of $20.5 million, of which
$3.0 million was the Companys proportionate share at
December 31, 2007. These swaps were either terminated or
determined to be ineffective in 2008. These swaps had notional
amounts and effectively converted variable-rate LIBOR to fixed
rates as follows:
|
|
|
|
|
December 31, 2007
|
Notional Amount
|
|
Fixed-rate
|
|
$ 75.0
|
|
|
4.90%
|
|
$ 75.0
|
|
|
5.22%
|
|
$157.3
|
|
|
5.25%
|
|
$ 70.0
|
|
|
5.79%
|
|
$ 80.0
|
|
|
5.09%
|
|
$100.0
|
|
|
5.47%
|
|
One of the Companys joint ventures, DDR Macquarie Fund,
entered into fixed-rate interest swaps that carry notional
amounts of $377.3 million and $79.1 million, of which
the Companys proportionate share was $94.3 million
and $11.5 million at December 31, 2008 and 2007,
respectively. These swaps converted variable-rate LIBOR to a
weighted-average fixed rate of 5.1% and 4.6%, respectively.
These derivatives are marked to market with the adjustments
flowing through its income statement. The fair value adjustment
at December 31, 2008 and 2007, was not significant. The
fair value of the swaps referred to above was calculated based
upon expected changes in future benchmark interest rates.
The fair value of the Companys fixed-rate debt adjusted
to: (i) include the $600 million that was swapped to a
fixed rate at December 31, 2008 and 2007; (ii) include
the Companys proportionate share of the joint venture
fixed-rate debt and (iii) include the Companys
proportionate share of $80.8 million that was swapped to a
fixed rate at December 31, 2007, and an estimate of the
effect of a 100 point increase at December 31, 2008 and a
100 point decrease in market interest rates at December 31,
2007, is summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
December 31, 2007
|
|
|
|
|
|
|
|
|
|
100 Basis
|
|
|
|
|
|
|
|
|
100 Basis
|
|
|
|
|
|
|
|
|
|
Point
|
|
|
|
|
|
|
|
|
Point
|
|
|
|
|
|
|
|
|
|
Increase
|
|
|
|
|
|
|
|
|
Decrease
|
|
|
|
|
|
|
|
|
|
in Market
|
|
|
|
|
|
|
|
|
in Market
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Interest
|
|
|
Carrying
|
|
|
Fair
|
|
|
Interest
|
|
|
|
Value
|
|
|
Value
|
|
|
Rates
|
|
|
Value
|
|
|
Value
|
|
|
Rates
|
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
(Millions)
|
|
|
Companys fixed-rate debt
|
|
$
|
4,375.5
|
|
|
$
|
3,439.0
|
(1)
|
|
$
|
3,381.3
|
(2)
|
|
$
|
4,466.1
|
|
|
$
|
4,421.0
|
(1)
|
|
$
|
4,525.0
|
(2)
|
Companys proportionate share of joint venture fixed-rate
debt
|
|
$
|
982.3
|
|
|
$
|
911.0
|
|
|
$
|
878.8
|
|
|
$
|
860.5
|
|
|
$
|
880.1
|
(3)
|
|
$
|
927.0
|
(4)
|
65
|
|
|
(1)
|
|
Includes the fair value of interest
rate swaps, which was a liability of $21.7 million and
$17.8 million at December 31, 2008 and 2007,
respectively.
|
|
(2)
|
|
Includes the fair value of interest
rate swaps, which was a liability of $12.4 million and
$32.0 million at December 31, 2008 and 2007,
respectively.
|
|
(3)
|
|
Includes the Companys
proportionate share of the fair value of interest rate swaps
that was a liability of $3.0 million at December 31,
2007.
|
|
(4)
|
|
Includes the Companys
proportionate share of the fair value of interest rate swaps
that was a liability of $7.5 million at December 31,
2007.
|
The sensitivity to changes in interest rates of the
Companys fixed-rate debt was determined utilizing a
valuation model based upon factors that measure the net present
value of such obligations that arise from the hypothetical
estimate as discussed above.
Further, a 100 basis point increase in short-term market
interest rates at December 31, 2008 and 2007, would result
in an increase in interest expense of approximately
$14.9 million and $10.6 million, respectively, for the
Company and $2.3 million and $1.7 million,
respectively, representing the Companys proportionate
share of the joint ventures interest expense relating to
variable-rate debt outstanding for the twelve-month periods. The
estimated increase in interest expense for the year does not
give effect to possible changes in the daily balance for the
Companys or joint ventures outstanding variable-rate
debt.
The Company and its joint ventures intend to continually monitor
and actively manage interest costs on their variable-rate debt
portfolio and may enter into swap positions based on market
fluctuations. In addition, the Company believes that it has the
ability to obtain funds through additional equity
and/or
debt
offerings, including the issuance of medium term notes and joint
venture capital. Accordingly, the cost of obtaining such
protection agreements in relation to the Companys access
to capital markets will continue to be evaluated. The Company
has not, and does not plan to, enter into any derivative
financial instruments for trading or speculative purposes. As of
December 31, 2008, the Company had no other material
exposure to market risk.
66
DEVELOPERS
DIVERSIFIED REALTY CORPORATION
INDEX TO
FINANCIAL STATEMENTS
|
|
|
|
|
|
|
Page
|
|
Financial Statements:
|
|
|
|
|
|
|
|
F-2
|
|
|
|
|
F-3
|
|
|
|
|
F-4
|
|
|
|
|
F-5
|
|
|
|
|
F-6
|
|
|
|
|
F-7
|
|
Financial Statement Schedules:
|
|
|
|
|
II Valuation and Qualifying Accounts and Reserves for the three years ended December 31, 2008.
|
|
|
|
|
III Real Estate and Accumulated Depreciation at
December 31, 2008.
|
|
|
F-62
|
|
IV Mortgage Loans on Real Estate at December 31, 2008.
|
|
|
|
|
All other schedules are omitted because they are not applicable
or the required information is shown in the consolidated
financial statements or notes thereto.
F-1
REPORT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Developers Diversified Realty Corporation:
In our opinion, the consolidated financial statements listed in
the accompanying index present fairly, in
all material respects, the financial position of Developers
Diversified Realty Corporation and its subsidiaries at
December 31, 2008, and 2007, and the results of their
operations and their cash flows for each of the three years in
the period ended December 31, 2008 in conformity with
accounting principles generally accepted in the United States of
America. In addition, in our opinion, the financial statement
schedules listed in the accompanying index
present fairly, in all material respects, the information set
forth therein when read in conjunction with the related
consolidated financial statements. Also in our opinion, the
Company maintained, in all material respects, effective internal
control over financial reporting as of December 31, 2008,
based on criteria established in
Internal Control
Integrated Framework
issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). The
Companys management is responsible for these financial
statements and financial statement schedules, for maintaining
effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over
financial reporting, included in Managements Report on
Internal Control over Financial Reporting (not presented herein) appearing under
Item 9A of the Companys 2008 Annual Report on Form 10-K. Our responsibility is to express opinions on these
financial statements, on the financial statement schedules, and
on the Companys internal control over financial reporting
based on our integrated audits. We conducted our audits in
accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we
plan and perform the audits to obtain reasonable assurance about
whether the financial statements are free of material
misstatement and whether effective internal control over
financial reporting was maintained in all material respects. Our
audits of the financial statements included examining, on a test
basis, evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating the
overall financial statement presentation. Our audit of internal
control over financial reporting included obtaining an
understanding of internal control over financial reporting,
assessing the risk that a material weakness exists, and testing
and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audits also
included performing such other procedures as we considered
necessary in the circumstances. We believe that our audits
provide a reasonable basis for our opinions.
A companys internal control over financial reporting is a
process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with
generally accepted accounting principles. A companys
internal control over financial reporting includes those
policies and procedures that (i) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the
company; (ii) provide reasonable assurance that
transactions are recorded as necessary to permit preparation of
financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the
company are being made only in accordance with authorizations of
management and directors of the company; and (iii) provide
reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the
companys assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future
periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree
of compliance with the policies or procedures may deteriorate.
As discussed in Note 1 to the consolidated financial statements, the
Company changed the manner in which it accounts for convertible debt
instruments and non-controlling interests and in the manner it computes
earnings per share effective January 1, 2009.
/s/
PRICEWATERHOUSECOOPERS
LLP
Cleveland, Ohio
February 27, 2009,
except
with respect to our opinion on the consolidated financial statements in so far as it relates
to the effects of the discontinued operations as discussed in Note 24, changes in accounting for
certain convertible debt instruments and non-controlling interests and in the computation of
earnings per share as discussed in Note 1, as to which the date is August 10, 2009
F-2
CONSOLIDATED
BALANCE SHEETS
(In thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
December 31, (As Adjusted)
|
|
|
|
2008
|
|
|
2007
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
2,073,947
|
|
|
$
|
2,142,942
|
|
Buildings
|
|
|
5,890,332
|
|
|
|
5,933,890
|
|
Fixtures and tenant improvements
|
|
|
262,809
|
|
|
|
237,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,227,088
|
|
|
|
8,313,949
|
|
Less: Accumulated depreciation
|
|
|
(1,208,903
|
)
|
|
|
(1,024,048
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
7,018,185
|
|
|
|
7,289,901
|
|
Construction in progress and land under development
|
|
|
882,478
|
|
|
|
666,004
|
|
Real estate held for sale
|
|
|
|
|
|
|
5,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,900,663
|
|
|
|
7,961,701
|
|
Investments in and advances to joint ventures
|
|
|
583,767
|
|
|
|
638,111
|
|
Cash and cash equivalents
|
|
|
29,494
|
|
|
|
49,547
|
|
Restricted cash
|
|
|
111,792
|
|
|
|
58,958
|
|
Accounts receivable, net
|
|
|
164,356
|
|
|
|
199,354
|
|
Notes receivable
|
|
|
75,781
|
|
|
|
18,557
|
|
Deferred charges, net
|
|
|
25,579
|
|
|
|
29,792
|
|
Other assets
|
|
|
128,790
|
|
|
|
133,494
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,020,222
|
|
|
$
|
9,089,514
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Equity
|
|
|
|
|
|
|
|
|
Unsecured indebtedness:
|
|
|
|
|
|
|
|
|
Senior notes
|
|
$
|
2,402,032
|
|
|
$
|
2,555,158
|
|
Revolving credit facility
|
|
|
1,027,183
|
|
|
|
709,459
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,429,215
|
|
|
|
3,264,617
|
|
Secured indebtedness:
|
|
|
|
|
|
|
|
|
Term debt
|
|
|
800,000
|
|
|
|
800,000
|
|
Mortgage and other secured indebtedness
|
|
|
1,637,440
|
|
|
|
1,459,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,437,440
|
|
|
|
2,259,336
|
|
|
|
|
|
|
|
|
|
|
Total indebtedness
|
|
|
5,866,655
|
|
|
|
5,523,953
|
|
Accounts payable and accrued expenses
|
|
|
169,014
|
|
|
|
141,629
|
|
Dividends payable
|
|
|
6,967
|
|
|
|
85,851
|
|
Other liabilities
|
|
|
112,165
|
|
|
|
143,616
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,154,801
|
|
|
|
5,895,049
|
|
|
|
|
|
|
|
|
|
|
Redeemable operating partnership units
|
|
|
627
|
|
|
|
1,163
|
|
Commitments and contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Developers Diversified Realty Corporation equity:
|
|
|
|
|
|
|
|
|
Preferred shares (Note 12)
|
|
|
555,000
|
|
|
|
555,000
|
|
Common shares, with par value, $0.10 stated value;
300,000,000 shares authorized; 128,642,765 and
126,793,684 shares issued at December 31, 2008 and
2007, respectively
|
|
|
12,864
|
|
|
|
12,679
|
|
Paid-in-capital
|
|
|
2,849,364
|
|
|
|
3,107,809
|
|
Accumulated distributions in excess of net income
|
|
|
(635,239
|
)
|
|
|
(272,428
|
)
|
Deferred compensation obligation
|
|
|
13,882
|
|
|
|
22,862
|
|
Accumulated other comprehensive (loss) income
|
|
|
(49,849
|
)
|
|
|
8,965
|
|
Less: Common shares in treasury at cost: 224,063 and
7,345,304 shares at December 31, 2008 and 2007,
respectively
|
|
|
(8,731
|
)
|
|
|
(369,839
|
)
|
|
|
|
|
|
|
|
|
|
Total DDR shareholders equity
|
|
|
2,737,291
|
|
|
|
3,065,048
|
|
Non-controlling interests
|
|
|
127,503
|
|
|
|
128,254
|
|
|
|
|
|
|
|
|
|
|
Total equity
|
|
|
2,864,794
|
|
|
|
3,193,302
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,020,222
|
|
|
$
|
9,089,514
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-3
CONSOLIDATED
STATEMENTS OF OPERATIONS
(In
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
(As Adjusted)
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues from operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum rents
|
|
$
|
605,961
|
|
|
$
|
613,010
|
|
|
$
|
512,117
|
|
Percentage and overage rents
|
|
|
8,999
|
|
|
|
10,157
|
|
|
|
10,381
|
|
Recoveries from tenants
|
|
|
193,489
|
|
|
|
198,067
|
|
|
|
164,990
|
|
Ancillary and other property income
|
|
|
22,205
|
|
|
|
19,434
|
|
|
|
19,384
|
|
Management fees, development fees and other fee income
|
|
|
62,890
|
|
|
|
50,840
|
|
|
|
30,294
|
|
Other
|
|
|
8,751
|
|
|
|
13,697
|
|
|
|
14,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
902,295
|
|
|
|
905,205
|
|
|
|
752,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operation expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating and maintenance
|
|
|
142,300
|
|
|
|
128,129
|
|
|
|
103,281
|
|
Real estate taxes
|
|
|
107,357
|
|
|
|
104,126
|
|
|
|
87,058
|
|
Impairment charges
|
|
|
76,283
|
|
|
|
|
|
|
|
|
|
General and administrative
|
|
|
97,719
|
|
|
|
81,244
|
|
|
|
60,679
|
|
Depreciation and amortization
|
|
|
233,611
|
|
|
|
206,465
|
|
|
|
174,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
657,270
|
|
|
|
519,964
|
|
|
|
425,553
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
5,462
|
|
|
|
8,730
|
|
|
|
8,996
|
|
Interest expense
|
|
|
(251,663
|
)
|
|
|
(263,829
|
)
|
|
|
(205,751
|
)
|
Gain on repurchase of senior notes
|
|
|
10,455
|
|
|
|
|
|
|
|
|
|
Abandoned projects and transaction costs
|
|
|
(12,433
|
)
|
|
|
|
|
|
|
|
|
Other expense, net
|
|
|
(15,819
|
)
|
|
|
(3,019
|
)
|
|
|
(446
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(263,998
|
)
|
|
|
(258,118
|
)
|
|
|
(197,201
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before equity in net income of joint ventures,
impairment of joint venture investments, tax
benefit of taxable REIT subsidiaries and franchise taxes,
discontinued operations and gain on disposition of real estate,
net of tax
|
|
|
(18,973
|
)
|
|
|
127,123
|
|
|
|
129,269
|
|
Equity in net income of joint ventures
|
|
|
17,719
|
|
|
|
43,229
|
|
|
|
30,337
|
|
Impairment of joint venture investments
|
|
|
(106,957
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before tax benefit of taxable
REIT subsidiaries and franchise taxes, discontinued operations
and gain on disposition of real estate
|
|
|
(108,211
|
)
|
|
|
170,352
|
|
|
|
159,606
|
|
Tax benefit of taxable REIT subsidiaries and franchise taxes
|
|
|
17,465
|
|
|
|
14,700
|
|
|
|
2,505
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
|
(90,746
|
)
|
|
|
185,052
|
|
|
|
162,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
5,606
|
|
|
|
16,564
|
|
|
|
15,226
|
|
(Loss) gain on disposition of real estate, net of tax
|
|
|
(4,830
|
)
|
|
|
12,259
|
|
|
|
11,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
776
|
|
|
|
28,823
|
|
|
|
26,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before gain on disposition of real estate
|
|
|
(89,970
|
)
|
|
|
213,875
|
|
|
|
188,388
|
|
Gain on disposition of real estate, net of tax
|
|
|
6,962
|
|
|
|
68,851
|
|
|
|
72,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(83,008
|
)
|
|
$
|
282,726
|
|
|
$
|
260,411
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-controlling interests:
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss (income) attributable to non-controlling interests
|
|
|
11,139
|
|
|
|
(8,016
|
)
|
|
|
(8,301
|
)
|
Preferred operating partnership interest
|
|
|
|
|
|
|
(9,690
|
)
|
|
|
|
|
Loss attributable to redeemable operating partnership units
|
|
|
(61
|
)
|
|
|
(78
|
)
|
|
|
(152
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,078
|
|
|
|
(17,784
|
)
|
|
|
(8,453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR
|
|
$
|
(71,930
|
)
|
|
$
|
264,942
|
|
|
$
|
251,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred dividends
|
|
|
42,269
|
|
|
|
50,934
|
|
|
|
55,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(114,199
|
)
|
|
$
|
214,008
|
|
|
$
|
196,789
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.52
|
|
|
$
|
1.56
|
|
(Loss) income from discontinued operations attributable to DDR common shareholders
|
|
|
|
|
|
|
0.24
|
|
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.76
|
|
|
$
|
1.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.51
|
|
|
$
|
1.55
|
|
(Loss) income from discontinued operations attributable to DDR common shareholders
|
|
|
|
|
|
|
0.24
|
|
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.75
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-4
CONSOLIDATED
STATEMENTS OF EQUITY
(In thousands, except per share amounts)
(As Adjusted)
Developers Diversified Realty Corporation Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Distributions
in
|
|
Deferred
|
|
Accumulated
Other
|
|
Unearned
|
|
Treasury
|
|
Non-
|
|
|
|
|
Preferred
|
|
Common
|
|
Paid-in
|
|
Excess of
Net
|
|
Compensation
|
|
Comprehensive
|
|
Compensation
-
|
|
Stock at
|
|
Controlling
|
|
|
|
|
Shares
|
|
Shares
|
|
Capital
|
|
Income
|
|
Obligation
|
|
Income (Loss)
|
|
Restricted Stock
|
|
Cost
|
|
Interests
|
|
Total
|
Balance, 12/31/2005
|
|
|
705,000
|
|
|
|
10,895
|
|
|
|
1,943,368
|
|
|
|
(99,756
|
)
|
|
|
11,616
|
|
|
|
10,425
|
|
|
|
(13,144
|
)
|
|
|
|
|
|
|
129,916
|
|
|
|
2,698,320
|
|
Issuance of 726,574 common shares for cash
related to exercise of stock
options, dividend reinvestment plan and director
compensation
|
|
|
|
|
|
|
28
|
|
|
|
(1,819
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,028
|
|
|
|
|
|
|
|
8,237
|
|
Contributions from non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,061
|
|
|
|
3,061
|
|
Redemption of operating partnership units in
exchange for common shares
|
|
|
|
|
|
|
45
|
|
|
|
22,371
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14,932
|
)
|
|
|
7,484
|
|
Repurchase of 909,000 common
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(48,313
|
)
|
|
|
|
|
|
|
(48,313
|
)
|
Issuance of 64,940 common shares related to
restricted stock plan
|
|
|
|
|
|
|
6
|
|
|
|
653
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150
|
)
|
|
|
|
|
|
|
509
|
|
Vesting of restricted stock
|
|
|
|
|
|
|
|
|
|
|
1,628
|
|
|
|
|
|
|
|
770
|
|
|
|
|
|
|
|
|
|
|
|
(1,585
|
)
|
|
|
|
|
|
|
813
|
|
Purchased option arrangement on common
shares
|
|
|
|
|
|
|
|
|
|
|
(10,337
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,337
|
)
|
Adoption of SFAS 123R
|
|
|
|
|
|
|
|
|
|
|
(1,558
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,144
|
|
|
|
|
|
|
|
|
|
|
|
11,586
|
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
3,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,446
|
|
Dividends declared-common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(257,954
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(257,954
|
)
|
Dividends declared-preferred
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(55,169
|
)
|
Distributions to non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(12,964
|
)
|
|
|
(12,964
|
)
|
Reclassification of non-controlling
interests to redeemable OP units
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
685
|
|
|
|
685
|
|
(Gain)
loss on sale of non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(831
|
)
|
|
|
(831
|
)
|
Investment in non-controlling
interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,848
|
|
|
|
7,848
|
|
Adjustment for retrospective adoption of FSP
APB 14-1
|
|
|
|
|
|
|
|
|
|
|
22,547
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,547
|
|
Adjustment to
redeemable operating partnership units
|
|
|
|
|
|
|
|
|
|
|
207
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
207
|
|
Comprehensive income (Note 16):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,301
|
|
|
|
260,259
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,729
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,729
|
)
|
Amortization of interest rate
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,454
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,958
|
|
|
|
|
|
|
|
(2,596
|
)
|
|
|
|
|
|
|
|
|
|
|
8,301
|
|
|
|
257,663
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, 12/31/2006
|
|
|
705,000
|
|
|
|
10,974
|
|
|
|
1,980,506
|
|
|
|
(160,921
|
)
|
|
|
12,386
|
|
|
|
7,829
|
|
|
|
|
|
|
|
(40,020
|
)
|
|
|
121,084
|
|
|
|
2,636,838
|
|
Issuance of 69,964 common shares related to
the exercise of stock options,
dividend reinvestment plan, performance plan and director
compensation
|
|
|
|
|
|
|
|
|
|
|
(28,326
|
)
|
|
|
|
|
|
|
3,739
|
|
|
|
|
|
|
|
|
|
|
|
33,059
|
|
|
|
|
|
|
|
8,472
|
|
Issuance of 11,599,134 common shares for
cash-underwritten offering
|
|
|
|
|
|
|
1,160
|
|
|
|
745,485
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
746,645
|
|
Issuance of 5,385,324 common shares
associated with the IRRETI merger
|
|
|
|
|
|
|
539
|
|
|
|
378,580
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
15,041
|
|
|
|
|
|
|
|
394,160
|
|
Contributions from non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,771
|
|
|
|
17,771
|
|
Repurchase of common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(378,942
|
)
|
|
|
|
|
|
|
(378,942
|
)
|
Issuance of restricted stock
|
|
|
|
|
|
|
6
|
|
|
|
(674
|
)
|
|
|
|
|
|
|
487
|
|
|
|
|
|
|
|
|
|
|
|
1,459
|
|
|
|
|
|
|
|
1,278
|
|
Vesting of restricted stock
|
|
|
|
|
|
|
|
|
|
|
(3,567
|
)
|
|
|
|
|
|
|
6,250
|
|
|
|
|
|
|
|
|
|
|
|
(436
|
)
|
|
|
|
|
|
|
2,247
|
|
Purchased option arrangement on common
shares
|
|
|
|
|
|
|
|
|
|
|
(32,580
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(32,580
|
)
|
Redemption of preferred shares
|
|
|
(150,000
|
)
|
|
|
|
|
|
|
5,405
|
|
|
|
(5,405
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(150,000
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
5,224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,224
|
|
Dividends declared-common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(324,906
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(324,906
|
)
|
Dividends declared-preferred
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,138
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(46,138
|
)
|
Distributions to non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(26,080
|
)
|
|
|
(26,080
|
)
|
Investment in non-controlling
interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2,227
|
)
|
|
|
(2,227
|
)
|
Adjustment for retrospective adoption of FSP
APB 14-1
|
|
|
|
|
|
|
|
|
|
|
56,622
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
56,622
|
|
Adjustment to
redeemable operating partnership units
|
|
|
|
|
|
|
|
|
|
|
1,134
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,134
|
|
Comprehensive income (Note 16):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264,942
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17,706
|
|
|
|
282,648
|
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,126
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,126
|
)
|
Amortization of interest rate
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,454
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,454
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
22,716
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
264,942
|
|
|
|
|
|
|
|
1,136
|
|
|
|
|
|
|
|
|
|
|
|
17,706
|
|
|
|
283,784
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, 12/31/2007
|
|
|
555,000
|
|
|
|
12,679
|
|
|
|
3,107,809
|
|
|
|
(272,428
|
)
|
|
|
22,862
|
|
|
|
8,965
|
|
|
|
|
|
|
|
(369,839
|
)
|
|
|
128,254
|
|
|
|
3,193,302
|
|
Issuance of 8,142 common shares related to
exercise of stock options, dividend
reinvestment plan, performance plan and director
compensation
|
|
|
|
|
|
|
1
|
|
|
|
(2,671
|
)
|
|
|
|
|
|
|
702
|
|
|
|
|
|
|
|
|
|
|
|
8,711
|
|
|
|
|
|
|
|
6,743
|
|
Issuance of 1,840,939 common shares for
cash-underwritten offering
|
|
|
|
|
|
|
184
|
|
|
|
(286,220
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
327,387
|
|
|
|
|
|
|
|
41,351
|
|
Contributions from non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
55,039
|
|
|
|
55,039
|
|
Issuance of restricted stock
|
|
|
|
|
|
|
|
|
|
|
(5,681
|
)
|
|
|
|
|
|
|
4,289
|
|
|
|
|
|
|
|
|
|
|
|
6,578
|
|
|
|
|
|
|
|
5,186
|
|
Vesting of restricted stock
|
|
|
|
|
|
|
|
|
|
|
16,745
|
|
|
|
|
|
|
|
(13,971
|
)
|
|
|
|
|
|
|
|
|
|
|
(4,895
|
)
|
|
|
|
|
|
|
(2,121
|
)
|
Stock-based compensation
|
|
|
|
|
|
|
|
|
|
|
24,018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
24,018
|
|
Redemption of 463,185 operating partnership
units in exchange for common shares
|
|
|
|
|
|
|
|
|
|
|
(5,172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
23,327
|
|
|
|
(9,104
|
)
|
|
|
9,051
|
|
Dividends declared-common shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(248,612
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(248,612
|
)
|
Dividends declared-preferred
shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,269
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(42,269
|
)
|
Distributions to non-controlling
interests
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,162
|
)
|
|
|
(11,162
|
)
|
(Gain)
loss on sale of non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(20,562
|
)
|
|
|
(20,562
|
)
|
Adjustment to
redeemable operating partnership units
|
|
|
|
|
|
|
|
|
|
|
536
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
536
|
|
Comprehensive loss (Note 16):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71,930
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(11,139
|
)
|
|
|
(83,069
|
)
|
Other
comprehensive income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change
in fair value of interest rate contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,293
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(13,293
|
)
|
Amortization of interest rate
contracts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(643
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(643
|
)
|
Foreign currency translation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(44,878
|
)
|
|
|
|
|
|
|
|
|
|
|
(3,823
|
)
|
|
|
(48,701
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(71,930
|
)
|
|
|
|
|
|
|
(58,814
|
)
|
|
|
|
|
|
|
|
|
|
|
(14,962
|
)
|
|
|
(145,706
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, 12/31/2008
|
|
|
555,000
|
|
|
|
12,864
|
|
|
|
2,849,364
|
|
|
|
(635,239
|
)
|
|
|
13,882
|
|
|
|
(49,849
|
)
|
|
|
|
|
|
|
(8,731
|
)
|
|
|
127,503
|
|
|
|
2,864,794
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-5
CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
(As Adjusted)
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash flow from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(83,008
|
)
|
|
$
|
282,726
|
|
|
$
|
260,411
|
|
Adjustments to reconcile net (loss) income to net cash flow provided by
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization
|
|
|
246,374
|
|
|
|
224,375
|
|
|
|
193,527
|
|
Stock-based compensation
|
|
|
27,970
|
|
|
|
5,224
|
|
|
|
3,446
|
|
Amortization of deferred finance costs and settled interest rate
protection agreements
|
|
|
9,946
|
|
|
|
9,474
|
|
|
|
7,719
|
|
Accretion of convertible debt discount
|
|
|
15,255
|
|
|
|
12,459
|
|
|
|
1,343
|
|
Gain on repurchase of senior notes
|
|
|
(10,455
|
)
|
|
|
|
|
|
|
|
|
Settlement of accreted debt discount on repurchase of convertible
senior notes
|
|
|
(541
|
)
|
|
|
|
|
|
|
|
|
Ineffective portion of derivative financing investments
|
|
|
|
|
|
|
|
|
|
|
1,157
|
|
Net cash paid from interest rate hedging contracts
|
|
|
(5,410
|
)
|
|
|
|
|
|
|
|
|
Equity in net income of joint ventures
|
|
|
(17,719
|
)
|
|
|
(43,229
|
)
|
|
|
(30,337
|
)
|
Impairment of joint venture investments
|
|
|
106,957
|
|
|
|
|
|
|
|
|
|
Cash distributions from joint ventures
|
|
|
24,427
|
|
|
|
33,362
|
|
|
|
23,304
|
|
Gain on disposition of real estate
|
|
|
(2,132
|
)
|
|
|
(81,110
|
)
|
|
|
(83,074
|
)
|
Impairment charge
|
|
|
85,264
|
|
|
|
|
|
|
|
|
|
Net change in accounts receivable
|
|
|
(1,520
|
)
|
|
|
(47,999
|
)
|
|
|
(38,013
|
)
|
Net change in accounts payable and accrued expenses
|
|
|
18,783
|
|
|
|
(11,955
|
)
|
|
|
9,875
|
|
Net change in other operating assets and liabilities
|
|
|
(22,189
|
)
|
|
|
37,418
|
|
|
|
(728
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total adjustments
|
|
|
475,010
|
|
|
|
138,019
|
|
|
|
88,219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow provided by operating activities
|
|
|
392,002
|
|
|
|
420,745
|
|
|
|
348,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Real estate developed or acquired, net of liabilities assumed
|
|
|
(398,563
|
)
|
|
|
(2,803,102
|
)
|
|
|
(454,357
|
)
|
Equity contributions to joint ventures
|
|
|
(98,113
|
)
|
|
|
(247,882
|
)
|
|
|
(206,645
|
)
|
(Advances to) repayment of joint venture advances, net
|
|
|
(56,926
|
)
|
|
|
1,913
|
|
|
|
622
|
|
Proceeds resulting from contribution of properties to joint
ventures and repayments of advances from affiliates
|
|
|
|
|
|
|
1,274,679
|
|
|
|
298,059
|
|
Proceeds from sale and refinancing of joint venture interests
|
|
|
12,154
|
|
|
|
43,041
|
|
|
|
|
|
Return on investments in joint ventures
|
|
|
28,211
|
|
|
|
20,462
|
|
|
|
50,862
|
|
(Issuance) repayment of notes receivable, net
|
|
|
(36,047
|
)
|
|
|
1,014
|
|
|
|
6,834
|
|
Increase in restricted cash
|
|
|
(52,834
|
)
|
|
|
(58,958
|
)
|
|
|
|
|
Proceeds from disposition of real estate
|
|
|
133,546
|
|
|
|
606,546
|
|
|
|
101,578
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash flow used for investing activities
|
|
|
(468,572
|
)
|
|
|
(1,162,287
|
)
|
|
|
(203,047
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flow from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from revolving credit facilities, net
|
|
|
343,201
|
|
|
|
412,436
|
|
|
|
147,500
|
|
Proceeds from term loan borrowings
|
|
|
|
|
|
|
1,150,000
|
|
|
|
|
|
Repayment of term loans
|
|
|
|
|
|
|
(750,000
|
)
|
|
|
(20,000
|
)
|
Proceeds from mortgage and other secured debt
|
|
|
466,936
|
|
|
|
134,300
|
|
|
|
11,093
|
|
Principal payments on mortgage debt
|
|
|
(306,309
|
)
|
|
|
(401,697
|
)
|
|
|
(153,732
|
)
|
Repayment of senior notes
|
|
|
(158,239
|
)
|
|
|
(197,000
|
)
|
|
|
|
|
Proceeds from issuance of convertible senior notes, net of
underwriting commissions and offering expenses of $267 and $550
in 2007 and 2006, respectively
|
|
|
|
|
|
|
587,733
|
|
|
|
244,450
|
|
Payment of deferred finance costs
|
|
|
(5,522
|
)
|
|
|
(5,337
|
)
|
|
|
(4,047
|
)
|
Redemption of preferred shares
|
|
|
|
|
|
|
(150,000
|
)
|
|
|
|
|
Proceeds from issuance of common shares, net of underwriting
commissions and offering expenses paid of $208 in 2007
|
|
|
41,352
|
|
|
|
746,645
|
|
|
|
|
|
Payment of underwriting commissions for forward-equity contract
|
|
|
|
|
|
|
|
|
|
|
(4,000
|
)
|
Purchased option arrangement for common shares
|
|
|
|
|
|
|
(32,580
|
)
|
|
|
(10,337
|
)
|
Proceeds from the issuance of common shares in conjunction with
exercise of stock options, 401(k) plan and dividend reinvestment
plan
|
|
|
1,371
|
|
|
|
11,998
|
|
|
|
9,560
|
|
Proceeds from issuance of preferred operating partnership
interest, net of expenses
|
|
|
|
|
|
|
484,204
|
|
|
|
|
|
Redemption of preferred operating partnership interest
|
|
|
|
|
|
|
(484,204
|
)
|
|
|
|
|
Contributions from non-controlling interests
|
|
|
55,039
|
|
|
|
17,771
|
|
|
|
3,061
|
|
Return of investment non-controlling interest
|
|
|
(10,078
|
)
|
|
|
(14,190
|
)
|
|
|
(10,964
|
)
|
Purchase of redeemable operating partnership units
|
|
|
(46
|
)
|
|
|
(683
|
)
|
|
|
(2,097
|
)
|
Distributions to preferred and redeemable operating partnership units
|
|
|
(1,705
|
)
|
|
|
(11,907
|
)
|
|
|
(2,382
|
)
|
Repurchase of common shares
|
|
|
|
|
|
|
(378,942
|
)
|
|
|
(48,313
|
)
|
Net cash received from foreign currency hedge contract
|
|
|
|
|
|
|
1,250
|
|
|
|
|
|
Dividends paid
|
|
|
(369,765
|
)
|
|
|
(356,464
|
)
|
|
|
(307,652
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used for) financing activities
|
|
|
56,235
|
|
|
|
763,333
|
|
|
|
(147,860
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
(Decrease) increase in cash and cash equivalents
|
|
|
(20,335
|
)
|
|
|
21,791
|
|
|
|
(2,277
|
)
|
Effect of exchange rate changes on cash and cash equivalents
|
|
|
282
|
|
|
|
(622
|
)
|
|
|
|
|
Cash and cash equivalents, beginning of year
|
|
|
49,547
|
|
|
|
28,378
|
|
|
|
30,655
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of year
|
|
$
|
29,494
|
|
|
$
|
49,547
|
|
|
$
|
28,378
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
consolidated financial statements.
F-6
Notes to
Consolidated Financial Statements
|
|
1.
|
Summary
of Significant Accounting Policies
|
Nature of
Business
Developers Diversified Realty Corporation and its related real
estate joint ventures and subsidiaries (collectively, the
Company or DDR) are primarily engaged in
the business of acquiring, expanding, owning, developing,
redeveloping, leasing, managing and operating shopping centers
and enclosed malls. The Companys shopping centers are
typically anchored by two or more national tenant anchors
(Wal-Mart and Target), home improvement stores (Home Depot or
Lowes Home Improvement) and two or more junior tenants
(Bed Bath & Beyond, Kohls, T.J. Maxx or
PetSmart). At December 31, 2008, the Company owned or had
interests in 702 shopping centers in 45 states plus Puerto
Rico and Brazil, and six business centers in four states. The
Company has an interest in 329 of these shopping centers through
equity method investments. The Company also had assets under
development in Canada and Russia. The tenant base primarily
includes national and regional retail chains and local
retailers. Consequently, the Companys credit risk is
concentrated in the retail industry.
Consolidated revenues derived from the Companys largest
tenant, Wal-Mart, aggregated 4.5%, 4.3% and 4.7% of total
revenues for the years ended December 31, 2008, 2007 and
2006, respectively. The total percentage of Company-owned gross
leasable area (GLA) (all references are unaudited)
attributed to Wal-Mart was 8.6% at December 31, 2008. The
Companys 10 largest tenants constituted 20.0%, 18.5% and
17.7% of total revenues for the years ended December 31,
2008, 2007 and 2006, respectively, including revenues reported
within discontinued operations. Management believes the
Companys portfolio is diversified in terms of the location
of its shopping centers and its tenant profile. Adverse changes
in general or local economic conditions could result in the
inability of some existing tenants to meet their lease
obligations and could adversely affect the Companys
ability to attract or retain tenants. During the three years
ended December 31, 2008, 2007 and 2006, certain national
and regional retailers experienced financial difficulties, and
several filed for protection under bankruptcy laws, including
Mervyns and Circuit City which, as of December 31, 2008,
represented approximately 4.2% and 1.2%, respectively, of the
Companys total revenues.
New Accounting Standards Implemented with Retrospective Application
The following accounting standards were implemented on January 1, 2009 with retrospective
application as appropriate. As a result, the financial statements as
of and for the three years ended December 31, 2008 have been adjusted as required by the provisions of these standards.
Non-Controlling Interests in Consolidated Financial Statements an Amendment of ARB No. 51
SFAS 160
In December 2007, the Financial Accounting Standards Board (FASB) issued Statement
No. 160, Non-Controlling Interest in Consolidated Financial Statements an Amendment of ARB
No. 51 (SFAS 160). A non-controlling interest, sometimes referred to as minority equity
interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a
parent. The objective of this statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards that require: (i) the
ownership interest in subsidiaries held by other parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial position within
equity, but separate from the parents equity; (ii) the amount of consolidated net income
attributable to the parent and to the non-controlling interest be clearly identified and presented
on the face of the consolidated statement of operations; (iii) changes in a parents ownership
interest while the parent retains its controlling financial interest in a subsidiary be accounted
for consistently and requires that they be accounted for similarly, as equity transactions;
(iv) when a subsidiary is deconsolidated, any retained non-controlling equity investment in the
former subsidiary be initially measured at fair value (the gain or loss on the deconsolidation of
the subsidiary is measured using the fair value of any non-controlling equity investments rather
than the carrying amount of that retained investment) and (v) entities provide sufficient
disclosures that clearly identify and distinguish between the interest of the parent and the
interest of the non-controlling owners. This statement was effective for fiscal years, and interim
reporting periods within those fiscal years, beginning on or after December 15, 2008, to be applied
on a prospective basis, except for the presentation and disclosure requirements, which have been
applied on a retrospective basis. Early adoption was not permitted. The Company adopted SFAS 160 on
January 1, 2009. As required by SFAS 160, the Company adjusted the presentation of non-controlling
interests, as appropriate, in the consolidated balance sheets, consolidated statements of operations and consolidated statements of cash flows as of and for the five years ended December 31, 2008. In
connection with the Companys adoption of SFAS 160, the Company also applied the recent revisions
to EITF Topic D-98 Classification and Measurement of Redeemable Securities (D-98). The
Companys consolidated balance sheets no longer have a line item referred to as Minority Interests.
There have been no other changes in the measurement of this line item from amounts previously
reported, although, as a result of the Companys adoption of these standards, amounts
previously reported as minority equity interests and operating partnership minority interests on
the Companys consolidated balance sheets are now presented as non-controlling interests within
equity. Equity at December 31, 2008, 2007 and 2006 was adjusted to include $127.5 million, $128.3
million and $121.1 million, respectively, attributable to non-controlling interests. The Company reflected
approximately $0.6 million, $1.2 million and $2.5 million
at December 31, 2008, 2007 and 2006, respectively, as
redeemable operating partnership units due to certain redemption
features, in the
temporary equity section (between liabilities and equity) of the consolidated balance sheets.
These units are exchangeable, at the election of the OP Unit holder, and under certain
circumstances at the option of the Company, into an equivalent number of the Companys common
shares or for the equivalent amount of cash. Based on the requirements of D-98, the measurement of
the redeemable operating partnership units are now presented at the greater of their carrying
amount or redemption value at the end of each reporting period. The Company will assess the impact
of significant transactions involving changes in controlling interests, if any, as they are
contemplated.
F-7
Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion
(Including Partial Cash Settlement) FSP APB 14-1
In May 2008, the FASB issued Staff Position (FSP) Accounting for Convertible Debt
Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement) (FSP
APB 14-1). The FSP prohibits the classification of convertible debt instruments that may be
settled in cash upon conversion, including partial cash settlement, as debt instruments within the
scope of FSP APB 14-1 and requires issuers of such instruments to separately account for the
liability and equity components by allocating the proceeds from the issuance of the instrument
between the liability component and the embedded conversion option (i.e., the equity component).
The liability component of the debt instrument is accreted to par using the effective yield method;
accretion is reported as a component of interest expense. The equity component is not subsequently
re-valued as long as it continues to qualify for equity treatment. FSP APB 14-1 must be applied
retrospectively to issued cash-settleable convertible instruments as well as prospectively to newly
issued instruments. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years.
FSP APB 14-1 was adopted by the Company as of January 1, 2009 with retrospective
application for the three years ended December 31, 2008. As a result of the adoption, the initial
debt proceeds from the $250 million aggregate principal amount
of 3.5% convertible notes, due in 2011, and $600 million
aggregate principal amount of
3.0%
convertible notes, due in 2012, issued in October 2006 and March
2007, respectively, were required to be allocated between a liability component and an
equity component. This allocation was based upon what the assumed interest rate would have been if
the Company had issued similar nonconvertible debt. Accordingly, the Companys consolidated balance
sheets at December 31, 2008, 2007 and 2006 were adjusted to reflect a decrease in unsecured debt of
approximately $50.7 million, $67.1 million and $21.7
million, respectively, reflecting the unamortized discount.
In addition, at December 31, 2008, 2007 and 2006, real estate
assets increased by $2.9 million, $1.1 million and -0-, respectively, relating to the impact of capitalized interest and deferred charges
decreased by $1.0 million, $1.4 million and $0.5 million, respectively, relating to the reallocation of original
issuance costs to reflect such amounts as a reduction of proceeds from the reclassification of the
equity component.
In connection with FSP APB 14-1, the guidance in D-98 was also amended, whereas the equity component
related to the convertible debt would need to be evaluated in accordance with D-98 if the
convertible debt were currently redeemable at the balance sheet date. As the Companys convertible
debt was not redeemable, no evaluation was required as of
December 31, 2008, 2007 and 2006.
For the years ended December 31, 2008, 2007 and 2006, the Company adjusted the
consolidated statements of operations to reflect additional non-cash interest expense of
$14.2 million, $11.1 million and $1.3 million, respectively, net of the impact of capitalized
interest, pursuant to the provisions of FSP APB 14-1. In addition, in 2008 the Company repurchased
$17.0 million of its senior unsecured notes. As a result of the adoption of this FSP, the Company
recorded an adjustment to the gain on repurchase of senior notes of approximately $1.1 million for
the amount of the unamortized discount allocated to these notes.
Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities FSP EITF 03-6-1
In June 2008, the FASB issued the FSP Determining Whether Instruments Granted in
Share-Based Payment Transactions Are Participating Securities (FSP EITF 03-6-1), which addresses
whether instruments granted in share-based payment transactions are participating securities prior
to vesting and, therefore, need to be included in the earnings allocation in computing earnings per
share under the two-class method as described in SFAS No. 128, Earnings per Share. Under the guidance
in FSP EITF 03-6-1, unvested share-based payment awards that contain non-forfeitable rights to
dividends or dividend equivalents (whether paid or unpaid) are participating securities and shall
be included in the computation of earnings per share pursuant to the two-class method. The FSP is
effective for financial statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years. All prior-period earnings
per share data is required to be adjusted
retrospectively. As a result, the Companys earnings per share
calculations for the three years
ended December 31, 2008, have been adjusted retrospectively to reflect
the provisions of this
FSP. The adoption of this standard did not have a material impact on the Companys financial
position and results of operations.
