DEVELOPERS DIVERSIFIED REALTY CORPORATION
For Immediate Release:
- ---------------------
Contact: Scott A. Wolstein Michelle A. Mahue
Chairman Vice President of Investor Relations
Chief Executive Officer 216-755-5455
216-755-5500
DEVELOPERS DIVERSIFIED REALTY REPORTS A 6.3%
INCREASE IN FFO PER SHARE FOR THE QUARTER
ENDED DECEMBER 31, 2003
CLEVELAND, OHIO, FEBRUARY 17, 2004 - Developers Diversified Realty
Corporation (NYSE: DDR), a real estate investment trust ("REIT"), today
announced that fourth quarter 2003 Funds From Operations ("FFO"), a widely
accepted measure of REIT performance, on a per share basis was $0.68 (diluted)
and $0.69 (basic) as compared to $0.64 (diluted) and $0.65 (basic) per share for
the same period in the previous year, a per share increase of 6.3% diluted and
6.2% basic. FFO available to common shareholders reached $60.1 million for the
quarter ended December 31, 2003, as compared to $43.1 million for 2002, an
increase of 39.4%. Excluding the impact of the recently announced litigation
charge of approximately $9.2 million, FFO was $0.78 (diluted) as compared to
$0.64 (diluted) per share for the same period in 2002, a per share increase of
21.9%. Net income for the three months ended December 31, 2003 increased 209.1%
to $91.5 million compared to fourth quarter 2002 net income of $29.6 million, or
$0.92 per share (diluted) and $0.94 (basic) in 2003 compared to $0.35 per share
(diluted) and $0.36 (basic) for the same period in 2002. The significant
increase in net income for the quarter ended December 31, 2003 is primarily
related to the Company's gains on sale of assets to MDT, which aggregated
approximately $50 million.
On a per share basis, FFO (diluted) was $2.54 and $2.42 for the years
ended December 31, 2003 and 2002, respectively, an increase of 5.0%. Excluding
the non-cash charges associated with the redemption of preferred shares in 2003
and 2002, aggregating $10.7 million and $5.5 million, respectively, and the $9.2
million litigation charge referred to above in 2003, FFO, on a per share basis
was $2.78 (diluted) in 2003 compared to $2.50 (diluted) in 2002, an increase of
11.2%. FFO available to common shareholders for the year ended December 31, 2003
was $214.3 million compared to FFO for the year ended December 31, 2002 of
$159.4 million, an increase of 34.4%. Net income for the year ended December 31,
2003 was $240.3 million, or $2.27 per share (diluted), compared to net income of
$102.0 million, or $1.07 per share (diluted) for the prior comparable period. An
increase in net income of approximately $80 million is due to the net gain on
sale of real estate assets by the Company and its joint ventures. The remainder
of the increase in net income is primarily attributable to the merger with JDN
Realty on March 13, 2003, core operations, and a reduction in minority interest
expense associated with preferred operating partnership units which were
redeemed in 2003.
Scott A. Wolstein, DDR's Chairman and Chief Executive Officer stated,
"We are pleased to announce this quarter's financial results, which reflect the
portfolio's strong fundamentals and Developers Diversified's strategic property
level transactions and capital markets initiatives, including the Company's new
platforms to access equity capital, Macquarie DDR Trust and the Coventry Real
Estate Fund II. During 2003, we took advantage of strong market demand for
retail product to create significant value through capital recycling. Developers
Diversified generated approximately $250 million in gains to the Company and its
partners through the sale of assets and joint venture interests. Including its
proportionate share of sales proceeds, the Company's 2003 retained capital
approximated $350 million, effectively self-funding its development pipeline.
Concurrent with this value creation, we continued to strengthen our balance
sheet. The market has recognized this improvement, as evidenced by the 20 basis
point interest rate reduction in our credit line
pricing we received during the quarter and the Company's issuance of $275
million in five-year senior notes with a coupon rate of 3.875% in January,
2004."
