DDR Unveils 4Q Transaction Update - Analyst Blog
January 04 2013 - 12:19PM
Zacks
DDR Corp.
(DDR) – 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.
Acquisition Activity
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. (TGT), Bed
Bath & Beyond Inc. (BBBY),
Ross Stores Inc. (ROST) and
Shoe Carnival Inc. (SCVL).
Disposition Activity
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.
Other Transactions
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
years.
In addition, DDR inked a deal with Macy's, Inc.
(M) 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.
Our Viewpoint
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 new development.
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.
BED BATH&BEYOND (BBBY): Free Stock Analysis Report
DDR CORP (DDR): Free Stock Analysis Report
MACYS INC (M): Free Stock Analysis Report
ROSS STORES (ROST): Free Stock Analysis Report
SHOE CARNIVAL (SCVL): Free Stock Analysis Report
TARGET CORP (TGT): Free Stock Analysis Report
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