EX-99.1 3 l02415aexv99w1.txt EX-99.1 PRESS RELEASE Exhibit 99.1 DEVELOPERS DIVERSIFIED REALTY CORPORATION For Immediate Release: Contact: Scott A. Wolstein William H. Schafer Chairman Senior Vice President Chief Executive Officer Chief Financial Officer 216-755-5500 216-755-5775 DEVELOPERS DIVERSIFIED REALTY REPORTS AN 8.1% INCREASE IN FFO PER SHARE FOR THE THREE MONTH PERIOD ENDED JUNE 30, 2003 CLEVELAND, OHIO, JULY 31, 2003 - Developers Diversified Realty Corporation (NYSE: DDR), a real estate investment trust ("REIT"), today announced that second quarter 2003 Funds From Operations ("FFO"), a widely accepted measure of REIT performance, on a per share basis was $0.67 (diluted) and $0.68 (basic) compared to $0.62 (diluted) and $0.63 (basic) per share for the same period in the previous year, a per share increase of 8.1% diluted and 7.9% basic. FFO reached $58.6 million for the quarter ended June 30, 2003, as compared to $41.2 million for 2002. Net income for the three month period ended June 30, 2003 was $68.4 million, or $0.66 per share (diluted) and $0.67 (basic), compared to second quarter 2002 net income of $23.2 million, or $0.25 per share (diluted) and $0.25 (basic), an increase of 164% diluted and 168% basic. An increase in net income of $27.9 million, or $0.32 per share (diluted), is due to the gain on sale of assets, which is not included in FFO. The remainder of the increase is attributable to a full quarter of operations from the merger with JDN Realty Corporation ("JDN") on March 13, 2003 and core operations and a reduction in minority interest expense associated with preferred operating partnership units which were redeemed in 2003. On a per share basis, FFO (diluted) was $1.35 and $1.25 for the six month periods ended June 30, 2003 and 2002, respectively, an increase of 8.0%. FFO for the six months ended June 30, 2003 was $107.9 million compared to FFO for the six month period ended June 30, 2002 of $81.3 million. Net income for the six month period ended June 30, 2003 was $106.8 million, or $1.06 per share (diluted), compared to net income of $47.2 million, or $0.52 per share (diluted) for the prior comparable period. An increase in net income of $22.8 million is due to the net gain on sale of real estate assets. The remainder of the increase in net income is attributable to the merger with JDN on March 13, 2003 and 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 report this quarter's earnings growth, which was achieved concurrently with dramatic positive changes to the Company's balance sheet. This improvement enhanced the quality of earnings, reduced interest rate risk from variable rate indebtedness, and strengthened the Company's financial flexibility. During the second quarter, both rating agencies upgraded Developers Diversified's corporate credit outlook from Negative to Stable. We completed several capital markets transactions, including a $300 million bond issuance in July 2003 at spreads roughly half their level six months ago. In addition, we issued $385 million of new preferred stock in March and July to refinance higher yielding preferred issuances. These improvements to the Company's financial strength have long-term benefits to shareholders' interests." Management believes that FFO provides an additional indicator of the financial performance of a REIT. The Company also believes that FFO 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 as an indicator of the Company's operating performance or as an alternative to cash flow as a measure of liquidity. FFO 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 second quarter of 2003, the Company executed 72 new leases aggregating approximately 291,500 square feet and 112 renewals aggregating approximately 585,600 square feet. Rental rates on new leases increased by 17.4% to $15.77 per square foot and rental rates on renewals increased by 6.7 % to $13.48 per square foot. On a blended basis, rental rates for new leases and renewals increased by 7.8% to $13.69 per square foot. At June 30, 2003, the average annualized base rent per occupied square foot, including those properties owned through joint ventures, was $10.49. Excluding the impact of the