FFO is a supplemental non-GAAP financial measurement used as a standard
in the real estate industry. Management believes that FFO provides an additional
indicator of the financial performance of a REIT. The Company also believes that
FFO more appropriately measures the core operations of the Company and provides
a benchmark to its peer group. FFO does not represent cash generated from
operating activities in accordance with generally accepted accounting principles
and is not necessarily indicative of cash available to fund cash needs and
should not be considered as an alternative to net income and an indicator of the
Company's operating performance or as an alternative to cash flow as a measure
of liquidity. FFO available to common shareholders is defined and calculated by
the Company as net income, adjusted to exclude: (i) preferred dividends, (ii)
gains (or losses) from sales of depreciable real estate property, except for
those sold through the Company's merchant building program, which are presented
net of taxes, (iii) sales of securities, (iv) extraordinary items and (v)
certain non-cash items. These non-cash items principally include real property
depreciation, equity income from joint ventures and equity income from minority
equity investments and adding the Company's proportionate share of FFO from its
unconsolidated joint ventures and minority equity investments, determined on a
consistent basis. Other real estate companies may calculate FFO in a different
manner. A reconciliation of net income to FFO is presented in the financial
highlights section.
LEASING:
Leasing activity continues to be strong throughout the portfolio.
During the fourth quarter of 2003, the Company executed 103 new leases
aggregating approximately 570,000 square feet and 118 renewals aggregating
approximately 430,000 square feet. Rental rates on new leases increased by 21.8%
to $13.24 per square foot and rental rates on renewals increased by 7.3% to
$11.70 per square foot. On a blended basis, rental rates for new leases and
renewals increased by 12.1% to $12.57 per square foot.
At December 31, 2003, the average annualized base rent per occupied
square foot, including those properties owned through joint ventures, was
$10.82. Excluding the impact of the properties acquired through the JDN merger,
the average annualized base rent per occupied square foot for the portfolio was
$11.09, as compared to $10.58 at December 31, 2002.
As of December 31, 2003, the portfolio was 95.1% leased as compared to
94.6% leased at September 30, 2003. Excluding the impact of the properties
acquired through the JDN merger, the portfolio was 95.6% leased, as compared to
95.2% at September 30, 2003 and 95.9% leased at December 31, 2002. These
percentages include tenants for which signed leases have been executed and
occupancy has not occurred. Based on tenants in place and responsible for paying
rent as of December 31, 2003, the portfolio was 94.3% occupied as compared to
94.0% occupied at September 30, 2003. Excluding the impact of the properties
acquired through the JDN merger, the portfolio was 95.0% occupied, as compared
to 94.6% at September 30, 2003 and 95.1% at December 31, 2002.
Same store tenant sales performance over the trailing 12 month period
within the Company's portfolio remained strong at approximately $234 per square
foot in 2003 compared to $233 per square foot in 2002 for those tenants required
to report. Aggregate base and percentage rental revenues relating to Core
Portfolio Properties (i.e., shopping center properties owned since January 1,
2002, excluding properties under redevelopment) increased approximately $2.8
million (or 1.7%) for the year ended December 31, 2003, compared to the same
period in 2002.
STRATEGIC TRANSACTIONS:
Macquarie DDR Trust
In November 2003, the Company closed a transaction pursuant to which
the Company formed an Australian based Listed Property Trust, Macquarie DDR
Trust ("MDT"), with Macquarie Bank Limited (ASX: MBL), an international
investment bank, advisor and manager of specialized real estate funds in
Australia. MDT will focus on acquiring ownership interests in
institutional-quality community center properties in the U.S. The aggregate
purchase value (assuming 100% ownership) of the initial portfolio of eleven
assets owned by DDR and its joint ventures and acquired by MDT is approximately
$730 million. MDT operates with a leverage ratio of approximately 50%.
MDT, which listed on the Australian Stock Exchange during November
2003, owns an 81.0% interest in the eleven asset portfolio. DDR retained a 14.5%
effective ownership interest in the assets and MBL owns the remaining 4.5%. DDR
remains responsible for all day-to-day operations of the properties and will
receive fees for property management, leasing, construction management,
acquisitions, due diligence, dispositions (including outparcel sales), and
financing. Through their joint venture company, DDR and MBL will also receive
base asset management fees and incentive fees based on the performance of MDT.
DDR recorded fees aggregating $6.7 million in 2003 through the structuring,
formation and operation of the MDT joint ventures.
It is anticipated that an additional asset in Minneapolis, MN (Coon
Rapids -- Inner Quadrant) will be sold to MDT after construction and leasing are
completed, subject to the satisfaction of MDT's investment criteria and the
availability of financing. MDT has a two year right of first offer on twenty
pre-determined joint venture and wholly owned assets currently in DDR's
portfolio. This right of first offer only applies if DDR determines that it will
pursue the sale of these assets. MDT also is expected to pursue acquisitions of
additional stabilized, institutional-quality community center properties.
