SITE Centers Corp. (SITC) Q3 2012 Earnings Report, Transcript and Summary

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 Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division Todd M. Thomas - KeyBanc Capital Markets Inc., Research Division Paul Morgan - Morgan Stanley, Research Division Jeffrey J. Donnelly - Wells Fargo Securities, LLC, Research Division Quentin Velleley - Citigroup Inc, Research Division Cedrik Lachance - Green Street Advisors, Inc., Research Division Thomas C. Truxillo - BofA Merrill Lynch, Research Division Vincent Chao - Deutsche Bank AG, Research Division Samit Parikh - ISI Group Inc., Research Division Michael W. Mueller - JP Morgan Chase & Co, Research Division

Good day, ladies and gentlemen, and welcome to the Q3 2012 DDR Corp.'s Earnings Conference Call. My name is Andrew, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Samir Khanal, Senior Director of Investor Relations. Please proceed, sir.

Good morning, and thank you 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 risks 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, as 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.

Thank you, Samir, and good morning, everyone. Our third quarter results highlight the continuation and execution of our strategic plan and the operational benefits of our investment and portfolio pieces. As you've heard me mention before, the great thing about our business is that we don't have to guess about who's winning or losing the attention of the consumer. As a result, we are not surprised that our retailers continue to gain market share, expand margins and aggressively seek new store opportunities, all of which continue to benefit our portfolio operations. Consistent with the various reports that have recently been published regarding the retail sector in general and power center tenants specifically, the vast majority of our retailers continue to experience market share gains in general merchandise, apparel, domestics and grocery sales. While there are certainly some structural issues that persist for specific retailers, overall, demand for space far outstrips supply, and as a result, we continue to see lease rate gains and strong same-store NOI growth across our portfolio. While we are pleased to benefit from the continued strong performance of our assets, cap rates have yet to reflect the stability and credit quality of cash flows commensurate with prime power centers. Recently, this has created a unique opportunity for us to accelerate our acquisitions activity while sourcing off-market transactions with a variety of our joint venture partners. This effort has allowed us to achieve pricing that is 25 to 50 basis points wide of the already mispriced market cap rates while prudently financing to continue our deleveraging efforts. Not only does this further simplify our story by reducing our number of joint venture partners, it gives us access to a proprietary pipeline of low risk acquisitions that are not broadly marketed. As you read in our third quarter…

Thank you, Dan. I'd like to spend some time today discussing the leasing environment and our expectations for holiday sales. But first, I will briefly address the quarterly results. As evidenced by another quarter of strong leasing volume, we continue to see robust demand and increasing competition for quality space, resulting in positive trends in both occupancy and leasing spreads. In the third quarter, we executed 230 new deals for 1.2 million square feet. This was the second highest level of quarterly leasing volume by square footage in company history and it was achieved with a new deal spread of 9.8%. We also executed 286 renewals for 1.7 million square feet at a spread of 6.5%, our highest renewal spread in 16 quarters. Combined, we leased 2.9 million square feet during the quarter, which brings us to 8.9 million square feet year-to-date and over 42 million square feet leased in the past 15 quarters. Combined spreads for the quarter were positive 7.0% representing the 10th consecutive quarter of positive leasing spreads. As a result of these achievements, our lease rate is now 94.0%, up 30 basis points over the second quarter. These strong results have been supported in large part by the dramatic shift in the supply and demand dynamic, as today's most successful retailers seek new store growth opportunities and favor the high-quality power center format which offers the most sought after co-tenancy, greatest access and visibility and dramatically-lower operating expenses. We are not surprised by this growing trend and we expect this dynamic to continue, supporting consistently strong operating metrics for the foreseeable future. Our top 40 tenants alone are on track to open 77 million square feet of new stores in 2012, and project to open another 82 million square feet per year in 2013 and 2014.…

