Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2014 DDR Earnings Conference Call. My name is Ketene and I'll be your coordinator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today’s call Ms. Meghan Finneran, Financial Analyst. Please, proceed.

Thanks. Good morning and thank you for joining us. On today's call, you will hear from President and CEO, David Oakes and Senior Executive Vice President of Leasing and Development, Paul Freddo. 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 these statements are subject to risks and uncertainties and actual results may differ materially from the forward-looking statements. Additional information about such risks and uncertainties that could cause actual results to differ may be found in the press release issued yesterday and the documents that we file with the SEC including our Form 10-K for the year ended December 31, 2013 as amended. In addition, we will be discussing non-GAAP financial measures on today's call, including FFO and operating 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. Lastly, we will be observing a one question limit during the Q&A portion of our call in order to give everyone the opportunity to participate. If you have additional questions, please rejoin the queue. At this time, it is my pleasure to introduce our President and CEO, David Oakes.

Thank you, Meghan. Good morning and thank you for joining us today. I'd like to start off by addressing the announcement released yesterday morning indicating that I will become the next Chief Executive Officer of this firm. There are few constituents that I would like to address prior to discussing the fourth quarter results. First and I am pleased that the Board’s decision and appreciate their confidence in me and this management team and the shareholder value that we can create. I would also like to thank the investors and analysts on this call, who have chosen the team and extraordinary amount of support in the past few months. Next, I would also like to thank our outgoing CEO, Dan Hurwitz for his significant contributions in positioning this company where it is today. Finally, I would like to thank the employees of DDR. While the past months of uncertainty had not always been easy, the people in this organization remain loyal and have continued to perform like the top-notch professionals that they are. I look forward to working with them and taking this company to next level in the coming years. I would now like to address the quarterly and annual results. For the fourth quarter, operating FFO was $112.2 million, or $0.31 per share including non-operating items, FFO for the quarter was $80.9 million or $0.22 per share. Non-operating items primarily consisted of non-cash impairment charges on non-operating assets. For the full year, operating FFO was $420.4 million, or $1.16 per share representing a 5% increase over the prior year. And in the past four years, we have grown FFO per share to compound annual rate of over 6% despite selling over $2 billion of low-quality assets and significantly lowering leverage. In January, we released information on a number…

Thank you, David. Before I begin, I would like to take a moment to congratulate David and to mention the enthusiasm with which this announcement has been made here at DDR. As most of you know, I was personally very supportive of David throughout this process and I know I speak for my team as well as the entire organization saying that we are thrilled with the Board’s decision and anxious to support David as he leads DDR in this next phase. The momentum we experienced during the first three quarters of 2014 continued throughout the fourth quarter and we are extremely proud of our team for the strong results delivered in the quarter and for the full year. In the fourth quarter, we completed 327 new deals and renewals for 1.8 million square feet. Our leased rate improved by 10 basis sequentially and 70 basis points year-over-year to 95.7%. This is our highest leased rate in 27 quarters or since the first quarter of 2008. For the fourth quarter, we achieved a positive pro-rata new deal spread of 25%, a positive pro-rata renewal spread of 7.2% and a combined pro-rata spread of 11.9%. Our new deal spread of 25% represents the highest spread in 10 quarters or since the second quarter of 2012. When combined, new deal and renewal volume for 2014 represents the highest volume in DDR’s history for the US and Puerto Rico showing the continued strength and quality of our portfolio. We are confident that we will build on our recent successes and deliver a leased rate increase of 25 to 50 basis points in 2015 consistent with our guidance. More importantly, we projecting same-store NOI growth of 2.5% to 3% despite the leased rate of nearly 96%. We have consistently reached or exceeded 3% same-store…

Thanks, Paul. I would like to conclude by walking you through our previously announced 2015 operating FFO guidance. The midpoint of the outline range of $1.20 to $1.25 per share represents a growth rate of 6%, above the pure average and inline with our average growth rate over the past four years. The OFFO range in conjunction with the recently announced 11% dividend increase to an annualized $0.69 per share should provide for a total shareholder return profile of between 7% and 11% at the current pricing. On the operational front, we are forecasting same-store NOI growth of 2.5% to 3%, a midpoint below we achieved in 2014 but reflective of the high quality portfolio of power centers that is approaching full occupancy of approximately 97% in the next 18 to 24 months. Growth components include approximately 125 basis points from rent bumps, 75 basis points from renewal spreads and 50 to 100 basis points positive net absorption from new leasing. Given the extremely favorable supply and demand dynamic in our sector and our dramatically improved portfolio quality, leasing spreads should continue in line or slightly above what DDR achieved in 2014. We also expect to bring online approximately $200 million of ground up development and redevelopment including approximately $100 million from legacy developments, notably in Gilford Connecticut, Orlando Florida and Seabrook New Hampshire just north of Boston. The vast majority of what would be placed in service will be in the fourth quarter at incremental yields in the mid to high single-digits. We also intend to bring online over 30 redevelopment projects totaling over $100 million with the majority coming from our full-scale redevelopment projects in Long Beach California and in the eastern sub-market of Columbus, Ohio. Redevelopment LOI will also be back half weighted with yields of approximately 10% on a stabilized basis. Finally, on the transaction front, we are coming off a very robust 2014 and intend to continue the dramatic portfolio optimization as we reach the final steps of eliminating non-prime assets. We are budgeting for a net neutral transaction activity to include the continued sale of non-prime line of assets at the mid 7% cap rate and a comparable amount of acquisitions at a total spread of approximately 100 basis points. While we currently have $159 million of dispositions closed or under contract, thus far in the first quarter, the acquisitions environment remains incredibly competitive and we will not compromise on our return or asset quality’s thresholds for purposes of FFO and to that end forecasted bulk of the acquisition activity will be back-end weighted. At this point, I will turn the call over to the operator and we will begin to take your questions.