DDR received approximately $195 million in cash and retained a $53
million equity investment in the joint venture, which represents DDR's 14.5%
effective ownership interest. MDT is funded with approximately $370 million in
debt, which is approximately 50% of total asset value. The interest rate for
this debt was generally structured with 80% fixed and 20% floating. The new
fixed rate financing has a weighted average interest rate of approximately 4.3%
and the floating rate debt has a weighted average interest rate of 3.5%.
Approximately $42.0 million of the initial outstanding floating rate debt is
financed under MDT's $100 million secured revolving credit facility.
The aggregate size of the MDT portfolio is approximately 5.4 million
square feet of total GLA (of which 4.8 million is owned GLA), and the average
size of the eleven properties is approximately 490,000 square feet of total GLA.
Prior to MDT's acquisition, DDR held seven of the MDT portfolio assets in joint
ventures. These properties are located in Boston (Framingham), Massachusetts;
Chicago (Schaumburg), Illinois; Minneapolis (Coon Rapids), Minnesota; Atlanta,
Georgia; Washington, D.C. (Fairfax, Virginia); Atlanta (Marietta), Georgia and
Naples, Florida. The remaining four assets were wholly owned by DDR and located
in St. Paul, Minnesota; Kansas City (Independence), Missouri; Canton, Ohio and
Cleveland (N. Olmsted), Ohio.
MDT is governed by a board of directors, which includes three members
selected by DDR, three members selected by MBL and two independent members.
MDT's offering in Australia in November 2003 raised approximately $315 million
which equates to AUD $441.4 million.
EXPANSIONS:
For the twelve month period ended December 31, 2003, the Company
completed expansions and redevelopments at nine shopping centers located in
Birmingham, Alabama; Bayonet Point, Florida; Brandon, Florida; Tucker, Georgia;
Fayetteville, North Carolina; North Canton, Ohio; Erie, Pennsylvania; Riverdale,
Utah and Taylorsville, Utah at an aggregate cost of approximately $26.8 million.
The Company is currently expanding/redeveloping six shopping centers located in
North Little Rock, Arkansas; Tallahassee, Florida; Starkville, Mississippi;
Aurora, Ohio; Tiffin, Ohio and Monaca, Pennsylvania at a projected incremental
cost of approximately $27.6 million. The Company is also scheduled to commence
eight additional expansion projects during 2004 at the Gadsden, Alabama;
Brandon, Florida; Suwanee, Georgia; Princeton, New Jersey; Hendersonville, North
Carolina; Allentown, Pennsylvania; Brentwood, Tennessee and Chattanooga,
Tennessee shopping centers.
For the twelve month period ended December 31, 2003, the Company's
joint ventures completed expansions and redevelopments at three shopping centers
located in San Ysidro, California; Shawnee, Kansas and North Olmsted, Ohio at an
aggregate cost of approximately $9.7 million. The Company's joint ventures are
currently expanding/redeveloping a shopping center located in Deer Park,
Illinois at a projected incremental cost of approximately $13.9 million. In
2004, the Company is also scheduled to commence two additional
expansion/redevelopment projects at Merriam, Kansas and Kansas City, Missouri.
ACQUISITIONS:
In December 2003, the Company acquired Flatiron Marketplace, a 422,000
square foot shopping center in suburban Denver, Colorado from a private investor
for approximately $55.5 million.
In January 2004, the Company, through its joint venture with Coventry,
acquired a 20% interest in Totem Lake Mall, a 290,000 square foot shopping
center in suburban Seattle, Washington for approximately $37.0 million, of which
the Company's proportionate share is approximately $7.4 million.
DEVELOPMENT (CONSOLIDATED):
During the twelve month period ended December 31, 2003, the Company
completed the construction of thirteen shopping centers located in Fayetteville,
Arkansas; Sacramento, California; Aurora, Colorado; Parker, Colorado; Parker
South, Colorado; Lithonia, Georgia; McDonough, Georgia; Meridian, Idaho (Phase
II of the existing shopping center); Grandville, Michigan; Coon Rapids
(Minneapolis) Minnesota; St. John's, Missouri; Erie, Pennsylvania and Frisco,
Texas.
The Company currently has twelve shopping center projects under
construction. These projects are located in Long Beach, California; Fort
Collins, Colorado; Overland Park, Kansas; Chesterfield, Michigan; Lansing,
Michigan; St. Louis, Missouri; Apex, North Carolina; Hamilton, New Jersey; Mount
Laurel, New Jersey; Pittsburgh, Pennsylvania; Irving, Texas and Mesquite, Texas.
These projects are scheduled for completion during 2004 and 2005 and will create
an additional 3.4 million square feet of retail space.