Principles
of Consolidation
The Company consolidates certain entities in which it owns less
than a 100% equity interest if the entity is a variable interest
entity (VIE), as defined in FASB Interpretation No. 46(R)
Consolidation of Variable Interest Entities
(FIN 46(R)), and the Company is deemed to be
the primary beneficiary in the VIE. The Company also
consolidates certain entities that are not a VIE as defined in
FIN 46(R) in which it has effective control. The Company
consolidates one entity pursuant to the provisions of Emerging
Issues Task Force (EITF)
04-05,
Investors Accounting for an Investment in a Limited
Partnership When the Investor Is the Sole General Partner and
the Limited Partners Have Certain Rights. The equity
method of accounting is applied to entities in which the Company
is not the primary beneficiary as defined by FIN 46(R), or
does not have effective control, but can exercise significant
influence over the entity with respect to its operations and
major decisions. See Note 2 for a discussion of one
significant joint venture that is considered a VIE but for which
the Company is not considered the primary beneficiary.
In 2005, the Company formed a joint venture with Macquarie DDR
Trust (Note 2) and DDR MDT MV LLC (MV LLC) that
acquired the underlying real estate of 37 operating Mervyns
stores. DDR provides management, financing, expansion,
re-tenanting and oversight services for these real estate
investments. The Company holds a 50% economic interest in MV
LLC, which is considered a VIE. The Company was determined to be
the primary beneficiary due to related party considerations, as
defined in FIN 46(R), as well as being the member
determined to have a greater exposure to variability in expected
losses as DDR is entitled to earn certain fees from the joint
venture. DDR earned aggregate fees of $1.4 million and $1.3
million during 2008 and 2007, respectively. MV LLC had total
real estate assets of $348.5 million and
$405.8 million at December 31, 2008 and 2007,
respectively, and total non-recourse mortgage debt of
$258.5 million at December 31, 2008 and 2007, and is
consolidated in the results of the Company. All fees earned from
the joint venture are eliminated in consolidation.
F-8
Statement
of Cash Flows and Supplemental Disclosure of Non-Cash Investing
and Financing Information
Non-cash investing and financing activities are summarized as
follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Contribution of net assets of previously unconsolidated joint
ventures
|
|
$
|
|
|
|
$
|
|
|
|
$
|
2.9
|
|
Consolidation of the net assets (excluding mortgages as
disclosed below) of previously unconsolidated joint ventures
|
|
|
|
|
|
|
14.4
|
|
|
|
368.9
|
|
Mortgages assumed, shopping center acquisitions and
consolidation of previously unconsolidated joint ventures
|
|
|
17.5
|
|
|
|
446.5
|
|
|
|
132.9
|
|
Liabilities assumed with the acquisition of shopping centers
|
|
|
|
|
|
|
32.5
|
|
|
|
|
|
Consolidation of net assets from adoption of EITF
04-05
|
|
|
|
|
|
|
|
|
|
|
43.0
|
|
Mortgages assumed, adoption of EITF
04-05
|
|
|
|
|
|
|
|
|
|
|
17.1
|
|
Dividends declared, not paid
|
|
|
7.0
|
|
|
|
85.9
|
|
|
|
71.3
|
|
Fair value of interest rate swaps
|
|
|
21.7
|
|
|
|
20.1
|
|
|
|
1.1
|
|
Deferred payment of swaption
|
|
|
|
|
|
|
|
|
|
|
2.8
|
|
Share issuance for operating partnership unit redemption
|
|
|
9.1
|
|
|
|
|
|
|
|
14.9
|
|
The transactions above did not provide or use cash in the years
presented and, accordingly, are not reflected in the
consolidated statements of cash flows.
Real
Estate
Real estate assets held for investment are stated at cost less
accumulated depreciation, which, in the opinion of management,
is not in excess of the individual propertys estimated
undiscounted future cash flows, including estimated proceeds
from disposition.
Depreciation and amortization are provided on a straight-line
basis over the estimated useful lives of the assets as follows:
|
|
|
Buildings
|
|
Useful lives, ranging from 30 to 40 years
|
Building improvements
|
|
Useful lives, ranging from five to 40 years
|
Fixtures and tenant improvements
|
|
Useful lives, which approximate lease terms, where applicable
|
Expenditures for maintenance and repairs are charged to
operations as incurred. Significant renovations that improve or
extend the life of the asset are capitalized. Included in land
at December 31, 2008, was undeveloped real estate,
generally outlots or expansion pads adjacent to shopping centers
owned by the Company (excluding shopping centers owned through
unconsolidated joint ventures), and excess land of approximately
1,300 acres.
Construction in progress includes shopping center developments
and significant expansions and redevelopments. The Company
capitalizes interest on funds used for the construction,
expansion or redevelopment of shopping centers, including funds
invested in or advanced to unconsolidated joint ventures with
qualifying development activities. Capitalization of interest
ceases when construction activities are substantially completed
and the property is available for occupancy by tenants or when
construction activities are temporarily ceased. If the Company
suspends substantially all activities related to development of
a qualifying asset, the Company will cease capitalization of
interest until activities are resumed. In addition, the Company
capitalized certain direct and incremental internal construction
and software development and implementation costs of
$14.6 million, $12.8 million and $10.0 million in
2008, 2007 and 2006, respectively.
Purchase
Price Accounting
Upon acquisition of properties, the Company estimates the fair
value of acquired tangible assets, consisting of land, building
and improvements, and, if determined to be material, identifies
intangible assets generally consisting
F-9
of the fair value of (i) above- and below-market leases,
(ii) in-place leases and (iii) tenant relationships.
The Company allocates the purchase price to assets acquired and
liabilities assumed based on their relative fair values at the
date of acquisition pursuant to the provisions of Statement of
Financial Accounting Standards (SFAS) No. 141,
Business Combinations. In estimating the fair value
of the tangible and intangible assets acquired, the Company
considers information obtained about each property as a result
of its due diligence, marketing and leasing activities, and
utilizes various valuation methods, such as estimated cash flow
projections using appropriate discount and capitalization rates,
estimates of replacement costs net of depreciation, and
available market information. The fair value of the tangible
assets of an acquired property considers the value of the
property as if it were vacant.
Above- and below-market lease values for acquired properties are
recorded based on the present value (using a discount rate that
reflects the risks associated with the leases acquired) of the
difference between (i) the contractual amounts to be paid
pursuant to each in-place lease and (ii) managements
estimate of fair market lease rates for each corresponding
in-place lease, measured over a period equal to the remaining
term of the lease for above-market leases and the initial term
plus the term of any below-market fixed-rate renewal options for
below-market leases. The capitalized above-market lease values
are amortized as a reduction of base rental revenue over the
remaining term of the respective leases, and the capitalized
below-market lease values are amortized as an increase to base
rental revenue over the remaining initial terms plus the terms
of any below-market fixed-rate renewal options of the respective
leases. At December 31, 2008 and 2007, below-market leases
aggregated $28.8 million and $31.3 million,
respectively. At December 31, 2008 and 2007, above-market
leases aggregated $9.1 million and $9.8 million,
respectively.
The total amount allocated to in-place lease values and tenant
relationship values is based upon managements evaluation
of the specific characteristics of the acquired lease portfolio
and the Companys overall relationship with anchor tenants.
Factors considered in the allocation of these values include the
nature of the existing relationship with the tenant, the
expectation of lease renewals, the estimated carrying costs of
the property during a hypothetical, expected
lease-up
period, current market conditions and costs to execute similar
leases. Estimated carrying costs include real estate taxes,
insurance, other property operating costs and estimates of lost
rentals at market rates during the hypothetical, expected
lease-up
periods, based upon managements assessment of specific
market conditions.
The value of in-place leases, including origination costs, is
amortized over the estimated weighted average remaining initial
term of the acquired lease portfolio. The value of tenant
relationship intangibles is amortized to expense over the
estimated initial and renewal terms of the lease portfolio;
however, no amortization period for intangible assets will
exceed the remaining depreciable life of the building.
Intangible assets associated with property acquisitions are
included in other assets and other liabilities, with respect to
the above- and below-market leases, in the Companys
consolidated balance sheets.
Impairment
of Long-Lived Assets
The Company follows the provisions of SFAS No. 144,
Accounting for the Impairment or Disposal of Long-Lived
Assets (SFAS 144). If an asset is held
for sale, it is stated at the lower of its carrying value or
fair value, less cost to sell. The determination of undiscounted
cash flows requires significant estimates made by management and
considers the expected course of action at the balance sheet
date. Subsequent changes in estimated undiscounted cash flows
arising from changes in anticipated actions could affect the
determination of whether an impairment exists.
The Company reviews its long-lived assets used in operations for
impairment when there is an event or change in circumstances
that indicates an impairment in value. The Company reviews its
real estate assets, including land held for development and
developments in progress, for potential impairment indicators
whenever events or changes in circumstances indicate that the
carrying value may not be recoverable. Impairment indicators are
assessed separately for each property and include, but are not
limited to, significant decreases in real estate property net
operating income and occupancy percentages as well as projected
losses on expected future sales. Impairment indicators for
pre-development projects, which typically include costs incurred
during the beginning stages of a potential development, and
developments in progress are assessed by project and include,
but are not limited to,
F-10
significant changes in projected completion dates, revenues or
cash flows, development costs, market factors and sustainability
of development projects. An asset is considered impaired when
the undiscounted future cash flows are not sufficient to recover
the assets carrying value. If such impairment is present,
an impairment loss is recognized based on the excess of the
carrying amount of the asset over its fair value. The Company
records impairment losses as an expense to operations and
reduces the carrying amounts of assets held for sale when the
carrying amounts exceed the estimated selling proceeds, less the
costs to sell.
Disposition
of Real Estate and Real Estate Investments
Disposition of real estate relates to the sale of outlots and
land adjacent to existing shopping centers, shopping center
properties and real estate investments. Gains from dispositions
are recognized using the full accrual or partial sale methods,
as applicable, in accordance with the provisions of
SFAS No. 66, Accounting for Real Estate
Sales (SFAS 66) provided that various
criteria relating to the terms of sale and any subsequent
involvement by the Company with the properties sold are met.
SFAS 144 retains the basic provisions for presenting
discontinued operations in the income statement but broadens the
scope to include a component of an entity rather than a segment
of a business. Pursuant to the definition of a component of an
entity in SFAS 144, assuming no significant continuing
involvement, the sale of a retail or industrial operating
property is considered discontinued operations. In addition,
properties classified as held for sale are also considered a
discontinued operation. Accordingly, the results of operations
of properties disposed of, or classified as held for sale, for
which the Company has no significant continuing involvement, are
reflected as discontinued operations. Interest expense, which is
specifically identifiable to the property, is used in the
computation of interest expense attributable to discontinued
operations. Consolidated interest at the corporate level is
allocated to discontinued operations pursuant to the methods
prescribed under Emerging Issues Task Force (EITF)
87-24,
Allocation of Interest to Discontinued Operations,
based on the proportion of net assets disposed.
Real
Estate Held for Sale
The Company generally considers assets to be held for sale when
the transaction has been approved by the appropriate level of
management and there are no known significant contingencies
relating to the sale such that the property sale within one year
is considered probable. The Company evaluates the held for sale
classification of its owned real estate each quarter. Assets
that are classified as held for sale are recorded at the lower
of their carrying amount or fair value less cost to sell. If the
Company is not expected to have any significant continuing
involvement following the sale, the results of operations of
these shopping centers are reflected as discontinued operations
in all periods presented.
The Company frequently sells assets from its portfolio and, on
occasion, will receive unsolicited offers from third parties to
buy individual shopping centers. The Company will generally
classify properties as held for sale when a sales contract is
executed with no contingencies and the prospective buyer has
significant funds at risk to ensure performance.
Interest
and Real Estate Taxes
Interest and real estate taxes incurred during the development
and significant expansion of real estate assets are capitalized
and depreciated over the estimated useful life of the building.
The Company will cease the capitalization of these expenses when
assets are placed in service or upon the temporary suspension of
construction. If the Company suspends substantially all
activities related to development of a qualifying asset, the
Company will cease capitalization of interest, insurance, and
taxes until activities are resumed. Interest paid during the
years ended December 31, 2008, 2007 and 2006, aggregated
$281.4 million, $296.6 million and
$239.3 million, respectively, of which $41.1 million,
$28.0 million and $20.0 million, respectively, was
capitalized.
Investments
in and Advances to Joint Ventures
To the extent that the Company contributes assets to an
unconsolidated joint venture, the Companys investment in
the joint venture is recorded at the Companys cost basis
in the assets that were contributed to the joint venture. To the
extent that the Companys cost basis is different from the
basis reflected at the joint venture
F-11
level, the basis difference is amortized over the life of the
related assets and included in the Companys share of
equity in net income of the joint venture. In accordance with
the provisions of SFAS 66 and Statement of Position
78-9,
Accounting for Investments in Real Estate Ventures,
paragraph 30, the Company recognizes gains on the
contribution of real estate to unconsolidated joint ventures,
relating solely to the outside partners interest, to the
extent the economic substance of the transaction is a sale.
On a periodic basis, management assesses whether there are any
indicators that the value of the Companys investments in
unconsolidated joint ventures may be impaired. An
investments value is impaired only if managements
estimate of the fair value of the investment is less than the
carrying value of the investment and such difference is deemed
to be other than temporary pursuant to Accounting Principles
Board Opinion No. 18, The Equity Method of Accounting
for Investments in Common Stock (APB 18). As
disclosed in Note 14, the Company recorded an aggregate
impairment charge of approximately $107.0 million relating
to its investments in unconsolidated joint ventures during the
year ended December 31, 2008.
Goodwill is included in the consolidated balance sheet caption
Investments in and Advances to Joint Ventures in the amount of
$5.4 million as of December 31, 2008 and 2007.
SFAS No. 142, Goodwill and Other Intangible
Assets (SFAS 142), requires that
intangible assets not subject to amortization and goodwill be
tested for impairment annually, or more frequently if events or
changes in circumstances indicate that the carrying value may
not be recoverable. Amortization of goodwill, including such
assets associated with unconsolidated joint ventures acquired in
past business combinations, ceased upon adoption of
SFAS 142. The Company evaluated the goodwill related to its
unconsolidated joint venture investments for impairment and
determined that it was not impaired as of December 31, 2008
and 2007.
Cash and
Cash Equivalents
The Company considers all highly liquid investments with an
original maturity of three months or less to be cash
equivalents. The Company maintains cash deposits with major
financial institutions, which from time to time may exceed
federally insured limits. The Company periodically assesses the
financial condition of these institutions and believes that the
risk of loss is minimal. Cash flows associated with items
intended as hedges of identifiable transactions or events are
classified in the same category as the cash flows from the items
being hedged.
Restricted
Cash
Restricted Cash is comprised of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
DDR MDT MV LLC(1)
|
|
$
|
31,806
|
|
|
$
|
|
|
DDR MDT MV LLC(2)
|
|
|
33,000
|
|
|
|
|
|
Bond fund(3)
|
|
|
46,986
|
|
|
|
58,958
|
|
|
|
|
|
|
|
|
|
|
Total restricted cash
|
|
$
|
111,792
|
|
|
$
|
58,958
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
MV LLC, which is consolidated by
the Company, owns 37 locations formerly occupied by Mervyns. The
terms of the original acquisition contained a contingent
refundable purchase price adjustment secured by a
$25.0 million letter of credit (LOC) from the
seller of the real estate portfolio, which was owned in part by
an affiliate of one of the members of the Companys board
of directors. In addition, MV LLC held a $7.7 million
Security Deposit Letter of Credit (SD LOC) from
Mervyns. These LOCs were drawn in full in 2008 due to Mervyns
filing for protection under Chapter 11 of the United States
Bankruptcy Code. Although the funds are required to be placed in
escrow with MV LLCs lender to secure the entitys
mortgage loan, these funds are available for re-tenanting
expenses or to fund debt service. The funds will be released as
the related leases are either assumed or released, or the debt
is repaid. The balance at December 31, 2008, has been
adjusted for a release of $1.1 million by the lender
relating to unencumbered assets and an increase of
$0.2 million in interest income.
|
|
(2)
|
|
In connection with MV LLCs
draw of the $25.0 million LOC, MV LLC was required under
the loan agreement to provide an additional $33.0 million
as collateral security for the entitys mortgage loan. DDR
and MDT funded the escrow requirement with proportionate capital
contributions. The funds will be released in the same manner as
the $25.0 million LOC.
|
F-12
|
|
|
(3)
|
|
Under the terms of a bond issue by
the Mississippi Business Finance Corporation, the proceeds of
approximately $60.0 million from the sale of bonds were
placed in a trust in connection with a Company development
project in Mississippi. As construction is completed on the
Companys project in Mississippi, the Company will request
disbursement of these funds.
|
Accounts
Receivable
The Company makes estimates of the amounts that will not be
collected of its accounts receivable related to base rents,
expense reimbursements and other revenues. The Company analyzes
accounts receivable and historical bad debt levels, customer
credit worthiness and current economic trends when evaluating
the adequacy of the allowance for doubtful accounts. In
addition, tenants in bankruptcy are analyzed and estimates are
made in connection with the expected recovery of pre-petition
and post-petition claims. The Companys reported net income
is directly affected by managements estimate of the
collectibility of accounts receivable.
Accounts receivable, other than straight-line rents receivable,
are substantially expected to be collected within one year and
are net of estimated unrecoverable amounts of approximately
$30.3 million and $30.1 million at December 31,
2008 and 2007, respectively. At December 31, 2008 and 2007,
straight-line rents receivable, net of a provision for
uncollectible amounts of $3.3 million and
$4.1 million, aggregated $53.8 million and
$61.7 million, respectively.
Notes
Receivables
Notes receivables include certain loans issued relating to real
estate investments. Loan receivables are recorded at stated
principal amounts. The Company defers certain loan origination
and commitment fees, net of certain origination costs, and
amortizes them over the term of the related loan. The Company
evaluates the collectibility of both interest and principal on
each loan to determine whether it is impaired. A loan is
considered to be impaired when, based upon current information
and events, it is probable that the Company will be unable to
collect all amounts due according to the existing contractual
terms. When a loan is considered to be impaired, the amount of
loss is calculated by comparing the recorded investment to the
value of the underlying collateral. Interest income on
performing loans is accrued as earned. Interest income on
non-performing loans is generally recognized on a cost-recovery
basis.
Deferred
Charges
Costs incurred in obtaining indebtedness are included in
deferred charges in the accompanying consolidated balance sheets
and are amortized on a straight-line basis over the terms of the
related debt agreements, which approximates the effective
interest method. Such amortization is reflected as interest
expense in the consolidated statements of operations.
Intangible
Assets
In addition to the intangibles discussed above in purchase price
accounting, the Company has finite-lived intangible assets,
composed of management contracts associated with the
Companys acquisition of an unconsolidated joint venture,
stated at cost less amortization calculated on a straight-line
basis over 15 years. Intangible assets, net, are included
in the balance sheet caption Investments in and Advances to
Joint Ventures in the amount of $1.6 million and
$1.9 million as of December 31, 2008 and 2007,
respectively. The
15-year
life
approximates the expected turnover rate of the original
management contracts acquired. The estimated amortization
expense associated with this intangible asset for each of the
five succeeding fiscal years is approximately $0.3 million
per year.
Revenue
Recognition
Minimum rents from tenants are recognized using the
straight-line method over the lease term of the respective
leases. Percentage and overage rents are recognized after a
tenants reported sales have exceeded the applicable sales
breakpoint set forth in the applicable lease. Revenues
associated with tenant reimbursements are recognized in the
period that the expenses are incurred based upon the tenant
lease provision. Management fees are recorded in the
F-13
period earned based on a percentage of collected rent at the
properties under management. Ancillary and other
property-related income, which includes the leasing of vacant
space to temporary tenants and kiosk income, is recognized in
the period earned. Lease termination fees are included in other
income and recognized upon the effective termination of a
tenants lease when the Company has no further obligations
under the lease. Fee income derived from the Companys
unconsolidated joint venture investments is recognized to the
extent attributable to the unaffiliated ownership interest.
General
and Administrative Expenses
General and administrative expenses include certain internal
leasing and legal salaries and related expenses directly
associated with the re-leasing of existing space, which are
charged to operations as incurred.
Stock
Option and Other Equity-Based Plans
The Company follows the provisions of SFAS No. 123(R),
Share-Based Payment (SFAS 123(R)),
an amendment of SFAS 123, which requires that the
compensation cost relating to share-based payment transactions
be recognized in the financial statements based upon the grant
date fair value. The grant date fair value of the portion of the
restricted stock and performance unit awards issued prior to the
adoption of SFAS 123(R) that is ultimately expected to vest
is recognized as expense on a straight-line attribution basis
over the requisite service periods in the Companys
consolidated financial statements. SFAS 123(R) requires
forfeitures to be estimated at the time of grant in order to
estimate the amount of share-based awards that will ultimately
vest. The forfeiture rate is based on historical rates.
The Company adopted SFAS 123(R) as required on
January 1, 2006, using the modified prospective method. The
adoption of this standard changed the balance sheet and resulted
in decreasing other liabilities and increasing
shareholders equity by $11.6 million. In addition,
unearned compensation restricted stock (included in
shareholders equity) of $13.1 million was eliminated
and reclassified to paid in capital. These balance sheet changes
relate to deferred compensation under the performance unit plans
and unvested restricted stock awards. Under SFAS 123(R),
deferred compensation is no longer recorded at the time unvested
shares are issued.
Share-based
compensation expense is recognized over the requisite service
period with an offsetting credit to equity.
The compensation cost recognized under SFAS 123(R) was
$29.0 million (which includes a charge of
$15.8 million related to the termination of an equity award
plan), $11.0 million and $8.3 million for the years
ended December 31, 2008, 2007 and 2006, respectively. For
the years ended December 31, 2008 and 2007, the Company
capitalized $0.4 million and $0.3 million of
stock-based compensation, respectively. There were no
significant capitalized stock-based compensation costs in 2006.
See Note 18, Benefit Plans, for additional
information.
Income
Taxes
The Company has made an election to qualify, and believes it is
operating so as to qualify, as a real estate investment trust
(REIT) for federal income tax purposes. Accordingly,
the Company generally will not be subject to federal income tax,
provided that it makes distributions to its shareholders equal
to at least the amount of its REIT taxable income as defined
under Sections 856 through 860 of the Code.
In connection with the REIT Modernization Act, which became
effective January 1, 2001, the Company is permitted to
participate in certain activities that it was previously
precluded from in order to maintain its qualification as a REIT,
so long as these activities are conducted in entities that elect
to be treated as taxable subsidiaries under the Code. As such,
the Company is subject to federal and state income taxes on the
income from these activities.
Income taxes are accounted for under the asset and liability
method. Deferred tax assets and liabilities are recognized for
the estimated future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases
and operating loss and tax credit carry-forwards. Deferred tax
assets and liabilities are measured using enacted tax rates in
effect for the year in which those temporary differences are
expected to be recovered or settled.
F-14
Foreign
Currency Translation
The financial statements of several international consolidated
and unconsolidated joint venture investments are translated into
U.S. dollars using the exchange rate at each balance sheet
date for assets and liabilities and an average exchange rate for
each period for revenues, expenses, gains and losses, with the
Companys proportionate share of the resulting translation
adjustments recorded as Accumulated Other Comprehensive Income
(Loss). Gains or losses resulting from foreign currency
transactions, translated to local currency, are included in
income as incurred. Foreign currency gains or losses from
changes in exchange rates were not material to the consolidated
operating results.
Treasury
Stock
The Companys share repurchases are reflected as treasury
stock utilizing the cost method of accounting and are presented
as a reduction to consolidated shareholders equity.
Reissuances of our treasury stock at an amount below cost are
recorded as a charge to paid in capital due to the
Companys cumulative distributions in excess of net income.
Use of
Estimates in Preparation of Financial Statements
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amount
of assets and liabilities, the disclosure of contingent assets
and liabilities and the reported amounts of revenues and
expenses during the year. Actual results could differ from those
estimates.
New
Accounting Standards Implemented
The Fair
Value Option for Financial Assets and Financial Liabilities
Including an Amendment of FASB Statement
No. 115 SFAS 159
In February 2007, the FASB issued Statement No. 159,
The Fair Value Option for Financial Assets and Financial
Liabilities (SFAS 159), which gives
entities the option to measure eligible financial assets,
financial liabilities and firm commitments at fair value on an
instrument-by-instrument
basis, that are otherwise not permitted to be accounted for at
fair value under other accounting standards. The election to use
the fair value option is available when an entity first
recognizes a financial asset or financial liability or upon
entering into a firm commitment. Subsequent changes (i.e.,
unrealized gains and losses) in fair value must be recorded in
earnings. Additionally, SFAS 159 allows for a one-time
election for existing positions upon adoption, with the
transition adjustment recorded to beginning retained earnings.
The Company adopted SFAS 159 on January 1, 2008, and
did not elect to measure any assets, liabilities or firm
commitments at fair value.
Fair
Value Measurements SFAS 157
In September 2006, the FASB issued Statement No. 157,
Fair Value Measurements (SFAS 157).
SFAS 157 provides guidance for using fair value to measure
assets and liabilities. This statement clarifies the principle
that fair value should be based on the assumptions that market
participants would use when pricing the asset or liability.
SFAS 157 establishes a fair value hierarchy, giving the
highest priority to quoted prices in active markets and the
lowest priority to unobservable data. SFAS 157 applies
whenever other standards require assets or liabilities to be
measured at fair value. SFAS 157 also provides for certain
disclosure requirements, including, but not limited to, the
valuation techniques used to measure fair value and a discussion
of changes in valuation techniques, if any, during the period.
The Company adopted this statement for disclosure requirements
and its financial assets and liabilities, including valuations
associated with the impairment assessment of unconsolidated
joint ventures on January 1, 2008.
For nonfinancial assets and nonfinancial liabilities that are
not recognized or disclosed at fair value on a recurring basis,
the statement is effective for fiscal years beginning after
November 15, 2008. The Company is currently evaluating the
impact that this statement, for nonfinancial assets and
liabilities, will have on its financial position and results of
operations.
F-15
FSP
FAS 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities
In December 2008, the FASB issued FSP
FAS No. 140-4
and FIN 46(R)-8, Disclosures by Public Entities
(Enterprises) about Transfers of Financial Assets and Interests
in Variable Interest Entities (FSP
FAS 140-4).
The purpose of this FSP is to improve disclosures by public
entities and enterprises until pending amendments to
SFAS No. 140, Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities (SFAS 140), and FIN 46(R) are
finalized and approved by the FASB. The FSP amends SFAS 140
to require public entities to provide additional disclosures
about transferors continuing involvements with transferred
financial assets. It also amends FIN 46(R) to require public
enterprises, to provide additional disclosures about their
involvement with variable interest entities. FSP
FAS 140-4
and FIN 46(R)-8 is effective for financial statements issued for
fiscal years and interim periods ending after December 15,
2008. For periods after the initial adoption date, comparative
disclosures are required. The Company adopted the FSP and
FIN 46(R)-8 on December 31, 2008.
Determining
the Fair Value of a Financial Asset When the Market for That
Asset Is Not Active FSP
FAS 157-3
In October 2008, the FASB issued FSP
FAS No. 157-3,
Fair Value Measurements (FSP
FAS 157-3),
which clarifies the application of SFAS 157 in an inactive
market and provides an example to demonstrate how the fair value
of a financial asset is determined when the market for that
financial asset is inactive. FSP
FAS 157-3
was effective upon issuance, including prior periods for which
financial statements had not been issued. The adoption of this
standard as of September 30, 2008, did not have a material
impact on the Companys financial position and results of
operations.
New
Accounting Standards to Be Implemented
Business
Combinations SFAS 141(R)
In December 2007, the FASB issued Statement No. 141
(revised 2007), Business Combinations
(SFAS 141(R)). The objective of this statement
is to improve the relevance, representative faithfulness and
comparability of the information that a reporting entity
provides in its financial reports about a business combination
and its effects. To accomplish that, this statement establishes
principles and requirements for how the acquirer:
(i) recognizes and measures in its financial statements the
identifiable assets acquired, the liabilities assumed, and any
non-controlling interest of the acquiree, (ii) recognizes
and measures the goodwill acquired in the business combination
or a gain from a bargain purchase and (iii) determines what
information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the
business combination. This statement applies prospectively to
business combinations for which the acquisition date is on or
after the first annual reporting period beginning on or after
December 15, 2008. Early adoption is not permitted. The
Company adopted SFAS 141(R) on January 1, 2009. To the
extent that the Company enters into new acquisitions in 2009 and
beyond that qualify as businesses, this standard will require
that acquisition costs and certain fees, which are currently
capitalized and allocated to the basis of the acquisition, be
expensed as these costs are incurred. Because of this change in
accounting for costs, the Company expects that the adoption of
this standard could have a negative impact on the Companys
results of operations depending on the size of a transaction and
the amount of costs incurred. The Company is currently
assessing the impact, if any, the adoption of SFAS 141(R) will
have on its financial position and results of operations. The
Company will assess the impact of significant transactions, if
any, as they are contemplated.
F-16
Disclosures
about Derivative Instruments and Hedging Activities
SFAS 161
In March 2008, the FASB issued SFAS 161, Disclosures
about Derivative Instruments and Hedging Activities
(SFAS 161), which is intended to help investors
better understand how derivative instruments and hedging
activities affect an entitys financial position, financial
performance and cash flows through enhanced disclosure
requirements. The enhanced disclosures primarily surround
disclosing the objectives and strategies for using derivative
instruments by their underlying risk as well as a tabular format
of the fair values of the derivative instruments and their gains
and losses. SFAS 161 is effective for financial statements
issued for fiscal years and interim periods beginning after
November 15, 2008, with early application encouraged. The
Company is currently assessing the impact, if any, that the
adoption of SFAS 161 will have on its financial statement
disclosures.
Accounting
for Transfers of Financial Assets and Repurchase Financing
Transactions FSP
FAS 140-3
In February 2008, the FASB issued an FSP, Accounting for
Transfers of Financial Assets and Repurchase Financing
Transactions (FSP
FAS 140-3).
FSP
FAS No. 140-3
addresses the issue of whether or not these transactions should
be viewed as two separate transactions or as one
linked transaction. FSP
FAS 140-3
includes a
F-17
rebuttable presumption linking the two transactions
unless the presumption can be overcome by meeting certain
criteria. FSP
FAS 140-3
is effective for fiscal years beginning after November 15,
2008, and will apply only to original transfers made after that
date; early adoption is not permitted. The Company is currently
evaluating the impact, if any, the adoption of FSP
FAS 140-3
will have on its financial position and results of operations.
Determination
of the Useful Life of Intangible Assets FSP
FAS 142-3
In April 2008, the FASB issued an FSP Determination of the
Useful Life of Intangible Assets
(FSP 142-3),
which amends the factors that should be considered in developing
renewal or extension assumptions used to determine the useful
life of a recognized intangible asset under SFAS 142.
FSP 142-3
is intended to improve the consistency between the useful life
of an intangible asset determined under SFAS 142 and the
period of expected cash flows used to measure the fair value of
the asset under SFAS 141(R) and other U.S. Generally
Accepted Accounting Principles. The guidance for determining the
useful life of a recognized intangible asset in this FSP shall
be applied prospectively to intangible assets acquired after the
effective date. The disclosure requirements in this FSP shall be
applied prospectively to all intangible assets recognized as of,
and subsequent to, the effective date.
FSP 142-3
is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods
within those fiscal years. Early adoption is not permitted. The
Company is currently evaluating the impact, if any, the adoption
of FSP,142-3 will have on its financial position and results of
operations.
EITF
Issue
No. 08-6,
Equity Method Investment Accounting Considerations
In November 2008, the FASB issued EITF Issue
No. 08-6,
Equity Method Investment Accounting Considerations
(EITF 08-6).
EITF 08-6
clarifies the accounting for certain transactions and impairment
considerations involving equity method investments.
EITF 08-6
applies to all investments accounted for under the equity
method.
EITF 08-6
is effective for fiscal years and interim periods beginning on
or after December 15, 2008. The Company is currently
assessing the impact, if any, the adoption of
EITF 08-6
will have on its financial position and results of operations.
F-18
|
|
2.
|
Investments
in and Advances to Joint Ventures
|
The Companys significant unconsolidated joint ventures at
December 31, 2008, are as follows:
|
|
|
|
|
|
|
|
|
Effective
|
|
|
|
|
|
Ownership
|
|
|
|
Unconsolidated Real Estate Ventures
|
|
Percentage (1)
|
|
|
Assets Owned
|
|
Sun Center Limited
|
|
|
79.45
|
%
|
|
A shopping center in Columbus, Ohio
|
DDRA Community Centers Five LP
|
|
|
50.0
|
|
|
Five shopping centers in several states
|
DOTRS LLC
|
|
|
50.0
|
|
|
A shopping center in Macedonia, Ohio
|
Jefferson County Plaza LLC
|
|
|
50.0
|
|
|
A shopping center in St. Louis (Arnold), Missouri
|
Lennox Town Center Limited
|
|
|
50.0
|
|
|
A shopping center in Columbus, Ohio
|
Sansone Group/DDRC LLC
|
|
|
50.0
|
|
|
A management and development company
|
Sonae Sierra Brazil BV Sarl
|
|
|
47.4
|
|
|
Nine shopping centers, one shopping center under development and
a management company in Brazil
|
Retail Value Investment Program IIIB LP
|
|
|
25.75
|
|
|
A shopping center in Deer Park, Illinois
|
Retail Value Investment Program VIII LP
|
|
|
25.75
|
|
|
A shopping center in Austin, Texas
|
RO & SW Realty LLC
|
|
|
25.25
|
|
|
11 shopping centers in several states
|
Cole MT Independence Missouri JV LLC
|
|
|
25.0
|
|
|
A shopping center in Independence, Missouri
|
DDR Macquarie Fund
|
|
|
25.0
|
|
|
50 shopping centers in several states
|
Retail Value Investment Program VII LLC
|
|
|
21.0
|
|
|
Two shopping centers in California
|
Coventry II DDR Buena Park LLC
|
|
|
20.0
|
|
|
A shopping center in Buena Park, California
|
Coventry II DDR Fairplain LLC
|
|
|
20.0
|
|
|
A shopping center in Benton Harbor, Michigan
|
Coventry II DDR Merriam Village LLC
|
|
|
20.0
|
|
|
A shopping center in Merriam, Kansas
|
Coventry II DDR Phoenix Spectrum LLC
|
|
|
20.0
|
|
|
A shopping center in Phoenix, Arizona
|
Coventry II DDR Totem Lakes LLC
|
|
|
20.0
|
|
|
A shopping center in Kirkland, Washington
|
Coventry II DDR Ward Parkway LLC
|
|
|
20.0
|
|
|
A shopping center in Kansas City, Missouri
|
DDR Domestic Retail Fund I
|
|
|
20.0
|
|
|
63 shopping centers in several states
|
DDR Markaz II LLC
|
|
|
20.0
|
|
|
13 neighborhood grocery-anchored retail properties in several
states
|
DDR SAU Retail Fund LLC
|
|
|
20.0
|
|
|
29 shopping centers located in several states
|
Service Holdings LLC
|
|
|
20.0
|
|
|
44 retail sites in several states
|
Coventry II DDR Westover LLC
|
|
|
20.0
|
|
|
A shopping center in San Antonio, Texas
|
Coventry II DDR Tri-County LLC
|
|
|
20.0
|
|
|
A shopping center in Cincinnati, Ohio
|
DDRTC Core Retail Fund LLC
|
|
|
15.0
|
|
|
66 assets in several states
|
Macquarie DDR Trust
|
|
|
12.3
|
|
|
An Australian Real Estate Investment Trust
|
Coventry II DDR Bloomfield LLC
|
|
|
10.0
|
|
|
A shopping center under development in Bloomfield Hills, Michigan
|
Coventry II DDR Marley Creek Square LLC
|
|
|
10.0
|
|
|
A shopping center in Orland Park, Illinois
|
Coventry II DDR Montgomery Farm LLC
|
|
|
10.0
|
|
|
A shopping center in Allen, Texas
|
DPG Realty Holdings LLC
|
|
|
10.0
|
|
|
12 neighborhood grocery-anchored retail properties in several
states
|
TRT DDR Venture I
|
|
|
10.0
|
|
|
Three shopping centers in several states
|
DDR MDT PS LLC
|
|
|
0.0
|
|
|
Six shopping centers in several states
|
|
|
|
(1)
|
|
Ownership may be held through
different investment structures. Percentage ownerships are
subject to change as certain investments contain promoted
structures.
|
F-19
Combined condensed unconsolidated financial information of the
Companys unconsolidated joint venture investments is
summarized as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Combined balance sheets
|
|
|
|
|
|
|
|
|
Land
|
|
$
|
2,378,033
|
|
|
$
|
2,384,069
|
|
Buildings
|
|
|
6,353,985
|
|
|
|
6,253,167
|
|
Fixtures and tenant improvements
|
|
|
131,622
|
|
|
|
101,115
|
|
|
|
|
|
|
|
|
|
|
|
|
|
8,863,640
|
|
|
|
8,738,351
|
|
Less: Accumulated depreciation
|
|
|
(606,530
|
)
|
|
|
(412,806
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
8,257,110
|
|
|
|
8,325,545
|
|
Construction in progress
|
|
|
412,357
|
|
|
|
207,387
|
|
|
|
|
|
|
|
|
|
|
Real estate, net
|
|
|
8,669,467
|
|
|
|
8,532,932
|
|
Receivables, net
|
|
|
136,410
|
|
|
|
124,540
|
|
Leasehold interests
|
|
|
12,615
|
|
|
|
13,927
|
|
Other assets
|
|
|
315,591
|
|
|
|
365,925
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,134,083
|
|
|
$
|
9,037,324
|
|
|
|
|
|
|
|
|
|
|
Mortgage debt
|
|
$
|
5,776,897
|
|
|
$
|
5,551,839
|
|
Amounts payable to DDR
|
|
|
64,967
|
|
|
|
8,492
|
|
Other liabilities
|
|
|
237,363
|
|
|
|
201,083
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,079,227
|
|
|
|
5,761,414
|
|
Accumulated equity
|
|
|
3,054,856
|
|
|
|
3,275,910
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
9,134,083
|
|
|
$
|
9,037,324
|
|
|
|
|
|
|
|
|
|
|
Companys share of accumulated equity(1)
|
|
$
|
622,569
|
|
|
$
|
614,477
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Combined statements of operations
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues from operations
|
|
$
|
934,143
|
|
|
$
|
800,004
|
|
|
$
|
417,993
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental operation expenses
|
|
|
324,997
|
|
|
|
268,511
|
|
|
|
142,704
|
|
Depreciation and amortization expense
|
|
|
238,769
|
|
|
|
190,166
|
|
|
|
78,664
|
|
Interest expense
|
|
|
304,043
|
|
|
|
265,715
|
|
|
|
125,902
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
867,809
|
|
|
|
724,392
|
|
|
|
347,270
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before gain on disposition of real estate and
discontinued operations
|
|
|
66,334
|
|
|
|
75,612
|
|
|
|
70,723
|
|
Income tax expense (primarily Sonae Sierra Brazil), net
|
|
|
(15,479
|
)
|
|
|
(4,839
|
)
|
|
|
(1,176
|
)
|
(Loss) gain on disposition of real estate
|
|
|
(67
|
)
|
|
|
94,386
|
|
|
|
398
|
|
Other
|
|
|
(31,318
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
19,470
|
|
|
|
165,159
|
|
|
|
69,945
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Discontinued operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from discontinued operations, net of tax
|
|
|
(1,883
|
)
|
|
|
1,520
|
|
|
|
2,336
|
|
Gain on disposition of real estate, net of tax
|
|
|
7,364
|
|
|
|
2,516
|
|
|
|
20,343
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,481
|
|
|
|
4,036
|
|
|
|
22,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
24,951
|
|
|
$
|
169,195
|
|
|
$
|
92,624
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Companys share of net income(2)
|
|
$
|
17,335
|
|
|
$
|
44,537
|
|
|
$
|
28,530
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-20
Investments in and advances to joint ventures include the
following items, which represent the difference between the
Companys investment and its proportionate share of all of
the unconsolidated joint ventures underlying net assets
(in millions):
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Companys proportionate share of accumulated equity
|
|
$
|
622.6
|
|
|
$
|
614.5
|
|
Basis differentials(2)
|
|
|
(4.6
|
)
|
|
|
114.1
|
|
Deferred development fees, net of portion relating to the
Companys interest
|
|
|
(5.2
|
)
|
|
|
(3.8
|
)
|
Basis differential upon transfer of assets(2)
|
|
|
(95.4
|
)
|
|
|
(97.2
|
)
|
Notes receivable from investments
|
|
|
1.4
|
|
|
|
2.0
|
|
Amounts payable to DDR
|
|
|
65.0
|
|
|
|
8.5
|
|
|
|
|
|
|
|
|
|
|
Investments in and advances to joint ventures(1)
|
|
$
|
583.8
|
|
|
$
|
638.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The difference between the
Companys share of accumulated equity and the investments
in, and advances to, joint ventures recorded on the
Companys consolidated balance sheets primarily results
from the basis differentials, as described below, deferred
development fees, net of the portion relating to the
Companys interest notes and amounts receivable from the
unconsolidated joint ventures investments.
|
|
(2)
|
|
Basis differentials occur primarily
when the Company has purchased interests in existing
unconsolidated joint ventures at fair market values, which
differ from their proportionate share of the historical net
assets of the unconsolidated joint ventures. In addition,
certain acquisition, transaction and other
costs, including
capitalized interest, and impairments of the Companys
investments that were other than temporary may not be reflected
in the net assets at the joint venture level. Basis
differentials recorded upon transfer of assets are primarily
associated with assets previously owned by the Company that have
been transferred into an unconsolidated joint venture at fair
value. This amount represents the aggregate difference between
the Companys historical cost basis and the basis reflected
at the joint venture level. Certain basis differentials
indicated above are amortized over the life of the related asset.
|
|
|
|
Differences in income also occur
when the Company acquires assets from unconsolidated joint
ventures. The difference between the Companys share of net
income, as reported above, and the amounts included in the
consolidated statements of operations is attributable to the
amortization of such basis differentials, deferred gains and
differences in gain (loss) on sale of certain assets due to the
basis differentials. The Companys share of joint venture
net income has been increased by $0.4 million, reduced by
$1.2 million and increased by $1.6 million for the
years ended December 31, 2008, 2007 and 2006, respectively,
to reflect additional basis depreciation and basis differences
in assets sold.
|
The Company has made advances to several joint ventures in the
form of notes receivable and fixed-rate loans that accrue
interest at rates ranging from 10.5% to 12.0%. Maturity dates
range from payment on demand to July 2011. Included in the
Companys accounts receivables are approximately
$8.2 million and $5.0 million at December 31,
2008 and 2007, respectively, due from affiliates related to
construction receivables.