Thank you. [Operator Instructions] Your first question comes from the line of Christy McElroy representing Citi. Please proceed.

Thank you. David, can you comment on what if any changes you plan to make internally a CEO whether relating to strategy, operations, G&A, et cetera, and I am wondering if you’ve already begun the process of backfilling the CFO role and whether you are looking internally, externally or both?

Sure, the mandate is CFO is - or a CEO is a very recent one. So I think, I can say a few things, but not overly inclined to go into too greater detail at this very early point. One, I think what we’ve accomplished at DDR over the past several years has been very significant and has worked very well. I think the portfolio upgrade, the balance sheet upgrade, the management team changes and upgrades, have all been very significant and I think that that has positioned us well for everything that we can accomplish going forward. I’d obviously work closely with Dan on strategic matters for a number of years and certainly support very significantly the direction we’ve gone. So I think, for us, it’s how do we take the next several steps in that direction to get to blue chip status and I think there are steps on the portfolio side that continue to be out there, dramatically less dilutive than what we’ve done in the past. But I do think there is continued progress to be made both on the portfolio and the balance sheet. I do think we have the opportunity to execute an even higher level than what we’ve executed at to-date and so excited as the new team gets together with the formal mandates to best position this company as we look out over the next several quarters and much more importantly over the next several years. I also think we are much more focused on showing you what we can do than telling you what we can do. I am so excited to put that on display is, again, as we look out over the next few quarters, to years, as for the CFO we have been incredibly strong finance and accounting team here and no concerns about the depth of that bench somewhat it was timing-related issues with the Board’s formal decision on the CEO and trying to make sure we can get that out. But for earnings and somewhat just the importance of that mandate wanting to make sure that it got its own attention and so, we do expect to fill that role internally in the very near term and we will be in touch in the next several weeks regarding that.

Your next question comes from the line of Ross Nussbaum representing UBS. Please proceed.

Hey David. Good morning and congratulations.

Thank you, Ross.

Let me see if I can tackle Christy’s question slightly differently. I think, during the CEO search process, it kind of felt like there were a lot of whispers coming either true or false from around the DDR circle that perhaps the Board was looking for someone who would consider a change in strategic direction and that your predecessor was unwilling to be open to such a significant potential strategic change. So, I guess the question is, just that, which is, in you are being named the CEO of the company, is this the Board saying that they want you to take the company into a more diverse place, like grocery anchored shopping centers, urban retail, or stick with what the game plan has been in the past few years?

I will say a couple things, obviously cannot completely speak on behalf of the Board, but have had a great opportunity to spend considerable time with them through this process discussing aspects of that question. And I don’t think, at least that I experience there was any formal push that there needed to be a strategic change. I think the Board’s focus was on finding the right person to lead this organization and trusting that that person in that team would execute well on the right strategies in a formal push for change. But I think, very prudently during the time of transition of Board that took the time to go through comprehensive searching and think about all of the options to best position shareholders for the near-term but even more so the long-term. So, I am really was in a party to the overwhelming majority of those discussions. I think I heard the same rumors that you did, but I think we are past that at this point. The current team has the mandate more excited about what we can execute on with the great base of assets we have today, but also with some continued improvement in that asset base as we look forward over the next few years.

Your next question comes from the line of George Auerbach representing Credit Suisse. Please proceed.

Thanks, good morning. David, last year you sold the $1 billion of assets and probably 700 million plus if we exclude Brazil. I know, lot of the heavy lifting is done in that portfolio refocus but, just given compressing cap rates for shopping centers across the country, how likely do you think it is that we’ll see a sale much, much more than $250 million included in the guidance?