The Company anticipates commencing construction in 2004 on two
additional shopping centers located in Norwood, Massachusetts and McKinney,
Texas.
DEVELOPMENT (JOINT VENTURES):
The Company has joint venture development agreements for three shopping
center projects. These three projects have an aggregate projected cost of
approximately $97.8 million. The projects located in Long Beach, California and
Austin, Texas were substantially completed during 2003 and the project in
Jefferson County (St. Louis, Missouri) will be substantially completed in 2004.
At December 31, 2003, approximately $86.5 million of costs were incurred in
relation to these development projects. The projects located in Long Beach,
California (City Place) and Austin, Texas are being financed through the
Prudential/DDR Retail Value Fund.
DISPOSITIONS:
In October 2003, the Company sold a 123,000 square foot shopping center
located in Decatur, Alabama for approximately $6.9 million and a 32,000 square
foot office building in Atlanta, Georgia for approximately $5.5 million. In
November 2003, the Company sold a 5,000 square foot Applebee's in McDonough,
Georgia for approximately $1.6 million. The Company acquired these properties in
the merger with JDN Realty in March 2003. Additionally, in October 2003, the
Company sold a 92,000 square foot shopping center located in St. Louis, Missouri
for approximately $3.3 million.
In October 2003, one of the Company's RVIP joint ventures sold a
208,000 square foot shopping center located in Bellingham, Washington for
approximately $23.5 million. The joint venture recognized an aggregate gain of
approximately $3.7 million of which the Company's proportionate share was $0.7
million. In January 2004, this joint venture also sold a portion, approximately
300,000 square feet of GLA, of a shopping center in Puente Hills, California for
approximately $33.0 million and recognized a gain of approximately $4.9 million
of which the Company's proportionate share was approximately $0.7 million. These
gains were not and will not be included in FFO in 2003 or 2004.
In January 2004, a joint venture in which the Company owns a 35%
interest, sold a 320,000 square foot shopping center property located in San
Antonio, Texas for approximately $58.0 million and recognized a gain of $19.2
million, of which the Company's proportionate share was approximately $6.7
million. This gain will not be included in FFO in 2004.
FINANCINGS:
In January 2004, the Company issued $275 million of ten-year unsecured
senior notes with a coupon rate of 3.875%. Net proceeds from this offering of
approximately $272.2 million were used to repay approximately $104 million of
variable rate mortgage debt, $150 million of the Company's unsecured term debt
associated with the JDN merger, and the balance was used to repay revolving
credit facilities. Following the issuance of these securities the Company's
current floating rate debt exposure is approximately 16.3% of total debt.
In addition to the MDT financing activities previously discussed, in
December 2003, the Company amended and restated its primary unsecured credit
facility and extended the term of the revolver from May 30, 2005 to May 30,
2006. Based on the Company's current corporate credit ratings (Moody's rating is
Baa3 stable and Standard and Poors' is BBB stable), the amended and restated
facility bears a reduced interest rate of LIBOR plus 80 basis points, compared
to the previous interest rate of LIBOR plus 100 basis points, and continues to
offer a competitive bid option for up to 50% of the facility amount. At the
Company's option, the revolver may be increased from its current size of $650
million to $1.0 billion. The Company also amended its $30 million secured
facility with National City to reflect the same changes in pricing.
Developers Diversified Realty Corporation currently owns and manages
over 360 retail operating and development properties in 44 states comprising
over 82 million square feet of real estate. DDR is a self-administered and
self-managed real estate investment trust (REIT) operating as a fully integrated
real estate company which acquires, develops, leases and manages shopping
centers.
A copy of the Company's Supplemental Financial/Operational package is
available to all interested parties upon request at our corporate office to
Michelle A. Mahue, Vice President of Investor Relations, Developers Diversified
Realty Corporation, 3300 Enterprise Parkway, Beachwood, OH 44122 or on our
Website which is located at http:/www.ddr.com.
Developers Diversified Realty Corporation considers portions of this
information to be forward-looking statements within the meaning of Section 27A
of the Securities Exchange Act of 1933 and Section 21 E of the Securities
Exchange Act of 1934, both as amended, with respect to the Company's expectation
for future periods. Although the Company believes that the expectations
reflected in such forward-looking statements are based upon reasonable
assumptions, it can give no assurance that its expectations will be achieved.
