INVESTOR UPDATE SAFE HARBOR
DDR considers portions of the information in this presentation to be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E 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 our results to differ materially from those indicated by such forward-looking statements, including, among other factors, local conditions such as supply 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; the loss of, significant downsizing of or bankruptcy of a major tenant; constructing properties or expansions that produce a desired yield on investment; our ability to buy or sell assets on commercially reasonable terms; our ability to complete acquisitions or dispositions of assets under contract; our ability to secure equity or debt financing on commercially acceptable terms or at all; our ability to enter into definitive agreements with regard to our financing and joint venture arrangements or our failure to satisfy conditions to the completion of these arrangements; and the success of our capital recycling strategy. For additional factors that could cause the results of the Company to differ materially from those indicated in the forward-looking statements, please refer to the Company’s Form 10-K for the year ended December 31, 2014, as amended. The Company undertakes no obligation to publicly revise these forward-looking statements to reflect events or circumstances that arise after the date hereof.
2 OVERVIEW DDR OVERVIEW AND INVESTMENT THESIS $17B 407 117MSF 95.5% AUM # PROPERTIES TOTAL GLA LEASED RATE
• Invest in market dominant prime power centers located in large and supply-constrained markets occupied by high credit quality retailers that cater to the consumer’s desire for value and convenience • Experienced management team with diverse retail and investment backgrounds, shareholder centric, and free from conflicts of interest • Unique, scalable operating platform that drives strong and consistent results and creates incremental value • Focused on NAV growth and long-term value creation • Prudent risk profile with free cash flow to reinvest in the portfolio and room to further grow the dividend
4 DDR GREW FFO BY 18% DESPITE SELLING NEARLY 200 ASSETS SINCE YEAR-END 2012
OPERATING FFO GROWTH, 2013 - 2015 25%
20%
15%
10%
5%
0% FRT DDR REG WRI EQY KIM RPAI
Growth calculated using the midpoint of most recent 2015 FFO guidance range. 5 THE CORRELATION BETWEEN MULTIPLE AND GROWTH SUGGESTS ROOM FOR MULTIPLE EXPANSION
2015 FFO Multiple FRT
25x
REG 22x
19x KIM RPAI WRI 16x KRG DDR BRX 13x
10x -10% -5% 0% 5% 10% 15% 2014 - 2015E FFO Growth DDR IS ~4 TURNS BELOW THE WARRANTED VALUATION, BASED ON YOY FFO GROWTH
6 LOWER RISK PROFILE ALLOWS FOR HIGHER PAYOUT RATIO GOING FORWARD
CURRENT FFO PAYOUT RATIO
80%
70% Peer Average = 62%
60% 56% 53% 49% 50% 47%
40%
30% 23% 20%
10%
0% EQY RPAI KIM WRI REG FRT KRG BRX DDR DDR DDR DDR DDR 2011 2012 2013 2014 2015
Source: Bloomberg, Company Reports; 2015 payout ratio calculated using the midpoint of FFO guidance range 7 CAPITAL ALLOCATION IS DDR’S TOP PRIORITY
ACQUIRED OVER 40% OF YE09 GROSS ASSET VALUE 43% $2.0 ACQUISITIONS DISPOSITIONS
$1.5 SINCE THE BEGINNING OF 2010, DDR HAS TURNED OVER MORE THAN 65% $1.0 OF ITS GROSS ASSET VALUE
$0.5
BILLIONS BILLIONS $0.0
-$0.5 36%
-$1.0 29% 25%
-$1.5 2010 2011 2012 2013 2014 2015 YTD
SOLD 25% OF YE09 GROSS ASSET VALUE
8 INTENSE FOCUS ON INCREASING RENT PSF HAS YIELDED ATTRACTIVE GROWTH
RENT PER SQUARE FOOT
$14.50 4.4% CAGR
$14.29 $14.00 $14.15
