Good day, and welcome to the DDR Corp. Second Quarter 2016 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Meghan Finneran, Senior Financial Analyst. Please go ahead.

Thank you. Good afternoon and thank you for joining us. Today’s call will be led by President and CEO, Thomas August. 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 that 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, 2015. In addition, we will be discussing non-GAAP financial measures on today’s call, including FFO, operating FFO and same store NOI. 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. Last, 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 Chief Executive Officer, Tom August.

Great. Thank you. First of all, let me apologize to everybody for the glitch this morning. It was a system failure by our service provider that unfortunately we couldn’t control, so we were as frustrated as you are. Clearly is not the way I wanted to begin my tenure here at DDR. We understand there were a number of other companies that experienced the same problem, so again I apologize I know at this time of the quarter you are all pretty busy with the number of calls and this is probably pretty disruptive, but again not much we could do. So let me start, where I thought we were going to be four hours ago with introducing the participants who’ll either speak during the call or certainly be available here to answer your questions. Paul Freddo, Senior Executive Vice President of Development and Leasing. I think most of you know Paul pretty well. Secondly, Vince Corno, Executive Vice President of Development and Leasing. Vince just joined us two weeks ago along the same day I did will be working with Paul. I’m going to let Paul to explain Vince’s background and how they are going to work together in this transition period, but suffice it to say we are really happy that Vince is with us. Christa Vesy is our Chief Accounting Officer, Interim Chief Financial Officer. Christa really stepped up when Luke left and then done a lot more in the last two weeks since I’ve been here, so I’m certainly glad she is here. And Matt Lougee is here with us and Matt is sort of our Senior Vice President of everything. He does a lot of different things and today you probably recognize him mostly as the Investor Relations person. So with that, what I’d like…

Thanks, Tom. I would first like to elaborate on the announcement of Vince Corno, joining DDR two weeks ago as our new Executive Vice President of Leasing and Development. Vince has been in the retail real estate industry for nearly 25 years and brings a wealth of knowledge about the retail sector after previous roles as Senior Vice President of Real Estate at DICK’S Sporting Goods, Saks and the May Company as well as Vice President of Development at Forest City. He is an extremely well-known and respected figure in the retail real estate industry with extensive retail and landlord contacts. Vince will report to our CEO, Tom August and fulfills our succession plan with the optimal candidate. As I wind down my tenure here at the Company during the first half of 2017, my plan is to familiarize Vince with our portfolio, our people, and our processes in order to ensure an orderly transition of my duties to Vince upon my departure. In fact, next month we will conduct our multi-week portfolio review process in order to analyze the strategic plan and long-term prospects for each asset. Given Tom and Vince’s recent start, we will also use it as an opportunity to introduce them to the portfolio and further develop future growth opportunities across the portfolio. We are excited to have Vince on Board and we fully expect that you will be as pleased as we are with his knowledge of the business and his ability to sustain and improve upon our consistently strong operational results. Turning to the quarter, I was very pleased with the performance of our team and the result they delivered and equally as pleased to see how [indiscernible] portfolio upgrade continues to flow into strong operating metrics. We produce same-store NOI growth of 3.1%…

Thank you, Paul. For the second quarter, operating FFO was $122.4 million or $0.33 per share, which is a 6.5% increase over the prior year. Including non-operating items, FFO for the quarter was $120.3 million, also $0.33 per share. Non-operating items related primarily to land sales. During the second quarter, we also received approximately $3 million of additional management fee income related to the amendment of our asset management agreement with one of our joint venture partners that provided for a one-time payment upon execution. This payment is a non-recurring event and recurring quarterly fee income for the remainder of the year should continue to be in the range of $8 million to $8.5 million which is inline with our original guidance. When adjusting for the wind down of our commingled joint venture, the DDR domestic retail fund which is projected for year-end 2016, recurring quarterly fee income should be approximately $5 million. Additionally, as Paul discussed in detail, the timing of the Sports Authorities auction process pushed all rent loss associated with that bankruptcy from the second quarter and into the third quarter, given both of these items as well as the slight delay in the closing of our asset sales that are under contract. We are increasing our full-year operating FFO guidance range by $0.02 at the midpoint to a range of a $1.23 to a $1.26 per share. Turning to transactional activity. We closed on the sale of three operating assets and three land parcels for $58 million at our share during the second quarter, bringing full-year disposition to $282 million with an additional $505 million under contract. All of the operating assets under contract for sale are expected to close in the third quarter. Notably the portfolio located in Upstate New York comprises approximately 80% of…

We will now begin the question-and-answer session. [Operator Instructions] The first question comes from Alexander Goldfarb with Sandler O’Neill. Please go ahead.

