EX-99.1 4 d745566dex991.htm EX-99.1 EX-99.1

EXHIBIT 99.1

DDR Corp.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2018 and December 31, 2017

On July 1, 2018, DDR Corp. (“DDR” or the “Company”) entered into a Separation and Distribution Agreement with Retail Value Inc. (“RVI”), pursuant to which the Company agreed to transfer a portfolio of 48 assets, comprised of 36 continental U.S. assets and 12 assets in Puerto Rico, to RVI and distribute all of the outstanding shares of RVI common stock to the holders of DDR common stock in a pro-rata distribution (the “spin-off”). The spin-off was effective on July 1, 2018 to the Company’s stockholders of record as of the close of business on June 26, 2018. As a result of the spin-off, RVI is now an independent public company and its common stock is listed under the symbol “RVI” on the New York Stock Exchange.

The unaudited pro forma condensed consolidated statements of operations included herein represent the results of the Company for the three months ended March 31, 2018 and year ended December 31, 2017 and give effect to the RVI spin-off from DDR and other transactions described below as if they all occurred on January 1, 2017. The pro forma condensed consolidated balance sheet assumes the spin-off and other transactions described below all occurred on March 31, 2018.

The unaudited pro forma adjustments include the following:

 

  •   consummation of the spin-off of RVI on July 1, 2018;

 

  •   repayment of outstanding mortgage indebtedness associated with RVI assets utilizing a portion of the loan proceeds of the aggregate principal amount of $1.35 billion mortgage loan closed in February 2018 and collateralized by the RVI assets;

 

  •   completion of the External Management Agreement and Property Management Agreements with DDR;

 

  •   issuance by RVI series A preferred shares to DDR with a dividend preference of $190 million;

 

  •   transfer of unrestricted cash of $1.0 million from DDR to RVI upon consummation of the separation pursuant to the terms of the Separation and Distribution Agreement; and

 

  •   establishment of a receivable from RVI for certain cash balances held in restricted cash accounts on the separation date in connection with the mortgage loan; RVI has agreed to pay these amounts as soon as reasonably possible out of its operating cash flow but in no event later than March 31, 2020 pursuant to the terms of the Separation and Distribution Agreement.

The unaudited pro forma condensed consolidated financial statements of the Company are not necessarily indicative of what our financial condition or results of operations would have been for the periods presented, nor are they representative of the future financial condition or results of operations of the Company. The unaudited pro forma condensed consolidated financial statements of the Company should be read in conjunction with the historical financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Report on Form 10-Q for the three months ended March 31, 2018 and RVI Predecessor’s combined financial statements and the notes thereto as of and for the year ended December 31, 2017 and for the three months ended March 31, 2018 included in its Information Statement filed as an exhibit to RVI’s Amendment No. 1 to Form 10 filed with the SEC on June 14, 2018.

 

1

DDR Corp.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

March 31, 2018

DDR Corp.

Pro Forma Condensed Consolidated Balance Sheet

As of March 31, 2018

(Unaudited, in thousands)

 

         Pro Forma Adjustments        
     Company
Historical (A)		   RVI Spin-Off (B)   Other       Pro Forma

Assets

           

Land

      $ 1,700,502       $ (711,712 )          $ 988,790  

Buildings

      5,599,708       (1,904,858 )          3,694,850  

Fixtures and tenant improvements

                     696,787       (196,844 )          499,943  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

     7,996,997       (2,813,414 )          5,183,583  

Less: Accumulated depreciation

      (1,963,427 )                       714,953           (1,248,474 ) 
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

     6,033,570       (2,098,461 )          3,935,109  

Construction in progress and land

      77,033       (8,532 )          68,501  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

Total real estate assets, net

      6,110,603       (2,106,993 )          4,003,610  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

Investments in and advances to joint ventures, net

      333,659                              333,659  

Investments in and advances to affiliate

                           190,000     (C)     230,513  
         40,513     (D)  

Cash and cash equivalents

      16,560         (1,000 )    (E)     15,560  

Restricted cash

      49,257         (40,513 )    (D)     8,744  

Accounts receivable, net

      100,464       (31,929 )          68,535  

Casualty insurance receivable

      65,547       (65,547 )          —  

Notes receivable, net

      19,675             19,675  

Other assets, net

      214,681       (81,844 )          132,837  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

     $ 6,910,446       $ (2,286,313 )      $ 189,000         $ 4,813,133  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

Liabilities and Equity

           

Unsecured indebtedness:

      $ 2,236,285             $ 2,236,285  

Mortgage indebtedness

      1,505,235       (1,317,736 )          187,499  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

Total indebtedness

      3,741,520       (1,317,736 )          2,423,784  

Accounts payable and other liabilities

      317,916       (96,998 )          220,918  

Dividends payable

      78,687             78,687  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

Total liabilities

      4,138,123       (1,414,734 )          2,723,389  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

Total DDR shareholders’ equity

      2,767,417       (871,579 )      190,000     (C)     2,084,838  
         (1,000 )    (E)  

Non-controlling interests

      4,906             4,906  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

Total equity

      2,772,323       (871,579 )      189,000         2,089,744  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

     $ 6,910,446       $ (2,286,313 )      $ 189,000         $ 4,813,133  
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

 

2

DDR Corp.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET

March 31, 2018 (continued)

 

(A) Reflects the unaudited historical condensed consolidated balance sheet of the Company as of March 31, 2018.

