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DDR > SEC Filings for DDR > Form 8-K/A on 13-Dec-2013All Recent SEC Filings

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Form 8-K/A for DDR CORP


13-Dec-2013

Financial Statements and Exhibits


Item 9.01 Financial Statements and Exhibits.

(a) Financial Statements of Businesses Acquired.

Audited combined statement of revenues and certain expenses for the BRE-DDR Portfolio for the period from January 1, 2012 to June 19, 2012
(the "Predecessor Period")

Audited combined statement of revenues and certain expenses for the BRE-DDR Portfolio for the period from June 20, 2012 to December 31, 2012
(the "Successor Period")

Unaudited combined statement of revenues and certain expenses for the BRE-DDR Portfolio for the nine-month period ended September 30, 2013

(b) Pro Forma Financial Information.

Unaudited pro forma condensed consolidated balance sheet at September 30, 2013

Unaudited pro forma condensed consolidated statement of operations for the nine months ended September 30, 2013

Unaudited pro forma condensed consolidated statement of operations for the year ended December 31, 2012


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(d) Exhibits.

Exhibit
  No.                                     Description

2.1          Agreement of Purchase and Sale between the Parties listed on Schedule
             A attached thereto, as REIT Seller, BRE Pentagon Retail Holding B,
             LLC, as Homart Seller, JDN Real Estate - Lakeland, L.P., as REIT
             Buyer, and the Company, as Homart Buyer, dated as of May 15, 2013
             (filed as Exhibit 2.1 to the Company's Quarterly Report on Form 10-Q
             (Commission File No. 001-11690) for the quarter ended June 30, 2013
             and incorporated by reference herein)

23.1         Consent of Deloitte & Touche LLP


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                                                                      Schedule A