Yes, I think it’s probably the greatest risk in - within that range, not outside of that range, but within that range and our guidance is that the transaction market does continue to be quite strong making dispositions easier and acquisitions more challenging. The good news is that when you are getting better pricing on those dispositions, the good news is that with the worst part of the portfolio gone, it often times means we are selling better assets, institutional quality assets that are still at the lowest tier than our portfolio, but also generally larger assets. And so, instead of selling a lot of $5 million assets to get up to $250 million, you do have some larger ones in there. So, with a $160 million roughly under contract or closed six weeks into the year, I think it feels likely if today’s pricing environment continues that we would probably exceed that $250 million level knock at the expense of our FFO guidance range. But I think as one mid again to getting to the high-end or above that just when we think about the opportunity to accelerate this portfolio optimization in an environment that is strong. On the other side of that, last year, we had a few unique opportunities particularly the ARCP portfolio where we could redeploy capital in an off-market transaction where we thought pricing was attractive and so even though we dramatically accelerated the disposition volume in 2014, we also found a few unique opportunities on the acquisition side. I don’t know that we can find those again, but at this point last year, I had no clue that we could find them last year. So you should be sure that there is a team here working very aggressively on finding ways to redeploy that capital but obviously keeping our discipline very high in terms of return thresholds and our discipline very high in terms of asset quality.

Your next question comes from the line of Samir Khanal representing Evercore ISI. Please proceed.

David, good morning and congratulations for your promotion as well.

Thanks, Samir.

I look at your lease spreads in the quarter and it looks like they are approaching 12% and as we think about kind of the next 12 months, are these double-digit spread sustainable or do you think at some point that you have to moderate the kind of the high-digit - single-digits? I guess, a lot of it will probably depend on kind of the new leases, but as renewals cap out at some point, just trying to get a sense of what the blend of spread would be on a run rate basis here?

Hi, Samir, this is Paul. I think those spreads are sustainable certainly for the 12 months period you are talking about and probably beyond that, they want to go too far out, but changes that can happen in the macro obviously. But, you hit it on the head, the renewal rates are strong, are going to stay in that, I think, 7 to 9 range and then we should be able to sustain that on at the run rate going forward. You are going to see more balance if you will in the new deal rate, we had a very, very strong quarter obviously with the 25% pro rata spread on the new deals. But, there is still going to be - they are going to be out there, I would expect they are going to be in the mid-teens to the mid-20s. We are going to have some outlier deals that are very strong, that they are help prompt that and so that blended spread of low double-digits is achievable for the foreseeable future.

Your next question comes from the line of Craig Schmidt representing Bank of America. Please proceed.

Thanks. First, David, congratulations.

Thank you, Craig.

My question is, how should we think about DDR’s relationship with Blackstone given the Radar Hill partnership?

I think you should think of DDR’s relationship with Blackstone is a very close one, Dan, was absolutely an important part of that as evidenced by his new firm’s partnership with Blackstone. But there is an extraordinarily deep relationship with Blackstone particularly through Luke Partridge, our Head of Capital Markets, he is also been leading the efforts with our recent transactional activity with Blackstone. So, we’ve obviously worked very, very closely with Dan over the years, we’ve obviously worked very, very closely with Blackstone over the years and so we wouldn’t expect any change to the very close nature of our relationship with them. Even forgetting personalities for a second, both sides of this partnership have made a considerable amount of money in the two transactions that we’ve entered into - that have been monetized at least from a Blackstone perspective and we are very encouraged by the early returns from our third venture together. And so, I think more important than anything financially, this has worked extremely well, but beyond that, the organizations have worked well together and I would expect that that would continue.

Your next question comes from the line Steve Sakwa representing Evercore ISI. Please proceed.

Thanks good morning.

Hi, Steve.

Hi, I guess, to go back to the disposition acquisition and kind of where to put the money and given the comment that you are going to be approaching 97% occupancy, I’m just wondering where development plays a role here and I know that many of the larger boxes that historically drove the development are not as active today, but I am just wondering as you look at the landscape, can development play a more meaningful role over the next two to four years?

Steve, I’ll start with the overall - my overall view and talking for the entire sector. I don’t think it’s going to play a very meaningful role over the next several years and you hit the key point, to call, the Khol’s, the Target, the Lowe’s, these are the guys driving new power centers, strip center developments and they are not making deals right now. And in terms of our portfolio, that’s pretty exciting, we’ve got several underway. We are finishing up Seabrook as you know, and really just getting going on a project in Orlando and it Gilford Connecticut, land we’ve held for sometime, we’ll be starting a second phase down in Belgate, which was one of our new acquisitions done in Charlotte a year-and-a half, two years ago. So we are going to continue to be opportunistic. We look most of our development has been focused on the legacy land, best way to monetize the land as we look at it and - but we will keep our eyes and ears open as we were presented with of lot of opportunities all the time, obviously, they are very difficult to make work meaning new ground-up developments and we are not going to go out and find a land which is going to have a long entitlement process or a long lead time in terms of soliciting retailer interest. So, we’ll continue to do it on a limited scale, best way to monetize the land and in terms of this entire sector, I will see it being a significant factor for at least three to four years.

