We have reiterated our Neutral recommendation on
), a real estate investment trust (REIT), as we expect the stock to
perform in line with the broader market.
The company reported first quarter 2012 FFO (funds from
operations) of $59.7 million or 21 cents per share compared with
$93.0 million or 27 cents per share in the year-earlier quarter.
Funds from operations, a widely used metric to gauge the
performance of REITs, is obtained after adding depreciation and
amortization and other non-cash expenses to net income.
DDR acquires, owns, develops, leases and manages shopping
centers and business centers across 39 states in the U.S., along
with Puerto Rico and Brazil. It has a well-diversified portfolio
concentrated mostly in the high growth areas of the country,
including Florida, California, Texas and North Carolina. With a
focus on best-in-class retailers in strategic locations, the
portfolio drives value and mitigates operating risks by generating
a relatively steady revenue stream.
The company continues to minimize ground-up development spending
in its domestic portfolio, and instead allocates capital to the
lease-up of existing projects as it believes there may be
opportunities to redevelop many of its existing assets. These
redevelopments should create a growth opportunity for the company's
existing assets and create future value without the level of risk
or capital required for a new development.
However, the possibility of store closings at many DDR centers
due to lease terminations adds uncertainty to the earnings, and it
might have to re-let large big box spaces at significantly lower
rents in a tough leasing environment.
This in turn would affect the top-line growth of the company and
put considerable pressure on its sustainability. The company has a
significant development pipeline, which increases operational risks
in the current credit-constrained market, exposing it to rising
construction costs, entitlement delays, and lease-up risk.
DDR currently retains a Zacks #3 Rank, which translates into a
short-term Hold rating. One of its competitors,
Kimco Realty Corporation
) also holds a Zacks #3 Rank.
DDR CORP (DDR): Free Stock Analysis Report
KIMCO REALTY CO (KIM): Free Stock Analysis
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