                                                        Total
                                                         GLA
Location                            Center              (000s)         Key Tenants (1)
1    Birmingham, AL      Riverchase Promenade           228      2nd & Charles (U), Jo-Ann,
                                                                 Toys "R" Us (U)
2    Aurora, CO          Pioneer Hills                  479      Bed Bath & Beyond, Home
                                                                 Depot (U), Walmart (U)
3    Parker, CO          FlatAcres                      631      Bed Bath & Beyond, Home
                         MarketCenter/Parker                     Depot (U), Kohl's (U),
                         Pavilions                               Michaels, Office Depot,
                                                                 Sports Authority, Walmart
                                                                 (U)
4    Plainville, CT      Connecticut Commons            566      A.C. Moore, Dick's Sporting
                                                                 Goods, DSW, Kohl's, Loew's
                                                                 Cinema, Lowe's, Marshalls,
                                                                 Old Navy, PetSmart
5    Apopka, FL          Piedmont Plaza                 208      Bealls
6    Brandon, FL         Lake Brandon Village           244      buybuy BABY, Lowe's (U),
                                                                 PetSmart, Sports Authority
7    Naples, FL          Carillon Place                 283      Bealls, hhgregg, OfficeMax,
                                                                 Ross Dress For Less, T.J.
                                                                 Maxx, Walmart
8    Plant City, FL      Lake Walden Square             257      Premiere Cinemas, Ross Dress
                                                                 For Less, Sweetbay
                                                                 Supermarket
9    Lithonia, GA        Shops At Turner Hill           32       -
10   Lithonia, GA        Turner Hill Marketplace        255      Bed Bath & Beyond, Best Buy,
                                                                 Sam's Club (U), Toys "R" Us
11   Schaumburg, IL      Woodfield Village Green        674      Bloomingdale's The Outlet
                                                                 Store, Container Store,
                                                                 Costco (U), hhgregg,
                                                                 Homegoods, Marshalls,
                                                                 Michaels, Nordstrom Rack,
                                                                 Off 5th, PetSmart
12   Merriam, KS         Merriam Town Center            474      Cinemark, Dick's Sporting
                                                                 Goods, Hen House, Home Depot
                                                                 (U), Marshalls, OfficeMax,
                                                                 PetSmart
13   Overland Park, KS   Overland Pointe Marketplace    382      Babies "R" Us, Home Depot
                                                                 (U), Party City (U), Sam's
                                                                 Club (U)
14   Framingham, MA      Shoppers World                 778      A.C. Moore, AMC Theatres,
                                                                 Babies "R" Us, Barnes &
                                                                 Noble, Best Buy, Bob's
                                                                 Stores, DSW, Kohl's, Macy's,
                                                                 Marshalls, Nordstrom Rack,
                                                                 PetSmart, Sports Authority,
                                                                 T.J. Maxx, Toys "R" Us
15   Grandville, MI      Grandville Marketplace         351      Gander Mountain, Hobby
                                                                 Lobby, Lowe's (U), OfficeMax
16   Coon Rapids, MN     Riverdale Village              941      Bed Bath & Beyond, Best Buy,
                                                                 Costco (U), Dick's Sporting
                                                                 Goods, DSW, JCPenney,
                                                                 Jo-Ann, Kohl's, Old Navy,
                                                                 Sears, T.J. Maxx
17   St. Paul, MN        Midway Marketplace             487      Cub Foods, Herberger's (U),
                                                                 LA Fitness, T.J. Maxx,
                                                                 Walmart
18   Clarence, NY        Jo-Ann Plaza                   203      Big Lots, Jo-Ann, OfficeMax
19   North Canton, OH    Belden Park Crossings          594      Dick's Sporting Goods, DSW,
                                                                 hhgregg, Jo-Ann, Kohl's,
                                                                 PetSmart, Target (U), Value
                                                                 City Furniture
20   North Olmsted, OH   Great Northern Plaza           669      Bed Bath & Beyond, Best Buy,
                                                                 Big Lots, Burlington Coat
                                                                 Factory, DSW, Home Depot,
                                                                 Jo-Ann, K & G Menswear,
                                                                 Marc's, PetSmart
21   Monaca, PA          Township Marketplace           299      Cinemark, Lowe's, Michaels,
                                                                 Party City
22   Columbia, SC        Harbison Court                 298      Anna's Linens, Babies "R" Us
                                                                 (U), Barnes & Noble,
                                                                 Golfsmith, Marshalls, Ross
                                                                 Dress For Less
23   Brentwood, TN       Cool Springs Pointe            201      Best Buy, DSW, Ross Dress
                                                                 For Less
24   Frisco, TX          Frisco Marketplace             108      Kohl's
25   Irving, TX          MacArthur Marketplace          599      Hollywood Theaters, Kohl's,
                                                                 Sam's Club (U), Walmart (U)
26   McKinney, TX        McKinney Marketplace           184      Albertson's (U), Kohl's
27   Mesquite, TX        Marketplace At Towne Center    404      Cavender's Boot City (U),
                                                                 Home Depot (U), Kohl's (U),
                                                                 Michaels, PetSmart, Ross
                                                                 Dress For Less
28   Fairfax, VA         Fairfax Towne Center           253      Bed Bath & Beyond, Jo-Ann,
                                                                 Regal Cinemas, Safeway, T.J.
                                                                 Maxx
29   Brookfield, WI      Shoppers World Brookfield      265      Burlington Coat Factory,
                                                                 OfficeMax, Pick 'N Save (U),
                                                                 T.J. Maxx, Xperience Fitness
30   Brown Deer, WI      Marketplace Of Brown Deer      405      Anna's Linens, Burlington
                                                                 Coat Factory, hhgregg,
                                                                 Kohl's, Michaels, OfficeMax,
                                                                 Old Navy, Pick 'N Save, T.J.
                                                                 Maxx

(1) (U) indicates unowned


Table of Contents

DDR Corp.

INDEX TO FINANCIAL STATEMENTS

September 30, 2013

Page Independent Auditor's Report - BRE-DDR Portfolio F-1 Combined Statements of Revenues and Certain Expenses - BRE-DDR Portfolio F-2 Notes to Combined Statements of Revenues and Certain Expenses - BRE-DDR Portfolio F-3 DDR Corp. (Pro Forma - unaudited):
Condensed Consolidated Balance Sheet as of September 30, 2013 F-5 Condensed Consolidated Statement of Operations for the Nine Months Ended September 30, 2013 F-9 Condensed Consolidated Statement of Operations for the Year Ended December 31, 2012 F-13


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INDEPENDENT AUDITOR'S REPORT

To the Board of Directors and Shareholders of DDR Corp.:

We have audited the accompanying combined statements of revenues and certain expenses of the BRE-DDR Portfolio, a portfolio of 30 open-air value oriented power centers located throughout the United States, (collectively, the "Properties") for the periods January 1, 2012, to June 19, 2012, (the "Predecessor Period") and June 20, 2012, the date of acquisition by BRE-DDR Retail Holdings LLC, to December 31, 2012, (the "Successor Period") and the related notes (the "Statements"). These Properties are under common ownership and management.

Management's Responsibility for the Statements

Management is responsible for the preparation and fair presentation of the Statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statements that is free from material misstatement, whether due to fraud or error.