Thanks, Paul. Operating FFO was $83 million or $0.27 per share for the third quarter, slightly ahead of our projections and 12.5% above last year. Including non-operating items, FFO for the quarter was $30 million higher to $113 million or $0.37 per share. Nonoperating items were primarily gains resulting from the acquisition of our joint venture partners interest, offset partially by a write-off of issuance costs associated with the redemption of our Class I Preferred Shares in August. We are very pleased to report another quarter of significant progress improving the quality of our balance sheet, portfolio and our long-term growth prospects, driven largely by the acquisition of high-quality, attractively priced and financed prime power centers. As we have said throughout the year and Dan just previously mentioned, we've reached the current market for power centers represents a unique acquisition opportunity, and we have and we'll continue to take advantage of that dynamic without compromising our investment discipline. During the quarter, we acquired 3 prime power centers for $250 million, and year-to-date, we have invested more than $600 million in primarily off-market purchases of prime power centers. As the majority of these investments represent recapitalizations of legacy joint ventures and purchases of partners interest in shopping centers that we have leased and managed for many years, we have mitigated risk and are confident in our continued opportunity to leverage our operating platform to improve initial yields, consistent with the case studies cited by Paul. We have continued to fund our growth initiatives in a manner that lowers leverage and risk and improves our long-term cost of capital. Investments during the year were funded with proceeds from asset sales and the issuance of $435 million of new common equity. Financed funding investments with equity, we have grown our portfolio of unencumbered…

[Operator Instructions] Your first question comes from Craig Schmidt, Bank of America.

Your recent acquisitions have included some of the larger power centers in the country. And given that you already own some midsized and very large power centers, I wondered if you could outline the opportunities and challenges of these sort of ubersized power centers relative to sort of more midsized product.

Well, Craig, we're in a position right now where we really do feel that size matters. We like larger centers for a number of reasons. Number one, they offer great co-tenancy variety to whatever retailers may be interested in occupying vacant space, so there's a very diverse merchandise mix that we can offer to the consumer. And probably most importantly, we are definitely in an era of retail fluctuation. And retail is evolving and flexibility is incredibly important. And we like the fact that the large power centers aren't sitting on a 12-acre site -- and I'd much rather have a 60-acre site today, where we have the flexibility to move buildings, add buildings, expand buildings, take buildings down and whatever it may take to accommodate the evolution of the retail environment. So the large power centers are attractive to us. Tenant demand for those centers is extraordinarily high. Co-tenancy is absolutely a high priority for retailers today and they give us maximum flexibility. So as a result, we will continue to pursue those centers. The medium-sized power centers that we have offer a similar opportunity, but just slightly less flexibility. And given the current environment we obviously like having that flexibility in our back pocket.

Craig, I think it's also worth pointing out that as we look at any acquisition, regardless of the size of the power center, we're seeing opportunity. I think the examples I cited in the script were great examples of that where we're confident we are seeing something that maybe others aren't in terms of upside.

And I think it's just a less competitive acquisition environment. While there's tons of capital out there, across-the-board you just look at the transactional activity even just of the public companies let alone digging into the data of all the private companies and the volume of transactions and the competition that I think you're seeing for some of the smaller format centers, in addition to the fundamental opportunity that Dan and Paul outlined, we think this allowed us to achieve better pricing on some of the larger format centers in addition to having better growth profiles over time.

Your next question comes from Alex Goldfarb, Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Just -- you mentioned some outlets or outlet concepts that are opening up, and touring your assets recently, it sounds like there's more demand from some of these outlet concepts to open up at your centers. Do you think that this cannibalizes the overall outlet market, the sales for outlets, or you think this will expand the pie?

I think it expands the pie a little bit, Alex. I'll let Paul comment in a second but I think it expands the pie. I think the outlet business is while it's an important and growing part of the retail environment in our country, it's still relatively small. I think you'll be -- you won't be surprised when a lot of the centers that are currently proposed don't get built. I think they'll be far less built than is currently on the table. And as a result, these tenants, like Gap and Saks Off 5th and Blooming's Outlet and Nordstrom Rack, et cetera, need growth opportunities. And the spend structure of our asset class, and going back to Craig's question about size and opportunity and flexibility, gives them the ability to open new stores and satisfy their open to buys without relying on what could be somewhat questionable development projects that may or may not be delivered at any given time. So I think there's plenty of room for growth. I think that it's not likely that these stores will cannibalize anything else from the outlet business. I think it's just retailers evolving their format and evolving their desires to attract the consumer who are interested in value and convenience, and obviously our centers do that.

