DDR Ddr Corp.

Developers Diversified Realty Corporation (DDR), a real estate investment trust (REIT), has recently decided to swap an asset with one of its peers Glimcher Realty Trust (GRT), as part of its strategy to better align the portfolio with the other’s operating platform. The transaction, likely to close in fourth quarter 2011, is expected to be accretive to earnings to both the participating companies.

Developers Diversified would sell Town Center Plaza – an open-air mall spanning 650,000 square feet in Kansas City, Kansas, to Glimcher for $139 million. In exchange, Glimcher would sell Polaris Towne Center – a 700,000 square-foot shopping center in Columbus, Ohio, to Developers Diversified for $80 million. Developers Diversified will utilize the additional proceeds from the asset swap to develop prime retail properties. 

Town Center Plaza is anchored by leading retailers such as Macy's, Inc. (M) and Dick's Sporting Goods Inc. (DKS). With 95% occupancy and a high sales productivity of over $400 per square foot, the retail property is expected to enhance the overall quality of Glimcher's mall portfolio. In addition, the business module of Town Center Plaza aligns well with Glimcher's core competencies and would enable it to capitalize on its deep tenant relationships within the mall sector.

Polaris Towne Center is a market-dominant shopping center anchored by prime retailers such as Target Corp. (TGT), Lowe's Companies Inc. (LOW), and The Kroger Co. (KR).  The property is the seventh of its kind that is owned by Developers Diversified in the Columbus MSA (metropolitan statistical area), thereby strengthening its leading position in the market.

The asset swap involving the simultaneous sale and purchase of retail properties is expected to be mutually beneficial given the core competencies of both companies, the efficacy of each operating platform, and the long-term value creation potential of each asset.

Headquartered in Beachwood, Ohio, Developers Diversified acquires, owns, develops, leases and manages shopping centers and business centers across 41 states in the U.S., along with Puerto Rico and Brazil. At the end of second quarter 2011, Developers Diversified owned and managed 546 retail operating (primarily open-air, value-oriented shopping centers) and development properties spanning approximately 126 million square feet.

We maintain our ‘Neutral’ recommendation on Developers Diversified for the long term. The company presently has a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.

 
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