Thank you. Good morning. Sorry, good afternoon. Originally it was good morning. Good afternoon, Tom and team. Tom just a question here, it’s a two parter, but it involves the same element. If you can – one, you talked about stability and the need on the portfolio and investment side to create some stability with the various investments, so on one hand originally prior management had spoke about nearing the end of the clean up and you outlined what sounds like there maybe a lot more cleanup to go. But the second part is at the C-suite level in the past seven years there’s been three CEO’s, so how do you bring stability to the C-suite. So one is on the investment side stability and the other one is from a leadership standpoint stability?

Maybe I misspoke, but I tend to try to say that we are near the end, but we just got to hurry up and get there. We are dragging this out a lot longer than we had hoped and I think that everybody is looking for us to finalize the last few sales to get over the hump, but I don’t think it’s more to do I think we just want to do it quicker. In terms of the C-suite I’m signing a three-year deal. I’m here and I think we want to add people to the – we added Vince, we’re adding others to stabilize that, so I don’t see any contradiction in terms. We just need to get it going to be honest I’m the fourth CEO not the third.

The next question comes from Christy McElroy with Citi. Please go ahead.

Hi. Good afternoon everyone. Tom, you’ve been doing a more in-depth review of the Company and its strategy, what’s driving that decision. Is that from your take on what you’ve seen since you became part of the management team in the last few weeks or - and a deeper review is needed or is that more Board driven as the result of any prior concern. So what does have happened regardless of David’s termination?

Well, I mean it happened because I’m unfamiliar I joined the Board in May, so I attended one meeting and I just felt before – to me is where are you, where you want to go and how do you get there and before we decide where we want to go, how we get there, I’ve got to figure out where we are, so I just wanted to do a quick and an in-depth analysis I could have sort of the whole Company from the asset side, the liability side, and the organizational side so we could make more intelligent decisions on how to proceed both organizationally and with our strategy on the assets.

The next question is from Michael Bilerman with Citi. Please go ahead.

Yes. Tom, I’m just curious I know there was no severance charges related to David’s termination, but were there any costs in the quarter or anticipated in future quarters just regarding the whole termination process and I wasn’t sure if there was any sort of outstanding lawsuits from either David if he ever filed for wrongful termination or from potential third parties whether they be internal or external that may have been a reason or part of the termination process?

There are no lawsuits that we know up for sure; I mean nothing has been filed. We don’t anticipate any. We don’t anticipate reserving for anything in our cost to date if we’ve incurred some have been very minimal.

The next question is from Todd Thomas with KeyBanc Capital Markets. Please go ahead.

Hi, thanks. Tom, you mentioned there being more of both development and redevelopment opportunities and the Company you may have realized previously. Is the development you’re talking about expansion opportunities of existing centers or is this ground-up development, new sites with existing land, just looking for some clarification. And then can you comment on how much more sizable you suspect the opportunity might be over time?

Well, number one I would tell you that we are not talking about necessarily ground-up, the real focus was on the development within the portfolio. I’m going to let Paul comment on the size, but again all I’m saying is just from the beginning of our review with some of these assets there are more opportunities that we identified than we had previously thought and since we haven’t gone through the portfolio, it’s difficult to quantify the excess over what our original estimates were.