Service fees earned by the Company through management, leasing,
development and financing activities related to all of the
Companys unconsolidated joint ventures are as follows (in
millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Management and other fees
|
|
$
|
50.3
|
|
|
$
|
40.4
|
|
|
$
|
23.7
|
|
Acquisition, financing, guarantee and other fees(1)
|
|
|
1.6
|
|
|
|
8.5
|
|
|
|
0.5
|
|
Development fees and leasing commissions
|
|
|
12.0
|
|
|
|
9.6
|
|
|
|
6.1
|
|
Interest income
|
|
|
0.8
|
|
|
|
0.5
|
|
|
|
5.4
|
|
|
|
|
(1)
|
|
Acquisition fees of
$6.3 million were earned from the formation of the DDRTC
Core Retail Fund LLC in 2007, excluding the Companys
retained ownership. Financing fees were earned from several
unconsolidated joint venture interests, excluding the
Companys retained ownership. The Companys fees were
earned in conjunction with services rendered by
|
F-21
|
|
|
|
|
the Company in connection with the
acquisition of the IRRETI real estate assets and financings and
re-financings of unconsolidated joint ventures.
|
The Companys joint venture agreements generally include
provisions whereby each partner has the right to trigger a
purchase or sale of its interest in the joint venture
(Reciprocal Purchase Rights), to initiate a purchase or sale of
the properties (Property Purchase Rights) after a certain number
of years, or if either party is in default of the joint venture
agreements. Under these provisions, the Company is not obligated
to purchase the interests of its outside joint venture partners.
Unconsolidated
Joint Venture Interests
DDR
Macquarie Fund and Macquarie DDR Trust
The Company entered into a joint venture with Macquarie DDR
Trust (ASX:MDT) (MDT), an Australian Real Estate
Investment Trust which is managed by an affiliate of Macquarie
Group Limited (ASX: MQG), an international investment bank,
advisor and manager of specialized real estate funds, focusing
on acquiring ownership interests in institutional-quality
community center properties in the United States (DDR
Macquarie Fund). DDR Macquarie Fund is in the business of
expanding, owning and operating shopping centers. DDR provides
management, financing, expansion, re-tenanting and oversight
services on these real estate investments.
In February 2008, the Company began purchasing units of MDT.
Through December 31, 2008, the Company purchased an
aggregate of 115.7 million units of MDT at an aggregate
purchase price of $43.4 million. Through the combination of
its purchase of the units in MDT (8.3% on a weighted-average
basis for the year ended December 31, 2008, and 12.3% as of
December 31, 2008) and its 14.5% direct and indirect
ownership of the DDR Macquarie Fund, DDR is entitled to an
approximate 25.0% effective economic interest in the DDR
Macquarie Fund as of December 31, 2008. As the
Companys direct and indirect investments in MDT and the
DDR Macquarie Fund give it the ability to exercise significant
influence over operating and financial policies, the Company
accounts for both its interest in MDT and the DDR Macquarie Fund
using the equity method of accounting.
At December 31, 2008, the market price of the MDT shares as
traded on the Australian Securities Exchange was $0.04 per
share, as compared to $0.25 per share at September 30,
2008. This represents a decline of over 80% in value in the
fourth quarter of 2008. Due to the significant decline in the
unit value of this investment, as well as the continued
deterioration of the global capital markets and the related
impact on the real estate market and retail industry, the
Company determined that the loss in value was other than
temporary pursuant to the provisions of APB 18. Accordingly, the
Company recorded an impairment charge of approximately
$31.7 million related to this investment (Note 14)
reducing its investment in MDT to $4.8 million at
December 31, 2008. MDT was considered a significant
subsidiary pursuant to applicable
Regulation S-X
rules at December 31, 2008 due to the significance of the
impairment charge recorded.
DDR Macquarie Fund is a VIE. However, the Company was not
determined to be the primary beneficiary, as MDT is the entity
that absorbs the majority of the VIEs expected
losses pursuant to the provisions of FIN 46(R). The
following is summary financial information, available as of
December 31, 2008 and 2007, regarding DDR Macquarie Fund
and the Companys investment (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Real estate assets
|
|
$
|
1,759.2
|
|
|
$
|
1,802.2
|
|
Non-recourse debt
|
|
|
1,150.7
|
|
|
|
1,177.5
|
|
DDR direct ownership interest
|
|
|
14.5
|
%
|
|
|
14.5
|
%
|
DDR maximum exposure to loss:
|
|
|
|
|
|
|
|
|
Investment in DDR Macquarie Fund
|
|
|
26.5
|
|
|
|
36.3
|
|
Annual asset management and performance fees
|
|
|
10.4
|
|
|
|
9.2
|
|
The financial statements of DDR Macquarie Fund are included as
part of the combined unconsolidated joint ventures financial
statements disclosed above. The Company has not provided any
additional financial or other support to DDR Macquarie Fund or
MDT during 2008 and does not have any contractual commitments or
F-22
disproportionate obligations to provide additional financial
support. The Company has assessed its risk of a loss equal to
the maximum exposure to be remote and accordingly has not
recognized an obligation associated with any portion of the
maximum exposure to loss.
DDR
Domestic Retail Fund I
In June 2007, the Company formed DDR Domestic Retail Fund I
(the Domestic Retail Fund), a Company sponsored,
fully-seeded commingled fund. The Domestic Retail Fund acquired
63 shopping center assets aggregating 8.3 million square
feet of Company-owned GLA (Portfolio) from the
Company and a joint venture for approximately $1.5 billion.
The Portfolio is composed of 54 assets acquired by the Company
through its acquisition of IRRETI (Note 3), seven assets
formerly held in a joint venture with Kuwait Financial Centre
(DDR Markaz LLC), in which the Company had a 20%
ownership interest, and two assets from the Companys
wholly-owned portfolio. The Company recognized a gain of
approximately $9.6 million, net of its 20% retained
interest, from the sale of the two wholly-owned assets, which is
included in gain on disposition of real estate in the
Companys consolidated statements of operations. In
conjunction with the sale of assets to the Domestic Retail Fund
and identification of the equity partners, the Company paid a
$7.8 million fee to a third-party consulting firm and
recognized this amount as a reduction of gain on disposition of
real estate. DDR Markaz LLC recorded a gain of approximately
$89.9 million. The Companys proportionate share of
approximately $18.0 million of the joint venture gain was
deferred, as the Company retained an effective 20% ownership
interest in these assets. As the Company does not have economic
or effective control, the Domestic Retail Fund is accounted for
using the equity method of accounting. The Company has been
engaged by the Domestic Retail Fund to perform day-to-day
operations of the properties and receives fees for asset
management and property management, leasing, construction
management and ancillary income in addition to a promoted
interest. In addition, upon the sale of the assets from DDR
Markaz LLC to the Domestic Retail Fund, the Company recognized
promoted income of approximately $13.6 million, which is
included in the equity in net income of joint ventures for the
year ended December 31, 2007.
DDRTC
Core Retail Fund LLC
In February 2007, the Company formed a joint venture
(DDRTC Core Retail Fund LLC) with TIAA-CREF ,
which acquired 66 shopping center assets from IRRETI comprising
approximately 15.6 million square feet of Company-owned
GLA. DDRTC Core Retail Fund LLC is owned 85% by TIAA-CREF
and 15% by the Company. As the Company does not have economic or
effective control, DDRTC Core Retail Fund LLC is accounted
for using the equity method of accounting. Real estate and
related assets of approximately $3.0 billion were acquired
by DDRTC Core Retail Fund LLC. The DDRTC Core Retail Fund
had debt of approximately $1.8 billion at formation, of
which $285.6 million was assumed in connection with the
acquisition of the properties. Pursuant to the terms of the
joint venture agreement, the Company earned an acquisition fee
of $6.3 million during the year ended December 31,
2007, and receives ongoing asset management, property management
and construction management fees, plus fees on leasing and
ancillary income. At December 31, 2008, this joint venture
was considered a significant subsidiary pursuant to applicable
Regulation S-X
rules due to the significance of the impairment charge recorded
as discussed below.
Coventry II
Fund
The Company and Coventry Real Estate Advisors (CREA)
formed Coventry Real Estate Fund II (the
Coventry II Fund). The Coventry II Fund
was formed with several institutional investors and CREA as the
investment manager. Neither the Company nor any of its officers
owns a common equity interest in this Coventry II Fund or
has any incentive compensation tied to this Coventry II
Fund. The Coventry II Funds strategy was to invest in
a variety of retail properties that present opportunities for
value creation, such as re-tenanting, market repositioning,
redevelopment or expansion.
The Coventry II Fund and the Company, through a joint
venture, acquired 11 value-added retail properties and owns 44
sites formerly occupied by Service Merchandise in the United
States. The Company co-invested approximately 20% in each joint
venture and is generally responsible for day-to-day management
of the properties. Pursuant to the terms of the joint venture,
the Company earns fees for property management, leasing and
F-23
construction management. The Company also could earn a promoted
interest, along with CREA, above a preferred return after return
of capital to fund investors.
As of December 31, 2008, the aggregate amount of the
Companys net investment in the Coventry II joint
ventures is approximately $72.0 million. The Company has
also advanced $58.1 million of financing to one of the
Coventry II joint ventures which accrues interest at the
greater of LIBOR plus 700 basis points or 12% and has an
initial maturity of July 2011. In addition to its existing
equity and note receivable, the Company has provided payment
guaranties to third-party lenders in connection with financing
for seven of the projects. The amount of each such guaranty is
not greater than the proportion to the Companys investment
percentage in the underlying project, and the aggregate amount
of the Companys guaranties is approximately
$35.3 million.
Discontinued
Operations
Included in discontinued operations in the combined statements
of operations for the joint ventures are the following
properties sold subsequent to December 31, 2005:
|
|
|
|
|
A 10% interest in a shopping center in Kildeer, Illinois, sold
in 2006;
|
|
|
|
A 20% interest in Service Merchandise sites, six sites sold in
2007 and one site sold in 2006;
|
|
|
|
A 20.75% interest in one property in Everett, Washington, sold
in 2006;
|
|
|
|
A 25.5% interest in five properties in Kansas City, Kansas and
Kansas City, Missouri, one sold in 2007 and four sold in 2006;
|
|
|
|
An approximate 25% interest in one Service Merchandise site sold
in 2006 and
|
|
|
|
A 50% interest in a property in Fort Worth, Texas, sold in
2006.
|
In addition, a 50% owned joint venture sold its interest in
vacant land in 2007. This disposition did not meet the
discontinued operations disclosure requirement.
The following properties were sold for the period January 1, 2009 to June 30, 2009:
|
|
|
|
|
A 10% interest in a shopping center in Lilburn, Georgia;
|
|
|
|
A 20% interest in one Service Merchandise site and
|
|
|
|
An interest in three shopping centers owned through the DDR Macquarie Fund.
|
Impairment
of Joint Venture Investments
In December 2008, due to the continued deterioration of the
U.S. capital markets, the lack of liquidity and the related
impact on the real estate market and retail industry which
accelerated during the fourth quarter of 2008, the Company
determined that several of its unconsolidated joint venture
investments incurred an other than temporary
impairment at December 31, 2008. The approximately
$107.0 million of impairment charges associated with the
joint venture investments described below were determined in
accordance with APB 18. The provisions of this opinion require
that a loss in value of an investment under the equity method of
accounting that is an other than temporary decline
must be recognized. The estimated fair value of each investment
was determined pursuant to the provisions of SFAS 157
(Note 14) because investments in unconsolidated joint
ventures are considered financial assets subject to the
provisions of this standard. A summary of the impairment charge
by investment is as follows (in millions):
|
|
|
|
|
DDRTC Core Retail Fund LLC
|
|
$
|
47.3
|
|
Macquarie DDR Trust
|
|
|
31.7
|
|
DDR-SAU
Retail Fund LLC
|
|
|
9.0
|
|
Coventry II DDR Bloomfield LLC
|
|
|
10.8
|
|
Coventry II DDR Merriam Village LLC
|
|
|
3.3
|
|
RO & SW Realty LLC/Central Park Solon LLC
(Note 17)
|
|
|
3.2
|
|
DPG Realty Holdings LLC
|
|
|
1.7
|
|
|
|
|
|
|
|
|
$
|
107.0
|
|
|
|
|
|
|
F-24
|
|
3.
|
Acquisitions
and Pro Forma Financial Information
|
Acquisitions
On February 22, 2007, the shareholders of Inland Retail
Real Estate Trust, Inc. (IRRETI) approved a merger
with a subsidiary of the Company pursuant to a merger agreement
among IRRETI, the Company and the subsidiary. Pursuant to the
merger, the Company acquired all of the outstanding shares of
IRRETI for a total merger consideration of $14.00 per share, of
which $12.50 per share was funded in cash and $1.50 per share
was paid in the form of DDR common shares. As a result, on
February 27, 2007, the Company issued 5.7 million DDR
common shares to the IRRETI shareholders with an aggregate value
of approximately $394.2 million valued at $69.54 per share,
which was the average closing price of the Companys common
shares for the 10 trading days immediately preceding the two
trading days prior to the IRRETI shareholders meeting. The
other assets allocation of $34.2 million relates primarily
to in-place leases, leasing commissions, tenant relationships
and tenant improvements of the properties (Note 6). There
was a separate allocation in the purchase price of
$7.5 million for above-market leases and $8.4 million
for below-market leases. The merger was accounted for utilizing
the purchase method of accounting. The Company entered into the
merger to acquire a large portfolio of assets, among other
reasons.
The IRRETI merger was initially recorded at a total cost of
approximately $6.2 billion. Real estate and related assets
of approximately $3.1 billion were recorded by the Company
and approximately $3.0 billion was recorded by the DDRTC
Core Retail Fund LLC joint venture. The Company assumed
debt at a fair market value of approximately
$443.0 million. At the time of the merger, the IRRETI real
estate portfolio consisted of 315 community shopping centers,
neighborhood shopping centers and single tenant/net leased
retail properties, totaling approximately 35.2 million
square feet of Company-owned GLA, and five development
properties. In connection with the merger, the DDRTC Core Retail
Fund LLC joint venture acquired 66 of these shopping
centers, totaling approximately 15.6 million square feet of
Company-owned GLA. During 2007, the Company sold or transferred
78 of the assets, valued at approximately $1.2 billion,
acquired in the merger with IRRETI, 21 of which were sold to
independent buyers with the remaining 57 contributed to
unconsolidated joint ventures.
At December 31, 2007, the total aggregate purchase price,
based on the remaining 171 IRRETI properties that were wholly
owned by the Company as of that date, was allocated as follows
(in thousands):
|
|
|
|
|
Land
|
|
$
|
478,197
|
|
Building
|
|
|
1,078,815
|
|
Tenant improvements
|
|
|
9,949
|
|
Intangible assets
|
|
|
41,673
|
|
|
|
|
|
|
|
|
$
|
1,608,634
|
|
|
|
|
|
|
In 2006, the MV LLC joint venture purchased the underlying real
estate of one operating Mervyns site for approximately
$11.0 million, and the Company purchased one additional
site for approximately $12.4 million. The assets were
acquired from several funds, one of which was managed by
Lubert-Adler Real Estate Funds (Note 17). The Company is
responsible for the day-to-day management of the assets and
receives fees in accordance with the same fee schedule as DDR
Macquarie Fund for property management services.
Pro Forma
Financial Information
The following unaudited supplemental pro forma operating data is
presented for the years ended December 31, 2007 and 2006,
as if the IRRETI merger and the formation of the DDRTC Core
Retail Fund LLC joint venture had occurred at the beginning
of each period presented. Pro forma amounts include general and
administrative expenses that IRRETI reported in its historical
results of approximately $48.3 million for the year ended
2007, including severance, a substantial portion of which
management believes to be non-recurring.
These acquisitions were accounted for using the purchase method
of accounting. The revenues and expenses related to assets and
interests acquired are included in the Companys historical
results of operations from the date of purchase.
F-25
The pro forma financial information is presented for
informational purposes only and may not be indicative of what
actual results of operations would have been had the
acquisitions occurred as indicated; nor does it purport to
represent the results of the operations for future periods (in
thousands, except per share data):
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
(Unaudited)
|
|
|
|
2007
|
|
|
2006
|
|
|
Pro forma revenues
|
|
$
|
898,099
|
|
|
$
|
907,513
|
|
|
|
|
|
|
|
|
|
|
Pro forma income from continuing operations attributable to DDR
common shareholders
|
|
$
|
135,025
|
|
|
$
|
205,255
|
|
|
|
|
|
|
|
|
|
|
Pro forma income from discontinued operations attributable to DDR
common shareholders
|
|
$
|
28,823
|
|
|
$
|
26,277
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income attributable to DDR common shareholders
|
|
$
|
173,804
|
|
|
$
|
243,154
|
|
|
|
|
|
|
|
|
|
|
Per share data:
|
|
|
|
|
|
|
|
|
Basic earnings per share data:
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to DDR common
shareholders
|
|
$
|
1.09
|
|
|
$
|
1.65
|
|
Income from discontinued operations
|
|
|
0.23
|
|
|
|
0.21
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DDR common shareholders
|
|
$
|
1.32
|
|
|
$
|
1.86
|
|
|
|
|
|
|
|
|
|
|
Diluted earning per share data:
|
|
|
|
|
|
|
|
|
Income from continuing operations attributable to DDR common
shareholders
|
|
$
|
1.09
|
|
|
$
|
1.64
|
|
Income from discontinued operations
|
|
|
0.23
|
|
|
|
0.21
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DDR common shareholders
|
|
$
|
1.32
|
|
|
$
|
1.85
|
|
|
|
|
|
|
|
|
|
|
The above supplemental pro forma financial information does not
present the acquisitions described below or the disposition of
real estate assets. In addition, the above supplemental pro
forma operating data does not present the sale of assets for the
years ended December 31, 2007 and 2006, or the formation of
a joint venture which owns three assets.
During the year ended December 31, 2006, the Company
acquired its partners interests, at an initial aggregate
investment of approximately $94.1 million, net of mortgages
assumed, in the following joint venture properties:
|
|
|
|
|
|
|
|
|
Company-
|
|
|
|
|
Owned
|
|
|
Interest
|
|
Square Feet
|
|
|
Acquired
|
|
(Thousands)
|
|
Phoenix, Arizona
|
|
50%
|
|
197
|
Pasadena, California
|
|
75%
|
|
557
|
Salisbury, Maryland
|
|
50%
|
|
126
|
Apex, North Carolina
|
|
80%/20%
|
|
324
|
San Antonio, Texas
|
|
50%
|
|
Under Development
|
|
|
|
|
|
|
|
|
|
1,204
|
|
|
|
|
|
Additionally, the Company acquired one Mervyns site for
approximately $12.4 million, which was accounted for as a
financing lease. (Note 17).
The Company has notes receivables aggregating $75.8 million
and $18.6 million, including accrued interest, at
December 31, 2008 and 2007, respectively. The notes are
secured by certain rights in development projects, partnership
interests, sponsor guarantees and real estate assets. Included
in Notes Receivable are other financing receivables that consist
of loans acquired. For a complete listing of the Companys
financing receivables at December 31, 2008, see Financial
Statement Schedule IV of this annual report on
Form 10-K.
F-26
Notes receivable consists of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December
|
|
|
Maturity
|
|
Interest
|
|
|
2008
|
|
|
2007
|
|
|
Date
|
|
Rate
|
|
Tax Increment Financing Bonds(1):
|
|
|
|
|
|
|
|
|
|
|
|
|
Town of Plainville, Connecticut
|
|
$
|
6.8
|
|
|
$
|
7.0
|
|
|
April 2021
|
|
7.13%
|
City of Merriam, Kansas
|
|
|
4.8
|
|
|
|
6.0
|
|
|
February 2016
|
|
6.9%
|
City of St. Louis, Missouri
|
|
|
2.8
|
|
|
|
2.5
|
|
|
July 2026
|
|
7.1% - 8.5%
|
Chemung County Industrial Development Agency
|
|
|
2.0
|
|
|
|
1.9
|
|
|
April 2014 and April 2018
|
|
5.5%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
16.4
|
|
|
|
17.4
|
|
|
|
|
|
Other notes
|
|
|
2.1
|
|
|
|
1.2
|
|
|
|
|
|
Financing receivables
|
|
|
57.3
|
|
|
|
|
|
|
December 2010 to September 2017
|
|
6.0% -12.0%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
75.8
|
|
|
$
|
18.6
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Interest and principal are payable
solely from the incremental real estate taxes, if any, generated
by the respective shopping center and development project
pursuant to the terms of the financing agreement.
|
The following table reconciles the financing receivables on real
estate from January 1, 2008, to December 31, 2008 (in
thousands):
|
|
|
|
|
|
|
2008
|
|
|
Balance at January 1
|
|
$
|
|
|
Additions:
|
|
|
|
|
New mortgage loans
|
|
|
62,729
|
|
|
|
|
|
|
Deductions:
|
|
|
|
|
Loan loss reserve(1)
|
|
|
(5,400
|
)
|
|
|
|
|
|
Balance at December 31
|
|
$
|
57,329
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Amount classified in other expense,
net in the consolidated statements of operations for the year
ended December 31, 2008.
|
As of December 31, 2008, the Company had seven loans with
total commitments of up to $77.7 million, of which
$62.7 million had been funded. Availability under the
Companys revolving credit facilities is expected to be
sufficient to fund these commitments. The Company identified a
financing receivable with a carrying value of $10.8 million
that was impaired at December 31, 2008 in accordance with
SFAS 114 resulting in a specific reserve of approximately
$5.4 million, which was driven by the deterioration of the
economy and the dislocation of the credit markets. In addition
to this receivable, the Company has one additional financing
receivable in the amount of $19.0 million that is considered
non-performing.
Deferred charges consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Deferred financing costs
|
|
$
|
55,133
|
|
|
$
|
52,854
|
|
Less: Accumulated amortization
|
|
|
(29,554
|
)
|
|
|
(23,062
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
25,579
|
|
|
$
|
29,792
|
|
|
|
|
|
|
|
|
|
|
The Company incurred deferred financing costs aggregating
$5.7 million and $17.6 million in 2008 and 2007,
respectively. Deferred financing costs paid in 2008 primarily
relate to mortgages payable (Note 9). Deferred financing
costs paid in 2007 primarily relate to the issuance of
convertible notes (Note 8), modification of the
F-27
Companys unsecured credit agreements, and expansion of
term loans (Note 7). Amortization of deferred charges was
$10.1 million, $10.1 million and $7.1 million for
the years ended December 2008, 2007 and 2006, respectively.
Other assets consist of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Intangible assets:
|
|
|
|
|
|
|
|
|
In-place leases (including lease origination costs and fair
market value of leases), net
|
|
$
|
21,721
|
|
|
$
|
31,201
|
|
Tenant relations, net
|
|
|
15,299
|
|
|
|
22,102
|
|
|
|
|
|
|
|
|
|
|
Total intangible assets
|
|
|
37,020
|
|
|
|
53,303
|
|
Other assets:
|
|
|
|
|
|
|
|
|
Prepaids, deposits and other assets
|
|
|
91,770
|
|
|
|
80,191
|
|
|
|
|
|
|
|
|
|
|
Total other assets
|
|
$
|
128,790
|
|
|
$
|
133,494
|
|
|
|
|
|
|
|
|
|
|
The amortization period of the in-place leases and tenant
relations is approximately two to 31 years and
10 years, respectively. The Company recorded amortization
expense of approximately $8.8 million, $8.2 million
and $5.5 million for the years ended December 31,
2008, 2007 and 2006, respectively. The estimated amortization
expense associated with the Companys intangible assets is
$7.6 million, $7.5 million, $6.6 million,
$6.5 million and $6.0 million for the years ending
December 31, 2009, 2010, 2011, 2012 and 2013, respectively.
Other assets consist primarily of deposits, land options and
other prepaid expenses.
|
|
7.
|
Revolving
Credit Facilities and Term Loans
|
The Company maintains an unsecured revolving credit facility
with a syndicate of financial institutions, (the Unsecured
Credit Facility), which was amended in December 2007. The
Unsecured Credit Facility, for which JP Morgan serves as the
administrative agent, provides for borrowings of
$1.25 billion, if certain financial covenants are
maintained, and an accordion feature for a future expansion to
$1.4 billion upon the Companys request, provided that
new or existing lenders agree to the existing terms of the
facility and increase their commitment level, and a maturity
date of June 2010, with a one-year extension option at the
option of the Company subject to certain customary closing
conditions. The Unsecured Credit Facility includes a competitive
bid option on periodic interest rates for up to 50% of the
facility. The Companys borrowings under the Unsecured
Credit Facility bear interest at variable rates at the
Companys election, based on either (i) the prime rate
less a specified spread (0.125% at December 31, 2008), as
defined in the facility or (ii) LIBOR, plus a specified
spread (0.60% at December 31, 2008). The specified spreads
vary depending on the Companys long-term senior unsecured
debt rating from Standard and Poors and Moodys
Investors Service. The Company is required to comply with
certain financial covenants relating to total outstanding
indebtedness, secured indebtedness, maintenance of unencumbered
real estate assets and fixed charge coverage, as well as various
non-financial covenants including a material adverse change
provision. The Unsecured Credit Facility is used to finance the
acquisition, development and expansion of shopping center
properties, to provide working capital and for general corporate
purposes. The Company was in compliance with these covenants at
December 31, 2008. The facility also provides for an annual
facility fee of 0.15% on the entire facility. At
December 31, 2008 and 2007, total borrowings under the
Unsecured Credit Facility aggregated $975.4 million and
$709.5 million, respectively, with a weighted average
interest rate of 2.2% and 5.5%, respectively.
The Company also maintains a $75 million unsecured
revolving credit facility, amended in December 2007, with
National City Bank (together with the Unsecured Credit Facility,
the Revolving Credit Facilities). This facility has
a maturity date of June 2010, with a one-year extension option
at the option of the Company subject to certain customary
closing conditions, and reflects terms consistent with those
contained in the Unsecured Credit Facility. Borrowings under
this facility bear interest at variable rates based on
(i) the prime rate less a specified spread (-0.125% at
December 31, 2008), as defined in the facility or
(ii) LIBOR, plus a specified spread (0.60% at
F-28
December 31, 2008). The specified spreads are dependent on
the Companys long-term senior unsecured debt rating from
Standard and Poors and Moodys Investors Service. The
Company is required to comply with certain covenants relating to
total outstanding indebtedness, secured indebtedness,
maintenance of unencumbered real estate assets and fixed charge
coverage. The Company was in compliance with these covenants at
December 31, 2008. At December 31, 2008, total
borrowings under the National City Bank facility aggregated
$51.8 million with a weighted average interest rate of
1.1%. At December 31, 2007, there were no borrowings
outstanding.
Additionally, the Company maintains an $800 million
collateralized term loan with a syndicate of financial
institutions, for which KeyBank Capital Markets serves as the
administrative agent (Term Loan). The Term Loan
matures in February 2011, with a one-year extension option at
the option of the Company subject to certain customary closing
conditions. Borrowings under this facility bear interest at
variable rates based on LIBOR plus a specified spread based on
the Companys current credit rating (0.70% at
December 31, 2008). The collateral for this Term Loan is
assets, or investment interests in certain assets, that are
already collateralized by first mortgage loans. The Company is
required to comply with similar covenants as agreed upon in the
Companys Revolving Credit Facilities. The Company was in
compliance with these covenants at December 31, 2008. At
December 31, 2008 and 2007, total borrowings under this
facility aggregated $800.0 million with a weighted average
interest rate of 4.0% and 5.8%, respectively.
In February 2007, the Company entered into a $750 million
unsecured bridge facility (Bridge Facility) with
Bank of America, N.A. in connection with the financing of the
IRRETI merger. The Bridge Facility had a maturity date of August
2007 and bore interest at LIBOR plus 0.75%. This Bridge Facility
was repaid in June 2007. Following the repayment, the Company
did not have the right to draw on this Bridge Facility.
Total fees paid by the Company on its Revolving Credit
Facilities and Term Loans in 2008, 2007 and 2006 aggregated
approximately $2.1 million, $1.9 million and
$1.7 million, respectively. At December 31, 2008 and
2007, the Company all of the was in compliance with its
financial and other covenant requirements.
The Company had outstanding unsecured fixed-rate notes in the
aggregate of approximately $2.4 billion and
$2.6 billion at December 31, 2008 and 2007,
respectively. Several of the notes were issued at a discount
aggregating $1.9 million and $2.8 million at
December 31, 2008 and 2007, respectively. The effective
interest rates of the unsecured notes range from 3.4% to 7.5%
per annum.
In March 2007, the Company issued $600 million of
3.0% senior convertible notes due in 2012 (the 2007
Senior Convertible Notes). In August 2006, the Company
issued $250 million of senior convertible notes due in 2011
(the 2006 Senior Convertible Notes and, together
with the 2007 Senior Convertible Notes, the Senior
Convertible Notes). The Senior Convertible Notes are
senior unsecured obligations and rank equally with all other
senior unsecured indebtedness. Effective January 1, 2009, the
Company retrospectively adopted the provisions of FSP APB 14-1 (Note
1).
Concurrent with the issuance of the Senior Convertible Notes,
the Company purchased an option on its common shares in a
private transaction in order to effectively increase the
conversion price of the notes to a specified option price
(Option Price). This purchase option allows the
Company to receive a number of the Companys common shares
(Maximum Common Shares, from counterparties equal to
the amounts of common shares
and/or
cash
related to the excess conversion value that it would pay to the
holders of the Senior Convertible Notes upon conversion. The
option was recorded as a reduction of shareholders equity.
The Senior Convertible Notes are subject to net settlement based
on conversion prices (Conversion Price) which are
subject to adjustment based on increases in the Companys
quarterly stock dividend. If certain conditions are met, the
incremental value can be settled in cash or the Companys
common shares, at the Companys option. The Senior
Convertible Notes may only be converted prior to maturity based
on certain provisions in the governing note documents. In
connection with the issuance of these notes, the Company entered
into a registration rights agreement for the common shares that
may be issuable upon conversion of the Senior Convertible Notes.
F-29
The following table summarizes the information related to the
Senior Convertible Notes (shares and dollars in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2008
|
|
|
|
|
|
Maximum Common
|
|
|
|
|
|
Conversion Price
|
|
|
Conversion Price
|
|
|
Option Price
|
|
|
Shares
|
|
|
Option Cost
|
|
|
|
|
|
|
2007 Senior Convertible Notes
|
$
|
74.75
|
|
|
$
|
74.56
|
|
|
$
|
82.71
|
|
|
|
1.1
|
|
|
$
|
32.6
|
|
2006 Senior Convertible Notes
|
$
|
64.76
|
|
|
$
|
64.23
|
|
|
$
|
65.17
|
|
|
|
0.5
|
|
|
$
|
10.3
|
|
The following tables reflect the Companys previously reported
amounts, along with the adjusted amounts as required by FSP APB 14-1
as adjusted to reflect the impact of discontinued operations in
accordance with SFAS 144 (Note 15)
(in thousands, except per share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2008
|
|
Year Ended December 31, 2007
|
|
Year Ended December 31, 2006
|
|
|
As Previously Reported
|
|
As Adjusted
|
|
Effect of Change
|
|
As Previously Reported
|
|
As Adjusted
|
|
Effect of Change
|
|
As Previously Reported
|
|
As Adjusted
|
|
Effect of Change
|
Consolidated
statement of
operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations
|
|
$
|
(61,317
|
)
|
|
$
|
(90,746
|
)
|
|
$
|
(29,429
|
)
|
|
$
|
185,894
|
|
|
$
|
185,052
|
|
|
$
|
(842
|
)
|
|
$
|
160,784
|
|
|
$
|
162,111
|
|
|
$
|
1,327
|
|
Net (loss) income attributable to DDR
|
|
|
(57,776
|
)
|
|
|
(71,930
|
)
|
|
|
(14,154
|
)
|
|
|
276,047
|
|
|
|
264,942
|
|
|
|
(11,105
|
)
|
|
|
253,264
|
|
|
|
(251,958
|
)
|
|
|
(1,306
|
)
|
Net (loss) income attributable to DDR per share, basic
|
|
|
(0.83
|
)
|
|
|
(0.97
|
)
|
|
|
(0.14
|
)
|
|
|
1.86
|
|
|
|
1.76
|
|
|
|
(0.10
|
)
|
|
|
1.82
|
|
|
|
1.80
|
|
|
|
(0.02
|
)
|
Net (loss) income attributable to DDR per share, diluted
|
|
|
(0.83
|
)
|
|
|
(0.97
|
)
|
|
|
(0.14
|
)
|
|
|
1.85
|
|
|
|
1.75
|
|
|
|
(0.10
|
)
|
|
|
1.81
|
|
|
|
1.79
|
|
|
|
(0.02
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
December 31, 2007
|
|
|
As Previously Reported
|
|
As Adjusted
|
|
Effect of Change
|
|
As Previously Reported
|
|
As Adjusted
|
|
Effect of Change
|
Consolidated balance sheets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Construction
in progress and land under development
|
|
$
|
879,547
|
|
|
$
|
882,478
|
|
|
$
|
2,931
|
|
|
$
|
664,926
|
|
|
|
666,004
|
|
|
|
1,078
|
|
Deferred changes, net
|
|
|
26,613
|
|
|
|
25,579
|
|
|
|
(1,034
|
)
|
|
|
31,172
|
|
|
|
29,792
|
|
|
|
(1,380
|
)
|
Senior unsecured notes
|
|
|
(2,452,741
|
)
|
|
|
(2,402,032
|
)
|
|
|
50,709
|
|
|
|
(2,622,219
|
)
|
|
|
(2,555,158
|
)
|
|
|
67,061
|
|
Paid-in capital
|
|
|
(2,770,194
|
)
|
|
|
(2,849,364
|
)
|
|
|
(79,170
|
)
|
|
|
(3,029,176
|
)
|
|
|
(3,108,346
|
)(1)
|
|
|
(79,170
|
)
|
Accumulated distributions in excess
of net income
|
|
|
(608,675
|
)
|
|
|
(635,239
|
)
|
|
|
(26,564
|
)
|
|
|
(260,018
|
)
|
|
|
(272,428
|
)
|
|
|
(12,410
|
)
|
|
|
|
(1)
|
|
Amount disclosed excludes the adoption of SFAS 160.
|
The effect of this accounting change on the carrying amounts of the
Companys debt and equity balances, are as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
|
|
|
|
|
|
Carrying value of equity component
|
|
$
|
(77,587
|
)
|
|
$
|
(79,170
|
)
|
|
|
|
|
|
|
|
Principal amount of convertible debt
|
|
$
|
(833,000
|
)
|
|
$
|
(850,000
|
)
|
Remaining unamortized debt discount
|
|
|
50,709
|
|
|
|
67,061
|
|
|
|
|
|
|
|
|
Net carrying value
of convertible debt
|
|
$
|
(782,291
|
)
|
|
$
|
(782,939
|
)
|
|
|
|
|
|
|
|
The Companys various fixed-rate notes have maturities
ranging from January 2009 to July 2018. Interest coupon rates
ranged from approximately 3.0% to 7.5% (averaging 4.4% and 4.5%
at December 31, 2008 and 2007, respectively). Notes issued
prior to December 31, 2001, aggregating $100 million,
may not be redeemed by the Company prior to maturity and will
not be subject to any sinking fund requirements. Notes issued
subsequent to 2001, aggregating $1.2 billion at
December 31, 2008, may be redeemed based upon a yield
maintenance calculation. The notes issued in October 2005
(aggregating $345.7 million) are redeemable prior to
maturity at par value plus a make-whole premium. If the notes
issued in October 2005 are redeemed within 90 days of the
maturity date, no make-whole premium is required. The
convertible notes, aggregating $833.0 million and $850.0 million at
December 31, 2008 and 2007, respectively, may be converted prior to maturity into
cash equal to the lesser of the principal amount of the note or
the conversion value and, to the extent the conversion value
exceeds the principal amount of the note, common shares of the
Companys stock. The fixed-rate senior notes and Senior
Convertible Notes were issued pursuant to an indenture dated
May 1, 1994, as amended, which contains certain covenants
including limitation on incurrence of debt, maintenance of
unencumbered real estate assets and debt service coverage.
Interest is paid semi-annually in arrears. At December 31,
2008 and 2007, the Company was in compliance with all of the
financial and other covenant requirements.
As of December 31, 2008, the remaining amortization period for the debt discount was approximately
32 and 39 months for the 2006 Senior Convertible Notes and the 2007 Senior Convertible Notes,
respectively. As of December 31, 2007, the remaining amortization period for the debt discount was
approximately 44 and 51 months for the 2006 Senior Convertible Notes and the 2007 Senior
Convertible Notes, respectively.
The adjusted effective interest rates for the liability components of the 2006 Senior Convertible Notes and
the 2007 Senior Convertible Notes were 5.7% and 5.2%, respectively. The impact of this accounting
change required the Company to adjust its interest expense and record non-cash interest-related
charges of $14.2 million, $11.1 million and
$1.3 million, for the years ended December 31,
2008, 2007 and 2006, respectively. The Company recorded contractual interest expense of $26.8
million, $23.1 million and $3.1 million for the years periods ended December 31, 2008, 2007
and 2006, respectively.
During the years ended December 31, 2008, the Company purchased approximately $66.9 million of
aggregate principal amount of its outstanding senior unsecured notes at a discount to par resulting
in net GAAP gains of approximately $10.5 million. The net GAAP gain reflects a decrease of
approximately $1.1 million due to the adoption of FSP APB 14-1 (Note 1) in 2008. No purchases of
outstanding senior unsecured notes were made during 2007 and 2006. As required by FSP APB 14-1, the
Company allocated the consideration paid between the liability component and equity component based
on the fair value of those components immediately prior to the purchases.
|
|
9.
|
Mortgages
Payable and Scheduled Principal Repayments
|
At December 31, 2008, mortgages payable, collateralized by
investments and real estate with a net book value of
approximately $2.9 billion and related tenant leases, are
generally due in monthly installments of principal
and/or
interest and mature at various dates through 2037. Fixed-rate
debt obligations included in mortgages payable at
December 31, 2008 and 2007, aggregated approximately
$1,373.4 million and $1,310.8 million, respectively.
Fixed interest rates ranged from approximately 4.2% to 10.2%
(averaging 6.0% and 6.2% at December 31, 2008 and 2007,
respectively). Variable-rate debt obligations totaled
approximately $264.0 million and $148.5 million at
December 31, 2008 and 2007, respectively. Interest rates on
the variable-rate debt averaged 1.9% and 6.2% at
December 31, 2008 and 2007.
Included in mortgages payable are $71.5 million and
$72.8 million of tax-exempt certificates with a weighted
average fixed interest rate of 1.9% and 4.1% at
December 31, 2008 and 2007, respectively.
As of December 31, 2008, the scheduled principal payments
of the Revolving Credit Facilities, Term Loans, fixed-rate
senior notes and mortgages payable for the next five years and
thereafter are as follows (in thousands):
|
|
|
|
|
Year
|
|
Amount
|
|
|
2009
|
|
$
|
399,685
|
|
2010
|
|
|
1,983,887
|
|
2011
|
|
|
1,596,036
|
|
2012
|
|
|
1,003,926
|
|
2013
|
|
|
432,348
|
|
Thereafter
|
|
|
450,773
|
|
|
|
|
|
|
|
|
$
|
5,866,655
|
|
|
|
|
|
|
Included in principal payments are $1.0 billion in 2010 and
$800 million in 2011, associated with the maturing of the
Revolving Credit Facilities and the Term Loans, respectively,
both of which have a one year extension option, subject to
certain requirements as described above.
F-30
|
|
10.
|
Financial
Instruments
|
The Company adopted the provisions of SFAS 157, as amended
by FSP
FAS No. 157-1,
FSP
FAS No. 157-2
and FSP
FAS No. 157-3,
on January 1, 2008. The following methods and assumptions
were used by the Company in estimating fair value disclosures of
financial instruments:
Fair
Value Hierarchy
SFAS 157 specifies a hierarchy of valuation techniques
based upon whether the inputs to those valuation techniques
reflect assumptions other market participants would use based
upon market data obtained from independent sources (observable
inputs). In accordance with SFAS 157, the following
summarizes the fair value hierarchy:
|
|
|
|
Level 1
|
Quoted prices in active markets that are unadjusted and
accessible at the measurement date for identical, unrestricted
assets or liabilities;
|
|
|
|
|
Level 2
|
Quoted prices for identical assets and liabilities in markets
that are inactive, quoted prices for similar assets and
liabilities in active markets or financial instruments for which
significant inputs are observable, either directly or
indirectly, such as interest rates and yield curves that are
observable at commonly quoted intervals and
|
|
|
Level 3
|
Prices or valuations that require inputs that are both
significant to the fair value measurement and unobservable.
|
In certain cases, the inputs used to measure fair value may fall
into different levels of the fair value hierarchy. In such
cases, the level in the fair value hierarchy within which the
fair value measurement in its entirety falls has been determined
based on the lowest level input that is significant to the fair
value measurement in its entirety. The Companys assessment
of the significance of a particular input to the fair value
measurement in its entirety requires judgment and considers
factors specific to the asset or liability.
Measurement
of Fair Value
At December 31, 2008, the Company used pay-fixed interest
rate swaps to manage its exposure to changes in benchmark
interest rates. The valuation of these instruments is determined
using widely accepted valuation techniques including discounted
cash flow analysis on the expected cash flows of each derivative.
Although the Company has determined that the certain inputs used
to value its derivatives fall within Level 2 of the fair
value hierarchy, the credit valuation adjustments associated
with the Companys counterparties and its own credit risk
utilize Level 3 inputs, such as estimates of current credit
spreads, to evaluate the likelihood of default by itself and its
counterparties. During the second half of 2008, the credit
spreads on the Company and certain of its counterparties widened
significantly and as a result, as of December 31, 2008, the
Company has assessed the significance of the impact of the
credit valuation adjustments on the overall valuation of its
derivative positions and has determined that the credit
valuation adjustments are significant to the overall valuation
of all of its derivatives. As a result, the Company has
determined that its derivative valuations in their entirety are
classified in Level 3 of the fair value hierarchy. These
inputs reflect the Companys assumptions.
Items Measured
at Fair Value on a Recurring Basis
The following table presents information about the
Companys financial assets and liabilities (in millions),
which consists of interest rate swap agreements that are
included in other liabilities at December 31, 2008,
measured at fair value on a recurring basis as of
December 31, 2008, and indicates the fair value hierarchy
of the valuation techniques utilized by the Company to determine
such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements
|
|
|
|
at December 31, 2008
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Derivative Financial Instruments
|
|
$
|
|
|
|
$
|
|
|
|
$
|
21.7
|
|
|
$
|
21.7
|
|
F-31
The table presented below presents a reconciliation of the
beginning and ending balances of interest rate swap agreements
that are included in other liabilities having fair value
measurements based on significant unobservable inputs
(Level 3). As described above, the Company transferred its
derivatives into Level 3 from Level 2 during the
fourth quarter of 2008 due to changes in the significance on our
derivatives valuation as a result of changes in
nonperformance risk associated with our credit standing.
|
|
|
|
|
|
|
Derivative Financial
|
|
|
|
Instruments
|
|
|
Balance of level 3 at December 31, 2007
|
|
$
|
|
|
Transfers into level 3
|
|
|
(17.1
|
)
|
Total losses included in other comprehensive (loss) income
|
|
|
(4.6
|
)
|
|
|
|
|
|
Balance of level 3 at December 31, 2008
|
|
$
|
(21.7
|
)
|
|
|
|
|
|
The fair value of derivative financial interests at
December 31, 2007 was approximately $17.8 million. The
losses of $4.6 million above included in other
comprehensive loss are attributable to the change in unrealized
gains or losses relating to derivative liabilities that are
still held at December 31, 2008, none of which were
reported in our consolidated statement of operations.
