DDR Unveils 1Q Transaction Update - Analyst Blog
03 April 2013 - 9:10PM
Zacks
DDR Corp. (DDR) –
a real estate investment trust (REIT) – recently provided an update
on its portfolio restructuring activities for the first quarter of
2013. Continuing with its successful execution of the capital
recycling program, it completed $127 million worth of strategic
transactions in the quarter.
Acquisition
Activity
During the quarter, DDR acquired
two premium assets in the 4th and 11th largest MSA
(Metropolitan Statistical Areas) of U.S. –Texas and Calif. – for
$81 million.
DDR purchased the first asset –
Marketplace at Highland Village – for $40 million. Positioned in
Dallas, the property spans 400,000 square foot and is 90% leased.
Positioned at the center of the Flower Mound/Highland Village
submarket, the shopping center generates 85% of its revenue from
the U.S. retail giants. These include Wal-Mart Stores,
Inc. (WMT), T.J. Maxx, LA Fitness and Office Depot
Inc. (ODP). With this upscale asset acquisition, DDR now
boasts a solid portfolio of 6 major power centers comprising 1.8
million square feet in Dallas.
Whole Foods at Bay Place, the
second asset, was acquired for $41 million. The property is based
in downtown Oakland and spans 57,000 square foot. The Class A
acquisition features WholeFoods Market Inc.’s
(WFM) property operating in a thickly populated high
barrier-to-entry urban infill location.
Both the assets were funded through
a combination of proceeds from asset dispositions and new common
equity. The acquired properties have an average trade area
household income of $96,000 and population of 434,000 people.
Notably, DDR issued 2.3 million new shares during the quarter at an
average price of $17.57 through its at-the-market common equity
program. The company generated gross proceeds of $40 million
through the offering.
Disposition
Activity
During the quarter, DDR sold 21
non-core and 2 non-income producing assets and generated gross
proceeds of $46 million. Moreover, currently DDR has around $81
million worth of non-core assets under contract for sale, which
includes non-income producing assets worth $27 million.
Our Viewpoint
We remain impressed with DDR’s
long-term strategy of restructuring the overall portfolio by
upgrading the quality of shopping centers and improving the balance
sheet by reducing leverage. In particular, the addition of upscale
assets and mortgage free assets to its high-end assets kitty along
with strengthening of the tenant base promises steady rental
revenue.This will augur well for DDR’s earnings going forward.
DDR is expected to release its
first-quarter 2013 results on Apr 30, 2013. The Zacks Consensus
Estimate for the first-quarter FFO (fund from operations) is
currently pegged at 27 cents per share.
DDR currently holds a Zacks Rank #3
(Hold).
Note: FFO, a widely accepted
and reported measure of the performance of REITs is derived by
adding depreciation, amortization and other non-cash expenses to
net income
DDR CORP (DDR): Free Stock Analysis Report
OFFICE DEPOT (ODP): Free Stock Analysis Report
WHOLE FOODS MKT (WFM): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis Report
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