INVESTMENTS IN AND ADVANCES TO JOINT VENTURES

At June 30, 2013 and December 31, 2012, the Company had ownership interests in various unconsolidated joint ventures that had an investment in 199 and 206 shopping center properties, respectively. Condensed combined financial information of the Company’s unconsolidated joint venture investments is as follows (in thousands):


	June 30, 2013			December 31, 2012
Condensed Combined Balance Sheets
Land	$	1,529,795		$	1,569,548
Buildings		4,632,324			4,681,462
Fixtures and tenant improvements		266,917			244,293

		6,429,036			6,495,303
Less: Accumulated depreciation		(881,857	)		(833,816	)

		5,547,179			5,661,487
Land held for development and construction in progress		277,314			348,822

Real estate, net		5,824,493			6,010,309
Cash and restricted cash		368,948			467,200
Receivables, net		101,938			99,098
Other assets		380,154			427,014

	$	6,675,533		$	7,003,621


Mortgage debt	$	4,141,601		$	4,246,407
Notes and accrued interest payable to DDR^(A)		153,042			143,338
Other liabilities		295,990			342,614

		4,590,633			4,732,359
Redeemable preferred equity		167,060			154,556
Accumulated equity		1,917,840			2,116,706

	$	6,675,533		$	7,003,621

Company’s share of Accumulated Equity	$	399,551		$	432,500

(A)

The Company has amounts receivable from several joint ventures aggregating $36.3 million and $34.3 million at June 30, 2013 and December 31, 2012, respectively, which are included in Investments in and Advances to Joint Ventures on the condensed consolidated balance sheets. The remaining amounts were fully reserved by the Company in prior years.


	Three-Month Periods Ended June 30,						Six-Month Periods Ended June 30,
	2013			2012			2013			2012
Condensed Combined Statements of Operations
Revenues from operations	$	184,820		$	163,694		$	371,547		$	322,908


Operating expenses^(A)		65,022			64,433			129,909			115,495
Impairment charges		44,563			—			44,563			840
Depreciation and amortization		59,045			41,863			124,345			81,550
Interest expense		60,059			58,860			122,258			113,978

		228,689			165,156			421,075			311,863

(Loss) income before tax expense and discontinued operations		(43,869	)		(1,462	)		(49,528	)		11,045
Income tax expense (primarily Sonae Sierra Brasil), net		(7,238	)		(6,200	)		(13,853	)		(12,190	)

Loss from continuing operations		(51,107	)		(7,662	)		(63,381	)		(1,145	)
Discontinued operations:
Loss from discontinued operations		(87	)		(8,287	)		(62	)		(10,534	)
(Loss) gain on disposition of real estate, net of tax		(369	)		247			(5,906	)		107

Loss before gain (loss) on disposition of real estate, net		(51,563	)		(15,702	)		(69,349	)		(11,572	)
Gain (loss) on disposition of real estate, net		164			(750	)		643			13,102

Net (loss) income	$	(51,399	)	$	(16,452	)	$	(68,706	)	$	1,530
Non-controlling interests		(6,695	)		(4,600	)		(13,914	)		(13,534	)

Net loss attributable to unconsolidated joint ventures	$	(58,094	)	$	(21,052	)	$	(82,620	)	$	(12,004	)

Company’s share of equity in net (loss) income of joint ventures	$	(1,522	)	$	3,171		$	1,528		$	13,351

Amortization of basis differentials^(B)		331			61			235			(1,871	)

Equity in net (loss) income of joint ventures	$	(1,191	)	$	3,232		$	1,763		$	11,480

(A)	Operating expenses for the three- and six-month periods ended June 30, 2012, include transaction costs associated with the formation of the unconsolidated joint venture BRE DDR Retail Holdings, LLC.

(B)

The difference between the Company’s share of net (loss) income, as reported above, and the amounts included in the condensed consolidated statements of operations is attributable to the amortization of basis differentials, deferred gains and differences in gain (loss) on sale of certain assets due to the basis differentials and other than temporary impairment charges. The Company is not recording income or loss from those investments in which its investment basis is zero and the Company does not have the obligation or intent to fund any additional capital.

Investments in and Advances to Joint Ventures include the following items, which represent the difference between the Company’s investment basis and its share of all of the unconsolidated joint ventures’ underlying net assets (in millions):


	June 30, 2013			December 31, 2012
Company’s share of accumulated equity	$	399.6		$	432.5
Redeemable preferred equity and notes receivable from investments^(A)		167.5	^(B)		155.0
Basis differentials		(3.3	)		(5.9	)
Deferred development fees, net of portion related to the Company’s interest		(2.9	)		(2.9	)
Notes and accrued interest payable to DDR		36.3	^(B)		34.3

Investments in and Advances to Joint Ventures	$	597.2		$	613.0

(A)	Primarily relates to $167.1 million and $154.6 million preferred equity investment in BRE DDR Retail Holdings, LLC at June 30, 2013 and December 31, 2012, respectively.

(B)	As discussed below, in conjunction with the Company’s pending acquisition of 30 assets, approximately $146 million is expected to be repaid upon closing.

Service fees and income earned by the Company through management, financing, leasing and development activities performed related to all of the Company’s unconsolidated joint ventures are as follows (in millions):


	Three-Month Periods Ended June 30,				Six-Month Periods Ended June 30,
	2013		2012		2013		2012
Management and other fees	$	7.8	$	6.5	$	15.3	$	13.4
Development fees and leasing commissions		2.3		1.9		5.2		3.9
Interest income		4.6		0.5		9.1		0.5

BRE DDR Retail Holdings, LLC

In May 2013, the Company entered into a purchase agreement with certain affiliates of The Blackstone Group L.P. (collectively, “Blackstone”) pursuant to which the Company will ultimately acquire sole ownership of a portfolio of 30 open-air, value-oriented power centers that are currently owned by BRE DDR Retail Holdings, LLC, the Company’s joint venture with Blackstone (the “BRE JV”). The Company expects to acquire Blackstone’s interest in the properties in a transaction valued at approximately $1.46 billion ($1.54 billion at 100%) (the “Blackstone Acquisition”). The transaction will include a cash payment of $566 million and the assumption of Blackstone’s 95% share of each of approximately $398 million of mortgage debt to be assumed by the Company at closing, approximately $146 million of the Company’s preferred equity interest and mezzanine loan previously funded by the Company to the BRE JV that will no longer be outstanding upon closing, and approximately $406 million of mortgage debt to be repaid at closing. The Blackstone Acquisition is subject to the satisfaction of customary closing conditions and is expected to close in the fourth quarter of 2013. The Company paid a $25 million deposit to Blackstone pursuant to the terms of the purchase agreement, which will reduce the final cash payment required upon closing. The deposit is recorded in Other Assets on the condensed consolidated balance sheet as of June 30, 2013.

DDRTC Core Retail Fund LLC

In April 2013, the Company purchased its unconsolidated joint venture partner’s 85% ownership interest in five assets. The aggregate purchase price of these assets was $110.5 million. The Company recorded an aggregate Gain on Change in Control of Interests related to the difference between the Company’s carrying value and fair value of the previously held equity interest. At closing, $92.4 million of aggregate mortgage debt was repaid. Upon acquisition, these shopping centers were unencumbered and consolidated into the Company’s results from operations.