Real estate investment trust -
) - reported second-quarter 2013 operating FFO (funds from
operations) per share of 27 cents, in line with the Zacks
Consensus Estimate and up 8% from 25 cents reported in the
The year-over-year increase was mainly aided by organic growth
and investments in shopping center acquisitions, but was partly
dwarfed by asset sales.
Including non-recurring items, DDR reported second-quarter 2013
FFO of $80.0 million or 25 cents per share, compared with $78.1
million or 27 cents per share in the year-ago quarter.
Total revenue for the quarter increased 13.8% to $217.1 million
from $190.7 million reported in the year-ago quarter. Moreover,
total revenue also outpaced the Zacks Consensus Estimate of $206
Leasing and Operating Activity
DDR executed strong leasing activities during the quarter under
review. The company signed 190 new leases (0.9 million square
feet) and 271 renewal leases (1.9 million square feet). As of Jun
30, 2013, the company's core portfolio was 94.6% leased - a
sequential expansion of 20 bps (basis point) and 90 bps year over
DDR's portfolio generated positive leasing spreads, with new
leases climbing 12.0% and renewals up 7.0% while blended spreads
escalated 7.9% at 100% ownership. Also, same-store net operating
income (NOI) increased 3.1% on a year-over-year basis.
DDR opened Belgate Shopping Center in Charlotte, N.C. in May.
Spanning 900,000-square-foot, the property is 100% leased and
anchored by IKEA,
Wal-Mart Stores Inc.
) and several others.
Portfolio Restructuring Activity
In tune with its long-term strategic objectives of restructuring
the overall portfolio by upgrading the quality of shopping
centers, DDR acquired $106 million of prime assets and
disposition of $64 million of non-prime assets. DDR's pro rata
share of the gross proceeds from dispositions was $60 million.
Notably, in May DDR inked a deal to buy 30 shopping centers from
its existing joint venture (JV) with an affiliate of
The Blackstone Group L.P.
). Expected to close in the fourth quarter of 2013, subject
to customary closing conditions, the deal is projected to
substantially enhance DDR's cash flow.
Situated in top 40 MSA's (Metropolitan Statistical Areas), the
portfolio includes Riverdale Village in Minneapolis and Shoppers
World in Boston among many, and consists of a total of 11.8
million square feet. Leased 95%, these properties include large
format centers with an average size of around 400,000 square
feet, well ahead (20% larger) of the current DDR prime portfolio.
Moreover, in April, DDR acquired one of its JV partners' 85%
interest in 5 unencumbered power centers for $94 million.
Positioned in Atlanta, Tampa and Richmond and Newport News, these
98% leased premium assets span 1.3 million square feet and are
anchored by industry leading global retailers -including WalMart,
) and several others.
As of Jun 30, 2013, DDR had $41.7 million of cash, compared with
$18.9 million as of Mar 31, 2013 and $31.2 million as of Dec 31,
During the quarter, DDR reaped $45 million by issuing 2.5 million
common shares for funding investments in prime assets. Moreover,
to finance the Blackstone deal, DDR issued $300 million worth of
senior unsecured notes due May 2023 and penned forward sale
agreements to sell 39.1 million common shares for gross proceeds
of $739 million.
2013 Guidance Reaffirmed
DDR has reiterated its operating FFO forecast at $1.08-$1.11 per
share. Notably, it was on May 15, 2013 that the company updated
the guidance and raised the lower end of the range to $1.08 from
Going forward, we believe that the addition of upscale assets to
its high-end asset portfolio along with strengthening of the
tenant base promises strong growth prospects for DDR.
However, the company has a significant development pipeline,
which increases its operational risks. Additionally, the rise in
consumer purchases through catalogs and the Internet could hurt
the demand for DDR's properties.
DDR currently holds a Zacks Rank #3 (Hold).
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.
BLACKSTONE GRP (BX): Free Stock Analysis
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