For this purpose, any statements contained herein that are not historical fact
may be deemed to be forward looking statements. There are a number of important
factors that could cause the results of the Company to differ materially from
those indicated by such forward-looking statements, including, among other
factors, local conditions such as oversupply of space or a reduction in demand
for real estate in the area, competition from other available space, dependence
on rental income from real property or the loss of a major tenant. For more
details on the risk factors, please refer to the Company's Form on 10-K as of
December 31, 2002.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
FINANCIAL HIGHLIGHTS
(IN THOUSANDS - EXCEPT PER SHARE DATA)
Three Month Period Year Ended
Ended December 31, December 31,
2003 2002 2003 2002
---- ---- ---- ----
REVENUES:
Minimum rent (A) $ 88,066 $ 67,001 $342,699 $254,084
Percentage and overage rents (A) 2,412 2,024 5,659 4,306
Recoveries from tenants 26,860 18,549 94,575 69,228
Ancillary income 1,038 757 2,356 1,928
Other property related income 268 507 942 1,625
Management fee income 2,914 2,356 10,647 10,145
Development fees 470 187 1,446 2,229
Interest income 1,190 1,849 5,082 5,905
Other (B) 3,171 501 12,691 5,396
-------- -------- -------- --------
126,389 93,731 476,097 354,846
-------- -------- -------- --------
EXPENSES:
Operating and maintenance 19,965 13,607 63,816 43,506
Real estate taxes 15,591 11,181 57,946 43,113
General and administrative (C) 12,819 9,380 40,820 29,392
Interest 24,310 18,859 89,678 76,236
Impairment charge (D) -- -- 600 --
Other expense (E) 9,190 -- 9,190 --
Depreciation and amortization 25,979 20,465 94,376 76,802
-------- -------- -------- --------
107,854 73,492 356,426 269,049
-------- -------- -------- --------
Income before equity in net income of joint ventures, gain on sale of joint
venture interests, minority equity interests, income tax of taxable REIT
subsidiary, discontinued operations and gain on sales
of real estate and real estate investments 18,535 20,239 119,671 85,797
Equity in net income of joint ventures (F) 20,506 10,371 44,254 32,769
Gain on sale of joint venture interests (F) 8,663 -- 8,663 --
Minority equity interests (G) (563) (4,800) (5,365) (21,570)
Income tax of taxable REIT subsidiary 130 -- -- --
-------- -------- -------- --------
Income from continuing operations 47,271 25,810 167,223 96,996
Income (loss) from discontinued operations (H) (574) 3,367 (894) 1,545
-------- -------- -------- --------
Income before gain on sales of real estate
and real estate investments 46,697 29,177 166,329 98,541
Gain on sales of real estate and real
estate investments, net of tax 44,789 440 73,932 3,429
-------- -------- -------- --------
NET INCOME $ 91,486 $ 29,617 $240,261 $101,970
======== ======== ======== ========
NET INCOME, APPLICABLE TO COMMON SHAREHOLDERS (I) $ 80,881 $ 23,127 $189,056 $ 69,368
======== ======== ======== ========
FUNDS FROM OPERATIONS ("FFO"):
Net income applicable to common shareholders (I) $ 80,881 $ 23,127 $189,056 $ 69,368
Depreciation and amortization of real estate investments 25,161 20,225 93,174 76,462
Equity in net income of joint ventures (20,506) (10,371) (44,254) (32,769)
Gain on sale of joint venture interests (F) (8,663) -- (8,663) --
Joint ventures' FFO (F) 23,127 12,328 47,942 44,473
Minority equity interests (OP Units) 466 346 1,769 1,450
(Gain) loss on sales and impairment charge on depreciable real estate and
real estate investments, net (40,335) (2,604) (64,712) 454
-------- -------- -------- --------
FFO available to common shareholders 60,131 43,051 214,312 159,438
Preferred dividends (I) 10,605 6,490 51,205 32,602
-------- -------- -------- --------
FFO (I) $ 70,736 $ 49,541 $265,517 $192,040
======== ======== ======== ========
Per share data: (I)
Earnings per common share
Basic $ 0.94 $ 0.36 $ 2.31 $ 1.09
======== ======== ======== ========
Diluted $ 0.92 $ 0.35 $ 2.27 $ 1.07
======== ======== ======== ========
Dividends Declared $ 0.46 $ 0.38 $ 1.69 $ 1.52
======== ======== ======== ========
Funds From Operations - Basic (J), (I) $ 0.69 $ 0.65 $ 2.58 $ 2.45
======== ======== ======== ========
Funds From Operations - Diluted (J), (I) $ 0.68 $ 0.64 $ 2.54 $ 2.42
======== ======== ======== ========
Basic - average shares outstanding (thousands) (J) 86,206 65,029 81,903 63,807
======== ======== ======== ========
Diluted - average shares outstanding (thousands) (J) 88,414 65,967 84,188 64,837
======== ======== ======== ========
DEVELOPERS DIVERSIFIED REALTY CORPORATION
FINANCIAL HIGHLIGHTS
(IN THOUSANDS - EXCEPT PER SHARE DATA)
(A) Increases in base and percentage rental revenues for the twelve month
period ended December 31, 2003 as compared to 2002, aggregated $87.0
million consisting of $2.8 million related to leasing of core portfolio
properties (an increase of 1.7% from 2002), $21.1 million from the
acquisition of fourteen shopping centers in 2002 and 2003, $71.9
million from the JDN merger and $1.9 million related to developments
and redevelopments. These amounts were offset by a decrease of $1.2
million relating to the business center properties and $9.5 million due
to the sale of twelve properties to joint ventures in 2002 and 2003.
