DDR Corp. (
- a real estate investment trust (REIT) - recently provided an
update of the portfolio restructuring activities and other
transactions in the fourth quarter of 2012. Also, the company
announced the completion of acquisitions worth $2.1 billion and
disposition worth $347 million in full year 2012.
During the fourth quarter of 2012, the company acquired two
California-based prime power centers for $151 million. Both the
assets were funded through a combination of proceeds from asset
dispositions, new common equity and issuance of unsecured notes.
DDR purchased the first asset - Carolina Pavilion - from
Blackstone Real Estate Partners VII for $106 million. Positioned
in Charlotte, Carolina Pavilion spans 852,000 square foot and is
94% leased. Poyner Place, the second asset, was acquired for $45
million. The property is based in Raleigh and is currently 96%
occupied. Both the properties boast various industry-leading
tenants, such as
Target Corp. (
Bed Bath & Beyond Inc. (
Ross Stores Inc. (
Shoe Carnival Inc. (
DDR sold seven non-core assets worth $255 million during the
quarter. Additionally, the company sold $61 million of non-income
producing assets worth $61 million during the quarter and $107
million in 2012. Currently, DDR has around $96 million worth of
non-core assets under contract for sale, which include non-income
producing assets worth $31 million.
Sonae Sierra Brasil - a joint venture of DDR - closed the sale of
its 10% ownership stake in Patio Brasil, 51% share in Shopping
Penha and 30% share in Tivoli Shopping for a total price of $103
million. The joint venture company will continue to manage and
lease Shopping Penha and Tivoli Shopping for at least three
In addition, DDR inked a deal with
Macy's, Inc. (
to take back the leased space at its Pasadena-based shopping
center - Paseo Colorado. DDR gained control of the 150,000
square-foot space to facilitate the proposed extensive
redevelopment of the shopping center.
In November, DDR issued $150 million worth of unsecured notes at
a yield-to-maturity rate of 3.5% through the reopening of its
$300 million worth of 10-year senior unsecured notes. In
December, the company closed the new long-term financings of $365
million. The company used the proceeds from these financings to
pay-off the mortgage loan secured by six core assets, having a
maturity date in April 2013.
We remain impressed with the 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. This will augur well for its earnings going forward.
Also, the company continues to spend capital for the
redevelopment of existing assets, which will create a growth
opportunity for its existing assets and generate future value
without the involvement of risk or requirement of capital for a
DDR is expected to release its fourth-quarter 2012 results on
February 12, 2013. The Zacks Consensus Estimate for the fourth
quarter FFO (fund from operations) is currently pegged at 27
cents per share.
We expect the company to report FFO in line with the Zacks
Consensus Estimate, as the earnings ESP (expected surprise
prediction) is nil for the stock. DDR currently has a Zacks #3
Rank (implying a short-term Hold rating). However, we maintain
our long-term 'Neutral' recommendation on the stock.
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.
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