Your next question comes from the line Todd Thomas representing Keybanc Capital Markets. Please proceed.

Yes, hi, good morning. David, you talked about the balance sheet a bit. Leverage has ticked up over the last couple of quarters as you’ve continued to recycle capital and assets. I was just curious what the current thinking here in terms of lowering leverages from here. Do you feel that this is sort of a comfortable level for the company to operate at longer-term?

Yes. I’ll address it in a couple ways. To the last point, I absolutely believe that it is a comfortable level in terms of a very acceptable risk profile and appropriate place to be even if the world got dramatically worst. That said, our leverage will go down as we look out over the next several quarters, the next several years. I think we had outlined targets in the past, I am in complete agreements that the delveraging was slower, even took a pause in 2014 and you will not see that happen again this year. So, while I have no discomforts where we sit today you will see additional progress on that front. I can’t talk about this without broadening the topic to what we really focus on internally which is risk, leverage is one component of risk and there are many others. And so, when I think of 2014, if you ask me the question, did we significantly lower the risk of this company, I would say, absolutely, even though we did not significantly lowered the leverage of this company. And so, I think that the exit of Brazil, particularly as we look at an exchange rate that is 20%, 25% wide of where we sold that, even for a very good company down there, but one that did contain other risks for DDR as a US dollar-denominated owner of that as we have eliminated a number of joint ventures as we’ve significantly extended debt duration with our recent bond issuance. As we’ve eliminated a number of joint ventures as we have eliminated over 80 non-prime or prime minus assets last year. I have a long list of reasons I feel good that we significantly lowered risk last year, even if we didn’t lower leverage on a go forward basis, you will see us lower risk and lower leverage.

Your next question comes from the line of Paul Morgan representing MLV. Please proceed.

Hi. It’s been a while since you came out with your prime asset definition and, David, you alluded the prime minus in terms of sales from there. I mean, as you look at 2014, the experience in terms of the performance of the assets within the buckets that you created, how - are you seeing any shifts? Are there more centers that are becoming prime minus or non-prime that would kind of be better viewed as sale candidates now or maybe there are centers going the other way because of improvements in market conditions? But is the centers with demarcation that you came up with a couple of years ago, few years ago now, I mean, is it the way you see it today or would you raise or lower the bars if you think about 2015?

Yes. It’s a good question and it is something we focus on a lot because, honestly, I think the mindset has worked well, the performance of the assets has validated our ranking and what’s been the toughest part is the nomenclature. So we originally created prime and non-prime, we’ve then expanded prime to prime plus prime and prime minus in addition to non-prime. And so, we’ve created more grades as we refined our portfolio management process effectively, the re-underwriting in great detail and long-term budgeting of every asset we owned through a department we created about two years ago. And so I think while the nomenclature has gotten tougher, our focus on it has gotten even more significant our ability to quantify in terms of a zero to 100 score for every asset has gotten dramatically more detailed and more significant and more important in driving our transaction activity, both on a buy side seen how new assets fit in and on the sell-side identifying exactly what the sale candidates are for this year and next year. In the past, it might have been as simple as just same, here is the pool of clearly non-prime, non-institutional assets that we have no business owning. I think today it’s a much more quantifiable exercise and thoughtful exercise as we’d have to more clearly define what makes sense either because the higher risk profile or lower growth profile to not own them going forward. And so, we haven’t rolled out the complete details with the exception of this new property to us we’ll show off the complete details of that analysis every once in a while. But obviously, a proprietary analysis that we do internally that continues to raise the bar for average DDR quality, raise the bar also then for - from what we are selling. And so, that’s why we struggle at times the question about the portfolio transformation done, yes. As we define the portfolio transformation four to five years ago, when we first outlined some of these turns that is absolutely done, in fact, we’ve meaningfully exceeded what we’ve planned. Are we done optimizing and improving this portfolio? Absolutely not and so I think you’ll continue to see activity there driven by this quantifiable portfolio management exercise that continues to identify the lowest tier assets in terms of our ranking system for disposition over the coming year and so that process will continue and intensify.

Your next question comes from the line of Alexander David Goldfarb representing Sandler O'Neill. Please proceed.

Good morning and congratulations David.

Thank you, Alex.

Just, a question on FFO, it’s come up on a few of the different conference calls this quarter. If you look at what the company has achieved in the past, since the downturn, huge strides that continue to sort of operating FFO sort of harkens back to the dark days when there was a lot of stuff going on the numbers. For the most part, you guys have cleaned up, the FFO has very little. These days, I mean, obviously, this quarter had one major item, but for the most part, the numbers have gotten substantially cleaner. So, do you think that DDR will start to just use the NAREIT definition and lead with that, guide with that and obviously point out the one-timers. But get back towards the NAREIT definition as a way of demonstrating the transition that the company has completed?