Todd. Yes, this is Paul. One of the things, we got a great advantage with the timing with Vince and Tom just coming on with this portfolio review, which is an extensive review of every asset in the portfolio which will be doing over the entire month of August, but really the way I look at it is and we’ve accomplished quite a bit, we’ve been somewhere around $600 million on about a six-year program and redevelopment with yields that average somewhere north of 10%. This is a fresh look at the portfolio because we do realize that redevelopment is one of the greatest ways we’re going to grow this Company and it’s a skill set we have, we will look at ground-up, but as we have talked about many times on these calls, it’s not a significant mover of the needle for us or anybody else in the industry. So skill set we have. We will maintain it. We will look for opportunities. We’re going to remain very disciplined and how we might go after the ground-up side of it if at all, but that’s something that as we get through the process of reviewing the portfolio and what our skills are and where we want to go, we will come up with a better determination. One of the things we have talked about very early on that we haven’t really focused on since we started this redevelopment program years ago was value add opportunities. Again, I feel very strongly that’s a skill set we have here at DDR, we should take advantage of it. Tom alluded to that in his prepared remarks about creating value versus just buying quality assets that [indiscernible]. So we’re going to look at it all. Fresh eyes on it, Vince had some development experience in his background with Forest City here in Cleveland and he seen it all from various retailers side. So it’s a good healthy look at the entire portfolio and see where we can go with it.

The next question is from Vincent Chao with Deutsche Bank. Please go ahead.

Hi, everyone. Just curious in terms of the stability of the organization. Just curious if you could comment on sort of the morale of the group given the suddenness of the change here as well as any thoughts on potentially reallocation of sort of the human capital as you think about the organization?

Well, I’m obviously biased, but I’d like to think that the morale is pretty good. I mean clearly when you walk in at Monday morning and make an announcement that your CEO is no longer here, there was a bit of what the heck happened and a bit of a shock. But my focus is not been on and I’ve tried to be really diligent. I’m not looking back over my shoulder, I’m looking forward and I’m trying to convince everybody else that there’s still great opportunities here at DDR. We got a lot of things going for us. We’ve been through a lot of organizational changes, I can’t argue that, but if you look forward the opportunities look pretty bright and let’s do that. And I think that again from my perspective and I’m biased because I’m trying really hard to do this, I think the morale is good. And the capital – I don’t know, we got a lot of good people. I just need to understand it, we’re going to finish that process up real quick. I don’t expect a lot of reallocations, but I just want to make sure I understand what everybody’s position is, what they do the skill set et cetera, et cetera. So I think we’re well on our way to that.

The next question is from Haendel St. Juste with Mizuho. Please go ahead.

Hey, good afternoon. So, Tom maybe you could expound or clarify a bit on the comments you made about potential sale of Puerto Rico asset. It’s been something that’s been contemplated for a while at DDR, but as I understand it, there’s been less interest in the DDR’s part in selling the best assets on the island, Plaza Del Sol, which I’m sure would garner interest, but that’s one you’d be probably more willing to sell, the bottom rung. There’s not much of a bid there. So can you give me a sense of what you’d like to do and how maybe the Puerto Rico portfolio looks in a couple of years as you get to execute how you want. And then maybe some sense, current sense of what cap rates are on the island for the better and then maybe the bottom tier assets?

Haendel, let me first suggest that I think I better discuss our strategy with the Board before I discuss it with you. As I said in my remarks, we are preparing a presentation for the Board. This is going to be a Board decision on the strategy and you’re right we have talked about some of the low quality, the high quality, no quality, all the quality. And I think to be honest more appropriate to review this with the Board and make sure I get their perspective before we comment on exactly what we want to do.

The next question is from Jeremy Metz with UBS. Please go ahead.

Hey, guys. I know you talked about a hold on hiring for the time being, but one of the holds following Luke’s departure was that sort of CIO role. So just wondering if you give us your views there and if that’s the spot you’ll be looking to backfill down the road and then maybe bigger picture Tom your thoughts on the current G&A load of the Company?

Again, clearly that was an empty – it’s a spot that’s been empty which again probably 30 days before we figure out our structure and if that’s the position we need we’ll look internally and then go externally I mean clearly I think what is for sure. We want a senior person whether here or outside who can access deals, has good financial background, and can help us execute our strategy of growing the Company. Once we get over this review, we’ll see if we have that person internally if we don’t will go outside, but we’re going to make those decisions pretty quickly, but I think it would just been a little bit rash to go out and start hiring people before I understood who is here and what exactly our structure was.

The next question is from George Hoglund with Jefferies. Please go ahead.