$13.50 $13.53
$13.00
$12.85 $12.50 $12.45
$12.00
$11.50 2011 2012 2013 2014 1Q15
9 PORTFOLIO QUALITY UPGRADE TRANSLATES INTO INCREASING PRICING POWER
10% 12% 96% > 95% BLENDED SPREAD LEASED % LEASED OVER 280BP OF PRICING POWER 10% 8% 95%
< 95% 8% 6% LEASED 94%
6%
4% 93% 4%
2% 92% 2%
0% 0% 91% 2014 LEASING SPREAD 2010 2011 2012 2013 2014
10 DDR’S MANAGEMENT TEAM HAS DECADES OF OPERATIONS EXPERIENCE
EXECUTIVE TITLE YEARS IN INDUSTRY EXECUTIVE TITLE YEARS IN INDUSTRY
Senior Vice President - Senior Vice President - Peripheral Development 28 Leasing - Western Region 18
Ken Stern Anthony Vodicka
Senior Vice President - Senior Vice President - Leasing 23 Leasing 15
David Dieterle Bryan Zabell
Vice President - Senior Vice President - 13 Leasing - Eastern Region 22 National Accounts
James Bold Bill Kern
11 SHAREHOLDER-FRIENDLY CORPORATE GOVERNANCE FOSTERS ETHICAL LEADERSHIP AND TRANSPARENCY
BEST PRACTICES NOTABLE UPDATES COMPENSATION DICTATED BY LONG TERM – David Oakes has joined the board of directors P SHAREHOLDER VALUE CREATION – NOT FFO
P EQUITY COMPENSATION > CASH COMPENSATION – Four board members did not stand for reelection in 2015 P NON-STAGGERED BOARD
P MAJORITY INDEPENDENT DIRECTORS – Alexander Otto, whose family owns 17% of DDR’s P SEPARATE CHAIRMAN AND CEO outstanding stock, joined DDR’s board of directors in 2015
P NO POISON PILL – DDR achieved 92% approval in 2014’s Say-On-Pay vote to P NO SHAREHOLDER RIGHTS PLAN approve the compensation of named executive officers
SIX OF THE NINE DIRECTORS ARE INDEPENDENT P
12 OVER THE LAST 20 YEARS, REITS OUTPERFORMED A 60/40 STOCKS AND BONDS ALLOCATION BY 280 BP
TWENTY YEAR ANNUALIZED RETURNS BY ASSET CLASS, 1995 – 2014 14%
12% 12%
10% 10% 9%
8% 6% 6% 6% 6% 5%
4% 3% 3% 2% 2%
0% REITs S&P 500 60/40 Stocks Bonds Gold Oil EAFE Homes Average Inflation & Bonds Investor
Source: J.P. Morgan Asset Management, Guide to the Markets, U.S. 2Q 2015 13 HISTORICAL DATA DOES NOT VALIDATE FEARS SURROUNDING THE CORRELATION BETWEEN REITS AND RISING INTEREST RATES
CUMULATIVE Δ (BP)
10-YEAR TREASURY YIELD IMPLIED CAP RATE
1986 - ‘87 + 193 0 RISING RATES ARE DRIVEN BY A STRENGTHENING ECONOMY AND HEALTHY CONSUMER 1993 - ‘94 + 248 - 40 FUNDAMENTALS.
1998 - ‘00 + 204 - 10
2003 - '07 + 149 - 260
2012 - ‘14 + 110 - 60
The correlation between DDR’s returns and the 10-Year Treasury from 1994 - 2014 is less than 3%.
Source: Cohen & Steers, “What History Tells Us About Rising Rates” 14 THE POWER CENTER THESIS NEVER UNDERESTIMATE THE U.S. CONSUMER
U.S. RETAIL SALES
$500
$450
$400
$350
$300
$250 IN BILLIONS BILLIONS IN $200 $150 4.4% Long-Term Annual Growth $100
$50
$0 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
Source: US Census Bureau 16 JOBS AND WAGES MOST INFLUENCE THE US CONSUMER OVER THE LONG TERM…
83% CORRELATION BETWEEN WAGE GROWTH AND RETAIL SALES 10% Wage Growth, Y/Y Retail Sales - SA ex-Autos and Gas Y/Y % 8% 6% 4% 2% 0% -2% -4% -6% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
83% CORRELATION BETWEEN EMPLOYMENT GROWTH AND RETAIL SALES 4% 10% Non-Farm Payrolls, Y/Y Retail Sales - SA ex-Autos and Gas Y/Y % 8% 2% 6% 0% 4% 2% -2% 0% -2% -4% -4% -6% -6% 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Source: Credit Suisse Equity Research (Bureau of Labor Statistics, Credit Suisse estimates, company data) 17 …AND WILL BENEFIT FROM HISTORICALLY LOW UNDEREMPLOYMENT AND HIGH CONSUMPTION