Yes, I think, number one, we have made massive strides in transparency over the past five years or so, and you’ll only see that continues as we go forward. The way we look at it is the small number of adjustments we make to get from NAREIT to defined FFO to operating FFO are justified by the fact that we truly believe that is the better way to understand the company, its earnings power and its growth over time. That said, we disclose NAREIT defined FFO, we talk about it, we think about it. There is clear reconciliation from EPS to NAREIT defined FFO and then from that FFO to operating FFO per share. And so, we leave to the analyst community and the investor community to pick what’s most useful for them. Definitely understand your points about not wanting companies manipulating numbers, wanting things apples-to-apples as often as possible. And so, I think we want the disclosure out there for that. But we do end up with one-off situation, whether it’s Dan separation payment that was expensed or whether it’s the write-down on a piece of Toronto lands because Target pulled their multi-billion dollar Canada program off the table. I do think those are unique one-time items that at minimum we will highlight and people can use NAREIT defined FFO or operating FFO and we are going to try to make it as clear as possible, how to get between the two and basically the way that we think is most useful to look at the company in terms of an appropriate number to ascribe a multiple to or associated growth rate with.

Your next question comes from the line of Ki Bin Kim representing SunTrust. Please proceed.

Thanks. Congrats David.

Thanks Ki Bin,

You are welcome. And so, I think you bring out little bit of a unique perspective, you’ve been in the buy-side, you’ve been in the CFO role, now in the CEO role. How do you internally think about balancing - I know, someone - and Steve touched on it, but balancing financial leverage versus NAV per share or FFO per share and I know you alluded to lowering leverage over time, but, should we expect that to come from asset repositioning, recycling, or is equity more in the table now than it has been in the past?

We think about all those concepts a lot, probably FFO per share, least of those I said, we absolutely understand the importance of growing that metric. Over time, probably not on a quarterly basis, but on a much longer term basis, the question is constantly asked how do we best position this company to grow FFO per share over a very long period of time and certainly how do we grow NAV per share on a regular basis. You mentioned aspects of my background, I think the most interesting part of it, that, me and a lot of other people here live through one of the most significant blow-ups in this industry in terms of what we live through in the late 2008 and early 2009. And that’s I think is what has impacted us the most, those scars are deep, those are not forgotten. And so, we will never lose sight of the risk profile of this company even if another financial crisis of that magnitude is extraordinarily unlikely, we will never lose sight of that. And so, I think that’s what continues to drive the significant focus on risk management here. I went through a lot of the ways that we significantly lowered risk last year. The one that’s obviously somewhat missing is leverage reduction and defining and debt-to-EBITDA standpoint. I still think you are more likely to see leverage reduction through EBITDA increases and simple debt reduction. I don’t think there is a massively different view towards capital raising, equity is a portion of that. We’ve used it over the past several years, many times. But we’ve obviously been sensitive to the price that hasn’t been equity issuance - any price by any means and so I think it’s constantly something that we’ll be evaluated as part of that plan. I’d also remind you, we have - because of our relatively low dividend payout ratio, more free cash flow per share than any of our competitors which we certainly think of is equity that is created every year. We obviously address the issue earlier of having more concern about dispositions being higher than acquisitions. And so I think we’ll not equity that is additional capital that comes in available for leverage reduction or any other purposes. And so, we continue to believe that there are considerable ways that we can lower leverage either by debt reduction or by EBITDA increase and equity issuance is one of those levers.

Your next question comes from the line of James Sullivan representing Cowen Group. Please proceed.

Good morning. Thank you. Maybe, just to take another stab at the issue of external growth outside of acquisitions, I mean, Steve asked a question about this earlier and Ross implied a question I guess about grocery anchored centers. But, given that, power center ground-up power center development is not going to - you don’t expect it to be likely for another couple of years and I am assuming it’s not likely because potential anchor tenants are not willing the pay the rents that are required to generate an acceptable return. When you think about the external growth alternatives other than acquisitions, that leaves you with redevelopments, and you have some of those and potentially you are going to expand that menu. But, one of the possibilities of course is doing smaller infill centers or grocery anchored centers, some of your peers are ramping up that development pipeline. So, I am just curious what your appetite is to increase the redevelopment pipeline as a percentage of the total external spend as well as possibly doing some grocery anchored products?