Yes, Alex, the 3 we mentioned in the script were the Rack and Blooming's Outlet and Saks Off 5th, these guys have -- are very confident they can perform in the traditional center, and that's what's really driving this. And as Dan mentioned briefly Gap, we're going to see nothing but negative movement with the traditional Gap stores in the mall locations. But Gap outlet is the driver of the growth for that division, and that's exciting. They're quite comfortable in a center with -- discount-oriented center -- with a Ross or a TJ and a Bed Bath, and they know they can achieve the same results or even better than they do in a traditional outlet setting.

And your next question comes from Todd Thomas, KeyBanc Capital Markets.

As you -- the question is, as you think about your rollover next year, what are your expectations for leasing spreads for non-anchor tenants? It looks like the expiring rent is fairly low. It's about 10% below the portfolio average. Are we through all of the pre-recession leases? And I'd imagine that you've been working on some of these deals, how much visibility do you have on that right now?

The visibility we do have, Todd, is that we will continue to increase the spreads on those non-anchor tenants. One thing you have to be aware of when we -- when you grow the spread, it will vary quarter to quarter. You may have a quarter where the smaller space has a more positive spread than the anchor space. The anchor space we're clearly beyond the recession, and we actually have leased up most of that came back to us in '08 and '09, so you're looking at a more consistent growth rate in the spreads. And I would tell you, even in the non-anchors, we hope to see continued improvement in those spreads.

And the next question we have comes from Paul Morgan, Morgan Stanley.

Just looking at your-- a couple of your operating metrics, I mean, you're at 94% occupancy. You were from '05 to '07 kind of regularly in the 96% kind of territory, and your lease spreads were sort of double around where they are now. And you've obviously done a lot of work on improving the portfolio composition over the past 5 years. I mean, how quickly can we get to those levels, and I guess presumably potentially exceed them and kind of over? What are the catalysts that you need to get there in terms of maybe market conditions?

Well, clearly, the catalyst, Paul, is the lack of new supply and the continued demand and it's a great question, as we think about it and we talk about it all the time. I would've told you a few years ago that 95, 95.5 might feel like full occupancy and what could be considered a new normal. I don't feel that way anymore. I can't tell you exactly when we'll get there, but we're quite confident, as we improve the quality of our assets of our portfolio and we continue to see strong demand and as we continue to reduce small shop, the smallest shop space as a percentage of our total GLA, that we're going to see that full occupancy number be a little higher. When we hit that, I don't know at this point, but the momentum is good, the demand is great and I'm confident it will be higher than we would've thought a few years ago.

And I think, Paul's comments hit exactly on a same-store basis, but don't forget that while he's trying to push occupancy as high as possible for the total portfolio, Dan and I are trying to buy vacancy and find opportunities out there in the market and make his job more challenging by giving more inventory of that product. We think that's where some of the most attractive returns are available where we know more about tenant demand than an existing owner and we can buy something very selectively in the high 80s, 90% occupancy range like the example in Chicago that Paul talked about earlier and then challenge the leasing team to lease that up. We've had great success with that so far. But just when you think about those overall portfolio metrics, you might see continued progress on that same-store pool, but we hope we're successful in sourcing some attractively-priced vacancy that can lead to good returns and good NOI growth over the year or so after we initially make that acquisition.

And your next question comes from Jeff Donnelly, Wells Fargo.

Dan, you mentioned in your remarks that prime assets were mispriced or are mispriced. And I think, in last quarter's call, David had touched upon how some of the top coastal markets might in fact be overpriced and that I think that A-quality product was seeing greater improvement in cap rates than other peers. Can you guys give us a little more detail in your thinking about the mispricing, maybe just where do you think it is today on prime, where do you think it could be? Which cities can you think present the best opportunities and does that imply that the B product is also mispriced, too?