SEASONALLY ADJUSTED UNDEREMPLOYMENT REAL PERSONAL CONSUMPTION EXPENDITURES PER CAPITA UNDEREMPLOYMENT: HIGHLY-SKILLED LABOR EMPLOYED IN LOW-PAYING JOBS OR WORKING BELOW CAPACITY 18% $36 17% UPWARD OUTPACING PRE- PRESSURE ON RECESSION 16% WAGE GROWTH HIGHS $35 15%
14% $34 13%
12%
THOUSANDS THOUSANDS $33 11%
10% NATURAL RATE OF UNDEREMPLOYMENT 9% $32
8%
7% $31 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 E
Source: Bureau of Labor Statistics, Goldman Sachs Investment Research, Federal Reserve Bank of St. Louis 18 IMPROVING CONSUMER BALANCE SHEETS IMPLY ADDITIONAL SPENDING CAPACITY
HOUSEHOLD FINANCIAL OBLIGATIONS RATIO DEBT AND FINANCIAL OBLIGATIONS AS A PERCENT OF DISPOSABLE PERSONAL INCOME
19%
18%
17%
16% APART FROM 4Q12, THE CURRENT FINANCIAL OBLIGATION RATIO IS THE LOWEST IT HAS BEEN 33 YEARS 15% 2000 2002 2004 2006 2008 2010 2012 2014
Federal Reserve Board, Bank of America Merrill Lynch 19 RELATIVE TO TOTAL U.S. RETAIL SALES, DDR’S TOP TENANTS HAVE WON THE MARKET SHARE BATTLE THROUGHOUT THE CYCLES
TOTAL SALES GROWTH (INDEXED TO 100) 450 US RETAIL TJX 400 WMT TGT DKS WFM BBBY PETM 350 KSS BBY ROST 300
250
200
150
100
50 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
20 OUR TOP TENANTS ARE WINNING THE MARKET SHARE BATTLE
100% Value/Convenience: Discounters, Warehouse Clubs, Dollar Stores, Specialty Grocers 80% Department stores are losing market 60% share at more than 2.5% annually 40% 20% Dept. Stores: JCPenney, Macy’s, Nordstrom, Bloomingdale’s, Saks, Dillard’s, Bon-Ton 0% 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014
65% Traditional Grocers: Ahold, Delhaize, Kroger, Publix, Supervalu, Safeway 55% 70% of DDR’s wholly-owned Prime assets contain a grocery component
45% Non-Traditional Grocers: Walmart, Target, Costco, BJ’s, Sam’s Club, Whole Foods, The Fresh Market, Trader Joe’s, Sprouts Farmers Market, Fresh Thyme 35% 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: US Census Bureau 21 CONSUMERS CONTINUE TO SPREAD THEIR GROCERY SHOPPING ACROSS MULTIPLE CHANNELS
EXPECTED CHANGE IN STORE COUNT, 2013 – 2018E EXPECTED CHANGE IN MARKET SHARE, 2013 – 2018E
85 20,886 100 65 61
50 31
-
WHOLE FOODS, SAM’S CLUB, TRADER JOE’S, DOLLAR GENERAL, (50) THE FRESH COSTCO, ALDI, DOLLAR TREE, MARKET, ETC. WALMART, ETC. SAVE-A-LOT, ETC. ETC.
(100)
(150) 804 668 POINTS BASIS (200) 320
(250)
(300) (303) (576) (350) DOLLAR, DRUG, WHOLESALE, ORGANIC LIMITED TRADITIONAL ORGANIC WHOLESALE, LIMITED DOLLAR, DRUG, TRADITIONAL CONVENIENCE SUPERCENTERS ASSORTMENT SUPERMARKETS SUPERCENTER ASSORTMENT CONVENIENCE SUPERMARKETS STORES STORES
Source: JLL, Willard Bishop. Traditional supermarkets are defined as stores offering groceries, meat, and produce, with 15,000 - 60,000 SKUs and at least $2M in annual sales. 22
WHAT YOU NEED TO KNOW ABOUT DDR’S PUERTO RICO PORTFOLIO
11% Puerto Rico as a percentage of DDR’s pro rata base rent
60% Estimated value of the top three Prime + malls as a % of the total portfolio…
>$500psf …In-line tenant sales performance of those top three enclosed malls
3.6% Debt coupon on the 7-year, non-recourse loan encumbering Plaza Escorial completed in 2014
10 / 15 Prime + or Prime assets, representing 90% of portfolio value
70% Base rent derived from U.S. based credit-worth tenants
+2.4% Total NOI growth from 2013 to 2014
4.9 Years Weighted average lease term remaining
23
WHILE DEMAND IS STRONG, SUPPLY OF POWER CENTERS PER CAPITA IS DECLINING
U.S. POWER CENTER GLA PER CAPITA
3.0
2.5 POWER CENTER GLA PER CAPITA HAS DECREASED BY 2% SINCE 2010 AFTER GROWING NEARLY 5X SINCE 1975 2.0
1.5
1.0
0.5 1975 1978 1981 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014