Yes, lot of questions in it, Jim. First, on the development side, I don’t know that it’s so much - when I talk about some of the larger anchors, the discounters department stores, it’s not a function of not willing to pay the rents to make ground-up development, they are not doing deals. I mean, Target is going to fix their business domestically. That’s very clear. They are going to do a handful of deals, majority of those been express or urban and not going to be - not some fields we are going to play in and what they fit into one of our centers. I’ll touch on the grocery anchored concept and then David could follow-up. It’s just not something. We worked our way out of a lot of the grocery anchored centers heavily reliant on small shops base. We’ve talked about the shops base in the power center sector of our portfolio. It’s a much higher quality shop space. We still have some clean up to do through lease up and through dispositions. But it’s not an area right now, but we are thinking - but not that we’d rule anything up, but not thinking about jumping into that business as we are seeing vacancy doing a pretty big way. Redevelopment is clearly a focus that continues to be a robust program. We spent over $125 million last year and brought about the same number of different projects obviously, because they are not just calendar year projects, but brought about the same amount into service throughout the year. In 2015, we are going to spend somewhere $100 million and $115 million, hopefully bring in between that in developments about $200 million as David mentioned in his script. That is a program we are continuing to rollout. We view every asset within the portfolio regularly in terms of what opportunities are out there that we haven’t identified yet. And there is still a big pipeline in that redevelopment. You have to see that going on for the next several years where we can spend and bring in somewhere between $100 million and $115 million a year at those much more risk adverse returns north of 10. It’s definitely a different type of project than development comes with a lot of that risk. The only asset you know what’s going on, easier to entitle et cetera. So, that will be the focus as far as going forward.

Yes, Jim, the exact question you ask is one that we ask internally and Paul and I discuss quite a bit of where should we be allocating capital within these projects and I think exactly as Paul outlined clearly today, redevelopment is the focus and we are not seeing many opportunities elsewhere. Lines are blurring and so, you are seeing many, many more of our projects including our new development in Gilford Connecticut that is grocery anchored, but still much more of a power center sort of focus in terms of when you look at whom we are going to place the side the fresh market that’s going there.

Your next question comes from the line of Vincent Chao representing Deutsche Bank. Please proceed.

Hi good morning everyone. David, just want to go back to your comments about the share gains vision and generally being agreement in line obviously that’s been very successful for you guys over the years. Just curious if you could comment on some areas or that maybe you didn’t agree with Dan as closely?

I mean, look, Dan and I work very closely, especially for the last five years, but really for the entire eight years that I’ve been here and so I think aspects of this strategy are both his and mine and Paul’s and a broader group of the industry, the experts that we solicited to make sure that we were on the right page. And so, I don’t think there are any massive differences in opinion that in terms of strategic direction that we disagreed on in terms of anything major and so. I am excited to have the formal mandate to run the organization and excited to show you exactly how well we think we can execute on most of the strategy you’ve seen and some additional items over the next, hopefully many years.

Your next question comes from the line of Carol Campbell representing Hilliard Lyons. Please proceed.

Congratulations David.

Thank you very much.

Can you go over the details of the convertible notes that you talked about earlier. Just exactly what’s included in guidance?

Yes, absolutely. This is for - originally issuance what we thought on, that is obviously a convertible security more complicated than straight equity or straight debt. I do think we’ve realized from a final conversion process and from an accounting process is actually more complicated than even we had bargained for particularly when the security is in the money. So, at this point, it’s a $350 million principal security with a conversion feature. The cash interest rate that we pay is 1.75%, the GAAP interest rate at which we expense the interest is closer to 5.25%. So we have considerable, effectively phantom interest that is currently being expensed and will be expensed until we call this note for redemption in the fourth quarter of this year. The other thing - and so the good news about that refinance is $350 million of principal is that right now - and I certainly think likely by the end of the year, we should be able to refinance that $350 million of principal at a rate comfortably inside that 5.25% rate that is expensed in our earnings. The aspect of the security that has not historically shown up in results has been the dilutive nature of the conversion feature. At this point, the notes are in the money to the tune of about 6 million shares that would be issued as part of our calling of these notes in the fourth quarter and so, we will start to reflect the dilutive nature of those securities for the second - excuse me - for the third - for the final three quarters of this year, those will be reflected in our diluted share count. So we’ll still be expensing the higher interest expense as well as the additional shares, even though they are not yet outstanding. And so, there is a negative impact to our 2015 results due to this security even if it doesn’t in fact convert and get refinanced until the fourth quarter.

Your next question comes from the line of Tayo Okusanya representing Jefferies. Please proceed.

Yes, good morning. David, let me also add my congratulations as well, very well deserved.

Thank you.

In regards to the asset sales this quarter, I mean, could you just give us a sense again, the cap rates on those transactions and a general sense of the quality of those assets? Just as we kind of try to understand what’s left in regards to lower quality assets that would still be on the block for sale?