Auditors' Responsibility

Our responsibility is to express an opinion on the Statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Properties' preparation and fair presentation of the Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Properties' internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Statements referred to above present fairly, in all material respects, the combined revenues and certain expenses described in Note 1 of the BRE-DDR Portfolio for the periods from January 1, 2012, to June 19, 2012, (the "Predecessor Period") and June 20, 2012, the date of acquisition by BRE-DDR Retail Holdings LLC, to December 31, 2012, (the "Successor Period"), in accordance with accounting principles generally accepted in the United States of America.

Emphasis of a matter

We draw attention to Note 1 to the Statements, which describes that the accompanying Statements were prepared for the purpose of complying with provisions of Rule 3-14 of Regulation S-X promulgated by the Securities and Exchange Commission (the "SEC") (for inclusion in the Current Report on Form 8-K of DDR Corp.), and were not intended to be a complete presentation of the Properties' revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ Deloitte & Touche LLP

Cleveland, Ohio

December 13, 2013

F-1


Table of Contents

BRE-DDR Portfolio

Combined Statements of Revenues and Certain Expenses



                                        Nine-Month               Period from                 Period from
                                       Period Ended            June 20, 2012 to           January 1, 2012 to
                                      September 30,           December 31, 2012             June 19, 2012
                                     2013 (unaudited)         (Successor Period)         (Predecessor Period)
Revenues:
Minimum rents                       $       77,911,284       $         54,328,246       $           46,775,994
Overage rents                                   62,073                     27,534                      198,032
Recoveries from tenants                     28,768,615                 18,759,685                   17,200,437
Ancillary and other income                     533,430                    675,920                      347,835

Total revenues                             107,275,402                 73,791,385                   64,522,298
Certain expenses:
Operating and maintenance                   11,240,865                  6,808,678                    8,315,298
Real estate taxes                           20,359,809                 13,898,997                   11,260,033
General and administrative                     412,313                    308,643                      697,513

Total certain expenses                      32,012,987                 21,016,318                   20,272,844

Revenues in excess of certain
expenses                            $       75,262,415       $         52,775,067       $           44,249,454

See accompanying notes.

F-2


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BRE-DDR Portfolio

Notes to Combined Statements of Revenues and Certain Expenses

1. Basis of Presentation

On October 1, 2013, DDR Corp. ("DDR" or the "Company") acquired sole ownership of 30 open-air value oriented power centers ("BRE-DDR Portfolio" or the "Properties") that were previously owned by BRE DDR Retail Holdings LLC, the Company's joint venture with certain affiliates of The Blackstone Group L.P. (the "BRE-DDR JV" or "Successor"). The Properties were acquired by the BRE-DDR JV on June 20, 2012 and were previously owned by EDT Fund LLC (the "Predecessor") and managed by DDR Corp. The Properties consist of retail shopping centers located throughout the United States. The specific properties and terms of sale are outlined in the Agreement of Purchase and Sale, dated as of May 15, 2013.

The combined statements of revenues and certain expenses (the "Statements") have been prepared for the purpose of complying with the provisions of Rule 3-14 of Regulation S-X and Item 9.01 of Form 8-K, promulgated by the Securities and Exchange Commission (the "SEC"), which require certain information with respect to real estate operations to be included in certain filings with the SEC. The Statements include the combined historical revenues and certain expenses of the Properties, exclusive of items which may not be comparable to the proposed future operations of the Properties. Material amounts that would not be directly attributable to future operating results of the Properties are excluded, and the Statements are not intended to be a complete presentation of the Properties' revenues and expenses. Revenues excluded consist primarily of the amortization of minimum rent related to above- or below-market leases recorded in conjunction with the original purchase price accounting, interest income and lease termination fees. Expenses excluded consist primarily of property management fees, interest expense, transactional expenses, depreciation and amortization.

The revenues and certain expenses of the BRE-DDR Portfolio for the year ended December 31, 2012, includes combined statements of revenues and certain expenses for the periods from June 20, 2012, the date of acquisition of the Properties by the BRE-DDR JV, to December 31, 2012, (the "Successor Period") and from January 1, 2012 to June 19, 2012, (the "Predecessor Period").

The unaudited interim Statement for the nine-month period ended September 30, 2013, was prepared on the same basis as the Statements for the Successor Period and Predecessor Period and reflects all adjustments (consisting of only normal recurring adjustments) which are, in the opinion of management, necessary for the fair presentation of the combined revenues and certain expenses for the period presented. The combined statements of revenues and certain expenses for the nine-month period ended September 30, 2013, is not necessarily indicative of the expected results for an entire fiscal year.

2. Summary of Significant Accounting Principles

Principles of Combination

The Statements were prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP).