properties acquired through the JDN merger, the average annualized base rent per occupied square foot for the portfolio was $10.85, as compared to $10.40 at June 30, 2002. As of June 30, 2003, the portfolio was 94.3% leased. Excluding the impact of the properties acquired through the JDN merger, the portfolio was 94.9% leased, as compared to 95.1% at June 30, 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 June 30, 2003, the portfolio was 93.8% occupied. Excluding the impact of the properties acquired through the JDN merger, the portfolio was 94.8% occupied, as compared to 93.3% at June 30, 2002. Same store tenant sales performance over the trailing 12 month period within the Company's portfolio remained strong at approximately $235 per square foot 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 $2.1 million (or 2.4%) for the six month period ended June 30, 2003, compared to the same period in 2002. STRATEGIC TRANSACTIONS: The Company and Coventry Real Estate Advisors ("CREA") announced the joint acquisition of the first property in connection with CREA's formation of Coventry Real Estate Fund II (the "Fund"). The Fund was formed with several institutional investors and CREA as the investment manager. The Fund and DDR have agreed to jointly acquire value-added retail properties in the United States. CREA is seeking to raise up to $250 million of equity to invest exclusively in joint ventures with DDR. The Fund will invest in a variety of well-located retail properties that present opportunities for value creation, such as retenanting, market repositioning, redevelopment or expansion. DDR will co-invest 20% in each joint venture and will be responsible for day-to-day management of the properties. Pursuant to the terms of the joint venture, DDR will earn fees for property management, leasing and construction management plus a promoted interest, along with Coventry, above a 10% preferred return after return of capital to investors. The first property acquired by the joint venture, Ward Parkway, is a 712,000 square foot shopping center located in suburban Kansas City, Missouri that was purchased for approximately $48.4 million. Ward Parkway was built in 1959 as a three-anchor regional enclosed mall and redevelopment began in 2001. A portion of the property has been converted to an open-air center. The property is anchored by Target, Dillard's, AMC Theater, Pier One Imports, SteinMart, Dick's Sporting Goods, 24-Hour Fitness and T.J. Maxx. DDR will complete the remainder of the redevelopment by converting approximately 150,000 square feet of enclosed mall space to an open-air format. The property offers additional opportunities to add value through the leasing and development of an outparcel and 12 acres of excess land. In May 2003, the Company completed the formation of DDR Markaz LLC, a joint venture transaction with an investor group led by Kuwait Financial Centre - Markaz (a Kuwaiti publicly traded company). The Company contributed seven retail properties to the joint venture. The properties are located in Richmond, California; Oviedo, Florida; Tampa, Florida; Highland, Indiana; Grove City, Ohio; Toledo, Ohio and Winchester, Virginia. In connection with this formation, DDR Markaz LLC secured $110 million, non-recourse, five-year, CMBS financing at a fixed interest rate of 4.13%. Proceeds from the transaction were used to repay variable rate indebtedness. The Company retained a 20% ownership interest in the seven properties and received cash proceeds of approximately $156 million. The Company earns fees for asset management, property management, leasing, out-parcel sales and construction management. During the first quarter of 2003, the Company's and JDN's shareholders approved a definitive merger agreement pursuant to which JDN shareholders received 0.518 shares of DDR in exchange for each share of JDN stock on March 13, 2003. The transaction valued JDN at approximately $1.1 billion, which included approximately $576 million of assumed debt at the carrying amount and $50 million of preferred voting stock. DDR acquired 102 retail assets aggregating 23 million square feet including 16 development properties comprising approximately 