Yes. I was wondering if you could comment a little bit more on sort of the delay in asset sales. I guess one with the upstate portfolio is that delay just - purely just because of problems with getting financing and then also are there any other sort of broader delays on asset sales in the portfolio? And if so kind of what’s driving that?

Number one, I don’t think there’s any just broader issues for the delay, this is a big portfolio, it’s a lot of different assets. I think it’s just taking time given the flexibility that the buyer wants to have with his financing to put the pieces all together. We know that they’ve been spending money, they probably in excess of the million dollars I’m guessing I don’t know the exact number. They’re certainly following through on their due diligence. So I think it’s just an overall look at we like good - they want good financing, they want flexibility and they’re taking their time and putting that pieces together.

The next question is from Floris van Dijkum with Boenning. Please go ahead.

I was going to ask you Tom what has surprised you the most since you’ve been at the organization on the positive side and also where do you think you’ve got maybe the most work to do?

Well, I think on the positive side to be honest, I was - again I’m not you know we’re not unique, okay I’m not trying to say we’re unique. But the amount of change that has occurred in this Company since 2010 has been enormous. Now we often had a bigger hill to climb, but the amount – it just surprise me and it surprise me to be honest how well the team and the organization has worked given to be honest the dysfunction at the CEO level and that has really surprised me. And I think what’s - I don’t want to say which takes the most work, but I think we’ve been so focused on sort of fixing things that we just going to turn our attention to how we’re going to grow. Because we just got a little more to go to get over the goal line and then we’re going to grow. And we just need to be able to shift as they say in politics we need to be able to pivot. We need to pivot towards the growth strategy from sort of fixing the balance sheet.

The next question is from Richard Hill with Morgan Stanley. Please go ahead.

Hey good afternoon. Just a quick question I know you’re still thinking about how you are looking to position the Company. But I’m just curious just from your vantage point. Would it be something that you’d be looking at running a much smaller portfolio of assets? Overall I know in the past DDR is highlighted that your top 100 assets contribute about 50% of your NOI. So how are you thinking about that being in the [indiscernible] and I recognize you’ve only done this seat for a couple of weeks?

Oh! Please recognize that this comment comes from someone who’s been only two weeks to it but I don’t think we’re focused on size, we’re focused on the bottom line for our shareholders and if it means we grow, we grow that means we shrink, we shrink. I mean I don’t think to be honest given a lot of thought to the size as being a factor in how we want to position the Company. It’s really is what we’re focused on it we’re going to create the most growth for the Company and create the most accretive for our shareholders and the size has not been a factor or something we really spent a lot of time thinking about yes. Maybe I will as we go forward but certainly not yet.

The next question is from Jeffrey Donnelly with Wells Fargo. Please go ahead.

Good afternoon. Tom, I recognize you need to be sensitive, but I’m curious what was it about the DDR culture that brought us to this point? And how significant could administrative changes ultimately be to assure that the organization gets to a place where you think investor confidence is restored and I guess if I could in sort of follow-up. Just over the past few years under prior CEO’s DDR kind of flirted with various satellite office locations, New York, Chicago. For whatever reason just given the opportunity you have now to sort of re-staff the C-suite, you know, are you going to contemplate locations outside of Cleveland for the organization?

Well, we have a few already, number one – let me answer the second part first. We have a few already. And secondly, as I said in my opening remarks we’re pretty highly centralized, we’re analyzing whether that’s the best model for us. It seems to be because of our concentration with our top 20 or 30 tenants, but that’s something that we were continuing to analyze. What got us to this point I really don’t care. I really couldn’t care less what got us to this point. Here is where we are today and we’re keeping our eye looking forward, I have no interest in looking backward. If it could be helpful, I would, but I’m not sure it will be helpful so I’m just looking forward. And what happened in the past, happened in the past that’s not my concern and I’m here to fix whatever is where we are from today going forward.

[Operator Instructions] The next question comes from Chris Lucas with Capital One Securities. Please go ahead.

Yes. Good afternoon, everyone. Welcome Tom. I guess I wanted to touch on one of the topics that you mentioned, which was filling an independent Board seat you vacated. And I guess the current Board members have a great deal of private real estate expertise and tenure. I guess I was wondering what kind of characteristics or background are you looking to backfill that independent Board seat. And then maybe on a second part just from your perspective, does your move to management negatively or positively impact your ability to make organizational changes from being an independent Board member in your view.