24 SHOPPING CENTERS ARE EXPERIENCING LITTLE NEW DEVELOPMENT ON AN ABSOLUTE AND RELATIVE BASIS
Construction lending remains restrained as Basel III forces banks to hold 50% more capital for a construction loan
NEW DELIVERIES AS A % OF EXISTING STOCK
2.0%
1.5%
EVEN A SMALLER % MEET THE '05 - '08 1.0% DEFINITION OF A POWER CENTER '09 - '12 '13 - '14 0.5%
0.0% APARTMENTS INDUSTRIAL OFFICE ALL SHOPPING CENTERS
25 KEY TAKEAWAYS FROM MEETINGS AT ICSC RECON
THEME #1: RETAILERS CONTINE TO TRADE DOWN TO OFF-PRICE AND VALUE CONCEPTS Macy’s Backstage, F21 Red, Whole Food’s value, and Bloomingdale’s outlet have been added to compete with TJ Maxx, Ross, and Burlington
THEME #2: OUTLET BRANDS ARE EXPANDING INTO POWER CENTERS FOR MORE DESIRABLE CO-TENANCY, CONVENIENCE Nike Factory, J Crew Outlet, and Gap Outlet, in addition to traditional mall tenants like Forever 21
THEME #3: CAP RATES IN BOTH CORE AND SECONDARY MARKETS CONTINUE TO DECLINE Power centers with and without grocery anchors continue to trade sub-6%
THEME #4: NON-TRADITIONAL BUYERS OF SHOPPING CENTERS CONTINUE TO EMERGE Interested parties include traditional grocery retailers, power center tenants, and B mall landlords
THEME #5: THE RESURGENCE IN SMALL SHOP CONCEPTS IS CONCENTRATED IN FITNESS AND FAST CASUAL New burger, pizza, and cycle concepts, many of which are mom-and-pop shops, are spurring demand
26 NEW STORE OPENING PLANS CONTINUE TO BE ROBUST BASED ON RECENT MEETINGS
RETAILER PREFERRED FOOTPRINT (SF) PLANNED OPENINGS TIMELINE, AND OTHER NOTABLE ITEMS:
Walmart Neighborhood Market 50,000 250 Looking to open 250 stores in 2015 and 200 stores in 2016
Aldi 18,000 125 Intending to add 500 new stores over the next 4 years
Panera 4,300 110 Looking to continue to open 110 stores annually
Five Below 7,500 85 Their next new market will be in Los Angeles
Famous Footwear 5,000 55 Annual openings of 55 stores will continue through 2017
Costco 140,000 35 Looking to open 35 stores in 2015 following 35 openings in 2015
Burlington 50,000 30 Looking to open 30 stores in both 2015 and 2016
Nordstrom Rack 35,000 30 Looking to open 20 – 25 units annually
Planet Fitness 20,000 30 Looking to open 30 stores within the next year
J Crew Factory Outlet 6,000 25 Increasing presence in power centers as outlet construction has slowed
Nike Factory Outlet 19,000 20 Increasing presence in power centers as outlet construction has slowed
Total Wine 20,000 17 Projecting an additional 20 stores in 2016 and 2017
27 EXISTING RETAILERS CONTINUE TO EVOLVE THEIR FOOTPRINTS AND ROLL OUT NEW CONCEPTS
RETAILER PREFERRED FOOTPRINT (SF) CHANGE FROM PREVIOUS OR ALTERNATIVE FOOTPRINT
Dick’s Sporting Goods 100,000 Experimenting with a side-by-side concept featuring adjoined Field and Stream and Dick’s Sporting Goods
Macy’s Backstage 35,000 Off-price concept will debut in September
Nordstrom Rack 25,000 Smaller footprint will target smaller-metro markets, and will have a scaled down merchandise mix
Bloomingdale’s Outlet 25,000 Outlet concept will open three units in 2015, and is planning an additional 3 – 6 units annually
Whole Foods Value Concept 25,000 New concept targets millennial shoppers, offering a lower price point in smaller-format boxes
Starbucks 15,000 Will open Starbucks Roastery stores in major metros over the next few years
Charlotte Russe 10,000 Fast fashion Lemonpop concept targets whole family
Payless ShoeSource 7,500 Large format concept contrasts with 3,000 SF average stores, and are looking top open 30 in 2015