In general, there is an extraordinary amount of capital out there chasing most, if not all, income-oriented opportunities, particularly those that are perceived to be lower risk. When you look at real estate in general and shopping centers in general, a disproportionate amount of that capital has been focused exclusively on coastal markets. A disproportionate amount of that capital has been focused largely on grocery-anchored product where, thus far, there hasn't been nearly as much capital focused on major MSAs but not necessarily with immediate ocean access that have larger footprints as Dan talked about earlier that usually do have a grocery component but along with that smaller format, just grocery-anchored neighborhood center. And so we think it's just an environment where there's less capital currently looking at the product we are and that's why you have seen us be a much larger acquirer this year because we do still think there's an opportunity there. I would be cautious going too far to your question down the quality spectrum and saying what that means for B or even C assets because there is certainty a massive retailer demand overall, but it is disproportionately focused on the higher-quality centers in larger MSAs. Whether you can drive to the ocean in a day or not, I think we're seeing good demand consistently for those higher-quality A centers, even A-, B+ centers. When you get lower than that, I think it's a challenge and that's why you haven't seen us active in that market and you probably won't. So I think you've seen pricing there tighten a bit, especially with maturing or improving CMBS market, but that hasn't been where we've been focused and not where we see the most significant opportunity today.

And your next question comes from Quentin Velleley from Citi.

Just following on in terms of acquisitions, I get the sense that you're sort of potentially ready to ramp acquisitions, can you maybe talk a little bit about the size of the current pipeline that you're seeing and also what your preference on funding that pipeline would be? Would you look to do it on a leverage mutual basis or sort of match fund deals with equity?

The pipeline we're looking at continues to be significant as it has been for a while. We continue to close a very small proportion of those deals simply because we are very focused on maintaining our investment discipline. You know this company suffered mightily from losing that at times in the past and that is not at all lost on this management team or board. And so I think it continues to be a very disciplined process where we look at a ton of stuff and end up buying a very small percentage of the overall product we look at. I think we continue to be much more focused on one-off or very small portfolio opportunities. We continue to be very focused on opportunities with assets that we've owned and managed. Oftentimes, a joint venture for many years given the lower risk profile there. And so I think the profile of what we've seen throughout the course of this year is consistent with what we're looking at going forward. We obviously think that we've got an operating platform that provides us information, they've put us in an extremely strong position to underwrite assets. In most cases, that means we know too much to bid as aggressively as others. And in some cases though, it means we know more and can get a greater level of comfort. And so I think you will see us continue to be active in major MSAs and large format prime power centers like we have been year-to-date. From a funding perspective, the natural means of funding that we've used over the past few years has been disposition of non-prime assets. I think acquiring good assets is important for improving portfolio quality, but selling the bad stuff is probably even more important in terms of the…

Just to expand a little bit on what David's saying, Quentin. In our investor presentation, which is obviously online, there's a list of proprietary pipeline joint venture assets that we have some sort of governance rights to. And we have been very pleased with acquiring assets, off-market assets that we already managed, assets where we know where the opportunity is, assets, quite frankly, that may have been capital-starved. For example, IBDT portfolio that we did with Blackstone, where we knew there was a lot of pent-up demand and a lot of deals available, a lot of opportunities to grow, it's just that their venture was not in a position to take advantage of it so -- from a capital perspective. So there's great opportunity. We like to keep certain assets certainly in the family. We're working with our joint venture partners on a regular basis to do that. It's highly unlikely that we'll be involved in a market bid where you have multiple people coming in and bidding for an asset through a process. That's something that often does not lead to the efficiency of pricing that we're looking for.

And your next question comes from the line of Cedrik Lachance, Green Street Advisors.

Dan, I think, a few quarters ago, you talked about looking at a $750 million redevelopment pipeline over the next 5 years. Now that you're increasing your acquisition activity, what do you think it will mean for the redevelopment pipeline over time?