Revenue Recognition

Minimum rents from tenants are recognized using the straight-line method over the lease term. Percentage and overage rents are recognized after the reported tenant's sales have exceeded the applicable sales breakpoint. Revenues associated with tenant reimbursements are recognized in the period in which the expenses are incurred based upon provisions of the individual tenant leases.

Repairs and Maintenance

Expenditures for maintenance and repairs are charged to operations as incurred. Renovations and expenditures which improve or extend the life of the asset are capitalized.

F-3


Table of Contents

BRE-DDR Portfolio

Notes to Combined Statements of Revenues and Certain Expenses

Use of Estimates in Preparation of Financial Statements

The preparation of the Statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates.

3. Transactions with Related Parties

DDR was the property manager for all of the Properties for all periods presented in the Statements. All management fees associated with the Properties have been excluded as discussed in Note 1.

4. Commitments

The Properties lease space to tenants pursuant to agreements which provide for terms ranging from one to 30 years; and, in some cases, for annual rentals, which are 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 period from October 1, 2013, to December 31, 2013 (unaudited), and five years ending December 31, and thereafter, are as follows:

                     Oct. 1 to Dec. 31, 2013   $  24,974,200
                     2014                         99,271,199
                     2015                         84,425,607
                     2016                         70,033,865
                     2017                         60,211,650
                     2018                         46,267,071
                     Thereafter                  102,380,719

5. Subsequent Events

The BRE-DDR Portfolio was evaluated with respect to subsequent events through December 13, 2013, the date the financial statements were available to be issued, to determine if either recognition or disclosure of significant events or transactions is required. Management has determined that no such recognition or disclosure is required.

F-4


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DDR Corp.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2013

(Unaudited)

The following unaudited pro forma condensed consolidated balance sheet is presented as if (i) the BRE-DDR Acquisition and (ii) the issuance and sale of 35.14 million DDR common shares in a forward equity offering, which the Company settled on October 1, 2013, were completed on September 30, 2013. This unaudited pro forma condensed consolidated balance sheet should be read in conjunction with the unaudited pro forma condensed consolidated statement of operations of the Company and the notes thereto presented herein and the historical financial statements and notes thereto of the Company included in the Company's Quarterly Report on Form 10-Q for the period ended September 30, 2013 and Annual Report on Form 10-K, as amended, for the year ended December 31, 2012.

The unaudited pro forma condensed consolidated balance sheet does not purport to represent what the actual financial position of the Company would have been at September 30, 2013 if the BRE-DDR Acquisition had been completed as of that date, nor does it purport to represent the future financial position of the Company. The Company accounted for the BRE-DDR Acquisition utilizing the purchase price method of accounting pursuant to the provisions of ASC 805, Business Combinations. The pro forma adjustments relating to the purchase price allocation of the BRE-DDR Acquisition are based on the Company's best estimates and are subject to change based upon the final determination of the fair value of the assets and liabilities acquired.

F-5


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DDR Corp.

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

September 30, 2013 (continued)



(In thousands)

(Unaudited)



                                                   Company            Pro Forma                 Company
                                                 Historical        Adjustments (a)             Pro Forma
Assets
Real estate assets, net                          $ 7,139,441      $       1,363,797  (b)      $ 8,503,238
Investments in and advances to joint ventures        631,983               (169,264 ) (c)         462,719
Cash and cash equivalents                             35,351                  8,227  (d)           90,392
                                                                             46,814  (e)
Restricted cash                                       25,853                  9,848  (f)           35,701
Notes receivable, net                                 77,857                     -                 77,857
Other assets, net                                    434,658                247,973  (g)          682,631

                                                 $ 8,345,143      $       1,507,395           $ 9,852,538

Liabilities and Equity
Unsecured indebtedness:
Senior notes                                     $ 2,453,336      $              -            $ 2,453,336
Unsecured term loan                                  350,000                     -                350,000
Revolving credit facilities                           42,869                (42,869 ) (h)              -

                                                   2,846,205                (42,869 )           2,803,336

Secured indebtedness:
Secured term loan                                    400,000                     -                400,000
Mortgage indebtedness                              1,349,852                818,237  (i)        2,168,089

                                                   1,749,852                818,237             2,568,089

Total indebtedness                                 4,596,057                775,368             5,371,425
Accounts payable and other liabilities               346,933                 82,317  (j)          429,250
Dividends payable                                     49,826                     -                 49,826

Total liabilities                                  4,992,816                857,685             5,850,501

Total DDR shareholders' equity                     3,328,553                630,244  (k)        3,978,263
. . .
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