Included in the rental revenues for the twelve month periods ended
December 31, 2003 and 2002 is approximately $6.3 million and $3.3
million, respectively, of revenue resulting from the recognition of
straight line rents.
(B) Other income for the three month periods ended December 31, 2003 and
2002 included approximately $0.4 million and $0.9 million,
respectively, in lease termination revenue. Other income for the twelve
month periods ended December 31, 2003 and 2002 included approximately
$6.9 million and $3.9 million in lease termination revenue,
respectively. Other income for the twelve month period ended December
31, 2003 includes approximately $2.4 million of income from the
settlement of a call option relating to the MOPPRS debt assumed from
JDN and $3.4 million relating to transaction and financing fees
received in connection with the MDT transaction. Included in other
income for the twelve month periods ended December 31, 2003 and 2002
was approximately $0.9 million and $2.5 million, respectively,
primarily associated with the sale of certain option rights (2003), the
sale of development rights to the Wilshire project in Los Angeles,
California (2002), financing and other miscellaneous fees. Offsetting
these revenues for the twelve months ended December 31, 2003 and 2002
was a charge of $0.9 million and $1.0 million, respectively, relating
to the write-off of abandoned development projects.
(C) General and administrative expenses include internal leasing salaries,
legal salaries and related expenses associated with the releasing of
space, which are charged to operations as incurred. For the twelve
month periods ended December 31, 2003 and 2002, general and
administrative expenses were approximately 5.3% and 4.8%, respectively,
of total revenues, including joint venture revenues, for each period.
In addition to increases attributable to the merger with JDN in March
2003, included in the twelve month period ended December 31, 2003
general and administrative expense is approximately $4.0 million of
non-cash deferred, director compensation and executive management
incentive compensation primarily associated with performance unit
grants which compares to $1.4 million in 2002. This increase of $2.6
million is attributed to the increase in the Company's stock price in
2003. In addition, the impact of Sarbanes-Oxley resulted in additional
general and administrative costs of approximately $1 million, a
significant amount of which related to the payment of split dollar life
insurance compensation during the fourth quarter of 2003. Additional
professional fees, primarily related to the MDT transaction,
aggregating approximately $0.4 million, were also charged to expense in
the fourth quarter of 2003.
(D) Impairment charge relates to the potential sale of a shopping center
aggregating 60,000 square feet of GLA, in 2003 with a projected loss of
approximately $0.6 million. This property sold in February 2004.