Cedrik, this is Paul. I mean, clearly, the $750 million we initially talked about and are working towards include some future acquisitions. As we continue to go, we've identified quite a bit of that $750 million today, some of that through our existing portfolio, some of it through the recent acquisitions we talked about in the script. So it's certainly something we consider in the $750 million as we plan out our final number going forward. It obviously continues to be a very big part of our big growth initiative for us. The spend continues to ramp up and we remain on track to spend about $120 million this year, which is well in excess of the $30 million we spent last year and we'll see even more of that ramp up in 2013 and beyond. But at this point, we are not going beyond the initial $750 million as we do include future acquisitions as part of that initiative.

And your next question comes from the line of Tom Truxillo, Bank of America Merrill Lynch.

Obviously, you guys have made tremendous strides in terms of your balance sheet and you've gotten recognition from that from the agencies finally. Just looking forward, you don't have a lot of maturities coming due. You already took care of most of the '13s. But your secured debt seems still relatively high for the peer group. Can you provide any comments on continuing to look to use more unsecured debt and to continue to grow that unencumbered asset as secured debt matures in '14 and '15?

Yes, we are absolutely in agreement, I think, with the direction of your question. Over time, secured debt did get to be a higher and higher percentage of the balance sheet, partially because of joint ventures and partially because even for consolidated asset, there was a period of time a few years ago where secured was either the only thing available or a much more efficient means of financing. We recognize that in the stronger environment that exists today, where we do have opportunities for multiple sources of new capital, that our interest in unsecured meaningfully exceeds our interest in secured. And I think you'll continue to see the progress in the proportion of secured debt going down over time. It's obviously a portion of the initiative with the 2013 refinancings where you will see mortgage debt replaced by unsecured debt. I think we have an even more significant opportunity in '14 with an opportunity to further replace secured with unsecured. The biggest individual maturity in '14 is the TALF CMBS deal that we've done a few years ago. If you remember, the challenges of that period of time being the first CMBS market back -- first CMBS field back in the market, as well as the Fed's involvement in that process ended up with just the most stringent underwriting that's ever occurred for securitization. And so, I think, today, that leaves us with an extraordinarily under-levered pool that, at minimum, would allow us to remove a considerable number of assets and grow that unencumbered pool, but could also let us easily replace some or all of that secured debt with unsecured. So I think that's clearly the direction you see us going. We made progress this year. We'll make more progress next year. Also as some of our joint ventures are rationalized, whether it's just selling assets or whether it's us buying those assets, you've seen a considerable number of those assets move from a joint venture structure where they almost have to have secured debt to a wholly-owned structure where we could look at it, putting those in the unencumbered pool and effectively applying unsecured debt to those. And so you've seen us make progress and you will see considerably more in the coming years that we will continue to show you on a regular basis, including the refinancing activity we outlined for the very early 2013 maturity.

And the next question comes from Vincent Chao, Deutsche Bank.

I just wanted to get your thoughts on sort of the initiatives by retailers like Wal-Mart to deliver online orders through their stores. Just wondering if that's something you think -- are you seeing others adopt more and more of and whether or not you think that's really going to make a material difference in sort of the ongoing battle between sort of the online-only retailers versus the bricks and mortars guys.

That's a great question, Vincent. I'll tell you, we are seeing a lot more of it and we're going to see even more of it. It makes a heck of a lot of sense. Buying online and pickup in-store is one way of not eroding margin. One of the things that's happening, as you look across the retail community, is that as Internet sales in the traditional sense grow, operating margin erodes because of the shipping costs in particular, or the inability to charge for shipping, you have to give free shipping. So we think that shopping online, buying in-store, buying online, pickup in-store, buying online and returning in-store, all of which are positive because it's bringing people to the store and to the acknowledgment of the convenience and the dominance of the brick and mortar location has all been very, very positive. So I think we're going to see buying online or -- and picking up in-store or shopping online and buying in-store, all increase as smart retailers continue to evolve in a multichannel environment. So I think -- and I also think it has a significant effect on profitability while it's also taking advantage of the consumers' demand for instant gratification. People like to have what they want when they want it. And if you see something online and you can go down the road and pick it up in the store, that's a very, very attractive way to communicate with the consumer and it's a very attractive and efficient way to distribute goods. So I think we're going to continue to see various aspects of online in-store interaction. But buying online, pick up in-store, shop online, buy in-store, the whole buying online and even return to store or exchange in-store is all going to become ever more active in our business.