 

(B) Reflects the historical unaudited combined balance sheet of RVI as of March 31, 2018. Includes two assets sold by DDR in the second quarter of 2018 prior to the spin-off.

 

(C) Reflects DDR’s preferred investment in RVI based upon the terms of the Series A preferred shares.

 

(D) Reflects DDR’s receivable from RVI related to its obligation to repay restricted cash of $38.3 million and prepaid insurance of $2.2 million to DDR no later than March 31, 2020 pursuant to the terms of the Separation and Distribution Agreement.

 

(E) Reflects the transfer of unrestricted cash of $1.0 million to RVI upon consummation of the spin-off pursuant to the terms of the Separation and Distribution Agreement.

 

3

DDR CORP.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the three months ended March 31, 2018

 

        

        DDR Corp.

        Pro Forma Condensed Consolidated Statement of Operations

        For the three months ended March 31, 2018

        (Unaudited, in thousands, except per share data)

                
         Pro Forma Adjustments                
     Company
Historical(A)		   RVI Spin-Off(B)   Financing         Management and
Disposition Fees		         Pro Forma      

Revenues from operations:

                 

Minimum rents

      $ 146,887       $ (51,601 )              $ 95,286    

Percentage and overage rents

      1,808       (1,077 )              731    

Recoveries from tenants

      51,354       (18,720 )              32,634    

Fee and other income

      13,019       (2,862 )          6,658       (D )      16,815    
               (E )     

Business interruption income

      2,000       (2,000 )              —    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  
                           215,068       (76,260 )                                    6,658         145,466    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  

Rental operation expenses:

                 

Operating and maintenance

      29,757       (12,008 )              17,749    

Real estate taxes

      32,023       (9,894 )              22,129    

Impairment charges

      30,444       (30,444 )            (F )      —    

Hurricane casualty loss

      750       (750 )              —    

General and administrative

      16,115       (3 )              16,112    

Depreciation and amortization

      74,424       (25,652 )              48,772    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  
     183,513       (78,751 )                                    104,762    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  

Other income (expense):

                 

Interest income

      5,341                 5,341    

Interest expense

      (44,040 )      10,996               (33,044 )   

Other income (expense), net

      (61,607 )      31,207       29,718       (C )          (682 )   
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  
     (100,306 )      42,203       29,718             (28,385 )   
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  

(Loss) income before earnings from equity method investments and other items

      (68,751 )                              44,694                               29,718         6,658         12,319    

Equity in net income of joint ventures

      8,786                 8,786    

Reserve of preferred equity interests

      (3,961 )                (3,961 )   
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  

(Loss) income before tax benefit

      (63,926 )      44,694       29,718         6,658         17,144    

Tax benefit of taxable REIT subsidiaries and state franchise and income taxes

      18       128               146    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  

(Loss) income from continuing operations

      (63,908 )      44,822       29,718         6,658         17,290    

Gain on disposition of real estate, net

      10,011                 10,011    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  

Net (loss) income

      $ (53,897 )      $ 44,822       $ 29,718          $ 6,658          $ 27,301    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

    

 

 

 

  

Income attributable to non-controlling interests, net

      (256 )                (256 )   
  

 

 

 

            

 

 

 

  

Net (loss) income attributable to DDR

      $ (54,153 )                $ 27,045    
  

 

 

 

            

 

 

 

  

Preferred Dividends

      (8,383 )                (8,383 )   
  

 

 

 

            

 

 

 

  

Net (loss) income attributable to DDR common shareholders

      $ (62,536 )                $ 18,662    
  

 

 

 

            

 

 

 

  

Per share data:

                 

Basic

      $ (0.34 )                $ 0.10       (G ) 
  

 

 

 

            

 

 

 

  

Diluted

      $ (0.34 )                $ 0.10       (G ) 
  

 

 

 

            

 

 

 

  

Basic - Average shares outstanding

      184,560                 184,560    

Diluted - Average shares outstanding

      184,560                 184,568    

 

 

 

4

DDR CORP.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the year ended December 31, 2017

        

DDR Corp.