The Company calculates the fair value of its interest rate swaps
pursuant to SFAS 157 based upon the amount of the expected
future cash flows paid and received on each leg of the swap. The
cash flows on the fixed leg of the swap are agreed to at
inception and the cash flows on the floating leg of a swap
change over time as interest rates change. To estimate the
floating cash flows at each valuation date, the Company utilizes
a forward curve which is constructed using LIBOR fixings,
Eurodollar futures, and swap rates, which are observable in the
market. Both the fixed and floating legs cash flows are
discounted at market discount factors. For purposes of adjusting
our derivative values, we incorporate the nonperformance risk
for of both the Company and our counterparties to these
contracts based upon either credit default swap spreads (if
available) or Moodys KMV ratings in order to derive a
curve that considers the term structure of credit.
Cash and cash equivalents, restricted cash, accounts
receivable, accounts payable, accruals and other liabilities
The carrying amounts reported in the balance sheet for these
financial instruments approximated fair value because of their
short-term maturities. The carrying amount of straight-line
rents receivable does not materially differ from its fair market
value.
Notes
receivable and advances to affiliates
The fair value is estimated by discounting the current rates at
which management believes similar loans would be made. The fair
value of these notes was approximately $134.0 million and
$16.9 million at December 31, 2008 and 2007,
respectively, as compared to the carrying amounts of
$134.0 million and $16.9 million, respectively. The
carrying value of the TIF Bonds (Note 4) approximated
its fair value at December 31, 2008 and 2007. The fair
value of loans to affiliates is not readily determinable and has
been estimated by management based upon its assessment of the
interest rate, credit risk and performance risk.
Debt
The fair market value of debt is determined using the trading
price of public debt, or a discounted cash flow technique that
incorporates a market interest yield curve with adjustments for
duration, optionality, and risk profile including the
Companys non-performance risk.
Considerable judgment is necessary to develop estimated fair
values of financial instruments. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts
the Company could realize on disposition of the financial
instruments.
F-32
Financial instruments at December 31, 2008 and 2007, with
carrying values that are different than estimated fair values,
based on the valuation method of SFAS 157 at
December 31, 2008 and the valuation method of SFAS 107
at December 31, 2007 are summarized as follows (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
|
Carrying
|
|
|
Fair
|
|
|
Carrying
|
|
|
Fair
|
|
|
|
Amount
|
|
|
Value
|
|
|
Amount
|
|
|
Value
|
|
|
Senior notes
|
|
$
|
2,402,032
|
|
|
$
|
1,496,474
|
|
|
$
|
2,555,158
|
|
|
$
|
2,450,361
|
|
Revolving Credit Facilities and Term Debt
|
|
|
1,827,183
|
|
|
|
1,752,260
|
|
|
|
1,509,459
|
|
|
|
1,509,459
|
|
Mortgages payable and other indebtedness
|
|
|
1,637,440
|
|
|
|
1,570,877
|
|
|
|
1,459,336
|
|
|
|
1,501,345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
5,866,655
|
|
|
$
|
4,819,611
|
|
|
$
|
5,523,953
|
|
|
$
|
5,461,165
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounting
Policy for Derivative and Hedging Activities
All derivatives are recognized on the balance sheet at their
fair value. On the date that the Company enters into a
derivative, it designates the derivative as a hedge against the
variability of cash flows that are to be paid in connection with
a recognized liability or forecasted transaction. Subsequent
changes in the fair value of a derivative designated as a cash
flow hedge that is determined to be highly effective are
recorded in other comprehensive income (loss), until earnings
are affected by the variability of cash flows of the hedged
transaction. Any hedge ineffectiveness is reported in current
earnings.
From time to time, the Company enters into interest rate swaps
to convert certain fixed-rate debt obligations to a floating
rate (a fair value hedge). This is consistent with
the Companys overall interest rate risk management
strategy to maintain an appropriate balance of fixed-rate and
variable-rate borrowings. Changes in the fair value of
derivatives that are highly effective and that are designated
and qualify as a fair value hedge, along with changes in the
fair value of the hedged liability that are attributable to the
hedged risk, are recorded in current-period earnings. If hedge
accounting is discontinued due to the Companys
determination that the relationship no longer qualified as an
effective fair value hedge, the Company will continue to carry
the derivative on the balance sheet at its fair value but cease
to adjust the hedged liability for changes in fair value.
The Company formally documents all relationships between hedging
instruments and hedged items, as well as its risk management
objective and strategy for undertaking various hedge
transactions. The Company formally assesses (both at the
hedges inception and on an ongoing basis) whether the
derivatives that are used in hedging transactions have been
highly effective in offsetting changes in the cash flows of the
hedged items and whether those derivatives can be expected to
remain highly effective in future periods. Should it be
determined that a derivative is not (or has ceased to be) highly
effective as a hedge, the Company will discontinue hedge
accounting on a prospective basis.
The Company entered into consolidated joint ventures that own
real estate assets in Canada and Russia. The net assets of these
subsidiaries are exposed to volatility in currency exchange
rates. As such, the Company uses nonderivative financial
instruments to hedge this exposure. The Company manages currency
exposure related to the net assets of the Companys
Canadian and European subsidiaries primarily through foreign
currency-denominated debt agreements that the Company enters
into. Gains and losses in the parent companys net
investments in its subsidiaries are economically offset by
losses and gains in the parent companys foreign
currency-denominated debt obligations.
For the year ended December 31, 2008, $25.5 million of
net losses related to the foreign currency-denominated debt
agreements was included in the Companys cumulative
translation adjustment. As the notional amount of the
nonderivative instrument substantially matches the portion of
the net investment designated as being hedged and the
nonderivative instrument is denominated in the functional
currency of the hedged net investment, the hedge ineffectiveness
recognized in earnings was not material.
F-33
Risk
Management
The Company enters into derivative contracts to minimize
significant unplanned fluctuations in earnings that are caused
by interest rate volatility or, in the case of a fair value
hedge, to minimize the impacts of changes in the fair value of
the debt. The Company does not typically utilize these
arrangements for trading or speculative purposes. The principal
risk to the Company through its interest rate hedging strategy
is the potential inability of the financial institutions from
which the interest rate swaps were purchased to cover all of
their obligations. To mitigate this exposure, the Company
purchases its interest rate swaps from major financial
institutions.
Cash Flow
Hedges
The Company has six interest rate swaps with notional amounts
aggregating $600 million ($200 million which expires
in 2009, $300 million which expires in 2010 and
$100 million which expires in 2012). Interest rate swaps
aggregating $500 million effectively convert Term Loan
floating rate debt into a fixed rate of approximately 5.7%.
Interest rate swaps aggregating $100 million effectively
convert Revolving Credit Facilities floating rate debt into a
fixed rate of approximately 5.5%. As of December 31, 2008
and 2007, the aggregate fair value of the Companys
$600 million of interest rate swaps was a liability of
$21.7 million and $17.8 million, respectively, which
is included in other liabilities in the consolidated balance
sheets. For the year ended December 31, 2008, the amount of
hedge ineffectiveness was not material.
All components of the interest rate swaps were included in the
assessment of hedge effectiveness. The Company expects that
within the next 12 months it will reflect as a decrease to
earnings of $22.3 million for the amount recorded in
accumulated other comprehensive loss.
Unconsolidated
Joint Venture Derivative Instruments
At December 31, 2007, certain of the Companys
unconsolidated joint ventures had interest rate swaps with
notional amounts aggregating $557.3 million converting
LIBOR to a weighted average fixed rate of approximately 5.3%.
The aggregate fair value of these instruments at
December 31, 2007, was a liability of $20.5 million.
Investments in unconsolidated joint ventures are considered
financial assets subject to the provisions of SFAS 157. See
discussion of fair value considerations in Note 14.
|
|
11.
|
Commitments
and Contingencies
|
Business
Risks and Uncertainties
The retail and real estate markets have been significantly
impacted by the continued deterioration of the global credit
markets and other macro economic factors including, among
others, rising unemployment and a decline in consumer confidence
leading to a decline in consumer spending. Although a majority
of the Companys tenants remain in relatively strong
financial standing, especially the anchor tenants, the current
recession has resulted in tenant bankruptcies affecting the
Companys real estate portfolio including Mervyns, Linens
n Things, Steve & Barrys, Goodys and
Circuit City. In addition, certain other tenants may be
experiencing financial difficulties. Due to the timing of these
bankruptcies in the second half of 2008, they did not have a
significant impact on the cash flows during 2008 as compared to
our internal projections. However, given the expected decrease
in occupancy and the projected timing associated with re-leasing
these vacated spaces, the 2009 forecasts have been revised to
reflect these events and the potential for further deterioration
and the incorporation of expectations associated with the timing
it will take to release the vacant space. This has resulted in
downward pressure on the Companys 2009 projected operating
results. The reduced occupancy will likely have a negative
impact on the Companys consolidated cash flows, results of
operations, financial position and financial ratios that are
integral to the continued compliance with the covenants on the
Companys line of credit facilities as further described
below. Offsetting some of the current challenges within the
retail environment, the Company has a low occupancy cost
relative to other retail formats and historical averages, as
well as a diversified tenant base with only one tenant exceeding
2.5% of total consolidated revenues, Wal-Mart at 4.5%. Other
significant tenants include Target, Lowes Home
Improvement, Home Depot, Kohls, T.J. Maxx/Marshalls,
Publix Supermarkets, PetSmart and Bed Bath & Beyond, all of
which have relatively strong credit ratings. Management believes
these tenants should continue providing the Company with a
stable ongoing revenue base for
F-34
the foreseeable future given the long-term nature of these
leases. Moreover, the majority of the tenants in the
Companys shopping centers provide day-to-day consumer
necessities versus high priced discretionary luxury items with a
focus toward value and convenience, which should enable many
tenants to continue operating within this challenging economic
environment. Furthermore, LIBOR rates, the rates upon which the
Companys variable-rate debt is based, are at historic lows
and are expected to have a positive impact on the cash flows.
As discussed in Notes 7 and 8, the Companys credit
facilities and the indentures under which the Companys
senior and subordinated unsecured indebtedness is, or may be,
issued contain certain financial and operating covenants,
including, among other things, leverage ratios, debt service
coverage and fixed charge coverage ratios, as well as
limitations on the Companys ability to incur secured and
unsecured indebtedness, sell all or substantially all of the
Companys assets and engage in mergers and certain
acquisitions. These credit facilities and indentures also
contain customary default provisions including the failure to
timely pay principal and interest issued thereunder, the failure
to comply with our financial and operating covenants, the
occurrence of a material adverse effect on the Company, and the
failure to pay when due any other Company consolidated
indebtedness (including non-recourse obligations) in excess of
$50 million. In the event our lenders declare a default, as
defined in the applicable loan documentation, this could result
in our inability to obtain further funding
and/or
an
acceleration of any outstanding borrowings.
As of December 31, 2008, the Company was in compliance with
all of its financial covenants. However, due to the economic
environment, the Company has less financial flexibility than
desired given the current market dislocation. The Companys
current business plans indicate that it will be able to operate
in compliance with these covenants in 2009 and beyond, however
the current dislocation in the global credit markets has
significantly impacted the projected cash flows, financial
position and effective leverage of the Company. If there is a
continued decline in the retail and real estate industries
and/or
we
are unable to successfully execute our plans as further
described below, we could violate these covenants, and as a
result may be subject to higher finance costs and fees
and/or
accelerated maturities. In addition, certain of the
Companys credit facilities and indentures permit the
acceleration of the maturity of debt issued thereunder in the
event certain other debt of the Company has been accelerated.
Furthermore, a default under a loan to the Company or its
affiliates, a foreclosure on a mortgaged property owned by the
Company or its affiliates or the inability to refinance existing
indebtedness would have a negative impact on the Companys
financial condition, cash flows and results of operations. These
facts and an inability to predict future economic conditions
have encouraged the Company to adopt a strict focus on lowering
leverage and increasing our financial flexibility.
The Company is committed to prudently managing and minimizing
discretionary operating and capital expenditures and raising the
necessary equity and debt capital to maximize our liquidity,
repay our outstanding borrowings as they mature and comply with
our financial covenants in 2009 and beyond. As discussed below,
we plan to raise additional equity and debt through a
combination of retained capital, the issuance of common shares,
debt financing and refinancing and asset sales. In addition, the
Company will strategically utilize proceeds from the above
sources to repay outstanding borrowings on our credit facilities
and strategically repurchase our publicly traded debt at a
discount to par to further improve our leverage ratios.
|
|
|
|
|
Retained Equity
With regard to retained
capital, the Company has adjusted its dividend policy to the
minimum required to maintain its REIT status. The Company did
not pay a dividend in January 2009 as it had already distributed
sufficient funds to comply with its 2008 tax requirements.
Moreover, the Company expects to fund a portion of its 2009
dividend payout through common shares and has the flexibility to
distribute up to 90% of dividends in shares. This new policy is
consistent with the Companys top priorities to improve
liquidity and lower leverage. This change in dividend payment is
expected to save in excess of $300 million of retained
capital in 2009.
|
|
|
|
Issuance of Common Shares
The Company has
several alternatives to raise equity through the sale of its
common shares. As discussed in Note 12, in December 2008,
the Company issued $41.9 million of equity capital through
its continuous equity program. The Company intends to continue
to issue additional shares under this program in 2009. As
discussed in Note 22, on February 23, 2009, the Company
entered into a stock purchase agreement with Mr. Alexander Otto
for the sale of 30 million of the Companys common
shares and warrants for 10 million of the Companys
common shares for
|
F-35
|
|
|
|
|
additional potential cash in the future. The sale of the common
shares and warrants is subject to shareholder approval and the
satisfaction or waiver of customary and other conditions. There
can be no assurances the Company will be able to obtain such
approval or satisfy such conditions. The Company intends to use
the estimated $112.5 million in gross proceeds received
from this strategic investment in 2009 to reduce leverage.
|
|
|
|
|
|
Debt Financing and Refinancing
The Company
had approximately $372.8 million of consolidated debt
maturities during 2009, excluding obligations where there is an
extension option. The largest debt maturity in 2009 related to
the repayment of senior unsecured notes in the amount of
$227.0 million in January 2009. Funding of this repayment
was primarily through retained capital and our Revolving Credit
Facilities. The remaining $145.8 million in maturities is
related to various loans secured by certain shopping centers.
The Company plans to refinance approximately $80 million of
this remaining indebtedness related to two assets. Furthermore,
the Company has received lender approval to extend a mortgage
loans aggregating $29.6 million. All three loans are
scheduled to mature in the first quarter of 2009. The Company is
planning to either repay the remaining maturities with its
Revolving Credit Facility or financings discussed below or seek
extensions with the existing lender.
|
|
|
|
|
|
The Company is also in active discussions with various life
insurance companies regarding the financing of assets that are
currently unencumbered. The total loan proceeds are expected to
range from $100 million to $200 million depending on
the number of assets financed. The loan-to-value ratio required
by these lenders is expected to fall within the 50% to 60% range.
|
|
|
|
|
|
Asset Sales
During the months of January and
February 2009, the Company and its consolidated joint ventures
sold seven assets generating in excess of $65.8 million in
gross proceeds. During 2008, the Company and its joint ventures
sold 23 assets generating aggregate gross proceeds of almost
$200 million, of which the Companys proportionate
share aggregated $136.1 million. The Company is also in
various stages of discussions with third parties for the sale of
additional assets with aggregate values in excess of
$500 million, including four assets that are under contract
or subject to letters of intent, aggregating $30 million,
of which the Companys share is approximately
$14 million.
|
|
|
|
Debt Repurchases
Given the current economic
environment, the Companys publicly traded debt securities
are trading at significant discounts to par. During the fourth
quarter of 2008 and in January 2009, the Company repurchased
approximately $77.1 million of debt securities at a
discount to par aggregating $15.2 million. Although
$48 million of this debt repurchase reflected above related
to unsecured debt maturing in January 2009 at a small discount,
the debt with maturities in 2010 and beyond are trading at much
wider discounts. The Company intends to utilize the proceeds
from retained capital, equity issuances, secured financing and
asset sales, as discussed above, to repurchase its debt
securities at a discount to par to further improve its leverage
ratios.
|
As further described above, although the Company believes it has
several viable alternatives to address its objectives of
reducing leverage and continuing to comply with its covenants
and repay obligations as they become due, the Company does not
have binding agreements for all of the planned transactions
discussed above, and therefore, there can be no assurances that
the Company will be able to execute these plans, which could
adversely impact the Companys operations including its
ability to remain compliant with its covenants.
Legal
Matters
The Company is a party to litigation filed in November 2006 by a
tenant in a Company property located in Long Beach, California.
The tenant filed suit against the Company and certain
affiliates, claiming the Company and its affiliates failed to
provide adequate valet parking at the property pursuant to the
terms of the lease with the tenant. After a six-week trial, the
jury returned a verdict in October 2008, finding the Company
liable for compensatory damages in the amount of approximately
$7.8 million. The Company strongly disagrees with the
verdict and has filed a motion for new trial and a motion for
judgment notwithstanding the verdict. In the event the
Companys post-trial motions are unsuccessful, the Company
intends to appeal the verdict. The Company recorded a charge
during the year ended December 31, 2008, which represents
managements best estimate of loss based upon a range of
liability pursuant to SFAS No. 5, Accounting for
Contingencies. The accrual, as well as the related
litigation costs
F-36
incurred to date, was recorded in Other Expense, net in the
consolidated statements of operations. The Company will continue
to monitor the status of the litigation and revise the estimate
of loss as appropriate. Although the Company believes it has
meritorious defenses, there can be no assurance that the
Companys post-trial motions will be granted or that an
appeal will be successful.
In addition to the litigation discussed above, the Company and
its subsidiaries are subject to various legal proceedings,
which, taken together, are not expected to have a material
adverse effect on the Company. The Company is also subject to a
variety of legal actions for personal injury or property damage
arising in the ordinary course of its business, most of which
are covered by insurance. While the resolution of all matters
cannot be predicted with certainty, management believes that the
final outcome of such legal proceedings and claims will not have
a material adverse effect on the Companys liquidity,
financial position or results of operations.
Commitments
and Guarantees
In conjunction with the development and expansion of various
shopping centers, the Company has entered into agreements with
general contractors for the construction of shopping centers
aggregating approximately $111.4 million as of
December 31, 2008.
At December 31, 2008, the Company had outstanding letters
of credit of approximately $77.2 million. The Company has
not recorded any obligation associated with these letters of
credit. The majority of the letters of credit are collateral for
existing indebtedness and other obligations of the Company.
In conjunction with certain unconsolidated joint venture
agreements, the Company
and/or
its
equity affiliates have agreed to fund the required capital
associated with approved development projects, composed
principally of outstanding construction contracts, aggregating
approximately $63.3 million as of December 31, 2008.
The Company
and/or
its
equity affiliates are entitled to receive a priority return on
these capital advances at rates ranging from 10.5% to 12.0%.
In connection with certain of the Companys unconsolidated
joint ventures, the Company agreed to fund amounts due the joint
ventures lender if such amounts are not paid by the joint
venture based on the Companys pro rata share of such
amount, aggregating $40.2 million at December 31, 2008.
In connection with the transfer of one of the properties to DDR
Macquarie Fund in November 2003, the Company deferred the
recognition of approximately $2.3 million of the gain on
sale of real estate, related to a shortfall agreement guarantee
maintained by the Company. DDR Macquarie Fund is obligated to
fund any shortfall amount caused by the failure of the landlord
or tenant to pay taxes on the shopping center when due and
payable. The Company is obligated to pay any shortfall to the
extent that the shortfall is not caused by the failure of the
landlord or tenant to pay taxes on the shopping center when due
and payable. No shortfall payments have been made on this
property since the completion of construction in 1997.
The Company entered into master lease agreements from 2006
through 2007 in connection with the transfer of properties to
certain unconsolidated joint ventures, which are recorded as a
liability and reduction of its related gain. The Company is
responsible for the monthly base rent, all operating and
maintenance expenses and certain tenant improvements and leasing
commissions for units not yet leased at closing for a three-year
period. At December 31, 2008 and 2007, the Companys
significant master lease obligations, included in accounts
payable and other expenses, in the following amounts, were
incurred with the properties transferred to the following
unconsolidated joint ventures (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
DDR Macquarie Fund LLC
|
|
$
|
|
|
|
$
|
0.1
|
|
DDR Markaz II
|
|
|
0.1
|
|
|
|
0.2
|
|
DDR MDT PS LLC
|
|
|
0.3
|
|
|
|
1.1
|
|
TRT DDR Venture I
|
|
|
0.5
|
|
|
|
1.0
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.9
|
|
|
$
|
2.4
|
|
|
|
|
|
|
|
|
|
|
F-37
In connection with Service Holdings LLC, the Company guaranteed
the base rental income from one to three years for various
affiliates of Service Holdings LLC in the aggregate amount of
$3.0 million. The Company has not recorded a liability for
the guarantee, as the subtenants of Service Holdings LLC are
paying rent as due. The Company has recourse against the other
parties in the partnership in the event of default. No assets of
the Company are currently held as collateral to pay this
guarantee.
As a result of the IRRETI merger, the Company assumed certain
environmental and non-recourse obligations of DDR-SAU Retail
Fund LLC pursuant to eight guaranty and environmental
indemnity agreements. The Companys guaranty is capped at
$43.1 million in the aggregate, except for certain events,
such as fraud, intentional misrepresentation or misappropriation
of funds.
Related to one of the Companys developments in Long Beach,
California, the Company guaranteed the payment of any special
taxes levied on the property within the City of Long Beach
Community Facilities District No. 6 and attributable to the
payment of debt service on the bonds for periods prior to the
completion of certain improvements related to this project. In
addition, an affiliate of the Company has agreed to make an
annual payment of approximately $0.6 million to defray a
portion of the operating expenses of a parking garage through
the earlier of October 2032 or the date when the citys
parking garage bonds are repaid. No assets of the Company are
currently held as collateral related to these obligations. The
Company has not recorded a liability for the guarantee.
The Company has guaranteed certain special assessment and
revenue bonds issued by the Midtown Miami Community Development
District. The bond proceeds were used to finance certain
infrastructure and parking facility improvements. As of
December 31, 2008, the remaining debt service obligation
guaranteed by the Company was $10.6 million. In the event
of a debt service shortfall, the Company is responsible for
satisfying the shortfall. There are no assets held as collateral
or liabilities recorded related to these guarantees. To date,
tax revenues have exceeded the debt service payments for these
bonds.
The Company continually monitors obligations and commitments
entered into on its behalf. There have been no other material
items entered into by the Company since December 31, 2003,
through December 31, 2008, other than as described above.
Leases
The Company is engaged in the operation of shopping centers
which are either owned or, with respect to certain shopping
centers, operated under long-term ground leases that expire at
various dates through 2070, with renewal options. Space in the
shopping centers is leased to tenants pursuant to agreements
that provide for terms ranging generally from one month to
30 years and, in some cases, for annual rentals subject to
upward adjustments based on operating expense levels, sales
volume or contractual increases as defined in the lease
agreements.
The scheduled future minimum revenues from rental properties
under the terms of all non-cancelable tenant leases, assuming no
new or renegotiated leases or option extensions for such
premises for the subsequent five years ending December 31,
are as follows for continuing operations (in thousands):
|
|
|
|
|
2009
|
|
$
|
550,246
|
|
2010
|
|
|
506,056
|
|
2011
|
|
|
450,459
|
|
2012
|
|
|
383,743
|
|
2013
|
|
|
323,911
|
|
Thereafter
|
|
|
1,529,939
|
|
|
|
|
|
|
|
|
$
|
3,744,354
|
|
|
|
|
|
|
F-38
Scheduled minimum rental payments under the terms of all
non-cancelable operating leases in which the Company is the
lessee, principally for office space and ground leases, for the
subsequent five years ending December 31, are as follows
for continuing operations (in thousands):
|
|
|
|
|
2009
|
|
$
|
4,895
|
|
2010
|
|
|
4,585
|
|
2011
|
|
|
4,524
|
|
2012
|
|
|
4,421
|
|
2013
|
|
|
3,977
|
|
Thereafter
|
|
|
141,049
|
|
|
|
|
|
|
|
|
$
|
163,451
|
|
|
|
|
|
|
|
|
12.
|
Non-Controlling Interests, Redeemable
Operating Partnership Units,
Preferred Shares, Common Shares, Common Shares in Treasury and
Deferred Compensation Obligations
|
Equity
The Companys balance sheet was
adjusted as of December 31, 2008 to reclassify
$127.5 million in non-controlling interests as a component of equity pursuant to the
provisions of SFAS 160. In addition, paid-in capital was
increased by $79.2 million relating to the retrospection adoption of FSP APB 14-1
relating to the allocated value of the equity component of certain of the Companys senior
convertible unsecured notes
(Note 1).
Redemption of OP Units Non-controlling interest
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to DDR
|
|
$
|
(71,930
|
)
|
|
$
|
264,942
|
|
|
$
|
251,958
|
|
Purchase of OP Units
|
|
|
(5,172
|
)
|
|
|
|
|
|
|
22,371
|
|
|
|
|
|
|
|
|
|
|
|
Change from net (loss) income
attributable to DDR and decrease
from the non-controlling interest
|
|
$
|
(77,102
|
)
|
|
$
|
264,942
|
|
|
$
|
274,329
|
|
|
|
|
|
|
|
|
|
|
|
Non-Controlling Interests
Non-controlling interests consist of the following (in millions):
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
MV LLC
|
|
$
|
70.2
|
|
|
$
|
74.6
|
|
Shopping centers and development parcels in Arizona, Missouri,
Utah and Wisconsin
|
|
|
15.4
|
|
|
|
3.8
|
|
Business center in Massachusetts
|
|
|
|
|
|
|
20.5
|
|
Consolidated joint venture interests primarily outside the
United States
|
|
|
34.5
|
|
|
|
12.9
|
|
Operating
partnership units
|
|
|
7.4
|
|
|
|
16.5
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
127.5
|
|
|
$
|
128.3
|
|
|
|
|
|
|
|
|
|
|
At
December 31, 2008 and 2007, the Company had 369,177 and
832,369 operating partnership units
(OP Units) outstanding, respectively. These
OP Units, issued to different partnerships, are
exchangeable, at the election of the OP Unit holder, and
under certain circumstances at the option of the Company, into
an equivalent number of the Companys common shares or for
the equivalent amount of cash. Most of these OP Units have
registration rights agreements equivalent to the amount of
OP Units held by the holder if the Company elects to settle
in its common shares. The liability for the OP Units is
classified on the Companys balance sheet either as redeemable operating
partnership units or non-controlling interests.
The OP Unit holders are entitled to receive distributions,
per OP Unit, generally equal to the per share distributions
on the Companys common shares.
In 2008, 0.5 million of OP Units were converted into
an equivalent number of common shares of the Company. In 2006, the Company purchased 32,274
OP Units for cash of $2.1 million. Also in 2006,
0.4 million of OP Units were converted into an
equivalent number of common shares of the Company. These
transactions were treated as a purchase of non-controlling interest.
Redeemable Operating
Partnership Units
At December 31, 2008 and 2007, the Company had 29,524 redeemable OP Units outstanding.
Redeemable OP Units are accounted for in accordance with D-98, and are presented at the greater of their carrying amount or
redemption value at the end of each reporting period. Changes in the value from period to period
are recorded to paid in capital in the Companys consolidated balance sheets. Below is a
table reflecting the activity of the redeemable OP units (in thousands):
|
|
|
|
|
Balance at December 31, 2006
|
|
$
|
2,519
|
|
Net income
|
|
|
78
|
|
Distributions
|
|
|
(78
|
)
|
Adjustment to redeemable operating partnership units
|
|
|
(1,134
|
)
|
Adjustment
to non-controlling interests
|
|
|
(222
|
)
|
|
|
|
|
Balance at December 31, 2007
|
|
|
1,163
|
|
Net income
|
|
|
61
|
|
Distributions
|
|
|
(61
|
)
|
Adjustment to redeemable operating partnership units
|
|
|
(536
|
)
|
|
|
|
|
Balance at December 31, 2008
|
|
$
|
627
|
|
|
|
|
|
In 2007,
the Company purchased 10,480 OP Units for cash of
$0.7 million.
Preferred
Operating Partnership Units
In February 2007, a consolidated subsidiary of the Company
issued to a designee of Wachovia Bank, N.A.
(Wachovia) 20 million preferred units (the
Preferred OP Units), with a liquidation
preference of $25 per unit, aggregating $500 million, of
one of the net assets of the Companys consolidated
subsidiaries. In accordance with terms of the agreement, the
Preferred OP Units were redeemed at 97.0% of par in June
2007 from the proceeds related to the sale of assets.
F-39
Preferred
Shares
The Companys preferred shares outstanding at December 31
are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
Class G 8.0% cumulative redeemable preferred
shares, without par value, $250 liquidation value;
750,000 shares authorized; 720,000 shares issued and
outstanding at December 31, 2008 and 2007
|
|
$
|
180,000
|
|
|
$
|
180,000
|
|
Class H 7.375% cumulative redeemable preferred
shares, without par value, $500 liquidation value;
750,000 shares authorized; 410,000 shares issued and
outstanding at December 31, 2008 and 2007
|
|
|
205,000
|
|
|
|
205,000
|
|
Class I 7.5% cumulative redeemable preferred
shares, without par value, $500 liquidation value;
750,000 shares authorized; 340,000 shares issued and
outstanding at December 31, 2008 and 2007
|
|
|
170,000
|
|
|
|
170,000
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
555,000
|
|
|
$
|
555,000
|
|
|
|
|
|
|
|
|
|
|
In April 2007, the Company redeemed all outstanding shares of
its 8.6% Class F Cumulative Redeemable Preferred Shares,
aggregating $150 million, at a redemption price of
$25.10750 per Class F Preferred Share (the sum of $25 per
share and a dividend per share of $0.10750 prorated to the
redemption date). The Company recorded a charge to net income
attributable to DDR common shareholders of $5.4 million relating
to the write-off of the original issuance costs.
The Class G depositary shares represent
1
/
10
of a preferred share and have a stated value of $250 per share.
The Class H and I depositary shares represent
1
/
20
of a Class H and Class I preferred share,
respectively, and have a stated value of $500 per share. The
Class G, Class H and Class I depositary shares
are not redeemable by the Company prior to March 28, 2008,
July 28, 2008, and May 7, 2009, respectively, except
in certain circumstances relating to the preservation of the
Companys status as a REIT.
The Companys authorized preferred shares consist of the
following:
|
|
|
|
|
750,000 Class A Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class B Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class C Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class D Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class E Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class F Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class G Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class H Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class I Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class J Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Class K Cumulative Redeemable Preferred Shares,
without par value
|
|
|
|
750,000 Non Cumulative Preferred Shares, without par value
|
Common
Shares
The Companys common shares have a $0.10 per share par
value. Dividends declared per share of common stock were $2.07, $2.64 and $2.36 for 2008, 2007 and 2006, respectively.
In 2008, the Company issued 8.3 million common shares at a
weighted-average price of $4.92 per share and received aggregate
net proceeds of approximately $41.9 million. The net cash
proceeds received from these issuances were used to repay
amounts outstanding on the Companys Revolving Credit
Facilities.
F-40
In December 2006, the Company entered into forward-sale
agreements in anticipation of the merger with IRRETI
(Note 3). In February 2007, the Company settled this
contract and issued an aggregate of 11.6 million of its
common shares for approximately $750 million. In February
2007, the Company issued an additional 5.7 million of its
common shares as part of the consideration to the IRRETI
shareholders (Note 3).
Common
Shares in Treasury
In August 2006 and March 2007, the Companys Board of
Directors authorized the Company to repurchase 909,000 and
1,878,311 common shares, respectively, of the Companys
common stock at a cost of $53.15 per share and $62.29 per share,
respectively, in connection with the issuance of the
Companys Senior Convertible Notes in each respective year
(Note 8). In June 2007, the Companys Board of
Directors authorized a common share repurchase program. Under
the terms of the program, the Company may purchase up to a
maximum value of $500 million of its common shares over a
two-year period. As of December 31, 2008, the Company had
repurchased 5.6 million of its common shares under this
program at a
weighted-average
cost of $46.66 per share.
Deferred
Compensation Obligations
In 2006, certain officers of the Company completed a
stock-for-stock option exercise and received approximately
0.3 million common shares in exchange for 0.2 million
common shares of the Company. In addition, vesting of restricted
stock grants approximating 0.1 million, 0.1 million
and less than 0.1 million common shares in 2008, 2007 and
2006, respectively, was deferred. The Company recorded
$4.3 million, $6.7 million and $0.8 million in
2008, 2007 and 2006, respectively, in shareholders equity
as deferred compensation obligations for the vested restricted
stock deferred into the Companys non-qualified deferred
compensation plans.
In 2008, deferred obligations aggregating $14.0 million
were distributed from the Equity Deferred Compensation Plan
(Note 18) to the Chairman of the Board and Chief
Executive Officer (CEO) of the Company resulting in
a reduction of the deferred obligation and corresponding
increase in
paid-in
capital.
Other revenue from continuing operations was composed of the
following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Lease terminations and bankruptcy settlements
|
|
$
|
5,799
|
|
|
$
|
4,961
|
|
|
$
|
13,989
|
|
Acquisition and financing fees(1)
|
|
|
1,991
|
|
|
|
7,881
|
|
|
|
414
|
|
Other
|
|
|
961
|
|
|
|
855
|
|
|
|
454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other revenue
|
|
$
|
8,751
|
|
|
$
|
13,697
|
|
|
$
|
14,857
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Includes acquisition fees of
$6.3 million earned from the formation of the DDRTC Core
Retail Fund LLC in February 2007, excluding the
Companys retained ownership interest. The Companys
fees were earned in conjunction with services rendered by the
Company in connection with the acquisition of the IRRETI real
estate assets. Financing fees are earned in connection with the
formation and refinancing of unconsolidated joint ventures,
excluding the Companys retained ownership interest. The
Companys fees are earned in conjunction with the closing
and are based upon the amount of the financing transaction by
the joint venture.
|
|
|
14.
|
Impairment
Charges and Impairment of Joint Venture Investments
|
In December 2008, due to the continued deterioration of the
U.S. capital markets, the lack of liquidity and the related
impact on the real estate market and retail industry that
accelerated during the fourth quarter of 2008, the Company
determined that certain of its consolidated real estate
investments and unconsolidated joint venture investments were
impaired. As a result, the Company recorded impairment charges
of approximately $76.3 million on several consolidated real
estate investments, including operating shopping centers and
land under development, as determined pursuant to the provisions
of SFAS 144.
An additional $3.6 million was reported for the year ended December
31, 2008 as a component of discontinued operations.
In addition, as discussed in Note 2, the
Company recorded impairment charges on several investments in
unconsolidated joint ventures of $107.0 million determined
pursuant
F-41
to the provisions of APB 18. Investments in unconsolidated joint
ventures are considered financial assets within the
scope of SFAS 157, which was adopted by the Company
effective January 1, 2008.
Investment
Valuation Consolidated Investments
The fair value of real estate investments is estimated based on
the price that would be received to sell an asset in an orderly
transaction between marketplace participants at the measurement
date. The valuation techniques that we used included discounted
cash flow analysis, an income capitalization approach on
prevailing or earning multiples applied to earnings from the
investment, analysis of recent comparable sales transactions,
actual sale negotiations and bona fide purchase offers received
from third parties and/or consideration of the amount that
currently would be required to replace the asset, as adjusted
for obsolescence. In general, the Company considers multiple
valuation techniques when measuring the fair value of an
investment. However, in certain circumstances, a single
valuation technique may be appropriate. Investments in publicly
traded equity securities are valued based on their quoted market
prices.
The fair value of real estate investments generally reflects
estimated sale costs, which may be incurred upon disposition of
the real estate investments. Such costs are estimated to
approximate 2% to 3% of the estimated sales price.
Certain investments in real estate and real estate related
investments occur in geographic areas for which no liquid market
exists. The market prices for such investments may be volatile
and may not be readily ascertainable. In addition, there
continues to be significant disruptions in the global capital,
credit and real estate markets. These disruptions have led to,
among other things, a significant decline in the volume of
transaction activity, in the fair value of many real estate and
real estate related investments, and a significant contraction
in short-term and long-term debt and equity sources. This
contraction in capital includes sources that the Company may
depend on to finance certain of its real estate investments.
These market developments have had a significant adverse impact
on the Companys liquidity position, results of operations
and financial condition and may continue to adversely impact the
Company if market conditions continue to deteriorate. The
decline in liquidity and prices of real estate and real estate
related investments, as well as the availability of observable
transaction data and inputs, may have made it more difficult to
determine the fair value of such investments. As a result,
amounts ultimately realized by the Company from investments sold
may differ from the fair values presented, and the differences
could be material.
Measurement
of Fair Value
Unconsolidated Investments
At December 31, 2008, the Company was required to assess
the value of certain of its unconsolidated investments in joint
ventures in accordance with SFAS 157. The valuation of
these assets is determined using widely accepted valuation
techniques including discounted cash flow analysis on the
expected cash flows of each asset as well as the income
capitalization approach considering prevailing market
capitalization rates. The Company reviews each investment based
on the highest and best use of the investment and market
participation assumptions. For joint ventures with investments
in projects under development the significant assumptions
included the discount rate, the timing for the construction
completion and project stabilization and the exit capitalization
rate. For joint ventures with investments in operational real
estate assets, the significant assumptions included the
capitalization rate used in the income capitalization valuation,
as well as projected property net operating income and the
valuation of joint venture debt pursuant to SFAS 157. The
Company has determined that the significant inputs used to value
its unconsolidated joint venture investments with a value of
approximately $75.3 million at December 31, 2008,
excluding MDT, fall within Level 3. The valuation
adjustment of approximately $31.7 million relating to the
Companys investment in MDT was considered to be a
Level 1 input, as it was valued based upon a quoted market
price on the Australian Stock Exchange.
These valuation adjustments were calculated based on market
conditions and assumptions made by management at the time the
valuation adjustments were recorded, which may differ materially
from actual results if market conditions or the underlying
assumptions change.
F-42
Items Measured
at Fair Value on a Non-Recurring Basis
The following table presents information about the
Companys impairment charges on financial assets (in
millions) that were measured on a fair value basis for the year
ended December 31, 2008. The table indicates the fair value
hierarchy of the valuation techniques utilized by the Company to
determine such fair value.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair-Value Measurements at December 31, 2008
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Unconsolidated joint venture investments
|
|
$
|
31.7
|
|
|
$
|
|
|
|
$
|
75.3
|
|
|
$
|
107.0
|
|
|
|
15.
|
Discontinued
Operations and Disposition of Real Estate and Real Estate
Investments
|
Discontinued
Operations
During the year ended December 31, 2008, the Company sold
22 properties (including one business center and one property
held for sale at December 31, 2007) which were
classified as discontinued operations for the years ended
December 31, 2008, 2007 and 2006, aggregating
1.3 million square feet of Company-owned GLA. During the
period January 1, 2009 through June 30, 2009, the
Company sold 15 properties and six properties were considered held
for sale at June 30, 2009,
aggregating 2.4 million square feet of Company-owned GLA. The Company
had one property considered held for sale at December 31,
2007. Included in discontinued operations for the three years
ended December 31, 2008, are 116 properties aggregating
10.8 million square feet of Company-owned GLA. Of these
properties, 94 previously had been included in the shopping
center segment and one of these properties previously had been
included in the business center segment (Note 21). The
operations of these properties have been reflected on a
comparative basis as discontinued operations in the consolidated
financial statements for the three years ended December 31,
2008 included herein.
There were no assets designated as held for sale as of
December 31, 2008. The balance sheet relating to the assets
held for sale and the operating results relating to assets sold
or designated as assets held for sale at December 31, 2007,
are as follows (in thousands):
|
|
|
|
|
|
|
December 31,
|
|
|
|
2007
|
|
|
Land
|
|
$
|
3,365
|
|
Building
|
|
|
2,494
|
|
Other real estate assets
|
|
|
4
|
|
|
|
|
|
|
|
|
|
5,863
|
|
Less: Accumulated depreciation
|
|
|
(67
|
)
|
|
|
|
|
|
Total assets held for sale
|
|
$
|
5,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Revenues
|
|
$
|
41,359
|
|
|
$
|
68,485
|
|
|
$
|
72,702
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
|
|
|
11,483
|
|
|
|
18,320
|
|
|
|
20,179
|
|
Impairment charge
|
|
|
3,581
|
|
|
|
|
|
|
|
|
|
Interest, net
|
|
|
7,926
|
|
|
|
15,691
|
|
|
|
18,305
|
|
Depreciation
|
|
|
12,763
|
|
|
|
17,910
|
|
|
|
18,992
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,753
|
|
|
|
51,921
|
|
|
|
57,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from discontinued operations
|
|
|
5,606
|
|
|
|
16,564
|
|
|
|
15,226
|
|
(Loss) gain on disposition of real estate, net of tax
|
|
|
(4,830
|
)
|
|
|
12,259
|
|
|
|
11,051
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
776
|
|
|
$
|
28,823
|
|
|
$
|
26,277
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-43
The Company sold properties and recorded (losses) gains on
dispositions, as described below, for the three years ended
December 31, 2008 as follows ($ in millions):
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Gain (loss) on
|
|
|
|
Properties
|
|
|
Disposition of
|
|
|
|
Sold
|
|
|
Real Estate
|
|
|
2008
|
|
|
22
|
|
|
$
|
(4.8
|
)
|
2007
|
|
|
67
|
|
|
|
12.3
|
|
2006
|
|
|
6
|
|
|
|
11.1
|
|
Disposition
of Real Estate and Real Estate Investments
The Company recorded gains on disposition of real estate and
real estate investments for the three years ended
December 31, 2008, as follows (in millions):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended
|
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Transfer of assets to DDR Domestic Retail Fund I (1)(2)
|
|
$
|
|
|
|
$
|
1.8
|
|
|
$
|
|
|
Transfer of assets to TRT DDR Venture I (1)(3)
|
|
|
|
|
|
|
50.3
|
|
|
|
|
|
Transfer of assets to DPG Realty Holdings LLC (1)(4)
|
|
|
|
|
|
|
|
|
|
|
0.6
|
|
Transfer of assets to DDR Macquarie Fund (1)(5)
|
|
|
|
|
|
|
|
|
|
|
9.2
|
|
Transfer of assets to the MDT PS LLC (1)(6)
|
|
|
|
|
|
|
|
|
|
|
38.9
|
|
Transfer of assets to Service Holdings LLC (1)(7)
|
|
|
|
|
|
|
|
|
|
|
6.1
|
|
Land sales (8)
|
|
|
6.2
|
|
|
|
14.0
|
|
|
|
14.8
|
|
Previously deferred gains and other loss on dispositions (9)
|
|
|
0.8
|
|
|
|
2.8
|
|
|
|
2.4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
7.0
|
|
|
$
|
68.9
|
|
|
$
|
72.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
This disposition is not classified
as discontinued operations due to the Companys continuing
involvement through its retained ownership interest and
management agreements.
|
|
(2)
|
|
The Company transferred two
wholly-owned assets. The Company did not record a gain on the
contribution of 54 assets, as these assets were recently
acquired through the merger with IRRETI.
|
|
(3)
|
|
The Company transferred three
recently developed assets.
|
|
(4)
|
|
The Company transferred a newly
developed expansion area adjacent to a shopping center owned by
the joint venture.
|
|
(5)
|
|
The Company transferred three
assets in 2007 and newly developed expansion areas adjacent to
four shopping centers owned by the joint venture in 2006. The
Company did not record a gain on the contribution of three
assets in 2007, as these assets were recently acquired through
the merger with IRRETI.
|
|
(6)
|
|
The Company transferred six
recently developed assets.
|
|
(7)
|
|
The Company transferred 51 retail
sites previously occupied by Service Merchandise.
|
|
(8)
|
|
These dispositions did not meet the
criteria for discontinued operations, as the land did not have
any significant operations prior to disposition.
|
|
(9)
|
|
These gains and losses are
primarily attributable to the subsequent leasing of units
related to master lease and other obligations originally
established on disposed properties, which are no longer required.
|
F-44
|
|
16.
|
Comprehensive
(Loss) Income
|
Comprehensive (loss) income attributable to DDR is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Net (loss) income
|
|
$
|
(83,008
|
)
|
|
$
|
282,726
|
|
|
$
|
260,411
|
|
Other comprehensive (loss) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of interest rate contracts
|
|
|
(13,293
|
)
|
|
|
(20,126
|
)
|
|
|
(2,729
|
)
|
Amortization of interest rate contracts
|
|
|
(643
|
)
|
|
|
(1,454
|
)
|
|
|
(1,454
|
)
|
Foreign currency translation
|
|
|
(48,701
|
)
|
|
|
22,716
|
|
|
|
1,587
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
|
(62,637
|
)
|
|
|
1,136
|
|
|
|
(2,596
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive (loss) attributable to the non-controlling interests
|
|
|
14,962
|
|
|
|
(17,706
|
)
|
|
|
(8,301
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total comprehensive (loss) income attributable to DDR
|
|
$
|
(130,683
|
)
|
|
$
|
266,156
|
|
|
$
|
249,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
17.
|
Transactions
with Related Parties
|
In July 2008, the Company purchased a 25.2525% membership
interest in RO & SW Realty LLC (ROSW), a
Delaware limited liability company, from Wolstein Business
Enterprises, L.P. (WBE), a limited partnership
established for the benefit of the children of Scott A.