6 million square feet of total GLA. In March 2002, the Company announced its participation in a joint venture with Lubert-Adler Funds and Klaff Realty, L.P., which was awarded asset designation rights for all of the retail real estate interests of the bankrupt estate of Service Merchandise Corporation. The Company has a 25% interest in the joint venture. In addition, the Company earns fees for the management, leasing, development and disposition of the real estate portfolio. The designation rights enable the joint venture to determine the ultimate use and disposition of the real estate interests held by the bankrupt estate. At June 30, 2003, the portfolio consisted of approximately 80 Service Merchandise retail sites totaling approximately 4.6 million square feet. The transaction was approved in 2002 by the U.S. Bankruptcy Court in Nashville, Tennessee and subsequently the designation rights were transferred to the joint venture. EXPANSIONS: For the six month period ended June 30, 2003, the Company completed expansions and redevelopments at five shopping centers located in Birmingham, Alabama; Brandon, Florida; North Canton, Ohio; Fayetteville, North Carolina and Taylorsville, Utah at an aggregate cost of approximately $23.3 million. The Company is currently expanding/redeveloping eight shopping centers located in North Little Rock, Arkansas; Bayonet Point, Florida; Tucker, Georgia; Aurora, Ohio; Tiffin, Ohio; Erie, Pennsylvania; Monaca, Pennsylvania and Riverdale, Utah at a projected incremental cost of approximately $25.7 million. The Company is also scheduled to commence an additional expansion project at the Princeton, New Jersey shopping center. For the six month period ended June 30, 2003, one of the Company's joint ventures completed expansions and redevelopments at two shopping centers located in Shawnee, Kansas and North Olmsted, Ohio at an aggregate cost of approximately $4.4 million. The Company's joint ventures are currently expanding/redeveloping two shopping centers located in San Ysidro, California and Deer Park, Illinois at a projected incremental cost of approximately $18.2 million. DEVELOPMENT (CONSOLIDATED): During the six month period ended June 30, 2003, the Company completed the construction of five shopping centers located in Fayetteville, Arkansas; Aurora, Colorado; Parker, Colorado; St. John's, Missouri and Frisco, Texas. The Company currently has 16 shopping center projects under construction, 14 of which resulted from the merger with JDN. These projects are located in Meridian, Idaho (Phase II of the existing shopping center); Long Beach, California; Sacramento, California; Fort Collins, Colorado; Parker, Colorado; Lithonia, Georgia; McDonough, Georgia; Overland Park, Kansas; Chesterfield, Michigan; Grandville, Michigan; Lansing, Michigan; Coon Rapids, Minnesota; Apex, North Carolina; Hamilton, New Jersey; Erie, Pennsylvania; Irving, Texas and Mesquite, Texas. These projects are scheduled for completion during 2003 and 2004 and will create an additional 3.1 million square feet of retail space. The Company anticipates commencing construction on four additional shopping centers located in Norwood, Massachusetts; St. Louis, Missouri; Mt. Laurel, New Jersey 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 $96.7 million and are currently scheduled for completion during 2003 and 2004. At June 30, 2003, approximately $84.6 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. The other project is located in St. Louis, Missouri. ACQUISITIONS: In April 2003, the Company acquired its partner's 51% equity interest in a shopping center located in Suwanee, Georgia for approximately $18 million. Upon acquisition, the Company repaid the mortgage debt assumed of $28.6 million. Additionally, the Company acquired its partner's 50% equity interest in a shopping center located in Leawood, Kansas for approximately $15.3 million, net of debt assumed of $53 million. In June 2003, the Company purchased through a 20% owned joint venture a 712,000 square foot center in Kansas City, Missouri for $48.4 million (See Strategic Transactions). DISPOSITIONS: In May 2003, the Company transferred approximately $169 million of real estate