Vincent, it's also worth noting, as we go into this holiday season, we've heard many of the larger retailers, the discounters, the electronics guys and others talk about price matching and same-day delivery. These guys are not sitting back. They're obviously going after the business that the pure online plays are doing. I also think it's one of the reasons why we're seeing a little bit less of the downsizing that had been previously reported because if shop online and pickup in-store accelerates, which it is, and then the real size of the store, you may need lesser square footage of actual selling space, but you might need more stockroom space because you have people coming to pick up. The competitive advantage is, of course, that you can get same-day goods, and in order to have same-day goods, you must have a sufficient inventory levels to deliver those same-day goods. So I think that's why you see some hesitation from some of the retailers that have previously talked about downsizing and from actually executing the downsizing strategy because they're not quite sure exactly how the store is going to weigh out and how much stockroom space they need as they continue to push for a store relationship between online and the consumer.

And your next question comes from Alex Goldfarb, Sandler O'Neill. Alexander David Goldfarb - Sandler O'Neill + Partners, L.P., Research Division: Yes, just following up that question, are you guys seeing more retailers trying to reinvigorate the concept of a genuine sales force? I mean, if you look at what happened at Best Buy or Circuit City, they didn't really have salespeople. So you've got customers walking into the store, touching the product, going on their iPhone, ordering it, which seems crazy. Are you seeing more retailers rediscover the importance of having a well-trained commission-based sales force? Or is that not really how they're tackling the Internet?

Alex, they've rediscovered the need for that. That's where we are right now. I mean, I think there's still a lot to be proven. As far as with the electronics guys and in Best Buy specifically, there is no doubt where they are focused and that's almost to the appleseque in terms of their sales staff and how they treat and educate the customer. But right now, I would tell you that it's probably at the stage where they've identified we have to do that and we're seeing some initiatives on the part of retailers and some progress, but they've still got a long way to go. You can see it more and more from the -- especially that category.

And while I think having a professional sales force and a motivated sales force is important, it's not nearly as important as having the right merchandise in the store. And a great sales force trying to sell bad merchandise won't work. So while I think that's important, I don't think anyone should think that, that's going to be the solution for stores that are struggling in gaining consumer acceptance of their merchandise. And it'll take some time, in some cases, for some of the retailers to realize that. But again, no matter how good your sales folks are, if you don't have the right product in the store, and some of the retailers you mentioned, Alex, are exactly what the issue is, they don't have the right merchandise in the store, a good sales force is not going to help. And just like great real estate cannot bail out a bad retailer. Great real estate cannot bail out a bad merchant. The consumer is just simply too smart.

And your next question comes from Cedrik Lachance, Green Street Advisors.

I just wanted to follow up on Brazil actually. Can you comment a little bit on the performance of your portfolio in Brazil currently? And then what was the impact of the Brazilian operations to your reported same-store NOI this quarter?

Conditions in Brazil continue to be relatively strong. We'd characterize it as an absolute deceleration from last year, but I think we tried to be very candid at that time in saying that we thought the results and the growth in 2011 was unsustainable. And so while the full results from the third quarter will come out when Sonae Sierra Brazil reports results early next week, I think we can say that conditions continue to be relatively strong growth in the high single-digits has replaced growth in the high teens from 12 months ago. It's been further impaired by currency, the depreciated 20-ish percent, 15% to 20% depending on what exact period you're looking at. And so it's certainly been a drag on our overall results when you have that currency overlay on the decelerated growth for this year. It's still a market where we see a considerable opportunity for our operating assets and for the remaining condo development. Enthusiasm works, but certainly a slower growth environment, and last year's assets still stronger growth than we see available just about anywhere else from a macro standpoint. It did have a slightly positive benefit to same-store NOI for the quarter. So on a pro-rata basis, the 3.7% same-store NOI growth that we reported was improved by approximately 20 basis points relative to what it would have been on a just-domestic basis. So a slight help, but 3.5% versus 3.7%, and really very strong numbers and much less of a skew relative to last year when Brazil was a meaningful driver of the overall same-store results. So this year, you are seeing the overwhelming majority of that growth come domestically, but Brazil continues to be a bit of a helpful driver and we would expect that to continue.