Wolstein, the Companys CEO and a 50% membership interest
in Central Park Solon LLC, an Ohio limited liability company
(Central Park), from Mr. Wolstein, for
$10.0 million. The acquired interests in both ROSW and
Central Park are referred to herein as the Membership
Interests. ROSW is a real estate company that owns 11
properties (the Properties). Central Park is a real
estate company that owns the development rights relating to a
large-scale mixed use project in Solon, Ohio (the
Project). The Company had identified a number of
development projects located near the Properties as well as
several value-add opportunities relating to the Properties,
including the Project. In October 2008, the Company assumed
Mr. Wolsteins obligation under a promissory note that
funded the pre-development expenses of the Project.
Mr. Wolstein and his 50% partner, who also holds the
remaining membership interest in each of Central Park and ROSW,
were jointly and severally liable for the obligations under the
promissory note, and they agreed to indemnify each other for 50%
of such obligations. The balance of the promissory note was
$2.5 million at the effective date of assumption in July
2008, of which the Company is responsible for 50%.
The purchase of the Membership Interests by the Company,
including the assumption of the promissory note obligations,
were approved by a special committee of disinterested directors
of the Company who were appointed and authorized by the
Nominating and Corporate Governance Committee of the
Companys Board of Directors to review and approve the
terms of the acquisition and assumption.
The Company accounts for its interest in ROSW and Central Park
under the equity method of accounting, and recorded the
aggregate $11.3 million acquisition of the Membership
Interests as Investments in and Advances to Joint Ventures in
the Companys consolidated balance sheet. In the fourth
quarter of 2008 due to deteriorating market conditions, the
Company and its partner in Central Park decided not to pursue
the Project. As a result, the Company recorded a charge of
approximately $3.2 million, representing a
write-off
the purchase price allocated to the Project and the 50% interest
in Central Park. In addition, it was determined that
approximately $1.9 million of the pre-development costs,
assumed upon acquisition and subsequently incurred should be
written off as dead-deal costs, of which the Company
has a 50% interest.
In March 2002, the Company entered into a joint venture with
Klaff Realty L.P. and Lubert-Adler Real Estate Funds, (which is
owned in part by a director of the Company). In August 2006, the
Company purchased its then partners approximate 75%
interest in the remaining 52 assets owned by the joint venture
at a gross purchase price of approximately $138 million
relating to the partners ownership, based on a total
valuation of approximately $185 million for all remaining
assets, including outstanding indebtedness. The Company sold 51
of the assets to Service Holdings LLC, an unconsolidated joint
venture of which the Company owns 20%, in September 2006.
As discussed in Note 3, MV LLC purchased one additional
site for approximately $11.0 million in 2006, and the
Company purchased one additional site for approximately
$12.4 million. The assets were acquired from several
F-45
funds, one of which was managed by Lubert-Adler Real Estate
Funds, which is owned in part by a director of the Company.
The Company has a lease for office space owned by
Mr. Wolsteins mother. General and administrative
rental expense associated with this office space aggregated
$0.6 million for each of the years ended December 31,
2008, 2007 and 2006. The Company periodically utilizes a
conference center owned by the trust of Bert Wolstein, deceased
founder of the Company, Mr. Wolsteins father, and one
of the Companys principal shareholders, for
Company-sponsored events and meetings. The Company paid
$0.2 million in 2008 and 2007 and less than
$0.1 million in 2006 for the use of this facility.
Transactions with the Companys equity affiliates are
described in Note 2.
Stock-Based
Compensation
The Companys stock option and equity-based award plans
provide for grants to Company employees of incentive and
non-qualified stock options to purchase common shares of the
Company, rights to receive the appreciation in value of common
shares, awards of common shares subject to restrictions on
transfer, awards of common shares issuable in the future upon
satisfaction of certain conditions and rights to purchase common
shares and other awards based on common shares. Under the terms
of the plans, awards available for grant approximated
3.9 million shares at December 31, 2008. Options may
be granted at per-share prices not less than fair market value
at the date of grant, and in the case of options, must be
exercisable within the maximum contractual term of 10 years
thereof (or, with respect to incentive options granted to
certain employees, within five years thereof). Options granted
under the plans generally vest over three years in one-third
increments, beginning one year after the date of grant.
In previous years, the Company granted options to its directors.
Options are no longer granted to the Companys directors.
Such options were granted at the fair market value on the date
of grant. All of the options granted to the directors are
currently exercisable.
The Company accounts for stock-based awards pursuant to the
provisions of SFAS 123(R). The fair values for stock-based
awards granted in 2008, 2007 and 2006 were estimated at the date
of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions:
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
2008
|
|
2007
|
|
2006
|
|
Weighted-average fair value of grants
|
|
$3.39
|
|
$9.76
|
|
$6.50
|
Risk-free interest rate (range)
|
|
2.0% - 2.9%
|
|
4.1% - 4.8%
|
|
4.4% - 5.1%
|
Dividend yield (range)
|
|
6.9% - 9.0%
|
|
4.0% - 4.9%
|
|
4.2% - 5.0%
|
Expected life (range)
|
|
3 - 5 years
|
|
3 - 5 years
|
|
3 - 4 years
|
Expected volatility (range)
|
|
22.3% - 36.3%
|
|
19.2% - 20.3%
|
|
19.8% - 20.3%
|
The risk-free rate was based upon a U.S. Treasury Strip
with a maturity date that approximates the expected term of the
award. The expected life of the award was derived by referring
to actual exercise experience. The expected volatility of the
stock was derived by referring to changes in the Companys
historical stock prices over a time frame similar to the
expected life of the award.
F-46
The following table reflects the stock option activity described
above (aggregate intrinsic value in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
Average
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
|
|
|
Remaining
|
|
|
Aggregate
|
|
|
|
Number of Options
|
|
|
Exercise
|
|
|
Contractual
|
|
|
Intrinsic
|
|
|
|
Employees
|
|
|
Directors
|
|
|
Price
|
|
|
Term
|
|
|
Value
|
|
|
Balance December 31, 2005
|
|
|
1,903
|
|
|
|
62
|
|
|
$
|
32.46
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
302
|
|
|
|
|
|
|
|
51.19
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(679
|
)
|
|
|
(20
|
)
|
|
|
29.31
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(41
|
)
|
|
|
|
|
|
|
42.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2006
|
|
|
1,485
|
|
|
|
42
|
|
|
$
|
37.28
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
341
|
|
|
|
|
|
|
|
65.54
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(148
|
)
|
|
|
|
|
|
|
32.22
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(25
|
)
|
|
|
|
|
|
|
47.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2007
|
|
|
1,653
|
|
|
|
42
|
|
|
$
|
43.37
|
|
|
|
|
|
|
|
|
|
Granted
|
|
|
665
|
|
|
|
|
|
|
|
37.43
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(51
|
)
|
|
|
(10
|
)
|
|
|
27.01
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
(82
|
)
|
|
|
|
|
|
|
45.31
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance December 31, 2008
|
|
|
2,185
|
|
|
|
32
|
|
|
$
|
41.97
|
|
|
|
6.8
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options exercisable at December 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
1,268
|
|
|
|
32
|
|
|
$
|
40.06
|
|
|
|
5.3
|
|
|
$
|
|
|
2007
|
|
|
1,003
|
|
|
|
42
|
|
|
|
35.67
|
|
|
|
5.7
|
|
|
|
5,706
|
|
2006
|
|
|
616
|
|
|
|
42
|
|
|
|
28.75
|
|
|
|
6.1
|
|
|
|
22,517
|
|
The following table summarizes the characteristics of the
options outstanding at December 31, 2008 (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options Outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
Options Exercisable
|
|
|
|
Outstanding
|
|
|
Average
|
|
|
Weighted-
|
|
|
|
|
|
Weighted-
|
|
Range of
|
|
as of
|
|
|
Remaining
|
|
|
Average
|
|
|
Exercisable as of
|
|
|
Average
|
|
Exercise Prices
|
|
12/31/08
|
|
|
Contractual Life
|
|
|
Exercise Price
|
|
|
12/31/08
|
|
|
Exercise price
|
|
|
$6.88-$13.76
|
|
|
18
|
|
|
|
1.4
|
|
|
$
|
13.21
|
|
|
|
18
|
|
|
$
|
13.21
|
|
$13.77-$20.63
|
|
|
46
|
|
|
|
3.0
|
|
|
|
19.55
|
|
|
|
46
|
|
|
|
19.55
|
|
$20.64-$27.51
|
|
|
173
|
|
|
|
3.8
|
|
|
|
22.93
|
|
|
|
173
|
|
|
|
22.93
|
|
$27.52-$34.38
|
|
|
65
|
|
|
|
6.1
|
|
|
|
30.11
|
|
|
|
39
|
|
|
|
29.61
|
|
$34.39-$41.27
|
|
|
926
|
|
|
|
7.7
|
|
|
|
37.27
|
|
|
|
311
|
|
|
|
36.42
|
|
$41.28-$48.15
|
|
|
404
|
|
|
|
5.8
|
|
|
|
41.82
|
|
|
|
404
|
|
|
|
41.82
|
|
$48.16-$55.02
|
|
|
252
|
|
|
|
6.7
|
|
|
|
50.97
|
|
|
|
176
|
|
|
|
50.94
|
|
$55.03-$61.90
|
|
|
20
|
|
|
|
8.0
|
|
|
|
56.15
|
|
|
|
12
|
|
|
|
55.98
|
|
$61.91-$68.78
|
|
|
313
|
|
|
|
7.8
|
|
|
|
65.78
|
|
|
|
121
|
|
|
|
65.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,217
|
|
|
|
6.7
|
|
|
$
|
41.97
|
|
|
|
1,300
|
|
|
$
|
40.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-47
The following table reflects the activity for unvested stock
option awards for the year ended December 31, 2008 (in
thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Options
|
|
|
Fair Value
|
|
|
Unvested at December 31, 2007
|
|
|
650
|
|
|
$
|
7.73
|
|
Granted
|
|
|
665
|
|
|
|
3.39
|
|
Vested
|
|
|
(352
|
)
|
|
|
6.86
|
|
Forfeited
|
|
|
(46
|
)
|
|
|
5.28
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2008
|
|
|
917
|
|
|
$
|
5.03
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008, total unrecognized stock option
compensation cost of share-based compensation arrangements
aggregated $2.8 million. The cost is expected to be
recognized over a weighted-average period of approximately two
years.
Exercises
of Employee Stock Options
The total intrinsic value of options exercised for the year
ended December 31, 2008, was approximately
$0.8 million. The total cash received from employees as a
result of employee stock option exercises for the year ended
December 31, 2008, was approximately $1.6 million. The
Company settles employee stock option exercises primarily with
newly issued common shares or with treasury shares, if available.
Restricted
Stock Awards
In 2008, 2007 and 2006, the Board of Directors approved grants
of 132,394, 89,172 and 64,940 restricted common shares,
respectively, to certain executives of the Company. The
restricted stock grants vest in equal annual amounts over a
five-year period. Restricted stock awards have the same cash
dividend and voting rights as other common stock and are
considered to be currently issued and outstanding. These grants
have a weighted-average fair value at the date of grant ranging
from $30.80 to $66.75, which was equal to the market value of
the Companys common shares at the date of grant. In 2008,
2007 and 2006, grants of 16,978; 5,172 and 9,497 common shares,
respectively, were issued as compensation to the Companys
outside directors. These grants were issued equal to the market
value of the Companys stock at the date of grant.
The following table reflects the activity for unvested
restricted stock awards for the year ended December 31,
2008 (awards in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
|
|
|
|
|
|
|
Average
|
|
|
|
|
|
|
Grant Date
|
|
|
|
Awards
|
|
|
Fair Value
|
|
|
Unvested at December 31, 2007
|
|
|
146
|
|
|
$
|
54.47
|
|
Granted
|
|
|
132
|
|
|
|
37.10
|
|
Vested
|
|
|
(81
|
)
|
|
|
45.39
|
|
Forfeited
|
|
|
(4
|
)
|
|
|
48.67
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2008
|
|
|
193
|
|
|
$
|
46.50
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2008, total unrecognized compensation of
restricted stock award arrangements granted under the plans
aggregated $9.0 million. The cost is expected to be
recognized over a weighted-average period of approximately
1.4 years.
Performance
Units
The Board of Directors approved a grant of performance units
(Performance Units) to the Companys CEO (in
2000 and 2002), former President (in 2002) and current
President (in 2002). Pursuant to the provisions of the
F-48
Performance Units, through 2006 the Performance Units were
converted to an aggregate 666,666 restricted common shares based
on the annualized total shareholders return for the five
years then ended. Each of these restricted share grants vests
over a five-year period.
The fair value of each Performance Unit grant was estimated on
the date of grant using a simulation approach based model using
the following assumptions:
|
|
|
|
|
Range
|
|
Risk-free interest rate
|
|
4.4%-6.4%
|
Dividend yield
|
|
7.8%-10.9%
|
Expected life
|
|
10 years
|
Expected volatility
|
|
20%-23%
|
The following table reflects the activity for the unvested
awards for the year ended December 31, 2008
(in thousands):
|
|
|
|
|
|
|
Awards
|
|
|
Unvested at December 31, 2007
|
|
|
385
|
|
Vested
|
|
|
(91
|
)
|
|
|
|
|
|
Unvested at December 31, 2008
|
|
|
294
|
|
|
|
|
|
|
As of December 31, 2008, total unrecognized compensation
costs of the 2000 and 2002 Performance Units that were granted
aggregated $0.1 million and $0.6 million,
respectively. The costs are expected to be recognized over one-
and three-year terms, respectively.
Outperformance
Awards
In December 2005 and August 2006, the Board of Directors
approved grants of outperformance long-term incentive plan
agreements (Outperformance Awards) with certain
executive officers. The outperformance agreements provide for
awards of the Companys common shares, or an equivalent
amount in cash, at the Companys option, to certain
officers of the Company if stated performance metrics are
achieved.
The measurement period for the Companys CEO and President
Executive Officers ended on December 31, 2007. At the end
of this measurement period, the Company achieved the FFO Target
(a specified level of growth in the Companys funds from
operations), and the Compensation Committee of the Board of
Directors (Committee) determined that the Senior
Executive Officers attained a discretionary metric
(non-financial performance criteria established by the
Compensation Committee of the Board of Directors of the Company)
based on effective development of executives and the successful
transition of management responsibilities and duties following
the former President of the Companys departure as an
executive officer. The Company, however, did not achieve either
metric (based on a total return to the Companys
shareholders target (the TRS Target) and a total
return to the Companys shareholders target relative to
that of the total return to shareholders of companies included
in a specified peer group (the Comparative TRS
Target, together with the TRS Target, the TRS
Metrics). Thus, the Committee granted outperformance
awards which were converted into 107,879 common shares of the
Company to the Senior Executive Officers in 2008.
With respect to eight additional executive officers (the
Officers), the performance metrics are as follows:
(a) the FFO Target and (b) the TRS Metrics and
together with the FFO Target and the TRS Target, the
Officer Targets. The measurement period for the
Officer Targets is January 1, 2005, through the earlier of
December 31, 2009, or the date of a change in control.
If the FFO Target is achieved, the Company will issue to each
Officer a number of common shares equal to (a) the dollar
value assigned to the FFO Target set forth in such
officers outperformance agreement and (b) divided by
the greater of (i) the average closing price for the common
shares over the 20 trading days ending on the valuation date (as
defined in the outperformance agreements) or (ii) the
closing price per common share on the last trading date before
the officer valuation date (as defined in the outperformance
agreements), or the equivalent amount of cash, at the
Companys option, as soon as practicable following the
applicable vesting date, March 1, 2010.
F-49
If one or both of the TRS Metrics are achieved, the Company will
issue to each Officer a number of shares set forth in the
agreement, depending on whether one or both of the TRS Metrics
have been achieved, or the equivalent amount of cash, at the
Companys option, as soon as practicable following the
applicable vesting date. The value of the number of common
shares or equivalent amount paid in cash with respect to the TRS
Metrics that may be paid is capped at an amount specified in
each Officers outperformance agreement, which management
believes does not represent an obligation that is based solely
or predominantly on a fixed monetary amount known at the grant
date.
The fair value of each outperformance unit grant for the share
price metrics was estimated on the date of grant using a Monte
Carlo approach model based on the following assumptions:
|
|
|
|
|
Range
|
|
Risk-free interest rate
|
|
4.4%-5.0%
|
Dividend yield
|
|
4.4%-4.5%
|
Expected life
|
|
3-5 years
|
Expected volatility
|
|
19%-21%
|
As of December 31, 2008, $0.4 million of total
unrecognized compensation costs were related to the two market
metric components associated with the award granted under the
Officers outperformance plan and expected to be recognized
over a 1.2-year term.
2007
Supplemental Equity Program
In December 2007, the Board of Directors approved the 2007
Supplemental Equity Program (2007 Program) for
certain executive officers. The 2007 Program provided for an
award pool payable in the Companys common shares, or an
equivalent amount in cash, at the Companys option, to
certain executive officers of the Company if the actual total
return on the Companys common shares during the relevant
measurement period exceeds the minimum return. The 2007 Program
allowed for measurement periods beginning December 1, 2010,
and the final measurement period was through the earlier of
December 1, 2012, or the date of a change in control.
The 2007 Program provided for the grant of awards to certain
executive officers, to be earned based on the satisfaction of
certain performance goals over a specified period. Under the
2007 Program certain executive officers had the opportunity to
receive, in the form of common shares, a percentage of an award
pool created based on the relative and absolute total
shareholder return (measured against entities in the North
American Real Estate Investment Trust index) during a series of
measurement periods extending into 2012 (or until a change in
control of the Company). In December 2008, the Committee decided
to terminate the 2007 Program because it determined that the
program no longer provided any motivational or retention value,
and therefore would not help achieve the two goals for which it
was created. In connection with the termination of the 2007
Program, as the Committee and the participants agreed to cancel
the awards for no consideration and the termination was not
accompanied by a concurrent grant of (or offer to grant)
replacement awards or other valuable consideration, the Company
recorded a non-cash charge of approximately $15.8 million
of previously unrecognized compensation cost associated with
these awards. The termination was considered a settlement for no
consideration pursuant to the provisions of SFAS 123(R). As
a result, in 2008 the Company recorded a charge of
$15.8 million representing the unrecorded compensation
expense based upon the grant date fair value relating to the
remaining four years under the 2007 Program relating to its
termination. This charge is included in general and
administrative expenses in the Companys consolidated
statement of operations.
The fair value of each 2007 Program award was estimated on the
date of grant using a Monte Carlo approach model based on the
following assumptions:
|
|
|
|
|
Range
|
|
Risk-free interest rate
|
|
3.4%
|
Dividend yield
|
|
5.9%
|
Expected life
|
|
5 years
|
Expected volatility
|
|
21%
|
During 2008, 2007 and 2006, approximately $29.0 million,
$11.0 million and $8.3 million, respectively, was
charged to expense associated with awards under the equity-based
award plans relating to stock grants, restricted
F-50
stock, Performance Units, Outperformance Awards and 2007
Program. In addition, in 2007 the Company recorded approximately
$0.9 million of stock-based compensation in accordance with
the provisions of SFAS 123(R) related to the former
presidents resignation as an executive officer of the
Company, effective May 2007. This charge is included in general
and administrative expenses in the Companys consolidated
statement of operations.
401(k)
Plan
The Company has a 401(k) defined contribution plan, covering
substantially all of the officers and employees of the Company,
that permits participants to defer up to a maximum of 50% of
their compensation subject to statutory limits. The Company
matches the participants contribution in an amount equal
to 50% of the participants elective deferral for the plan
year up to a maximum of 6% of a participants base salary
plus annual cash bonus, not to exceed the sum of 3% of the
participants base salary plus annual cash bonus. The
Companys plan allows for the Company to also make
additional discretionary contributions. No discretionary
contributions have been made. Employees contributions are
fully vested, and the Companys matching contributions vest
20% per year over five years. The Company funds all matching
contributions with cash. The Companys contributions for
each of the three years ended December 31, 2008, 2007 and
2006, were $1.0 million, $0.8 million and
$0.6 million, respectively. The 401(k) plan is fully funded
at December 31, 2008.
Elective
Deferred Compensation Plan
The Company has a non-qualified elective deferred compensation
plan for certain officers that permits participants to defer up
to 100% of their base salaries and annual performance-based cash
bonuses, less applicable taxes and benefits deductions. The
Company provides a matching contribution to any participant who
has contributed the maximum permitted under the 401(k) plan.
This matching contribution is equal to the difference between
(a) 3% of the sum of the participants base salary and
annual performance-based bonus deferred under the 401(k) plan
and the deferred compensation combined and (b) the actual
employer matching contribution under the 401(k) plan. Deferred
compensation related to an employee contribution is charged to
expense and is fully vested. Deferred compensation related to
the Companys matching contribution is charged to expense
and vests 20% per year. Once an employee has been with the
Company five years, all matching contributions are fully vested.
The Companys contributions were $0.1 million,
$0.2 million and $0.1 million for the three years
ended December 31, 2008, 2007 and 2006, respectively. At
December 31, 2008, 2007, 2006, deferred compensation under
this plan aggregated approximately $3.3 million,
$15.6 million and $12.3 million, respectively. The
plan is fully funded at December 31, 2008.
Equity
Deferred Compensation Plan
In 2003, the Company established the Developers Diversified
Realty Corporation Equity Deferred Compensation Plan (the
Plan), a non-qualified compensation plan for certain
officers and directors of the Company to defer the receipt of
restricted shares and, for compensation earned prior to
December 31, 2004, the gain otherwise recognizable upon the
exercise of options (see Note 12 regarding the deferral of
stock to this Plan). At December 31, 2008 and 2007, there
were 0.2 million and 0.8 million common shares,
respectively, of the Company in the Plan valued at
$1.2 million and $29.3 million, respectively. The Plan
is fully funded at December 31, 2008.
Directors
Deferred Compensation Plan
In 2000, the Company established the Directors Deferred
Compensation Plan (the Directors Plan), a
non-qualified compensation plan for the directors of the Company
to defer the receipt of quarterly compensation. In 2007, the
Company funded this obligation with common shares. At
December 31, 2008 and 2007, there were 0.1 million and
less than 0.1 million common shares, respectively, of the
Company in the Plan valued at $0.6 million and
$2.0 million, respectively. The Plan is fully funded at
December 31, 2008.
Other
Compensation
During 2006, the Company recorded $0.7 million of charges
as additional compensation to the Companys CEO, relating
to an incentive compensation agreement associated with the
Companys investment in the Retail Value Fund Program.
Pursuant to this agreement, the Companys CEO was entitled
to receive up to 25% of the distributions made by
Coventry I, a consolidated joint venture, provided the
Company achieved certain
F-51
performance thresholds in relation to funds from operations
growth
and/or
total
shareholder return. This agreement was terminated in January
2007 as part of the Companys acquisition of Coventry I.
|
|
19.
|
Earnings
and Dividends Per Share
|
Earnings Per Share (EPS) have been computed pursuant
to the provisions of SFAS No. 128, Earnings Per
Share. The following table provides a reconciliation of
income from continuing operations and the number of common
shares used in the computations of basic EPS, which
utilizes the weighted average of common shares outstanding
without regard to dilutive potential common shares, and
diluted EPS, which includes all such shares.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
(In thousands, except per share amounts)
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
(Loss) income from continuing operations
|
|
$
|
(90,746
|
)
|
|
$
|
185,052
|
|
|
$
|
162,111
|
|
Plus: Gain on disposition of real estate and real estate
investments
|
|
|
6,962
|
|
|
|
68,851
|
|
|
|
72,023
|
|
Less: Loss
(income) attributable to non-controlling interests
|
|
|
11,078
|
|
|
|
(17,784
|
)
|
|
|
(8,453
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations attributable to DDR
|
|
|
(72,706
|
)
|
|
|
236,119
|
|
|
|
225,681
|
|
Less: Preferred share dividends
|
|
|
(42,269
|
)
|
|
|
(50,934
|
)
|
|
|
(55,169
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted (Loss) income from continuing
operations attributable to DDR common shareholders
|
|
$
|
(114,975
|
)
|
|
$
|
185,185
|
|
|
$
|
170,512
|
|
Less: Earnings attributable to unvested shares and operating partnership units
|
|
|
(1,211
|
)
|
|
|
(1,730
|
)
|
|
|
(703
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and Diluted (Loss) income from continuing
operations
|
|
|
(116,186
|
)
|
|
|
183,455
|
|
|
|
169,809
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.52
|
|
|
$
|
1.56
|
|
Income from discontinued operations attributable to DDR common shareholders
|
|
|
|
|
|
|
0.24
|
|
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.76
|
|
|
$
|
1.80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Shares:
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic Average shares outstanding
|
|
|
119,843
|
|
|
|
120,879
|
|
|
|
109,002
|
|
Effect of dilutive securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock options
|
|
|
|
|
|
|
456
|
|
|
|
546
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted Average shares outstanding
|
|
|
119,843
|
|
|
|
121,335
|
|
|
|
109,548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share data:
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from continuing operations attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.51
|
|
|
$
|
1.55
|
|
Income from discontinued operations attributable to DDR common shareholders
|
|
|
|
|
|
|
0.24
|
|
|
|
0.24
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to DDR common shareholders
|
|
$
|
(0.97
|
)
|
|
$
|
1.75
|
|
|
$
|
1.79
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
Amounts attributable to DDRs common shareholders:
|
(Loss) income from continuing operations, net of tax
|
|
$
|
(72,596
|
)
|
|
$
|
235,685
|
|
|
$
|
225,241
|
|
Discontinued operations, net of tax
|
|
|
666
|
|
|
|
29,257
|
|
|
|
26,717
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income attributable to DDR
|
|
$
|
(71,930
|
)
|
|
$
|
264,942
|
|
|
$
|
251,958
|
|
|
|
|
|
|
|
|
|
|
|
Preferred
dividends
|
|
|
42,269
|
|
|
|
50,934
|
|
|
|
55,169
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss)
income attributable to DDR common shareholders
|
|
$
|
(114,119
|
)
|
|
$
|
214,008
|
|
|
$
|
196,789
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase 2.2 million, 1.7 million and
1.5 million common shares were outstanding at
December 31, 2008, 2007 and 2006, respectively
(Note 18), a portion of which has been reflected above in
diluted per share amounts using the treasury stock method.
Options aggregating 2.2 million and 0.6 million common
shares, respectively, were antidilutive at December 31,
2008 and 2007, and none of the options outstanding at 2006 were
antidilutive. Accordingly, the antidilutive options were
excluded from the computations.
Basic average shares outstanding do not include restricted
shares totaling 192,984; 145,980 and 161,958 that were not
vested at December 31, 2008, 2007 and 2006, respectively,
or Performance Units totaling 294,667, 385,333 and 136,000 that
were not vested at December 31, 2008, 2007 and 2006,
respectively.
The exchange into common shares,
associated with OP Units, was not included in the
computation of diluted for 2008, 2007 or 2006 because the effect
of assuming conversion was antidilutive (Note 12).
The Senior Convertible Notes, which are convertible into common
shares of the Company with conversion prices of approximately
$64.23 and $74.56 at December 31, 2008, were not included
in the computation of diluted EPS for 2008 and 2007, and the
2006 Senior Convertible Notes were not included in the
computation of diluted EPS
F-52
for the year ended December 31, 2006, as the Companys
stock price did not exceed the strike price of the conversion
feature (Note 8).
The forward equity contract entered into in December 2006 for
11.6 million common shares of the Company was not included
in the computation of diluted for 2006 because the effect of
assuming conversion was antidilutive (Note 12). This
contract was not outstanding in 2007 or 2008.
The Company elected to be treated as a REIT under the Internal
Revenue Code of 1986, as amended, commencing with its taxable
year ended December 31, 1993. To qualify as a REIT, the
Company must meet a number of organizational and operational
requirements, including a requirement that the Company
distribute at least 90% of its taxable income to its
shareholders. It is managements current intention to
adhere to these requirements and maintain the Companys
REIT status. As a REIT, the Company generally will not be
subject to corporate level federal income tax on taxable income
it distributes to its shareholders. As the Company distributed
sufficient taxable income for the three years ended
December 31, 2008, no U.S. federal income or excise
taxes were incurred.
If the Company fails to qualify as a REIT in any taxable year,
it will be subject to federal income taxes at regular corporate
rates (including any alternative minimum tax) and may not be
able to qualify as a REIT for the four subsequent taxable years.
Even if the Company qualifies for taxation as a REIT, the
Company may be subject to certain state and local taxes on its
income and property, and to federal income and excise taxes on
its undistributed taxable income. In addition, at
December 31, 2008, the Company has one taxable REIT
subsidiary that generates taxable income from non-REIT
activities and is subject to federal, state and local income
taxes.
At December 31, 2008, 2007 and 2006, the tax cost basis of
assets was approximately $9.2 billion, $8.8 billion
and $7.3 billion, respectively.
The following represents the combined activity of the
Companys taxable REIT subsidiary (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Book (loss) income before income taxes
|
|
$
|
(11,605
|
)
|
|
$
|
47,315
|
|
|
$
|
7,770
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Components of income tax (benefit) expense are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Current:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
1,611
|
|
|
$
|
1,188
|
|
|
$
|
3,410
|
|
State and local
|
|
|
237
|
|
|
|
1,759
|
|
|
|
490
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,848
|
|
|
|
2,947
|
|
|
|
3,900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred:
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
(18,747
|
)
|
|
|
(12,962
|
)
|
|
|
(6,428
|
)
|
State and local
|
|
|
(2,757
|
)
|
|
|
(1,939
|
)
|
|
|
(945
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(21,504
|
)
|
|
|
(14,901
|
)
|
|
|
(7,373
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total benefit
|
|
$
|
(19,656
|
)
|
|
$
|
(11,954
|
)
|
|
$
|
(3,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
During 2008, the Company recognized a $16.7 million income
tax benefit. Approximately $15.6 million of this amount
related to the release of valuation allowances associated with
deferred tax assets that were established in prior years. These
valuation allowances were previously established due to the
uncertainty that the deferred tax assets would be utilizable. As
of December 31, 2008, the Company has no valuation
allowances recorded against its deferred tax assets.
In order to maintain its REIT status, the Company must meet
certain income tests to ensure that its gross income consists of
passive income and not income from the active conduct of a trade
or business. The Company utilizes its Taxable REIT Subsidiary to
the extent certain fee and other miscellaneous non-real estate
related income
F-53
cannot be earned by the REIT. During the third quarter of 2008,
the Company began recognizing certain fee and miscellaneous
other non-real estate related income within its TRS.
Therefore, based on the Companys evaluation of the current
facts and circumstances, the Company determined during the third
quarter of 2008 that the valuation allowance should be released,
as it was more-likely-than-not that the deferred tax assets
would be utilized in future years. This determination was based
upon the increase in fee and miscellaneous other non-real estate
related income that is projected to be recognized within the
Companys TRS.
In 2007, the Company recognized an aggregate income tax benefit
of approximately $14.6 million. In the first quarter, the
Company recognized $15.4 million of the benefit as a result
of the reversal of a previously established valuation allowance
against deferred tax assets. The reserves were related to
deferred tax assets established in prior years, at which time it
was determined that it was more likely than not that the
deferred tax asset would not be realized and, therefore, a
valuation allowance was required. Several factors were
considered in the first quarter of 2007 that contributed to the
reversal of the valuation allowance. The most significant factor
was the sale of merchant build assets by the Companys
taxable REIT subsidiary in the second quarter of 2007 and
similar projected taxable gains for future periods. Other
factors included the merger of various taxable REIT subsidiaries
and the anticipated profit levels of the Companys taxable
REIT subsidiaries, which will facilitate the realization of the
deferred tax assets. Management regularly assesses established
reserves and adjusts these reserves when facts and circumstances
indicate that a change in estimates is necessary. Based upon
these factors, management determined that it is more likely than
not that the deferred tax assets will be realized in the future
and, accordingly, the valuation allowance recorded against those
deferred tax assets is no longer required.
The 2006 income tax benefit is primarily attributable to the
Companys ability to deduct intercompany interest costs due
to the increased gain on disposition of real estate. The
allowance of intercompany interest expense within the
Companys taxable REIT subsidiary is subject to certain
intercompany limitations based upon taxable income as required
under Internal Revenue Code Section 163(j).
The differences between total income tax expense or benefit and
the amount computed by applying the statutory federal income tax
rate to income before taxes were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Statutory rate of 34% applied to pre-tax (loss) income
|
|
$
|
(3,946
|
)
|
|
$
|
16,087
|
|
|
$
|
2,642
|
|
Effect of state and local income taxes, net of federal tax
benefit
|
|
|
(580
|
)
|
|
|
2,366
|
|
|
|
388
|
|
Valuation allowance decrease
|
|
|
(17,410
|
)
|
|
|
(22,180
|
)
|
|
|
(13,043
|
)
|
Other
|
|
|
2,280
|
|
|
|
(8,227
|
)
|
|
|
6,540
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total benefit
|
|
$
|
(19,656
|
)
|
|
$
|
(11,954
|
)
|
|
$
|
(3,473
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective tax rate
|
|
|
169.37
|
%(1)
|
|
|
(25.27
|
)%
|
|
|
(44.70
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The 2008 effective tax rate
includes the discrete impact from the release of the valuation
allowance in the third quarter 2008. Without this discrete
impact, the effective tax rate is approximately 33.97%.
|
Deferred tax assets and liabilities of the Companys
taxable REIT subsidiary were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Deferred tax assets (1)
|
|
$
|
45,960
|
|
|
$
|
41,825
|
|
|
$
|
45,100
|
|
Deferred tax liabilities
|
|
|
(729
|
)
|
|
|
(688
|
)
|
|
|
(237
|
)
|
Valuation allowance (1)
|
|
|
|
|
|
|
(17,410
|
)
|
|
|
(36,037
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax asset
|
|
$
|
45,231
|
|
|
$
|
23,727
|
|
|
$
|
8,826
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
The majority of the deferred tax
assets and valuation allowance is attributable to interest
expense, subject to limitations and basis differentials in
assets due to purchase price accounting.
|
F-54
Reconciliation of GAAP net (loss) income attributable to DDR to taxable income is as
follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
GAAP net (loss) income attributable to DDR
|
|
$
|
(71,930
|
)
|
|
$
|
264,942
|
|
|
$
|
251,958
|
|
Plus: Book depreciation and amortization(1)
|
|
|
179,015
|
|
|
|
112,202
|
|
|
|
93,189
|
|
Less: Tax depreciation and amortization(1)
|
|
|
(147,606
|
)
|
|
|
(99,894
|
)
|
|
|
(80,852
|
)
|
Book/tax differences on gains/losses from capital transactions
|
|
|
1,598
|
|
|
|
12,384
|
|
|
|
12,161
|
|
Joint venture equity in earnings, net(1)
|
|
|
68,856
|
|
|
|
(4,321
|
)
|
|
|
(41,695
|
)
|
Dividends from subsidiary REIT investments
|
|
|
3,640
|
|
|
|
32,281
|
|
|
|
33,446
|
|
Deferred income
|
|
|
13,212
|
|
|
|
9,471
|
|
|
|
(2,136
|
)
|
Compensation expense
|
|
|
6,892
|
|
|
|
8,818
|
|
|
|
(9,215
|
)
|
Impairment charges
|
|
|
186,821
|
|
|
|
|
|
|
|
|
|
Convertible debt interest expense
|
|
|
14,154
|
|
|
|
11,105
|
|
|
|
1,307
|
|
Miscellaneous book/tax differences, net
|
|
|
(2,923
|
)
|
|
|
(20,950
|
)
|
|
|
(6,068
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income before adjustments
|
|
|
251,729
|
|
|
|
326,038
|
|
|
|
252,095
|
|
Less: Capital gains
|
|
|
(1,388
|
)
|
|
|
(116,108
|
)
|
|
|
(69,977
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxable income subject to the 90% dividend requirement
|
|
$
|
250,341
|
|
|
$
|
209,930
|
|
|
$
|
182,118
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Depreciation expense from
majority-owned subsidiaries and affiliates, which are
consolidated for financial reporting purposes but not for tax
reporting purposes, is included in the reconciliation item
Joint venture equity in earnings, net.
|
Reconciliation between cash dividends paid and the dividends
paid deduction is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Cash dividends paid
|
|
$
|
366,049
|
|
|
$
|
353,094
|
|
|
$
|
306,929
|
|
Less: Dividends designated to prior year
|
|
|
(6,967
|
)
|
|
|
(6,967
|
)
|
|
|
(6,900
|
)
|
Plus: Dividends designated from the following year
|
|
|
6,967
|
|
|
|
6,967
|
|
|
|
6,900
|
|
Less: Portion designated capital gain distribution
|
|
|
(1,388
|
)
|
|
|
(116,108
|
)
|
|
|
(69,977
|
)
|
Less: Return of capital
|
|
|
(114,320
|
)
|
|
|
(27,056
|
)
|
|
|
(54,835
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends paid deduction
|
|
$
|
250,341
|
|
|
$
|
209,930
|
|
|
$
|
182,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Characterization of distributions is as follows (per share):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Year Ended December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Ordinary income
|
|
$
|
1.7563
|
|
|
$
|
1.5089
|
|
|
$
|
1.3053
|
|
Capital gains
|
|
|
0.0098
|
|
|
|
0.8345
|
|
|
|
0.5016
|
|
Return of capital
|
|
|
0.9639
|
|
|
|
0.2266
|
|
|
|
0.5031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.7300
|
|
|
$
|
2.5700
|
|
|
$
|
2.3100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-55
All dividends for each of the years ended December 31, 2007
and 2006, have been allocated and reported to shareholders in
the subsequent year. Dividends per share reported to
shareholders for the years ended December 31, 2008, 2007
and 2006, are summarized as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
Date
|
|
|
Ordinary
|
|
|
Capital Gain
|
|
|
Return of
|
|
|
Total
|
|
Dividends
|
|
Paid
|
|
|
Income
|
|
|
Distributions
|
|
|
Capital
|
|
|
Dividends
|
|
|
4th quarter 2007
|
|
|
01/08/08
|
|
|
$
|
0.4246
|
|
|
$
|
0.0023
|
|
|
$
|
0.2331
|
|
|
$
|
0.6600
|
|
1st quarter
|
|
|
04/08/08
|
|
|
|
0.4439
|
|
|
|
0.0025
|
|
|
|
0.2436
|
|
|
|
0.6900
|
|
2nd quarter
|
|
|
07/08/08
|
|
|
|
0.4439
|
|
|
|
0.0025
|
|
|
|
0.2436
|
|
|
|
0.6900
|
|
3rd quarter
|
|
|
10/07/08
|
|
|
|
0.4439
|
|
|
|
0.0025
|
|
|
|
0.2436
|
|
|
|
0.6900
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.7563
|
|
|
$
|
0.0098
|
|
|
$
|
0.9639
|
|
|
$
|
2.7300
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
Date
|
|
|
Ordinary
|
|
|
Capital Gain
|
|
|
Return of
|
|
|
Total
|
|
Dividends
|
|
Paid
|
|
|
Income
|
|
|
Distributions
|
|
|
Capital
|
|
|
Dividends
|
|
|
4th quarter 2006
|
|
|
01/08/07
|
|
|
$
|
0.3464
|
|
|
$
|
0.1916
|
|
|
$
|
0.0520
|
|
|
$
|
0.5900
|
|
1st quarter
|
|
|
04/09/07
|
|
|
|
0.3875
|
|
|
|
0.2143
|
|
|
|
0.0582
|
|
|
|
0.6600
|
|
2nd quarter
|
|
|
07/03/07
|
|
|
|
0.3875
|
|
|
|
0.2143
|
|
|
|
0.0582
|
|
|
|
0.6600
|
|
3rd quarter
|
|
|
10/02/07
|
|
|
|
0.3875
|
|
|
|
0.2143
|
|
|
|
0.0582
|
|
|
|
0.6600
|
|
4th quarter
|
|
|
01/08/08
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.5089
|
|
|
$
|
0.8345
|
|
|
$
|
0.2266
|
|
|
$
|
2.5700
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
Date
|
|
|
Ordinary
|
|
|
Capital Gain
|
|
|
Return of
|
|
|
Total
|
|
Dividends
|
|
Paid
|
|
|
Income
|
|
|
Distributions
|
|
|
Capital
|
|
|
Dividends
|
|
|
4th quarter 2005
|
|
|
01/08/06
|
|
|
$
|
0.3051
|
|
|
$
|
0.1173
|
|
|
$
|
0.1176
|
|
|
$
|
0.5400
|
|
1st quarter
|
|
|
04/03/06
|
|
|
|
0.3334
|
|
|
|
0.1281
|
|
|
|
0.1285
|
|
|
|
0.5900
|
|
2nd quarter
|
|
|
07/05/06
|
|
|
|
0.3334
|
|
|
|
0.1281
|
|
|
|
0.1285
|
|
|
|
0.5900
|
|
3rd quarter
|
|
|
10/02/06
|
|
|
|
0.3334
|
|
|
|
0.1281
|
|
|
|
0.1285
|
|
|
|
0.5900
|
|
4th quarter
|
|
|
01/08/07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
1.3053
|
|
|
$
|
0.5016
|
|
|
$
|
0.5031
|
|
|
$
|
2.3100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company did not pay a dividend in the fourth quarter of 2008.
