Investments in and Advances to Joint Ventures

3 Months Ended

Mar. 31, 2012

Investments in and Advances to Joint Ventures [Abstract]

INVESTMENTS IN AND ADVANCES TO JOINT VENTURES

2. INVESTMENTS IN AND ADVANCES TO JOINT VENTURES

At March 31, 2012 and December 31, 2011, the Company had ownership interests in various unconsolidated joint ventures that had an investment in 172 and 177 shopping center properties, respectively. Condensed combined financial information of the Company’s unconsolidated joint venture investments is as follows (in thousands):

	March 31, 2012			December 31, 2011
Condensed Combined Balance Sheets
Land	$	1,416,122		$	1,400,469
Buildings		4,514,103			4,334,097
Fixtures and tenant improvements		196,940			189,940
		6,127,165			5,924,506
Less: Accumulated depreciation		(840,360	)		(808,352	)
		5,286,805			5,116,154
Land held for development and construction in progress		137,979			239,036
Real estate, net		5,424,784			5,355,190
Cash and restricted cash (A)		479,397			308,008
Receivables, net		102,493			108,038
Leasehold interests		9,136			9,136
Other assets		188,377			168,115
	$	6,204,187		$	5,948,487
Mortgage debt (A)	$	3,925,260		$	3,742,241
Notes and accrued interest payable to DDR		105,104			100,470
Other liabilities		229,941			214,370
		4,260,305			4,057,081
Accumulated equity		1,943,882			1,891,406
	$	6,204,187		$	5,948,487
Company’s share of accumulated equity	$	414,738		$	402,242

^(A)  Increase is due to issuance of public debt by Sonae Sierra Brasil. The proceeds will be used to fund development activities.

	Three-Month Periods Ended March 31,
	2012			2011
Condensed Combined Statements of Operations
Revenues from operations	$	169,932		$	168,561
Operating expenses		57,320			58,428
Impairment charges (A)		1,347			—
Depreciation and amortization		42,910			47,323
Interest expense		58,182			57,051
		159,759			162,802
Income before tax expense and discontinued operations		10,173			5,759
Income tax expense (primarily Sonae Sierra Brasil), net		(6,029	)		(6,144	)
Income (loss) from continuing operations		4,144			(385	)
Discontinued operations:
Income (loss) from discontinued operations		126			(306	)
Loss on disposition of real estate, net of tax (B)		(139	)		(863	)
Income (loss) before gain on disposition of real estate, net		4,131			(1,554	)
Gain on disposition of real estate, net (C)		13,852			—
Net income (loss)	$	17,983		$	(1,554	)
Non-controlling interests		(8,934	)		(2,375	)
Net income (loss) attributable to unconsolidated joint ventures	$	9,049		$	(3,929	)
Company’s share of equity in net income of joint ventures (C)	$	10,180		$	3,899

(A) For the three-month period ended March 31, 2012, impairment charges of which the Company’s proportionate share was approximately $0.5 million were recorded primarily on assets being marketed for sale.

(B) For the three-month period ended March 31, 2012, loss on disposition of discontinued operations includes the sale of one property. The Company’s proportionate share of the aggregate loss was not material.

For the three-month period ended March 31, 2011, loss on disposition of discontinued operations includes the sale of two properties by two of the Company’s unconsolidated joint ventures. The Company’s proportionate share of the aggregate loss for the assets sold for the three-month period ended March 31, 2011, was approximately $1.9 million.

(C) The difference between the Company’s share of net income (loss), 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. Adjustments to the Company’s share of joint venture net loss for these items are reflected as follows (in millions):

	Three-Month Periods Ended March 31,
	2012			2011
Net loss	$	(1.9	)	$	(1.9	)

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

	March 31, 2012			December 31, 2011
Company’s share of accumulated equity	$	414.7		$	402.2
Basis differentials (A)		(152.9	)		(145.6	)
Deferred development fees, net of portion relating to the Company’s interest		(3.6	)		(3.6	)
Notes receivable from investments		0.4			0.4
Notes and accrued interest payable to DDR (B)		105.1			100.5
Investments in and Advances to Joint Ventures	$	363.7		$	353.9

(A) This amount represents the aggregate difference between the Company’s historical cost basis and the equity basis reflected at the joint venture level. Basis differentials recorded upon transfer of assets are primarily associated with assets previously owned by the Company that have been transferred into an unconsolidated joint venture at fair value. Other basis differentials occur primarily when the Company has purchased interests in existing unconsolidated joint ventures at fair market values, which differ from its proportionate share of the historical net assets of the unconsolidated joint ventures. In addition, certain transaction and other costs, including capitalized interest, reserves on notes receivable as discussed below and impairments of the Company’s investments that were other than temporary may not be reflected in the net assets at the joint venture level. Certain basis differentials indicated above are amortized over the life of the related assets.

(B) The Company has amounts receivable from several joint ventures aggregating approximately $2.6 million at March 31, 2012. The remaining amounts were fully reserved by the Company at March 31, 2012.

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 March 31,
	2012		2011
Management and other fees	$	6.8	$	7.3
Development fees and leasing commissions		2.0		1.8
Interest income		—		0.1

Sonae Sierra Brasil

During the first quarter, Sonae Sierra Brasil completed a strategic asset swap and partial sale that resulted in Sonae Sierra Brasil owning a majority interest in Shopping Plaza Sul, an enclosed mall located in Sao Paulo. Sonae Sierra Brasil acquired an additional 30% interest in Shopping Plaza Sul in exchange for a 22% stake in Shopping Penha and $29 million in cash. As a result of these transactions, Sonae Sierra Brasil increased its ownership interest in Shopping Plaza Sul to 60% and decreased its interest in Shopping Penha to 51%. The Company’s proportionate share of the net gain on its partial sale of its interest in Shopping Penha was $2.8 million.

Newly Formed Joint Venture

In January 2012, affiliates of the Company and The Blackstone Group L.P. (“Blackstone”) formed a joint venture that is expected to acquire a portfolio of 46 shopping centers owned by EPN Group and managed by the Company. The transaction is valued at approximately $1.4 billion, including assumed debt of $640 million and at least $305 million of anticipated new financings. An affiliate of Blackstone will own 95% of the common equity of the joint venture, and the remaining 5% interest will be owned by an affiliate of the Company. The Company is also expected to invest $150 million in preferred equity in the joint venture with a fixed dividend rate of 10%, and will continue to provide leasing and property management services. In addition, the Company will have the right of first offer to acquire ten of the assets under specified conditions.