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Investments in and Advances to Joint Ventures | 9 Months Ended
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Sep. 30, 2014
Equity Method Investments And Joint Ventures [Abstract] |
Investments in and Advances to Joint Ventures |
2. | INVESTMENTS IN AND ADVANCES TO JOINT VENTURES
At September 30, 2014 and December 31, 2013, the Company had ownership interests in various unconsolidated joint ventures that had an investment in 147 and 170 shopping center properties, respectively. Condensed combined financial information of the Company’s unconsolidated joint venture investments is as follows (in thousands):
| September 30, 2014 |  |  | December 31, 2013 |
Condensed Combined Balance Sheets |  |  |  |  |  |  |
Land | $ | 1,080,086 |  |  | $ | 1,275,232 |
Buildings |  | 2,917,565 |  |  |  | 3,940,806 |
Fixtures and tenant improvements |  | 168,575 |  |  |  | 266,851 |
|  | 4,166,226 |  |  |  | 5,482,889 |
Less: Accumulated depreciation |  | (814,365 | ) |  |  | (839,867 | )
|  | 3,351,861 |  |  |  | 4,643,022 |
Land held for development and construction in progress |  | 56,713 |  |  |  | 116,088 |
Real estate, net |  | 3,408,574 |  |  |  | 4,759,110 |
Cash and restricted cash |  | 95,768 |  |  |  | 282,866 |
Receivables, net |  | 68,951 |  |  |  | 101,003 |
Other assets |  | 97,959 |  |  |  | 196,615 |
| $ | 3,671,252 |  |  | $ | 5,339,594 |
Mortgage debt | $ | 2,572,521 |  |  | $ | 3,282,643 |
Notes and accrued interest payable to DDR(A) |  | 142,502 |  |  |  | 127,679 |
Other liabilities |  | 142,521 |  |  |  | 245,368 |
|  | 2,857,544 |  |  |  | 3,655,690 |
Redeemable preferred equity |  | 38,635 |  |  |  | 71,771 |
Accumulated equity |  | 775,073 |  |  |  | 1,612,133 |
| $ | 3,671,252 |  |  | $ | 5,339,594 |
Company's share of Accumulated Equity | $ | 116,711 |  |  | $ | 365,297 |
(A) | The Company had net amounts receivable from several joint ventures aggregating $4.4 million and $2.7 million at September 30, 2014 and December 31, 2013, respectively, which are included in Investments in and Advances to Joint Ventures on the condensed consolidated balance sheets. The remaining receivables on the joint ventures’ books were fully reserved by the Company in prior years.
| Three-Month Periods Ended September 30, |  |  | Nine-Month Periods Ended September 30, |
| 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Condensed Combined Statements of Operations |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Revenues from operations | $ | 119,973 |  |  | $ | 176,001 |  |  | $ | 392,523 |  |  | $ | 527,799 |
Operating expenses |  | 40,024 |  |  |  | 61,099 |  |  |  | 137,787 |  |  |  | 182,130 |
Impairment charges |  | 11,093 |  |  |  | 13,390 |  |  |  | 11,693 |  |  |  | 51,713 |
Depreciation and amortization |  | 35,579 |  |  |  | 56,502 |  |  |  | 119,641 |  |  |  | 173,333 |
Interest expense |  | 41,764 |  |  |  | 56,453 |  |  |  | 141,776 |  |  |  | 169,935 |
Other expense, net |  | 188 |  |  |  | 1,916 |  |  |  | 3,024 |  |  |  | 2,229 |
|  | 128,648 |  |  |  | 189,360 |  |  |  | 413,921 |  |  |  | 579,340 |
Loss before tax expense and discontinued operations |  | (8,675 | ) |  |  | (13,359 | ) |  |  | (21,398 | ) |  |  | (51,541 | )
Income tax expense (primarily SSB), net |  | — |  |  |  | (6,446 | ) |  |  | (6,565 | ) |  |  | (20,299 | )
Loss from continuing operations |  | (8,675 | ) |  |  | (19,805 | ) |  |  | (27,963 | ) |  |  | (71,840 | )
Discontinued operations: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Loss from discontinued operations |  | (55 | ) |  |  | (11,196 | ) |  |  | (844 | ) |  |  | (22,604 | )
Gain (loss) on disposition of real estate, net of tax |  | 4,713 |  |  |  | (21,228 | ) |  |  | 28,224 |  |  |  | (27,133 | )
Loss before gain on disposition of real estate, net |  | (4,017 | ) |  |  | (52,229 | ) |  |  | (583 | ) |  |  | (121,577 | )
Gain on disposition of real estate, net |  | 3,833 |  |  |  | 151 |  |  |  | 3,833 |  |  |  | 794 |
Net (loss) income | $ | (184 | ) |  | $ | (52,078 | ) |  | $ | 3,250 |  |  | $ | (120,783 | )
Non-controlling interests |  | — |  |  |  | (5,800 | ) |  |  | (2,023 | ) |  |  | (19,715 | )
Net (loss) income attributable to unconsolidated joint ventures | $ | (184 | ) |  | $ | (57,878 | ) |  | $ | 1,227 |  |  | $ | (140,498 | )
Company's share of equity in net income of joint ventures | $ | 3,316 |  |  | $ | 2,800 |  |  | $ | 9,483 |  |  | $ | 4,328 |
Amortization of basis differentials(A) |  | 304 |  |  |  | 980 |  |  |  | 758 |  |  |  | 1,215 |
Equity in net income of joint ventures(B) | $ | 3,620 |  |  | $ | 3,780 |  |  | $ | 10,241 |  |  | $ | 5,543 |
(A) | Related to the amortization of basis differentials, the recognition of deferred gains and differences in gain (loss) on sale of certain assets recognized due to the basis differentials and other than temporary impairment charges.