Let see, number one, the Board qualification, you’re right, we’ve got a lot of real estate expertise. I think there are other things that – first of all let me check this is the dominating government committee decision, not mine. I will certainly try and influence it the way I think we should do it, but it’s their decision to make. And I think whether it’s a retail, whether it’s a financial expert, but certainly someone I think we have plenty real estate expertise. So someone with a different perspective that again as I said in my opening remarks will help the Board and help me and the team run this Company better. So different than a real estate expertise, retail, financial that comes to mind, but we’ll see. In terms of the decisions I think I have more influence. My position is that the Board is involved in the Board level decisions and then I am running the Company and there’s a lot of decisions that are – they’re my decisions to make and I will certainly make them in consultation with the Board because I value their input, but ultimately they’re my decisions to make and that’s the way we’ll make them.

The next question comes from Stephen Sakwa with Evercore ISI. Please go ahead.

Thanks. Good afternoon. Maybe this question is for Paul since Tom you’re obviously very new and maybe don’t have this history, but in terms of the redevelopment and trying to I guess want to speed those up or you found more of them and going through the review. I guess I’m trying to understand maybe why those weren’t brought to light in the past or what’s – I guess what made you uncover them today versus a six months ago, 12 months ago, 18 months ago?

Steve, we haven’t uncovered anything in the past two weeks and we do have a pretty significant pipeline of pending deals which is probably in the $300 million to $400 million range. The thought we’re trying to get across, we’re going to take a fresh look at everything in this organization starting with the portfolio and that’s going to bring to light, different ways of going about it and I mentioned the value add which is something we’ve really not focused on since we started the program six or seven years ago. So it’s not like we’ve uncovered anything in the last two weeks that’s earth-shattering or huge number. I’m very confident what we have in our pipeline and ability to deliver somewhere between $100 million to $150 million a year of redevelopment spend and then bring into service. So we’re just going to take a fresh look at it, scrub it, look at how we can do things a little differently and see where we can create more value. So it’s not something we’ve been sitting on, no lack of confidence in the folks that deliver or execute on that program, it’s really – let’s just see how we can do it better and do it quicker.

And Steve, just the focus – it just you know when you’re looking in one direction you kind of miss a little bit in the other, it’s not that’s been over looked, it’s just that this has been the primary focus, how do we buy high quality assets in infill locations. I think we just need to open our eyes a little bit wider and have a broader perspective.

The next question is a follow-up from Michael Bilerman with Citi. Please go ahead.

Great. Thank you. Tom you’ve expressed this sense of urgency, this complete review of the organization you mentioned policies, procedures, cultures. I’m curious you didn’t mention a review of corporate governance and the Board of Directors and so outside of just adding an independent to the Board. You look at the Board is constructed now eight members, five have been there for an average of almost 16 years which would have covered all four prior administrations including yours or four administrations. You have two from the Germans which obviously own a lot of stock and have that right to those seats and then you have yourself as CEO. Will you as part of this review look at the Board and make a recommendation if you decide that changes need to be made and if not if you’re not going to do that why and secondarily, if your recommendation is status quo other than adding independent. Do you think that the Company is at risk from you know from a slate that’s put up that would want to see better effective management of the organization?

Well, let me answer the last part first I hope that better management the organization has been addressed the last two weeks. So that’s number one. Secondly, is I understand the issue about longevity of the Board members. I think unfortunately or fortunately we’re in a position now what we need to add we can’t rotate to and I think that adding too many Board members at once is a risk as well just the culture in the thinking of the organization. So A it’s not my ultimate decision. I can make a recommendation to the Board. And right now my recommendation to the Board we need to add somebody and we need to add one or two people with a different perspective than as the previous one. The previous caller suggested financial expertise and our real estate expertise and bringing some of the financial or retail expertise. So ultimately I’m sure at some point there will be a rotation right now I’m more focused on the additions and bringing in a different perspective. End of Q&A

This concludes our Q&A session and the conference as a whole. Thank you for attending today’s presentation. You may now disconnect.