Pro Forma Condensed Consolidated Statement of Operations

For the year ended December 31, 2017

(Unaudited, in thousands, except per share data)

                
         Pro Forma Adjustments                
     Company
Historical(A)		   RVI Spin-Off(B)   Management and
Disposition Fees		         Pro Forma      

Revenues from operations:

             

Minimum rents

      $ 632,917       $ (218,537 )          $ 414,380    

Percentage and overage rents

      7,094       (2,862 )          4,232    

Recoveries from tenants

      211,942       (75,592 )          136,350    

Fee and other income

      61,135       (17,388 )      26,340       (D )      70,087    
           (E )     

Business interruption income

      8,500       (8,500 )          —    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  
     921,588       (322,879 )      26,340         625,049    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

Rental operation expenses:

             

Operating and maintenance

      122,315       (50,836 )          71,479    

Real estate taxes

      128,602       (38,573 )          90,029    

Impairment charges

      340,480       (267,240 )          73,240    

Hurricane casualty and impairment loss

      5,930       (5,930 )          —    

General and administrative

      89,854           (F )      89,854    

Depreciation and amortization

      346,204       (116,372 )                                 229,832    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  
                         1,033,385       (478,951 )          554,434    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

Other income (expense):

             

Interest income

      28,364             28,364    

Interest expense

      (188,647 )      18,085           (170,562 )   

Other income (expense), net

      (68,003 )      1,962           (66,041 )   
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  
     (228,286 )      20,047           (208,239 )   
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

(Loss) income before earnings from equity method investments and other items

      (340,083 )      176,119       26,340         (137,624 )   

Equity in net income of joint ventures

      8,837             8,837    

Reserve of preferred equity interests

      (61,000 )            (61,000 )   

Gain on sale and change in control of interests, net

      368             368    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

(Loss) income before tax benefit (expense)

      (391,878 )      176,119       26,340         (189,419 )   

Tax (expense) benefit of taxable REIT subsidiaries and state franchise and income taxes

      (12,418 )      11,266           (1,152 )   
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

(Loss) income from continuing operations

      (404,296 )      187,385      
                          26,340
  
       (190,571 )   

Gain on disposition of real estate, net

      161,164       (351 )          160,813    
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

Net (loss) income

      $ (243,132 )      $                        187,034       $ 26,340         $ (29,758 )   
  

 

 

 

  

 

 

 

  

 

 

 

    

 

 

 

  

Loss attributable to non-controlling interests, net

      1,447             1,447    
  

 

 

 

        

 

 

 

  

Net loss attributable to DDR

      $ (241,685 )            $ (28,311 )   
  

 

 

 

        

 

 

 

  

Preferred dividends

      (28,759 )            (28,759 )   
  

 

 

 

        

 

 

 

  

Net loss attributable to DDR common shareholders

      $ (270,444 )            $ (57,070 )   
  

 

 

 

        

 

 

 

  

Per share data:

             

Basic

      $ (1.48 )            $ (0.32 )      (G ) 
  

 

 

 

        

 

 

 

  

Diluted

      $ (1.48 )            $ (0.32 )      (G ) 
  

 

 

 

        

 

 

 

  

Basic and Diluted - Average shares outstanding

      183,681             183,681    

 

5

DDR CORP.

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

For the three months ended March 31, 2018 and for the year ended December 31, 2017 (continued)

$ in thousands

 

(A) Reflects the unaudited condensed consolidated statements of operations of the Company for the three months ended March 31, 2018 and the year ended December 31, 2017.

 

(B) Reflects the removal of revenues and expenses for the three months ended March 31, 2018 and the year ended December 31, 2017 attributable to the RVI shopping centers from the historical results presented.

 

(C) Reflects the elimination of debt extinguishment costs ($26,119) and other expenses ($3,599) incurred for the three months ended March 31, 2018 assuming that the prepayment of mortgage debt occurred on January 1, 2017.

 

(D) Reflects an adjustment to include the property management and asset management fee income to be earned by DDR in accordance with the External Management Agreement and the Property Management Agreements. The asset management fee is calculated based on 0.5% of the gross asset value, as defined, of each of the RVI assets. The property management fee is calculated based upon gross revenues on a cash basis at a rate of no greater than 3.5% for the 36 continental U.S. assets and no greater than 5.5% for the 12 Puerto Rico assets. The fee income is broken out as follows:

 

     March 31, 2018      December 31, 2017  

Asset management fee

    $ 3,301      $ 13,205  

Property management fee

      3,357        13,135  
  

 

 

     

 

 

  
   $ 6,658      $ 26,340  
  

 

 

     

 

 

  

 

(E) In addition to the asset management fees and property management fees, the Company will earn disposition fees equal to 1% of the gross sales price of each asset sold. DDR would have received a disposition fee of approximately $1.1 million from the sale of two assets calculated based on a gross sales price of $105.8 million. This fee is not presented in the pro forma statements as this fee is non-recurring.

 

(F) These unaudited pro forma condensed consolidated financial statements do not include the impact of any synergies that may be achieved in the transactions or any strategies that management may consider in order to continue to efficiently manage RVI’s operations.

 

(G) Pro forma income (loss) per common share is based upon the historical basic and diluted weighted-average number of common shares outstanding during the three months ended March 31, 2018 and the year ended December 31, 2017. Effective as of 5:00 p.m., Eastern Time, on May 18, 2018, the Company effected a 1 for 2 reverse stock split of its issued and outstanding common shares, which is reflected in these proforma adjustments.

 

6