assets to a new joint venture, DDR Markaz LLC, and recognized a gain of approximately $26.3 million (See Strategic Transactions). In April 2003, the Company sold three business center properties aggregating 0.4 million square feet of gross leasable area for approximately $14.0 million and recognized a gain of approximately $0.6 million. In April and May 2003, the Company sold four properties, aggregating 0.2 million square feet of GLA acquired in the merger with JDN for approximately $24 million and recognized a gain of $0.2 million. These properties are located in Gulf Breeze, Florida (Walgreen's); Buford, Georgia; Fayetteville, Georgia and Lilburn, Georgia (Lowe's). In June 2003, the Company also sold a shopping center located in Anderson, South Carolina for approximately $1.4 million and recognized a gain of approximately $0.4 million. In April 2003, one of the Company's Retail Value Program joint ventures, in which the Company has a 24.75% ownership interest, sold a 15,000 square foot shopping located in Kansas City, Missouri for approximately $2.6 million and recognized a gain of $0.3 million of which the Company's proportionate share was $0.1 million. In June 2003, the Company's Community Centers VI joint venture, in which the Company has a 50% ownership interest, sold a 211,000 square foot shopping located in St. Louis, Missouri for approximately $22.0 million and recognized a gain of $5.2 million of which the Company's proportionate share was $2.6 million. FINANCINGS: In June 2003, the Company announced the sale of $205 million of Class H Cumulative Redeemable Preferred Shares with an annual dividend coupon of 7.375%. In addition, the Company called all outstanding shares of its 8.375% Class C Depositary Cumulative Preferred Shares aggregating $100 million on July 28, 2003 and provided notices for redemption for all outstanding shares of its 8.68% Class D Depositary Cumulative Preferred Shares aggregating $54 million for redemption on August 20, 2003. The sale of $205 million of Class H Cumulative Redeemable Preferred Shares closed on July 28, 2003. The Company also intends to call its 9.375%, $50 million Voting Preferred Shares for redemption in September 2003. In July 2003, the Company issued $300 million of seven-year senior unsecured notes with a coupon rate of 4.625%. These notes are due August 1, 2010 and were offered at 99.843% of par. Proceeds from this offering were used to repay borrowings under the Company's unsecured credit facility and to selectively prepay secured mortgage financing. Developers Diversified Realty Corporation currently owns and manages approximately 400 retail operating and development properties in 44 states comprising over 83 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 written 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 Six Month Period Ended June 30, Ended June 30, 2003 2002 2003 2002 --------- --------- --------- --------- REVENUES: Minimum rent (A) $ 91,726 $ 60,973 $ 165,547 $ 121,264 Percentage and overage rents (A) 1,292 564 2,477 1,470 Recoveries from tenants 23,214 16,778 42,939 32,278 Ancillary income 448 322 796 665 Other property related income 233 350 308 574 Management fee income 2,528 2,599 5,132 5,362 Development fees 344 301 673 806 Interest income 1,156 1,883 2,759 2,560 Other (B) 2,858 1,004 5,921 4,739 --------- --------- --------- --------- 123,799 84,774 226,552 169,718 --------- --------- --------- --------- EXPENSES: Operating and maintenance 15,153 9,888 28,320 19,133 Real estate taxes 14,351 10,770 26,524 20,748 General and administrative (C) 11,189 6,893 18,913 13,381 Interest 23,136 19,028 42,128 37,887 Impairmant charge(D) 2,640 - 2,640 - Depreciation and amortization 24,296 17,321 44,116 38,229 --------- --------- --------- --------- 90,765 63,900 162,641 129,378 --------- --------- --------- --------- Income before equity in net income of joint ventures, minority equity interests, discontinued operations and gain on sales of real estate and real estate investments 33,034 20,874 63,911 40,340 Equity in net income of joint ventures (E) 6,797 10,890 16,896 17,617 Minority equity interests (F) (873) (5,595) (3,938) (11,200) --------- --------- --------- --------- Income