And your next question comes from Samit Parikh from ISI.

David, earlier this year, you were out repurchasing your 9.625% unsecured. Is DDR still in the market, repurchasing longer-dated unsecured?

Year-to-date, we have repurchased $60 million of our 9 5/8 2016 notes. I think, at the time we were buying those, we made the case that while it's a no-brainer from a current yield perspective, more importantly, from a yield to maturity perspective, were we able to raise longer-term capital at a lower yield to maturity than what the 16s were trading at. So from a true economic standpoint, we were better off by effectively prepaying a portion of that interest and getting to replace it with new cheaper debt had not only the current yield benefit but a true economic benefit. Where we look at pricing today, as well as the relatively low liquidity in those bonds, we haven't seen opportunities recently and so you did not see us back in. In the third quarter, I think we've bought more of our debt back in the open market than any REIT by a pretty significant amount and so we're constantly aware of what's going on in that market, both in terms of our incremental cost of capital to fund that, as well as where our bonds are trading, but we haven't seen opportunities lately the way that we did earlier in the year. So it's something we continue to monitor but haven't been active real recently and also when we think about a tender for those bonds and anything close to make whole sort of pricing, I think that is just a premium and an extremely low yield maturity at which we'd be buying those back where -- while you might have a current yield benefit, we just don't see the economic gain to DDR from prepaying those. We'll continue to be opportunistic, but we didn't see anything happen in the third quarter.

And your next question comes from Michael Mueller, JPMorgan. Michael W. Mueller - JP Morgan Chase & Co, Research Division: In terms of the acquisitions, a lot of what you've done, it looks like it's on balance sheet, you've been buying out partner interest. And I know, Dan, you mentioned there are partnership or JV agreements where you have certain rights. If we look down the road, say, 3 years or 5 years, and look at the JVs that are remaining and outstanding today, because it's -- do we get -- do you have the sense that, that number's going to be very different a few years from now?

Yes, I do think that we expect the number of joint ventures to be different as we look out a few years. It's already changed pretty significantly from a point when we had 15 to almost 20 total joint ventures including a number of one-off joint ventures. And today, we're right around 10. I do think that we make a case that there's a value to that business, there's value to us being able to run out what we think is certainly the highest-quality operating portfolio out there. There's value to having access to private equity which might be priced differently in certain points of the cycle than what public equity is available at. But I think that historic perspective of let's work with as many people as possible, even on very small joint ventures is one that we just don't think makes a lot of sense going forward. So I think you could expect that number to certainly be smaller as we look out a few years, but a smaller number of larger potentially joint ventures than the average size of our venture today and with higher quality, best of breed sort of partners that have a long-term alignment of interest. And so when you've seen us add people like Blackstone to that mix, it doesn't necessarily have a perfect alignment of interest because they do have a little greater interest in debt and a little shorter-term timeline and to recognize their profits versus our longer-term ownership mindset. I do think you've seen us actively work on a larger deal with a group like that rather than some of these one-off transactions you've seen in the past and we've been actively working our way out of some of those smaller ventures and I think you could expect to see that continue and us deal with less people on a joint venture basis going forward.

And I would now like to turn the call over to management for closing remarks.

Thank you, all, for joining us this morning. For those of us who are -- those of our friends on the call who are still having difficulty with power and telephones, et cetera, we appreciate the efforts and we hope that you get a sense of normalcy back as soon as possible. Thank you very much.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.