Macy’s Micro Store 6,000 Small format concept will target street and off-mall locations, and will offer buy online, pick up in store
Verizon Smart Store 5,000 Experiential store will include areas for music, gaming, tablets, phones, fitness tech, and workshops
Panera 2,500 Panera To You concept provides limited seating, and plans to grow as a pick up/delivery café
Massage Envy 2,000 Typical prototype is 3,500 SF; new stores are intended to reach hard-to-access markets
Sally Beauty 1,750 Developing a new concept to compete with ULTA, including higher-end merchandise and salon chairs
Starbucks 750 Will roll out their “express” stores in urban markets in 2016
28 NEW RETAILERS PROVIDE MOMENTUM IN THE SHOP AND BOX CATEGORIES
RETAILER DESCRIPTION
Active Ride Shop Sells skate clothing, shoes, and skateboards, and is targeting 3,500sf stores in CA, NV, AZ, TX, CO
Air Time Trampoline park operator looking for 27,500sf Midwestern locations
Cinepolis Mexico’s largest theater chain, expanding into the US; operating with luxury, traditional, and hybrid concepts
Cycle Bar Instructor-led cycling workouts expanding nationwide through franchising, looking for 2,500sf spaces
Jake’s Wayback Burgers Retro-style fast-food restaurant serving burgers and milkshakes, designed to compete with Five Guys
Lucky’s Market Specialty grocer looking for 30,000sf spaces, run by the Wild Oats founders
Midici Neapolitan Pizza Fast casual pizza concept looking for 4,000sf spaces, developed by the creators of Menchie’s
MOD Pizza Fast casual pizza concept looking for 2,600sf spaces and planning to double their 45 store base by YE16
Pet Supermarket Competition to PetSmart and Petco, looking for 8,000sf spaces; plans to double store count to 300 in next 5 years
Tin Drum Asiacafè Fast casual Asian concept started by the creators of Tropical Smoothie Cafe
29 TOP 20 TENANTS HAVE STRONG CREDIT PROFILES
% OF % OF % OF % OF RATING (S&P / RATING (S&P / COMPANY TOTAL OWNED COMPANY TOTAL OWNED MOODY’S / FITCH) MOODY’S / FITCH) ABR GLA ABR GLA
1. TJX Companies 3.4% 3.9% A+ / A3 / NR 11. Gap / Old Navy / 1.6% 1.3% BBB- / Baa3 / BBB- Banana Republic 2. PetSmart 3.0% 2.5% B+ / NR / NR 12. Office Depot 1.5% 1.4% B- / B2 / NR 3. Bed Bath & 2.9% 3.0% A- / Baa1 / NR Beyond 13. Publix 1.4% 2.0% NR 4. Walmart 2.6% 5.1% AA / Aa2 / AA 14. Ulta 1.2% 0.7% NR 5. Kohl’s 2.4% 3.9% BBB / Baa1 / BBB+ 15. Ascena 1.1% 0.7% NR 6. Dick’s Sporting 2.2% 2.2% NR Goods 16. Kroger 1.1% 1.6% BBB / Baa2 / BBB 7. Ross Stores 2.0% 2.4% A- / A3 / NR 17. Barnes & Noble 1.0% 0.7% NR 8. Best Buy 2.0% 1.7% BB / Baa2 / BB 18. Jo-Ann 1.0% 1.2% B / Caa1 / NR
9. Michaels 1.8% 1.8% B+ / NR / NR 19. Lowe’s 1.0% 2.0% A- / A3 / NR
10. AMC Theatres 1.6% 0.9% B+ / NR / NR 20. Staples 0.9% 0.8% BBB- / Baa2 / BBB-
Total 35.7% 39.8%
30 WHY WE ARE INVESTING IN POWER CENTERS
GROCERY ANCHORED NEIGHBORHOOD METRIC POWER CENTERS CENTERS
1. SCALE = FLEXIBILITY >40 acres, >350ksf 10 - 20 acres, ~125ksf
2. CREDIT QUALITY >75% ABR from Nationals ~25% ABR from Nationals
3. COLLECTION RISK Low: National Tenants High: Local Tenants
4. TRADE AREA POPULATION 350k+ 200k-
5. ANCHOR LOSS IMPLICATIONS Minimal/Opportunity Disastrous
6. MARKET SHARE TREND Gaining Losing
7. SITE PLAN CONTROL Flexible Inflexible
8. ANNUAL ROLLOVER ~10% ~20%
9. ECONOMIES OF SCALE Relationships/Co-Tenancy Health of grocer is all that matters
10. MERCHANT TYPE Food, Service, Hardlines, Softlines, Entertainment, Mass Merchants, Home Food and Service