(B) | The Company is not recording income or loss from those investments in which its investment basis is zero, as the Company does not have the obligation or intent to fund any additional capital in the joint ventures.
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):
| September 30, 2014 |  |  | December 31, 2013 |
Company's share of accumulated equity | $ | 116.7 |  |  | $ | 365.3 |
Redeemable preferred equity and other(A) |  | 39.1 |  |  |  | 72.2 |
Basis differentials |  | 4.2 |  |  |  | 10.6 |
Deferred development fees, net of portion related to the Company's interest |  | (2.7 | ) |  |  | (2.8 | )
Amounts payable to DDR |  | 4.4 |  |  |  | 2.7 |
Investments in and Advances to Joint Ventures | $ | 161.7 |  |  | $ | 448.0 |
(A) | Primarily related to $38.6 million and $71.8 million in preferred equity investments in joint ventures with affiliates of The Blackstone Group L.P. (collectively, “Blackstone”) at September 30, 2014 and December 31, 2013, respectively.
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 September 30, |  |  | Nine-Month Periods Ended September 30, |
| 2014 |  |  | 2013 |  |  | 2014 |  |  | 2013 |
Management and other fees | $ | 5.9 |  |  | $ | 7.4 |  |  | $ | 18.2 |  |  | $ | 22.6 |
Development fees and leasing commissions |  | 1.4 |  |  |  | 2.7 |  |  |  | 4.9 |  |  |  | 7.9 |
Interest income |  | 1.7 |  |  |  | 5.3 |  |  |  | 5.0 |  |  |  | 14.4 |
BRE DDR Retail Holdings II Joint Venture In 2013, a joint venture between consolidated affiliates of the Company and Blackstone acquired a portfolio of seven shopping centers (“BRE DDR Retail Holdings II”), aggregating approximately 2.3 million square feet of total gross leasable area (“GLA”). In September 2014, the Company acquired Blackstone’s 95% interest in the seven assets (the “Blackstone II Acquisition”) (Note 3). The Company invested $30.0 million in preferred equity in the joint venture in 2013, all of which was repaid upon the closing of the Blackstone II Acquisition. Sonae Sierra Brazil BV SARL (“SSB”) On April 28, 2014, affiliates of DDR (the “Sellers”) sold to Mr. Alexander Otto (the “Investor”) and certain of his affiliates (collectively with the Investor, the “Purchasers”) the Company’s 50% ownership interest in SSB for approximately $343.6 million, which represented the Company’s entire investment in Brazil. SSB owned an approximate 66% interest in a publicly traded company in Brazil, Sonae Sierra Brasil, S.A., and an indirect interest in the Parque Dom Pedro shopping center. Sonae Sierra Brasil, S.A. owned 10 shopping centers in Brazil and is headquartered in Sao Paulo. The Company’s effective economic ownership in this investment was 33%. The Company recorded a Gain on Sale of Interests of $83.8 million in the second quarter of 2014, which included the reclassification of $19.7 million of foreign currency translation from accumulated other comprehensive income (Note 10). The weighted-average exchange rate used for recording the equity in net income into U.S. dollars was 2.26 for the Company’s ownership period, January 1, 2014 to April 28, 2014, and 2.10 for the nine-month period ended September 30, 2013. The Investor is deemed to be a related party as a result of his common stock ownership in DDR. Furthermore, Dr. Finne, a director of DDR, is a Managing Director of certain entities affiliated with the Investor that agreed to purchase a portion of the Company’s ownership interest in SSB. The Company believes that the sales price and other terms of the transaction were negotiated on terms equivalent to those prevailing in an arms’ length transaction. The transaction was approved by a special committee of the Company’s Board of Directors, which committee included all directors except for the two board members recommended for nomination by the Investor. Other Joint Venture Interests For the nine months ended September 30, 2014, the Company’s unconsolidated joint ventures sold eight assets and received aggregate proceeds of $106.1 million, of which $21.1 million was the Company’s proportionate share. For the 2014 disposition activity, the joint ventures recorded an aggregate gain of $32.1 million, of which $7.7 million was the Company’s proportionate share.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6382943&loc=d3e33918-111571 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=35687916&loc=d3e32787-111569 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=35687916&loc=d3e32847-111569 + Details
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