DDR Unveils 1Q Transaction Update - Analyst Blog

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 11^th 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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