from continuing operations 38,958 26,169 76,869 46,757 Income (loss) from discontinued operations (G) 1,398 (3,000) 1,673 (2,411) --------- --------- --------- --------- Income before gain on sales of real estate and real estate investments 40,356 23,169 78,542 44,346 Gain on sales of real estate and real estate investments 28,046 75 28,245 2,829 --------- --------- --------- --------- NET INCOME $ 68,402 $ 23,244 $ 106,787 $ 47,175 ========= ========= ========= ========= NET INCOME, APPLICABLE TO COMMON SHAREHOLDERS $ 57,140 $ 16,162 $ 83,650 $ 33,098 ========= ========= ========= ========= FUNDS FROM OPERATIONS ("FFO"): Net income applicable to common shareholders $ 57,140 $ 16,162 $ 83,650 $ 33,098 Depreciation and amortization of real estate investments 23,973 17,277 43,694 38,208 Equity in net income of joint ventures (6,797) (10,890) (16,896) (17,617) Joint ventures' FFO (E) 8,149 14,755 15,943 23,351 Minority equity interests (OP Units) 482 378 859 762 Original issuance costs associated with the Preferred OP Units redeemed (H) -- -- 4,990 -- (Gain) loss on sales and impairment charge on depreciable real estate and real estate investments, net (24,377) 3,526 (24,377) 3,526 --------- --------- --------- --------- FFO $ 58,570 $ 41,208 $ 107,863 $ 81,328 ========= ========= ========= ========= Per share data: Earnings per common share Basic $ 0.67 $ 0.25 $ 1.08 $ 0.53 ========= ========= ========= ========= Diluted $ 0.66 $ 0.25 $ 1.06 $ 0.52 ========= ========= ========= ========= Dividends Declared $ 0.41 $ 0.38 $ 0.82 $ 0.76 ========= ========= ========= ========= Funds From Operations - Basic (I) $ 0.68 $ 0.63 $ 1.37 $ 1.27 ========= ========= ========= ========= Funds From Operations - Diluted (I) $ 0.67 $ 0.62 $ 1.35 $ 1.25 ========= ========= ========= ========= Basic - average shares outstanding (thousands) 85,031 64,442 77,626 62,726 ========= ========= ========= ========= Diluted - average shares outstanding (thousands) 87,667 65,589 79,981 63,766 ========= ========= ========= =========
(A) Increases in base and percentage rental revenues for the six month period ended June 30, 2003 as compared to 2002, aggregated $44.2 million consisting of $2.1 million related to leasing of core portfolio properties (an increase of 2.4% from 2002), $16.2 million from the acquisition of thirteen shopping centers in 2002 and 2003, $26.9 million is attributed to the JDN merger and $1.3 million relating to developments and redevelopments. These amounts were offset by a decrease of $0.3 million relating to the business center properties and $2.0 million due to the transfer of eight properties to joint ventures in 2002 and 2003. Included in the rental revenues for the six month period ended June 30, 2003 and 2002 is approximately $3.0 million and $1.9 million, respectively, of revenue resulting from the recognition of straight line rents. (B) Other income for the three month period ended June 30, 2003 and 2002 included approximately $2.5 million and $1.2 million, respectively, in lease termination revenue. Other income for the six month period ended June 30, 2003 and 2002 included approximately $2.8 million in lease termination revenue in each year. Other income for the six month period ended June 30, 2003 includes approximately $2.4 million of income from the settlement of a call option relating to the MOPPRS debt assumed from JDN. Included in other income for the period ended June 30, 2003 and 2002 was approximately $0.7 million and $2.3 million, respectively, relating to the sale of certain option rights (2003) and the sale of development rights to the Wilshire project in Los Angeles, California in 2002. Offsetting these revenues for the six months ended June 30, 2003 and 2002 was a charge of $0.3 million relating to the write-off of abandoned development projects in each year. (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 six month periods ended June 30, 2003 and 2002, general and administrative expenses were approximately 5.3% and 4.5%, 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 three and six month periods ended June 30, 2003 general and administrative expense is approximately $2.0 million and $2.5 million, respectively, of non-cash executive management incentive compensation primarily associated with performance unit grants which compares to $0.3 million and $0.8 million, respectively, during the same periods of 2002. The increase of $1.7 million is attributed to the increase in the Company's stock price in the second quarter of 2003. Excluding this additional non-cash incentive compensation, general and administrative expense, as a percentage of total revenues, including joint venture revenues, was approximately 4.7%. (D) Impairment charge relates to the potential sale of two shopping center assets, aggregating 150,000 square feet of GLA, in 2003 with a projected loss of approximately $2.6 million. (E) 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 Six month period ended June 30 , ended June 30 2003 (b) 2002 (b) 2003 (b) 2002 (b) -------- -------- -------- -------- Revenues from operations (a) $ 64,063 $ 55,113 $ 127,456 $ 109,435 -------- -------- --------- --------- Operating expense 24,640 18,790 47,577 37,144 Depreciation and amortization of real estate Investments 10,000 8,024 20,993 15,740 Interest expense 20,917 16,036 40,380 32,543 -------- -------- --------- --------- 55,557 42,850 108,950 85,427 -------- -------- --------- --------- Income from operations before gain on sale of real estate and real estate investments and tax expense 8,506 12,263 18,506 24,008 Gain on sale of real estate and real estate investments 3,090 5,473 2,332 10,925 Income from discontinued operations 61 2,469 268 5,172 Gain on sale of discontinued operations 5,197 4,955 40,887 15,596 -------- -------- --------- --------- Net income $ 16,854 $ 25,160 $ 61,993 $ 55,701 ======== ======== ========= ========= DDR Ownership interests (b) $ 7,094 $ 11,342 $ 17,531 $ 19,328 ======== ======== ========= ========= Funds From Operations from joint ventures are summarized as follows: Net income $ 16,854 $ 25,160 $ 61,993 $ 55,701 Gain on sale of real estate and real estate investments, including discontinued operations (5,125) -- (40,815) (15,348) Depreciation and amortization of real estate investments 10,068 8,601 21,481 18,104 -------- -------- --------- --------- $ 21,797 $ 33,761 $ 42,659 $ 58,457 ======== ======== ========= ========= DDRC Ownership interests (b) $ 8,149 $ 14,755 $ 15,943 $ 23,351 ======== ======== ========= ========= DDRC Partnership distributions received, net $ 12,669 $ 14,510 $ 34,110 $ 38,154 ======== ======== ========= =========
DEVELOPERS DIVERSIFIED REALTY CORPORATION FINANCIAL HIGHLIGHTS (IN THOUSANDS - EXCEPT PER SHARE DATA) (a) Revenues for the three month periods ended June 30, 2003 and 2002 included approximately $0.7 million and $0.8 million, respectively, resulting from the recognition of straight line rents of which the Company's proportionate share is $0.1 million and $0.3 million, respectively. Revenues for the six month periods ended June 30, 2003 and 2002 included approximately $1.6 million and $1.8 million, respectively, resulting from the recognition of straight line rents of which the Company's proportionate share is $0.4 million and $0.6 million, respectively. (b) At June 30, 2003 and 2002, the Company owned joint venture interests relating to 54 and 51 shopping center properties, respectively. In addition, at June 30, 2003 and 2002, respectively, the Company owned through its 25% owned joint venture, 80 and 159 shopping center sites formerly owned by Service Merchandise. The Company's share of joint venture net income has been reduced by $0.7 million and $1.6 million for the six month periods ended June 30, 2003 and 2002, respectively, to reflect additional basis depreciation and the elimination of gain on sale in relation to a property acquired by the Company from a joint venture. (F) Minority Equity Interests are comprised of the following:
Three Month Period Six Month Period Ended June 30, Ended June 30, 2003 2002 2003 2002 ---- ---- ---- ---- Minority interests $ 391 $ 447 $ 843 $ 897 Preferred Operating Partnership Units -- 4,770 2,236 9,541 Operating Partnership Units 482 378 859 762 ------ ------ ------- ------- $ 873 $5,595 $ 3,938 $11,200 ====== ====== ======= =======
