DDR Q1 FFO & Revs Meet Ests. - Analyst Blog
08 May 2014 - 1:00AM
Zacks
DDR Corp. (DDR)
reported first-quarter 2014 operating funds from operations (FFO)
per share of 28 cents, in line with the Zacks Consensus Estimate
and a penny above the year-ago quarter figure. Organic growth and
premium assets buyout were the major positives. However, non-prime
property divestitures hurt the results to some extent.
Total revenue for the quarter
rocketed 29.8% year over year to $246.0 million and came in line
with the Zacks Consensus Estimate.
Quarter in
Details
DDR inked 378 new (0.8 million
square feet) and renewal (2.3 million square feet) leases. Notably,
the company experienced the highest square footage leasing volume
in 19 quarters. DDR’s portfolio generated positive leasing spreads,
with new leases climbing 15.1% and renewals up 6.7% at 100%
ownership. Also, same-store net operating income (NOI) increased
3.1% on a year-over-year basis at 100% ownership.
As of Mar 31, 2014, the company’s
U.S. portfolio was 95.1% leased, reflecting an improvement of 10
bps (basis point) sequentially and 90 bps year over year. Moreover,
as of same date, total portfolio average annualized base rent per
occupied square foot was $13.44, up 4.2% from $12.90 as of Mar 31,
2013.
During the quarter, DDR offloaded
14 non-prime assets for $198 million, of which, this retail real
estate investment trusts (REITs) pro-rata share was $142 million.
The company also disclosed the divestiture of its 50% stake in the
Luxembourg-based firm – Sonae Sierra Brazil BV Sarl – for $343.6
million. The transaction closed on Apr 28. The move marked the
complete exit of DDR from the Brazilian market.
DDR exited the first quarter 2014
with $163.8 million of cash, up from $86.7 million as of Dec 31,
2013.
Outlook
DDR has reaffirmed its previously
issued guidance and expects operating FFO per share in the range of
$1.14 to $1.18. As a matter of fact, this outlook came up in March
and then the company had lowered its guided range so as to
incorporate the effect of the Sonae Sierra deal. The Zacks
Consensus Estimate of $1.17 for the same falls within the company’s
guided range.
In Conclusion
Continuing with its decent
performance since last year, DDR met our expectations yet again.
Improving operating portfolio performance and strategic
repositioning efforts continue to fuel the company’s results.
Particularly, the disposition spree is at par with the company’s
motive of offloading the small format or single tenant centers and
investing the proceeds in large format prime power centers in top
Metropolitan Statistical Area of the U.S. However, the near-term
earnings dilution from such divestitures cannot be avoided.
DDR currently holds a Zacks Rank #3
(Hold). Some better-ranked stocks in the retail REIT sector include
General Growth Properties, Inc (GGP),
Acadia Realty Trust (AKR) and Agree Realty
Corp. (ADC). All the stocks hold a Zacks Rank #2
(Buy).
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.
AGREE RLTY CORP (ADC): Free Stock Analysis Report
ACADIA RLTY TR (AKR): Free Stock Analysis Report
DDR CORP (DDR): Free Stock Analysis Report
GENL GRWTH PPTY (GGP): Free Stock Analysis Report
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