Q1 2012 Earnings Call

May 02, 2012 10:00 am ET


Samir Khanal - Senior Director of Investor Relations

Daniel B. Hurwitz - Chief Executive Officer, President, Member of Board of Directors, Chairman of Dividend Declaration Committee, Chairman of Pricing Committee, Chairman of Other Committee, Member of Executive Committee, Member of Management Committee and Member of Investment Committee

Paul W. Freddo - Senior Executive Vice President of Leasing & Development

David John Oakes - Chief Financial Officer and Senior Executive Vice President


Craig R. Schmidt - BofA Merrill Lynch, Research Division

Christy McElroy - UBS Investment Bank, Research Division

Paul Morgan - Morgan Stanley, Research Division

Jason White

Todd M. Thomas - KeyBanc Capital Markets Inc., Research Division

Carol L. Kemple - Hilliard Lyons, Research Division

Michael Bilerman - Citigroup Inc, Research Division

Richard C. Moore - RBC Capital Markets, LLC, Research Division



Good day, ladies and gentlemen, and welcome to the First Quarter 2012 DDR Corp. Earnings Conference Call. My name is Jasmine, and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes.

I will now like to turn the presentation over to your host for today, Mr. Samir Khanal, Senior Director of Investor Relations. You may proceed.

Samir Khanal

Good morning, and thanks for joining us. On today's call you will hear from President and CEO, Dan Hurwitz; Senior Executive Vice President of Leasing and Development, Paul Freddo; and Chief Financial Officer, David Oakes.

Please be aware that certain of our statements today may be forward-looking. Although we believe such statements are based upon reasonable assumptions, you should understand those statements are subject to risk and uncertainties and actual results may differ materially from the forward-looking statements. Additional information about such factors and uncertainties that could cause actual results to differ may be found in the press release issued yesterday and filed with the SEC on Form 8-K and in our Form 10-K for the year ended December 31, 2011 and filed with the SEC.

In addition, we will be discussing non-GAAP financial measures on today's call, including FFO. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP measures can be found in our earnings press release issued yesterday. This release and our quarterly financial supplement are available on our website at www.ddr.com.

[Operator Instructions] At this time, it's my pleasure to introduce our CEO, Dan Hurwitz.

Daniel B. Hurwitz

Thank you, Samir. Good morning and thank you for joining us. We continue to be very pleased with our operating results, performance of our platform, sales results and growth aspirations of our retail partners and the receptivity we continue to receive from the capital markets. All factors, when combined, continued to provide consistent performance, long-term value creation and a simplified story that continues to enjoy a very positive momentum. Paul and David will provide you with more details in a moment, but suffice it to say we are very pleased with our progress and remained firmly committed to the strategic objectives that we have articulated to the market over the past few years.

The strategy is working and we have no reason to doubt its continued success. Undesirable assets are being sold; quality assets are being bought; vacancy is being leased and occupancy rates continue to grow with improved credit quality of cash flows; projects are being redeveloped, providing new store opportunities our retail partners; access to capital is abundant as leverage metrics continue to improve and our maturity profile continues to expand; and NAV continues to grow as financial engineering and short-term FFO focus continues to become a distant memory. So overall, we are very pleased and see continued runway for continued positive results moving forward.

Before turning the call over to Paul I'd, like to share with you one observation that I have noticed over the past few months as I have traveled to meet with many of you through the non-deal roadshow process. Whether it's folks trying to grab catchy hired headlines at the expense of actual retail operating results or individuals attempting to paint a specific business with an inappropriately broadbrush, it's important to keep in mind that the success of our tenants is completely dependent on the merchandising presented to the consumer by our retailers and the receptivity that, that consumer has to the inventory contained in the store.

While many attempt to link the issues of our retailer like Best Buy with the fate of other junior anchor retailers, it's important to keep in mind that comparing the market conditions of a Best Buy to the market conditions of a T.J. Maxx or Bed Bath & Beyond, for example, is equal to comparing the results of Sears to that of a department store such as Macy's. There simply is no link. These are vastly different companies with vastly different strategies, different merchandising expertise and therefore, vastly different results. There is no broad generalization that one can make intelligently about merchandising except the obvious conclusion that great merchants win and bad merchants lose. And since we live in a world with great transparency, guessing and sweeping generalization is simply not necessary.

The future of the department store is not linked to the fate of a struggling company, no differently to the future of a junior anchor is linked to the fate of a struggling co-tenant, especially when they consistently trade in different merchandise at a different price point.

The numbers are what they are. That is why retailers that operate side-by-side in the same asset consistently show vastly different results. It's not primarily about the real estate and it's not primarily about the box. It's what's inside the box that matters and will ultimately determine the success or failure of a retail concept. It's not about whether you operate in a mall, outlet center, power center or grocery anchored neighborhood center, it's about the merchandise you present to the consumer as a merchant whose primary task is to distribute the right goods, at the right time, at the right price.

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