Yes, we went through a little bit of the detail in the call getting down to only 32 wholly-owned non-prime assets remaining. So, I think you can see how much that pie is shrinking relative to 300 plus of those 400 plus of those only a few years ago when we think about the transaction activity in the fourth quarter, it was on a wholly-owned basis spread across the country. Generally, small to mid-sized assets looking at a range of probably $5 million up to as high as $40 million to build up to that $600 million gross amount which is $258 million at DDR’s share. We also had two portfolio sales that went to liquidation of two of our joint ventures for $150 million and $170 million and so all of that aggregated up into that $600 million of total sales volume at a mid to high 7% cap rate range. I think the sort of product that we are looking to sell in 2015 is not higher than that and you are looking at a pricing environment that seems to only be getting stronger and so we would expect that cap rate range for 2015 sales to be somewhat lower and so we are encouraged by the activity that we continue to have on the deposition front. You are absolutely right to know there is less and less non-prime product out there. But then, the definition just becomes what’s still the lowest 5% to 10% on the quality perspective - on the quality spectrum in this portfolio and that’s what the focus is for 2015 sales. And so you’ll continue to see us active probably in the mid 7 cap rate range for the year and selling assets in - again probably hand $30 million range with a few of them might be a little larger than that.

Your next question comes from the line of Haendel St. Juste representing Morgan Stanley. Please proceed.

Hey there. Congratulations from me as well.

Thank you.

So one quick clarification before I ask my question. Just wanted to go back to an earlier question. It sounded - I just wanted to make sure that the current guidance does not contemplate incremental CFO or CIO costs?

The current guidance includes the company that we were sort of mandated to have looking back a couple months ago when we first came out of that, where there with the expectation that we would have me and we would have a CEO, some notionally, Dan’s run rate sort of compensation. Today, we are not adding that additional CEO and so, I think that does create some G&A benefits for us even with some compensation changes for internal people moving into the CEO and CFO roles.

Okay, got that. And my question is on your overall small-shop occupancy, in aggregate you guys are at 92.5% now up from 91.3% last quarter. Have you maxed out the opportunity there? And then, if you could also comment on demand for the space that is sub 5,000 square feet where the occupancy is 86.5%, how would you assess the demand for that kind of - for that size space? Where do you think you could take that segment of your portfolio occupancy up to and then any incremental capital that might be required to do so?

Yes, Haendel, the 92.5% you quoted is really on that 5000 to 10,000 feet and as you mentioned the less than 5,000 is 86.5%, opportunities in both. So, the combined for everything under 10 which is - I know it’s a - the way a lot of our peers quoted is that 88.7% and then we’ve talked in the past and since believe we can get that combined everything under 10. So the 0% to 5 and the 5 to 10 to 92%. So we’ve got a better bit of 300 plus basis points. Demand is good, right and we are doing it in a lot of ways. And so we are consolidating shops base, we’ve seen several deals where we have combined two or three or four of these units for an Ulta or a Five Below or a PetSmart. And that's something we’ll continue to do as we get away from the smallest of shop space. The biggest percentage of - the zero to 5000 is going to be in some of the grocery anchored stuff - some of the stuff that you are going to see on disposition less. But again, the demand is good. We are seeing - we are not as mom and pop-centric. I think that some of our peers, again based on the character of our centers and we are going to see more franchisees, more of the service providers have seen a lot of food demand, but we still got room to run. Again, as we try to get that zero to 10,000 up to a combined 92% which is at 88.7%. If you are looking at comparative supplements too, you got to remember that in, at year 2013, we’ve had some - we had Brazil in that number. So, I feel pretty good about what we did over the course of the year. We were up 80 basis points jut on the quarter. The stuff doesn’t show - it’s shows at 10 basis points down year-over-year but that included Brazil in the year end 2013 number. So the progress is good. The demand is good. You’ll see us reduce the overall percentage of our GLA devoted to that smaller size, but you’ll see us get down leased rate up over 90% over the next couple of years.

Your next question comes from the line of Jason White representing Green Street Advisors. Please proceed.

Just wondering as you look back over the last two, three, four years of acquisitions and how they performed relative to your underwriting. Is there anything that you plan on tweaking in your underwriting process to, maybe target assets that you might feel are going to perform better than perhaps your underwriting would have suggested?

Yes, I mean, it’s been a major focus for us, especially after through the crisis completely taken a few years off and barely even reviewing acquisition opportunities because the capital wasn’t there for us and so as we get back into that business, probably four years ago as we started to outline the power center pieces, it’s probably three years ago as a mis-priced asset we have been very active on that front. We’ve done the few large portfolio deals, mostly from joint ventures. So assets we knew well, so I’d sort of exclude that from this analysis and outside of that it’s on the ARCP deal and a lot of one-off transactions. I would say, in general, the assets have performed better than our underwriting. There is going to be two reasons behind that, one, plugging them into our platform, we always find a few additional opportunities, two, the overall macro environment has continued to get better, which I think is important and three, maybe most important and most controllably, I do think we’ve taken cautious view to underwriting is why we lose the overwhelming majority of assets that we bid on because we are cautious in our underwriting. And you know often and you know the way that we think about retailers that doesn’t mean that we think every - supply stores going away and you underwrite that space as zero, but it does mean that we take a cautious view on underwriting and we are not filling everything up completely in the next few months and I think we got reasonable lead time capital cost everything else that go into that. And so, I think for those various reasons, we’ve generally seen acquisitions outperform our expectations, given the volume that have been joint venture acquisitions, I think…

Your next question comes from the line of Chris Lucas representing Capital One Securities. Please proceed.

