Balanced Risk-Reward for DDR


On Apr 01, 2014, we issued an updated research report on the retail real estate investment trust (:REIT) – DDR Inc. (DDR).

On Feb 12, DDR reported fourth-quarter 2013 operating FFO per share of 29 cents, in line with the Zacks Consensus Estimate and up 7.4% from 27 cents in the year-ago quarter. Organic growth, investments in prime retail center acquisitions and strong leasing activity aided the results.

DDR’s aggressive capital recycling program through strategic asset management, which is aimed at reducing currency and development risk and expand in premium US markets, bodes well for its long-term growth. In relation to that, most recently, the company disclosed the divestiture of 14 non-prime assets and reaped $142 million in proceeds as its share, in the first quarter of 2014. Also, the company disclosed a deal to purchase 3 prime power centers for an aggregate price of about $235 million.

Though the company is enhancing its portfolio mix through continued divestitures, the near-term dilution effect of such moves is unavoidable. Accordingly, DDR recently lowered its 2014 FFO per share guidance to incorporate the effect of the Brazilian assets divestiture deal. Furthermore, rising online sales that adversely affect the demand for retail space remains a concern and an anticipated increase in the interest rate may dent its financial results, going forward.

Over the last 30 days, the Zacks Consensus Estimate for 2014 and 2015 FFO per share tumbled by 3 cents each to $1.17 and $1.26, respectively. The stock currently has a Zacks Rank #3 (Hold).

Stocks That Warrant a Look

Some better-ranked stocks in the retail REIT industry include Simon Property Group Inc. (SPG), General Growth Properties, Inc (GGP) and National Retail Properties, Inc. (NNN). All these stocks carry a Zacks Rank #2 (Buy).

Note: FFO, a widely used metric to gauge the performance of REITs, is obtained after adding depreciation and amortization and other non-cash expenses to net income.

Read the Full Research Report on DDR
Read the Full Research Report on SPG
Read the Full Research Report on GGP
Read the Full Research Report on NNN

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