The Company had two reportable business segments, shopping
centers and other investments, determined in accordance with
SFAS No. 131, Disclosures About Segments of an
Enterprise and Related Information
(SFAS 131). Each shopping center is considered
a separate operating segment, and utilizes the accounting
policies described in Note 1; however, each shopping center
on a stand-alone basis represents less than 10% of the revenues,
profit or loss, and assets of the combined reported operating
segment and meets the majority of the aggregation criteria under
SFAS 131.
At December 31, 2008, the shopping center segment consisted
of 702 shopping centers (including 329 owned through
unconsolidated joint ventures and 40 that are otherwise
consolidated by the Company) in 45 states, plus Puerto Rico
and Brazil. At December 31, 2007, the shopping center
segment consisted of 710 shopping centers (including 317 owned
through unconsolidated joint ventures and 40 that are otherwise
consolidated by the Company) in 45 states, plus Puerto Rico
and Brazil. At December 31, 2006, the shopping center
segment consisted of 467 shopping centers (including 167 owned
through unconsolidated joint ventures and 39 that are otherwise
consolidated by the Company) in 44 states, plus Puerto Rico
and Brazil. At December 31, 2008, the Company also
F-56
owned six business centers in four states. At December 31,
2007 and 2006, the Company owned seven business centers in five
states.
The table below presents information about the Companys
reportable segments for the years ended December 31, 2008,
2007 and 2006
reflecting the impact of discontinued operations (Note 15) (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
Other
|
|
|
Shopping
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
Centers
|
|
|
Other
|
|
|
Total
|
|
|
Total revenues
|
|
$
|
6,061
|
|
|
$
|
896,234
|
|
|
|
|
|
|
$
|
902,295
|
|
Operating expenses
|
|
|
(2,036
|
)
|
|
|
(323,904
|
)
|
|
|
|
|
|
|
(325,940
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,025
|
|
|
|
572,330
|
|
|
|
|
|
|
|
576,355
|
|
Unallocated expenses (1)
|
|
|
|
|
|
|
|
|
|
$
|
(577,863
|
)
|
|
|
(577,863
|
)
|
Equity in net loss of
joint ventures
(2)
|
|
|
|
|
|
|
(89,238
|
)
|
|
|
|
|
|
|
(89,238
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
(90,746
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate assets
|
|
$
|
49,707
|
|
|
$
|
9,059,859
|
|
|
|
|
|
|
$
|
9,109,566
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
|
Other
|
|
|
Shopping
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
Centers
|
|
|
Other
|
|
|
Total
|
|
|
Total revenues
|
|
$
|
5,198
|
|
|
$
|
900,007
|
|
|
|
|
|
|
$
|
905,205
|
|
Operating expenses
|
|
|
(2,077
|
)
|
|
|
(230,178
|
)
|
|
|
|
|
|
|
(232,255
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,121
|
|
|
|
669,829
|
|
|
|
|
|
|
|
672,950
|
|
Unallocated expenses (1)
|
|
|
|
|
|
|
|
|
|
$
|
(531,127
|
)
|
|
|
(531,127
|
)
|
Equity in net income of
joint ventures
|
|
|
|
|
|
|
43,229
|
|
|
|
|
|
|
|
43,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
185,052
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate assets
|
|
$
|
101,989
|
|
|
$
|
8,883,760
|
|
|
|
|
|
|
$
|
8,985,749
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2006
|
|
|
|
Other
|
|
|
Shopping
|
|
|
|
|
|
|
|
|
|
Investments
|
|
|
Centers
|
|
|
Other
|
|
|
Total
|
|
|
Total revenues
|
|
$
|
4,437
|
|
|
$
|
747,586
|
|
|
|
|
|
|
$
|
752,023
|
|
Operating expenses
|
|
|
(1,923
|
)
|
|
|
(188,416
|
)
|
|
|
|
|
|
|
(190,339
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,514
|
|
|
|
559,170
|
|
|
|
|
|
|
|
561,684
|
|
Unallocated expenses (1)
|
|
|
|
|
|
|
|
|
|
$
|
(429,910
|
)
|
|
|
(429,910
|
)
|
Equity in net income of
joint ventures
|
|
|
|
|
|
|
30,337
|
|
|
|
|
|
|
|
30,337
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from continuing operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
162,111
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total real estate assets
|
|
$
|
90,772
|
|
|
$
|
7,356,686
|
|
|
|
|
|
|
$
|
7,447,458
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
Unallocated expenses consist of
general and administrative, interest income, interest expense,
other income/expense, tax benefit/expense and depreciation and
amortization as listed in the consolidated statements of
operations.
|
|
(2)
|
|
Includes impairment of joint
venture investments.
|
F-57
In January 2009, the Company repaid $227.0 million of
unsecured
fixed-rate
notes from borrowings on the Companys Unsecured Credit
Facility.
On February 23, 2009, the Company entered into a stock
purchase agreement with Mr. Alexander Otto (the
Investor) to issue and sell 30 million common
shares and warrants to purchase up to 10 million common
shares with an exercise price of $6.00 per share (the
Warrants) to the Investor and certain members of his
family (collectively with the Investor, the Otto
Family) for aggregate gross proceeds of approximately
$112.5 million. The transaction, if approved and
consummated, as further described below, will occur in two
closings, each consisting of 15 million common shares and a
warrant to purchase five million common shares, provided that
the Investor also has the right to purchase all of the common
shares and warrants at one closing. The first closing will occur
upon the satisfaction or waiver of certain closing conditions
including the approval by the Companys shareholders of the
issuance of the Companys securities and the second closing
will occur within six months of the shareholder approval. Under
the terms of the stock purchase agreement, the Company will also
issue additional common shares to Mr. Otto in an amount
equal to any dividends declared by the Company after
February 23, 2009 and prior to the applicable closing to
which Mr. Otto would have been entitled had the common
shares the Investor is purchasing been outstanding on the record
dates for any such dividends.
The purchase price for the first 15 million common shares
will be $3.50 per share, and the purchase price for the second
15 million common shares will be $4.00 per share,
regardless of when purchased and regardless of whether or there
is one closing or two closings. No separate consideration will
be paid by the Investor for the shares issued in respect of
dividends. The purchase price for the common shares will be
subject to downward adjustment if the weighted average purchase
price of all additional common shares (or equivalents thereof)
sold by the Company from February 23, 2009 until the
applicable closing is less than $2.94 per share (excluding,
among other things, common shares payable in connection with any
dividends, but including in the calculation all common shares
outstanding as of the date of the stock purchase agreement as if
issued during such period at $2.94 per share). If the weighted
average price for such issuances in the aggregate is less than
$2.94, the applicable purchase price will be reduced by an
amount equal to the difference between $2.94 and such weighted
average price. A five-year warrant for five million shares will
be issued for each 15 million common shares purchased by
the Investor, for a maximum of 10 million common shares.
The warrants have an exercise price of $6.00 per share (subject
to downward adjustment pursuant to their terms) and may be
exercised on a cashless basis in which we may not receive any
consideration upon exercise as the Investor would receive a net
amount of shares equivalent to the appreciation in price (if
any) of our common stock in excess of $6.00 per share. No
separate consideration will be paid for the warrants at closing.
Completion of the transactions contemplated by the stock
purchase agreement depends upon the satisfaction or waiver of a
number of conditions that may be outside of our control,
including, but not limited to, the approval of the
Companys shareholders of the securities being issued, the
receipt by the Company of additional debt financing and no
material adverse change, as defined in the agreement, having
occurred. There can be no assurance that we will satisfy all or
any of these conditions and, accordingly, there can be no
assurance that we will be able to consummate the transaction
with the Investor.
F-58
|
|
23.
|
Quarterly
Results of Operations (Unaudited)
|
The following table sets forth the quarterly results of
operations, as restated for discontinued operations, for the
years ended December 31, 2008 and 2007 (in thousands,
except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
|
Second
|
|
|
Third
|
|
|
Fourth
|
|
|
Total
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
230,014
|
|
|
$
|
222,634
|
|
|
$
|
225,754
|
|
|
$
|
223,893
|
|
|
$
|
902,295
|
|
Net income (loss) attributable to DDR
|
|
|
40,160
|
|
|
|
36,663
|
|
|
|
35,250
|
|
|
|
(184,003
|
)
|
|
|
(71,930
|
)
|
Net income (loss) attributable to DDR common shareholders
|
|
|
29,593
|
|
|
|
26,096
|
|
|
|
24,682
|
|
|
|
(194,570
|
)
|
|
|
(114,199
|
)
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to DDR common shareholders
|
|
$
|
0.25
|
|
|
$
|
0.22
|
|
|
$
|
0.20
|
|
|
$
|
(1.61
|
)
|
|
$
|
(0.97
|
)
|
Weighted average number of shares
|
|
|
119,148
|
|
|
|
119,390
|
|
|
|
119,795
|
|
|
|
121,019
|
|
|
|
119,843
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per common share attributable to DDR common shareholders
|
|
$
|
0.24
|
|
|
$
|
0.21
|
|
|
$
|
0.20
|
|
|
$
|
(1.61
|
)
|
|
$
|
(0.97
|
)
|
Weighted average number of shares
|
|
|
119,300
|
|
|
|
119,561
|
|
|
|
119,882
|
|
|
|
121,019
|
|
|
|
119,843
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
211,577
|
|
|
$
|
242,126
|
|
|
$
|
223,342
|
|
|
$
|
228,160
|
|
|
$
|
905,205
|
|
Net income attributable to DDR
|
|
|
61,517
|
|
|
|
124,075
|
|
|
|
39,921
|
|
|
|
39,429
|
|
|
|
264,942
|
|
Net income attributable to DDR common shareholders
|
|
|
47,725
|
|
|
|
108,067
|
|
|
|
29,354
|
|
|
|
28,862
|
|
|
|
214,008
|
|
Basic:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to DDR common shareholders
|
|
$
|
0.41
|
|
|
$
|
0.87
|
|
|
$
|
0.23
|
|
|
$
|
0.24
|
|
|
$
|
1.76
|
|
Weighted average number of shares
|
|
|
114,851
|
|
|
|
124,455
|
|
|
|
123,329
|
|
|
|
120,786
|
|
|
|
120,879
|
|
Diluted:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share attributable to DDR common shareholders
|
|
$
|
0.41
|
|
|
$
|
0.85
|
|
|
$
|
0.23
|
|
|
$
|
0.23
|
|
|
$
|
1.75
|
|
Weighted average number of shares
|
|
|
115,468
|
|
|
|
125,862
|
|
|
|
123,700
|
|
|
|
121,088
|
|
|
|
121,335
|
|
Subsequent to the filing of the Companys Annual Report on Form 10-K on February 27, 2009, the
Company has retrospectively adjusted its audited consolidated
financial statements as of and for the three years
ended December 31, 2008, 2007 and 2006 due to certain provisions of
SFAS 144, FSP APB 14-1, SFAS 160 and FSP EITF 03-6-1 (Note 1).
SFAS 144 requires the Company to report the results of operations of a property if it has
either been disposed or is classified as held for sale in discontinued operations and meets certain
other criteria. Accordingly, the Company has retrospectively adjusted its audited consolidated
financial statements for the years ended December 31, 2008, 2007
and 2006, to reflect 15
properties sold during the six-month period ended June 30, 2009
and
six properties
considered held for sale at June 30, 2009 that were not
previously classified as discontinued operations (DISC OP
Properties). Upon the sale and/or determination that certain
properties met the criteria for held for
sale, the Company recorded impairment charges of approximately $25.1
million during the six months ended June 30, 2009 relating to the
DISC OP Properties.
FSP APB 14-1 prohibits the classification of convertible debt instruments that may be settled
in cash upon conversion, including partial cash settlement, as debt instruments within the scope of
FSP APB 14-1 and requires issuers of such instruments to separately account for the liability and
equity components by allocating the proceeds from the issuance of the instrument between the
liability component and the embedded conversion option (i.e., the equity component). The liability
component of the debt instrument is accreted to par using the effective yield method; accretion is
reported as a component of interest expense. The equity component is not subsequently re-valued as
long as it continues to qualify for equity treatment. FSP APB 14-1 must be applied
retrospectively issued cash-settleable convertible instruments as well as prospectively to newly
issued instruments. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008,
and interim periods within those fiscal years.
FSP APB 14-1 was adopted by the Company as of January 1, 2009 with retrospective application
to prior periods. As a result of the adoption, the initial debt proceeds from the $250 million aggregate
principal amount of 3.5%
convertible notes, due in 2011, and $600 million aggregate
principal amount of 3.0% convertible notes, due in 2012, were required
to be allocated between a liability component and an equity component. This allocation was based
upon what the assumed interest rate would have been if the Company had issued similar
nonconvertible debt.
F-59
SFAS 160 states that a non-controlling interest, sometimes referred to as minority equity
interest, is the portion of equity in a subsidiary not attributable, directly or indirectly, to a
parent. The objective of this statement is to improve the relevance, comparability, and
transparency of the financial information that a reporting entity provides in its consolidated
financial statements by establishing accounting and reporting standards that require: (i) the
ownership interest in subsidiaries held by other parties other than the parent be clearly
identified, labeled, and presented in the consolidated statement of financial position within
equity, but separate from the parents equity; (ii) the amount of consolidated net income
attributable to the parent and to the non-controlling interest be clearly identified and presented
on the face of the consolidated statement of operations;
(iii) changes in a parents ownership interest while the parent retains its controlling financial
interest in a subsidiary be accounted for consistently and requires that they be accounted for
similarly, as equity transactions; (iv) when a subsidiary is deconsolidated, any retained
non-controlling equity investment in the former subsidiary be initially measured at fair value (the
gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any
non-controlling equity investments rather than the carrying amount of that retained investment) and
(v) entities provide sufficient disclosures that clearly identify and distinguish between the
interest of the parent and the interest of the non-controlling owners. This statement was effective
for fiscal years, and interim reporting periods within those fiscal years, beginning on or after
December 15, 2008, and applied on a prospective basis, except for the presentation and disclosure
requirements, which have been applied on a retrospective basis. Early adoption was not permitted.
The Company adopted SFAS 160 on January 1, 2009. As required by SFAS 160, the Company adjusted the
presentation of non-controlling interests, as appropriate, in the consolidated
balance sheets,
the consolidated statements of operations and consolidated
statements of cash flows as of and for the five years ended December
31, 2008.
The Companys consolidated balance sheets no
longer have a line item referred to as Minority Interests.
In addition,
redeemable operating partnership units
are reflected in the temporary equity section (between liabilities and
equity) of the consolidated balance sheets due to certain redemption
features.
As
a result of the foregoing, Notes 1, 3, 5, 8, 11, 12, 13, 14, 15, 16, 19, 20, 21 and 23 (unaudited)
to the consolidated financial statements for the years ended December 31, 2008, 2007 and 2006 have
been updated. Additionally, the effect on the Companys previously reported net income attributable
to DDR, financial condition and cash flows are as follows
as of December 31, 2008 and 2007 and for the three years ended
December 31, 2008, 2007 and 2006
(in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As Reported
|
|
Adjusted
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2008
|
|
2008
|
|
Difference
|
Interest expense
|
|
$
|
244,212
|
|
|
$
|
251,663
|
|
|
$
|
7,451
|
|
Gain on repurchase of senior notes
|
|
|
(11,552
|
)
|
|
|
(10,455
|
)
|
|
|
1,097
|
|
Loss from continuing operations
|
|
|
61,317
|
|
|
|
90,746
|
|
|
|
29,429
|
|
Net loss attributable to DDR
|
|
|
57,776
|
|
|
|
71,930
|
|
|
|
14,154
|
|
Net cash flow provided by
operating activities
|
|
|
424,568
|
|
|
|
392,002
|
|
|
|
(32,566
|
)
|
Net cash flow used for
investing activities
|
|
|
(464,341
|
)
|
|
|
(468,572
|
)
|
|
|
(4,231
|
)
|
Net cash flow provided by
financing activities
|
|
|
22,698
|
|
|
|
56,235
|
|
|
|
33,537
|
|
Total real estate assets
|
|
|
9,106,635
|
|
|
|
9,109,566
|
|
|
|
2,931
|
|
Deferred charges, net
|
|
|
26,613
|
|
|
|
25,579
|
|
|
|
(1,034
|
)
|
Total assets
|
|
|
9,018,325
|
|
|
|
9,020,222
|
|
|
|
1,897
|
|
Total liabilities
|
|
|
(6,205,510
|
)
|
|
|
(6,154,801
|
)
|
|
|
50,709
|
|
Minority interest
|
|
|
(128,130
|
)
|
|
|
|
|
|
|
128,130
|
|
Redeemable
OP Units
|
|
|
|
|
|
|
(627
|
)
|
|
|
(627
|
)
|
Total equity
|
|
|
(2,684,685
|
)
|
|
|
(2,864,794
|
)
|
|
|
(180,109
|
)
|
|
|
|
As Reported
|
|
Adjusted
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2007
|
|
2007
|
|
Difference
|
Interest expense
|
|
$
|
258,149
|
|
|
$
|
263,829
|
|
|
$
|
5,680
|
|
Income from continuing operations
|
|
|
(185,894
|
)
|
|
|
(185,052
|
)
|
|
|
842
|
|
Net income attributable to DDR
|
|
|
(276,047
|
)
|
|
|
(264,942
|
)
|
|
|
11,105
|
|
Net cash flow provided by
operating activities
|
|
|
414,616
|
|
|
|
420,745
|
|
|
|
6,129
|
|
Net cash flow used for
investing activities
|
|
|
(1,148,316
|
)
|
|
|
(1,162,287
|
)
|
|
|
(13,971
|
)
|
Net cash flow provided by
financing activities
|
|
|
755,491
|
|
|
|
763,333
|
|
|
|
7,842
|
|
Total real estate assets
|
|
|
8,978,875
|
|
|
|
8,979,953
|
|
|
|
1,078
|
|
Deferred charges, net
|
|
|
31,172
|
|
|
|
29,792
|
|
|
|
(1,380
|
)
|
Total assets
|
|
|
9,089,816
|
|
|
|
9,089,514
|
|
|
|
(302
|
)
|
Total liabilities
|
|
|
(5,962,110
|
)
|
|
|
(5,895,049
|
)
|
|
|
67,061
|
|
Minority interest
|
|
|
(128,881
|
)
|
|
|
|
|
|
|
128,881
|
|
Redeemable OP Units
|
|
|
|
|
|
|
(1,163
|
)
|
|
|
(1,163
|
)
|
Total equity
|
|
|
(2,998,825
|
)
|
|
|
(3,193,302
|
)
|
|
|
(194,477
|
)
|
|
|
|
As Reported
|
|
Adjusted
|
|
|
|
|
December 31,
|
|
December 31,
|
|
|
|
|
2006
|
|
2006
|
|
Difference
|
Interest expense
|
|
$
|
208,536
|
|
|
$
|
205,751
|
|
|
$
|
(2,785
|
)
|
Income from continuing operations
|
|
|
(160,784
|
)
|
|
|
(162,111
|
)
|
|
|
(1,327
|
)
|
Net income attributable to DDR
|
|
|
(253,264
|
)
|
|
|
(251,958
|
)
|
|
|
1,306
|
|
Net cash flow provided by
operating activities
|
|
|
340,692
|
|
|
|
348,630
|
|
|
|
7,938
|
|
Net cash flow used for
investing activities
|
|
|
(203,047
|
)
|
|
|
(203,047
|
)
|
|
|
|
|
Net cash flow used by
financing activities
|
|
|
(139,922
|
)
|
|
|
(147,860
|
)
|
|
|
(7,938
|
)
|
F-60
Price
Range of Common Shares (Unaudited)
The high and low sales prices per share of the Companys
common shares, as reported on the New York Stock Exchange
composite tape, and declared dividends per share for the
quarterly periods indicated, were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High
|
|
|
Low
|
|
|
Dividends
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
$
|
44.31
|
|
|
$
|
32.20
|
|
|
$
|
0.69
|
|
Second
|
|
|
45.66
|
|
|
|
34.44
|
|
|
|
0.69
|
|
Third
|
|
|
41.55
|
|
|
|
27.60
|
|
|
|
0.69
|
|
Fourth
|
|
|
31.50
|
|
|
|
1.73
|
|
|
|
|
|
2007
|
|
|
|
|
|
|
|
|
|
|
|
|
First
|
|
$
|
72.33
|
|
|
$
|
61.43
|
|
|
$
|
0.66
|
|
Second
|
|
|
66.70
|
|
|
|
50.75
|
|
|
|
0.66
|
|
Third
|
|
|
56.85
|
|
|
|
46.28
|
|
|
|
0.66
|
|
Fourth
|
|
|
59.27
|
|
|
|
37.42
|
|
|
|
0.66
|
|
As of February 13, 2009, there were approximately 9,655
record holders and approximately 44,000 beneficial owners of the
Companys common shares.
F-61
DEVELOPERS
DIVERSIFIED REALTY CORPORATION
VALUATION
AND QUALIFYING ACCOUNTS AND RESERVES
For the years ended December 31, 2008, 2007 and
2006
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at
|
|
|
Charged to
|
|
|
|
|
|
|
|
|
|
Beginning of
|
|
|
(Income)
|
|
|
|
|
|
Balance at
|
|
|
|
Year
|
|
|
Expense
|
|
|
Deductions
|
|
|
End of Year
|
|
|
Year ended December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts (1)
|
|
$
|
34,163
|
|
|
$
|
24,343
|
|
|
$
|
19,498
|
|
|
$
|
39,008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance for a deferred tax asset
|
|
$
|
17,410
|
|
|
$
|
(17,410
|
)
|
|
$
|
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts (1)
|
|
$
|
18,024
|
|
|
$
|
9,133
|
|
|
$
|
(7,006
|
)*
|
|
$
|
34,163
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance for a deferred tax asset
|
|
$
|
36,037
|
|
|
$
|
(22,180
|
)
|
|
$
|
(3,553
|
)
|
|
$
|
17,410
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December 31, 2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance for uncollectible accounts (1)
|
|
$
|
21,408
|
|
|
$
|
7,498
|
|
|
$
|
10,882
|
|
|
$
|
18,024
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance for a deferred tax asset
|
|
$
|
49,080
|
|
|
$
|
(13,043
|
)
|
|
$
|
|
|
|
$
|
36,037
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Includes reserves associated with the IRRETI merger.
(1) Includes reserves associated with discontinued
operations and
straight-line
rental revenues.
F-62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Brandon, FL
|
|
$
|
0
|
|
|
$
|
4,111
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
6,363
|
|
|
|
6,363
|
|
|
$
|
4,903
|
|
|
$
|
1,461
|
|
|
$
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1972(C)
|
|
Stow, OH
|
|
|
1,036
|
|
|
|
9,028
|
|
|
|
0
|
|
|
|
993
|
|
|
|
33,497
|
|
|
|
34,490
|
|
|
|
10,307
|
|
|
|
24,182
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1969(C)
|
|
Westlake, OH
|
|
|
424
|
|
|
|
3,803
|
|
|
|
203
|
|
|
|
424
|
|
|
|
10,003
|
|
|
|
10,427
|
|
|
|
5,554
|
|
|
|
4,874
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1974(C)
|
|
E. Norrition, PA
|
|
|
80
|
|
|
|
4,698
|
|
|
|
233
|
|
|
|
70
|
|
|
|
8,744
|
|
|
|
8,814
|
|
|
|
6,201
|
|
|
|
2,613
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1975(C)
|
|
Palm Harbor, FL
|
|
|
1,137
|
|
|
|
4,089
|
|
|
|
0
|
|
|
|
1,137
|
|
|
|
4,168
|
|
|
|
5,305
|
|
|
|
1,840
|
|
|
|
3,464
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1995(A)
|
|
Tarpon Springs, FL
|
|
|
248
|
|
|
|
7,382
|
|
|
|
81
|
|
|
|
244
|
|
|
|
11,955
|
|
|
|
12,199
|
|
|
|
9,124
|
|
|
|
3,074
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1974(C)
|
|
Bayonet Pt., FL
|
|
|
2,113
|
|
|
|
8,181
|
|
|
|
128
|
|
|
|
1,806
|
|
|
|
11,632
|
|
|
|
13,438
|
|
|
|
7,268
|
|
|
|
6,169
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1985(C)
|
|
McHenry, IL
|
|
|
963
|
|
|
|
3,949
|
|
|
|
0
|
|
|
|
10,648
|
|
|
|
41,067
|
|
|
|
51,715
|
|
|
|
1,897
|
|
|
|
49,818
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2006(C)
|
|
Miami, FL
|
|
|
11,626
|
|
|
|
30,457
|
|
|
|
0
|
|
|
|
24,860
|
|
|
|
79,335
|
|
|
|
104,195
|
|
|
|
4,833
|
|
|
|
99,362
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2006(C)
|
|
San Antonio, TX (Village)
|
|
|
3,370
|
|
|
|
21,033
|
|
|
|
0
|
|
|
|
2,505
|
|
|
|
25,865
|
|
|
|
28,370
|
|
|
|
806
|
|
|
|
27,564
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(C)
|
|
Starkville, MS
|
|
|
1,271
|
|
|
|
8,209
|
|
|
|
0
|
|
|
|
703
|
|
|
|
6,683
|
|
|
|
7,386
|
|
|
|
2,680
|
|
|
|
4,706
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Gulfport, MS
|
|
|
8,795
|
|
|
|
36,370
|
|
|
|
0
|
|
|
|
0
|
|
|
|
49,999
|
|
|
|
49,999
|
|
|
|
8,885
|
|
|
|
41,114
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Tupelo, MS
|
|
|
2,282
|
|
|
|
14,979
|
|
|
|
0
|
|
|
|
2,213
|
|
|
|
17,556
|
|
|
|
19,769
|
|
|
|
7,458
|
|
|
|
12,312
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Jacksonville, FL
|
|
|
3,005
|
|
|
|
9,425
|
|
|
|
0
|
|
|
|
3,028
|
|
|
|
9,948
|
|
|
|
12,976
|
|
|
|
4,388
|
|
|
|
8,588
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1995(A)
|
|
Long Beach, CA (Pike)
|
|
|
0
|
|
|
|
111,512
|
|
|
|
0
|
|
|
|
0
|
|
|
|
134,217
|
|
|
|
134,217
|
|
|
|
18,902
|
|
|
|
115,314
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(C)
|
|
Brunswick, MA
|
|
|
3,836
|
|
|
|
15,459
|
|
|
|
0
|
|
|
|
3,796
|
|
|
|
19,338
|
|
|
|
23,134
|
|
|
|
6,925
|
|
|
|
16,209
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1973(C)
|
|
Oceanside, CA
|
|
|
0
|
|
|
|
10,643
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,444
|
|
|
|
14,444
|
|
|
|
3,534
|
|
|
|
10,909
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2000(C)
|
|
Reno, NV
|
|
|
0
|
|
|
|
366
|
|
|
|
0
|
|
|
|
1,132
|
|
|
|
4,699
|
|
|
|
5,831
|
|
|
|
625
|
|
|
|
5,206
|
|
|
|
3,296
|
|
|
|
S/L 31.5
|
|
|
|
2000(C)
|
|
Everett, MA
|
|
|
9,311
|
|
|
|
44,647
|
|
|
|
0
|
|
|
|
9,462
|
|
|
|
50,294
|
|
|
|
59,756
|
|
|
|
11,684
|
|
|
|
48,072
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2001(C)
|
|
Pasadena, CA
|
|
|
47,215
|
|
|
|
101,475
|
|
|
|
2,053
|
|
|
|
47,360
|
|
|
|
105,307
|
|
|
|
152,667
|
|
|
|
10,640
|
|
|
|
142,027
|
|
|
|
79,100
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Salisbury, MD
|
|
|
1,531
|
|
|
|
9,174
|
|
|
|
174
|
|
|
|
1,531
|
|
|
|
9,585
|
|
|
|
11,116
|
|
|
|
2,830
|
|
|
|
8,286
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1999(C)
|
|
Salisbury, MD
|
|
|
539
|
|
|
|
3,321
|
|
|
|
104
|
|
|
|
540
|
|
|
|
3,433
|
|
|
|
3,973
|
|
|
|
344
|
|
|
|
3,629
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1999(C)
|
|
Atlanta, GA
|
|
|
475
|
|
|
|
9,374
|
|
|
|
0
|
|
|
|
475
|
|
|
|
10,122
|
|
|
|
10,597
|
|
|
|
4,778
|
|
|
|
5,820
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Jackson, MS
|
|
|
4,190
|
|
|
|
6,783
|
|
|
|
0
|
|
|
|
4,190
|
|
|
|
6,838
|
|
|
|
11,028
|
|
|
|
1,345
|
|
|
|
9,684
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Freehold, NJ
|
|
|
2,460
|
|
|
|
2,475
|
|
|
|
0
|
|
|
|
2,460
|
|
|
|
2,478
|
|
|
|
4,938
|
|
|
|
37
|
|
|
|
4,901
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Opelika, AL
|
|
|
3,183
|
|
|
|
11,666
|
|
|
|
0
|
|
|
|
2,415
|
|
|
|
7,948
|
|
|
|
10,363
|
|
|
|
3,632
|
|
|
|
6,731
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Scottsboro, AL
|
|
|
788
|
|
|
|
2,781
|
|
|
|
0
|
|
|
|
788
|
|
|
|
2,793
|
|
|
|
3,581
|
|
|
|
545
|
|
|
|
3,036
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Gulf Breeze, FL
|
|
|
2,485
|
|
|
|
2,214
|
|
|
|
0
|
|
|
|
2,485
|
|
|
|
2,239
|
|
|
|
4,724
|
|
|
|
449
|
|
|
|
4,275
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Apex, NC (South)
|
|
|
9,576
|
|
|
|
43,619
|
|
|
|
0
|
|
|
|
10,521
|
|
|
|
51,021
|
|
|
|
61,542
|
|
|
|
3,570
|
|
|
|
57,972
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2006(C)
|
|
Ocala, FL
|
|
|
1,916
|
|
|
|
3,893
|
|
|
|
0
|
|
|
|
1,916
|
|
|
|
6,002
|
|
|
|
7,918
|
|
|
|
952
|
|
|
|
6,967
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Tallahassee, FL
|
|
|
1,881
|
|
|
|
2,956
|
|
|
|
0
|
|
|
|
1,881
|
|
|
|
6,681
|
|
|
|
8,562
|
|
|
|
1,027
|
|
|
|
7,535
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Chamblee, GA
|
|
|
5,862
|
|
|
|
5,971
|
|
|
|
0
|
|
|
|
5,862
|
|
|
|
6,338
|
|
|
|
12,200
|
|
|
|
1,349
|
|
|
|
10,850
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Cumming, GA (Marketplace)
|
|
|
14,255
|
|
|
|
23,653
|
|
|
|
0
|
|
|
|
14,249
|
|
|
|
23,863
|
|
|
|
38,112
|
|
|
|
4,645
|
|
|
|
33,467
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
F-63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Douglasville, GA
|
|
|
3,856
|
|
|
|
9,625
|
|
|
|
0
|
|
|
|
3,540
|
|
|
|
9,723
|
|
|
|
13,263
|
|
|
|
1,926
|
|
|
|
11,337
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Athens, GA
|
|
|
1,649
|
|
|
|
2,084
|
|
|
|
0
|
|
|
|
1,477
|
|
|
|
2,103
|
|
|
|
3,580
|
|
|
|
412
|
|
|
|
3,168
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Griffin, GA
|
|
|
138
|
|
|
|
2,638
|
|
|
|
0
|
|
|
|
138
|
|
|
|
2,699
|
|
|
|
2,837
|
|
|
|
527
|
|
|
|
2,309
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Columbus, GA
|
|
|
4,220
|
|
|
|
8,159
|
|
|
|
0
|
|
|
|
4,220
|
|
|
|
8,274
|
|
|
|
12,494
|
|
|
|
1,621
|
|
|
|
10,873
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Newnan, GA
|
|
|
2,632
|
|
|
|
11,063
|
|
|
|
0
|
|
|
|
2,620
|
|
|
|
11,594
|
|
|
|
14,214
|
|
|
|
2,206
|
|
|
|
12,008
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Union City, GA
|
|
|
2,288
|
|
|
|
6,246
|
|
|
|
0
|
|
|
|
2,288
|
|
|
|
7,172
|
|
|
|
9,460
|
|
|
|
1,503
|
|
|
|
7,957
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Warner Robins, GA
|
|
|
5,977
|
|
|
|
7,459
|
|
|
|
0
|
|
|
|
5,729
|
|
|
|
7,613
|
|
|
|
13,342
|
|
|
|
1,503
|
|
|
|
11,840
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Woodstock, GA
|
|
|
2,022
|
|
|
|
8,440
|
|
|
|
0
|
|
|
|
1,199
|
|
|
|
1,408
|
|
|
|
2,607
|
|
|
|
120
|
|
|
|
2,487
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Fayetteville, NC
|
|
|
8,524
|
|
|
|
10,627
|
|
|
|
0
|
|
|
|
8,524
|
|
|
|
14,216
|
|
|
|
22,740
|
|
|
|
2,188
|
|
|
|
20,552
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Charleston, SC
|
|
|
3,479
|
|
|
|
9,850
|
|
|
|
0
|
|
|
|
3,479
|
|
|
|
10,033
|
|
|
|
13,512
|
|
|
|
4,400
|
|
|
|
9,112
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Denver, CO (University)
|
|
|
20,733
|
|
|
|
22,818
|
|
|
|
0
|
|
|
|
20,804
|
|
|
|
23,656
|
|
|
|
44,460
|
|
|
|
4,651
|
|
|
|
39,809
|
|
|
|
26,545
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Chattanooga, TN
|
|
|
1,845
|
|
|
|
13,214
|
|
|
|
0
|
|
|
|
1,845
|
|
|
|
15,365
|
|
|
|
17,210
|
|
|
|
3,110
|
|
|
|
14,100
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Hendersonville, TN
|
|
|
3,743
|
|
|
|
9,268
|
|
|
|
0
|
|
|
|
3,607
|
|
|
|
9,335
|
|
|
|
12,942
|
|
|
|
1,802
|
|
|
|
11,140
|
|
|
|
7,691
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Johnson City, TN
|
|
|
124
|
|
|
|
521
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,180
|
|
|
|
2,180
|
|
|
|
188
|
|
|
|
1,992
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Chester, VA
|
|
|
10,780
|
|
|
|
4,752
|
|
|
|
0
|
|
|
|
10,780
|
|
|
|
5,065
|
|
|
|
15,845
|
|
|
|
1,028
|
|
|
|
14,818
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Lynchburg,VA
|
|
|
5,447
|
|
|
|
11,194
|
|
|
|
0
|
|
|
|
5,447
|
|
|
|
11,820
|
|
|
|
17,267
|
|
|
|
2,453
|
|
|
|
14,814
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Brookfield, WI
|
|
|
588
|
|
|
|
0
|
|
|
|
0
|
|
|
|
588
|
|
|
|
2,864
|
|
|
|
3,452
|
|
|
|
168
|
|
|
|
3,285
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Milwaukee, WI
|
|
|
4,527
|
|
|
|
3,600
|
|
|
|
0
|
|
|
|
4,527
|
|
|
|
4,800
|
|
|
|
9,327
|
|
|
|
803
|
|
|
|
8,524
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Gallipolis, OH
|
|
|
1,249
|
|
|
|
1,790
|
|
|
|
0
|
|
|
|
1,249
|
|
|
|
1,986
|
|
|
|
3,235
|
|
|
|
372
|
|
|
|
2,864
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Lexington, KY (South)
|
|
|
3,344
|
|
|
|
2,805
|
|
|
|
0
|
|
|
|
3,344
|
|
|
|
2,805
|
|
|
|
6,149
|
|
|
|
558
|
|
|
|
5,591
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Lexington, KY (North)
|
|
|
2,915
|
|
|
|
3,447
|
|
|
|
0
|
|
|
|
2,919
|
|
|
|
3,394
|
|
|
|
6,313
|
|
|
|
774
|
|
|
|
5,539
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Richmond, KY
|
|
|
1,870
|
|
|
|
5,661
|
|
|
|
0
|
|
|
|
1,870
|
|
|
|
7,308
|
|
|
|
9,178
|
|
|
|
1,254
|
|
|
|
7,923
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Allentown, PA
|
|
|
5,882
|
|
|
|
20,060
|
|
|
|
0
|
|
|
|
5,882
|
|
|
|
22,757
|
|
|
|
28,639
|
|
|
|
4,017
|
|
|
|
24,622
|
|
|
|
15,899
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
St. John, MO
|
|
|
2,613
|
|
|
|
7,040
|
|
|
|
0
|
|
|
|
2,827
|
|
|
|
7,899
|
|
|
|
10,726
|
|
|
|
1,414
|
|
|
|
9,312
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Suwanee, GA
|
|
|
13,479
|
|
|
|
23,923
|
|
|
|
0
|
|
|
|
13,479
|
|
|
|
28,708
|
|
|
|
42,187
|
|
|
|
5,519
|
|
|
|
36,667
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
West Allis, WI
|
|
|
2,452
|
|
|
|
10,982
|
|
|
|
0
|
|
|
|
2,452
|
|
|
|
11,537
|
|
|
|
13,989
|
|
|
|
2,151
|
|
|
|
11,837
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Chesterfield, MI
|
|
|
566
|
|
|
|
2,324
|
|
|
|
0
|
|
|
|
382
|
|
|
|
2,327
|
|
|
|
2,709
|
|
|
|
209
|
|
|
|
2,499
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2006(A)
|
|
Ft. Collins, CO
|
|
|
2,767
|
|
|
|
2,054
|
|
|