31 THE OCCUPANCY COST OF DDR’S TOP TENANTS HIGHLIGHT THE EFFICIENCY OF BRICK-AND-MORTAR
OCCUPANCY COST 9.8% 10% GROSS SHIPPING COSTS / NET SALES
8% 6.6% 6.7% 6.4% 6.5% 6% 4.8% 4.1% 4.4% 3.8% 4%
2%
0% WFM ROST JWN PETM BBBY DKS TJX ULTA AMZN
32 POWER CENTER PRICE DISCOVERY
Institutional quality power center transactions not involving DDR: DATE MARKET PRICE (MIL) PRICE PSF CAP RATE ANCHORS
4Q13 Austin 81 231 6.5% Home Depot, Best Buy, Marshalls, Chair King, Bed Bath & Beyond
4Q13 San Francisco 202 233 5.2% Lowe's, Costco, Kohl's, Toys R Us, TJ Maxx, Jo-Ann, Nordstrom Rack
4Q13 Seattle 165 344 5.2% Regal, Dick's Sporting Goods, LA Fitness, Ross, Marshalls
4Q13 Denver 116 276 6.4% 24 Hour Fitness, Dick's Sporting Goods, Best Buy, Sprouts
4Q13 Denver 124 190 6.5% JC Penney, AMC, Ross, REI, H&M, Staples, Forever 21
4Q13 Atlanta 53 284 5.7% Bed Bath & Beyond, Havertys, TJ Maxx, PetSmart
1Q14 Philadelphia 92 202 6.2% Home Depot, BJ’s Wholesale, Conway’s, PetSmart, Staples, Walgreens
3Q14 Los Angeles 260 776 5.0% Old Navy, Nordstrom Rack, Men’s Wearhouse, Marshalls
3Q14 Chicago 50 260 5.7% Fresh Farms, Babies R Us, Ross, Walgreens
3Q14 Wash. DC 88 540 4.3% Whole Foods, Michaels, Modell's, Gold's Gym, CVS
3Q14 Orlando 114 263 5.8% Kohl's, Ross, Bed Bath & Beyond, Regal, Sports Authority, Old Navy, Michaels
4Q14 Denver 86 174 6.0% Dick's, Kohl's, Office Depot, Petco, Sprouts
4Q14 Atlanta 55 248 5.3% Target (U), Publix, TJ Maxx, Office Depot, Dick's, PetSmart
4Q14 Charlotte 61 257 6.3% Marshalls, PetSmart, Old Navy, Best Buy, Office Max
1Q15 Minneapolis 107 230 6.0% Cub Foods, Kohl's, HomeGoods, TJM, Nordstrom Rack
1Q15 Los Angeles 187 591 5.5% Lowe's, Ross, Sports Authority, PetSmart, Ulta
1Q15 Los Angeles 72 760 5.9% Marshalls, PetSmart, Michaels
1Q15 Denver 57 236 5.7% Target, TJ Maxx, HomeGoods, Michaels, Golf Galaxy, PetSmart
2Q15 Oklahoma City 53 255 5.3% Walmart, Babies R Us, Nordstrom Rack, Ulta, Shoe Carnival, Kirkland’s
2Q15 Northern New Jersey 50 358 5.0% Nordstrom Rack, DSW, TJ Maxx, buybuyBaby, Cost Plus World Market, Ulta $2,073 $117 5.7%
33 PORTFOLIO MANAGEMENT ~75% OF PORTFOLIO VALUE CONSISTS OF JUST 115 ASSETS (PRIME+ AND PRIME) Values shown at pro rata
JOINT 7% OF VALUE 5% OF VALUE VENTURE 188 ASSETS WHOLLY OWNED 40 ASSETS NON-PRIME
WHOLLY OWNED PRIME- 44% OF VALUE 14% OF VALUE WHOLLY OWNED PRIME+ 47 ASSETS 64 ASSETS
WHOLLY OWNED PRIME
30% OF VALUE 68 ASSETS
35 DECONSTRUCTING THE PORTFOLIO: WHOLLY OWNED PRIME +
INVESTMENT THESIS: Long-term hold
METRIC AVERAGE JOINT VENTURE EST. CAP RATE 4.75% - 5.75% WHOLLY OWNED NON-PRIME # OF ASSETS 47
NOI CAGR (5 YEAR) > 3.0%
VALUE ~ $105 M WHOLLY OWNED PRIME- 44% OF VALUE VALUE PSF ~ $270 WHOLLY OWNED PRIME+ SIZE ~ 500 KSF
ABR PSF ~ $17.00
LEASED RATE ~ 95%
WHOLLY OWNED PRIME TRADE AREA POPULATION ~ 650 K TRADE AREA HH INCOME ~ $90 K
36 DECONSTRUCTING THE PORTFOLIO: WHOLLY OWNED PRIME
INVESTMENT THESIS: Long-term hold with a focus on upgrading merchandise mix and enhancing market dominance
METRIC AVERAGE JOINT VENTURE EST. CAP RATE 6.0% - 6.5% WHOLLY OWNED NON-PRIME # OF ASSETS 68
NOI CAGR (5 YEAR) ~ 3.5%
VALUE ~ $50 M WHOLLY OWNED PRIME- VALUE PSF ~ $195 WHOLLY OWNED PRIME+ SIZE ~ 330 KSF
ABR PSF ~ $14.05
LEASED RATE ~ 93% 30% OF VALUE TRADE AREA POPULATION ~ 385 K WHOLLY OWNED PRIME TRADE AREA HH INCOME ~ $82 K
37 DECONSTRUCTING THE PORTFOLIO: WHOLLY OWNED PRIME -
INVESTMENT THESIS: Evaluate for investment to increase growth profile or for short or medium term disposition
