) 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
Total revenue for the quarter rocketed 29.8% year over year to
$246.0 million and came in line with the Zacks Consensus
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,
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.
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.
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
Acadia Realty Trust
Agree Realty Corp.
). All the stocks hold a Zacks Rank #2 (Buy).
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.
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