(E) As previously announced, the Company incurred a one-time charge
relating to litigation filed against the Company by Regal Cinemas
consisting of an $8.0 million judgment plus interest and legal costs.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
FINANCIAL HIGHLIGHTS
(IN THOUSANDS - EXCEPT PER SHARE DATA)
(F) The following is a summary of the Company's share of the combined operating
results relating to its joint ventures (in thousands):
Three month period Year ended
ended December 31, December 31,
2003 (b) 2002 (b) 2003 (b) 2002 (b)
-------- -------- -------- --------
Revenues from operations (a) $ 85,382 $ 53,562 $ 274,521 $ 215,925
--------- --------- --------- ---------
Operating expense 26,672 17,624 94,781 73,590
Depreciation and amortization of real
estate Investments 11,960 10,465 43,884 33,402
Interest expense 20,472 16,763 79,570 64,978
--------- --------- --------- ---------
59,104 44,852 218,235 171,970
--------- --------- --------- ---------
Income from operations before gain on
sale of real estate and real estate
investments and discontinued operations 26,278 8,710 56,286 43,955
Gain on sale of real estate and real
estate investments 134,292 5,219 138,489 18,916
Income (loss) from discontinued
operations, net of tax (177) 1,946 169 9,826
Gain on sale of discontinued operations, net of tax 6,024 18,384 59,357 32,863
--------- --------- --------- ---------
Net income $ 166,417 $ 34,259 $ 254,301 $ 105,560
========= ========= ========= =========
DDR Ownership interests (b) $ 49,354 $ 10,646 $ 74,033 $ 34,724
========= ========= ========= =========
Funds From Operations from joint ventures are summarized as follows:
Net income $ 166,417 $ 34,259 $ 254,301 $ 105,560
Gain on sale of real estate and real estate
investments, including discontinued operations (135,761) (14,338) (192,756) (29,413)
Depreciation and amortization of real estate
Investments 11,965 11,247 45,074 38,168
========= ========= ========= =========
$ 42,621 $ 31,168 $ 106,619 $ 114,315
========= ========= ========= =========
DDRC Ownership interests (b) $ 23,127 $ 12,328 $ 47,942 $ 44,473
========= ========= ========= =========
DDRC Partnership distributions received, net $ 58,743 $ 10,249 $ 112,218 $ 58,103
========= ========= ========= =========
(a) Revenues for the three month periods ended December 31, 2003 and 2002
included approximately $2.4 million and $0.7 million, respectively,
resulting from the recognition of straight line rents of which the
Company's proportionate share is $0.5 million and $0.2 million,
respectively. Revenues for the twelve month periods ended December 31,
2003 and 2002 included approximately $4.8 million and $3.2 million,
respectively, resulting from the recognition of straight line rents,
of which the Company's proportionate share is $1.2 million and $1.1
million, respectively.
(b) The Company's share of joint venture related income has been allocated
between two line items, equity in net income of joint ventures and
gain on sale of joint venture interests, on the Company's income
statement. Included in equity in net income of joint ventures is
approximately $7.5 million of promoted income received from the
Company's joint venture partners during the fourth quarter of 2003
which is included in the Company's FFO. Also included in the joint
venture net income and FFO, in the fourth quarter of 2003, is a gain
associated with the early extinguishment of debt of approximately $4.2
million of which the Company's proportionate share approximated $3.4
million. During 2003, the Company recorded its proportionate share of
merchant building gains and included in FFO gains of $0.9 million and
$11.3 million in 2003 and 2002, respectively.
The Company's share of joint venture net income has been reduced by
$21.0 million and $2.0 million for the twelve month periods ended
December 31, 2003 and 2002, respectively. The $21 million adjustment
in 2003 is the result of the elimination of a significant portion of
gain on sale from the sale of seven joint venture assets to the
Macquarie DDR Trust in the fourth quarter of 2003. The Company has
retained 14.5% effective ownership interest in these assets and
accordingly is required to defer a portion of the gain.
At December 31, 2003 and 2002, the Company owned joint venture
interests relating to 54 and 49 shopping center properties,
respectively. In addition, at December 31, 2003 and 2002,
respectively, the Company, through a joint venture, owned an interest
of approximately 25% in 72 and 100 shopping center sites formerly
owned by Service Merchandise.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
FINANCIAL HIGHLIGHTS
(IN THOUSANDS - EXCEPT PER SHARE DATA)
(G) Minority Equity Interests are comprised of the following:
Three Month Period Year
Ended December 31, Ended December 31,
2003 2002 2003 2002
---- ---- ---- ----
Minority interests $ 97 $ 427 $ 1,360 $ 1,782
Preferred Operating Partnership
Units -- 4,027 2,236 18,338
Operating Partnership Units 466 346 1,769 1,450
------- ------- ------- -------
$ 563 $ 4,800 $ 5,365 $21,570
======= ======= ======= =======
(H) The operating results relating to assets classified as discontinued
operations are summarized as follows in thousands):
Three Month Period Year Ended
Ended December 31, December 31,
2003 2002 2003 2002
---- ---- ---- ----
Revenues $ 433 $ 1,467 $ 2,599 $ 5,932
------- ------- ------- -------
Expenses:
Operating 161 217 586 1,396
Impairment charge -- -- 2,040 4,730
Interest 24 170 485 971
Depreciation 77 317 842 1,566
------- ------- ------- -------
262 704 3,953 8,663
------- ------- ------- -------
171 763 (1,354) (2,731)
Gain (loss) on sales of real
estate (a) (745) 2,604 460 4,276
------- ------- ------- -------
$ (574) $ 3,367 $ (894) $ 1,545
======= ======= ======= =======
(a) Upon finalization of the Company's purchase price allocation
associated with the JDN merger, in the fourth quarter of 2003, the
Company recorded an adjustment to reduce previously recorded gains
of approximately $0.4 million.
