SEC Filing Summary
Entity note: The supplied filing is DDR Corp.’s Form 10-Q, not a filing under the name SITE Centers Corp. It covers the quarter ended March 31, 2014; confirm the issuer before relying on this summary.
Business context and reporting period
DDR was a shopping-center REIT that acquired, owned, developed, leased and managed retail properties, and also invested in shopping-center loans and joint ventures. At March 31, 2014, its portfolio included 406 centers, including 167 held through joint ventures, with approximately 113 million square feet of gross leasable area. The unaudited results compare the three months ended March 31, 2014, with the same period in 2013.
Financial results and position
| Metric | Q1 2014 | Q1 2013 or prior date |
|---|---|---|
| Revenue | $254.2 million | $200.3 million |
| Net income (loss) attributable to DDR common shareholders | $(23.2) million; $(0.07) per diluted share | $(0.7) million; approximately $0.00 per diluted share |
| Funds from Operations (FFO), attributable to common shareholders | $85.8 million | $82.5 million |
| Operating FFO, attributable to common shareholders | $100.7 million | $86.1 million |
| Cash flow from operating activities | $91.9 million | $53.3 million |
| Cash and cash equivalents | $163.8 million | $86.7 million at Dec. 31, 2013 |
| Total debt | $5.24 billion | $5.29 billion at Dec. 31, 2013 |
| Total assets / total equity | $9.56 billion / $3.85 billion | $9.69 billion / $3.93 billion at Dec. 31, 2013 |
Investing activities provided $91.9 million, principally reflecting real estate sale proceeds; financing activities used $106.6 million, including $55.1 million of dividends paid. Operating cash flow increased by $38.6 million year over year. The filing does not provide a single consolidated operating-margin measure.
Occupancy was 92.4%, up from 91.3% a year earlier. Average annualized base rent per occupied square foot rose to $14.23 from $13.74. Comparable-property occupancy was 93.5%, versus 92.2% a year earlier. First-quarter leasing spreads were 20.4% for new leases and 7.6% for renewals.
Material changes versus the prior comparable period
- Revenue grew 26.9%, with management attributing most of the increase in base and percentage rents to acquisitions; comparable portfolio rent also increased.
- Common-shareholder net loss widened to $23.2 million from $0.7 million. Management cited higher impairment charges, partly offset by organic growth and acquisition activity.
- Continuing-operations expenses rose, including depreciation and amortization, which increased to $108.8 million from $65.9 million, and $10.8 million of impairment charges, versus none in Q1 2013.
- Interest expense increased to $62.9 million from $52.4 million as average debt outstanding rose to $5.3 billion from $4.4 billion; the average interest rate was 5.0% versus 5.1%.
- FFO rose 4.0%; Operating FFO rose 17.0%. These are non-GAAP measures and are not substitutes for GAAP earnings or cash flow.
Outlook, transactions, risks and unusual items
- Management reported no formal earnings guidance. It expected to place at least $100 million of development and redevelopment investment into service during 2014, net of outlot sales, and described development spending as discretionary and subject to leasing and financing conditions.
- DDR sold nine properties in Q1 for an aggregate sales price of $132.3 million. In April 2014, it sold its entire Sonae Sierra Brazil investment for approximately $343.6 million and anticipated recording a gain in Q2; the transaction was with an investor identified as a related party and was approved by a board special committee.
- DDR announced redemption of its remaining $55 million of 7.375% Class H preferred shares, scheduled for May 30, 2014; it expected a $1.9 million Q2 charge for writing off issuance costs.
- At March 31, cash and available revolving-credit borrowing capacity were $163.8 million and $775.8 million, respectively. The company reported compliance with debt covenants. A $306.2 million mortgage maturity was due in October 2014; no unsecured debt maturities were due until May 2015. Management planned to refinance part of the mortgage and use asset-sale proceeds to repay the remainder.
- Approximately 94.1% of consolidated debt was fixed-rate or effectively fixed-rate. A 100-basis-point increase in short-term rates was estimated to add about $0.8 million of quarterly interest expense for DDR and $0.5 million for its proportionate share of joint ventures’ expense.
- A Coventry II lawsuit sought at least $500 million plus punitive damages. Most claims had been dismissed, but limited contract claims remained on appeal. DDR recorded no loss provision, stating that a loss was not considered probable or estimable; it said it did not expect a material adverse effect.
- Other concerns include retail tenant credit and leasing conditions, refinancing and interest-rate exposure, joint-venture funding and debt, foreign-currency exposure, development risks, and potential impairment. DDR disclosed $10.8 million of consolidated asset impairments and a $9.1 million impairment of a joint-venture investment in Q1.
Key facts for investors to verify
- Confirm that DDR Corp., rather than SITE Centers Corp., is the intended issuer and that the historical 2014 filing is the relevant document.
- Review the April 2014 Brazil-interest sale terms, related-party disclosures, and the gain ultimately recognized in Q2.
- Assess the October 2014 mortgage refinancing and repayment plan, covenant headroom, and remaining credit-facility availability.
- Track the Coventry II litigation, defaulted joint-venture loans and guarantees, and whether any additional funding or losses arise.
- Reconcile GAAP losses with FFO and Operating FFO, including the effect of impairments, asset sales, acquisitions and preferred dividends.