|
0
|
|
|
|
1,129
|
|
|
|
4,506
|
|
|
|
5,635
|
|
|
|
756
|
|
|
|
4,879
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Lafayette, IN
|
|
|
1,217
|
|
|
|
2,689
|
|
|
|
0
|
|
|
|
1,217
|
|
|
|
2,705
|
|
|
|
3,922
|
|
|
|
537
|
|
|
|
3,385
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Hamilton, NJ
|
|
|
8,039
|
|
|
|
49,896
|
|
|
|
0
|
|
|
|
11,774
|
|
|
|
79,596
|
|
|
|
91,370
|
|
|
|
11,937
|
|
|
|
79,434
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Lansing, MI
|
|
|
1,598
|
|
|
|
6,999
|
|
|
|
0
|
|
|
|
1,801
|
|
|
|
11,478
|
|
|
|
13,279
|
|
|
|
1,750
|
|
|
|
11,529
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Erie, PA (Peach)
|
|
|
10,880
|
|
|
|
19,201
|
|
|
|
0
|
|
|
|
6,373
|
|
|
|
44,194
|
|
|
|
50,567
|
|
|
|
16,850
|
|
|
|
33,717
|
|
|
|
27,195
|
|
|
|
S/L 31.5
|
|
|
|
1995(C)
|
|
Erie, PA (Hills)
|
|
|
0
|
|
|
|
2,564
|
|
|
|
13
|
|
|
|
723
|
|
|
|
3,834
|
|
|
|
4,557
|
|
|
|
3,168
|
|
|
|
1,390
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1973(C)
|
|
F-64
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
San Francisco, CA
|
|
|
15,332
|
|
|
|
35,803
|
|
|
|
0
|
|
|
|
10,456
|
|
|
|
24,423
|
|
|
|
34,879
|
|
|
|
3,462
|
|
|
|
31,417
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2002(A)
|
|
Chillicothe, OH
|
|
|
43
|
|
|
|
2,549
|
|
|
|
2
|
|
|
|
1,170
|
|
|
|
4,366
|
|
|
|
5,536
|
|
|
|
1,837
|
|
|
|
3,698
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1974(C)
|
|
Phoenix, AZ
|
|
|
18,701
|
|
|
|
18,811
|
|
|
|
118
|
|
|
|
18,701
|
|
|
|
19,287
|
|
|
|
37,988
|
|
|
|
1,663
|
|
|
|
36,324
|
|
|
|
16,733
|
|
|
|
S/L 30.0
|
|
|
|
1999(A)
|
|
Martinsville, VA
|
|
|
3,163
|
|
|
|
28,819
|
|
|
|
0
|
|
|
|
3,163
|
|
|
|
29,683
|
|
|
|
32,846
|
|
|
|
16,537
|
|
|
|
16,309
|
|
|
|
18,936
|
|
|
|
S/L 30.0
|
|
|
|
1989(C)
|
|
Tampa, FL (Waters)
|
|
|
4,105
|
|
|
|
6,640
|
|
|
|
324
|
|
|
|
3,905
|
|
|
|
8,249
|
|
|
|
12,154
|
|
|
|
4,660
|
|
|
|
7,494
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1990(C)
|
|
Macedonia, OH (Phase II)
|
|
|
4,392
|
|
|
|
10,885
|
|
|
|
0
|
|
|
|
4,392
|
|
|
|
10,996
|
|
|
|
15,388
|
|
|
|
3,353
|
|
|
|
12,035
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(C)
|
|
Huber Hts, OH
|
|
|
757
|
|
|
|
14,469
|
|
|
|
1
|
|
|
|
757
|
|
|
|
25,105
|
|
|
|
25,862
|
|
|
|
7,743
|
|
|
|
18,119
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Lebanon, OH
|
|
|
651
|
|
|
|
911
|
|
|
|
31
|
|
|
|
812
|
|
|
|
1,428
|
|
|
|
2,240
|
|
|
|
446
|
|
|
|
1,795
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Xenia, OH
|
|
|
948
|
|
|
|
3,938
|
|
|
|
0
|
|
|
|
673
|
|
|
|
6,039
|
|
|
|
6,712
|
|
|
|
2,623
|
|
|
|
4,089
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Boardman, OH
|
|
|
9,025
|
|
|
|
27,983
|
|
|
|
0
|
|
|
|
8,152
|
|
|
|
28,233
|
|
|
|
36,385
|
|
|
|
10,188
|
|
|
|
26,197
|
|
|
|
25,320
|
|
|
|
S/L 31.5
|
|
|
|
1997(A)
|
|
Solon, OH
|
|
|
6,220
|
|
|
|
7,454
|
|
|
|
0
|
|
|
|
6,220
|
|
|
|
21,628
|
|
|
|
27,848
|
|
|
|
6,601
|
|
|
|
21,248
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(C)
|
|
Cincinnati, OH
|
|
|
2,399
|
|
|
|
11,238
|
|
|
|
172
|
|
|
|
2,399
|
|
|
|
14,132
|
|
|
|
16,531
|
|
|
|
6,889
|
|
|
|
9,642
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Bedford, IN
|
|
|
706
|
|
|
|
8,425
|
|
|
|
6
|
|
|
|
1,067
|
|
|
|
10,596
|
|
|
|
11,663
|
|
|
|
4,784
|
|
|
|
6,879
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Watertown, SD
|
|
|
63
|
|
|
|
6,443
|
|
|
|
442
|
|
|
|
63
|
|
|
|
12,579
|
|
|
|
12,642
|
|
|
|
8,503
|
|
|
|
4,138
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1977(C)
|
|
Pensacola, FL
|
|
|
1,805
|
|
|
|
4,010
|
|
|
|
273
|
|
|
|
816
|
|
|
|
3,142
|
|
|
|
3,958
|
|
|
|
1,030
|
|
|
|
2,928
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1988(C)
|
|
Los Alamos, NM
|
|
|
725
|
|
|
|
3,500
|
|
|
|
30
|
|
|
|
725
|
|
|
|
4,921
|
|
|
|
5,646
|
|
|
|
3,749
|
|
|
|
1,897
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1978(C)
|
|
St. Louis, MO (Sunset)
|
|
|
12,791
|
|
|
|
38,404
|
|
|
|
0
|
|
|
|
13,403
|
|
|
|
44,319
|
|
|
|
57,722
|
|
|
|
15,542
|
|
|
|
42,180
|
|
|
|
32,822
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
St. Louis, MO (Brentwood)
|
|
|
10,628
|
|
|
|
32,053
|
|
|
|
0
|
|
|
|
10,018
|
|
|
|
32,400
|
|
|
|
42,418
|
|
|
|
10,923
|
|
|
|
31,494
|
|
|
|
24,382
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Cedar Rapids, IA
|
|
|
4,219
|
|
|
|
12,697
|
|
|
|
0
|
|
|
|
4,219
|
|
|
|
13,969
|
|
|
|
18,188
|
|
|
|
4,805
|
|
|
|
13,383
|
|
|
|
8,609
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
St. Louis, MO (Olympic)
|
|
|
2,775
|
|
|
|
8,370
|
|
|
|
0
|
|
|
|
2,775
|
|
|
|
10,356
|
|
|
|
13,131
|
|
|
|
3,939
|
|
|
|
9,192
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
St. Louis, MO (Gravois)
|
|
|
1,336
|
|
|
|
4,050
|
|
|
|
0
|
|
|
|
1,525
|
|
|
|
4,925
|
|
|
|
6,450
|
|
|
|
1,673
|
|
|
|
4,777
|
|
|
|
448
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
St. Louis, MO (Morris)
|
|
|
0
|
|
|
|
2,048
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,143
|
|
|
|
2,143
|
|
|
|
773
|
|
|
|
1,369
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
St. Louis, MO (Southtowne)
|
|
|
4,159
|
|
|
|
3,818
|
|
|
|
0
|
|
|
|
5,403
|
|
|
|
7,783
|
|
|
|
13,186
|
|
|
|
1,048
|
|
|
|
12,138
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(C)
|
|
Aurora, OH
|
|
|
832
|
|
|
|
7,560
|
|
|
|
0
|
|
|
|
1,592
|
|
|
|
14,043
|
|
|
|
15,635
|
|
|
|
4,709
|
|
|
|
10,926
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1995(C)
|
|
Nampa, ID
|
|
|
1,395
|
|
|
|
8,563
|
|
|
|
0
|
|
|
|
1,395
|
|
|
|
8,563
|
|
|
|
9,958
|
|
|
|
386
|
|
|
|
9,573
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Idaho Falls, ID (DDRC)
|
|
|
1,302
|
|
|
|
5,703
|
|
|
|
0
|
|
|
|
1,418
|
|
|
|
6,414
|
|
|
|
7,832
|
|
|
|
2,399
|
|
|
|
5,433
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Mount Vernon, IL
|
|
|
1,789
|
|
|
|
9,399
|
|
|
|
111
|
|
|
|
1,789
|
|
|
|
16,769
|
|
|
|
18,558
|
|
|
|
7,157
|
|
|
|
11,401
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Fenton, MO
|
|
|
414
|
|
|
|
4,244
|
|
|
|
476
|
|
|
|
430
|
|
|
|
7,541
|
|
|
|
7,971
|
|
|
|
5,057
|
|
|
|
2,914
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1983(A)
|
|
Simpsonville, SC
|
|
|
431
|
|
|
|
6,563
|
|
|
|
0
|
|
|
|
417
|
|
|
|
6,828
|
|
|
|
7,245
|
|
|
|
3,329
|
|
|
|
3,917
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Cambden, SC
|
|
|
627
|
|
|
|
7,519
|
|
|
|
7
|
|
|
|
1,021
|
|
|
|
10,908
|
|
|
|
11,929
|
|
|
|
5,230
|
|
|
|
6,699
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
N. Charleston, SC
|
|
|
911
|
|
|
|
11,346
|
|
|
|
1
|
|
|
|
1,081
|
|
|
|
16,853
|
|
|
|
17,934
|
|
|
|
8,122
|
|
|
|
9,813
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Orangeburg, SC
|
|
|
318
|
|
|
|
1,693
|
|
|
|
0
|
|
|
|
318
|
|
|
|
3,445
|
|
|
|
3,763
|
|
|
|
1,298
|
|
|
|
2,465
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1995(A)
|
|
MT. Pleasant, SC
|
|
|
2,584
|
|
|
|
10,470
|
|
|
|
0
|
|
|
|
2,430
|
|
|
|
17,673
|
|
|
|
20,103
|
|
|
|
6,189
|
|
|
|
13,913
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1995(A)
|
|
F-65
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Sault ST. Marie, MI
|
|
|
1,826
|
|
|
|
13,710
|
|
|
|
0
|
|
|
|
1,826
|
|
|
|
15,219
|
|
|
|
17,045
|
|
|
|
6,811
|
|
|
|
10,234
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Cheboygan, MI
|
|
|
127
|
|
|
|
3,612
|
|
|
|
0
|
|
|
|
127
|
|
|
|
4,131
|
|
|
|
4,258
|
|
|
|
1,917
|
|
|
|
2,340
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Walker, MI (Grand Rapids)
|
|
|
1,926
|
|
|
|
8,039
|
|
|
|
0
|
|
|
|
1,926
|
|
|
|
8,924
|
|
|
|
10,850
|
|
|
|
3,679
|
|
|
|
7,171
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1995(A)
|
|
Detroit, MI
|
|
|
6,738
|
|
|
|
26,988
|
|
|
|
27
|
|
|
|
6,738
|
|
|
|
17,308
|
|
|
|
24,046
|
|
|
|
15,847
|
|
|
|
8,200
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Houghton, MI
|
|
|
440
|
|
|
|
7,301
|
|
|
|
1,821
|
|
|
|
413
|
|
|
|
13,807
|
|
|
|
14,220
|
|
|
|
10,409
|
|
|
|
3,811
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1980(C)
|
|
Bad Axe, MI
|
|
|
184
|
|
|
|
3,647
|
|
|
|
0
|
|
|
|
184
|
|
|
|
4,433
|
|
|
|
4,617
|
|
|
|
1,981
|
|
|
|
2,636
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Gaylord, MI
|
|
|
270
|
|
|
|
8,728
|
|
|
|
2
|
|
|
|
251
|
|
|
|
10,801
|
|
|
|
11,052
|
|
|
|
4,914
|
|
|
|
6,138
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Howell, MI
|
|
|
332
|
|
|
|
11,938
|
|
|
|
1
|
|
|
|
332
|
|
|
|
16,160
|
|
|
|
16,492
|
|
|
|
6,798
|
|
|
|
9,693
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Mt. Pleasant, MI
|
|
|
767
|
|
|
|
7,769
|
|
|
|
20
|
|
|
|
1,142
|
|
|
|
13,670
|
|
|
|
14,812
|
|
|
|
6,682
|
|
|
|
8,130
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1993(A)
|
|
Elyria, OH
|
|
|
352
|
|
|
|
5,693
|
|
|
|
0
|
|
|
|
352
|
|
|
|
8,469
|
|
|
|
8,821
|
|
|
|
4,653
|
|
|
|
4,168
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1977(C)
|
|
Meridian, ID
|
|
|
24,591
|
|
|
|
31,779
|
|
|
|
0
|
|
|
|
24,841
|
|
|
|
60,210
|
|
|
|
85,051
|
|
|
|
10,473
|
|
|
|
74,578
|
|
|
|
37,200
|
|
|
|
S/L 31.5
|
|
|
|
2001(C)
|
|
Midvale, UT (FT. Union I, II, III &
Wingers)
|
|
|
25,662
|
|
|
|
56,759
|
|
|
|
0
|
|
|
|
28,393
|
|
|
|
73,823
|
|
|
|
102,216
|
|
|
|
20,158
|
|
|
|
82,058
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Taylorsville, UT
|
|
|
24,327
|
|
|
|
53,686
|
|
|
|
0
|
|
|
|
31,368
|
|
|
|
76,893
|
|
|
|
108,261
|
|
|
|
22,642
|
|
|
|
85,619
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Orem, UT
|
|
|
5,428
|
|
|
|
12,259
|
|
|
|
0
|
|
|
|
5,428
|
|
|
|
13,195
|
|
|
|
18,623
|
|
|
|
4,454
|
|
|
|
14,170
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Salt Lake City, UT (33rd)
|
|
|
986
|
|
|
|
2,132
|
|
|
|
0
|
|
|
|
986
|
|
|
|
2,285
|
|
|
|
3,271
|
|
|
|
752
|
|
|
|
2,519
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Riverdale, UT
|
|
|
15,845
|
|
|
|
36,479
|
|
|
|
0
|
|
|
|
15,845
|
|
|
|
43,423
|
|
|
|
59,268
|
|
|
|
14,501
|
|
|
|
44,767
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Bemidji, MN
|
|
|
442
|
|
|
|
8,229
|
|
|
|
500
|
|
|
|
442
|
|
|
|
11,570
|
|
|
|
12,012
|
|
|
|
8,496
|
|
|
|
3,517
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1977(C)
|
|
Salt Lake City, UT
|
|
|
2,801
|
|
|
|
5,997
|
|
|
|
0
|
|
|
|
2,801
|
|
|
|
6,888
|
|
|
|
9,689
|
|
|
|
2,430
|
|
|
|
7,260
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Ogden, UT
|
|
|
3,620
|
|
|
|
7,716
|
|
|
|
0
|
|
|
|
3,620
|
|
|
|
8,414
|
|
|
|
12,034
|
|
|
|
2,826
|
|
|
|
9,207
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Birmingham, AL Eastwood)
|
|
|
3,726
|
|
|
|
13,974
|
|
|
|
0
|
|
|
|
3,726
|
|
|
|
17,129
|
|
|
|
20,855
|
|
|
|
7,472
|
|
|
|
13,384
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Birmingham, Al (Brookhighland)
|
|
|
10,573
|
|
|
|
26,002
|
|
|
|
0
|
|
|
|
11,434
|
|
|
|
51,440
|
|
|
|
62,874
|
|
|
|
16,713
|
|
|
|
46,161
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1995(A)
|
|
Ormond Beach, FL
|
|
|
1,048
|
|
|
|
15,812
|
|
|
|
4
|
|
|
|
1,048
|
|
|
|
18,025
|
|
|
|
19,073
|
|
|
|
8,104
|
|
|
|
10,969
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Antioch, CA
|
|
|
3,066
|
|
|
|
12,220
|
|
|
|
0
|
|
|
|
3,066
|
|
|
|
6,308
|
|
|
|
9,374
|
|
|
|
983
|
|
|
|
8,391
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Santa Rosa, CA
|
|
|
3,783
|
|
|
|
15,964
|
|
|
|
0
|
|
|
|
3,783
|
|
|
|
14,869
|
|
|
|
18,652
|
|
|
|
1,284
|
|
|
|
17,367
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
San Diego, CA (College)
|
|
|
0
|
|
|
|
11,079
|
|
|
|
55
|
|
|
|
0
|
|
|
|
9,465
|
|
|
|
9,465
|
|
|
|
804
|
|
|
|
8,661
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Las Vegas, NV
|
|
|
6,458
|
|
|
|
3,488
|
|
|
|
0
|
|
|
|
6,458
|
|
|
|
2,939
|
|
|
|
9,397
|
|
|
|
275
|
|
|
|
9,121
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
West Covina, CA
|
|
|
0
|
|
|
|
20,456
|
|
|
|
0
|
|
|
|
0
|
|
|
|
19,341
|
|
|
|
19,341
|
|
|
|
1,650
|
|
|
|
17,691
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Phoenix, AZ
|
|
|
2,443
|
|
|
|
6,221
|
|
|
|
0
|
|
|
|
2,443
|
|
|
|
5,633
|
|
|
|
8,076
|
|
|
|
497
|
|
|
|
7,578
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Fairfield, CA
|
|
|
9,140
|
|
|
|
11,514
|
|
|
|
0
|
|
|
|
9,140
|
|
|
|
4,941
|
|
|
|
14,081
|
|
|
|
922
|
|
|
|
13,159
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Garden Grove, CA
|
|
|
4,955
|
|
|
|
5,392
|
|
|
|
0
|
|
|
|
4,955
|
|
|
|
4,853
|
|
|
|
9,808
|
|
|
|
430
|
|
|
|
9,378
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
San Diego, CA
|
|
|
5,508
|
|
|
|
8,294
|
|
|
|
0
|
|
|
|
5,508
|
|
|
|
3,394
|
|
|
|
8,902
|
|
|
|
665
|
|
|
|
8,237
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Carson City, NV
|
|
|
1,928
|
|
|
|
4,841
|
|
|
|
0
|
|
|
|
1,928
|
|
|
|
4,450
|
|
|
|
6,378
|
|
|
|
387
|
|
|
|
5,992
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
F-66
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Tucson, AZ
|
|
|
1,938
|
|
|
|
4,151
|
|
|
|
0
|
|
|
|
1,938
|
|
|
|
3,785
|
|
|
|
5,723
|
|
|
|
330
|
|
|
|
5,393
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Redding, CA
|
|
|
1,978
|
|
|
|
5,831
|
|
|
|
0
|
|
|
|
1,978
|
|
|
|
5,384
|
|
|
|
7,362
|
|
|
|
467
|
|
|
|
6,895
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
San Antonio, TX
|
|
|
2,403
|
|
|
|
2,697
|
|
|
|
0
|
|
|
|
2,403
|
|
|
|
2,387
|
|
|
|
4,790
|
|
|
|
213
|
|
|
|
4,577
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Chandler, AZ
|
|
|
2,136
|
|
|
|
5,831
|
|
|
|
0
|
|
|
|
2,136
|
|
|
|
5,349
|
|
|
|
7,485
|
|
|
|
466
|
|
|
|
7,019
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Chino, CA
|
|
|
4,974
|
|
|
|
7,052
|
|
|
|
0
|
|
|
|
4,974
|
|
|
|
2,948
|
|
|
|
7,922
|
|
|
|
564
|
|
|
|
7,358
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Las Vegas, NV
|
|
|
2,621
|
|
|
|
6,039
|
|
|
|
0
|
|
|
|
2,621
|
|
|
|
5,546
|
|
|
|
8,167
|
|
|
|
483
|
|
|
|
7,684
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Clovis, CA
|
|
|
0
|
|
|
|
9,057
|
|
|
|
0
|
|
|
|
0
|
|
|
|
7,809
|
|
|
|
7,809
|
|
|
|
728
|
|
|
|
7,081
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Santa Maria, CA
|
|
|
1,117
|
|
|
|
8,736
|
|
|
|
0
|
|
|
|
1,117
|
|
|
|
8,185
|
|
|
|
9,302
|
|
|
|
701
|
|
|
|
8,601
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
El Cajon, CA
|
|
|
0
|
|
|
|
15,648
|
|
|
|
0
|
|
|
|
0
|
|
|
|
14,743
|
|
|
|
14,743
|
|
|
|
1,260
|
|
|
|
13,483
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Ukiah, CA
|
|
|
1,632
|
|
|
|
2,368
|
|
|
|
0
|
|
|
|
1,632
|
|
|
|
2,133
|
|
|
|
3,765
|
|
|
|
187
|
|
|
|
3,577
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Madera, CA
|
|
|
1,770
|
|
|
|
746
|
|
|
|
0
|
|
|
|
1,770
|
|
|
|
603
|
|
|
|
2,373
|
|
|
|
56
|
|
|
|
2,317
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Mesa, AZ
|
|
|
2,551
|
|
|
|
11,951
|
|
|
|
0
|
|
|
|
2,551
|
|
|
|
11,123
|
|
|
|
13,674
|
|
|
|
960
|
|
|
|
12,714
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Burbank, CA
|
|
|
0
|
|
|
|
20,834
|
|
|
|
0
|
|
|
|
0
|
|
|
|
19,661
|
|
|
|
19,661
|
|
|
|
1,637
|
|
|
|
18,024
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
North Fullerton, CA
|
|
|
4,163
|
|
|
|
5,980
|
|
|
|
0
|
|
|
|
4,163
|
|
|
|
5,427
|
|
|
|
9,590
|
|
|
|
478
|
|
|
|
9,113
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Tulare, CA
|
|
|
2,868
|
|
|
|
4,200
|
|
|
|
0
|
|
|
|
2,868
|
|
|
|
3,793
|
|
|
|
6,661
|
|
|
|
335
|
|
|
|
6,326
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Porterville, CA
|
|
|
1,681
|
|
|
|
4,408
|
|
|
|
0
|
|
|
|
1,681
|
|
|
|
4,038
|
|
|
|
5,719
|
|
|
|
351
|
|
|
|
5,368
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Lompac, CA
|
|
|
2,275
|
|
|
|
2,074
|
|
|
|
0
|
|
|
|
2,275
|
|
|
|
1,821
|
|
|
|
4,096
|
|
|
|
163
|
|
|
|
3,932
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Palmdale, CA
|
|
|
4,589
|
|
|
|
6,544
|
|
|
|
0
|
|
|
|
4,589
|
|
|
|
5,949
|
|
|
|
10,538
|
|
|
|
523
|
|
|
|
10,014
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Anaheim, CA
|
|
|
8,900
|
|
|
|
11,925
|
|
|
|
0
|
|
|
|
8,900
|
|
|
|
7,578
|
|
|
|
16,478
|
|
|
|
958
|
|
|
|
15,520
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Sonora, CA
|
|
|
1,889
|
|
|
|
6,860
|
|
|
|
0
|
|
|
|
1,889
|
|
|
|
5,100
|
|
|
|
6,989
|
|
|
|
550
|
|
|
|
6,439
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Phoenix, AZ
|
|
|
2,334
|
|
|
|
8,453
|
|
|
|
0
|
|
|
|
2,334
|
|
|
|
7,835
|
|
|
|
10,169
|
|
|
|
678
|
|
|
|
9,491
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Foot Hill Ranch, CA
|
|
|
5,409
|
|
|
|
9,383
|
|
|
|
0
|
|
|
|
5,409
|
|
|
|
2,631
|
|
|
|
8,040
|
|
|
|
753
|
|
|
|
7,288
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Reno, NV
|
|
|
2,695
|
|
|
|
5,078
|
|
|
|
0
|
|
|
|
2,695
|
|
|
|
4,629
|
|
|
|
7,324
|
|
|
|
405
|
|
|
|
6,919
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Las Vegas, NV
|
|
|
5,736
|
|
|
|
5,795
|
|
|
|
0
|
|
|
|
5,736
|
|
|
|
3,429
|
|
|
|
9,165
|
|
|
|
462
|
|
|
|
8,703
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Folsom, CA
|
|
|
3,461
|
|
|
|
11,036
|
|
|
|
0
|
|
|
|
3,461
|
|
|
|
10,205
|
|
|
|
13,666
|
|
|
|
886
|
|
|
|
12,779
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Slatten Ranch, CA
|
|
|
5,439
|
|
|
|
11,728
|
|
|
|
0
|
|
|
|
5,439
|
|
|
|
8,379
|
|
|
|
13,818
|
|
|
|
942
|
|
|
|
12,877
|
|
|
|
0
|
|
|
|
S/L 40.0
|
|
|
|
2005(A)
|
|
Buffalo, NY
|
|
|
2,341
|
|
|
|
8,995
|
|
|
|
0
|
|
|
|
2,341
|
|
|
|
9,580
|
|
|
|
11,921
|
|
|
|
1,461
|
|
|
|
10,460
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
West Seneca, NY
|
|
|
2,929
|
|
|
|
12,926
|
|
|
|
0
|
|
|
|
2,929
|
|
|
|
12,941
|
|
|
|
15,870
|
|
|
|
1,945
|
|
|
|
13,925
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
N. Tonawanda, NY
|
|
|
5,878
|
|
|
|
21,291
|
|
|
|
0
|
|
|
|
5,878
|
|
|
|
22,480
|
|
|
|
28,358
|
|
|
|
3,516
|
|
|
|
24,842
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Amherst, NY
|
|
|
5,873
|
|
|
|
22,458
|
|
|
|
0
|
|
|
|
5,873
|
|
|
|
23,225
|
|
|
|
29,098
|
|
|
|
3,508
|
|
|
|
25,590
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Ithaca, NY
|
|
|
9,198
|
|
|
|
42,969
|
|
|
|
0
|
|
|
|
9,198
|
|
|
|
43,150
|
|
|
|
52,348
|
|
|
|
6,393
|
|
|
|
45,955
|
|
|
|
15,933
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Hamburg, NY
|
|
|
3,303
|
|
|
|
16,239
|
|
|
|
0
|
|
|
|
3,303
|
|
|
|
16,766
|
|
|
|
20,069
|
|
|
|
2,653
|
|
|
|
17,415
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
West Seneca, NY
|
|
|
2,576
|
|
|
|
2,590
|
|
|
|
0
|
|
|
|
2,576
|
|
|
|
3,530
|
|
|
|
6,106
|
|
|
|
485
|
|
|
|
5,622
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
F-67
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Orland Park, IL
|
|
|
10,430
|
|
|
|
13,081
|
|
|
|
0
|
|
|
|
10,430
|
|
|
|
13,101
|
|
|
|
23,531
|
|
|
|
1,991
|
|
|
|
21,540
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Hamburg, NY
|
|
|
4,071
|
|
|
|
17,142
|
|
|
|
0
|
|
|
|
4,071
|
|
|
|
17,155
|
|
|
|
21,226
|
|
|
|
2,605
|
|
|
|
18,621
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Tonawanda, NY
|
|
|
3,061
|
|
|
|
6,887
|
|
|
|
0
|
|
|
|
3,061
|
|
|
|
7,683
|
|
|
|
10,744
|
|
|
|
1,154
|
|
|
|
9,590
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Hamburg, NY
|
|
|
4,152
|
|
|
|
22,075
|
|
|
|
0
|
|
|
|
4,152
|
|
|
|
22,660
|
|
|
|
26,812
|
|
|
|
3,317
|
|
|
|
23,495
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Columbus, OH (Consumer Square)
|
|
|
9,828
|
|
|
|
22,858
|
|
|
|
0
|
|
|
|
9,828
|
|
|
|
23,371
|
|
|
|
33,199
|
|
|
|
3,637
|
|
|
|
29,563
|
|
|
|
12,544
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Louisville, KY (Outer Loop)
|
|
|
4,180
|
|
|
|
747
|
|
|
|
0
|
|
|
|
4,180
|
|
|
|
1,010
|
|
|
|
5,190
|
|
|
|
184
|
|
|
|
5,006
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Olean, NY
|
|
|
8,834
|
|
|
|
29,813
|
|
|
|
0
|
|
|
|
8,834
|
|
|
|
30,525
|
|
|
|
39,359
|
|
|
|
4,982
|
|
|
|
34,376
|
|
|
|
3,662
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
N. Charleston, SC (N Charl Ctr)
|
|
|
5,146
|
|
|
|
5,990
|
|
|
|
0
|
|
|
|
5,146
|
|
|
|
8,456
|
|
|
|
13,602
|
|
|
|
1,255
|
|
|
|
12,347
|
|
|
|
10,027
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Jacsonville, FL (Arlington Road)
|
|
|
4,672
|
|
|
|
5,085
|
|
|
|
0
|
|
|
|
4,672
|
|
|
|
(509
|
)
|
|
|
4,163
|
|
|
|
857
|
|
|
|
3,306
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
West Long Branch, NJ (Monmouth)
|
|
|
14,131
|
|
|
|
51,982
|
|
|
|
0
|
|
|
|
14,131
|
|
|
|
53,716
|
|
|
|
67,847
|
|
|
|
7,885
|
|
|
|
59,963
|
|
|
|
9,597
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Big Flats, NY (Big Flats I)
|
|
|
22,229
|
|
|
|
52,579
|
|
|
|
0
|
|
|
|
22,279
|
|
|
|
56,185
|
|
|
|
78,464
|
|
|
|
9,852
|
|
|
|
68,612
|
|
|
|
8,289
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Hanover, PA
|
|
|
4,408
|
|
|
|
4,707
|
|
|
|
0
|
|
|
|
4,408
|
|
|
|
4,707
|
|
|
|
9,115
|
|
|
|
750
|
|
|
|
8,365
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Mays Landing, NJ (Wrangelboro)
|
|
|
49,033
|
|
|
|
107,230
|
|
|
|
0
|
|
|
|
49,033
|
|
|
|
109,194
|
|
|
|
158,227
|
|
|
|
16,436
|
|
|
|
141,791
|
|
|
|
43,475
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Plattsburgh, NY
|
|
|
10,734
|
|
|
|
34,028
|
|
|
|
0
|
|
|
|
10,767
|
|
|
|
35,296
|
|
|
|
46,063
|
|
|
|
5,697
|
|
|
|
40,366
|
|
|
|
4,458
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Williamsville, NY
|
|
|
5,021
|
|
|
|
6,768
|
|
|
|
0
|
|
|
|
5,021
|
|
|
|
8,335
|
|
|
|
13,356
|
|
|
|
1,172
|
|
|
|
12,184
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Niagara Falls, NY
|
|
|
4,956
|
|
|
|
11,370
|
|
|
|
0
|
|
|
|
1,973
|
|
|
|
3,191
|
|
|
|
5,164
|
|
|
|
493
|
|
|
|
4,671
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Amherst, NY
|
|
|
29,729
|
|
|
|
78,602
|
|
|
|
0
|
|
|
|
28,672
|
|
|
|
73,602
|
|
|
|
102,274
|
|
|
|
11,360
|
|
|
|
90,914
|
|
|
|
20,875
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Greece, NY
|
|
|
3,901
|
|
|
|
4,922
|
|
|
|
0
|
|
|
|
3,901
|
|
|
|
4,922
|
|
|
|
8,823
|
|
|
|
751
|
|
|
|
8,071
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Buffalo, NY (Elmwood)
|
|
|
6,010
|
|
|
|
19,044
|
|
|
|
0
|
|
|
|
6,010
|
|
|
|
19,100
|
|
|
|
25,110
|
|
|
|
2,866
|
|
|
|
22,244
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Orange Park, FL (The Village)
|
|
|
1,929
|
|
|
|
5,476
|
|
|
|
0
|
|
|
|
1,929
|
|
|
|
5,515
|
|
|
|
7,444
|
|
|
|
835
|
|
|
|
6,609
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Lakeland, FL (Highlands)
|
|
|
4,112
|
|
|
|
4,328
|
|
|
|
0
|
|
|
|
4,112
|
|
|
|
4,425
|
|
|
|
8,537
|
|
|
|
683
|
|
|
|
7,854
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Lockport, NY
|
|
|
9,253
|
|
|
|
23,829
|
|
|
|
0
|
|
|
|
9,253
|
|
|
|
24,121
|
|
|
|
33,374
|
|
|
|
3,640
|
|
|
|
29,734
|
|
|
|
10,124
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Buffalo, NY (Delaware)
|
|
|
3,568
|
|
|
|
29,001
|
|
|
|
0
|
|
|
|
3,620
|
|
|
|
29,555
|
|
|
|
33,175
|
|
|
|
4,304
|
|
|
|
28,872
|
|
|
|
715
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Cheektowaga, NY (Thruway)
|
|
|
15,471
|
|
|
|
25,600
|
|
|
|
0
|
|
|
|
15,471
|
|
|
|
26,888
|
|
|
|
42,359
|
|
|
|
4,450
|
|
|
|
37,910
|
|
|
|
4,060
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Walker, MI (Alpine Ave)
|
|
|
1,454
|
|
|
|
9,284
|
|
|
|
0
|
|
|
|
1,454
|
|
|
|
11,892
|
|
|
|
13,346
|
|
|
|
2,346
|
|
|
|
10,999
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Toledo, OH
|
|
|
1,316
|
|
|
|
3,961
|
|
|
|
0
|
|
|
|
1,316
|
|
|
|
3,961
|
|
|
|
5,277
|
|
|
|
613
|
|
|
|
4,664
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Amherst, NY
|
|
|
4,054
|
|
|
|
11,995
|
|
|
|
0
|
|
|
|
4,054
|
|
|
|
12,053
|
|
|
|
16,107
|
|
|
|
1,808
|
|
|
|
14,299
|
|
|
|
4,204
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
New Hartford, NY
|
|
|
1,279
|
|
|
|
13,685
|
|
|
|
0
|
|
|
|
1,279
|
|
|
|
13,743
|
|
|
|
15,022
|
|
|
|
2,079
|
|
|
|
12,943
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Tonawanda, NY (Sher/Delaware)
|
|
|
5,090
|
|
|
|
14,874
|
|
|
|
0
|
|
|
|
5,090
|
|
|
|
14,942
|
|
|
|
20,032
|
|
|
|
2,255
|
|
|
|
17,777
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Mays Landing, NJ (Hamilton)
|
|
|
36,224
|
|
|
|
56,949
|
|
|
|
0
|
|
|
|
36,224
|
|
|
|
59,240
|
|
|
|
95,464
|
|
|
|
8,788
|
|
|
|
86,676
|
|
|
|
11,349
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Gates, NY
|
|
|
9,369
|
|
|
|
40,672
|
|
|
|
0
|
|
|
|
9,369
|
|
|
|
41,558
|
|
|
|
50,927
|
|
|
|
6,233
|
|
|
|
44,694
|
|
|
|
23,783
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Rome, NY (Freedom)
|
|
|
4,565
|
|
|
|
5,078
|
|
|
|
0
|
|
|
|
4,565
|
|
|
|
9,239
|
|
|
|
13,804
|
|
|
|
1,189
|
|
|
|
12,615
|
|
|
|
3,571
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Englewood, FL
|
|
|
2,172
|
|
|
|
2,983
|
|
|
|
0
|
|
|
|
2,172
|
|
|
|
3,195
|
|
|
|
5,367
|
|
|
|
424
|
|
|
|
4,944
|
|
|
|
1,352
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
F-68
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Hamburg, NY (Milestrip)
|
|
|
2,527
|
|
|
|
14,711
|
|
|
|
0
|
|
|
|
2,527
|
|
|
|
14,872
|
|
|
|
17,399
|
|
|
|
2,382
|
|
|
|
15,017
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Mooresville, NC
|
|
|
14,369
|
|
|
|
43,688
|
|
|
|
0
|
|
|
|
14,369
|
|
|
|
44,410
|
|
|
|
58,779
|
|
|
|
6,125
|
|
|
|
52,655
|
|
|
|
22,869
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Amherst, NY (Sheridan/Harlem)
|
|
|
2,620
|
|
|
|
2,554
|
|
|
|
0
|
|
|
|
2,620
|
|
|
|
2,848
|
|
|
|
5,468
|
|
|
|
442
|
|
|
|
5,027
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Indian Trail, NC
|
|
|
3,172
|
|
|
|
7,075
|
|
|
|
0
|
|
|
|
3,172
|
|
|
|
7,368
|
|
|
|
10,540
|
|
|
|
1,153
|
|
|
|
9,386
|
|
|
|
6,634
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Dewitt, NY
|
|
|
1,140
|
|
|
|
6,756
|
|
|
|
0
|
|
|
|
881
|
|
|
|
5,677
|
|
|
|
6,558
|
|
|
|
844
|
|
|
|
5,714
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Chili, NY
|
|
|
2,143
|
|
|
|
8,109
|
|
|
|
0
|
|
|
|
2,143
|
|
|
|
8,109
|
|
|
|
10,252
|
|
|
|
1,235
|
|
|
|
9,017
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Horseheads, NY
|
|
|
659
|
|
|
|
2,426
|
|
|
|
0
|
|
|
|
4,682
|
|
|
|
19,484
|
|
|
|
24,166
|
|
|
|
273
|
|
|
|
23,893
|
|
|
|
30,618
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Ashtabula, OH
|
|
|
1,444
|
|
|
|
9,912
|
|
|
|
0
|
|
|
|
1,444
|
|
|
|
9,916
|
|
|
|
11,360
|
|
|
|
1,473
|
|
|
|
9,888
|
|
|
|
6,608
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Niskayuna, NY
|
|
|
20,297
|
|
|
|
51,155
|
|
|
|
0
|
|
|
|
20,297
|
|
|
|
51,916
|
|
|
|
72,213
|
|
|
|
8,128
|
|
|
|
64,085
|
|
|
|
20,804
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Dansville, NY
|
|
|
2,806
|
|
|
|
4,905
|
|
|
|
0
|
|
|
|
2,806
|
|
|
|
5,041
|
|
|
|
7,847
|
|
|
|
768
|
|
|
|
7,079
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Dewitt, NY (Dewitt Commons)
|
|
|
9,738
|
|
|
|
26,351
|
|
|
|
0
|
|
|
|
9,738
|
|
|
|
32,044
|
|
|
|
41,782
|
|
|
|
6,370
|
|
|
|
35,412
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Victor, NY
|
|
|
2,374
|
|
|
|
6,433
|
|
|
|
0
|
|
|
|
2,374
|
|
|
|
6,517
|
|
|
|
8,891
|
|
|
|
955
|
|
|
|
7,936
|
|
|
|
6,297
|
|
|
|
S/L 31.5
|
|
|
|
2004(A)
|
|
Wilmington, NC
|
|
|
4,785
|
|
|
|
16,852
|
|
|
|
1,183
|
|
|
|
4,287
|
|
|
|
34,528
|
|
|
|
38,815
|
|
|
|
15,396
|
|
|
|
23,418
|
|
|
|
24,500
|
|
|
|
S/L 31.5
|
|
|
|
1989(C)
|
|
Berlin, VT
|
|
|
859
|
|
|
|
10,948
|
|
|
|
24
|
|
|
|
866
|
|
|
|
15,466
|
|
|
|
16,332
|
|
|
|
8,932
|
|
|
|
7,401
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1986(C)
|
|
Brainerd, MN
|
|
|
703
|
|
|
|
9,104
|
|
|
|
272
|
|
|
|
1,182
|
|
|
|
15,955
|
|
|
|
17,137
|
|
|
|
7,388
|
|
|
|
9,749
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1991(A)
|
|
Spring Hill, FL
|
|
|
1,084
|
|
|
|
4,816
|
|
|
|
266
|
|
|
|
2,096
|
|
|
|
11,051
|
|
|
|
13,147
|
|
|
|
5,234
|
|
|
|
7,913
|
|
|
|
4,521
|
|
|
|
S/L 30.0
|
|
|
|
1988(C)
|
|
Tiffin, OH
|
|
|
432
|
|
|
|
5,908
|
|
|
|
435
|
|
|
|
432
|
|
|
|
7,907
|
|
|
|
8,339
|
|
|
|
5,767
|
|
|
|
2,572
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1980(C)
|
|
Broomfield, CO (Flatiron Gard)
|
|
|
23,681
|
|
|
|
31,809
|
|
|
|
0
|
|
|
|
13,707
|
|
|
|
42,731
|
|
|
|
56,438
|
|
|
|
7,116
|
|
|
|
49,323
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2003(A)
|
|
Denver, CO (Centennial)
|
|
|
7,833
|
|
|
|
35,550
|
|
|
|
0
|
|
|
|
8,082
|
|
|
|
56,549
|
|
|
|
64,631
|
|
|
|
18,087
|
|
|
|
46,544
|
|
|
|
36,573
|
|
|
|
S/L 31.5
|
|
|
|
1997(C)
|
|
Dickinson, ND
|
|
|
57
|
|
|
|
6,864
|
|
|
|
355
|
|
|
|
51
|
|
|
|
7,799
|
|
|
|
7,850
|
|
|
|
7,596
|
|
|
|
254
|
|
|
|
0
|
|
|
|
S/L 30.0
|
|
|
|
1978(C)
|
|
New Bern, NC
|
|
|
780
|
|
|
|
8,204
|
|
|
|
72
|
|
|
|
441
|
|
|
|
5,285
|
|
|
|
5,726
|
|
|
|
2,717
|
|
|
|
3,008
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1989(C)
|
|
Bayamon, PR (Plaza Del Sol)
|
|
|
132,074
|
|
|
|
152,441
|
|
|
|
0
|
|
|
|
132,759
|
|
|
|
155,203
|
|
|
|
287,962
|
|
|
|
19,400
|
|
|
|
268,563
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Carolina, PR (Plaza Escorial)
|
|
|
28,522
|
|
|
|
76,947
|
|
|
|
0
|
|
|
|
28,601
|
|
|
|
77,432
|
|
|
|
106,033
|
|
|
|
9,836
|
|
|
|
96,197
|
|
|
|
57,500
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Humacao, PR (Palma Real)
|
|
|
16,386
|
|
|
|
74,059
|
|
|
|
0
|
|
|
|
16,386
|
|
|
|
75,214
|
|
|
|
91,600
|
|
|
|
9,513
|
|
|
|
82,088
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Isabela, PR (Plaza Isabela)
|
|
|
8,175
|
|
|
|
41,094
|
|
|
|
0
|
|
|
|
8,175
|
|
|
|
42,507
|
|
|
|
50,682
|
|
|
|
5,373
|
|
|
|
45,308
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
San German, PR (Camino Real)
|
|
|
3,215
|
|
|
|
24
|
|
|
|
0
|
|
|
|
3,232
|
|
|
|
24
|
|
|
|
3,256
|
|
|
|
14
|
|
|
|
3,243
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Cayey, PR (Plaza Cayey)
|
|
|
19,214
|
|
|
|
25,584
|
|
|
|
0
|
|
|
|
18,629
|
|
|
|
26,235
|
|
|
|
44,864
|
|
|
|
3,390
|
|
|
|
41,474
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Bayamon, PR (Rio Hondo)
|
|
|
91,645
|
|
|
|
98,007
|
|
|
|
0
|
|
|
|
91,898
|
|
|
|
101,795
|
|
|
|
193,693
|
|
|
|
12,531
|
|
|
|
181,162
|
|
|
|
109,500
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
San Juan, PR (Senorial Plaza)
|
|
|
10,338
|
|
|
|
23,285
|
|
|
|
0
|
|
|
|
10,238
|
|
|
|
26,922
|
|
|
|
37,160
|
|
|
|
3,041
|
|
|
|
34,119
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Bayamon, PR (Rexville Plaza)
|
|
|
4,294
|
|
|
|
11,987
|
|
|
|
0
|
|
|
|
4,294
|
|
|
|
12,237
|
|
|
|
16,531
|
|
|
|
1,586
|
|
|
|
14,945
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Arecibo, PR (Atlantico)
|
|
|
7,965
|
|
|
|
29,898
|
|
|
|
0
|
|
|
|
8,094
|
|
|
|
30,890
|
|
|
|
38,984
|
|
|
|
3,945
|
|
|
|
35,039
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Hatillo, PR (Plaza Del Norte)
|
|
|
101,219
|
|
|
|
105,465
|
|
|
|
0
|
|
|
|
101,219
|
|
|
|
109,884
|
|
|
|
211,103
|
|
|
|
13,617
|
|
|
|
197,486
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Vega Baja, PR (Plaza Vega Baja)
|
|
|
7,076
|
|
|
|
18,684
|
|
|
|
0
|
|
|
|
7,076
|
|
|
|
18,728
|
|
|
|
25,804
|
|
|
|
2,410
|
|
|
|
23,393
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
F-69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Guyama, PR (Plaza Wal-Mart)
|
|
|
1,960
|
|
|
|
18,721
|
|
|
|
0
|
|
|
|
1,960
|
|
|
|
18,922
|
|
|
|
20,882
|
|
|
|
2,412
|
|
|
|
18,470
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Fajardo, PR (Plaza Fajardo)
|
|
|
4,376
|
|
|
|
41,199
|
|
|
|
0
|
|
|
|
4,376
|
|
|
|
41,502
|
|
|
|
45,878
|
|
|
|
5,254
|
|
|
|
40,624
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
San German, PR (Del Oeste)
|
|
|
6,470
|
|
|
|
20,751
|
|
|
|
0
|
|
|
|
6,470
|
|
|
|
21,117
|
|
|
|
27,587
|
|
|
|
2,714
|
|
|
|
24,874
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Princeton, NJ
|
|
|
7,121
|
|
|
|
29,783
|
|
|
|
0
|
|
|
|
7,121
|
|
|
|
36,049
|
|
|
|
43,170
|
|
|
|
11,600
|
|
|
|
31,570
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Princeton, NJ (Pavilion)
|
|
|
6,327
|
|
|
|
44,466
|
|
|
|
0
|
|
|
|
7,343
|
|
|
|
55,589
|
|
|
|
62,932
|
|
|
|
12,651
|
|
|
|
50,280
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2000(C)
|
|
Phoenix, AZ
|
|
|
15,352
|
|
|
|
22,813
|
|
|
|
1,601
|
|
|
|
15,352
|
|
|
|
26,545
|
|
|
|
41,897
|
|
|
|
9,002
|
|
|
|
32,894
|
|
|
|
30,000
|
|
|
|
S/L 31.5
|
|
|
|
2000(C)
|
|
Wichita, KS ( Eastgate)
|
|
|
5,058
|
|
|
|
11,362
|
|
|
|
0
|
|
|
|
5,222
|
|
|
|
12,549
|
|
|
|
17,771
|
|
|
|
2,956
|
|
|
|
14,814
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2002(A)
|
|
Russellville, AR
|
|
|
624
|
|
|
|
13,391
|
|
|
|
0
|
|
|
|
624
|
|
|
|
14,832
|
|
|
|
15,456
|
|
|
|
6,373
|
|
|
|
9,083
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
N. Little Rock, AR
|
|
|
907
|
|
|
|