METRIC AVERAGE JOINT VENTURE EST. CAP RATE 6.75% - 7.75% WHOLLY OWNED NON-PRIME # OF ASSETS 64
NOI CAGR (5 YEAR) ~ 3.0%
14% OF VALUE VALUE ~ $24 M WHOLLY OWNED VALUE PSF ~ $125 PRIME- WHOLLY OWNED PRIME+ SIZE ~ 260 KSF
ABR PSF ~ $10.70
LEASED RATE ~ 93%
WHOLLY OWNED PRIME TRADE AREA POPULATION ~ 290 K TRADE AREA HH INCOME ~ $71 K
38 DECONSTRUCTING THE PORTFOLIO: WHOLLY OWNED NON-PRIME
INVESTMENT THESIS: Near-term disposition to mitigate risk
METRIC AVERAGE 5% OF VALUE JOINT WHOLLY OWNED VENTURE EST. CAP RATE 7.50% - 8.25% NON-PRIME # OF ASSETS 40
NOI CAGR (5 YEAR) ~ -0.5%
VALUE ~ $16 M WHOLLY OWNED PRIME- VALUE PSF ~ $90 WHOLLY OWNED PRIME+ SIZE ~ 235 KSF
ABR PSF ~ $9.30
LEASED RATE ~ 88%
WHOLLY OWNED PRIME TRADE AREA POPULATION ~ 270 K TRADE AREA HH INCOME ~ $68K
39 WHAT’S LEFT OF NON-PRIME?
Values shown at pro rata $ in millions % OF NON-PRIME VALUE
% OF # OF JOINT CATEGORY NON-PRIME STRATEGY VENTURES ASSETS 11% VALUE
LEASE UP 13 40% Sell after lease up
MARKETING FOR Currently in the market or under 18 21% MARKETING LEASE UP SALE contract 21% 40% DEBT 4 17% Sell at maturity
SINGLE TENANT 5 12% Sell after renewal SINGLE TENANT JOINT VENTURES 57 11% 12% DEBT 17% TOTALS 97 100%
40 DISPOSITIONS: EVOLVING QUALITY
2011: 2012: EXITING DISTRESSED NON-CORE SALES PROPERTY Pine Ridge Square TYPES (Gaylord, MI) Tiffin Mall ~ 12% cap rate (Tiffin, OH) ~ 10% cap rate
2013: EXITING 2014: TAKING LOW GROWTH IN ADVANTAGE OF WEAK MARKETS PRICING Carlisle Commons ENVIRONMENT (Harrisburg, PA) Abernathy Square ~ 8% cap rate (Atlanta, GA) ~ 6% cap rate
41 THE EVOLUTION OF THE PORTFOLIO FROM SMALLER, LOWER QUALITY ASSETS INTO LARGE FORMAT PRIME POWER CENTERS CONTINUES
# OF ASSETS AND TOTAL GLA (WHOLLY-OWNED) 375 350 325 300 275 250
# OF ASSETS ASSETS # OF 225 200 175 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 AVERAGE ASSET SIZE (WHOLLY-OWNED)
325 300 s 275 250 -37% CHANGE IN # OF ASSETS SF, IN 000 IN SF, 225 +61% CHANGE IN AVG ASSET SIZE 200 175 1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15
42 THE PORTFOLIO HAS MOVED UP THE QUALITY SPECTRUM
(ADD) 2008 (LESS) (EQUALS) ACQUISITIONS / PORTFOLIO DISPOSITIONS CURRENT PORTFOLIO DEVELOPMENT
ASSET COUNT 621 376 162 407
TOTAL SQUARE FEET (MIL) 119 49 47 117
AVERAGE SIZE 190,000 130,000 290,000 290,000
LEASED RATE 92.6% 86.1% 93.2% 95.5%
RENT PSF $12.34 $11.02 $13.89 $14.02
POPULATION (TRADE AREA) 220,000 474,000 432,000
HH INCOME (TRADE AREA) $68,000 $82,000 $82,000
ORGANIC GROWTH OPPORTUNITY
43 THE PORTFOLIO HAS EXPERIENCED A DRAMATIC QUALITY UPGRADE SINCE 2010
CONSOLIDATED PORTFOLIO TOTAL PORTFOLIO
2010 2015 2010 2015
# OF ASSETS 348 219 LEASED RATE 91.2% 95.5%
AVG ASSET SIZE (KSF) 202 323 RENT PSF $12.46 $14.02
AVG ASSET VALUE (MIL) $23 $49 ABR FROM TOP 50 MSAs 57% 77%
CONSOLIDATED AS % TOTAL 81% 93% TRADE AREA POPULATION 359K 439K
RETAILERS THAT HAVE RETAILERS THAT HAVE MOVED MOVED INTO DDR’S TOP 50 OUT OF DDR’S TOP 25
44 AGGRESSIVE PORTFOLIO REPOSITIONING WILL CONTINUE
2008 CURRENT TARGET
TOTAL MSAs 174 106 <75 Defined by media markets
Exited North Dakota, South Dakota, TOTAL STATES 45 37 ~30 Vermont, Louisiana, and New Mexico
ABR FROM TOP 50 MSAs 57% 76% >90% Focused only on large growth markets
OFFICE / INDUSTRIAL 7 0 0 Further simplification of the story ASSETS
DOMESTIC B/C MALLS 10 0 0 Focused on only one property type
We have also… Added Boston, Orlando, Minneapolis, and San Antonio to our top 20 markets Decreased the combined ABR from Buffalo and Detroit by $28 million, or 45% of total exposure
45 DDR HAS WOUND DOWN 15 JVS SINCE 2011 AND WILL CONTINUE TO FOCUS ON FEWER, HIGH QUALITY PARTNERS
JOINT VENTURES All figures in millions, except asset counts and percentages DDR # OF # PRIME +, OWNED BOOK PARTNER OWN % ASSETS PRIME ASSETS GLA VALUE DEBT
BRE DDR RETAIL HOLDINGS III Blackstone 5% 67 20 11.2 $85 $62
DDRTC CORE RETAIL FUND TIAA-CREF 15% 26 18 8.4 233 122