Good morning. Just a quick question on the - David, you had mentioned before a little bit about the blurring of concepts as grocery starts to get into the larger format centers. I guess, I was curious as to what your thoughts are as to any cap rate differential for large format centers that have or - and then those that don't have a grocery component, and if you could quantify that cap rate differential?

Yes, I think it’s a good question. It’s certainly case-by-case basis, but I think overall, we’d say there is at least 25 basis point benefit to adding a grocer to a power center whether that’s a traditional grocer, whether that’s the addition of considerable food, that’s driving traffic to a Walmart or Target or Costco or whether it’s the actual addition of a box like a Sprouts or Fresh Market into an existing power center. I think you are seeing an immediate sort of 25 basis point, maybe even a little larger than that, maybe 50 basis points benefit to the cap rate. And so I think an important focus for us is making sure we do have that grocery component as part of the merchandize mix, but also very important as we think of terminal value of a center.

Your next question comes from the line of Jeff Donnelly representing Wells Fargo. Please proceed.

Good morning guys and thanks for taking my question. David, you had a few questions on external growth, I actually have a question on internal growth. At DDR's Investor Day back in 2013, I think you guys had given a five year same-store NOI outlook of like 2.5% to 3.5% growth rate. Since that time I think you’ve paced around 3%, looking forward, I think you guys are guiding that 2.5% to 3% towards the lower end of that outlook and I would have thought that growth would have been more front-end loaded. Is that a function of industry conditions or timing or just knowing what you know now would you maybe have guided to a slightly lower range than you guys did back then?

I certainly don’t think anything has gotten worse in the environment. I absolutely don’t think anything has gotten worse within the portfolio. And so, honestly, I would continue to be very supportive of thinking about that 2.5% to 3.5% range that we articulated a few years ago and so we executed on some of that, probably a little better than the midpoint of that range and think that we should be able to be around the midpoint as we look out over the next few years. Obviously, we’ll try to push hard to exceed that, but obviously we’d rather show you that over the coming quarters and years and tell you about it.

Your final question comes from the line of Christy McElroy representing Citi. Please proceed.

Hey, David, it's Michael Bilerman. I personally think it was your time on the sell-side that was the most important and defining of your career, so.

Absolutely.

I did have a question on G&A and I know you talked a little bit about sort of backfilling the CEO and CFO roles internally and maybe there is a slight positive there relative to existing comp ranges that are in G&A. But, maybe, just more broadly, I think there has been some discussion or scuttle around the marketplace that at north of $80 million, that DDR's G&A levels were too high or have been too high. And I guess, as both in the prior CFO role and then the CEO role, do you agree with that or not and is there a material level that you could see in terms of savings if you are going to manage the company either the same or differently than it was being run before?

Yes, I think, if you look at it from pure ratio standpoint for the handful of folks that either run the whole universe or some subset as G&A as a percentage of revenue, as a percentage of market cap, I think, we generally screen very well in terms of a reasonable compensation structure, especially for a company that’s performed relatively well. And so, I don’t think there is a problem where anyone is banging on the door saying you have to run this more efficiently, but I do think with any transition and this has obviously been a significant one. There is an opportunity to evaluate the organization structure, the G&A load and so we are absolutely embarking on that and hope that we will be able to find some opportunities to run more efficiently. I think there are two aspects to that, I mean, there is the one side of that, that’s the simple G&A savings that we can hopefully generate, I mean, some of it very obvious by not replacing Dan. So, I think that’s clear and hopefully, we can locate some other savings. And I think overall, the greater focus is just how can we run the company as efficiently as possible, constant recognition that we work for shareholders, their capital that we are spending on anything and it’s their returns that that were tasked to generate. So, again, very early to answer this question. I mean, we’ve lived inside of here and we got some views on it. But - and I think we see some opportunity, but it will take us sometime to figure out exactly what that opportunity is. And again, it’s not the penny-wise pound-foolish thoughts, it’s how do we most efficiently operate this company for shareholders and so, your question is a good one and then it is a very reasonable to assume that that is a considerable focus now that this team has demanded.

With no further questions at this time, I would now like to turn the call back to President and CEO, David Oakes. Please proceed.

Thank you all very much for your time and for your support of this team through this process and we look forward to many, many more of these. Thank you. Have a nice day.

Thank you. Ladies and gentlemen, thank you for your participation in today’s conference. This concludes the presentation. You may now disconnect. Good day.