17,160
|
|
|
|
0
|
|
|
|
907
|
|
|
|
19,228
|
|
|
|
20,135
|
|
|
|
6,968
|
|
|
|
13,167
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1994(A)
|
|
Ottumwa, IA
|
|
|
338
|
|
|
|
8,564
|
|
|
|
103
|
|
|
|
317
|
|
|
|
16,545
|
|
|
|
16,862
|
|
|
|
7,484
|
|
|
|
9,378
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1990(C)
|
|
Washington, NC
|
|
|
991
|
|
|
|
3,118
|
|
|
|
34
|
|
|
|
878
|
|
|
|
4,476
|
|
|
|
5,354
|
|
|
|
2,268
|
|
|
|
3,085
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1990(C)
|
|
Leawood, KS
|
|
|
13,002
|
|
|
|
69,086
|
|
|
|
0
|
|
|
|
13,527
|
|
|
|
79,210
|
|
|
|
92,737
|
|
|
|
14,489
|
|
|
|
78,248
|
|
|
|
46,435
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Littleton, CO
|
|
|
12,249
|
|
|
|
50,709
|
|
|
|
0
|
|
|
|
12,621
|
|
|
|
53,334
|
|
|
|
65,955
|
|
|
|
10,747
|
|
|
|
55,209
|
|
|
|
42,200
|
|
|
|
S/L 31.5
|
|
|
|
2002(C)
|
|
Durham, NC
|
|
|
2,210
|
|
|
|
11,671
|
|
|
|
278
|
|
|
|
2,210
|
|
|
|
13,776
|
|
|
|
15,986
|
|
|
|
7,838
|
|
|
|
8,148
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1990(C)
|
|
San Antonio, TX (N. Bandera)
|
|
|
3,475
|
|
|
|
37,327
|
|
|
|
0
|
|
|
|
3,475
|
|
|
|
37,981
|
|
|
|
41,456
|
|
|
|
7,860
|
|
|
|
33,597
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2002(A)
|
|
Crystal River, FL
|
|
|
1,217
|
|
|
|
5,796
|
|
|
|
365
|
|
|
|
1,219
|
|
|
|
9,827
|
|
|
|
11,046
|
|
|
|
4,948
|
|
|
|
6,098
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1986(C)
|
|
Dublin, OH (Perimeter Center)
|
|
|
3,609
|
|
|
|
11,546
|
|
|
|
0
|
|
|
|
3,609
|
|
|
|
11,708
|
|
|
|
15,317
|
|
|
|
4,064
|
|
|
|
11,253
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Hamilton, OH
|
|
|
495
|
|
|
|
1,618
|
|
|
|
0
|
|
|
|
495
|
|
|
|
1,618
|
|
|
|
2,113
|
|
|
|
552
|
|
|
|
1,561
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Barboursville, WV
|
|
|
431
|
|
|
|
1,417
|
|
|
|
2
|
|
|
|
0
|
|
|
|
1,959
|
|
|
|
1,959
|
|
|
|
647
|
|
|
|
1,312
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Columbus, OH (Easton Market)
|
|
|
11,087
|
|
|
|
44,494
|
|
|
|
0
|
|
|
|
12,243
|
|
|
|
49,112
|
|
|
|
61,355
|
|
|
|
15,936
|
|
|
|
45,418
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
1998(A)
|
|
Columbus, OH (Dublin Village))
|
|
|
6,478
|
|
|
|
29,792
|
|
|
|
0
|
|
|
|
6,478
|
|
|
|
29,681
|
|
|
|
36,159
|
|
|
|
29,654
|
|
|
|
6,505
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2005(A)
|
|
Denver, CO (Tamarac Square Mall)
|
|
|
2,990
|
|
|
|
12,252
|
|
|
|
0
|
|
|
|
2,987
|
|
|
|
13,957
|
|
|
|
16,944
|
|
|
|
4,195
|
|
|
|
12,749
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2001(A)
|
|
Daytona Beach, FL (Volusia Point)
|
|
|
3,838
|
|
|
|
4,485
|
|
|
|
0
|
|
|
|
3,834
|
|
|
|
5,059
|
|
|
|
8,893
|
|
|
|
1,291
|
|
|
|
7,602
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2001(A)
|
|
Twinsburg, OH (Heritage Business)
|
|
|
254
|
|
|
|
1,623
|
|
|
|
0
|
|
|
|
254
|
|
|
|
1,774
|
|
|
|
2,028
|
|
|
|
427
|
|
|
|
1,601
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2001(A)
|
|
Silver Springs, MD (Tech Center
29-1)
|
|
|
7,484
|
|
|
|
20,980
|
|
|
|
0
|
|
|
|
7,476
|
|
|
|
25,183
|
|
|
|
32,659
|
|
|
|
6,450
|
|
|
|
26,208
|
|
|
|
6,173
|
|
|
|
S/L 31.5
|
|
|
|
2001(A)
|
|
San Antonio, TX (Center)
|
|
|
1,232
|
|
|
|
7,881
|
|
|
|
0
|
|
|
|
1,014
|
|
|
|
7,256
|
|
|
|
8,270
|
|
|
|
304
|
|
|
|
7,966
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(C)
|
|
San Antonio, TX (Lifestyle)
|
|
|
1,613
|
|
|
|
10,791
|
|
|
|
0
|
|
|
|
5,427
|
|
|
|
54,036
|
|
|
|
59,463
|
|
|
|
985
|
|
|
|
58,478
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(C)
|
|
McHenry, IL
|
|
|
332
|
|
|
|
1,302
|
|
|
|
0
|
|
|
|
1,884
|
|
|
|
7,021
|
|
|
|
8,905
|
|
|
|
76
|
|
|
|
8,829
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2006(C)
|
|
San Antonio, TX (Terrell)
|
|
|
4,980
|
|
|
|
11,880
|
|
|
|
0
|
|
|
|
4,980
|
|
|
|
11,880
|
|
|
|
16,860
|
|
|
|
377
|
|
|
|
16,484
|
|
|
|
12,774
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Macon, GA
|
|
|
2,940
|
|
|
|
5,192
|
|
|
|
0
|
|
|
|
2,940
|
|
|
|
5,447
|
|
|
|
8,387
|
|
|
|
314
|
|
|
|
8,073
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Snellville, GA (Commons)
|
|
|
10,185
|
|
|
|
51,815
|
|
|
|
0
|
|
|
|
10,318
|
|
|
|
52,499
|
|
|
|
62,817
|
|
|
|
3,117
|
|
|
|
59,700
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Union, NJ
|
|
|
7,659
|
|
|
|
15,689
|
|
|
|
0
|
|
|
|
7,650
|
|
|
|
15,670
|
|
|
|
23,320
|
|
|
|
936
|
|
|
|
22,385
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
F-70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Spartanburg, SC (Northpoint)
|
|
|
1,015
|
|
|
|
8,992
|
|
|
|
0
|
|
|
|
1,015
|
|
|
|
8,992
|
|
|
|
10,007
|
|
|
|
553
|
|
|
|
9,455
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Taylors, SC (Hampton)
|
|
|
1,732
|
|
|
|
4,506
|
|
|
|
0
|
|
|
|
1,732
|
|
|
|
4,506
|
|
|
|
6,238
|
|
|
|
272
|
|
|
|
5,966
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Dothan, AL (Shops)
|
|
|
2,065
|
|
|
|
20,972
|
|
|
|
0
|
|
|
|
2,065
|
|
|
|
20,974
|
|
|
|
23,039
|
|
|
|
1,249
|
|
|
|
21,789
|
|
|
|
11,409
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Bradenton, FL (Cortez)
|
|
|
10,766
|
|
|
|
31,203
|
|
|
|
0
|
|
|
|
10,766
|
|
|
|
31,262
|
|
|
|
42,028
|
|
|
|
1,911
|
|
|
|
40,116
|
|
|
|
12,198
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Clearwater, FL
|
|
|
5,579
|
|
|
|
15,855
|
|
|
|
0
|
|
|
|
5,579
|
|
|
|
16,259
|
|
|
|
21,838
|
|
|
|
1,018
|
|
|
|
20,819
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
New Tampa, FL
|
|
|
1,707
|
|
|
|
3,338
|
|
|
|
0
|
|
|
|
1,707
|
|
|
|
3,343
|
|
|
|
5,050
|
|
|
|
208
|
|
|
|
4,841
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Tequesta, FL
|
|
|
2,108
|
|
|
|
7,400
|
|
|
|
0
|
|
|
|
2,108
|
|
|
|
8,271
|
|
|
|
10,379
|
|
|
|
561
|
|
|
|
9,818
|
|
|
|
5,200
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Kennesaw, GA (Town)
|
|
|
6,175
|
|
|
|
9,028
|
|
|
|
0
|
|
|
|
6,175
|
|
|
|
9,029
|
|
|
|
15,204
|
|
|
|
533
|
|
|
|
14,670
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Lawrenceville, GA (Springfield)
|
|
|
3,049
|
|
|
|
10,890
|
|
|
|
0
|
|
|
|
3,049
|
|
|
|
10,892
|
|
|
|
13,941
|
|
|
|
649
|
|
|
|
13,292
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Roswell, GA (Village)
|
|
|
6,566
|
|
|
|
15,005
|
|
|
|
0
|
|
|
|
6,566
|
|
|
|
15,057
|
|
|
|
21,623
|
|
|
|
892
|
|
|
|
20,731
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Hagerstown, MD
|
|
|
2,440
|
|
|
|
9,697
|
|
|
|
0
|
|
|
|
2,440
|
|
|
|
10,209
|
|
|
|
12,649
|
|
|
|
683
|
|
|
|
11,966
|
|
|
|
6,770
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Greensboro, NC (Golden)
|
|
|
5,012
|
|
|
|
11,162
|
|
|
|
0
|
|
|
|
5,012
|
|
|
|
11,163
|
|
|
|
16,175
|
|
|
|
679
|
|
|
|
15,496
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Greensboro, NC (Wendover)
|
|
|
3,153
|
|
|
|
9,455
|
|
|
|
0
|
|
|
|
3,153
|
|
|
|
9,536
|
|
|
|
12,689
|
|
|
|
565
|
|
|
|
12,124
|
|
|
|
5,450
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Brick, NJ
|
|
|
4,261
|
|
|
|
21,479
|
|
|
|
0
|
|
|
|
4,261
|
|
|
|
21,554
|
|
|
|
25,815
|
|
|
|
1,292
|
|
|
|
24,522
|
|
|
|
10,300
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
East Hanover, NJ (Plaza)
|
|
|
3,847
|
|
|
|
23,798
|
|
|
|
0
|
|
|
|
3,847
|
|
|
|
23,998
|
|
|
|
27,845
|
|
|
|
1,443
|
|
|
|
26,401
|
|
|
|
9,280
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
East Hanover, NJ (Sony)
|
|
|
6,861
|
|
|
|
11,165
|
|
|
|
0
|
|
|
|
6,861
|
|
|
|
11,165
|
|
|
|
18,026
|
|
|
|
671
|
|
|
|
17,354
|
|
|
|
6,445
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Camp Hill, PA
|
|
|
1,631
|
|
|
|
8,402
|
|
|
|
0
|
|
|
|
1,631
|
|
|
|
8,402
|
|
|
|
10,033
|
|
|
|
506
|
|
|
|
9,527
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Middletown, RI
|
|
|
3,804
|
|
|
|
16,805
|
|
|
|
0
|
|
|
|
3,804
|
|
|
|
16,805
|
|
|
|
20,609
|
|
|
|
1,011
|
|
|
|
19,599
|
|
|
|
10,000
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Conway, SC
|
|
|
1,217
|
|
|
|
7,038
|
|
|
|
0
|
|
|
|
1,217
|
|
|
|
7,045
|
|
|
|
8,262
|
|
|
|
459
|
|
|
|
7,804
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Lexington, SC
|
|
|
1,795
|
|
|
|
9,933
|
|
|
|
0
|
|
|
|
1,795
|
|
|
|
9,933
|
|
|
|
11,728
|
|
|
|
591
|
|
|
|
11,138
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Newport News, VA (Denbigh)
|
|
|
10,064
|
|
|
|
21,272
|
|
|
|
0
|
|
|
|
10,064
|
|
|
|
21,489
|
|
|
|
31,553
|
|
|
|
1,331
|
|
|
|
30,222
|
|
|
|
11,457
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Richmond, VA (Downtown)
|
|
|
12,002
|
|
|
|
34,736
|
|
|
|
0
|
|
|
|
11,990
|
|
|
|
34,740
|
|
|
|
46,730
|
|
|
|
2,067
|
|
|
|
44,663
|
|
|
|
18,480
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Springfield, VA (Loisdale)
|
|
|
12,627
|
|
|
|
30,572
|
|
|
|
0
|
|
|
|
12,627
|
|
|
|
30,572
|
|
|
|
43,199
|
|
|
|
1,803
|
|
|
|
41,396
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Springfield, VA (Spring Mall)
|
|
|
4,389
|
|
|
|
9,466
|
|
|
|
0
|
|
|
|
4,389
|
|
|
|
10,145
|
|
|
|
14,534
|
|
|
|
623
|
|
|
|
13,911
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Sterling, VA
|
|
|
8,426
|
|
|
|
18,651
|
|
|
|
0
|
|
|
|
8,426
|
|
|
|
18,651
|
|
|
|
27,077
|
|
|
|
1,109
|
|
|
|
25,968
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Windsor Court, CT
|
|
|
6,090
|
|
|
|
11,745
|
|
|
|
0
|
|
|
|
6,090
|
|
|
|
11,746
|
|
|
|
17,836
|
|
|
|
701
|
|
|
|
17,134
|
|
|
|
8,015
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Ocala, FL
|
|
|
2,877
|
|
|
|
9,407
|
|
|
|
0
|
|
|
|
2,877
|
|
|
|
9,408
|
|
|
|
12,285
|
|
|
|
566
|
|
|
|
11,719
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Plant City, FL
|
|
|
3,687
|
|
|
|
9,849
|
|
|
|
0
|
|
|
|
3,687
|
|
|
|
9,858
|
|
|
|
13,545
|
|
|
|
586
|
|
|
|
12,959
|
|
|
|
5,900
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Brandon, FL
|
|
|
3,571
|
|
|
|
12,190
|
|
|
|
0
|
|
|
|
3,571
|
|
|
|
12,190
|
|
|
|
15,761
|
|
|
|
718
|
|
|
|
15,043
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Atlanta, GA (Abernathy)
|
|
|
11,634
|
|
|
|
31,341
|
|
|
|
0
|
|
|
|
11,634
|
|
|
|
31,358
|
|
|
|
42,992
|
|
|
|
1,841
|
|
|
|
41,151
|
|
|
|
13,392
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Norcross, GA
|
|
|
3,007
|
|
|
|
8,489
|
|
|
|
0
|
|
|
|
3,007
|
|
|
|
8,507
|
|
|
|
11,514
|
|
|
|
508
|
|
|
|
11,006
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Bowie, MD
|
|
|
5,739
|
|
|
|
14,301
|
|
|
|
0
|
|
|
|
5,739
|
|
|
|
14,307
|
|
|
|
20,046
|
|
|
|
860
|
|
|
|
19,187
|
|
|
|
8,424
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Ashville, NC (Oakley)
|
|
|
2,651
|
|
|
|
8,908
|
|
|
|
0
|
|
|
|
2,651
|
|
|
|
8,924
|
|
|
|
11,575
|
|
|
|
597
|
|
|
|
10,978
|
|
|
|
5,175
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
F-71
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Cary, NC (Mill Pond)
|
|
|
6,913
|
|
|
|
17,301
|
|
|
|
0
|
|
|
|
6,913
|
|
|
|
17,334
|
|
|
|
24,247
|
|
|
|
1,034
|
|
|
|
23,213
|
|
|
|
8,500
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Charlotte, NC (Camfield)
|
|
|
2,842
|
|
|
|
9,807
|
|
|
|
0
|
|
|
|
2,842
|
|
|
|
9,843
|
|
|
|
12,685
|
|
|
|
591
|
|
|
|
12,093
|
|
|
|
5,150
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Cornelius, NC
|
|
|
4,382
|
|
|
|
15,184
|
|
|
|
0
|
|
|
|
4,382
|
|
|
|
15,277
|
|
|
|
19,659
|
|
|
|
900
|
|
|
|
18,759
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Greensboro, NC (Capital)
|
|
|
3,070
|
|
|
|
13,386
|
|
|
|
0
|
|
|
|
3,070
|
|
|
|
13,463
|
|
|
|
16,533
|
|
|
|
818
|
|
|
|
15,715
|
|
|
|
6,700
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Raleigh, NC (Capital)
|
|
|
2,728
|
|
|
|
10,665
|
|
|
|
0
|
|
|
|
2,728
|
|
|
|
10,665
|
|
|
|
13,393
|
|
|
|
640
|
|
|
|
12,753
|
|
|
|
5,478
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Raleigh, NC (Wakefield)
|
|
|
3,345
|
|
|
|
11,482
|
|
|
|
0
|
|
|
|
3,345
|
|
|
|
11,496
|
|
|
|
14,841
|
|
|
|
695
|
|
|
|
14,147
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Wilmington, NC (Oleander)
|
|
|
2,270
|
|
|
|
4,812
|
|
|
|
0
|
|
|
|
2,270
|
|
|
|
4,963
|
|
|
|
7,233
|
|
|
|
324
|
|
|
|
6,909
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Wilson, NC
|
|
|
1,598
|
|
|
|
8,160
|
|
|
|
0
|
|
|
|
1,598
|
|
|
|
8,240
|
|
|
|
9,838
|
|
|
|
499
|
|
|
|
9,338
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Morgantown, WV
|
|
|
4,645
|
|
|
|
10,341
|
|
|
|
0
|
|
|
|
4,645
|
|
|
|
10,341
|
|
|
|
14,986
|
|
|
|
673
|
|
|
|
14,314
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Greenwood, SC
|
|
|
607
|
|
|
|
4,094
|
|
|
|
0
|
|
|
|
607
|
|
|
|
4,094
|
|
|
|
4,701
|
|
|
|
252
|
|
|
|
4,450
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Edgewater, NJ
|
|
|
7,714
|
|
|
|
30,473
|
|
|
|
0
|
|
|
|
7,714
|
|
|
|
30,585
|
|
|
|
38,299
|
|
|
|
1,805
|
|
|
|
36,495
|
|
|
|
14,000
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Cullman, AL
|
|
|
2,542
|
|
|
|
7,651
|
|
|
|
0
|
|
|
|
2,542
|
|
|
|
7,651
|
|
|
|
10,193
|
|
|
|
469
|
|
|
|
9,724
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Dothan, AL
|
|
|
1,293
|
|
|
|
6,005
|
|
|
|
0
|
|
|
|
1,293
|
|
|
|
6,005
|
|
|
|
7,298
|
|
|
|
366
|
|
|
|
6,932
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Culver City, CA
|
|
|
4,239
|
|
|
|
4,824
|
|
|
|
0
|
|
|
|
4,239
|
|
|
|
4,824
|
|
|
|
9,063
|
|
|
|
290
|
|
|
|
8,773
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Highland Ranch, CO
|
|
|
1,380
|
|
|
|
4,739
|
|
|
|
0
|
|
|
|
1,380
|
|
|
|
4,739
|
|
|
|
6,119
|
|
|
|
288
|
|
|
|
5,831
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Manchester, CT
|
|
|
4,334
|
|
|
|
10,428
|
|
|
|
0
|
|
|
|
4,334
|
|
|
|
9,408
|
|
|
|
13,742
|
|
|
|
638
|
|
|
|
13,104
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Dania Beach, FL
|
|
|
9,593
|
|
|
|
17,686
|
|
|
|
0
|
|
|
|
9,593
|
|
|
|
17,686
|
|
|
|
27,279
|
|
|
|
1,075
|
|
|
|
26,203
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Plantation, FL (Vision)
|
|
|
1,032
|
|
|
|
580
|
|
|
|
0
|
|
|
|
1,032
|
|
|
|
580
|
|
|
|
1,612
|
|
|
|
35
|
|
|
|
1,577
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Vero Beach, FL
|
|
|
2,653
|
|
|
|
4,667
|
|
|
|
0
|
|
|
|
2,653
|
|
|
|
4,667
|
|
|
|
7,320
|
|
|
|
284
|
|
|
|
7,035
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Duluth, GA (Sofa)
|
|
|
815
|
|
|
|
2,692
|
|
|
|
0
|
|
|
|
815
|
|
|
|
2,692
|
|
|
|
3,507
|
|
|
|
165
|
|
|
|
3,342
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Gainesville, GA
|
|
|
1,073
|
|
|
|
1,586
|
|
|
|
0
|
|
|
|
1,073
|
|
|
|
1,586
|
|
|
|
2,659
|
|
|
|
95
|
|
|
|
2,564
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Lawrenceville, GA (Eckerd)
|
|
|
1,457
|
|
|
|
1,057
|
|
|
|
0
|
|
|
|
1,457
|
|
|
|
1,057
|
|
|
|
2,514
|
|
|
|
64
|
|
|
|
2,450
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Macon, GA (K-Mart)
|
|
|
1,397
|
|
|
|
1,142
|
|
|
|
0
|
|
|
|
1,397
|
|
|
|
1,142
|
|
|
|
2,539
|
|
|
|
67
|
|
|
|
2,473
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Marietta, GA (Eckerd)
|
|
|
1,622
|
|
|
|
1,050
|
|
|
|
0
|
|
|
|
1,622
|
|
|
|
1,050
|
|
|
|
2,672
|
|
|
|
64
|
|
|
|
2,609
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Rome, GA
|
|
|
1,523
|
|
|
|
4,065
|
|
|
|
0
|
|
|
|
1,523
|
|
|
|
4,065
|
|
|
|
5,588
|
|
|
|
249
|
|
|
|
5,339
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Snellville, GA (Eckerd)
|
|
|
1,303
|
|
|
|
1,494
|
|
|
|
0
|
|
|
|
1,303
|
|
|
|
1,494
|
|
|
|
2,797
|
|
|
|
90
|
|
|
|
2,708
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Sylvania, GA
|
|
|
431
|
|
|
|
3,774
|
|
|
|
0
|
|
|
|
431
|
|
|
|
3,774
|
|
|
|
4,205
|
|
|
|
235
|
|
|
|
3,970
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Warner Robbins, GA (Lowes)
|
|
|
3,667
|
|
|
|
10,940
|
|
|
|
0
|
|
|
|
3,667
|
|
|
|
10,940
|
|
|
|
14,607
|
|
|
|
672
|
|
|
|
13,934
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Rockford, IL
|
|
|
1,107
|
|
|
|
3,165
|
|
|
|
0
|
|
|
|
1,107
|
|
|
|
3,165
|
|
|
|
4,272
|
|
|
|
191
|
|
|
|
4,081
|
|
|
|
3,223
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Covington, LA
|
|
|
1,054
|
|
|
|
1,394
|
|
|
|
0
|
|
|
|
1,054
|
|
|
|
1,423
|
|
|
|
2,477
|
|
|
|
92
|
|
|
|
2,386
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Worcester, MA
|
|
|
5,395
|
|
|
|
10,938
|
|
|
|
0
|
|
|
|
5,395
|
|
|
|
10,938
|
|
|
|
16,333
|
|
|
|
656
|
|
|
|
15,677
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Dearborn Heights, MI
|
|
|
2,463
|
|
|
|
2,946
|
|
|
|
0
|
|
|
|
2,463
|
|
|
|
2,946
|
|
|
|
5,409
|
|
|
|
178
|
|
|
|
5,232
|
|
|
|
3,550
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Livonia, MI
|
|
|
1,411
|
|
|
|
2,727
|
|
|
|
0
|
|
|
|
1,411
|
|
|
|
2,727
|
|
|
|
4,138
|
|
|
|
165
|
|
|
|
3,973
|
|
|
|
2,477
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
F-72
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Port Huron, MI
|
|
|
1,662
|
|
|
|
3,270
|
|
|
|
0
|
|
|
|
1,662
|
|
|
|
3,270
|
|
|
|
4,932
|
|
|
|
198
|
|
|
|
4,735
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Westland, MI
|
|
|
1,400
|
|
|
|
2,531
|
|
|
|
0
|
|
|
|
1,400
|
|
|
|
2,531
|
|
|
|
3,931
|
|
|
|
155
|
|
|
|
3,776
|
|
|
|
2,625
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Cary, NC
|
|
|
2,264
|
|
|
|
4,581
|
|
|
|
0
|
|
|
|
2,264
|
|
|
|
4,581
|
|
|
|
6,845
|
|
|
|
277
|
|
|
|
6,568
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Concord, NC (Eckerd)
|
|
|
885
|
|
|
|
2,119
|
|
|
|
0
|
|
|
|
885
|
|
|
|
2,119
|
|
|
|
3,004
|
|
|
|
128
|
|
|
|
2,877
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Raleigh, NC (Eckerd)
|
|
|
1,249
|
|
|
|
2,127
|
|
|
|
0
|
|
|
|
1,249
|
|
|
|
2,127
|
|
|
|
3,376
|
|
|
|
128
|
|
|
|
3,248
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Winston-Salem, NC (Wal-Mart)
|
|
|
7,156
|
|
|
|
15,010
|
|
|
|
0
|
|
|
|
7,156
|
|
|
|
15,010
|
|
|
|
22,166
|
|
|
|
931
|
|
|
|
21,236
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Buffalo, NY (Eckerd)
|
|
|
1,229
|
|
|
|
2,428
|
|
|
|
0
|
|
|
|
1,229
|
|
|
|
2,428
|
|
|
|
3,657
|
|
|
|
146
|
|
|
|
3,511
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Cheektowaga, NY (Eckerd)
|
|
|
1,740
|
|
|
|
2,417
|
|
|
|
0
|
|
|
|
1,740
|
|
|
|
2,417
|
|
|
|
4,157
|
|
|
|
145
|
|
|
|
4,013
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Dunkirk, NY
|
|
|
0
|
|
|
|
1,487
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,487
|
|
|
|
1,487
|
|
|
|
91
|
|
|
|
1,396
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Amherst, NY (Eckerd)
|
|
|
1,483
|
|
|
|
1,917
|
|
|
|
0
|
|
|
|
1,483
|
|
|
|
1,917
|
|
|
|
3,400
|
|
|
|
116
|
|
|
|
3,285
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Alliance, OH
|
|
|
812
|
|
|
|
16,244
|
|
|
|
0
|
|
|
|
812
|
|
|
|
16,244
|
|
|
|
17,056
|
|
|
|
1,002
|
|
|
|
16,054
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Cincinnati, OH (Kroger)
|
|
|
2,805
|
|
|
|
5,028
|
|
|
|
0
|
|
|
|
2,805
|
|
|
|
5,028
|
|
|
|
7,833
|
|
|
|
303
|
|
|
|
7,530
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Steubenville, OH
|
|
|
3,324
|
|
|
|
10,423
|
|
|
|
0
|
|
|
|
3,324
|
|
|
|
10,423
|
|
|
|
13,747
|
|
|
|
639
|
|
|
|
13,107
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Weschester, OH
|
|
|
1,449
|
|
|
|
3,916
|
|
|
|
0
|
|
|
|
1,449
|
|
|
|
3,916
|
|
|
|
5,365
|
|
|
|
244
|
|
|
|
5,121
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Oklahoma City, OK
|
|
|
395
|
|
|
|
1,697
|
|
|
|
0
|
|
|
|
395
|
|
|
|
1,697
|
|
|
|
2,092
|
|
|
|
101
|
|
|
|
1,991
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Cheswick, PA
|
|
|
863
|
|
|
|
2,225
|
|
|
|
0
|
|
|
|
863
|
|
|
|
2,225
|
|
|
|
3,088
|
|
|
|
134
|
|
|
|
2,954
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Connelsville, PA
|
|
|
1,356
|
|
|
|
2,524
|
|
|
|
0
|
|
|
|
1,356
|
|
|
|
2,524
|
|
|
|
3,880
|
|
|
|
151
|
|
|
|
3,729
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Harborcreek, PA
|
|
|
1,062
|
|
|
|
2,124
|
|
|
|
0
|
|
|
|
1,062
|
|
|
|
2,124
|
|
|
|
3,186
|
|
|
|
127
|
|
|
|
3,059
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Erie, PA (Eckerd)
|
|
|
958
|
|
|
|
2,223
|
|
|
|
0
|
|
|
|
958
|
|
|
|
2,223
|
|
|
|
3,181
|
|
|
|
133
|
|
|
|
3,048
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Millcreek, PA (Eckerd)
|
|
|
1,525
|
|
|
|
2,416
|
|
|
|
0
|
|
|
|
1,525
|
|
|
|
2,416
|
|
|
|
3,941
|
|
|
|
145
|
|
|
|
3,796
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Millcreek, PA (Eckerd)
|
|
|
0
|
|
|
|
1,486
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,486
|
|
|
|
1,486
|
|
|
|
90
|
|
|
|
1,395
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Erie, PA (Eckerd)
|
|
|
1,578
|
|
|
|
2,721
|
|
|
|
0
|
|
|
|
1,578
|
|
|
|
2,721
|
|
|
|
4,299
|
|
|
|
163
|
|
|
|
4,137
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Erie, PA (Eckerd)
|
|
|
1,641
|
|
|
|
2,015
|
|
|
|
0
|
|
|
|
1,641
|
|
|
|
2,015
|
|
|
|
3,656
|
|
|
|
121
|
|
|
|
3,536
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Penn, PA
|
|
|
852
|
|
|
|
2,418
|
|
|
|
0
|
|
|
|
852
|
|
|
|
2,418
|
|
|
|
3,270
|
|
|
|
145
|
|
|
|
3,124
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Monroeville, PA
|
|
|
2,863
|
|
|
|
2,935
|
|
|
|
0
|
|
|
|
2,863
|
|
|
|
2,935
|
|
|
|
5,798
|
|
|
|
175
|
|
|
|
5,622
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Monroeville, PA (Eckerd)
|
|
|
1,431
|
|
|
|
2,024
|
|
|
|
0
|
|
|
|
1,431
|
|
|
|
2,024
|
|
|
|
3,455
|
|
|
|
122
|
|
|
|
3,333
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
New Castle, PA
|
|
|
1,331
|
|
|
|
2,016
|
|
|
|
0
|
|
|
|
1,331
|
|
|
|
2,016
|
|
|
|
3,347
|
|
|
|
121
|
|
|
|
3,226
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Pittsburgh, PA
|
|
|
1,771
|
|
|
|
2,523
|
|
|
|
0
|
|
|
|
1,771
|
|
|
|
2,523
|
|
|
|
4,294
|
|
|
|
151
|
|
|
|
4,143
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Plum Borough, PA
|
|
|
1,671
|
|
|
|
2,424
|
|
|
|
0
|
|
|
|
1,671
|
|
|
|
2,424
|
|
|
|
4,095
|
|
|
|
145
|
|
|
|
3,950
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Taega Cay, SC
|
|
|
1,387
|
|
|
|
2,451
|
|
|
|
0
|
|
|
|
1,387
|
|
|
|
2,451
|
|
|
|
3,838
|
|
|
|
148
|
|
|
|
3,690
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Gaffney, SC
|
|
|
1,189
|
|
|
|
2,363
|
|
|
|
0
|
|
|
|
1,189
|
|
|
|
2,363
|
|
|
|
3,552
|
|
|
|
144
|
|
|
|
3,408
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Greenville, SC (Eckerd)
|
|
|
1,452
|
|
|
|
1,909
|
|
|
|
0
|
|
|
|
1,452
|
|
|
|
1,909
|
|
|
|
3,361
|
|
|
|
115
|
|
|
|
3,246
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Greenville, SC (Wal-Mart)
|
|
|
5,659
|
|
|
|
14,411
|
|
|
|
0
|
|
|
|
5,659
|
|
|
|
14,411
|
|
|
|
20,070
|
|
|
|
897
|
|
|
|
19,174
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
F-73
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Developers Diversified Realty
Corporation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Real Estate and Accumulated Depreciation
(continued)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
Date
|
(In thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost,
|
|
|
|
|
|
|
|
|
of
|
|
|
Initial Cost
|
|
|
Total Cost (B)
|
|
|
|
|
|
Net
|
|
|
|
|
|
Depreciable
|
|
|
Construction
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
Buildings
|
|
|
|
|
|
|
|
|
of
|
|
|
|
|
|
Lives
|
|
|
(C)
|
|
|
|
|
|
&
|
|
|
|
|
|
|
|
|
&
|
|
|
|
|
|
Accumulated
|
|
|
Accumulated
|
|
|
|
|
|
(Years)
|
|
|
Acquisition
|
|
|
Land
|
|
|
Improvements
|
|
|
Improvements
|
|
|
Land
|
|
|
Improvements
|
|
|
Total
|
|
|
Depreciation
|
|
|
Depreciation
|
|
|
Encumbrances
|
|
|
(1)
|
|
|
(A)
|
|
Mt. Pleasant, SC (Bi-Lo)
|
|
|
2,420
|
|
|
|
7,979
|
|
|
|
0
|
|
|
|
2,420
|
|
|
|
7,979
|
|
|
|
10,399
|
|
|
|
492
|
|
|
|
9,907
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Piedmont, SC
|
|
|
589
|
|
|
|
1,687
|
|
|
|
0
|
|
|
|
589
|
|
|
|
1,687
|
|
|
|
2,276
|
|
|
|
102
|
|
|
|
2,174
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Spartanburg, SC (Blackstock)
|
|
|
1,223
|
|
|
|
2,128
|
|
|
|
0
|
|
|
|
1,223
|
|
|
|
2,128
|
|
|
|
3,351
|
|
|
|
128
|
|
|
|
3,222
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Spartanburg, SC (Eckerd)
|
|
|
1,255
|
|
|
|
2,226
|
|
|
|
0
|
|
|
|
1,255
|
|
|
|
2,226
|
|
|
|
3,481
|
|
|
|
134
|
|
|
|
3,347
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Woodruff, SC
|
|
|
1,145
|
|
|
|
2,353
|
|
|
|
0
|
|
|
|
1,145
|
|
|
|
2,353
|
|
|
|
3,498
|
|
|
|
143
|
|
|
|
3,355
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Baytown, TX (Lowes)
|
|
|
1,568
|
|
|
|
10,383
|
|
|
|
0
|
|
|
|
1,568
|
|
|
|
10,383
|
|
|
|
11,951
|
|
|
|
633
|
|
|
|
11,318
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Ft. Worth, TX (CVS )
|
|
|
860
|
|
|
|
1,913
|
|
|
|
0
|
|
|
|
860
|
|
|
|
1,913
|
|
|
|
2,773
|
|
|
|
114
|
|
|
|
2,659
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Ft. Worth , TX (CVS)
|
|
|
701
|
|
|
|
1,276
|
|
|
|
0
|
|
|
|
701
|
|
|
|
1,276
|
|
|
|
1,977
|
|
|
|
77
|
|
|
|
1,901
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Garland, TX
|
|
|
1,567
|
|
|
|
73
|
|
|
|
0
|
|
|
|
1,567
|
|
|
|
73
|
|
|
|
1,640
|
|
|
|
4
|
|
|
|
1,635
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Grand Prairie, TX
|
|
|
2,892
|
|
|
|
3,226
|
|
|
|
0
|
|
|
|
2,892
|
|
|
|
3,226
|
|
|
|
6,118
|
|
|
|
205
|
|
|
|
5,913
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Houston, TX
|
|
|
4,380
|
|
|
|
8,729
|
|
|
|
0
|
|
|
|
4,380
|
|
|
|
8,729
|
|
|
|
13,109
|
|
|
|
543
|
|
|
|
12,567
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Richland Hills, TX
|
|
|
1,094
|
|
|
|
1,605
|
|
|
|
0
|
|
|
|
1,094
|
|
|
|
1,605
|
|
|
|
2,699
|
|
|
|
97
|
|
|
|
2,603
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Richardson, TX (CVS)
|
|
|
1,045
|
|
|
|
1,594
|
|
|
|
0
|
|
|
|
1,045
|
|
|
|
1,594
|
|
|
|
2,639
|
|
|
|
96
|
|
|
|
2,543
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Rowlett, TX
|
|
|
1,241
|
|
|
|
211
|
|
|
|
0
|
|
|
|
1,241
|
|
|
|
211
|
|
|
|
1,452
|
|
|
|
12
|
|
|
|
1,440
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Tyler, TX
|
|
|
316
|
|
|
|
1,384
|
|
|
|
0
|
|
|
|
316
|
|
|
|
1,219
|
|
|
|
1,535
|
|
|
|
83
|
|
|
|
1,452
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Olympia, WA
|
|
|
2,946
|
|
|
|
3,094
|
|
|
|
0
|
|
|
|
2,946
|
|
|
|
3,094
|
|
|
|
6,040
|
|
|
|
190
|
|
|
|
5,850
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Oshkosh, WI
|
|
|
1,250
|
|
|
|
3,176
|
|
|
|
0
|
|
|
|
1,250
|
|
|
|
3,176
|
|
|
|
4,426
|
|
|
|
192
|
|
|
|
4,234
|
|
|
|
2,817
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Weirton, WV
|
|
|
694
|
|
|
|
2,109
|
|
|
|
0
|
|
|
|
694
|
|
|
|
2,109
|
|
|
|
2,803
|
|
|
|
127
|
|
|
|
2,676
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Lakeland, FL (Highlands)
|
|
|
2,800
|
|
|
|
3,148
|
|
|
|
0
|
|
|
|
2,800
|
|
|
|
3,442
|
|
|
|
6,242
|
|
|
|
298
|
|
|
|
5,944
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Plantation, FL (Fountains)
|
|
|
20,697
|
|
|
|
36,751
|
|
|
|
0
|
|
|
|
20,697
|
|
|
|
39,305
|
|
|
|
60,002
|
|
|
|
2,469
|
|
|
|
57,533
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Evansville, IN (East)
|
|
|
8,964
|
|
|
|
18,764
|
|
|
|
0
|
|
|
|
8,964
|
|
|
|
18,800
|
|
|
|
27,764
|
|
|
|
1,166
|
|
|
|
26,598
|
|
|
|
0
|
|
|
|
S/L 31.5
|
|
|
|
2007(A)
|
|
Portfolio Balance (DDR)
|
|
|
492,046
|
|
|
|
523,078
|
|
|
|
0
|
|
|
|
492,055
|
|
|
|
526,016
|
|
|
|
1,018,071
|
|
|
|
26,650
|
|
|
|
991,421
|
|
|
|
387,374
|
(2)
|
|
|
S/L 31.5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2,525,663
|
|
|
$
|
5,873,157
|
|
|
$
|
12,403
|
|
|
$
|
2,543,856
|
(3)
|
|
$
|
6,565,710
|
(4)
|
|
$
|
9,109,566
|
|
|
$
|
1,208,903
|
|
|
$
|
7,900,663
|
|
|
$
|
1,565,989
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
S/L refers to straight-line
depreciation.
|
|
(2)
|
|
Includes $258.5 million of
mortgage debt which encumbers 37 Mervyns sites.
|
|
(3)
|
|
Includes $469.9 million of
land under development at December 31, 2008.
|
|
(4)
|
|
Includes $409.6 million of
construction in progress at December 31, 2008.
|
|
(B)
|
|
The Aggregate Cost for Federal
Income Tax purposes was approximately $9.1 billion at
December 31, 2008.
|
F-74
The changes in Total Real Estate Assets for the three years
ended December 31, 2008 (as adjusted) are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Balance, beginning of year
|
|
$
|
8,979,953
|
|
|
$
|
7,442,135
|
|
|
$
|
7,029,337
|
|
Acquisitions and transfers from joint ventures
|
|
|
10,994
|
|
|
|
3,048,672
|
|
|
|
370,218
|
|
Developments, improvements and expansions
|
|
|
215,045
|
|
|
|
283,806
|
|
|
|
236,147
|
|
Changes in land under development and construction in progress
|
|
|
216,475
|
|
|
|
212,510
|
|
|
|
104,808
|
|
Real estate held for sale
|
|
|
|
|
|
|
(5,863
|
)
|
|
|
(8,558
|
)
|
Sales and transfers to joint ventures
|
|
|
(312,901
|
)
|
|
|
(2,001,307
|
)
|
|
|
(289,817
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
9,109,566
|
|
|
$
|
8,979,953
|
|
|
$
|
7,442,135
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The changes in Accumulated Depreciation and Amortization for the
three years ended December 31, 2008 are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
Balance, beginning of year
|
|
$
|
1,024,048
|
|
|
$
|
861,266
|
|
|
$
|
692,823
|
|
Depreciation for year
|
|
|
246,374
|
|
|
|
224,375
|
|
|
|
193,527
|
|
Real estate held for sale
|
|
|
|
|
|
|
(67
|
)
|
|
|
(3,326
|
)
|
Sales
|
|
|
(61,519
|
)
|
|
|
(61,526
|
)
|
|
|
(21,758
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, end of year
|
|
$
|
1,208,903
|
|
|
$
|
1,024,048
|
|
|
$
|
861,266
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-75
Schedule IV
Mortgage Loans on Real Estate
December 31, 2008
(Dollars amounts in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amount of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
subject to
|
|
|
|
|
|
|
Final
|
|
Periodic
|
|
|
|
|
|
|
|
|
|
|
delinquent
|
|
|
|
|
|
|
Maturity
|
|
Payment
|
|
Prior
|
|
|
Face Amount of
|
|
|
Carrying Amount of
|
|
|
principal
|
|
Description
|
|
Interest Rate
|
|
|
Date
|
|
Terms
|
|
Liens
|
|
|
Mortgages
|
|
|
Mortgages
|
|
|
or interest
|
|
|
MEZZANINE LOANS
MULTI-FAMILY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Multifamily Development/Mesa, AZ
|
|
|
LIBOR+6.0
|
%,
Floor 11%
|
|
Mar-11
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
5,211
|
|
|
|
5,211
|
|
|
|
|
|
Multifamily Development/Dallas, TX
|
|
|
LIBOR+6.5
|
%,
Floor 11.5%
|
|
Apr-11
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
2,822
|
|
|
|
2,822
|
|
|
|
|
|
Multifamily Development/Dallas, TX
|
|
|
LIBOR+8.0
|
%,
Floor 12%
|
|
Jun-11
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
7,624
|
|
|
|
7,624
|
|
|
|
|
|
RETAIL
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retail Development/ BonitaSprings, FL
|
|
|
LIBOR+6.0
|
%,
Floor 11%
|
|
May-11
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
10,806
|
|
|
|
5,406(1
|
)
|
|
|
|
|
Retail Development/ Bloomfield Hills, MI
|
|
|
LIBOR+7.0
|
%,
Floor 12%
|
|
Jul-11
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
58,089
|
|
|
|
58,089
|
|
|
|
|
|
Retail Development/ Orlando, FL
|
|
|
Prime+0.5
|
%,
Floor 7%
|
|
Oct-08
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
18,988
|
|
|
|
18,988
|
|
|
|
18,988
|
|
MIXED USE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mixed Use Development/ Washington DC
|
|
|
LIBOR+7.0
|
%,
Floor 11%
|
|
Dec-10
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
12,600
|
|
|
|
12,600
|
|
|
|
|
|
Mixed Use Development/ East Lansing, MI
|
|
|
LIBOR+10.0
|
%,
Floor 14%
|
|
Sep-11
|
|
Interest Monthly, principal at maturity
|
|
|
|
|
|
|
4,679
|
|
|
|
4,679
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
120,819
|
|
|
$
|
115,419
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Includes a $5.4 million loan loss reserve.
|
F-76
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
Year Ended
|
|
|
|
December 31,
|
|
|
December 31,
|
|
|
|
2008
|
|
|
2007
|
|
|
Balance at beginning of period
|
|
$
|
|
|
|
$
|
|
|
Additions during period:
|
|
|
|
|
|
|
|
|
New mortgage loans
|
|
|
120,819
|
|
|
|
|
|
Deductions during period:
|
|
|
|
|
|
|
|
|
Provision for loan loss reserve
|
|
|
(5,400
|
)
|
|
|
|
|
Collections of principal
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at close of period
|
|
$
|
115,419
|
|
|
$
|
|
|
|
|
|
|
|
|
|
|
|
F-77
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
|
|
|
|
|
|
|
Developers Diversified Realty Corporation
|
|
|
|
|
(Registrant)
|
|
|
|
|
|
|
|
Date
August 10, 2009
|
|
/s/ Christa A. Vesy
|
|
|
|
|
|
|
|
|
|
Christa A. Vesy
|
|
|
|
|
Senior Vice President and Chief Accounting Officer
|
|
|
EXHIBIT INDEX
|
|
|
Exhibit
|
|
|
No.
|
|
Description
|
23
|
|
Consent of PricewaterhouseCoopers LLP
|
Developers Realty (NYSE:DDR)
Historical Stock Chart
From Jun 2024 to Jul 2024
Developers Realty (NYSE:DDR)
Historical Stock Chart
From Jul 2023 to Jul 2024