DDR DOMESTIC RETAIL FUND I Various 20% 56 14 7.9 276 184
DDR-SAU RETAIL FUND State of Utah 20% 23 3 2.1 56 31
OTHER Various Various 13 2 2.0 73 23
TOTAL 185 57 31.6 $723 $453
JVS MAKE UP APPROXIMATELY 7% OF DDR’S PRO RATA GROSS ASSET VALUE
46 CAPITAL MARKETS BALANCED MATURITY PROFILE MITIGATES RISK
CONSOLIDATED DEBT MATURITIES $1,000
$800
REVOLVER AVAILABILITY $600
$400 IN MILLIONS IN
$200
$0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024+ GAAP INTEREST RATE 4.2% 7.5% 5.8% 3.8% 5.3% 6.0% 3.8% 4.7% 3.4% 3.5% CASH INTEREST RATE 4.5% 7.7% 6.6% 3.8% 5.3% 6.1% 3.9% 4.7% 3.4% 3.5%
48 DEBT / EBITDA REDUCTION WILL CONTINUE
0.0x
(0.1x) (0.15x) (0.2x) (0.07x) (0.3x) (0.11x) (0.4x) (0.06x) (0.5x)
(0.6x) (0.16x) (0.09x) (0.7x)
PRO RATA DEBT / EBITDA (BENEFIT) (BENEFIT) / EBITDA DEBT RATA PRO (0.8x) INCOME FROM LEASE-UP CIP LEASED RATE OPERATING ASSET NON-INCOME RETAINED SIGNED LEASES (PER $100M) INCREASE SALES (PER $100M) PRODUCING ASSET EARNINGS NOT YET OPEN (PER 100 BP) SALES (PER $100M) (ACTUAL) (PER $100M)
49 RISK REDUCTION GOES BEYOND DEBT/EBITDA
EXITED ALL INTERNATIONAL MARKETS THROUGH DIVESTURE OF BRAZILIAN INVESTMENT P Eliminated currency, sovereign, and partner risk, as well as development and reporting risks specific to Brazil P Removed unnecessary complexity associated with reporting and modeling × Increased debt / EBITDA
TRADED LOW QUALITY ASSETS FOR HIGH QUALITY ASSETS AT A 100 – 200BP SPREAD P Developed a portfolio of fortress power centers that will outperform in both a bull and a bear market P Enhanced the credit quality and lowered the beta of company cash flows × Increased debt / EBITDA
WOUND DOWN 15 JOINT VENTURES OVER FOUR YEARS IN FAVOR OF LONGER-TERM PARTNERSHIPS P Simplified company structure and enhanced quality of fee income streams P Increased management focus on DDR’s wholly-owned assets × Increased debt / EBITDA
ISSUED LONG-TERM, UNSECURED DEBT AT HISTORICALLY LOW INTEREST RATES P Decreased the weighted average cost of capital to approximately 6% P Extended the weighted average debt duration of the consolidated portfolio by ~1 year to 4.3 years since 2010
REDUCED LAND AND CIP AS A PERCENT OF GROSS ASSET VALUE TO 3.5% P Minimized development risk while simultaneously increasing focus on high-quality redevelopment projects (7 – 10% yields) P Redirected capital allocation to the highest quality assets in the portfolio
INCREASED THE UNENCUMBERED POOL TO $7.5 BILLION P Over the last five years, DDR has increased unencumbered NOI by 66% and increased the average asset size by 61% P In 2015, DDR will add 8 prime assets totaling $1 billion of value to the unencumbered pool
50 FFO TAILWINDS WITH HIGH COUPON REFINANCINGS
10%
9%
8% Refi at 7% = ($0.01) per share earnings Impact 9.63% 7% 7.50% 6% Refi at 5% = +$0.05 per share earnings Impact 5%
4% 4.48% 3%
2%
1%
0% 2015 2016 2017
51 GROWING THE UNENCUMBERED ASSET POOL
• The $6.8 billion unencumbered pool has improved materially in terms of size, quality and credit
2009 CURRENT CHANGE
NUMBER OF ASSETS 242 181 -25%
UNENCUMBERED NOI $252 $462 +83%
% OF CONSOLIDATED NOI 49% 66% +35%
UNENCUMBERED DEBT YIELD 10% 13% +30%
AVERAGE ASSET SIZE 180ksf 295ksf +64%
TOP CREDITS Walmart, Rite Aid, Lowe’s PetSmart, Bed Bath & Beyond, TJX
52 DDR UNENCUMBERED FOUR FORTRESS ASSETS IN THE SECOND QUARTER • In June, DDR repaid the $255 million of 6.4% (cash) secured debt; the GAAP interest rate was 2.75%
• The total value added to the unencumbered pool is greater than $650 million, implying <40% leverage previously on the pool
LOCATION TIER KEY TENANTS
Shoppers World Boston Prime + Kohl's, AMC, Macy's, Nordstrom Rack, TJ Maxx, Petsmart
Woodfield Village Chicago Prime + Trader Joe's, Container Store, Nordstrom Rack
Fairfax Towne Center Wash DC Prime + Safeway, Regal, TJ Maxx, Bed Bath & Beyond
Carillon Place Naples Prime Walmart Neighborhood Market, Ross, TJ Maxx, Total Wine
53