(G) The operating results relating to assets classified as discontinued operations are summarized as follows (in thousands):
Three Month Period Six Month Period Ended June 30, Ended June 30, 2003 2002 2003 2002 ---- ---- ---- ---- Revenues $ 372 $ 1,368 $ 1,011 $ 2,950 ------- ------- ------- ------- Expenses: Operating 46 322 102 694 Depreciation 51 336 269 730 Interest 83 184 173 411 ------- ------- ------- ------- 180 842 544 1,835 ------- ------- ------- ------- 192 526 467 1,115 Gain on sales of real estate and (impairment charge), net 1,206 (3,526) 1,206 (3,526) ------- ------- ------- ------- $ 1,398 $(3,000) $ 1,673 $(2,411) ======= ======= ======= =======
(H) Represents original issuance costs from the $180 million of preferred operating partnership units issued in 1999 and 2000. These preferred units were redeemed in March 2003 with the proceeds from the issuance of the Preferred Class G shares. This represents a non-cash charge to net income available to common shareholders and is not an adjustment to net income. Moreover, this treatment is consistent with the Company's redemption of previously redeemed preferred securities, which did not reflect an adjustment to net income available to common shareholders. (I) 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 June 30, 2003 and 2002 into 1.1 million and 1.0 million common shares of the Company for the three month periods ended June 30, 2003 and 2002, respectively, and 1.0 million common shares of the Company for the six month periods ended June 20, 2003 and 2002. The weighted average diluted shares and OP Units outstanding were 87.8 million and 66.7 million for the three month periods ended June 30, 2003 and 2002, respectively, and 80.1 million and 64.9 million for the six month periods ended June 30, 2003 and 2002, respectively. DEVELOPERS DIVERSIFIED REALTY CORPORATION FINANCIAL HIGHLIGHTS (IN THOUSANDS) Selected Balance Sheet Data:
June 30, 2003 December 31, 2002 ------------- ----------------- ASSETS: Real estate and rental property: Land $ 845,073 $ 488,292 Buildings 2,691,584 2,109,675 Fixtures and tenant improvements 77,619 72,674 Land under development 87,420 20,028 Construction in progress 165,457 113,387 ----------- ----------- 3,867,153 2,804,056 Less accumulated depreciation (432,903) (408,792) ----------- ----------- Real estate, net 3,434,250 2,395,264 Cash 22,009 16,371 Advances to and investments in joint ventures 317,385 258,610 Notes receivable 12,775 11,662 Receivables, including straight line rent 77,795 60,074 Other assets 44,658 34,871 ----------- ----------- $ 3,908,872 $ 2,776,852 =========== =========== LIABILITIES: Indebtedness: Revolving credit facilities $ 402,813 $ 446,000 Variable rate unsecured term debt 300,000 22,120 Unsecured debt 540,500 404,900 Mortgage and other secured debt 879,339 625,778 ----------- ----------- 2,122,652 1,498,798 Dividends payable 35,197 25,378 Other liabilities 131,647 92,070 ----------- ----------- 2,289,496 1,616,246 Minority interests 44,436 215,045 Shareholders' equity 1,574,940 945,561 ----------- ----------- $ 3,908,872 $ 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:
June 30, December 31, 2003 2002 ---- ---- Land $ 431,870 368,520 Buildings 1,353,331 1,219,947 Fixtures and tenant improvements 28,175 24,356 Construction in progress 113,142 91,787 ----------- ----------- 1,926,518 1,704,610 Accumulated depreciation (149,576) (153,537) ----------- ----------- Real estate, net 1,776,942 1,551,073 Receivables, including straight line rent, net 54,126 64,642 Investment in joint ventures 14,212 12,147 Leasehold interests 25,783 26,677 Other assets 92,298 80,285 ----------- ----------- $ 1,963,361 $ 1,734,824 =========== =========== Mortgage debt (a) $ 1,196,742 $ 1,129,310 Notes and accrued interest payable to DDRC 110,234 106,485 Amounts payable to other partners 76,058 71,153 Other liabilities 76,380 61,898 ----------- ----------- 1,459,414 1,368,846 Accumulated equity 503,947 365,978 ----------- ----------- $ 1,963,361 $ 1,734,824 =========== ===========
(a) The Company's proportionate share of joint venture debt aggregated approximately $390.4 million and $387.1 million at June 30, 2003 and December 31, 2002, respectively.