(I) As previously announced, DDR has complied with the Security and
Exchange Commission ("SEC") July 31, 2003's Staff Policy statement
that clarifies EITF Topic No. D-42, "The Effect on the Calculation of
Earnings per Share for the Redemption or Induced Conversion of
Preferred Stock," and restated net income available to common
shareholders for fiscal year 2002 and recorded the charges related to
the 2003 transactions. As a result of this change in accounting
principle, the Company has recorded a charge of $10.7 million and $5.5
million for the year ended December 31, 2003 and 2002, respectively,
to net income available to common shareholders and FFO.
(J) For purposes of computing FFO per share (basic), the weighted average
shares outstanding were adjusted to reflect the conversion, on a
weighted average basis of 1.1 million and 0.9 million Operating
Partnership Units (OP Units) outstanding at December 31, 2003 and 2002
into 1.1 million and 0.9 million common shares of the Company for the
three month periods ended December 31, 2003 and 2002, respectively,
and 1.1 million and 1.0 million common shares of the Company for the
twelve month periods ended December 31, 2003 and 2002, respectively.
The weighted average diluted shares and OP Units outstanding were 88.5
million and 67.0 million for the three month periods ended December
31, 2003 and 2002, respectively, and 84.3 million and 65.9 million for
the twelve month periods ended December 31, 2003 and 2002,
respectively.
DEVELOPERS DIVERSIFIED REALTY CORPORATION
FINANCIAL HIGHLIGHTS
(IN THOUSANDS)
Selected Balance Sheet Data:
December 31, 2003 December 31, 2002
----------------- -----------------
ASSETS:
Real estate and rental property:
Land $ 821,893 $ 488,292
Buildings 2,719,764 2,109,675
Fixtures and tenant improvements 90,384 72,674
Construction in progress 252,870 133,415
----------- -----------
3,884,911 2,804,056
Less accumulated depreciation (458,213) (408,792)
----------- -----------
Real estate, net 3,426,698 2,395,264
Cash 11,693 16,371
Restricted cash 99,340 --
Advances to and investments
in joint ventures 262,072 258,610
Notes receivable 9,812 11,662
Receivables, including straight line rent 76,509 60,074
Other assets 55,027 34,871
----------- -----------
$ 3,941,151 $ 2,776,852
=========== ===========
LIABILITIES:
Indebtedness:
Revolving credit facilities $ 186,500 $ 446,000
Variable rate unsecured term debt 300,000 22,120
Unsecured debt 838,996 404,900
Mortgage and other secured debt 757,635 625,778
----------- -----------
2,083,131 1,498,798
Dividends payable 43,520 25,378
Other liabilities 152,992 92,070
----------- -----------
2,279,643 1,616,246
Minority interests 47,438 215,045
Shareholders' equity 1,614,070 945,561
----------- -----------
$ 3,941,151 $ 2,776,852
=========== ===========
DEVELOPERS DIVERSIFIED REALTY CORPORATION
FINANCIAL HIGHLIGHTS
(IN THOUSANDS)
Selected Balance Sheet Data (Continued):
Combined condensed balance sheets relating to the Company's joint ventures are
as follows:
December 31, December 31,
2003 2002
----------- -----------
Land $ 519,846 368,520
Buildings 1,692,367 1,219,947
Fixtures and tenant improvements 24,985 24,356
Construction in progress 38,018 91,787
----------- -----------
2,275,216 1,704,610
Accumulated depreciation (118,755) (153,537)
----------- -----------
Real estate, net 2,156,461 1,551,073
Receivables, including straight line rent, net 47,165 64,642
Investment in joint ventures -- 12,147
Leasehold interests 28,895 26,677
Other assets 83,776 80,285
----------- -----------
$ 2,316,297 $ 1,734,824
=========== ===========
Mortgage debt (a) $ 1,321,117 $ 1,129,310
Notes and accrued interest
payable to DDRC 21,471 106,485
Amounts payable to other partners 42,333 71,153
Other liabilities 80,681 61,898
----------- -----------
1,465,602 1,368,846
Accumulated equity 850,695 365,978
----------- -----------
$ 2,316,297 $ 1,734,824
=========== ===========
(a) The Company's proportionate share of joint venture debt aggregated
approximately $368.5 million and $387.1 million at December 31, 2003 and
December 31, 2002, respectively.